<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1997
REGISTRATION NO. 333-30455
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WESTINGHOUSE ELECTRIC CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
PENNSYLVANIA 4833 25-0877540
(STATE OR OTHER JURISDICTION
OF
INCORPORATION OR (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
11 STANWIX STREET
PITTSBURGH, PENNSYLVANIA 15222
(412) 244-2300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
LOUIS J. BRISKMAN, ESQ.
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL
WESTINGHOUSE ELECTRIC CORPORATION
11 STANWIX STREET
PITTSBURGH, PENNSYLVANIA 15222
(412) 244-2300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
PETER S. WILSON, ESQ. RICHARD L. EASTON, ESQ.
CRAVATH, SWAINE & MOORE SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
WORLDWIDE PLAZA ONE RODNEY SQUARE
825 EIGHTH AVENUE WILMINGTON, DE 19801
NEW YORK, NEW YORK 10019
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement, which relates to the issuance of common stock in the Merger (as
defined herein) of G Acquisition Corp., a wholly owned subsidiary of
Westinghouse Electric Corporation, with and into Gaylord Entertainment Company
pursuant to the Merger Agreement described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE> 2
[GAYLORD ENTERTAINMENT]
July 16, 1997
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Gaylord Entertainment Company, a Delaware corporation (the
"Company"), to be held on Friday, August 15, 1997, at 10:00 a.m., local time, at
the Ryman Auditorium, 116 5th Avenue North, Nashville, Tennessee.
At this important meeting, you will be asked to vote on (i) the approval
and adoption of the Agreement and Plan of Merger, dated as of February 9, 1997
(the "Merger Agreement"), among Westinghouse Electric Corporation, a
Pennsylvania corporation ("Westinghouse"), G Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Westinghouse ("Sub"), and the
Company, and (ii) the approval and adoption of the New Gaylord Entertainment
Company 1997 Stock Option and Incentive Plan (the "New Gaylord Stock Plan"),
each as described more fully in the accompanying Proxy Statement/Prospectus.
Pursuant to the Merger Agreement, Sub will be merged with and into the
Company (the "Merger") and, as a result of the Merger, Westinghouse will acquire
the Company's cable networks business, consisting primarily of The Nashville
Network and the United States and Canadian operations of Country Music
Television ("CMT"), and certain other related businesses (collectively, the
"Cable Networks Business"). The Cable Networks Business to be acquired by
Westinghouse will not include the operations of Country Music Television outside
the United States and Canada ("CMT International") and the Company's management
of and option to acquire 95% of Z Music, Inc., a cable network currently
featuring primarily contemporary Christian music videos.
In the Merger, the Company's stockholders will receive shares of Common
Stock, par value $1.00 per share, of Westinghouse ("Westinghouse Common Stock"),
valued at the agreed upon transaction price of $1.55 billion, at a per share
consideration to be determined in accordance with the Merger Agreement that will
be based upon the average of the daily closing prices per share of Westinghouse
Common Stock for a period ending shortly before the date on which the effective
time of the Merger will occur (the "Effective Time") and the number of
outstanding shares of Class A Common Stock, $.01 par value, of the Company
("Company Class A Common Stock") and Class B Common Stock, $.01 par value, of
the Company ("Company Class B Common Stock" and, together with the Company Class
A Common Stock, "Company Common Stock"), provided that Westinghouse will not be
required to issue more than 110 million shares of Westinghouse Common Stock in
connection with the Merger (88 million shares in the unlikely event that
Westinghouse consummates the anticipated separation of its power-related and
non-power-related businesses into two companies (the "Westinghouse
Distribution") prior to the Effective Time). If the issuance of 110 million
shares (or 88 million shares, as the case may be) of Westinghouse Common Stock
would result in the Company's stockholders receiving shares with an aggregate
value of less than $1.55 billion (calculated in accordance with the Merger
Agreement as described above), then the Company would have the right to
terminate the Merger Agreement, subject to Westinghouse's right to issue
additional shares. Based on the average of the daily closing prices per share of
Westinghouse Common Stock as reported on the New York Stock Exchange Composite
Transactions List for the 15 day trading period ended July 15, 1997, and on the
number of shares of Company Common Stock outstanding on that date, each share of
Company Common Stock would have been converted into the right to receive 0.673
shares of Westinghouse Common Stock. However, the actual number of shares into
which each share of Company Common Stock will be converted at the Effective Time
may be greater or less thatn the above number.
[GAYLORD ADDRESS]
<PAGE> 3
Prior to the consummation of the Merger, the Company will be restructured
(the "Restructuring") so that the assets and liabilities that are part of the
Company's hospitality, attractions, music, television and radio businesses, as
well as CMT International and the option to acquire 95% of and the assets used
in the management of Z Music, Inc., will be transferred to or retained by New
Gaylord Entertainment Company (formerly known as Gaylord Broadcasting Company),
a Delaware corporation and a wholly owned subsidiary of the Company ("New
Gaylord"), or one of its subsidiaries (after giving effect to the Restructuring,
the "New Gaylord Companies"). In addition, the Restructuring will result in all
of the assets of the Cable Networks Business being held by the Company or one of
its subsidiaries other than the New Gaylord Companies. Upon completion of the
Restructuring and on the day prior to the Effective Time, the Company will
distribute (the "Company Distribution") to each holder of record of Company
Common Stock a number of shares of Common Stock, $.01 par value, of New Gaylord
("New Gaylord Common Stock") equal to one-third of the number of shares of
Company Common Stock held by such holder. Cash will be distributed in lieu of
any fractional shares of New Gaylord Common Stock. Although the shares of New
Gaylord Common Stock to be distributed in the Company Distribution are not part
of the Merger consideration, the Company Distribution will be consummated only
if the Merger is approved by the Company's stockholders and all other conditions
to consummation of the Merger (other than completion of the Company
Distribution) have been satisfied or waived.
The establishment of New Gaylord as a publicly traded company signifies our
continued commitment to providing entertainment that reflects the wholesome
values of the traditional American family while maintaining our roots in country
music. To this end, New Gaylord will be an entrepreneurial company whose
objective will be to expand its existing business interests and consider new
ventures with compatible goals. Thus, taken together, the Company Distribution
and the Merger will permit the Company's stockholders to continue to participate
in New Gaylord's family-oriented hospitality, attractions, music, television and
radio businesses while also allowing them to share in growth of the Cable
Networks Business as shareholders of Westinghouse, a corporation with which the
Company has enjoyed a long and beneficial relationship.
The Company and Westinghouse currently anticipate that the Merger will be
consummated prior to the consummation of the Westinghouse Distribution. In such
event, stockholders of the Company who become shareholders of Westinghouse in
connection with the Merger and who continue to hold their shares of Westinghouse
Common Stock on the record date for the Westinghouse Distribution will be
entitled to participate in the Westinghouse Distribution on the same basis as
all other shareholders of Westinghouse.
The approval and adoption of the Merger Agreement requires the affirmative
vote of the holders of a majority of the votes entitled to be cast at the
Special Meeting by the holders of the outstanding shares of Company Common Stock
voting as a single class. Under Section 162(m) of the United States Internal
Revenue Code of 1986, as amended, and the rules of the New York Stock Exchange,
Inc., the approval and adoption of the New Gaylord Stock Plan requires the
affirmative vote of the holders of a majority of the votes cast on such proposal
by the holders of the outstanding shares of Company Common Stock, voting as a
single class, provided that the total number of votes cast on such proposal
represents over 50% of the number of votes entitled to be cast on such proposal.
Each share of Company Class A Common Stock is entitled to one vote and each
share of Company Class B Common Stock is entitled to five votes on each proposal
properly presented at the Special Meeting. In 1990, certain stockholders of the
Company, including myself, established a voting trust (the "Voting Trust") under
which the trustees (the "Voting Trustees") have the right to vote the shares of
Company Class B Common Stock held in the Voting Trust. In connection with the
execution of the Merger Agreement, the Voting Trustees and certain other
stockholders of the Company entered into an agreement with Westinghouse pursuant
to which the Voting Trustees and such other stockholders have agreed to vote the
shares of Company Common Stock held by them, representing approximately 65% of
the total number of votes entitled to be cast at the Special Meeting, in favor
of the approval and adoption of the Merger Agreement. The Voting Trustees and
such stockholders have also advised the Company that they intend to vote all of
their shares in favor of the approval and adoption of the New Gaylord Stock
Plan. Therefore, the approval and adoption of the Merger Agreement and the New
Gaylord Stock Plan are assured.
<PAGE> 4
In addition to the approval of the Company's stockholders, the obligations
of the Company and Westinghouse to consummate the Merger are conditioned on,
among other things, the issuance by the United States Internal Revenue Service
of certain rulings, or in certain instances the receipt of tax opinions,
regarding the tax-free nature of the Merger, the Company Distribution and
certain other transactions comprising part of the Restructuring, the absence of
any adverse tax development that would cause the Company Distribution to be
taxable to the Company or its stockholders, the receipt of all necessary
governmental approvals and the consummation of the Restructuring and the Company
Distribution.
You are cordially invited to attend the Special Meeting. The Opryland Hotel
has reserved a limited number of rooms at a special rate of $169.00, single and
double occupancy, per night. If you would like a room, please make reservations
by August 7, 1997, by calling (615) 316-6554 and requesting the Gaylord
Entertainment Company Special Meeting rate.
YOUR BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED THE TERMS OF (I) THE
RESTRUCTURING, THE COMPANY DISTRIBUTION AND THE MERGER AND BELIEVES THAT SUCH
TRANSACTIONS ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
(II) THE NEW GAYLORD STOCK PLAN AND BELIEVES THAT SUCH PLAN IS IN THE BEST
INTERESTS OF NEW GAYLORD AND ITS STOCKHOLDERS. THE BOARD HAS UNANIMOUSLY
APPROVED EACH OF THE MERGER AGREEMENT AND THE NEW GAYLORD STOCK PLAN AND
RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE APPROVAL AND ADOPTION OF
(I) THE MERGER AGREEMENT AND (II) THE NEW GAYLORD STOCK PLAN.
The accompanying Proxy Statement/Prospectus includes details of the
proposed Merger and other important information concerning Westinghouse, the
Company and New Gaylord, including certain pro forma financial information, and
a discussion of the New Gaylord Stock Plan. Please give these materials your
careful attention.
Your interest and participation are appreciated.
Sincerely yours,
/s/ Edward L. Gaylord
Edward L. Gaylord
Chairman
<PAGE> 5
GAYLORD ENTERTAINMENT COMPANY
ONE GAYLORD DRIVE
NASHVILLE, TENNESSEE 37214
------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 15, 1997
------------------
As a stockholder of Gaylord Entertainment Company, a Delaware corporation
(the "Company"), you are hereby given notice and invited to attend in person or
by proxy a Special Meeting of Stockholders (the "Special Meeting") of the
Company to be held on Friday, August 15, 1997, at 10:00 a.m., local time, at the
Ryman Auditorium, 116 5th Avenue North, Nashville, Tennessee, for the following
purposes:
1. To consider and vote upon the approval and adoption of the
Agreement and Plan of Merger, dated as of February 9, 1997 (the "Merger
Agreement"), among Westinghouse Electric Corporation, a Pennsylvania
corporation ("Westinghouse"), G Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of Westinghouse ("Sub"), and the Company,
pursuant to which Sub will be merged with and into the Company (the
"Merger") and each share of Class A Common Stock, $.01 par value, of the
Company ("Company Class A Common Stock") and each share of Class B Common
Stock, $.01 par value, of the Company ("Company Class B Common Stock" and,
together with the Company Class A Common Stock, "Company Common Stock")
outstanding immediately prior to the Merger will be converted into the
right to receive a number of shares of Common Stock, par value $1.00 per
share, of Westinghouse determined pursuant to a formula set forth in the
Merger Agreement (all as more fully described in the enclosed Proxy
Statement/Prospectus).
2. To consider and vote upon the approval and adoption of the New
Gaylord Entertainment Company 1997 Stock Option and Incentive Plan (the
"New Gaylord Stock Plan") (as more fully described in the enclosed Proxy
Statement/Prospectus).
In accordance with the Restated By-laws of the Company, no business other
than that specified in this Notice of Special Meeting may properly be brought
before the Special Meeting.
Each proposal will be voted upon separately by the stockholders of the
Company. The approval and adoption of the Merger Agreement requires the
affirmative vote of the holders of a majority of the votes entitled to be cast
at the Special Meeting by the holders of the outstanding shares of Company
Common Stock, voting as a single class. Under Section 162(m) of the United
States Internal Revenue Code of 1986, as amended, and the rules of the New York
Stock Exchange, Inc., the approval and adoption of the New Gaylord Stock Plan
requires the affirmative vote of the holders of a majority of the votes cast on
such proposal by the holders of the outstanding shares of Company Common Stock,
voting as a single class, provided that the total number of votes cast on such
proposal represents over 50% of the number of votes entitled to be cast on such
proposal.
Each share of Company Class A Common Stock is entitled to one vote and each
share of Company Class B Common Stock is entitled to five votes on each proposal
properly presented at the Special Meeting. In 1990, certain stockholders of the
Company, including the Company's Chairman, Edward L. Gaylord, established a
voting trust (the "Voting Trust") under which the trustees (the "Voting
Trustees") have the right to vote the shares of Company Class B Common Stock
held in the Voting Trust. In connection with the execution of the Merger
Agreement, the Voting Trustees and certain other stockholders of the Company
entered into an agreement with Westinghouse pursuant to which the Voting
Trustees and such other stockholders have agreed to vote the shares of Company
Common Stock held by them, representing approximately 65% of the total number of
votes entitled to be cast at the Special Meeting, in favor of the approval and
adoption of the Merger Agreement. The Voting Trustees and such stockholders have
also advised the Company that they intend to vote all of their shares in favor
of the approval and adoption of the
<PAGE> 6
New Gaylord Stock Plan. Therefore, the approval and adoption of the Merger
Agreement and the New Gaylord Stock Plan are assured.
The Board of Directors has fixed the close of business on June 19, 1997 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Special Meeting and any adjournments or
postponements thereof. Only stockholders of record at the close of business on
the Record Date are entitled to notice of and to vote at such meeting. A list of
such stockholders will be available for examination by any stockholder for any
purpose germane to the Special Meeting at the offices of the Company located at
One Gaylord Drive, Nashville, Tennessee 37214, at least ten days prior to the
Special Meeting.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL
MEETING, MANAGEMENT DESIRES TO HAVE THE MAXIMUM REPRESENTATION AT THE SPECIAL
MEETING AND RESPECTFULLY REQUESTS THAT YOU DATE, EXECUTE AND MAIL PROMPTLY THE
ENCLOSED PROXY IN THE ENCLOSED STAMPED ENVELOPE FOR WHICH NO ADDITIONAL POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES. A PROXY MAY BE REVOKED AT ANY TIME
PRIOR TO ITS USE AS SPECIFIED IN THE ENCLOSED PROXY STATEMENT/PROSPECTUS. PLEASE
DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS
CONSUMMATED, INSTRUCTIONS WILL BE SENT TO YOU REGARDING THE SURRENDER AND
EXCHANGE OF YOUR STOCK CERTIFICATES.
By order of the Board of Directors,
/s/ F.M. Wentworth Jr.
F.M. Wentworth, Jr.
Secretary
Nashville, Tennessee
July 16, 1997
<PAGE> 7
GAYLORD ENTERTAINMENT COMPANY
PROXY STATEMENT FOR SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON FRIDAY, AUGUST 15, 1997
------------------
WESTINGHOUSE ELECTRIC CORPORATION
PROSPECTUS
COMMON STOCK, PAR VALUE $1.00 PER SHARE
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished to the holders of (a) Class A Common Stock, $.01 par value ("Company
Class A Common Stock"), of Gaylord Entertainment Company, a Delaware corporation
(the "Company" and, together with its subsidiaries, "Gaylord"), and (b) Class B
Common Stock, $.01 par value ("Company Class B Common Stock" and, together with
Company Class A Common Stock, "Company Common Stock"), of the Company in
connection with the solicitation of proxies by the Board of Directors of the
Company (the "Company Board") for use at a special meeting of stockholders of
the Company to be held on Friday, August 15, 1997, and at any and all
adjournments or postponements thereof (the "Special Meeting").
------------------ (continued on next page)
The obligations of the Company and Westinghouse to consummate the Merger
(as defined herein) are subject to the satisfaction or waiver of certain
conditions including, among other things: (i) approval and adoption of the
Merger Agreement by the Company's stockholders at the Special Meeting (the
"Merger Approval"); (ii) the issuance by the United States Internal Revenue
Service (the "IRS") of certain rulings regarding the tax-free nature of (a) the
transfer of certain assets and related liabilities to New Gaylord Entertainment
Company (formerly known as Gaylord Broadcasting Company), a wholly owned
subsidiary of the Company ("New Gaylord"), and its subsidiaries prior to the
Company Distribution (as defined herein), (b) the Company Distribution, (c) the
Merger, and (d) certain other transactions that are part of the Restructuring
(as defined herein) (except that under certain circumstances such transactions
may be consummated if opinions of counsel substantially to the effect of the
requested rulings are received with respect to (d) above); (iii) the absence of
any adverse tax development that would cause the Company Distribution to be
taxable to the Company or the Company's stockholders; (iv) the receipt of all
necessary governmental consents and approvals; and (v) the consummation of the
Restructuring and the Company Distribution. See "THE COMPANY DISTRIBUTION AND
RELATED TRANSACTIONS--Terms of the Distribution Agreement," "THE MERGER
AGREEMENT--Conditions to Each Party's Obligation to Effect the Merger,"
"--Conditions to the Obligations of Westinghouse and Sub" and "--Conditions to
the Obligations of the Company." SEE "RISK FACTORS" COMMENCING ON PAGE 21 FOR A
DESCRIPTION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED BEFORE VOTING.
This Proxy Statement/Prospectus, the attached Notice of Special Meeting of
Stockholders and the enclosed form of proxy are first being mailed to
stockholders of the Company on or about July 18, 1997.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/ PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The date of this Proxy Statement/Prospectus is July 16, 1997.
<PAGE> 8
At the Special Meeting, stockholders of the Company will be asked to
consider and vote upon the following proposals (each a "Proposal" and
collectively, the "Proposals"):
1. The approval and adoption of the Agreement and Plan of Merger, dated as
of February 9, 1997, a copy of which is attached as Annex I hereto (the "Merger
Agreement"), among Westinghouse Electric Corporation, a Pennsylvania corporation
("Westinghouse"), G Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Westinghouse ("Sub"), and the Company, pursuant to which Sub will
be merged with and into the Company (the "Merger") and each share of Company
Common Stock outstanding immediately prior to the Merger will be converted into
the right to receive a number of shares of Common Stock, par value $1.00 per
share, of Westinghouse ("Westinghouse Common Stock") determined pursuant to a
formula set forth in the Merger Agreement.
2. The approval and adoption of the New Gaylord Entertainment Company 1997
Stock Option and Incentive Plan, a copy of which is attached as Annex VII hereto
(the "New Gaylord Stock Plan").
The approval and adoption of the Merger Agreement requires the affirmative
vote of the holders of a majority of the votes entitled to be cast at the
Special Meeting by the holders of the outstanding shares of Company Common
Stock, voting as a single class. The approval and adoption of the New Gaylord
Stock Plan requires the affirmative vote of the holders of a majority of the
votes cast on such Proposal by the holders of the outstanding shares of Company
Common Stock, voting as a single class, provided that the total number of votes
cast on such Proposal represents over 50% of the number of votes entitled to be
cast on such Proposal. Each share of Company Class A Common Stock is entitled to
one vote and each share of Company Class B Common Stock is entitled to five
votes on each Proposal. Certain stockholders of the Company have entered into an
agreement with Westinghouse in which they have committed to vote certain shares
of Company Common Stock representing approximately 65% of the outstanding voting
power of Company Common Stock in favor of the approval and adoption of the
Merger Agreement. Therefore, the approval and adoption of the Merger Agreement
are assured. Such stockholders have also informed the Company that they intend
to vote in favor of the approval and adoption of the New Gaylord Stock Plan.
Therefore, its approval and adoption are also assured. See "THE SPECIAL
MEETING--Required Vote" and "THE MERGER--The Stockholder Agreement."
The number of shares of Westinghouse Common Stock to be received by the
Company's stockholders in connection with the Merger for each outstanding share
of Company Common Stock (subject to the proviso to this sentence, the "Per Share
Merger Consideration") will be equal to (i) the quotient of (x) $1.55 billion
divided by (y) the number of shares of Company Common Stock issued and
outstanding immediately prior to the time the Merger becomes effective (the
"Effective Time"), divided by (ii) the average of the daily closing prices per
share of Westinghouse Common Stock as reported on the New York Stock Exchange
("NYSE") Composite Transactions List for the 15 consecutive full NYSE trading
days immediately preceding the third full NYSE trading day prior to the
Effective Time (the "Averaging Period"); provided, that Westinghouse will not be
required to issue more than 110 million shares of Westinghouse Common Stock in
the Merger (or 88 million shares in the unlikely event that Westinghouse
consummates the anticipated separation of its power-related businesses
(including Energy Systems (including the Process Control Division), Power
Generation and Government Operations) and non-power-related businesses into two
companies (the "Westinghouse Distribution") prior to the Effective Time). If the
issuance of 110 million shares (or 88 million shares, as the case may be) of
Westinghouse Common Stock would result in the Company's stockholders receiving
shares with an aggregate value of less than $1.55 billion (calculated in
accordance with the Merger Agreement as described above), then the Company would
have the right to terminate the Merger Agreement, subject to Westinghouse's
right to issue additional shares. Based on the average of the daily closing
prices per share of Westinghouse Common Stock as reported on the NYSE Composite
Transactions List for the 15 day trading period ended July 15, 1997 ($23.688)
and on the number of shares of Company Common Stock outstanding on that date,
the Per Share Merger Consideration would have been 0.673 shares of Westinghouse
Common Stock. However, the actual Per Share Merger Consideration at the
Effective Time may be greater or less than the above number. So long as the
average of the daily closing prices per share of Westinghouse Common Stock for
the Averaging Period is at or above $14.09 (or $17.61 in the unlikely event that
the Westinghouse Distribution is consummated prior to the consummation of the
Merger), the
2
<PAGE> 9
Company's stockholders will receive shares of Westinghouse Common Stock having
an aggregate value of $1.55 billion (calculated in accordance with the Merger
Agreement). If the average of the daily closing prices per share of Westinghouse
Common Stock for the Averaging Period is $14.09 (or $17.61 in the unlikely event
that the Westinghouse Distribution is consummated prior to the consummation of
the Merger), based on the number of shares of Company Common Stock outstanding
on the Record Date the Per Share Merger Consideration would be 1.141 shares of
Westinghouse Common Stock (or 0.913 shares in the unlikely event that the
Westinghouse Distribution is consummated prior to the consummation of the
Merger).
Prior to the consummation of the Merger, the Company will be restructured
(the "Restructuring") (pursuant to the terms of the Agreement and Plan of
Distribution to be entered into by the Company and New Gaylord, the form of
which is attached as Annex II hereto (the "Distribution Agreement")) so that the
assets that are part of the Company's hospitality, attractions, music,
television and radio businesses, as well as the Company's interest in the
Country Music Television cable networks outside of the United States and Canada
("CMT International") and the option to acquire 95% of and the assets used in
the management of Z Music, Inc. ("Z Music"), a cable network currently featuring
primarily contemporary Christian music videos, will be transferred to or
retained by New Gaylord or one of its subsidiaries (after giving effect to the
Restructuring, collectively the "New Gaylord Companies"). In addition, the
Restructuring will result in certain of the assets of the Company's cable
networks business, consisting primarily of The Nashville Network ("TNN") and the
United States and Canadian operations of Country Music Television ("CMT"), and
certain other related businesses (collectively, the "Cable Networks Business"),
being held by the Company or one of its subsidiaries other than the New Gaylord
Companies (collectively, the "Cable Networks Companies"). In connection with the
Restructuring, New Gaylord will, or will cause one of its subsidiaries to,
unconditionally assume all the liabilities of Gaylord except to the extent that
they arise out of the Cable Networks Business which the Company will, or will
cause one of its subsidiaries to, retain or assume. See "SUMMARY--The Company
Distribution and Related Transactions." Upon completion of the Restructuring and
on the day prior to the Effective Time, the Company will distribute (the
"Company Distribution") to each holder of record of Company Common Stock as of
the record date for the Company Distribution that number of shares of Common
Stock, $.01 par value, of New Gaylord ("New Gaylord Common Stock") equal to
one-third of the number of shares of Company Common Stock held by such holder.
Cash will be distributed in lieu of any fractional shares of New Gaylord Common
Stock.
Although the shares of New Gaylord Common Stock to be distributed pursuant
to the Company Distribution are not part of the Merger consideration, the
Company Distribution will be consummated only if the Merger is approved and
adopted by the Company's stockholders and all other conditions to consummation
of the Merger (other than completion of the Company Distribution) have been
satisfied or waived.
This Proxy Statement/Prospectus also constitutes the Prospectus of
Westinghouse filed as part of a Registration Statement on Form S-4 (the
"Westinghouse Form S-4") with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the registration of shares of Westinghouse Common Stock to be issued in
connection with the Merger. Each share of Westinghouse Common Stock issued in
connection with the Merger will also be accompanied by a right (evidenced only
by the certificate representing such common stock) to purchase, under certain
circumstances, Series A Participating Preferred Stock of Westinghouse (the
"Series A Preferred Stock") pursuant to a Rights Agreement dated as of December
28, 1995 (the "Westinghouse Rights Agreement") between Westinghouse and First
Chicago Trust Company of New York, as Rights Agent. See "DESCRIPTION OF
WESTINGHOUSE CAPITAL STOCK."
The Company and Westinghouse currently anticipate that the Merger will be
consummated prior to the consummation of the Westinghouse Distribution. In such
event, stockholders of the Company who become shareholders of Westinghouse in
connection with the Merger and who continue to hold their shares of Westinghouse
Common Stock on the record date for the Westinghouse Distribution will be
entitled to participate in the Westinghouse Distribution on the same basis as
all other shareholders of Westinghouse. See "RECENT DEVELOPMENTS" and "THE
MERGER AGREEMENT--Alternative Transaction."
3
<PAGE> 10
Westinghouse Common Stock is listed for trading under the symbol "WX" on
the NYSE, the Chicago Stock Exchange (the "CSE"), the Pacific Stock Exchange
(the "PSE"), the Boston Stock Exchange (the "BSE") and the Philadelphia Stock
Exchange (the "PHSE") and Company Class A Common Stock is listed for trading
under the symbol "GET" on the NYSE. On February 7, 1997, the last trading day
prior to the execution of the Merger Agreement, the last reported sales prices
of Westinghouse Common Stock and Company Class A Common Stock, as reported on
the NYSE Composite Transactions List, were $17.75 per share and $25.375 per
share, respectively. On July 15, 1997, the last trading day prior to the
printing of this Proxy Statement/Prospectus, the last reported sales prices of
Westinghouse Common Stock and Company Class A Common Stock, as reported on the
NYSE Composite Transactions List, were $24.625 per share and $23.063 per share,
respectively.
4
<PAGE> 11
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION................................................................. 7
INCORPORATION OF DOCUMENTS BY REFERENCE............................................... 8
FORWARD-LOOKING STATEMENTS............................................................ 9
SUMMARY............................................................................... 10
The Westinghouse Group, Gaylord and the Cable Networks Business..................... 10
The Special Meeting................................................................. 11
The Merger and the Merger Agreement................................................. 11
Certain U.S. Federal Income Tax Considerations...................................... 15
The Company Distribution and Related Transactions................................... 15
The Post-Closing Covenants Agreement................................................ 16
The Tax Disaffiliation Agreement.................................................... 16
Westinghouse Selected Consolidated Historical Financial Data........................ 17
Cable Networks Business Selected Combined Historical Financial Data................. 18
Selected Unaudited Pro Forma Financial Information.................................. 19
RISK FACTORS.......................................................................... 21
RECENT DEVELOPMENTS................................................................... 24
THE SPECIAL MEETING................................................................... 25
General............................................................................. 25
Record Date; Stockholders Entitled to Vote.......................................... 25
Required Vote....................................................................... 25
Stock Ownership of Directors and Management......................................... 26
Proxies; Quorum..................................................................... 26
Solicitation of Proxies............................................................. 26
THE MERGER............................................................................ 27
General............................................................................. 27
Background of the Merger............................................................ 27
The Company's Reasons for the Merger; Recommendation of its Board of Directors...... 29
Interests of Certain Persons in the Merger.......................................... 30
Opinion of the Company's Financial Advisor.......................................... 31
Resale of Shares of Westinghouse Common Stock Issued in the Merger; Affiliates...... 34
Board Representation................................................................ 35
Accounting Treatment................................................................ 35
Absence of Dissenters' Appraisal Rights............................................. 35
Stock Exchange Listing.............................................................. 35
Delisting and Deregistration of Company Class A Common Stock........................ 35
The Stockholder Agreement........................................................... 36
THE MERGER AGREEMENT.................................................................. 38
The Merger.......................................................................... 38
Per Share Merger Consideration...................................................... 38
Conversion of Company Common Stock.................................................. 38
No Fractional Shares................................................................ 39
Effective Time of the Merger........................................................ 39
Exchange of Company Common Stock.................................................... 39
Employee Matters and Stock Options.................................................. 40
Representations and Warranties; Survival............................................ 41
Business of Gaylord Pending the Merger.............................................. 41
Business of Westinghouse Pending the Merger......................................... 43
Conditions to Each Party's Obligation to Effect the Merger.......................... 43
Conditions to the Obligations of Westinghouse and Sub............................... 44
Conditions to the Obligations of the Company........................................ 46
</TABLE>
5
<PAGE> 12
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Directors and Officers.............................................................. 46
Certificate of Incorporation and By-Laws............................................ 47
No Solicitation..................................................................... 47
Noncompetition Agreements........................................................... 48
Alternative Transaction............................................................. 48
Termination......................................................................... 48
Fees and Expenses................................................................... 50
Amendment........................................................................... 50
Waiver.............................................................................. 50
Substitution of Parties............................................................. 50
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS........................................ 51
REGULATORY REVIEWS AND APPROVALS...................................................... 53
THE COMPANY DISTRIBUTION AND RELATED TRANSACTIONS..................................... 54
General............................................................................. 54
Terms of the Distribution Agreement................................................. 54
Terms of the Ancillary Agreements................................................... 57
THE POST-CLOSING COVENANTS AGREEMENT.................................................. 59
Indemnification..................................................................... 59
Agreement Not to Compete............................................................ 60
Working Capital Adjustment.......................................................... 61
Other Agreements.................................................................... 61
THE TAX DISAFFILIATION AGREEMENT...................................................... 62
Terms of the Tax Disaffiliation Agreement........................................... 62
COMPARATIVE PER SHARE MARKET INFORMATION.............................................. 63
UNAUDITED PRO FORMA FINANCIAL INFORMATION............................................. 64
APPROVAL AND ADOPTION OF THE NEW GAYLORD STOCK PLAN................................... 73
General............................................................................. 73
Summary of the New Gaylord Stock Plan............................................... 73
Certain U.S. Federal Income Tax Consequences........................................ 76
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................ 77
DESCRIPTION OF WESTINGHOUSE CAPITAL STOCK............................................. 77
COMPARISON OF THE RIGHTS OF WESTINGHOUSE AND COMPANY STOCKHOLDERS..................... 79
BUSINESS OF THE WESTINGHOUSE GROUP.................................................... 88
BUSINESS OF GAYLORD AND THE CABLE NETWORKS BUSINESS................................... 90
STOCKHOLDER PROPOSALS................................................................. 91
EXPERTS............................................................................... 91
LEGAL OPINIONS........................................................................ 92
OTHER MATTERS......................................................................... 92
INDEX TO CABLE NETWORKS BUSINESS COMBINED FINANCIAL STATEMENTS........................ F-1
</TABLE>
ANNEX I AGREEMENT AND PLAN OF MERGER DATED AS OF FEBRUARY 9, 1997
ANNEX II FORM OF DISTRIBUTION AGREEMENT
ANNEX III STOCKHOLDER AGREEMENT DATED AS OF FEBRUARY 9, 1997
ANNEX IV FORM OF POST-CLOSING COVENANTS AGREEMENT
ANNEX V FORM OF TAX DISAFFILIATION AGREEMENT
ANNEX VI OPINION OF MERRILL LYNCH & CO.
ANNEX VII NEW GAYLORD STOCK PLAN
6
<PAGE> 13
AVAILABLE INFORMATION
Westinghouse and the Company are, and, as a result of the Company
Distribution, New Gaylord will become, subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file or will file, as the case may be, reports, proxy
statements and other information with the SEC. Such reports, proxy statements
and other information may be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of
the SEC: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60611; and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such reports, proxy statements and other information may
be obtained from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. The SEC maintains a Web site
at http://www.sec.gov that contains such reports, proxy statements and other
information. Copies of such materials filed by Westinghouse can be inspected at
the NYSE, 20 Broad Street, New York, New York 10005; the CSE, One Financial
Place, 440 South LaSalle Street, Chicago, Illinois 60605; the PSE, 301 Pine
Street, San Francisco, California 94104; the BSE, 1 Boston Place, Boston,
Massachusetts 02108; and the PHSE, 1900 Market Street, Philadelphia,
Pennsylvania 19103. Copies of such materials filed by the Company can be
inspected at the NYSE at the address noted above. After consummation of the
Merger, the Company will no longer be required to file reports, proxy statements
or other information with the SEC. Instead, such information will be included,
to the extent required, in filings made by Westinghouse and New Gaylord.
This Proxy Statement/Prospectus does not contain all of the information set
forth in the Westinghouse Form S-4, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. Reference is made to the
Westinghouse Form S-4 and the Exhibits thereto for further information.
Statements contained or incorporated by reference herein concerning the
provisions of any agreement or other document filed as an Exhibit to the
Westinghouse Form S-4 or otherwise filed with the SEC are not necessarily
complete and reference is hereby made to the copy thereof so filed for more
detailed information, each such statement being qualified in its entirety by
such reference. In connection with the Company Distribution, the Company has
filed a Registration Statement on Form 10 (the "New Gaylord Form 10", and
together with the Westinghouse Form S-4, the "Registration Statements"). Certain
important information relating to the Company Distribution and New Gaylord is
set forth in the Information Statement filed as part of the New Gaylord Form 10
(the "Information Statement"). A copy of the Information Statement accompanies
this Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS THAT
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS
(EXCLUDING EXHIBITS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) ARE AVAILABLE, WITHOUT
CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF SHARES OF COMPANY
COMMON STOCK TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN
OR ORAL REQUEST TO, IN THE CASE OF DOCUMENTS RELATING TO WESTINGHOUSE,
WESTINGHOUSE ELECTRIC CORPORATION, 11 STANWIX STREET, ROOM 1064, PITTSBURGH,
PENNSYLVANIA 15222, ATTENTION: CORPORATE INFORMATION CENTER (TELEPHONE: (412)
244-2300), AND, IN THE CASE OF DOCUMENTS RELATING TO GAYLORD, GAYLORD
ENTERTAINMENT COMPANY, ONE GAYLORD DRIVE, NASHVILLE, TENNESSEE 37214, ATTENTION:
F.M. WENTWORTH, JR., CORPORATE SECRETARY (TELEPHONE: (615) 316-6000). IN ORDER
TO ENSURE DELIVERY OF DOCUMENTS PRIOR TO THE SPECIAL MEETING, ANY REQUEST
THEREFOR SHOULD BE MADE NOT LATER THAN AUGUST 8, 1997.
7
<PAGE> 14
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents heretofore filed with the SEC pursuant to the
Exchange Act are incorporated herein by reference:
1. Westinghouse's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended by Form 10-K/A Amendment No. 1 filed on July
14, 1997 (the "1996 Westinghouse 10-K");
2. The portions of Westinghouse's Notice of 1997 Annual Meeting and
Proxy Statement that have been incorporated by reference in the 1996
Westinghouse 10-K;
3. Westinghouse's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1997, as amended by Form 10-Q/A Amendment No. 1
filed on July 14, 1997 (the "1997 Westinghouse 10-Q");
4. Westinghouse's Current Reports on Form 8-K reporting events on
December 31, 1996, February 10, 1997, February 11, 1997, April 25, 1997,
May 1, 1997, May 23, 1997, May 28, 1997, May 30, 1997 and June 18, 1997;
5. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended by Form 10-K/A filed on June 11, 1997 (the
"1996 Company 10-K");
6. The Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1997; and
7. The Company's Current Report on Form 8-K reporting events on
February 10, 1997.
All reports and other documents filed by either Westinghouse or the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Proxy Statement/Prospectus and prior to the date of the Special
Meeting shall be deemed to be incorporated by reference herein and to be a part
hereof from the dates of filing such reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein, or in any
other subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE
HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY EITHER WESTINGHOUSE OR THE COMPANY.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES, NOR DOES IT CONSTITUTE THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE WESTINGHOUSE GROUP (AS DEFINED
BELOW) OR GAYLORD, SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
As used herein, unless the context otherwise clearly requires,
"Westinghouse" refers to Westinghouse Electric Corporation, the "Westinghouse
Group" refers to Westinghouse Electric Corporation and its subsidiaries, the
"Company" refers to Gaylord Entertainment Company and "Gaylord" refers to
Gaylord Entertainment Company and its subsidiaries (before giving effect to the
Restructuring and the Company Distribution). Capitalized terms not defined in
this Proxy Statement/Prospectus have the respective meanings specified in the
Merger Agreement.
------------------
All information contained in this Proxy Statement/Prospectus with respect
to the Westinghouse Group has been provided by Westinghouse. All information
contained in this Proxy Statement/Prospectus with respect to Gaylord has been
provided by the Company.
8
<PAGE> 15
FORWARD-LOOKING STATEMENTS
Certain statements in this Proxy Statement/Prospectus (including the
documents incorporated by reference herein) constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance,
or achievements of the Westinghouse Group, the Cable Networks Business and the
New Gaylord Companies to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. When used in this Proxy Statement/Prospectus, the words "estimate,"
"project," "intend," "expect" and similar expressions, when used in connection
with the Westinghouse Group, the Cable Networks Business or the New Gaylord
Companies, including their respective management, are intended to identify
forward-looking statements. These forward-looking statements were based on
various factors and were derived utilizing numerous important assumptions and
other important factors that could cause actual results to differ materially
from those in the forward-looking statements. Important assumptions and other
important factors that could cause actual results to differ materially from
those in the forward-looking statements with respect to the Westinghouse Group
and the Cable Networks Business include, but are not limited to: the
Westinghouse Group's ability to increase audience share for its programs,
particularly in key demographic segments; uncertainty as to the effectiveness of
the Westinghouse Group's strategy to grow through international expansion,
particularly in its industrial and technology businesses; uncertainty as to the
effect of increased competition across all of the Westinghouse Group's
businesses; uncertainty as to continued growth in the popularity of country
music and country lifestyles; consumer tastes and preferences for the
programming and other entertainment offerings of the Cable Networks Business;
the ability of the Westinghouse Group to successfully integrate all of its
recent acquisitions; and uncertainty as to whether the Westinghouse Distribution
will occur, the possible timing thereof and the allocation of assets and
liabilities therein. Important assumptions and other important factors that
could cause actual results to differ materially from those in the
forward-looking statements with respect to the New Gaylord Companies include,
but are not limited to: uncertainty as to the New Gaylord Companies' future
profitability without the Cable Networks Business; the growth in the popularity
of Christian music and family values lifestyles; the advertising market in the
United States in general and in the New Gaylord Companies' local television and
radio markets; the perceived attractiveness of Nashville, Tennessee as a
convention and tourist destination; competition in the New Gaylord Companies'
existing and potential future lines of business; the New Gaylord Companies'
ability to integrate and successfully operate acquired businesses and the risks
associated with such businesses; and uncertainty as to the future profitability
of any acquired businesses. Other factors and assumptions not identified above
were also involved in the derivation of these forward-looking statements and the
failure of such other assumptions to be realized as well as other factors may
also cause actual results to differ materially from those projected. The
Westinghouse Group, Gaylord and the New Gaylord Companies assume no obligation
to update these forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking
statements.
9
<PAGE> 16
SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Proxy Statement/Prospectus. Reference is made
to, and this summary is qualified in its entirety by, the more detailed
information contained or incorporated by reference in this Proxy
Statement/Prospectus and the Annexes hereto.
------------------
STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THIS PROXY
STATEMENT/PROSPECTUS, INCLUDING THE ANNEXES HERETO AND THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE, IN THEIR ENTIRETY AND SHOULD CONSIDER
CAREFULLY THE INFORMATION SET FORTH BELOW UNDER THE HEADING "RISK FACTORS."
------------------
THE WESTINGHOUSE GROUP, GAYLORD AND THE CABLE NETWORKS BUSINESS
The Westinghouse Group. Westinghouse is a global company which operates
its businesses through the Westinghouse/CBS Group and the Industries &
Technology Group. The Westinghouse/CBS Group combines the operations of CBS Inc.
("CBS"), which Westinghouse acquired in 1995, Infinity Broadcasting Corporation
("Infinity"), which Westinghouse acquired in 1996, and the former Westinghouse
Broadcasting Company, Inc., and includes the CBS Television Network; CBS
Television Stations; CBS Radio; CBS Cable; and EYEMARK Entertainment. The
Westinghouse/CBS Group operates in the principal business areas of television
and radio station ownership and broadcast and cable programming. The Industries
& Technology Group provides services, fuel and equipment for the nuclear energy
market, services and equipment for the power generation market, transport
temperature control equipment and management services at government-owned
facilities. Westinghouse has announced that it intends to separate its
power-related and non-power-related businesses during 1997. See "RECENT
DEVELOPMENTS." Westinghouse's principal executive offices are located at 11
Stanwix Street, Pittsburgh, Pennsylvania 15222, and its telephone number is
(412) 244-2300. See "BUSINESS OF THE WESTINGHOUSE GROUP."
Gaylord and the Cable Networks Business. Gaylord is a diversified
entertainment and communications company whose businesses include hospitality,
attractions, music, television, radio and cable networks. Gaylord's cable
networks business consists primarily of TNN, CMT, CMT International and the
management of and option to acquire 95% of Z Music. Gaylord's hospitality and
attractions operations consist of an interrelated group of businesses based in
Nashville, Tennessee including the Grand Ole Opry, the Opryland Hotel, the
Opryland theme park, the Wildhorse Saloon, the Ryman Auditorium, the General
Jackson (an entertainment showboat) and related businesses. Gaylord's music
business includes recorded music and music publishing and consists primarily of
Word Entertainment and Opryland Music Group. Gaylord's broadcasting operations
include broadcast television station KTVT (Fort Worth-Dallas, Texas), and three
radio stations: WSM-AM, WSM-FM, and WWTN-FM, all of which are based in
Nashville. Gaylord's principal executive offices are located at One Gaylord
Drive, Nashville, Tennessee 37214, and its telephone number is (615) 316-6000.
The Cable Networks Business, which will be acquired by Westinghouse
pursuant to the Merger, consists primarily of Gaylord's cable networks segment,
including TNN and CMT, but excluding CMT International and the management of and
option to acquire 95% of Z Music. CMT International and the management of and
option to acquire 95% of Z Music, together with all other businesses and assets
of Gaylord that are not part of the Cable Networks Business (collectively, the
"New Gaylord Business"), will, as a result of the Restructuring, be transferred
to or retained by one of the New Gaylord Companies. Upon completion of the
Restructuring and on the day prior to the Effective Time, all the outstanding
shares of New Gaylord Common Stock will be distributed to the Company's
stockholders. See "THE COMPANY DISTRIBUTION AND RELATED TRANSACTIONS--Terms of
the Distribution Agreement" and "BUSINESS OF GAYLORD AND THE CABLE NETWORKS
BUSINESS."
Detailed information concerning New Gaylord, including historical financial
information and pro forma financial information, which gives effect to the
Restructuring, the Company Distribution and the Merger, as
10
<PAGE> 17
well as information concerning the business and operations of New Gaylord
following the Restructuring, the Company Distribution and the Merger, its
directors and officers and their stock ownership, remuneration and options
granted to them, is contained in the Information Statement, a copy of which
accompanies this Proxy Statement/Prospectus.
THE SPECIAL MEETING
General. The Special Meeting will be held at the Ryman Auditorium, 116 5th
Avenue North, Nashville, Tennessee, on Friday, August 15, 1997, at 10:00 a.m.,
local time. At the Special Meeting, the Company's stockholders will be asked to
consider and vote upon (i) the approval and adoption of the Merger Agreement and
(ii) the approval and adoption of the New Gaylord Stock Plan. In accordance with
the Restated By-laws of the Company, as amended (the "Company By-Laws"), no
business other than that specified in the Notice of Special Meeting may properly
be brought before the Special Meeting.
Record Date. The Company Board has fixed the close of business on June 19,
1997 as the record date (the "Record Date") for the determination of the
stockholders of the Company entitled to receive notice of and to vote at the
Special Meeting and at any adjournments or postponements thereof. Only
stockholders of record at the close of business on the Record Date are entitled
to notice of and to vote at such meeting.
Required Vote. At the close of business on the Record Date, 45,449,719
shares of Company Class A Common Stock and 50,943,845 shares of Company Class B
Common Stock were outstanding. The approval and adoption of the Merger Agreement
requires the affirmative vote of the holders of a majority of the votes entitled
to be cast at the Special Meeting by the holders of the outstanding shares of
Company Common Stock, voting as a single class. Under Section 162(m) of the
United States Internal Revenue Code of 1986, as amended (the "Code"), and the
rules of the NYSE, the approval and adoption of the New Gaylord Stock Plan
requires the affirmative vote of the holders of a majority of the votes cast on
such Proposal by the holders of the outstanding shares of Company Common Stock,
voting as a single class, provided that the total number of votes cast on such
Proposal represents over 50% of the number of votes entitled to be cast on such
Proposal. Each share of Company Class A Common Stock is entitled to one vote and
each share of Company Class B Common Stock is entitled to five votes on each
Proposal properly presented at the Special Meeting.
Certain stockholders of the Company have entered into an agreement with
Westinghouse in which they have committed to vote certain shares of Company
Common Stock representing approximately 65% of the outstanding voting power of
Company Common Stock in favor of the approval and adoption of the Merger
Agreement. Therefore, the approval and adoption of the Merger Agreement are
assured. Such stockholders have also informed the Company that they intend to
vote all of their shares in favor of the approval and adoption of the New
Gaylord Stock Plan. Therefore, its approval and adoption are also assured. See
"THE SPECIAL MEETING--Required Vote" and "THE MERGER--The Stockholder
Agreement."
Proxies; Quorum. The shares of Company Common Stock represented by valid
proxies received will be voted in the manner specified on the proxies. Where a
specific choice is not indicated, the shares represented by valid proxies
received will be voted FOR the approval and adoption of (i) the Merger Agreement
and (ii) the New Gaylord Stock Plan. An abstention will have the effect of a
vote cast against approval and adoption of (i) the Merger Agreement and (ii) the
New Gaylord Stock Plan. Brokers who hold shares of Company Class A Common Stock
as nominees will not have discretionary authority to vote such shares in the
absence of instructions from the beneficial owners thereof. Any shares which are
not voted because the nominee-broker lacks such discretionary authority will (i)
have the effect of votes cast against approval and adoption of the Merger
Agreement and (ii) be disregarded and have no effect on the approval and
adoption of the New Gaylord Stock Plan. See "THE SPECIAL MEETING--Required
Vote." The presence, in person or by properly executed proxy, of the holders of
a majority of the votes represented by the issued and outstanding shares of
Company Common Stock, considered as a single class, is necessary to constitute a
quorum at the Special Meeting.
THE MERGER AND THE MERGER AGREEMENT
General. At the Effective Time, Sub will be merged with and into the
Company, with the Company continuing as the surviving corporation (the
"Surviving Corporation") and a wholly owned subsidiary of
11
<PAGE> 18
Westinghouse. As a result of the Merger, the separate corporate existence of Sub
will cease and the Company will succeed to all the rights and be responsible for
all the obligations of Sub in accordance with the General Corporation Law of the
State of Delaware (the "DGCL"). The Per Share Merger Consideration to be
received by the Company's stockholders in the Merger will be equal to (i) the
quotient of (x) $1.55 billion divided by (y) the number of shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time
divided by (ii) the average of the daily closing prices per share of
Westinghouse Common Stock as reported on the NYSE Composite Transactions List
for the Averaging Period; provided, that Westinghouse will not be required to
issue more than 110 million shares of Westinghouse Common Stock in the Merger
(or 88 million shares in the unlikely event that Westinghouse consummates the
Westinghouse Distribution prior to the Effective Time). If the issuance of 110
million shares (or 88 million shares, as the case may be) of Westinghouse Common
Stock would result in the Company's stockholders receiving shares with an
aggregate value of less than $1.55 billion (calculated in accordance with the
Merger Agreement as described above), then the Company would have the right to
terminate the Merger Agreement, subject to Westinghouse's right to issue
additional shares. Based on the average of the daily closing prices per share of
Westinghouse Common Stock as reported on the NYSE Composite Transactions List
for the 15 day trading period ended July 15, 1997 ($23.688) and on the number of
shares of Company Common Stock outstanding on that date, the Per Share Merger
Consideration would have been 0.673 shares of Westinghouse Common Stock.
However, the actual Per Share Merger Consideration at the Effective Time may be
greater or less than the above number.
The Company and Westinghouse currently anticipate that the Merger will be
consummated prior to the consummation of the Westinghouse Distribution. However,
the Merger Agreement provides that under certain circumstances the Merger will
not be consummated until after the consummation of the Westinghouse Distribution
(the "Alternative Transaction") and in such event each share of Company Common
Stock will be converted in the Merger into the right to receive a number of
shares of Westinghouse Common Stock calculated in accordance with the Merger
Agreement, except that Westinghouse will not be required to issue more than 88
million shares of Westinghouse Common Stock. If the issuance of 88 million
shares of Westinghouse Common Stock would result in the Company's stockholders
receiving shares with an aggregate market value of less than $1.55 billion
(calculated in accordance with the Merger Agreement), then the Company would
have the right to terminate the Merger Agreement, subject to Westinghouse's
right to issue additional shares. In the unlikely event that the Alternative
Transaction is to be consummated, the Company would mail additional information
to its stockholders.
The calculation of the Per Share Merger Consideration is more fully
described under "THE MERGER AGREEMENT--Per Share Merger Consideration,"
"--Alternative Transaction" and "--Conversion of Company Common Stock." The
Company's termination right and Westinghouse's right to increase the number of
shares of Westinghouse Common Stock it will issue in connection with the Merger
are more fully described under "THE MERGER AGREEMENT--Per Share Merger
Consideration," "--Alternative Transaction" and "--Termination."
HOLDERS OF COMPANY COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES
REPRESENTING SHARES OF COMPANY COMMON STOCK WITH THE ENCLOSED PROXY CARD. IF THE
MERGER IS CONSUMMATED, A LETTER OF TRANSMITTAL WILL BE MAILED AS SOON AS
PRACTICABLE AFTER THE MERGER TO EACH PERSON WHO WAS A HOLDER OF OUTSTANDING
SHARES OF COMPANY COMMON STOCK IMMEDIATELY PRIOR TO THE CONSUMMATION OF THE
MERGER. COMPANY STOCKHOLDERS SHOULD SEND CERTIFICATES REPRESENTING COMPANY
COMMON STOCK TO THE EXCHANGE AGENT (AS DEFINED HEREIN) ONLY AFTER THEY RECEIVE,
AND IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED IN, THE LETTER OF TRANSMITTAL.
See "THE MERGER AGREEMENT--Exchange of Company Common Stock."
As soon as practicable on or after the date specified by the parties for
the closing of the Merger (the "Closing Date"), the parties to the Merger
Agreement will file a Certificate of Merger with the Secretary of State of the
State of Delaware (the "Certificate of Merger"). The Certificate of Merger will
specify that the
12
<PAGE> 19
Merger will become effective at 12:01 a.m. on the day following the Closing Date
or at such other time as Westinghouse and the Company may agree to specify in
the Certificate of Merger. See "THE MERGER AGREEMENT--Effective Time of the
Merger" and "--Conditions to Each Party's Obligation to Effect the Merger."
Recommendation of the Company Board. The Company Board has unanimously
approved the Restructuring, the Company Distribution and the Merger and believes
that such transactions are in the best interests of Gaylord and the holders of
Company Common Stock. Accordingly, the Company Board recommends that the
Company's stockholders vote FOR the approval and adoption of the Merger
Agreement. For a description of the factors considered by the Company Board and
the reasons for its recommendation, see "THE MERGER--The Company's Reasons for
the Merger; Recommendation of its Board of Directors."
The Board of Directors of New Gaylord has unanimously approved the terms of
the New Gaylord Stock Plan and believes that such plan is in the best interests
of New Gaylord and its stockholders. Accordingly, the Company Board recommends
that the Company's stockholders vote FOR the approval and adoption of the New
Gaylord Stock Plan. See "APPROVAL AND ADOPTION OF THE NEW GAYLORD STOCK PLAN."
Interests of Certain Persons in the Merger. In considering the
recommendation of the Company Board and whether to vote in favor of the approval
and adoption of the Merger Agreement, the Company's stockholders should be aware
that certain persons may have interests in the Merger that are different from or
in addition to those of the Company's stockholders generally. See "THE
MERGER--Interests of Certain Persons in the Merger."
Opinion of the Company's Financial Advisor. The Company retained Merrill
Lynch & Co. ("Merrill Lynch") to act as its exclusive financial advisor in
connection with the Merger. On February 9, 1997, Merrill Lynch rendered to the
Company Board its written opinion (the "Merrill Lynch Opinion") that, as of such
date and based upon and subject to the factors and assumptions set forth
therein, the Per Share Merger Consideration (the Per Share Merger Consideration
is referred to in the Merrill Lynch Opinion as the "Exchange Ratio") was fair to
the holders of the Company Common Stock from a financial point of view. The full
text of the Merrill Lynch Opinion is attached as Annex VI hereto and
stockholders of the Company are urged to read the full text of such opinion. The
Merrill Lynch Opinion was provided to the Company Board for its information and
is directed only to the fairness from a financial point of view of the Per Share
Merger Consideration to the holders of the Company Common Stock, does not
address the merits of the underlying decision by the Company to engage in the
Merger and does not constitute a recommendation to the Company's stockholders as
to how such stockholders should vote on the approval and adoption of the Merger
Agreement or any matter related thereto. See "THE MERGER--Opinion of the
Company's Financial Advisor."
The Stockholder Agreement. Pursuant to the terms of the Stockholder
Agreement, dated as of February 9, 1997, a copy of which is attached as Annex
III hereto (the "Stockholder Agreement"), among Westinghouse, certain holders of
Company Common Stock (each a "Principal Stockholder", and collectively, the
"Principal Stockholders") and the trustees (including the Company's Chairman,
Edward L. Gaylord) (the "Voting Trustees") of that certain voting trust (the
"Voting Trust") created pursuant to the Agreement dated as of October 3, 1990,
as amended by Amendment No. 1 to Voting Trust Agreement dated as of October 23,
1991 (as so amended, the "Voting Trust Agreement"), among the Voting Trustees
and certain stockholders of the Company party thereto from time to time, the
Voting Trustees and the Principal Stockholders have agreed to vote certain
shares of Company Common Stock in favor of the approval and adoption of the
Merger Agreement at the Special Meeting. Together, the Voting Trustees and the
Principal Stockholders control approximately 65% of the outstanding voting power
of Company Common Stock. Therefore, the approval and adoption of the Merger
Agreement are assured. See "THE MERGER--The Stockholder Agreement." The Voting
Trustees and the Principal Stockholders have also informed the Company that they
intend to vote all of their shares of Company Common Stock in favor of the
approval and adoption of the New Gaylord Stock Plan. Therefore, its approval and
adoption are also assured.
13
<PAGE> 20
Accounting Treatment. The Merger will be accounted for by Westinghouse
under the "purchase" method of accounting, in accordance with generally accepted
accounting principles. After the Merger, the results of operations of the Cable
Networks Business will be included in the consolidated financial statements of
Westinghouse.
Termination of the Merger Agreement. The Merger Agreement may be
terminated at any time prior to the Effective Time by mutual written consent of
Westinghouse, Sub and the Company. The Merger Agreement may also be terminated
prior to the Effective Time by either Westinghouse or the Company if, among
other things, (i) (a) at the Special Meeting, the Merger Approval is not
obtained; (b) the Merger is not consummated on or before February 9, 1998,
subject to certain exceptions; or (c) any federal, state or local government, or
any court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental Entity"),
has issued an order, decree, ruling or injunction or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and such
order, decree, ruling, injunction or other action shall have become final and
nonappealable; or (ii) the other party or any of its subsidiaries breaches any
of the representations, warranties, covenants or other agreements contained in
the Transaction Agreements (as defined below), which would give rise to the
failure of certain conditions to the Merger and cannot be or has not been cured
within 30 days following written notice to the breaching party of such breach (a
"Material Breach"), provided that the terminating party is not then in Material
Breach. In addition, the Merger Agreement may be terminated by the Company if
the shares of Westinghouse Common Stock to be received by the Company's
stockholders in connection with the Merger would have an aggregate value of less
than $1.55 billion (calculated in accordance with the Merger Agreement), subject
to Westinghouse's right to issue additional shares. See "THE MERGER
AGREEMENT--Termination."
As used herein "Transaction Agreements" means the Merger Agreement, the
Distribution Agreement, the Stockholder Agreement, the Post-Closing Covenants
Agreement to be entered into by Westinghouse, the Company, New Gaylord and
certain subsidiaries of New Gaylord, the form of which is attached as Annex IV
hereto (the "Post-Closing Covenants Agreement"), the Tax Disaffiliation
Agreement to be entered into by the Company, New Gaylord and Westinghouse, the
form of which is attached as Annex V hereto (the "Tax Disaffiliation
Agreement"), and the Ancillary Agreements (as defined herein; see "THE COMPANY
DISTRIBUTION AND RELATED TRANSACTIONS--Terms of the Distribution Agreement").
Conditions. The obligations of the Company and Westinghouse to consummate
the Merger are subject to the satisfaction or waiver of certain conditions
including, among other things: (i) the receipt of the Merger Approval; (ii) the
issuance by the IRS of certain rulings described under "--Certain U.S. Federal
Income Tax Considerations" below; (iii) the absence of any adverse tax
development that would cause the Company Distribution to be taxable to the
Company or the Company's stockholders; (iv) the receipt of all necessary
governmental approvals and consents; and (v) the consummation of the
Restructuring and the Company Distribution. See "THE MERGER
AGREEMENT--Conditions to Each Party's Obligation to Effect the Merger."
Fees and Expenses. Regardless of whether or not the Merger is consummated,
all fees, costs and expenses incurred in connection with the Transaction
Agreements and the transactions contemplated thereby will be paid by the party
incurring such fees, costs or expenses, except that each of Westinghouse and the
Company will pay one-half of (i) the fees, costs and expenses incurred in
connection with filing, printing and mailing the Westinghouse Form S-4, the New
Gaylord Form 10 and this Proxy Statement/Prospectus and (ii) all filing fees
incurred under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"). See "THE MERGER AGREEMENT -- Fees and Expenses."
If the Merger is consummated, New Gaylord will be responsible for and will
pay all expenses of Gaylord directly related to the Restructuring, the Company
Distribution and the Merger. See "THE POST-CLOSING COVENANTS AGREEMENT--Other
Agreements."
Absence of Dissenters' Appraisal Rights. Under the DGCL, the stockholders
of the Company are not entitled to appraisal rights in connection with the
Merger or any of the other transactions contemplated by the Merger Agreement or
the Distribution Agreement, including the Restructuring and the Company
Distribu-
14
<PAGE> 21
tion. See "THE MERGER--Absence of Dissenters' Appraisal Rights" and "COMPARISON
OF THE RIGHTS OF WESTINGHOUSE AND COMPANY STOCKHOLDERS."
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The Company and Westinghouse have requested a private letter ruling from
the IRS containing rulings (the "Tax Rulings") substantially to the effect that
each of the following generally will be tax-free to the Company and the
Company's stockholders: (a) the transfer of certain assets and related
liabilities to New Gaylord prior to the Company Distribution, (b) the Company
Distribution, (c) the Merger and (d) certain other transactions that are part of
the Restructuring. Receipt of the Tax Rulings in form and substance reasonably
satisfactory to each of the Company and Westinghouse is a condition to the
respective obligations of each of the Company, Westinghouse and Sub to
consummate the Company Distribution and the Merger (as applicable). However,
under certain circumstances such transactions may be consummated without the
rulings described in (d) above if opinions of counsel substantially to the same
effect are received. See "THE MERGER AGREEMENT--Conditions to Each Party's
Obligation to Effect the Merger" and "CERTAIN U.S. FEDERAL INCOME TAX
CONSIDERATIONS."
THE COMPANY DISTRIBUTION AND RELATED TRANSACTIONS
General. In connection with the Merger, prior to the Effective Time,
Gaylord will engage in a series of transactions including the Restructuring, the
Recapitalization and the Company Distribution, the purpose of which is to make
possible Westinghouse's acquisition of the Cable Networks Business on a tax-free
basis to the Company and the holders of Company Common Stock in a transaction in
which the holders of Company Common Stock will receive Westinghouse Common Stock
and will also retain their proportionate equity interests in the New Gaylord
Business in the form of New Gaylord Common Stock to be received in the Company
Distribution. The Company's stockholders are being asked to vote on the approval
and adoption of the Merger Agreement and are not being asked to vote on the
Restructuring, the Recapitalization or the Company Distribution.
The Restructuring. Gaylord will effect a series of mergers, asset and
stock transfers and liability assumptions among itself and its subsidiaries. The
purpose and effect of the Restructuring is to separate the New Gaylord Business,
which is not being acquired by Westinghouse in the Merger, from the Cable
Networks Business. In connection with the Restructuring, New Gaylord will, or
will cause one of its subsidiaries to, assume all liabilities of Gaylord (the
"Assumed Liabilities") other than certain liabilities to the extent that they
arise out of the Cable Networks Business (the "Cable Networks Liabilities"),
which the Company will, or will cause one of its subsidiaries to, retain or
assume. See "THE COMPANY DISTRIBUTION AND RELATED TRANSACTIONS--Terms of the
Distribution Agreement."
The Recapitalization. The Company will cause New Gaylord to amend its
certificate of incorporation to, among other things, authorize shares of New
Gaylord Common Stock, increase the authorized number of shares of common stock
of New Gaylord and convert the currently outstanding shares of common stock,
$100.00 par value ("Old Common Stock"), of New Gaylord (all of which is
currently held by the Company) into a number of shares of New Gaylord Common
Stock equal to one-third of the total number of shares of Company Common Stock
outstanding immediately prior to the date designated by the Company Board for
the purpose of determining the Company's stockholders entitled to participate in
the Company Distribution (the "Company Distribution Record Date") (collectively,
the "Recapitalization"). See "THE COMPANY DISTRIBUTION AND RELATED
TRANSACTIONS--Terms of the Distribution Agreement."
The Company Distribution. Upon completion of the Restructuring and on the
day prior to the Effective Time, the Company will effect the Company
Distribution by distributing to each holder of record of Company Common Stock as
of the record date for the Company Distribution certificates representing that
number of shares of New Gaylord Common Stock equal to one-third the number of
shares of Company Common Stock held of record by such stockholder. Cash will be
distributed in lieu of any fractional shares of New Gaylord Common Stock. See
"THE COMPANY DISTRIBUTION AND RELATED TRANSACTIONS--Terms of the Distribution
Agreement."
15
<PAGE> 22
THE POST-CLOSING COVENANTS AGREEMENT
Pursuant to the Merger Agreement and prior to the Company Distribution,
Westinghouse, the Company, New Gaylord and certain of New Gaylord's subsidiaries
will enter into the Post-Closing Covenants Agreement which will provide, among
other things, (i) that New Gaylord and certain of its subsidiaries will
indemnify Westinghouse and its affiliates against certain losses and liabilities
and Westinghouse will indemnify New Gaylord and its affiliates against certain
losses and liabilities; (ii) that New Gaylord and its subsidiaries will not
engage in certain specified activities which would constitute competition with
the Cable Networks Business and the Westinghouse Group will not engage in
certain activities which would constitute competition with CMT International;
and (iii) for a post-closing adjustment based on the level of working capital of
the Cable Networks Business. See "THE POST-CLOSING COVENANTS AGREEMENT."
THE TAX DISAFFILIATION AGREEMENT
Pursuant to the Merger Agreement and prior to the Company Distribution, the
Company, New Gaylord and Westinghouse will enter into the Tax Disaffiliation
Agreement which will set forth each party's rights and obligations with respect
to U.S. Federal, state, local and foreign taxes for periods before and after the
Merger and related matters such as the filing of tax returns and the conduct of
audits and other tax proceedings. See "THE TAX DISAFFILIATION AGREEMENT."
16
<PAGE> 23
WESTINGHOUSE SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The selected consolidated historical financial data presented below have
been derived from and should be read in conjunction with the Westinghouse
restated audited consolidated financial statements and the notes thereto
included in Westinghouse's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended by Form 10-K/A Amendment No. 1 filed on July 14,
1997 and the restated unaudited interim consolidated financial statements and
the notes thereto included in Westinghouse's Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 1997, as amended by Form 10-Q/A Amendment
No. 1 filed on July 14, 1997, which are incorporated by reference in this Proxy
Statement/Prospectus. The unaudited interim data reflect, in the opinion of
Westinghouse management, all adjustments considered necessary for a fair
presentation of results of such interim period. Results for unaudited interim
periods are not necessarily indicative of results which may be expected for any
other interim or annual period. The historical financial data presented below
include the results of CBS subsequent to its acquisition by Westinghouse on
November 24, 1995 and the results of Infinity subsequent to its acquisition by
Westinghouse on December 31, 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales of services and products............ $ 2,223 $ 2,039 $ 8,605 $ 5,548 $ 5,125 $ 5,153 $ 5,272
Interest expense.......................... (114) (146) (456) (236) (134) (164) (169)
Income (loss) from Continuing Operations
before income taxes and minority
interest in income of consolidated
subsidiaries............................ (210) (998) (1,190) (39) (58) (238) 259
Income (loss) from Continuing
Operations.............................. (151) (658) (773) (44) (37) (174) 175
Income (loss) from Discontinued
Operations.............................. -- 967 961 34 85 (99) (1,236)
Extraordinary item: Loss on early
extinguishment of debt.................. -- (63) (93) -- -- -- --
Cumulative effect of changes in accounting
principles.............................. -- -- -- -- -- (56) (338)
Net income (loss)......................... $ (151) $ 246 $ 95 $ (10) $ 48 $ (329) $(1,399)
======= ======= ======= ======= ======= ======= =======
Earnings (loss) per common share:
Continuing Operations..................... $ (0.23) $ (1.50) $ (1.74) $ (0.19) $ (0.23) $ (0.64) $ 0.43
Discontinued Operations................... -- 2.20 2.17 0.08 0.22 (0.28) (3.57)
Extraordinary item........................ -- (0.14) (0.21) -- -- -- --
Cumulative effect of changes in accounting
principles.............................. -- -- -- -- -- (0.16) (0.98)
------- ------- ------- ------- ------- ------- -------
Earnings (loss) per common share.......... $ (0.23) $ 0.56 $ 0.22 $ (0.11) $ (0.01) $ (1.08) $ (4.12)
======= ======= ======= ======= ======= ======= =======
Dividends per common share................ $ 0.05 $ 0.05 $ 0.20 $ 0.20 $ 0.20 $ 0.40 $ 0.72
======= ======= ======= ======= ======= ======= =======
Average common and common stock equivalent
shares outstanding (in thousands)....... 641,562 439,409 443,399 410,138 383,736 352,902 346,103
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, AS OF DECEMBER 31,
------------ -------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets--Continuing Operations....... $ 19,831 $19,889 $14,590 $ 6,629 $ 6,893 $ 6,220
Total assets--Discontinued Operations..... 1,457 1,418 3,958 5,168 7,616 11,696
Total assets.............................. 21,288 21,307 18,548 11,797 14,509 17,916
Total debt--Continuing Operations......... 6,315 5,650 7,862 2,497 2,500 2,800
Total debt--Discontinued Operations....... 444 424 506 1,240 3,850 7,133
Total debt................................ 6,759 6,074 8,368 3,737 6,350 9,933
Shareholders' equity...................... 5,595 5,742 1,442 1,774 1,050 2,226
</TABLE>
17
<PAGE> 24
CABLE NETWORKS BUSINESS SELECTED COMBINED HISTORICAL FINANCIAL DATA
The selected combined historical financial data as of March 31, 1997 and
for the three months ended March 31, 1997 and 1996 presented below have been
derived from and should be read in conjunction with the unaudited condensed
combined financial statements of the Cable Networks Business included elsewhere
in this Proxy Statement/Prospectus. The selected combined historical financial
data as of December 31, 1996 and 1995, and for each of the three years in the
period ended December 31, 1996, presented below have been derived from and
should be read in conjunction with the audited combined financial statements and
notes thereto of the Cable Networks Business included elsewhere in this Proxy
Statement/Prospectus. The selected combined balance sheet data as of December
31, 1994 have been derived from the audited combined balance sheet of the Cable
Networks Business as of December 31, 1994, which is not included in this Proxy
Statement/Prospectus. The selected combined historical data as of December 31,
1993 and 1992, and for each of the two years in the period ended December 31,
1993, have been derived from unaudited combined financial statements of the
Cable Networks Business.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............. $ 79,962 $ 72,309 $320,612 $273,824 $237,527 $207,765 $176,231
Operating income...... 19,508 17,553 90,042 75,171 63,557 51,236 43,334
Net income............ 10,582 9,671 48,423 40,781 36,199 30,735 27,799
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
MARCH 31, --------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........... $192,914 $187,531 $157,090 $136,578 $123,836 $101,240
Notes payable.......... 4,559 6,017 7,048 7,501 7,484 1,841
Divisional equity...... 127,653 117,841 103,211 89,386 85,078 71,834
</TABLE>
18
<PAGE> 25
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following selected unaudited pro forma combined condensed financial
data are derived from the Unaudited Pro Forma Financial Information included
elsewhere in this Proxy Statement/Prospectus and should be read in conjunction
therewith and with the notes thereto. These selected unaudited pro forma
combined condensed financial data: (a) are based upon the respective financial
statements of Westinghouse and the Cable Networks Business; (b) in the case of
the unaudited pro forma combined condensed financial data for the year ended
December 31, 1996, are adjusted to give effect to the acquisition by
Westinghouse of Infinity; and (c) are adjusted for the Merger. With respect to
the Statement of Operations Data, the Merger is assumed to have been consummated
on January 1 of each period presented and, in the case of the Statement of
Operations Data for the year ended December 31, 1996, the acquisition by
Westinghouse of Infinity is assumed to have been consummated on January 1, 1996.
With respect to the Balance Sheet Data, the Merger is assumed to have been
consummated as of March 31, 1997.
These selected unaudited pro forma combined condensed financial data are
presented for illustrative purposes only and are not necessarily indicative of
the operating results or financial position that would have been achieved had
the acquisition of Infinity and the Merger been consummated as of the dates
indicated or of the results that may be obtained in the future. See "UNAUDITED
PRO FORMA FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, 1997 DECEMBER 31, 1996
----------------------------- -----------------------------
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales of services and products................... $ 2,281 $ 9,591
Interest expense................................. (114) (537)
Loss from Continuing Operations before income
taxes and minority interest in income of
consolidated subsidiaries...................... (210) (1,152)
Loss from Continuing Operations.................. $ (154) $ (799)
========= =========
Loss per common share from Continuing
Operations..................................... $ (0.22) $ (1.14)
========= =========
Average common and common stock equivalent shares
outstanding (in thousands)..................... 706,996 701,414(1)
========= =========
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1997
----------------------------
(IN MILLIONS)
<S> <C>
BALANCE SHEET DATA:
Total assets-Continuing Operations..................................... $ 21,398
Total debt-Continuing Operations....................................... 6,315
Shareholders' equity................................................... 7,140
</TABLE>
COMPARATIVE PER SHARE DATA:
<TABLE>
<CAPTION>
COMPANY
WESTINGHOUSE, PRO FORMA PRO FORMA
AS ADJUSTED COMBINED EQUIVALENT(3)
-------------- ---------- --------------
<S> <C> <C> <C>
Loss per common share from Continuing Operations for the
three months ended March 31, 1997..................... $(0.23) $(0.22) $ (0.15)
Loss per common share from Continuing Operations for the
year ended December 31, 1996.......................... $(1.24) $(1.14) $ (0.77)
Book value per common share as of March 31, 1997(2)..... $ 8.59 $10.09 $ 6.79
Cash dividend per common share for the three months
ended March 31, 1997.................................. $ 0.05 $ 0.05 $ 0.03
Cash dividend per common share for the year ended
December 31, 1996..................................... $ 0.20 $ 0.20 $ 0.13
</TABLE>
See accompanying Notes to Selected Unaudited Pro Forma Financial Information.
19
<PAGE> 26
NOTES TO SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
(1) The average common and common stock equivalent shares outstanding used in
calculating pro forma loss per common share from Continuing Operations are
calculated assuming the estimated number of shares of Westinghouse Common
Stock to be issued in connection with the Merger were outstanding from
January 1 of each period presented and, in the case of the average common
and common stock equivalent shares outstanding used in calculating pro forma
loss per common share from Continuing Operations for the year ended December
31, 1996, assuming the Westinghouse Common Stock issued in connection with
the acquisition by Westinghouse of Infinity were outstanding from January 1,
1996.
(2) The historical book value per common share amounts of Westinghouse were
calculated by dividing shareholders' equity, less the liquidation value of
the Westinghouse preferred shares, by the number of common shares
outstanding, excluding treasury shares, at the end of the period.
The common shares outstanding used in the calculation of pro forma combined
book value per share are the number of Westinghouse common shares
outstanding at March 31, 1997 plus 65,433,975 the estimated number of common
shares assumed to be issued in connection with the Merger. See Note 2 to the
Unaudited Pro Forma Combined Condensed Financial Statements.
The historical book value per common share for Westinghouse as of December
31, 1996 was $8.90.
(3) Company pro forma equivalent amounts are calculated by multiplying the
respective pro forma combined per share amounts by 0.673, the Per Share
Merger Consideration based on the average daily closing prices per share of
Westinghouse Common Stock for the 15 day trading period ended July 15, 1997,
and on the number of shares of Company Common Stock outstanding on that date
(97,275,690). However, the actual Per Share Merger Consideration at the
Effective Time may be greater or less than the above number.
20
<PAGE> 27
RISK FACTORS
In considering whether to approve and adopt the Merger Agreement the
stockholders of the Company should consider the following matters.
TERMINATION RIGHTS
Pursuant to the Merger Agreement, the Per Share Merger Consideration is
subject to the limitation that Westinghouse will not be obligated to issue more
than 110 million shares of Westinghouse Common Stock in connection with the
Merger (or 88 million shares in the unlikely event that Westinghouse consummates
the Westinghouse Distribution prior to the Effective Time). In the event that
the Per Share Merger Consideration calculated in accordance with the Merger
Agreement multiplied by the number of outstanding shares of Company Common Stock
immediately prior to the Effective Time would exceed such 110 million share
limit (or 88 million share limit, as the case may be), then the Company will
have the right to terminate the Merger Agreement, subject to Westinghouse's
right to elect to increase the number of shares of Westinghouse Common Stock to
the Per Share Merger Consideration calculated without regard to such limit. In
the event Westinghouse elects to exercise such right, the Company's election to
terminate the Merger Agreement would not be effective. If the Company does not
exercise its right to terminate the Merger Agreement, the Company's stockholders
would receive less than the $1.55 billion fixed dollar price. See "THE MERGER
AGREEMENT--Termination."
The Company currently has no intention of waiving its termination right, if
applicable, although the Company might do so if the Company Board were to
determine in the exercise of its fiduciary duties, based on the facts and
circumstances then existing, that such waiver was in the best interests of
Gaylord and its stockholders. In any event, the Company would not waive its
termination right, if applicable, unless the Company Board were to receive an
updated opinion from Merrill Lynch to the effect that the actual Per Share
Merger Consideration was fair to the holders of Company Common Stock from a
financial point of view. In the unlikely event that the Company Board were to
determine to waive its termination right, the Company would mail additional
information to its stockholders and would consider whether it would be
appropriate to resolicit proxies from the Company's stockholders to reobtain the
Merger Approval based on circumstances then existing, including, among other
things, the amount by which the actual aggregate Per Share Merger Consideration
(calculated in accordance with the Merger Agreement) was less than $1.55
billion.
If the Company Board were to exercise its termination right, if applicable,
Westinghouse's decision as to whether or not to issue additional shares of
Westinghouse Common Stock would be based upon circumstances existing at that
time as well as other factors, including, among others, the number of shares
that Westinghouse would need to issue above 110 million (or 88 million, as the
case may be), the dilutive impact that the issuance of such additional shares
would have on its shareholders, the reasons for the decrease in the price of
Westinghouse Common Stock and then existing market conditions.
So long as the average of the daily closing prices per share of
Westinghouse Common Stock for the Averaging Period remains at or above $14.09
(or $17.61 in the unlikely event that Westinghouse consummates the Westinghouse
Distribution prior to the Effective Time), the Company's stockholders will
receive shares of Westinghouse Common Stock having an aggregate value equal to
the agreed upon transaction price of $1.55 billion (calculated in accordance
with the Merger Agreement), and the Company's termination right will not be
applicable.
TAX CONSIDERATIONS
The obligations of the Company, Westinghouse and Sub to consummate the
Company Distribution and the Merger (as applicable) are conditioned on, among
other things, the receipt of the Tax Rulings from the IRS (or the waiver of such
condition) relating to the Company Distribution and the Merger. Tax Rulings have
also been requested from the IRS to the effect that that certain aspects of the
Restructuring will be tax-free to the Company, New Gaylord and certain of their
respective subsidiaries. The Company Distribution and the Merger may be
consummated without the receipt of those rulings described in the previous
sentence from the IRS, provided that opinions of counsel to the same effect are
received or such condition is waived. An
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opinion of counsel, however, is not binding on the IRS or the courts. Moreover,
it is expected that the Company or New Gaylord will recognize taxable income as
a result of certain other aspects of the Restructuring. Any tax liability
resulting from the Restructuring generally will be the responsibility of New
Gaylord. The consummation of the Company Distribution and the Merger are also
conditioned on the absence of certain adverse tax legislation or adverse
legislative proposals on the Closing Date. See "CERTAIN U.S. FEDERAL INCOME TAX
CONSIDERATIONS" and "THE MERGER--Conditions to Each Party's Obligation to Effect
the Merger."
The Company currently has no intention of waiving the conditions relating
to the receipt of the Tax Rulings and the absence of certain adverse tax
legislation or legislative proposals, if applicable. In the unlikely event that
the Company Board were to determine to waive either or both of such conditions,
the Company would mail additional information to its stockholders as to any
changes in the material tax consequences that will result from the
Restructuring, the Company Distribution and the Merger and would resolicit
proxies from the Company's stockholders in order to reobtain the Merger Approval
if there are any changes in the tax consequences to them or any material changes
in the tax consequences to the Company or New Gaylord.
BROADCASTING INDUSTRY SUBJECT TO FEDERAL REGULATION
The television and radio broadcasting industry is subject to regulation by
the Federal Communications Commission (the "FCC") under the Communications Act
of 1934, as amended (the "Communications Act") and the Telecommunications Act of
1996 (the "Telecommunications Act"). Approval of the FCC is required for the
issuance, renewal or transfer of television and radio broadcast station
operating licenses. In particular, Westinghouse's television and radio broadcast
business will be dependent upon its continuing to hold broadcasting licenses
from the FCC. Television and radio broadcast licenses were previously issued for
terms of five and seven years, respectively. The FCC has adopted new rules to
implement a provision of the Telecommunications Act pursuant to which licenses
issued for radio renewal applications filed on or after June 1, 1995 and for
television renewal applications filed on or after June 3, 1996, will have terms
of eight years. While in the vast majority of cases such licenses are renewed by
the FCC, there can be no assurance that any of the stations' licenses will be
renewed at their expiration dates. The FCC currently has under consideration and
may in the future adopt new laws, regulations and policies regarding a wide
variety of matters (including technological changes) which could, directly or
indirectly, affect the operations and ownership of Westinghouse's broadcast
properties. In addition, the Communications Act and FCC rules restrict alien
ownership and voting of the capital stock of and participation in the affairs of
Westinghouse.
INDUSTRIAL COMPANY RISKS
Westinghouse is a global company which operates its business through the
Westinghouse/CBS Group and the Industries & Technology Group. Through its
Industries & Technology Group, Westinghouse provides services, fuel and
equipment for the nuclear energy market, provides services and equipment for the
power generation market, manufactures transport temperature control equipment
and provides management services at government-owned facilities. The domestic
utility sector is restructuring in response to a new competitive environment
brought about by regulatory changes. There is continued softness in this sector
and intense price pressures. The nuclear industry is a mature business with no
new nuclear plants scheduled to be built in the United States in the foreseeable
future. The businesses in the Industries & Technology Group are dependent on the
development of new products and technologies and also face a variety of
potential liabilities and lawsuits not common to broadcasting-based companies,
such as environmental clean-up liabilities and product liability litigation.
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in certain of the lawsuits pending against Westinghouse and,
although Westinghouse's management believes a significant adverse judgment is
unlikely, any such judgment could have a material adverse effect on
Westinghouse's results of operations for a quarter or a year.
COMPETITION
The television and radio broadcasting business is highly competitive. The
Westinghouse Group's television and radio broadcasting businesses currently
compete for audiences with other television and radio
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networks and stations, including cable and satellite television as well as with
other media, including newspapers, movie theaters and other advertising media.
In addition, the Telecommunications Act provides opportunities for potential new
competition for the television and radio broadcasting business. For example, the
Telecommunications Act allows the entry of telephone companies into the video
programming and distribution businesses, which may mean new competition in
program sales. Current and future technological developments may also affect
competition within the television and radio broadcasting business. Developments
such as advanced digital technology, digital compression technology and "digital
audio broadcasting" may allow competitors to provide broadcasting quality
superior to that currently provided by the Westinghouse Group's television and
radio stations. Westinghouse cannot predict the extent to which any of the
foregoing competitive factors may affect its television and radio broadcasting
business and there can be no assurance that such factors will not adversely
affect the Westinghouse Group's future broadcasting operations and competitive
position.
In addition to its television and radio broadcasting business, the
Westinghouse Group's Industries & Technology Group competes in a variety of
domestic and international businesses, including, among other things, the
design, development, manufacture and service of nuclear and fossil-fueled power
generation systems, the manufacture of transport temperature control equipment
and management services at government-owned facilities. Each of these businesses
is subject to worldwide competition and there can be no assurance that such
competition will not have an adverse effect on any of such businesses.
SMALLER BUSINESS BASE FOR NEW GAYLORD
The cable networks segment of the Company's operations has historically
contributed a significant portion of the Company's total revenues (44.4% in
1996) and total operating income (59.1% in 1996). Although the net cash flow
generated by the Cable Networks Business will no longer be available to the New
Gaylord Business, the sale of the Cable Networks Business to Westinghouse
pursuant to the Merger is not expected to adversely affect New Gaylord's ability
to conduct and expand the New Gaylord Business. In addition, the net cash flow
of the New Gaylord Business has historically exceeded its net investing and
financing requirements and the Company's management believes that the net cash
flow of the New Gaylord Business will continue to do so.
On a pro forma basis, after giving effect to the Restructuring, the Company
Distribution and the Merger, New Gaylord had total operating income of $31.3
million in 1996 and incurred an operating loss of $6.6 million for the first
three months of 1997. See "SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA
FINANCIAL DATA OF NEW GAYLORD" in the Information Statement. The 1997 first
quarter pro forma loss is due primarily to the seasonal nature of the two most
profitable of New Gaylord's three business segments: hospitality and attractions
and broadcasting and music. Many of the operations in the hospitality and
attractions segment are either closed or operate on a limited basis during the
first quarter of the year and conduct most of their business during the summer
tourism season. The first calendar quarter is also the weakest quarter for most
television and radio broadcasters, including New Gaylord, as advertising
revenues fall off in the post-Christmas period. As a result, the Company
believes that the seasonality of New Gaylord's hospitality and attractions and
broadcasting and music segments distorts the impact of the cable networks
segment's operating losses for the first three months of 1997. This seasonality
is further evidenced by New Gaylord's actual operating results for the full year
1996: the hospitality and attractions segment had operating income of $45.9
million in 1996, despite an operating loss of $0.2 million in the first quarter
of the year; and the broadcasting and music segment had operating income of
$23.8 million in 1996, only $2.3 million of which was recorded in the first
quarter of the year. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" in the Information Statement.
Although CMT International has yet to operate profitably, the Company's
management believes that its operating results can be improved. If CMT
International's results of operations do not improve, however, New Gaylord's
management will consider various possible courses of action, including seeking a
joint venture partner, a sale of CMT International or ceasing its operations.
New Gaylord's ability to improve CMT International's operating results may be
negatively impacted by the restrictions on its ability to change CMT
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International's programming content for the five-year period immediately
following the Merger under the non-competition provisions of the Post-Closing
Covenants Agreement. See "THE POST-CLOSING COVENANTS AGREEMENT -- Agreement Not
to Compete."
RECENT DEVELOPMENTS
In November 1996, Westinghouse announced that its Board of Directors (the
"Westinghouse Board") had approved, subject to certain conditions, a plan to
separate its media and industrial business into two separate companies (the
"Separation Plan") by way of a tax-free dividend to Westinghouse's shareholders
of a new publicly traded company to be called Westinghouse Electric Company
("WELCO"). See "BUSINESS OF THE WESTINGHOUSE GROUP." Under this Separation Plan,
after the Merger and the Westinghouse Distribution, Westinghouse (to be renamed
"CBS Corporation") would have consisted primarily of the CBS Television Network,
CBS Television Stations, CBS Radio, CBS Cable (formerly known as Group W
Satellite Communications ("GWSC"), and which would include the Cable Networks
Business) and EYEMARK Entertainment; and WELCO would have consisted primarily of
the manufacturing and service businesses for the nuclear and fossil-fueled power
generation industry, Thermo King Corporation ("Thermo King"), Westinghouse's
transport temperature control company, and the government operations businesses.
Also, Westinghouse would have retained debt obligations of Westinghouse as well
as the tax net operating loss carry forward ($1.5 billion as of December 31,
1996), and WELCO would have assumed the existing pension and other
post-retirement benefit obligations of Westinghouse and certain obligations
generated by the Westinghouse Group's industrial businesses.
In June 1997, the Westinghouse Board modified the Separation Plan. Under
the modified Separation Plan, Thermo King will remain with the parent company,
along with the existing pension and other post-retirement benefit obligations of
Westinghouse. Westinghouse will consider various options to enhance Thermo
King's value to shareholders, including a sale, public offering or spin-off to
shareholders. If Thermo King is sold, it is anticipated that Westinghouse's tax
net operating loss carry forward would offset the gain on disposition.
If the Westinghouse Distribution is completed, shares of WELCO common stock
will be distributed on a pro rata basis to the shareholders of record of
Westinghouse Common Stock as of a date to be determined. The modified Separation
Plan will not affect the timing of the Westinghouse Distribution which is
scheduled for this fall.
Completion of the Westinghouse Distribution is subject to a number of
conditions, including a favorable ruling from the IRS that the transaction will
not be taxable for U.S. Federal income tax purposes to Westinghouse or its
shareholders and the registration of the WELCO common stock under the Exchange
Act.
There can be no assurance that the Westinghouse Distribution will occur or
as to the related timing. Furthermore, if the Westinghouse Distribution does
occur, there can be no assurance that the assets, liabilities and contractual
obligations will be transferred as currently contemplated or that changes will
not be made to the modified Separation Plan.
The Company and Westinghouse currently anticipate that the Merger will be
consummated prior to the consummation of the Westinghouse Distribution. In such
event, stockholders of the Company who become shareholders of Westinghouse in
connection with the Merger and who continue to hold their shares of Westinghouse
Common Stock will be entitled to participate in the Westinghouse Distribution on
the same basis as all other shareholders of Westinghouse.
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<PAGE> 31
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to holders of Company
Common Stock in connection with the solicitation of proxies by the Company Board
for use at the Special Meeting of Stockholders, to be held at the Ryman
Auditorium, 116 5th Avenue North, Nashville, Tennessee, on Friday, August 15,
1997, at 10:00 a.m., local time, and at any adjournments or postponements
thereof. At the Special Meeting the Company's stockholders will be asked to
consider and vote upon (i) the approval and adoption of the Merger Agreement and
(ii) the approval and adoption of the New Gaylord Stock Plan. Each Proposal will
be voted upon separately by the stockholders of the Company.
STOCKHOLDERS ARE REQUESTED TO DATE, EXECUTE AND MAIL PROMPTLY THE ENCLOSED
PROXY CARD IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
If the Merger Agreement is approved and adopted by the Company's
stockholders and the other conditions to consummation of the Merger are
satisfied or waived, the Company will, on the day prior to the Effective Time,
consummate the Restructuring, the Recapitalization and the Company Distribution.
See "THE MERGER AGREEMENT--Conditions to Each Party's Obligation to Effect the
Merger," "--Conditions to the Obligations of Westinghouse and Sub" and
"--Conditions to the Obligations of the Company."
RECORD DATE; STOCKHOLDERS ENTITLED TO VOTE
The Company Board has fixed the close of business on June 19, 1997, as the
Record Date for the determination of the stockholders of the Company entitled to
receive notice of and to vote at the Special Meeting and at any adjournments or
postponements thereof. Only stockholders of record at the close of business on
the Record Date are entitled to notice of and to vote at the Special Meeting. A
list of such stockholders will be available for examination by any stockholder
for any purpose germane to the Special Meeting at the offices of the Company
located at One Gaylord Drive, Nashville, Tennessee 37214, at least ten days
prior to the Special Meeting.
REQUIRED VOTE
At the close of business on the Record Date, 45,449,719 shares of Company
Class A Common Stock and 50,943,845 shares of Company Class B Common Stock were
outstanding and held by approximately 4,131 and 171 holders of record,
respectively. The approval and adoption of the Merger Agreement requires the
affirmative vote of the holders of a majority of the votes entitled to be cast
at the Special Meeting by the holders of the outstanding shares of Company
Common Stock, voting as a single class. Under Section 162(m) of the Code and the
rules of the NYSE, the approval and adoption of the New Gaylord Stock Plan
requires the affirmative vote of the holders of a majority of the votes cast on
such Proposal by the holders of the outstanding shares of Company Common Stock,
voting as a single class, provided that the total number of votes cast on such
Proposal represents over 50% of the number of votes entitled to be cast on such
Proposal. Each share of Company Class A Common Stock is entitled to one vote and
each share of Company Class B Common Stock is entitled to five votes on each
Proposal. In 1990, certain stockholders of the Company established the Voting
Trust under which the Voting Trustees have the right to vote the shares of
Company Class B Common Stock held in the Voting Trust. See "--Stock Ownership of
Directors and Management." In connection with the execution of the Merger
Agreement, the Voting Trustees and the Principal Stockholders entered into the
Stockholder Agreement with Westinghouse, pursuant to which the Voting Trustees
and the Principal Stockholders have agreed to vote the shares of Company Common
Stock held by them, representing approximately 65% of the total number of votes
entitled to be cast at the Special Meeting, in favor of the approval and
adoption of the Merger Agreement. Therefore, the approval and adoption of the
Merger Agreement are assured. See "THE MERGER--The Stockholder Agreement." The
Voting Trustees and the Principal Stockholders have also advised the Company
that they intend to vote all their shares in favor of the approval and adoption
of the New Gaylord Stock Plan. Therefore, its approval and adoption are also
assured.
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STOCK OWNERSHIP OF DIRECTORS AND MANAGEMENT
As of June 19, 1997, the members of the Company Board and certain executive
officers of the Company collectively beneficially owned 1,352,059 shares of
Company Class A Common Stock and 39,041,594 shares of Company Class B Common
Stock (including 37,727,956 shares of Company Class B Common Stock held in the
Voting Trust), representing approximately 65% of the voting power of the Company
Common Stock. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT" in the Information Statement.
Pursuant to the terms of the Stockholder Agreement, the Voting Trustees and
the Principal Stockholders, including certain members of the Company Board, have
agreed to vote shares of Company Common Stock representing approximately 65% of
the total number of votes entitled to be cast at the Special Meeting, in favor
of the approval and adoption of the Merger Agreement. See "THE MERGER--The
Stockholder Agreement."
PROXIES; QUORUM
The Company's stockholders of record on the Record Date are entitled to
cast their votes, in person or by properly executed proxy, at the Special
Meeting. The shares of Company Common Stock represented by valid proxies
received will be voted in the manner specified on the proxies. Where a specific
choice is not indicated, the shares represented by valid proxies received will
be voted FOR the approval and adoption of (i) the Merger Agreement and (ii) the
New Gaylord Stock Plan. An abstention will have the effect of a vote cast
against approval and adoption of (i) the Merger Agreement and (ii) the New
Gaylord Stock Plan. Brokers who hold shares of Company Class A Common Stock as
nominees will not have discretionary authority to vote such shares in the
absence of instructions from the beneficial owners thereof. Any shares which are
not voted because the nominee-broker lacks such discretionary authority will (i)
have the effect of votes cast against approval and adoption of the Merger
Agreement and (ii) be disregarded and have no effect on the approval and
adoption of the New Gaylord Stock Plan. See "--Required Vote." In accordance
with the Company By-Laws, no business other than that specified in the Notice of
Special Meeting may properly be brought before the Special Meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Any stockholder of the Company has the
unconditional right to revoke his or her proxy at any time prior to the voting
thereof by any action inconsistent with such proxy, including notifying the
Secretary of the Company in writing, executing a subsequent proxy or personally
appearing at the Special Meeting and casting a contrary vote. No such revocation
will be effective, however, until such notice of revocation has been received by
the Company at or prior to the Special Meeting.
The presence, in person or by properly executed proxy, of the holders of a
majority of the votes represented by the issued and outstanding shares of
Company Common Stock, considered as a single class, is necessary to constitute a
quorum at the Special Meeting. The officer presiding over the Special Meeting
may adjourn the meeting if: (i) no quorum is present for the transaction of
business, or (ii) the Company Board determines that adjournment is necessary or
appropriate to enable the stockholders (A) to consider fully information which
the Company Board determines has not been made sufficiently or timely available
to the stockholders or (B) to exercise effectively their voting rights.
SOLICITATION OF PROXIES
The solicitation of proxies for the Special Meeting is being made on behalf
of the Company Board. Pursuant to the Merger Agreement, the entire cost of proxy
solicitation for the Special Meeting, including the reasonable expenses of
brokers, fiduciaries and other nominees in forwarding solicitation materials to
beneficial owners, will be borne by the Company, except that Westinghouse and
the Company will share equally all printing and mailing expenses and filing fees
for the Westinghouse Form S-4, the Gaylord Form-10 and this Proxy
Statement/Prospectus. Solicitation will be by mail, except for any personal
solicitation that may be made orally or in writing by or under the direction of
directors, officers and employees of Gaylord. The Company may request persons,
such as brokers, nominees and fiduciaries, holding Company Common Stock in their
names to forward proxy materials to the beneficial owners and it will reimburse
such persons for their reasonable expenses incurred in doing so.
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<PAGE> 33
THE MERGER
GENERAL
At the Effective Time, Sub will be merged with and into the Company, with
the Company continuing as the Surviving Corporation and a wholly owned
subsidiary of Westinghouse. Subject to the terms and conditions of the Merger
Agreement, each share of Company Common Stock outstanding immediately prior to
the Effective Time (other than shares owned directly or indirectly by the
Company, which will be canceled) will be converted into the right to receive the
Per Share Merger Consideration and cash in lieu of any fractional shares of
Westinghouse Common Stock. See "THE MERGER AGREEMENT--Per Share Merger
Consideration," "--Conversion of Company Common Stock" and "--No Fractional
Shares." The Merger Agreement also provides for the assumption by Westinghouse
of certain Company employee stock options.
Westinghouse and the Company currently anticipate that the Merger will be
consummated prior to the consummation of the Westinghouse Distribution. See
"RECENT DEVELOPMENTS." However, the Merger Agreement provides that under certain
circumstances the Alternative Transaction may be consummated and in such event
each share of Company Common Stock outstanding immediately prior to the
Effective Time will be converted in the Merger into the right to receive the
Alternative Per Share Consideration (as defined herein) and cash in lieu of
fractional shares. See "THE MERGER AGREEMENT--Alternative Transaction."
Based on the average of the daily closing prices per share of Westinghouse
Common Stock as reported on the NYSE Composite Transactions List for the 15 day
trading period ended July 15, 1997, and on the number of shares of Company
Common Stock outstanding on that date, the Per Share Merger Consideration would
have been 0.673 shares of Westinghouse Common Stock. However, the actual Per
Share Merger Consideration at the Effective Time may be greater or less than the
above number.
As soon as practicable on or after the Closing Date, the parties to the
Merger Agreement will file the Certificate of Merger with the Secretary of State
of the State of Delaware. The Certificate of Merger will specify that the Merger
will become effective at 12:01 a.m. on the day following the Closing Date or at
such other time as Westinghouse and the Company may agree to specify in the
Certificate of Merger. See "THE MERGER AGREEMENT--Effective Time of the Merger"
and "--Conditions to Each Party's Obligation to Effect the Merger."
BACKGROUND OF THE MERGER
In connection with the formation and launch of TNN, the Company and
Westinghouse formed a relationship whereby Westinghouse, through certain
divisions and subsidiaries, marketed and distributed the cable television
programming produced by TNN. Currently, under a Distribution Agreement dated as
of January 1, 1989 (as amended, the "Group W Distribution Agreement"), among New
Gaylord, as successor to Opryland USA Inc, Westinghouse, as successor to
Westinghouse Broadcasting Company, Inc. and Group W Television Inc. ("Group W
Television"), and GWSC, Westinghouse continues to provide such services to TNN.
Furthermore, similar services have been performed by Westinghouse on behalf of
CMT and CMT International pursuant to a separate arrangement (the "Group W
Services Arrangement"). See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
While the relationships established by the Group W Distribution Agreement
and the Group W Services Arrangement permitted TNN and CMT to experience
significant growth, in the early 1990s Gaylord began to assess its long-term
strategy in light of the increasing consolidation in the cable and broadcasting
industries. Specifically, Gaylord felt that TNN's and CMT's reliance on the
Group W Distribution Agreement and the Group W Services Arrangement limited the
Company's involvement in the cable network industry. As a result, in mid-1994,
the Company made a proposal to Westinghouse to restructure the relationship
between the parties. Thereafter, Westinghouse indicated that it was not
interested in modifying the existing relationship.
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With the acquisition of CBS by Westinghouse in late 1995, Gaylord
recognized the impact of consolidation in the cable and broadcasting industry.
In late 1995, Gaylord engaged Merrill Lynch to further explore a restructuring
of Gaylord's relationship with Westinghouse. From November 1995 through February
1996, a series of meetings took place among the Company, Merrill Lynch and
Westinghouse in which the parties discussed various possible alternative
transactions, including one that would have involved the transfer of Gaylord's
television stations and certain other assets, including a one-third equity
interest in TNN, to Westinghouse. Prior to beginning its discussions with
Westinghouse, the Company also had exploratory discussions with a number of
other companies in the media and entertainment businesses concerning possible
business combination transactions, although such discussions never advanced
beyond the preliminary stage and no agreements, arrangements or understandings
were reached, in part, because of the Company's existing arrangements with
Westinghouse.
In March 1996, Michael H. Jordan, Chairman and Chief Executive Officer of
Westinghouse, informed the Company that Westinghouse desired to discuss an
alternative transaction directly with Edward L. Gaylord, the Chairman of the
Company. In May 1996, Mr. Jordan discussed with Mr. Gaylord a transaction in
which Westinghouse would acquire Gaylord's television stations, as well as TNN,
CMT and CMT International, in exchange for an unspecified number of shares of
Westinghouse Common Stock. The Company suggested that such a transaction would
involve a tax-free spin-off of those Gaylord assets that Westinghouse did not
want to acquire followed by a tax-free stock merger of the Company and
Westinghouse or a wholly owned subsidiary of Westinghouse. Thereafter, Mr.
Gaylord informed Mr. Jordan that the Company would consider such a transaction
only after Westinghouse provided its proposed economic terms. In June 1996,
Westinghouse agreed to acquire Infinity. For the next few months, there were
periodic discussions between the Company and Westinghouse regarding a possible
transaction.
Beginning in September 1996, renewed discussions took place in person and
telephonically between the Company and Westinghouse with respect to a possible
transaction. During these discussions, the possible transaction was modified to
exclude the acquisition of the Company's television stations and the operations
of CMT International. For reasons related to the then pending Infinity
transaction, Westinghouse had decided not to include the Company's television
stations in a possible transaction. Westinghouse had decided not to include CMT
International in a possible transaction because it had acquired CBS TeleNoticias
in June 1996, had decided that CBS TeleNoticias would be the focus of its
international expansion and did not believe that CMT International fit well
strategically with CBS TeleNoticias.
In mid-December 1996, Terry E. London, then Senior Vice President and Chief
Financial and Administrative Officer of the Company and currently its President
and Chief Executive Officer, the Company's legal counsel and representatives
from Merrill Lynch met with Fredric G. Reynolds, Executive Vice President and
Chief Financial Officer of Westinghouse, J. Phillip Adams, Vice President and
General Tax Counsel of Westinghouse, and other officers of Westinghouse. Among
the issues discussed at the meeting were the specific assets of Gaylord that
might be acquired by Westinghouse, the value of the shares of Westinghouse
Common Stock that would be issued to the Company's stockholders, the structuring
of the possible transaction to ensure it would be tax-free to the Company and
the Company's stockholders, the terms under which New Gaylord and Westinghouse
would continue to provide services to each other after consummation of the
transaction, possible representation for the Company on the Westinghouse Board
and employee benefit issues.
Between January 9, 1997 and January 13, 1997, a team of Westinghouse
representatives conducted due diligence in Nashville, Tennessee. On January 14,
1997, counsel for the Company distributed a preliminary draft of an Agreement
and Plan of Distribution providing for (i) the separation of the Cable Networks
Business from the New Gaylord Business and (ii) the Company Distribution. This
structure was designed to enable (i) the Company to transfer the Cable Networks
Business to Westinghouse on a tax-free basis and (ii) the Company's stockholders
to receive the proceeds of such transfer on a tax-free basis while addressing
Westinghouse's objective to effect a transaction that would result in its stock
being issued directly to the Company's stockholders.
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On January 15, 1997, counsel for Westinghouse distributed a preliminary
draft of an Agreement and Plan of Merger providing for the merger of Sub with
and into the Company. On January 16, 1997, Mr. London and Carl Kornmeyer, Senior
Vice President of the Company's communications group, on behalf of the Company,
and Mr. Reynolds, Louis J. Briskman, Senior Vice President and General Counsel
of Westinghouse, Mr. Adams and Claudia E. Morf, Vice President and Treasurer of
Westinghouse, on behalf of Westinghouse, together with their respective legal
counsel, met in New York City to negotiate the principal terms of the Merger
Agreement. At that meeting, the parties identified numerous open issues
including a proposal by Westinghouse to cap the number of shares of Westinghouse
Common Stock to be issued by Westinghouse in the Merger and possible
representation for the Company on the Westinghouse Board. Westinghouse proposed
to cap the number of shares of Westinghouse Common Stock to be issued in the
Merger in order to limit the potential dilutive effects of the Merger on its
current shareholders.
On January 20, 1997, the Company Board met for several hours to consider
the proposed transaction. Representatives from Merrill Lynch summarized the
discussions between the Company and Westinghouse to date and presented
valuations prepared by Merrill Lynch regarding the Cable Networks Business and
Westinghouse. In addition, the Company's legal counsel described the primary
legal and tax considerations associated with the proposed transaction.
Between January 21, 1997, and February 6, 1997, Messrs. London and
Kornmeyer, together with the Company's legal counsel and representatives from
Merrill Lynch, on behalf of the Company, and Mr. Reynolds, Ms. Morf, Mr. Adams
and Mr. Briskman, together with Westinghouse's legal counsel, on behalf of
Westinghouse, continued to negotiate the remaining principal terms of the
transaction. By Saturday, February 8, 1997, Mr. London and Mr. Reynolds reached
an agreement in principle with respect to the transaction, subject to finalizing
the negotiation and execution of definitive agreements and obtaining the
approvals of their respective Boards of Directors.
Thereafter, the Company and Westinghouse and their respective legal counsel
finalized the terms of the Merger Agreement and the related agreements,
including the Distribution Agreement. On Sunday, February 9, 1997, the Company
Board and the Westinghouse Board, at their respective special meetings, each
approved the forms of the Merger Agreement and the related agreements. On the
same day, the Merger Agreement was executed and the transaction was publicly
announced prior to the opening of the financial markets in New York City on
Monday, February 10, 1997.
THE COMPANY'S REASONS FOR THE MERGER; RECOMMENDATION OF ITS BOARD OF DIRECTORS
The Company Board has unanimously approved the Restructuring, the Company
Distribution and the Merger and believes that such transactions are in the best
interests of Gaylord and the Company's stockholders. Accordingly, the Company
Board recommends that the Company's stockholders vote FOR the approval and
adoption of the Merger Agreement.
The Company believes that the Merger will permit the Cable Networks
Business to maximize its competitive advantage while allowing New Gaylord to
focus on its core entertainment businesses. The Company further believes that,
taken together, the Restructuring, the Company Distribution and the Merger will
permit the Company's stockholders to continue to be involved in New Gaylord's
core entertainment businesses, while also providing them with the opportunity to
participate in growth of the Cable Networks Business, as well as the other and
much larger media and entertainment businesses comprising the Westinghouse/CBS
Group, including the CBS Television Network, CBS Television Stations, CBS Radio
and CBS Cable, as shareholders of Westinghouse.
In reaching its conclusion, the Company Board considered a number of
factors, including, without limitation: (i) the financial condition, results of
operations and business and prospects of the Company, which formed the framework
for its evaluation of the Merger; (ii) the increasing consolidation of the cable
and broadcasting industries resulting in the competitors of the Cable Networks
Business having substantially greater assets and resources than those of the
Company; (iii) its belief that the Cable Networks Business would potentially be
disadvantaged if it did not participate in the consolidation occurring in the
cable and broadcasting industries; (iv) its belief that the Merger would provide
the Company and its stockholders with
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the opportunity to continue to be involved in New Gaylord's core entertainment
businesses, while also providing them with the opportunity to participate in
growth of the Cable Networks Business, as well as the other and much larger
media and entertainment businesses comprising the Westinghouse/CBS Group,
including the CBS Television Network, CBS Television Stations, CBS Radio and CBS
Cable, as shareholders of Westinghouse; (v) its positive assessment of the
existing strength and future prospects of the New Gaylord Business, even without
the net cash flow contributed by the Cable Networks Business; (vi) its belief in
the long-term potential of CMT International, notwithstanding its history of
losses during its start-up years and the restrictions that will be imposed upon
its programming content for the five-year period immediately following the
Merger under the non-competition provisions of the Post-Closing Covenants
Agreement (see "THE POST-CLOSING COVENANTS AGREEMENT--Agreement Not to
Compete"); (vii) that the Merger and the Company Distribution would be tax-free
to the Company's stockholders (except for cash in lieu of fractional shares) and
generally would be tax-free to the Company and New Gaylord; (viii) the terms and
conditions of the Merger Agreement, the Distribution Agreement and the related
agreements, and the likelihood of the consummation of the Restructuring, the
Company Distribution and the Merger; and (ix) the presentation of Merrill Lynch
and the fairness opinion of Merrill Lynch delivered to the Company Board,
including the fact that the agreed upon transaction value of $1.55 billion was
within or above the ranges of values for the Cable Networks Business determined
by Merrill Lynch utilizing its various valuation methodologies. See "--Opinion
of the Company's Financial Advisor."
The foregoing discussion of the factors considered by the Company Board is
not intended to be exhaustive, but includes all material factors considered by
the Company Board. In view of the variety of factors considered in connection
with its evaluation of the Merger, the Company Board did not find it practicable
to, and therefore did not, quantify or otherwise assign relative weights to the
specific factors considered in reaching its determination. In addition,
different members of the Company Board may have given different weights to
different factors.
THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Company Board and whether to vote
in favor of the approval and adoption of the Merger Agreement, the Company's
stockholders should be aware that certain persons may have interests in the
Merger that are different from or in addition to those of the Company's
stockholders generally.
In connection with the Merger, and prior to the Time of Distribution, the
Company will take actions (and New Gaylord will take such actions as are
reasonably required to implement the same) with respect to the options,
restricted stock and performance shares which are outstanding immediately prior
to the Time of Distribution to provide that (i) effective immediately prior to
the Time of Distribution, all restrictions with respect to restricted stock will
lapse and all performance criteria with respect to performance shares will be
deemed satisfied (as though the Company had achieved 100% of the applicable
performance targets), (ii) any such options to acquire Company Common Stock
which are held by employees of Gaylord who remain as employees of New Gaylord
after the Effective Time will become fully vested and exercisable and will be
converted into and represent options to acquire shares of New Gaylord Common
Stock, under the New Gaylord Stock Plan, and (iii) the terms and/or number of
such options to acquire Company Common Stock which are held by employees of
Gaylord who remain as employees of the Cable Networks Business after the
Effective Time will be adjusted and become options to acquire Westinghouse
Common Stock in accordance with the Merger Agreement. See "THE MERGER
AGREEMENT--Employee Matters and Stock Options." See also "EXECUTIVE
COMPENSATION" in the Information Statement.
The Merger will constitute a "Change in Control" under the terms of the
severance agreements the Company has entered into with certain members of
management. As a result, all persons party thereto will have two-year employment
agreements with New Gaylord following the Merger. In the event such a person is
terminated or his or her compensation is reduced during such two-year period, he
or she will be entitled to a
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lump sum payment equal to 150% or 250%, as applicable, of the sum of his or her
base salary and cash incentive bonus. See "EXECUTIVE COMPENSATION--Employment,
Severance, and Change in Control Arrangements" in the Information Statement.
In connection with the execution of the Merger Agreement, CBS entered into
an employment agreement with David E. Hall, who is currently a Vice President of
the Company, pursuant to which Mr. Hall will be employed as President of TNN and
CMT following the Merger. See "THE MERGER AGREEMENT-- Directors and Officers."
Finally, following the Merger, Martin C. Dickinson, a current director of
the Company, is expected to be recommended to the Nominating and Governance
Committee of the Westinghouse Board and to the Westinghouse Board for
appointment as a director of Westinghouse.
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
The Company retained Merrill Lynch to act as its exclusive financial
advisor in connection with the Merger. On February 9, 1997, Merrill Lynch
rendered to the Company Board its written opinion that, as of such date and
based upon and subject to the factors and assumptions set forth therein, the Per
Share Merger Consideration (referred to in the Merrill Lynch Opinion as the
"Exchange Ratio") was fair to the holders of Company Common Stock from a
financial point of view.
THE FULL TEXT OF THE MERRILL LYNCH OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS ANNEX VI HERETO AND IS
INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE MERRILL LYNCH OPINION SET
FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION. STOCKHOLDERS OF THE COMPANY ARE
URGED TO READ SUCH OPINION IN ITS ENTIRETY. THE MERRILL LYNCH OPINION WAS
PROVIDED TO THE COMPANY BOARD FOR ITS INFORMATION AND IS DIRECTED ONLY TO THE
FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE PER SHARE MERGER CONSIDERATION TO
THE HOLDERS OF COMPANY COMMON STOCK, DOES NOT ADDRESS THE MERITS OF THE
UNDERLYING DECISION BY THE COMPANY TO ENGAGE IN THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO THE COMPANY'S STOCKHOLDERS AS TO HOW SUCH
STOCKHOLDERS SHOULD VOTE ON THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT OR
ANY MATTER RELATED THERETO.
The Per Share Merger Consideration was determined through negotiations
between Westinghouse and the Company and was approved by the Company Board.
The summary set forth below does not purport to be a complete description
of the analyses underlying the Merrill Lynch Opinion or the presentation made by
Merrill Lynch to the Company Board. The preparation of a fairness opinion is a
complex analytical process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to partial analysis or summary description. In arriving
at its opinion, Merrill Lynch did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly, Merrill
Lynch believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinion.
In performing its analyses, numerous assumptions were made with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Merrill
Lynch, Gaylord or the Westinghouse Group. Any estimates contained in the
analyses performed by Merrill Lynch are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, estimates of the value of businesses
or securities do not purport to be appraisals or to reflect the prices at which
such businesses or securities might actually be sold. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty. In addition, as
described above, the Merrill Lynch Opinion and Merrill Lynch's presentation to
the Company Board were among several factors taken into consideration by the
Company Board in making its determination to approve and adopt the Merger
Agreement. Consequently, the Merrill
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Lynch analyses described below should not be viewed as determinative of the
decision of the Company Board or the Company's management with respect to the
fairness of the Per Share Merger Consideration.
In arriving at its opinion, Merrill Lynch, among other things, reviewed
certain publicly available business and financial information relating to each
of Gaylord and the Westinghouse Group, as well as a draft of the Merger
Agreement. Merrill Lynch also reviewed certain other information, including
financial forecasts, for Gaylord (after giving effect to the Restructuring and
the Company Distribution) and the Westinghouse Group (before and after giving
effect to the Westinghouse Distribution), in each case provided to it by Gaylord
and Westinghouse, and met with members of senior management and representatives
of each of Gaylord and Westinghouse to discuss the businesses and prospects of
Gaylord (after giving effect to the Restructuring and the Company Distribution)
and Westinghouse (before and after giving effect to the Westinghouse
Distribution), including after giving effect to the Merger.
Merrill Lynch also considered certain stock market data for the Company and
Westinghouse and certain financial data for Gaylord (after giving effect to the
Restructuring and the Company Distribution) and the Westinghouse Group (before
and after giving effect to the Westinghouse Distribution) and compared that data
with similar data for other publicly held companies that Merrill Lynch deemed to
be comparable to Gaylord (after giving effect to the Restructuring and the
Company Distribution) and the Westinghouse Group (before and after giving effect
to the Westinghouse Distribution). In addition, Merrill Lynch considered the
financial terms of certain other business combination transactions which Merrill
Lynch deemed relevant. Merrill Lynch reviewed such other financial studies and
analyses and performed such other investigations and took into account such
other matters as it deemed necessary, including its assessment of general
economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch relied on the accuracy and
completeness of all information supplied or otherwise made available to Merrill
Lynch by Gaylord, Westinghouse or their respective representatives, discussed
with or reviewed by or for Merrill Lynch, or publicly available, and further
relied on the assurances of management of Gaylord and Westinghouse that they
were not aware of any facts that would make such information inaccurate or
misleading. Merrill Lynch has not assumed any responsibility for independently
verifying such information, has not undertaken an independent evaluation or
appraisal of the assets or liabilities of Gaylord or the Westinghouse Group or
been furnished with such an evaluation or appraisal and has not conducted a
physical inspection of the properties or facilities of Gaylord or the
Westinghouse Group. With respect to the financial forecast information furnished
to or discussed with Merrill Lynch by Gaylord, Westinghouse or their
representatives, Merrill Lynch assumed that it was reasonably prepared and
reflected the best currently available estimates and judgments of Gaylord's and
Westinghouse's managements as to the expected future financial performance of
Gaylord (after giving effect to the Restructuring and the Company Distribution)
or the Westinghouse Group (before and after giving effect to the Westinghouse
Distribution), as the case may be, including after giving effect to the Merger.
Merrill Lynch expressed no opinion as to such financial forecast information or
the assumptions on which they were based. In addition, Merrill Lynch assumed
that the Merger will qualify as a tax-free reorganization for U.S. Federal
income tax purposes. For purposes of rendering its opinion Merrill Lynch
assumed, in all respects material to its analysis, that the representations and
warranties of each party to the Merger Agreement, the other Transaction
Agreements and all related documents and instruments contained therein are true
and correct, that each party to such documents will perform all of the covenants
and agreements required to be performed by such party under such documents and
that all conditions to the consummation of the Merger will be satisfied without
waiver thereof. Merrill Lynch also assumed that all material governmental,
regulatory or other consents and approvals will be obtained in connection with
the Merger and that in the course of obtaining any necessary governmental,
regulatory or other consents and approvals, or any amendments, modifications or
waivers to any documents to which either of Gaylord or the Westinghouse Group is
a party, no restrictions will be imposed or amendments, modifications or waivers
made that would have any material adverse effect on the contemplated benefits to
Gaylord of the Merger.
The Merrill Lynch Opinion is necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. For purposes of rendering the Merrill Lynch Opinion, Merrill Lynch
assumed that the Merger will not be consummated under circumstances in which the
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Company's termination right based on the aggregate market value of the shares of
Westinghouse Common Stock issuable in connection with the Merger would be
exercisable. See "THE MERGER AGREEMENT-- Per Share Merger Consideration."
Merrill Lynch was not authorized by the Company or the Company Board to solicit,
nor did it solicit or take into account any prospect of, third-party indications
of interest for the acquisition of all or any part of Gaylord. In addition,
Merrill Lynch was not asked to consider, and the Merrill Lynch Opinion does not
in any manner address, the price at which shares of Westinghouse Common Stock
will actually trade following consummation of the Merger. Furthermore, Merrill
Lynch was not asked to consider, and the Merrill Lynch Opinion does not in any
manner address, the Restructuring and the Company Distribution or any aspect
thereof, including, without limitation, its fairness, the merits of the
underlying decision by the Company to engage therein or the price at which the
shares of New Gaylord Common Stock will trade following the Restructuring and
the Company Distribution. The Company did not impose any other limitations on
the scope of Merrill Lynch's analyses.
The following is a brief summary of the material analyses performed by
Merrill Lynch in connection with its preparation of the Merrill Lynch Opinion.
Valuation of the Cable Networks Business After the Restructuring and the Company
Distribution
Comparable Transaction Analysis. Merrill Lynch reviewed certain publicly
available information regarding nine selected entertainment and broadcasting
related transactions between March 1993 and January 1997 (the "Entertainment
Comparable Transactions") and compared certain financial information and
multiples from the Entertainment Comparable Transactions to corresponding
financial information and multiples for Gaylord and the Westinghouse Group. The
Entertainment Comparable Transactions and the dates the transactions were
announced are as follows: The Walt Disney Company's proposed acquisition of E!
Entertainment (January 1997); Time Warner Inc.'s acquisition of Turner
Broadcasting System (August 1995); Westinghouse's acquisition of CBS (August
1995); The Walt Disney Company's acquisition of Capital Cities/ABC (August
1995); The Seagram Company's acquisition of MCA, Inc. (April 1995); Pearson
plc's acquisition of Grundy Worldwide Limited (March 1995); Hallmark Cards
Inc.'s acquisition of RHI Entertainment (April 1994); Viacom/Paramount's
acquisition of Blockbuster Entertainment Corp. (January 1994); and Blockbuster
Entertainment Corp.'s acquisition of Spelling Entertainment Group Inc. (March
1993).
Merrill Lynch's analysis indicated transaction value as a multiple of (i)
last twelve month's ("LTM") earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the Entertainment Comparable Transactions ranging
from 10.5x to 21.9x with a median of 13.9x and a mean of 14.9x compared to an
implied LTM EBITDA multiple of 16.6x to be paid in the Merger for the Cable
Networks Business and (ii) LTM earnings before interest and taxes ("EBIT") for
the Entertainment Comparable Transactions ranging from 11.6x to 25.9x with a
median of 15.0x and a mean of 17.1x compared to an implied LTM EBIT multiple of
18.9x to be paid in the Merger for the Cable Networks Business. Based on the
comparable transaction analysis, Merrill Lynch derived a summary reference range
of implied enterprise values for the Cable Networks Business of $1.1 billion to
$1.4 billion.
No transaction utilized in the comparable transaction analysis was
identical to the Merger. Accordingly, an analysis of the results of this
comparison is not purely mathematical; rather, it involves complex
considerations and judgments concerning differences in historical and projected
financial and operating characteristics of the comparable acquired companies and
other factors that could affect the acquisition value of such companies and the
Cable Networks Business.
Comparable Company Trading Analysis. Using publicly available information,
Merrill Lynch compared the Adjusted Market Value (as defined below) as a
multiple of estimated EBITDA for 1996 and 1997 for Gaylord and the Westinghouse
Group with corresponding financial and operating information and multiples for
two groups of publicly traded companies that Merrill Lynch deemed to be
comparable: a group consisting of three selected basic cable programming
companies (the "Cable Comparables") and a group consisting of four selected
entertainment companies (the "Entertainment Comparables"). The Cable Comparables
were BET Holdings, Inc., International Family Entertainment, Inc. and
Valuevision International, Inc. and the
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Entertainment Comparables were The Walt Disney Company, Viacom/Paramount, News
Corporation and Time Warner. Merrill Lynch calculated adjusted market value as
fully-diluted market value of the common stock plus total debt, preferred stock
and minority interests, less cash and cash equivalents ("Adjusted Market
Value"). For purposes of computing the Adjusted Market Value with respect to the
Cable Comparables and the Entertainment Comparables in the comparable company
trading analysis, Merrill Lynch assumed that options with exercise prices less
than the fair market value of the stock underlying such options ("in-the money")
were exercised and proceeds from such exercise were used to repurchase common
stock at the market price and in certain cases, also assumed the conversion of
significantly in-the-money convertible debt and preferred stock issues. Merrill
Lynch based the analysis on share prices for the Company and Westinghouse on
January 29, 1997 of $24.75 and $18.50, respectively, and Merrill Lynch research
estimates of EBITDA for 1996 and 1997. The analysis indicated Adjusted Market
Value as a multiple of (i) 1996 estimated EBITDA for (A) the Cable Comparables
ranging from 8.7x to 13.9x with a mean of 11.2x, (B) the Entertainment
Comparables ranging from 9.1x to 11.5x with a mean of 10.1x, (C) Gaylord of
14.8x and (D) the Westinghouse Group of 20.0x and (ii) 1997 estimated EBITDA for
(W) the Cable Comparables ranging from 4.7x to 12.1x with a mean of 8.1x, (X)
the Entertainment Comparables ranging from 7.7x to 10.1x with a mean of 8.8x,
(Y) Gaylord of 12.6x and (Z) the Westinghouse Group of 12.9x. Based on the
multiples calculated in the comparable company trading analysis and the
estimates of Gaylord's management for 1996 and 1997 EBITDA for the Cable
Networks Business, Merrill Lynch derived a summary reference range of implied
enterprise values for the Cable Networks Business of $1 billion to $1.3 billion.
Discounted Cash Flow Analysis. Using a discounted cash flow methodology,
Merrill Lynch calculated ranges of implied firm values for the Cable Networks
Business. The analysis was based on projections prepared by Gaylord's management
for the Cable Networks Business, 2001 terminal EBITDA multiples ranging from
10.0x to 12.0x and discount rates ranging from 11.0% to 13.0% which were based
on an analysis of the weighted average cost of capital for comparable television
and network companies. Based on the discounted cash flow analysis, Merrill Lynch
derived a summary reference range of implied enterprise values for the Cable
Networks Business of $1.3 billion to $1.6 billion.
Pursuant to a letter agreement between the Company and Merrill Lynch, the
Company agreed to pay Merrill Lynch (i) $100,000 upon the Company's execution of
such letter agreement and (ii) an additional fee in an amount equal to 0.5% of
the aggregate purchase price paid in the Merger or certain other business
combinations involving the Company, payable upon the closing of the Merger or
such other business combination. Assuming the aggregate value of the shares of
Westinghouse Common Stock issuable in connection with the Merger is $1.55
billion, upon the closing of the Merger, Merrill Lynch will be entitled to
receive a fee of approximately $7.75 million. The Company also agreed to
reimburse Merrill Lynch for its reasonable out-of-pocket expenses, including
certain reasonable fees and disbursements of its legal counsel. Additionally,
the Company agreed to indemnify Merrill Lynch and certain related persons for
certain liabilities related to or arising out of its engagement, including
liabilities under the federal securities laws.
The Company retained Merrill Lynch based upon Merrill Lynch's experience
and expertise. Merrill Lynch is an internationally recognized investment banking
and advisory firm. Merrill Lynch, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. Merrill Lynch has, in the past,
provided financial advisory and/or financing services to the Company and/or
Westinghouse and may continue to do so and has received, and may receive, fees
for the rendering of such services. In the ordinary course of its business,
Merrill Lynch and its affiliates may actively trade the debt and equity
securities of the Company and Westinghouse (and anticipate trading after the
Merger in the securities of Westinghouse and New Gaylord) for their own account
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities.
RESALE OF SHARES OF WESTINGHOUSE COMMON STOCK ISSUED IN THE MERGER; AFFILIATES
The shares of Westinghouse Common Stock to be issued in connection with the
Merger will be freely transferable, except that shares issued to any stockholder
of the Company who may be deemed to be an
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"affiliate" (as defined under the Securities Act, and which generally includes,
without limitation, directors, certain executive officers and beneficial owners
of 10% or more of a class of capital stock) of the Company for purposes of Rule
145 under the Securities Act may be resold by them only in transactions
permitted by the resale provisions of Rule 145 or as otherwise permitted under
the Securities Act. The Merger Agreement provides that Westinghouse's obligation
to consummate the Merger is subject to Westinghouse receiving, prior to the
Closing Date, a letter agreement from each affiliate of the Company to the
effect that such person will not offer or sell or otherwise dispose of any
shares of Westinghouse Common Stock issued to such person in connection with the
Merger in violation of the Securities Act or the rules and regulations
promulgated thereunder. This Proxy Statement/Prospectus does not cover resales
of shares of Westinghouse Common Stock received by any person who may be deemed
to be an affiliate of the Company.
BOARD REPRESENTATION
Following the Merger, Martin C. Dickinson, a member of the Company Board,
is expected to be recommended to the Nominating and Governance Committee of the
Westinghouse Board and the Westinghouse Board for appointment as a director of
Westinghouse.
ACCOUNTING TREATMENT
The Merger will be accounted for by Westinghouse under the "purchase"
method of accounting, in accordance with generally accepted accounting
principles. After the Merger, the results of operations of the Cable Networks
Business will be included in the consolidated financial statements of
Westinghouse. The purchase price (i.e., the aggregate Per Share Merger
Consideration) will be allocated based on the fair values of the assets acquired
and the liabilities assumed. Such allocations will be made based upon valuations
and other studies that have not yet been finalized.
ABSENCE OF DISSENTERS' APPRAISAL RIGHTS
Holders of Company Common Stock will not have the right to elect to have
the fair value of their shares of Company Common Stock judicially appraised and
paid to them in cash in connection with the Merger. Section 262 of the DGCL
("Section 262") provides appraisal rights to stockholders of Delaware
corporations in connection with certain mergers and consolidations. Under
Section 262, appraisal rights are not available to the stockholders of a
corporation that is a party to a merger if the corporation's stock is listed on
a national securities exchange as of the record date set to determine the
stockholders entitled to receive notice of and to vote at the meeting of
stockholders to approve the merger so long as the consideration to be received
by such stockholders in the merger consists of (i) shares of the capital stock
of the surviving corporation in the merger, (ii) shares of the capital stock of
any other corporation provided that such stock is listed on a national
securities exchange as of the date on which the merger becomes effective, (iii)
cash in lieu of fractional shares or (iv) a combination of the foregoing.
STOCK EXCHANGE LISTING
It is a condition to the consummation of the Merger that the shares of
Westinghouse Common Stock issuable to holders of Company Common Stock in
connection with the Merger be approved for listing on the NYSE, subject to
official notice of issuance.
DELISTING AND DEREGISTRATION OF COMPANY CLASS A COMMON STOCK
If the Merger is consummated, the Company Class A Common Stock will be
delisted from the NYSE and will be deregistered under the Exchange Act.
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THE STOCKHOLDER AGREEMENT
The description of the Stockholder Agreement contained in this Proxy
Statement/Prospectus does not purport to be complete and is qualified in its
entirety by reference to the Stockholder Agreement, a copy of which is attached
as Annex III and is incorporated herein by reference.
In connection with the execution of the Merger Agreement, Westinghouse, the
Voting Trustees and the Principal Stockholders entered into the Stockholder
Agreement. Together, the Voting Trustees and the Principal Stockholders had the
right to vote, at the Record Date, 89,612 shares of Company Class A Common Stock
and 39,048,819 shares of Company Class B Common Stock, representing
approximately 65% of the combined voting power of the outstanding Company Common
Stock.
Pursuant to the terms of the Stockholder Agreement, the Voting Trustees
have agreed to vote (or cause to be voted) the Company Class B Common Stock held
in the Voting Trust (the "Voting Trust Shares"), and each of the Principal
Stockholders has agreed to vote (or cause to be voted) the Company Common Stock
owned of record by such Principal Stockholder (i) in favor of the Merger, the
adoption by the Company of the Merger Agreement and the approval of the terms
thereof and each of the other transactions contemplated thereby or by any of the
other Transaction Agreements and (ii) against any alternative takeover proposal
or any amendment to the Restated Certificate of Incorporation of the Company
(the "Company Charter") or the Company By-Laws or other proposal or transaction
involving the Company or any of its subsidiaries, which amendment or other
proposal or transaction would in any manner impede, frustrate, prevent or
nullify the Merger, the Merger Agreement or any of the other transactions
contemplated thereby or by any of the other Transaction Agreements or change in
any manner the voting rights of the Company Common Stock.
Shares of Company Class B Common Stock (including the Voting Trust Shares)
are convertible into shares of Company Class A Common Stock at any time and
automatically convert upon the occurrence of certain events, including upon
certain transfers. However, pursuant to the terms of the Stockholder Agreement,
(i) the Voting Trustees have agreed, among other things, (a) not to consent to
the withdrawal of any of the Voting Trust Shares from the Voting Trust, (b) not
to take any action that would result in the conversion of any of the Voting
Trust Shares into shares of Company Class A Common Stock, (c) not to vote,
without the consent of Westinghouse, to amend, alter or modify the Voting Trust
Agreement, and (d) not to resign from their respective positions as Voting
Trustees or to vote for the removal of any of the other Voting Trustees; and
(ii) each Principal Stockholder has agreed (a) subject to certain exceptions,
not to sell, transfer (including by gift), pledge, assign or otherwise dispose
of his, her or its shares of Company Common Stock (whether owned of record or
beneficially), not to enter into any contract, option or other arrangement with
respect to the transfer of such Company Common Stock, and not to convert or
cause to be converted any shares of Company Class B Common Stock owned of record
by such Stockholder into shares of Company Class A Common Stock, (b) not to
enter into any voting arrangement, whether by proxy, voting agreement or
otherwise, in connection with, directly or indirectly, any takeover proposal,
(c) not to seek the withdrawal from the Voting Trust of any shares of Company
Common Stock held in the Voting Trust, and (d) not to execute any instrument
directing the termination of the Voting Trust.
Pursuant to the terms of the Stockholder Agreement, during the term of the
Stockholder Agreement each Principal Stockholder has agreed not to, and not to
authorize any investment banker, attorney or other advisor or representative to,
solicit, initiate or encourage the submission of any takeover proposal, or
participate in any discussions or negotiations regarding, or furnish to any
person information with respect to, or take any other actions to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, a takeover proposal. In addition, each Principal
Stockholder has agreed, until the consummation of the Merger or the termination
of the Merger Agreement, to use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and each of
the other transactions contemplated by the Merger Agreement or any of the other
Transaction Agreements.
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The Stockholder Agreement will terminate upon the earlier of (i) the
Effective Time of the Merger or (ii) the time the Merger Agreement is terminated
in accordance with its terms unless the Merger Agreement is terminated (a) by
Westinghouse or the Company because, at the Special Meeting, the Merger Approval
was not obtained, (b) by the Company because a Governmental Entity has issued an
order, decree, ruling or injunction or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree, ruling, injunction or other action has become final and nonappealable,
but only if at the time of such termination Westinghouse had the right to
terminate the Merger Agreement due to a Material Breach by Gaylord of any
representation, warranty, covenant or other agreement contained in the
Transaction Agreements which would give rise to the failure of certain
conditions contained in the Merger Agreement, (c) by Westinghouse due to a
Material Breach by Gaylord of any representation, warranty, covenant or other
agreement contained in the Transaction Agreements which would give rise to the
failure of certain conditions contained in the Merger Agreement, or (d) at a
time when one or more of the Voting Trustees or Principal Stockholders is in
breach in any material respect of any of the terms or provisions of the
Stockholder Agreement and such breach cannot be or has not been cured within 30
days after the giving of written notice by Westinghouse to the breaching Voting
Trustee or Principal Stockholder of such breach, in all of which cases, the
Stockholder Agreement will terminate on August 9, 1998. See the "THE MERGER
AGREEMENT--Termination."
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THE MERGER AGREEMENT
The description of the Merger Agreement contained in this Proxy
Statement/Prospectus does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, a copy of which is attached as
Annex I and is incorporated herein by reference.
THE MERGER
At the Effective Time, the Company, Westinghouse and Sub will consummate
the Merger in which Sub will be merged with and into the Company, with the
Company continuing as the Surviving Corporation. As a result of the Merger, the
separate corporate existence of Sub will cease and the Company will become a
wholly owned subsidiary of Westinghouse.
PER SHARE MERGER CONSIDERATION
Subject to the terms and conditions of the Merger Agreement, each share of
Company Common Stock outstanding immediately prior to the Effective Time (other
than shares owned directly or indirectly by the Company, which will be canceled)
will be converted into the right to receive the Per Share Merger Consideration,
which is equal to the quotient, rounded to the nearest thousandth, or if there
shall not be a nearest thousandth, the next higher thousandth, of (i) the
quotient of (x) $1.55 billion divided by (y) the number (the "Outstanding
Number") of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares owned directly or indirectly by
the Company, which are to be canceled), divided by (ii) the Market Price (as
defined below) of Westinghouse Common Stock on the date on which the Effective
Time shall occur; provided, however, that in the event that the product of the
Per Share Merger Consideration multiplied by the Outstanding Number would exceed
110 million (the "Maximum Number of Shares"), then the Per Share Merger
Consideration will be adjusted to mean the highest number (after taking into
account the rounding provision described above) that would not result in the
product of such number multiplied by the Outstanding Number exceeding 110
million. In the event of any such adjustment, the Company will have the right to
terminate the Merger Agreement (the "Cap Termination Right"), subject to the
right of Westinghouse to elect, after notice of the Company's election to
terminate, to increase the Per Share Merger Consideration to the Per Share
Merger Consideration calculated without giving effect to the Maximum Number of
Shares (a "Top-Up Right"). In the event of any such election by Westinghouse,
the Company's exercise of the Cap Termination Right would not be effective. See
"--Termination." The "Market Price" of Westinghouse Common Stock on any date
means the average of the daily closing prices per share of Westinghouse Common
Stock as reported on the NYSE Composite Transactions List (as reported by The
Wall Street Journal or, if not reported thereby, by another authoritative source
mutually selected by Westinghouse and the Company) for the Averaging Period;
provided that (A) if the Westinghouse Board declares a dividend on the
outstanding shares of Westinghouse Common Stock having a record date after the
Effective Time but an ex-dividend date (based on "regular way" trading on the
NYSE of shares of Westinghouse Common Stock (the "Ex-Date")) that occurs during
the Averaging Period, then for purposes of computing the Market Price, the
closing price on the Ex-Date and any trading day in the Averaging Period after
the Ex-Date will be adjusted by adding thereto the amount of such dividend and
(B) if the Westinghouse Board declares a dividend on the outstanding shares of
Westinghouse Common Stock having a record date before the Effective Time and an
Ex-Date that occurs during the Averaging Period, then for purposes of computing
the Market Price, the closing price on any trading day before the Ex-Date will
be adjusted by subtracting therefrom the amount of such dividend. For purposes
of the immediately preceding sentence, the amount of any non-cash dividend will
be the fair market value thereof on the payment date for such dividend as
determined in good faith by mutual agreement of Westinghouse and the Company.
Cash will be paid in lieu of any fractional shares of Westinghouse Common Stock.
See "--No Fractional Shares."
CONVERSION OF COMPANY COMMON STOCK
As of 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, each share of
Company Common Stock that is owned by the Company or by any subsidiary of the
Company will automatically be canceled and retired and will cease to exist, and
no
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consideration will be delivered in exchange therefor and, subject to the
provision of the Merger Agreement that no fractional shares of Westinghouse
Common Stock will be issued, each issued and outstanding share of Company Common
Stock (other than shares to be canceled) will be converted into the right to
receive the Per Share Merger Consideration. As of the Effective Time, all shares
of Company Common Stock will no longer be outstanding and will automatically be
canceled and retired and will cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock will cease to have any
rights with respect thereto, except the right to receive the Per Share Merger
Consideration and any cash in lieu of fractional shares of Westinghouse Common
Stock to be issued or paid in consideration therefor upon surrender of such
certificate (as set forth below), without interest.
NO FRACTIONAL SHARES
No fractional shares of Westinghouse Common Stock will be issued in the
Merger. Each holder of shares of Company Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of Westinghouse Common Stock (after taking into account all Certificates (as
defined below) delivered by such holder) will receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Westinghouse Common Stock multiplied by the closing price of a share of
Westinghouse Common Stock on the NYSE Composite Transactions List (as reported
by The Wall Street Journal or, if not reported thereby, another authoritative
source mutually selected by Westinghouse and the Company) on the Closing Date.
EFFECTIVE TIME OF THE MERGER
As soon as practicable on or after the Closing Date, the parties to the
Merger Agreement will file a Certificate of Merger with the Secretary of State
of the State of Delaware. The Certificate of Merger will specify that the Merger
will become effective at 12:01 a.m. on the day following the Closing Date or at
such other time as Westinghouse and the Company may agree to specify in the
Certificate of Merger.
EXCHANGE OF COMPANY COMMON STOCK
The Merger Agreement provides that the exchange of shares of Company Common
Stock in the Merger will be effected as follows:
(i) as of the Effective Time, Westinghouse will deposit with such bank
or trust company as may be designated by Westinghouse and not reasonably
disapproved of by the Company (the "Exchange Agent"), for the benefit of
holders of shares of Company Common Stock, certificates representing shares
of Westinghouse Common Stock issuable in exchange for outstanding shares of
Company Common Stock;
(ii) as soon as reasonably practicable after the Effective Time,
Westinghouse will cause the Exchange Agent to mail to each holder of record
of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (each a
"Certificate" and collectively, the "Certificates") whose shares were
converted into a right to receive the Per Share Merger Consideration, a
transmittal letter and instructions for use in effecting the surrender of
the Certificates for the Per Share Merger Consideration;
(iii) upon surrender of a Certificate for cancellation to the Exchange
Agent, together with a letter of transmittal duly executed and any other
required documents, the holder of such Certificate will be entitled to
receive in exchange therefor whole shares of Westinghouse Common Stock
equal to the Per Share Merger Consideration, and cash in lieu of any
fractional share of Westinghouse Common Stock, and the surrendered
Certificate will be canceled; and
(iv) after the Effective Time, each outstanding, unsurrendered
Certificate will be deemed to represent only the right to receive upon such
surrender shares of Westinghouse Common Stock and cash, if any, into which
such shares of Company Common Stock will have been converted; however, the
holders of outstanding, unsurrendered Certificates after the Effective Time
will not be entitled to receive
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any dividends or distributions with respect to Westinghouse Common Stock
with a record date after the Effective Time theretofore paid with respect
to the shares of Westinghouse Common Stock until such Certificates are
surrendered, although any such dividends or distributions will accrue and
be payable to the holder, without interest, upon surrender of the
Certificate.
COMPANY STOCKHOLDERS SHOULD NOT FORWARD CERTIFICATES TO THE EXCHANGE AGENT
UNTIL THEY HAVE RECEIVED LETTERS OF TRANSMITTAL AND INSTRUCTIONS.
All shares of Westinghouse Common Stock issued and cash in lieu of
fractional shares paid upon surrender of Certificates will be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock theretofore represented by such Certificates.
EMPLOYEE MATTERS AND STOCK OPTIONS
The Merger Agreement provides that as of the Effective Time, the employees
of Gaylord who remain with the Cable Networks Companies (each, a "Cable Networks
Employee" and collectively, the "Cable Networks Employees") immediately
following the time as of which the Company Distribution is effective (the "Time
of Distribution") will participate in the applicable employee benefit plans or
programs of CBS on the same basis as similarly situated employees of CBS. The
Merger Agreement further provides that Westinghouse will, or will cause the
Cable Networks Companies to, continue to employ, with comparable compensation,
as of the Effective Time, all of the Cable Networks Employees, including all
such Cable Networks Employees covered by any collective bargaining agreement.
The Merger Agreement provides that any Cable Networks Employee whose employment
is involuntarily terminated within a period of 90 days following the Effective
Time will be entitled to severance from Westinghouse or the Company on a basis
no less favorable than the severance that would have been provided to such
individual under the applicable severance policy or program of the Company in
effect on February 9, 1997 had such Cable Networks Employee been terminated
while covered by such policy or program. The Merger Agreement provides that
Westinghouse will, or will cause the Company to, give the Cable Networks
Employees full credit for purposes of eligibility and vesting (and for purposes
of calculating any severance, vacation, holiday and sick day entitlements) under
any employee benefit plans or arrangements maintained by Westinghouse, the
Company or any of their respective subsidiaries to the same extent recognized by
the Company immediately prior to the Effective Time.
The Merger Agreement also provides that Westinghouse will honor, or will
cause the Company to honor, the terms of the Company's annual incentive bonus
program as in effect as of the date of the Merger Agreement so that, upon
completion of the calendar year in which the Effective Time occurs, each Cable
Networks Employee who would have been entitled to a bonus thereunder had the
transactions contemplated under the Merger Agreement and the Distribution
Agreement not been consummated will receive an annual incentive bonus in an
amount not less than the annual bonus such Cable Networks Employee would have
received had such transactions not been consummated (prorated to the extent that
the employment of any such Cable Networks Employee is involuntarily terminated
by the Company prior to December 31 of the calendar year in which the Effective
Time will occur).
Furthermore, during the period from the date of the Merger Agreement
through the Closing Date, Westinghouse and the Company have agreed to use their
reasonable efforts to agree upon those Cable Networks Employees who also perform
financial, human resources and purchasing services for the New Gaylord Companies
to whom the New Gaylord Companies may offer employment without violating the
restrictions contained in the Post-Closing Covenants Agreement. (See "THE
POST-CLOSING COVENANTS AGREEMENT--Agreement Not to Compete").
In addition to the above, the Merger Agreement provides that each option to
acquire Company Class A Common Stock (each, an "Employee Stock Option") granted
pursuant to the Gaylord Entertainment Company Amended and Restated 1993 Stock
Option and Incentive Plan and the Gaylord Entertainment Company Amended and
Restated 1991 Stock Option and Incentive Plan (the "Company Stock Plans") held
by an employee of Gaylord who will be a Cable Networks Employee at the Effective
Time and that is
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outstanding immediately prior to the Effective Time and that is not required to
be assumed by New Gaylord pursuant to the Distribution Agreement, whether or not
then vested or exercisable, will, effective as of the Effective Time, be assumed
by Westinghouse and become and represent an option to acquire the number of
shares of Westinghouse Common Stock (a "Substitute Option"), rounded up to the
nearest whole share, determined in a manner that will preserve the spread
between the option exercise price and the fair market value of the Company Class
A Common Stock subject to such option and the ratio of the spread to the
exercise price of such option as provided in Section 425 of the Code and the
regulations promulgated thereunder, with such adjustments as are necessary to
preserve the tax favored status of incentive stock options under the Code. The
Merger Agreement provides that after the Effective Time, each Substitute Option
will be exercisable upon the same terms and conditions as were applicable to the
related Employee Stock Option immediately prior to the Effective Time.
Westinghouse, in its sole discretion, will determine whether such Substitute
Options will be issued under an existing or newly established plan of
Westinghouse, the Company or any of their respective subsidiaries.
REPRESENTATIONS AND WARRANTIES; SURVIVAL
The Merger Agreement contains various representations and warranties of the
Company, Westinghouse and Sub. The representations and warranties of the Company
relate generally to due corporate organization and qualification; corporate
authority; absence of violations of, among other things, certificates of
incorporation, by-laws, and certain contracts or laws; required filings with and
consents and approvals of governmental authorities; the capital structure of the
Company; the Cable Networks Companies; the New Gaylord Companies; documents
filed with the SEC, including this Proxy Statement/Prospectus, and the accuracy
of information, including financial statements, contained therein; absence of
undisclosed liabilities; financial statements with respect to the Cable Networks
Business; absence of certain material events and changes; compliance with
applicable laws; title to assets; litigation; taxes; employee benefit plans;
compliance with the Employee Retirement Income Security Act of 1974, as amended
("ERISA"); environmental matters; voting requirements; takeover statutes; labor
matters; brokers and finders; intellectual property; employees; contracts; and
opinions of financial advisors. The representations and warranties of
Westinghouse and Sub relate generally to due corporate organization and
qualification; corporate authority; absence of violations of, among other
things, certificates of incorporation, by-laws, and certain contracts or laws;
required filings with and consents and approvals of governmental authorities;
the capital structure of Westinghouse; documents filed with the SEC, including
this Proxy Statement/Prospectus, and the accuracy of information, including
financial statements, contained therein; absence of undisclosed liabilities;
absence of certain material changes or events; compliance with applicable laws;
litigation; takeover statutes; taxes; interim operations of Sub; voting
requirements; ownership of Company Common Stock; and brokers and finders.
The representations and warranties of the Company survive until the second
anniversary of the Effective Time, except that the representations and
warranties of the Company with respect to certain tax matters do not survive the
Effective Time. The representations and warranties of Westinghouse and Sub do
not survive past the Effective Time. The Tax Disaffiliation Agreement also
contains indemnification provisions with respect to certain tax matters. See
"THE TAX DISAFFILIATION AGREEMENT." Furthermore, pursuant to the Post-Closing
Covenants Agreement, New Gaylord will indemnify Westinghouse for certain
breaches of the representations and warranties of the Company. See "THE
POST-CLOSING COVENANTS AGREEMENT--Indemnification." The survival or nonsurvival
of any particular representation or warranty will not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
BUSINESS OF GAYLORD PENDING THE MERGER
The Company has agreed that, during the period from the date of the Merger
Agreement to the Effective Time, it will, and it will cause its subsidiaries to,
carry on the Cable Networks Business in the usual, regular and ordinary course
in substantially the same manner as conducted prior to the execution of the
Merger Agreement and in compliance in all material respects with all applicable
laws and regulations and, to the extent consistent with the above, use all
reasonable efforts to preserve intact the current business organizations
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of the Cable Networks Business, use reasonable efforts to keep available the
services of the current officers and other key employees of the Cable Networks
Business and preserve its relationships with those persons having business
dealings with the Cable Networks Business to the end that the goodwill and
ongoing businesses of the Cable Networks Business will be unimpaired at the
Effective Time. The Company has also agreed, without limiting the generality of
the foregoing, as to itself and its subsidiaries, except for the Restructuring
and the Company Distribution, or as otherwise expressly contemplated by the
Transaction Agreements, that during the period from the date of the Merger
Agreement to the Effective Time: (i) Gaylord will not (a) declare, set aside or
pay any dividends or other distributions with respect to shares of its capital
stock, other than regular quarterly cash dividends or (b) split, combine or
reclassify any of the Company's capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for shares
of the Company's capital stock; (ii) that Gaylord will not issue, deliver, sell,
pledge or otherwise encumber any shares of capital stock of the Cable Networks
Companies, any other voting securities or any securities convertible into, or
any options, warrants or rights to acquire, any such shares, voting securities
or convertible securities, other than (a) the issuance of Company Class A Common
Stock upon the exercise of Employee Stock Options outstanding on February 9,
1997, and in accordance with their terms on such date, and (b) the issuance of
Company Class A Common Stock upon conversion of Company Class B Common Stock in
accordance with the terms of the Company Charter (but only if such conversion
does not involve a violation of the Stockholder Agreement); (iii) the Company
will not amend the Company Charter or the Company By-Laws, nor will it permit
any of the other Cable Networks Companies to amend its comparable organizational
documents; (iv) none of the Cable Networks Companies will acquire or agree to
acquire (a) by merging or consolidating with, or by purchasing a substantial
portion of the capital stock or assets of, or by any other manner, any business
or any corporation, limited liability company, partnership, joint venture,
association or other business organization or division thereof, (b) any assets
that individually or in the aggregate are material to the Cable Networks
Business or (c) any Trust Certificates (as defined in the Stockholder
Agreement); (v) Gaylord will not, sell, lease, license, otherwise encumber or
subject to any lien or otherwise dispose of any of the properties or assets of
the Cable Networks Business, other than in the ordinary course of business
consistent with past practice or pursuant to existing contractual obligations
set forth in the disclosure schedule delivered by the Company to Westinghouse
simultaneously with the execution of the Merger Agreement (the "Company
Disclosure Schedule"); (vi) the Cable Networks Companies will not (a) incur any
indebtedness except in the case of the Company for indebtedness incurred in the
ordinary course of business consistent with past practice which is either repaid
or retired prior to the Effective Time or which becomes an Assumed Liability
pursuant to the terms of the Distribution Agreement or (b) make any loans,
advances, extensions of credit or capital contributions to, or investments in,
any other person, other than to officers and employees of the Cable Networks
Companies for travel, business or relocation expenses in the ordinary course of
business and other than investments in any entity that was a wholly owned Cable
Networks Subsidiary before giving effect to such investment; (vii) Gaylord will
continue to make capital expenditures with respect to the Cable Networks
Business in the ordinary course of business (other than with respect to
additional NASCAR Thunder retail stores) in an amount of up to $14,599,903 on an
annualized basis as specified in the Merger Agreement (the "Total Expenditure
Amount;" any portion of the Total Expenditure Amount not spent during the period
from January 1, 1997, to the Closing Date is referred to herein as the "Unspent
Amount"); provided, however, that Gaylord will not make or agree to make any
capital expenditure or capital expenditures relating to a single project in
excess of $100,000 without the prior written consent of Westinghouse;
furthermore, Gaylord will (a) make all capital expenditures necessary to
complete the build-out and opening of the NASCAR Thunder retail store to be
located in Cincinnati, Ohio, and (b) make such capital expenditures as
Westinghouse requests related to the acquisition of leases for, or the build-out
and opening of, other NASCAR Thunder retail stores (collectively, the "NASCAR
Expenditures"), and in each case such capital expenditures will not be included
in the calculation of the Total Expenditure Amount or of the Unspent Amount;
(viii) with respect to the Cable Networks Companies, Gaylord will not make any
tax election that would reasonably be expected to have a material adverse effect
on the Cable Networks Companies or settle or compromise any material income tax
liability; (ix) Gaylord will not enter into any programming agreements with a
term of more than one year to which any Cable Networks Company will be a party
or subject; (x) except in the ordinary course of business or except as would not
reasonably be expected to have a material adverse effect on the Cable Networks
Companies, the Cable Networks Companies will not
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modify, amend or terminate any material contract to which any Cable Networks
Company is, or at the Effective Time will be, a party or waive, release or
assign any material rights or claims thereunder; (xi) except as required by law
or in the ordinary course of business consistent with past practice, the Company
will not, nor will it permit any of its subsidiaries to, (a) increase the
compensation of any Cable Networks Employee, (b) enter into any contract with
any Cable Networks Employee regarding his employment, compensation or benefits,
or (c) adopt or amend any benefit plan, arrangement or policy to the extent such
adoption or amendment would create or increase any material liability or
obligation on the part of the Cable Networks Companies that will not either (A)
be fully performed or satisfied prior to the Effective Time or (B) be an Assumed
Liability pursuant to the Distribution Agreement; (xii) the Cable Networks
Companies will not make any change to their accounting methods, principles or
practices, except as may be required by GAAP or Regulation S-X promulgated by
the SEC or as relates only to the New Gaylord Companies; (xiii) Gaylord will not
take or cause or permit to be taken any action prior to the Effective Time that
would disqualify the Company Distribution as a transaction described in Section
355 of the Code or disqualify the Merger as a "reorganization" within the
meaning of Section 368(a)(1)(B) of the Code and the Company will use reasonable
efforts to do everything reasonably necessary to cause the Company Distribution
and the Merger so qualify; (xiv) the Company will not, and will not permit any
of its subsidiaries to, create, incur, suffer to exist or assume any lien on any
Cable Networks Asset, except for Permitted Liens (as defined in the Merger
Agreement); (xv) the Cable Networks Companies will continue to maintain and
repair all property material to the operation of the Cable Networks Business in
a manner consistent with past practice; (xvi) the Company will (a) not engage in
or allow transfers of assets or liabilities or engage or enter into other
transactions between any of the Cable Networks Companies, on the one hand, and
any of the New Gaylord Companies, on the other hand, except as contemplated by
the Distribution Agreement, (b) from and after the time of execution of any
Transaction Agreement, abide and cause the New Gaylord Companies to abide by
their respective obligations under such Transaction Agreements and (c) not
terminate or amend, or waive compliance with any obligations under, the
Distribution Agreement; provided that nothing contained in this clause (xvi)
will prohibit transfers of cash between the Cable Networks Companies and the New
Gaylord Companies, so long as such transfers are properly recorded on the
intercompany accounts of the Cable Networks Companies; (xvii) Gaylord will not
make any change in its lines of business as of February 9, 1997, that would,
based on the facts and circumstances and conduct of the particular business,
materially increase the potential liability of any of the Cable Networks
Companies under statutes or legal doctrines permitting the imposition of
liability on a parent corporation in respect of the liabilities of its
subsidiaries; and (xviii) Gaylord will not authorize, or commit or agree to
take, any of the foregoing actions.
Notwithstanding anything in the Merger Agreement to the contrary, the
Company will cause Closing Working Capital (as defined herein) of the Cable
Networks Business to be positive as of the Effective Time. See "THE POST-CLOSING
COVENANTS AGREEMENT--Working Capital Adjustment."
BUSINESS OF WESTINGHOUSE PENDING THE MERGER
Westinghouse has agreed that, during the period from the date of the Merger
Agreement to the Effective Time, it will, and will cause its subsidiaries to,
(i) not take or cause or permit to be taken any action that would disqualify the
Company Distribution as a transaction described in Section 355 of the Code or
disqualify the Merger as a "reorganization" within the meaning of Section
368(a)(1)(B) of the Code and will use reasonable efforts to do everything
reasonably necessary to cause the Company Distribution and the Merger to so
qualify; (ii) not make any material acquisitions except as previously discussed
with the Company; and (iii) continue to provide the advertising sales services
and billing, collection and cash management services to Gaylord that it is
currently providing consistent with past practices.
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER
The respective obligations of Westinghouse, Sub and the Company to effect
the Merger are subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions: (i) the Merger Approval and, if required by
the applicable rules of the NYSE, the affirmative vote of the holders of a
majority of the votes cast at a duly held meeting of the holders of Westinghouse
Common Stock (the "Westinghouse Shareholder
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Meeting") to authorize the issuance of the Westinghouse Common Stock in
connection with the Merger (the "Westinghouse Shareholder Approval") (see the
following paragraph) shall have been obtained; (ii) the waiting period (and any
extension thereof) applicable to the Merger under the HSR Act shall have been
terminated or expired; (iii) no judgment, order, decree, statute, law,
ordinance, rule, regulation, executive order, decree, temporary restraining
order, preliminary or permanent injunction or other order enacted, entered,
promulgated, enforced or issued by any court of competent jurisdiction or other
Governmental Entity or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; (iv) the Westinghouse Form S-4
and the New Gaylord Form 10 shall have become effective under the Securities Act
or the Exchange Act, as applicable, no stop order suspending the effectiveness
of either of the Westinghouse Form S-4 or the New Gaylord Form 10 shall have
been issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC; (v) the shares of Westinghouse Common Stock issuable to
the Company's stockholders in connection with the Merger shall have been
approved for listing on the NYSE, subject to official notice of issuance; (vi)
the Restructuring, the Company Distribution and the execution and delivery of
the Transaction Agreements not executed on the date of the Merger Agreement,
shall have been consummated in accordance with the terms of the Merger Agreement
and the Distribution Agreement; (vii) the IRS shall have issued and not revoked
the Tax Rulings, reasonably satisfactory in form and substance to Westinghouse
and the Company and, in the event that the IRS shall have issued all of the Tax
Rulings except for one or more of the Tax Rulings to the effect that certain
aspects of the Restructuring will not be taxable to New Gaylord or any of its
subsidiaries (each, an "Internal Merger Ruling" and collectively, the "Internal
Merger Rulings"), then, in lieu of each such Internal Merger Ruling, the
conditions of this clause (vii) will be satisfied if, as to the Company, the
Company shall have received an opinion of Skadden, Arps, Slate, Meagher & Flom
LLP, counsel to the Company, and, as to Westinghouse, if Westinghouse shall have
received an opinion of Cravath, Swaine & Moore, counsel to Westinghouse, in each
case to the same effect as each such Internal Merger Ruling, reasonably
satisfactory in form and substance to the Company or Westinghouse, as the case
may be, and dated as of the Closing Date; and (viii) there shall not be
outstanding as of the Closing Date any Adverse Tax Development. As used in the
Merger Agreement, "Adverse Tax Development" means (a) the enactment of any
legislation, the passage of any bill by either House of Congress or the
introduction of a bill by any Member of Congress, (b) that has not been
withdrawn or modified so as not to be an Adverse Tax Development, and (c) with
respect to which either Westinghouse or the Company provides the other with an
opinion of Cravath, Swaine & Moore, in the case of Westinghouse, or Skadden,
Arps, Slate, Meagher & Flom LLP, in the case of the Company, to the effect that
such legislation, as enacted, has, or if such bill were enacted into law with
the effective date and transition rules contained therein, such bill would have,
the effect of amending the Code so as to cause the Company Distribution to be
taxable for U.S. Federal income tax purposes to, and result in a material
increase in the U.S. Federal income tax liability of, the Company or its
stockholders; provided, however, that if the Adverse Tax Development does not by
its terms apply to contracts that are binding on the date of the Merger
Agreement (or on a later date), and if under the terms of such bill or
legislation constituting an Adverse Tax Development contracts are considered
binding despite conditions or contractual provisions that are referred to in
such bill or legislation as "customary" or "normal" or other language to the
same effect ("Customary Conditions"), then such opinion will be required to
reach its conclusion on the assumption that all conditions to the parties'
obligations to effect the Merger and all provisions of the Transaction
Agreements are Customary Conditions.
With respect to the condition set forth in clause (i) of the preceding
paragraph, the Westinghouse Shareholder Approval would only be required by the
applicable rules of the NYSE if the number of shares of Westinghouse Common
Stock to be issued in the Merger was equal to or exceeded 20% of the number of
shares of Westinghouse Common Stock outstanding at the Effective Time. Based on
the number of shares of Westinghouse Common Stock expected to be issued in the
Merger, assuming the Company's Cap Termination Right and Westinghouse's Top-Up
Right are not applicable (as is currently anticipated to be the case), the
Westinghouse Shareholder Approval will be neither required nor sought.
CONDITIONS TO THE OBLIGATIONS OF WESTINGHOUSE AND SUB
In addition to the foregoing conditions, the obligations of Westinghouse
and Sub to effect the Merger are further subject to satisfaction or waiver (by
Westinghouse) on or prior to the Closing Date of the following
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conditions: (i) the representations and warranties of the Company set forth in
the Merger Agreement that are qualified as to materiality shall be true and
correct, and the representations and warranties of the Company set forth in the
Merger Agreement that are not so qualified shall be true and correct in all
material respects, in each case as of the date of the Merger Agreement and as of
the Closing Date as though made on and as of the Closing Date, except to the
extent such representations and warranties expressly relate to an earlier date
(in which case as of such date), and Westinghouse shall have received a
certificate signed on behalf of the Company by the chief executive officer and
the chief financial officer of the Company to such effect; (ii) each of the
Company and its subsidiaries shall have performed in all material respects all
obligations required to be performed by it under the Transaction Agreements at
or prior to the Closing Date, and Westinghouse shall have received a certificate
signed on behalf of the Company by the chief executive officer and the chief
financial officer of the Company to such effect; (iii) Westinghouse shall have
received an executed agreement from each person who is an "affiliate" of the
Company for purposes of Rule 145 under the Securities Act relating to, among
other things, limitations on such person's subsequent sale of shares of
Westinghouse Common Stock received in connection with the Merger; (iv) there
shall not be pending or threatened by any Governmental Entity any suit, action
or proceeding (a) challenging the acquisition by Westinghouse of any shares of
capital stock of any of the Cable Networks Companies, seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by the Transaction Agreements or seeking to obtain from the Company
or Westinghouse or any of their respective subsidiaries any damages that are
material in relation to the Cable Networks Companies taken as a whole, or the
Westinghouse Group taken as a whole, (b) seeking to prohibit or limit the
ownership or operation by the Cable Networks Companies or by the Westinghouse
Group of any material portion of the Cable Networks Business or of the business
or assets of the Westinghouse Group taken as a whole, as applicable, or to
compel the Cable Networks Companies or the Westinghouse Group to dispose of or
hold separate any material portion of the Cable Networks Business or of the
business or assets of the Westinghouse Group taken as a whole, as applicable, as
a result of the transactions contemplated by the Transaction Agreements, (c)
seeking to impose limitations on the ability of Westinghouse to acquire or hold,
or exercise full rights of ownership of, any shares of capital stock of any of
the Cable Networks Companies or the Surviving Corporation, (d) seeking to
prohibit the Westinghouse Group from effectively controlling in any material
respect the Cable Networks Business, or (e) which otherwise would reasonably be
expected to have a material adverse effect on the Cable Networks Companies or on
the Westinghouse Group (excluding for this purpose the Cable Networks
Companies); in addition, there shall not be any judgment, order, decree,
statute, law, ordinance, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order enacted,
entered, promulgated, enforced or issued that is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses (b)
through (d) above; (v) the conditions to the obligations of the Company to
consummate the Company Distribution set forth in the Distribution Agreement
shall have been satisfied (without giving effect to any waiver of any such
condition not approved by Westinghouse) (see "THE COMPANY DISTRIBUTION AND
RELATED TRANSACTIONS--Terms of the Distribution Agreement"); (vi) all consents,
approvals, orders and authorizations of, and all registrations, declarations or
filings with, any Governmental Entity required to be obtained prior to the
Closing Date in connection with the execution, delivery and performance of the
Transaction Agreements shall have been obtained or made, except where the
failure to obtain or make the same individually or in the aggregate would not be
reasonably likely to have a material adverse effect on the Cable Networks
Companies or on the Westinghouse Group; (vii) each of Edward L. Gaylord and E.
K. Gaylord II shall have entered into noncompetition agreements with
Westinghouse with substantially the terms applicable to New Gaylord set forth in
the Post-Closing Covenants Agreement, and such agreements will be in full force
and effect (see "THE POST-CLOSING COVENANTS AGREEMENT--Agreement Not to
Compete"); and (viii) except as disclosed in the reports, schedules, forms,
statements and other documents required to be filed by the Company with the SEC
since January 1, 1995 (the "SEC Documents") that had been filed and were
publicly available prior to February 9, 1997 (the "Filed SEC Documents"), in the
Company Disclosure Schedule or as otherwise expressly contemplated by the
Transaction Agreements, since the date of the most recent audited financial
statements included in the Filed SEC Documents, there shall not have been any
event, change or development which individually or in the aggregate has had or
would reasonably be expected to have a material adverse effect on the Cable
Networks Companies or on the New Gaylord Companies or would impair the ability
of the Cable
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Networks Companies or the New Gaylord Companies, as the case may be, to
consummate the transactions contemplated by, or to satisfy their obligations
under, the Transaction Agreements.
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
In addition to the foregoing, the obligation of the Company to effect the
Merger is further subject to satisfaction or waiver (by the Company) on or prior
to the Closing Date of the following conditions: (i) the representations and
warranties of Westinghouse and Sub set forth in the Merger Agreement that are
qualified as to materiality shall be true and correct, and the representations
and warranties of Westinghouse and Sub set forth in the Merger Agreement that
are not so qualified shall be true and correct in all material respects, in each
case as of the date of the Merger Agreement and as of the Closing Date as though
made on and as of the Closing Date, except to the extent such representations
and warranties expressly relate to an earlier date (in which case as of such
date), and the Company shall have received a certificate signed on behalf of
Westinghouse by an executive officer of Westinghouse to such effect; (ii)
Westinghouse and Sub shall have performed in all material respects all
obligations required to be performed by them under the Transaction Agreements at
or prior to the Closing Date, and the Company shall have received a certificate
signed on behalf of Westinghouse by an executive officer of Westinghouse to such
effect; (iii) all consents, approvals, orders and authorizations of, and all
registrations, declarations or filings with, any Governmental Entity required to
be obtained prior to the Closing Date in connection with the execution, delivery
and performance of the Transaction Agreements shall have been obtained or made,
except where the failure to obtain or make the same individually or in the
aggregate would not be reasonably likely to have a material adverse effect on
the New Gaylord Companies; and (iv) except as disclosed in the reports,
schedules, forms, statements and other documents required to be filed by
Westinghouse with the SEC since January 1, 1995 (the "Westinghouse SEC
Documents") that had been filed and were publicly available prior to February 9,
1997 (the "Filed Westinghouse SEC Documents"), in connection with the
Westinghouse Distribution or as otherwise expressly contemplated by the
Transaction Agreements, since the date of the most recent audited financial
statements included in the Filed Westinghouse SEC Documents, there shall not
have been any event, change or development which individually or in the
aggregate has had or would reasonable be expected to have a material adverse
effect on Westinghouse or impair the ability of Westinghouse and Sub to
consummate the transactions contemplated by, or to satisfy their obligations
under, the Transaction Agreements.
DIRECTORS AND OFFICERS
The directors of Sub immediately prior to the Effective Time will become
the directors of the Surviving Corporation until the earlier of their
resignation or removal, or until their respective successors have been duly
elected. The directors of Sub currently are Louis J. Briskman, Senior Vice
President and General Counsel of Westinghouse, Frederic G. Reynolds, Executive
Vice President and Chief Financial Officer of Westinghouse and James A. DePalma,
Vice President, Audit and Control, of Westinghouse. The officers of Sub
immediately prior to the Effective Time will become the officers of the
Surviving Corporation until the earlier of their resignation or removal, or
until their respective successors have been duly elected. The officers of Sub
currently are Mr. Reynolds, President, Mr. Briskman, Vice President and
Secretary, Claudia E. Morf, Vice President and Treasurer of Westinghouse, Vice
President and Treasurer, and Angeline C. Straka, Vice President, Secretary and
Associate General Counsel of Westinghouse, Assistant Secretary.
Employment Contract. In connection with the execution of the Merger
Agreement, CBS entered into an employment agreement with David E. Hall, who is
currently a Vice President of the Company (the "Employment Agreement"). Pursuant
to the Employment Agreement, which, by its terms, becomes effective at the
Effective Time, Mr. Hall will be employed as President of TNN and CMT following
the Merger. The Employment Agreement provides for an employment term of three
years commencing on the Effective Date, and for a starting salary of $385,000
per annum, which salary will be subject to merit review and the potential for
annual increases (but not decreases) in accordance with CBS compensation
guidelines and practices. The Employment Agreement further provides that Mr.
Hall will have the opportunity to receive incentive bonuses of 50% of his base
salary for each calendar year during the employment term. The Employment
Agreement also provides that, subject to approval of the Compensation Committee
of the Westinghouse Board, Mr. Hall
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will be granted, as of the date the employment term commences, 50,000 options to
acquire Westinghouse Common Stock, and will thereafter be considered, in a
manner consistent with Westinghouse policy for executives in positions
comparable to Mr. Hall's, for standard grants of 25,000 options to acquire
Westinghouse Common Stock on an annual basis, during the employment term.
The Employment Agreement provides that Mr. Hall may be terminated for
cause, which is defined in the Employment Agreement to mean (i) fraud,
misappropriation or embezzlement by Mr. Hall; (ii) Mr. Hall's willful failure to
perform services under the Employment Agreement; (iii) Mr. Hall's intentional
breach of the provisions of the Employment Agreement covering time and attention
to be devoted to CBS and conflicts of interest; or (iv) Mr. Hall's incapacity
(subject to certain limitations).
In the event Mr. Hall is terminated without cause, CBS will be obligated to
pay to Mr. Hall all base salary otherwise payable pursuant to the Employment
Agreement, and to continue all plans or welfare benefits granted to Mr. Hall
pursuant to the Employment Agreement for the remainder of the employment term,
so long as Mr. Hall is willing, ready and able to render exclusive services
under the Employment Agreement during the remainder of the term of such
agreement; provided, however, that Mr. Hall will receive not less than the
greater of any remaining base salary payable under the Employment Agreement, one
year's base salary, or an applicable severance amount; provided further,
however, that if the employment of Mr. Hall is terminated for cause no severance
will be payable and CBS will have no further obligation to Mr. Hall.
Furthermore, pursuant to the Employment Agreement if, after the expiration of
the original three year employment term, the Employment Agreement is not
renewed, extended, renegotiated or replaced, Mr. Hall will be entitled to
receive one year's base salary and continuation of all health plans and welfare
benefits to which he is otherwise entitled under the Employment Agreement, on
the same basis made available to him as an active employee, for one year in lieu
of any severance pay to which he may otherwise be entitled.
CERTIFICATE OF INCORPORATION AND BY-LAWS
The Merger Agreement provides that the Company Charter, as in effect
immediately prior to the Effective Time, will become the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended,
except that such certificate of incorporation will be amended as of the
Effective Time so that Article I thereof reads in its entirety as follows: "The
name of this Corporation is G Corp. (the "Corporation")."
The By-Laws of Sub, as in effect as of the Effective Time, will become the
By-laws of the Surviving Corporation until thereafter changed or amended.
NO SOLICITATION
The Merger Agreement provides that the Company will not, nor will it permit
any of its subsidiaries to, nor will it authorize or permit any employee,
officer or director of or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any takeover
proposal (as defined below), (ii) enter into any agreement with respect to any
takeover proposal or give any approval with respect to any takeover proposal or
(iii) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any takeover proposal; provided, however,
that nothing contained in this clause (iii) will prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act. As used herein, "takeover proposal"
means any proposal for a merger, consolidation or other business combination
involving the Company or any of its subsidiaries or any proposal or offer to
acquire in any manner, directly or indirectly, an equity interest in or any
voting securities of the Company or any of its subsidiaries or a substantial
portion of the assets of Gaylord taken as a whole, other than the transactions
contemplated by the Merger Agreement.
The Merger Agreement also provides that neither the Company Board nor any
committee thereof will (i) withdraw or modify, or propose to withdraw or modify,
in a manner adverse to Westinghouse, the approval or recommendation by the
Company Board or such committee of the Merger Agreement or the Merger or
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(ii) approve or recommend, or propose to approve or recommend, any takeover
proposal. Under the Merger Agreement the Company is also required to promptly
advise Westinghouse orally and in writing of any request for information or of
any takeover proposal or any inquiry with respect to or which would reasonably
be expected to lead to any takeover proposal, the identity of the person making
any such request, takeover proposal or inquiry and all the terms and conditions
thereof and to keep Westinghouse fully informed of the status and details
(including amendments or proposed amendments) of any such request, takeover
proposal or inquiry.
NONCOMPETITION AGREEMENTS
In connection with the Merger Agreement, and as a condition to the
obligation of Westinghouse and Sub to consummate the Merger, each of Edward L.
Gaylord and E. K. Gaylord II will enter into noncompetition agreements with
Westinghouse with substantially the same terms applicable to the New Gaylord
Companies as set forth in the Post-Closing Covenants Agreement. See "THE MERGER
AGREEMENT--Conditions to the Obligations of Westinghouse and Sub" and "THE
POST-CLOSING COVENANTS AGREEMENT-- Agreement not to Compete."
ALTERNATIVE TRANSACTION
The Merger Agreement provides that, notwithstanding any provision of the
Merger Agreement to the contrary, in the event that (i) the IRS fails to issue
all of the Tax Rulings in form and substance reasonably satisfactory to
Westinghouse and the Company and a representative of the IRS has indicated that,
or Westinghouse and the Company reasonably believe that, the Tax Rulings (other
than the Merger Rulings) could be obtained if the Merger was delayed until after
the consummation of the Westinghouse Distribution, or (ii) Westinghouse, in its
sole discretion, determines to consummate the Westinghouse Distribution prior to
the consummation of the transactions contemplated by the Merger Agreement, then
(and only then) (a) the Merger will not be consummated until after the
consummation of the Westinghouse Distribution and (b) Westinghouse and the
Company will attempt to obtain the Tax Rulings based on the Merger being
consummated after the Westinghouse Distribution.
The Merger Agreement provides that in the unlikely event that, as a result
of the circumstances described immediately above, the Merger is to be
consummated after the consummation of the Westinghouse Distribution, then, for
all purposes of the Merger Agreement and this Proxy Statement/Prospectus, "Per
Share Merger Consideration" will mean that number of duly authorized, validly
issued, fully paid and nonassessable shares of Westinghouse Common Stock equal
to the quotient, rounded to the nearest thousandth, or if there will not be a
nearest thousandth, the next higher thousandth, of (i) the quotient of (x) $1.55
billion divided by (y) the Outstanding Number, divided by (ii) the Market Price
of Westinghouse Common Stock on the date on which the Effective Time will occur;
provided, however, that in the event that the product of the Per Share Merger
Consideration multiplied by the Outstanding Number would exceed 88 million (the
"Maximum Number of Alternative Shares"), then the Per Share Merger Consideration
will mean the highest number (after taking into account the rounding provision
of this sentence) that would not result in the product of such number multiplied
by the Outstanding Number exceeding 88 million. In the event of any such
adjustment, the Company will have its Cap Termination Right, subject to
Westinghouse's Top-Up Right.
In the unlikely event that the Alternative Transaction is to be
consummated, the Company would mail additional information to its stockholders.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after the Merger Approval or the Westinghouse
Shareholder Approval, if required (which, based on the number of shares of
Westinghouse Common Stock expected to be issued in the Merger, will not be
required):
(i) by mutual written consent of Westinghouse, Sub and the Company; or
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(ii) by either Westinghouse or the Company:
(a) if, upon a vote at the Special Meeting or any adjournment
thereof at which the Merger Approval is voted upon, the Merger Approval
is not obtained;
(b) if, upon a vote at a duly held Westinghouse Shareholder
Meeting or any adjournment thereof at which the Westinghouse Shareholder
Approval is voted upon, the Westinghouse Shareholder Approval is not
obtained;
(c) if the Merger has not been consummated on or before
February 9, 1998, unless the failure to consummate the Merger is the
result of a wilful and material breach of any Transaction Agreement by
the party seeking to terminate the Merger Agreement or any of its
subsidiaries, and, in the case of a termination by the Company, unless
the failure to consummate the Merger is the result of a wilful and
material breach of the Stockholder Agreement by any Stockholder or
Voting Trustee; provided, however, that the passage of such period will
be tolled for any part thereof (but not exceeding 60 calendar days in
the aggregate) during which any party is subject to a nonfinal order,
decree, ruling, injunction or action restraining, enjoining or otherwise
prohibiting the consummation of the Merger or the calling or holding of
the Special Meeting or, if the Westinghouse Shareholder Approval is
required by the applicable rules of the NYSE, the Westinghouse
Shareholder Meeting;
(d) if any Governmental Entity has issued an order, decree,
ruling or injunction or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Merger and such order, decree,
ruling, injunction or other action has become final and nonappealable;
or
(e) in the event of a breach by the other party or any of its
subsidiaries of any representation, warranty, covenant or other
agreement contained in the Transaction Agreements which would give rise
to the failure of a condition set forth in clause (i) or (ii) above
under "--Conditions to the Obligations of Westinghouse and Sub" or in
clause (i) or (ii) above under "--Conditions to the Obligations of the
Company", as applicable, that cannot be or has not been cured within 30
days after the giving of written notice to the breaching party of such
breach (provided that the terminating party is not then in such breach
of any representation, warranty, covenant or other agreement contained
in the Transaction Agreements);
(iii) by the Company in the event that the product of the Per Share
Merger Consideration multiplied by the Outstanding Number would be greater
than the Maximum Number of Shares but for the limitation on such amount to
the Maximum Number of Shares, by written notice to Westinghouse (the
"Company Termination Intent Notice") at least two days prior to the Closing
Date to the effect that the Company is unwilling to accept the Per Share
Merger Consideration calculated in accordance with the Merger Agreement;
provided, however, that the Company's exercise of its termination right as
described in this clause (iii) will not be effective if Westinghouse gives
written notice to the Company, at any time within 24 hours of its receipt
of the Company Termination Intent Notice, that Westinghouse elects to
exercise its Top-Up Right;
(iv) by the Company in the event that (i) the Merger is to be
consummated after the consummation of the Westinghouse Distribution, and
(ii) the product of the Per Share Merger Consideration multiplied by the
Outstanding Number would be greater than the Maximum Number of Alternative
Shares but for the limitation on such amount to the Maximum Number of
Alternative Shares, by written notice to Westinghouse (the "Alternative
Termination Intent Notice") at least two days prior to the Closing Date
that the Company is unwilling to accept the Per Share Merger Consideration
calculated in accordance with the Merger Agreement; provided, however, that
the Company's exercise of its termination right as described in this clause
(iv) will not be effective if Westinghouse gives written notice to the
Company, at any time within 24 hours of its receipt of the Alternative
Termination Intent Notice, that Westinghouse elects to exercise its Top-Up
Right.
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FEES AND EXPENSES
Regardless of whether or not the Merger is consummated, all fees, costs and
expenses incurred in connection with the Transaction Agreements and the
transactions contemplated thereby will be paid by the party incurring such fees,
costs or expenses, except that each of Westinghouse and the Company will bear
and pay one-half of (i) the fees, costs and expenses incurred in connection with
filing, printing and mailing the Westinghouse Form S-4, the New Gaylord Form 10
and this Proxy Statement/Prospectus and (ii) all filing fees incurred under the
HSR Act.
If the Merger is consummated, New Gaylord will be responsible for and will
pay all expenses of Gaylord directly related to the Restructuring, the Company
Distribution and the Merger. See "THE POST-CLOSING COVENANTS AGREEMENT--Other
Agreements."
AMENDMENT
The Merger Agreement provides that it may be amended by the parties thereto
by an instrument in writing signed on behalf of each party thereto at any time
before or after the Merger Approval or the Westinghouse Shareholder Approval (if
necessary), subject, if required by the Stockholder Agreement, to the prior
approval of the Voting Trustees and the Principal Stockholders; provided,
however, that after any such approval, there will not be made any amendment that
by law requires further approval by the stockholders of the Company without the
further approval of such stockholders.
WAIVER
At any time prior to the Effective Time, the Merger Agreement permits each
party thereto (in each case pursuant to a written instrument) to: (i) extend the
time for the performance of any of the obligations or other acts of the other
parties, (ii) waive any inaccuracies in the representations and warranties of
the other parties contained in the Transaction Agreements or in any document
delivered pursuant to the Transaction Agreements or (iii) subject to the proviso
in the first sentence of the paragraph immediately above, waive compliance by
the other parties with any of the agreements or conditions contained in the
Transaction Agreements.
SUBSTITUTION OF PARTIES
The Merger Agreement provides that, at the election of Westinghouse, any
direct wholly owned subsidiary of Westinghouse may be substituted for Sub as a
constituent corporation in the Merger (subject to the parties executing an
appropriate amendment to the Merger Agreement).
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
General. The following is a discussion of certain U.S. Federal income tax
consequences of the Company Distribution, the Merger and certain aspects of the
Restructuring. The discussion which follows is based on the Code, Treasury
regulations promulgated thereunder, and judicial and administrative
interpretations thereof, all as in effect on the date hereof, and is subject to
any changes in these or other laws occurring after such date, possibly with
retroactive effect. The discussion below is for general information only and
does not address the effects of any state, local or foreign tax laws on the
Restructuring, the Company Distribution and the Merger. The tax treatment of a
Company stockholder may vary depending upon his or her particular situation, and
certain stockholders (including insurance companies, tax-exempt organizations,
financial institutions or broker-dealers, persons who do not hold the Company
Common Stock as capital assets, individuals who received Company Common Stock
pursuant to the exercise of employee stock options or otherwise as compensation,
and non-U.S. persons) may be subject to special rules not discussed below.
EACH STOCKHOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES OF THE TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF CHANGES
IN APPLICABLE TAX LAWS.
U.S. Federal Income Tax Consequences of the Transactions. Consummation of
the Company Distribution and the Merger is conditioned upon the receipt of the
Tax Rulings issued by the IRS to the effect that (i) the Company Distribution
will qualify as a transaction described in Section 355(a) of the Code and the
transfer of assets and liabilities to New Gaylord immediately preceding the
Company Distribution will qualify as a transaction described in Section 351 of
the Code and/or a "reorganization" under Section 368(a)(1)(D) of the Code and
(ii) the Merger will qualify as a "reorganization" under Section 368(a)(1)(B) of
the Code. In addition, the Company has requested rulings from the IRS to the
effect that certain aspects of the Restructuring will not be taxable to New
Gaylord or any of its subsidiaries, and consummation of the Company Distribution
and the Merger is conditioned upon either (i) the receipt of such rulings or
(ii) the receipt by the Company and Westinghouse of opinions of their respective
counsel to the same effect.
The Tax Rulings and the opinions of counsel (if any) will be based on
current law, and will be based on certain representations as to factual matters
made by, among others, the Company, New Gaylord and Westinghouse. Such
representations, if incorrect in certain material respects, could jeopardize the
conclusions reached in the Tax Rulings or the opinions. None of the Company, New
Gaylord or Westinghouse is currently aware of any facts or circumstances which
would cause any such representations required to be made to the IRS or to
counsel to be untrue or incorrect in any material respect. Further, an opinion
of counsel is not binding on the IRS or the courts.
Based on the rulings and opinions (if any) discussed above, the material
federal income tax consequences that will result from the Restructuring, the
Company Distribution and the Merger are as follows:
(a) No income, gain or loss will be recognized by the Company or New
Gaylord in the Company Distribution or as a result of certain aspects of
the Restructuring. However, as a result of certain other aspects of the
Restructuring, the Company or New Gaylord will recognize income, gain or
loss.
(b) A Company stockholder will not recognize any income, gain or loss
as a result of the receipt of New Gaylord Common Stock in the Company
Distribution, except with respect to any cash received in lieu of
fractional shares of New Gaylord Common Stock.
(c) A Company stockholder's tax basis for the New Gaylord Common Stock
and Company Common Stock immediately after the Company Distribution,
including any fractional share interest of New Gaylord Common Stock for
which cash is received, will equal such stockholder's tax basis in the
Company Common Stock immediately before the Company Distribution, allocated
in proportion to the relative fair market values of New Gaylord Common
Stock and Company Common Stock at the time of the Company Distribution.
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(d) A Company stockholder's holding period for the shares of New
Gaylord Common Stock received in the Company Distribution, including any
fractional share interest of New Gaylord Common Stock for which cash is
received, will include the period during which the stockholder held Company
Common Stock, provided that the Company Common Stock was held as a capital
asset.
(e) The Merger will qualify as a "reorganization" under Section 368(a)
of the Code.
(f) No income, gain or loss generally will be recognized by the
Company, Westinghouse or Sub in the Merger.
(g) A Company stockholder will not recognize any income, gain or loss
as a result of the receipt of Westinghouse Common Stock in the Merger,
except with respect to any cash received in lieu of fractional shares of
Westinghouse Common Stock.
(h) A Company stockholder's tax basis for shares of Westinghouse
Common Stock received in the Merger, including any fractional share
interest of Westinghouse Common Stock for which cash is received, will
equal such stockholder's tax basis in the Company Common Stock surrendered
(as determined immediately following the Company Distribution).
(i) A Company stockholder's holding period for the shares of
Westinghouse Common Stock received in the Merger, including any fractional
share interest of Westinghouse Common Stock for which cash is received,
will include the period during which the stockholder held Company Common
Stock, provided that the Company Common Stock was held as a capital asset.
(j) A Company stockholder that receives cash in lieu of a fractional
share interest of New Gaylord Common Stock pursuant to the Company
Distribution or of Westinghouse Common Stock pursuant to the Merger will be
treated as having received such cash in exchange for such fractional share
interest and generally will recognize capital gain or loss on such deemed
exchange in an amount equal to the difference between the amount of cash
received and the Company stockholder's adjusted tax basis in such
fractional share. Such capital gain or loss generally will be long-term
capital gain or loss if the holding period for the New Gaylord Common Stock
or the Company Common Stock with respect to which such fractional share is
deemed issued exceeds one year.
BECAUSE OF THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH COMPANY
STOCKHOLDER IS URGED TO CONSULT ITS TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES TO IT OF THE COMPANY DISTRIBUTION AND THE MERGER, INCLUDING THE
EFFECT OF U.S. FEDERAL, STATE AND LOCAL, AND FOREIGN AND OTHER TAX RULES, AND
THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS.
Unless the Merger is effected after the consummation of the Westinghouse
Distribution, the Company's stockholders who continue to hold Westinghouse
Common Stock until the record date for the Westinghouse Distribution will be
entitled to participate in the Westinghouse Distribution in the same manner as
all other Westinghouse stockholders. Westinghouse has applied to the IRS for
rulings substantially to the effect that no income, gain or loss will be
recognized by Westinghouse stockholders (including former stockholders of the
Company) as a result of participating in the Westinghouse Distribution.
Possible Legislative Action. On June 26, 1997, the U.S. House of
Representatives passed a bill, and on June 27, 1997, the U.S. Senate passed a
similar bill (together, the "Proposed Legislation"), proposing certain changes
to the Code, which, if enacted, would, among other things, cause transactions
similar to the Company Distribution followed by the Merger to be taxable to the
distributed (or controlled) corporation (but not the distributing corporation's
stockholders). While the Proposed Legislation would generally apply to
distributions occurring after April 16, 1997, the Proposed Legislation contains
certain "grandfathering" rules that would apply to the Company Distribution and
related transactions. Accordingly, if the Proposed Legislation were enacted in
its current form, the Proposed Legislation would not apply to the Company
Distribution and such related transactions. There can be no assurance that the
Proposed Legislation will be enacted in its current form or that other
legislation with different effective date and grandfathering provisions will not
be introduced or enacted after the date hereof. The Company's and Westinghouse's
respective obligations to consummate
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the Company Distribution and the Merger (as applicable) are conditioned upon
there not being any pending legislation in bill form introduced, passed by
either House of Congress or enacted, which, in the opinion of either Skadden,
Arps, Slate, Meagher & Flom LLP (in the case of the Company) or Cravath, Swaine
& Moore (in the case of Westinghouse), if enacted with the effective date and
transition rules described therein, would have the effect of causing the Company
Distribution to be taxable for U.S. Federal income tax purposes to, and result
in a material increase in the U.S. Federal income tax liability of, the Company
or its stockholders. Accordingly, the introduction or enactment of legislation
differing from the Proposed Legislation could delay or prevent the consummation
of the Company Distribution and the Merger.
REGULATORY REVIEWS AND APPROVALS
General
Except as disclosed below, neither the Company nor Westinghouse is aware of
any material approval or other action by any governmental, administrative or
regulatory agency or authority, domestic or foreign, that would be required in
order to consummate the Merger or for Westinghouse to acquire the Cable Networks
Business. Should any such approval or other action be required, the Company and
Westinghouse currently contemplate that such approval or action would be sought.
While the Company and Westinghouse do not currently intend to delay the
consummation of the Merger pending the outcome of any such matter, there can be
no assurance that any such approval or action, if needed, would be obtained or
would be obtained without substantial conditions or that adverse consequences
might not result to the business of the Company or Westinghouse or that certain
parts of the businesses of the Company or Westinghouse might not have to be
disposed of in the event that such approvals were not obtained or any other
actions were not taken.
Antitrust
Pursuant to the Merger Agreement, the obligation of each of the Company,
Westinghouse and Sub to consummate the Merger is conditioned upon the expiration
or termination of the waiting period under the HSR Act. The Company and
Westinghouse filed Premerger Notification and Report Forms pursuant to the HSR
Act with the Antitrust Division of the Department of Justice ("DOJ") and the
Federal Trade Commission ("FTC") on May 12, 1997, and early termination of the
waiting period was granted on June 2, 1997. At any time before or after the
Effective Time, the FTC, the DOJ or any third party could take action under the
antitrust laws with respect to the Merger, including seeking to enjoin the
consummation of the Merger, to rescind the Merger or to require divestiture of
substantial assets of the Company or Westinghouse. There can be no assurance
that a challenge to the Merger on antitrust grounds will not be made, or if such
a challenge is made, that it would not be successful.
FCC Matters
As a result of the Merger, certain of the FCC licenses relating to the
Cable Networks Business will be transferred to the Westinghouse Group. Such
transfers will require prior FCC approval. In addition, certain FCC licenses
currently held by subsidiaries of the Company will have to be transferred to the
Company or other subsidiaries of the Company as part of the Restructuring.
Certain of such transfers will also require prior FCC approval. Westinghouse and
Gaylord have filed applications with the FCC requesting approval of the proposed
transfers and do not expect that the FCC will object to such transfers.
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THE COMPANY DISTRIBUTION AND RELATED TRANSACTIONS
This section of the Proxy Statement/Prospectus describes certain aspects of
the Restructuring, the Recapitalization and the Company Distribution. To the
extent that they relate to the Distribution Agreement, the following
descriptions do not purport to be complete and are qualified in their entirety
by reference to the Distribution Agreement, the form of which is attached as
Annex II and is incorporated herein by reference.
GENERAL
In connection with the Merger, and prior to the Effective Time, Gaylord
will engage in a series of transactions, including the Restructuring, the
Recapitalization and the Company Distribution, the purpose of which is to make
possible Westinghouse's acquisition of the Cable Networks Business on a tax-free
basis to the Company and the Company's Stockholders in a transaction in which
the Company's stockholders will receive Westinghouse Common Stock and will also
retain their proportionate equity interests in New Gaylord in the form of New
Gaylord Common Stock to be received in the Company Distribution. The Company's
stockholders are being asked to vote on the approval and adoption of the Merger
Agreement and are not being asked to vote on the Restructuring, the
Recapitalization or the Company Distribution.
Although the Restructuring, the Recapitalization and the Company
Distribution will not be effected unless the Merger Agreement is approved and
adopted by the Company's stockholders and all other conditions to consummation
of the Merger (other than completion of the Company Distribution) have been
satisfied or waived, these transactions are separate from the Merger, and the
New Gaylord Common Stock to be received by holders of Company Common Stock in
the Company Distribution does not constitute a part of the Per Share Merger
Consideration. However, consummation of the Restructuring, the Recapitalization
and the Company Distribution are conditions to the Merger.
TERMS OF THE DISTRIBUTION AGREEMENT
The Restructuring. Gaylord will effect a series of mergers, asset and stock
transfers and liability assumptions among itself and its subsidiaries. The
purpose and effect of the Restructuring is to separate the New Gaylord Business,
which is not being acquired by Westinghouse in the Merger, from the Cable
Networks Business. In connection with the Restructuring, New Gaylord will, or
will cause one of its subsidiaries to, assume the Assumed Liabilities, and the
Company will retain, or will cause one of its subsidiaries, other than the New
Gaylord Companies, to assume, the Cable Networks Liabilities.
Following the Restructuring, the assets transferred to or retained by the
Cable Networks Companies (the "Cable Networks Assets") will consist principally
of all of the assets that are used, or are being held for use, in the Cable
Networks Business (excluding certain specified excluded assets) including, but
not limited to: (i) TNN and CMT, (ii) all of Gaylord's contractual rights and
obligations under the programming contracts for programs (a) produced for and
originally aired on TNN and/or CMT or (b) licensed from a third party for
exhibition on TNN or CMT, (iii) all of Gaylord's right, title and interest in
and to the program inventory in its inventory tape library that was produced for
and originally aired on TNN and/or CMT and (iv) all of Gaylord's right, title
and interest in and to certain trademarks and other registered intellectual
property relating primarily to the Cable Networks Business. The Distribution
Agreement provides that certain assets that are or may be used or held for use
in the Cable Networks Business prior to the Closing Date will be transferred to
or retained by the New Gaylord Companies, including, but not limited to: (i) all
prepaid insurance amounts, (ii) the Company's, or its subsidiaries', investment
in the Wildhorse Saloon Joint Venture and related entities, (iii) certain
specified assets related to CMT International and Z Music, (iv) the cash
surrender value of all life insurance policies owned by the Company or any of
its subsidiaries, (v) the Opryland Duplicating Services service mark, (vi) all
real property and related improvements (excluding the property located at Unit
No. 206, Roland Martin's Lakeside Condominiums, Hendry County, Florida) owned
by, used by or in any way related to the Cable Networks Business, (vii) certain
shared computer software and (viii) one Astra jet aircraft.
The Recapitalization. The Company will cause New Gaylord to amend its
certificate of incorporation to authorize the New Gaylord Common Stock, increase
the authorized number of shares of common stock of
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New Gaylord, convert the currently outstanding Old Common Stock (all of which is
currently held by the Company) into that number of shares of New Gaylord Common
Stock equal to one-third of the total number of shares of Company Common Stock
outstanding immediately prior to the Company Distribution Record Date and
authorize 100 million shares of preferred stock, $.01 par value.
The Company Distribution. Following the Restructuring and the
Recapitalization, the Company will effect the Company Distribution by
distributing to each holder of record of Company Common Stock as of the record
date for the Company Distribution certificates representing that number of
shares of New Gaylord Common Stock equal to one-third the number of shares of
Company Common Stock held of record by such holder. Cash will be distributed in
lieu of any fractional shares of New Gaylord Common Stock.
The Company Board will formally declare the Company Distribution and
authorize the Company to effect the Company Distribution at the close of
business on the day immediately preceding the Effective Time subject to the
satisfaction or waiver of the conditions described under "--Conditions to
Consummation of the Company Distribution," by delivery of certificates
representing shares of New Gaylord Common Stock to the transfer agent to be used
in connection with the Company Distribution (the "Distribution Transfer Agent")
for delivery to the holders of Company Common Stock entitled thereto. The
Distribution Transfer Agent will deliver to the holders of record of Company
Common Stock on the record date for the Company Distribution certificates for
shares of New Gaylord Common Stock without any further action by such holders.
Other Agreements. Prior to the Time of Distribution, one or more of the
Cable Networks Companies will enter into various agreements with one or more of
the New Gaylord Companies relating to the future relationship between the Cable
Networks Companies and the New Gaylord Companies, including, but not limited to,
leases, agreements for transition services and intellectual property license
agreements (each an "Ancillary Agreement" and collectively, the "Ancillary
Agreements"). See "--Terms of the Ancillary Agreements."
Use of "Gaylord" and "Opryland" Names. New Gaylord will have all rights in
and use of the name "Gaylord" and all derivatives thereof and, except as
contemplated by the Ancillary Agreements, the name "Opryland" and all
derivatives thereof.
Listing on the NYSE. New Gaylord will use its reasonable best efforts to
list the shares of New Gaylord Common Stock to be issued pursuant to the Company
Distribution on the NYSE, subject to official notice of issuance, or to have
such shares designated as a national market system security on the interdealer
quotation system by the National Association of Securities Dealers, Inc.
Mutual Release. Effective as of the Time of Distribution, and except as
otherwise specifically set forth in the Transaction Agreements, each of the
Company, on the one hand, and New Gaylord, on the other hand, will release and
forever discharge the other and its affiliates, and its and their directors,
officers, employees and agents from all liabilities whatsoever against such
other party or any of its assigns, which arise out of or relate to events,
circumstances or actions taken by such other party prior to the Time of
Distribution; provided, however, that such release will not apply to the
Distribution Agreement, the Merger Agreement or the Tax Disaffiliation Agreement
or the transactions contemplated thereby and will not affect either party's
right to enforce the Distribution Agreement or any other agreement contemplated
thereby in accordance with its terms.
Employee Matters. The Cable Networks Employees will remain with the Cable
Networks Companies immediately following the Time of Distribution, each in the
same capacity as then held by such employee (or in such other capacities and
upon such other terms and conditions as the Company will determine in its sole
discretion). All other employees of Gaylord (each a "New Gaylord Employee" and
collectively, the "New Gaylord Employees") will become employees of one of the
New Gaylord Companies, each in the same capacity as then held by such employee
(or in such other capacities and upon such other terms and conditions as New
Gaylord will determine in its sole discretion). Effective as of the Time of
Distribution, the Company will be solely responsible for (i) all liabilities and
obligations related to the Cable Networks Employees incurred after the Time of
Distribution, (ii) all holiday, vacation and sick day benefits of the Cable
Networks Employees accrued as of the Time of Distribution to the extent
reflected on the audited combined balance
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sheet of the Cable Networks Companies (the "Closing Balance Sheet") to be
prepared and delivered by Westinghouse in connection with the working capital
adjustment pursuant to the Post-Closing Covenants Agreement (see "THE
POST-CLOSING COVENANTS AGREEMENT--Working Capital Adjustment") and (iii) all
other liabilities, including, without limitation, for worker's compensation and
medical benefits, to the extent reflected as a current liability on the Closing
Balance Sheet. Effective as of the Time of Distribution, New Gaylord will be
solely responsible for all liabilities and obligations related to (i) the New
Gaylord Employees and (ii) the Cable Networks Employees that were incurred on or
before the Time of Distribution with the exception of holiday, vacation and sick
day benefits accrued as of the Time of Distribution, as set forth above.
Notwithstanding the foregoing, New Gaylord will also be solely responsible for
(i) all liabilities and obligations related to certain Cable Networks Employees
who also perform services for the New Gaylord Companies and (ii) deferred
directors' fees in connection with the members of the Company Board.
Notwithstanding the above, effective as of the Time of Distribution, New
Gaylord will assume sponsorship of the Retirement Plan for Employees of Gaylord
Entertainment Company and Affiliated and Adopting Corporations (the "New Gaylord
Pension Plan") and the Gaylord Entertainment Company 401(k) Savings Plan (the
"New Gaylord Savings Plan") and the trusts related thereto. As of the Time of
Distribution, Cable Networks Employees will cease to actively participate in the
New Gaylord Pension Plan and the New Gaylord Savings Plan and will be fully
vested in their accrued benefits and account balances thereunder. The accrued
benefits and account balances of the Cable Networks Employees under the New
Gaylord Pension Plan and the New Gaylord Savings Plan will be maintained by New
Gaylord until distributed in accordance with the terms of the applicable plan.
Furthermore, the Distribution Agreement provides that, effective as of the Time
of Distribution, New Gaylord will assume sponsorship of the employee welfare
benefit plans (as such term is defined in ERISA) maintained or sponsored by the
Company (the "New Gaylord Welfare Plans"). As of the Time of Distribution, Cable
Networks Employees will cease to participate in the New Gaylord Welfare Plans
and, unless allowed to participate in the Westinghouse Group's welfare plans,
will participate in welfare benefit plans of the Company (such Westinghouse
Group or Company plans being hereinafter referred to as the "Replacement Welfare
Plans"). The Distribution Agreement further provides that the Company will, or
will use its best efforts to cause Westinghouse (or any of its subsidiaries) to,
(i) waive all limitations as to pre-existing condition exclusions and waiting
periods with respect to participation and coverage requirements applicable to
Cable Networks Employees under the Replacement Welfare Plans, other than
limitations or waiting periods that were in effect for such Cable Networks
Employees under the New Gaylord Welfare Plans and that have not been satisfied
as of the Time of Distribution, and (ii) provide each Cable Networks Employee
with credit for any co-payments and deductibles paid prior to the Time of
Distribution in satisfying any deductible or out-of-pocket requirements under
the Replacement Welfare Plans. Effective as of the Time of Distribution, New
Gaylord will assume sponsorship of the Gaylord Entertainment Company VEBA, a
benefit arrangement established under Section 501(c)(9) of the Code.
Effective as of the Time of Distribution, with respect to those collective
bargaining agreements to which any of the Cable Networks Companies or the New
Gaylord Companies is a party and which cover New Gaylord Employees, New Gaylord
will assume the liabilities and obligations of the Cable Networks Companies and
the New Gaylord Companies thereunder, to the extent that such liabilities and
obligations relate to New Gaylord Employees and the New Gaylord Business.
Furthermore, the Distribution Agreement provides that, effective as of the Time
of Distribution, New Gaylord will assume sponsorship of the Company's Opryland
USA Inc Supplemental Deferred Compensation Plan ("SUDCOMP Plan"), NLT
Supplemental Executive Retirement Plan, Gaylord Entertainment Company Retirement
Benefit Restoration Plan and Gaylord Entertainment Company Supplemental
Executive Retirement Plan (collectively, the "Nonqualified Plans"). The
Distribution Agreement further provides that, as of the Time of Distribution,
Cable Networks Employees will cease to participate in the Nonqualified Plans and
will be fully vested in their accrued benefits or account balances thereunder,
as applicable, as of the Time of Distribution and that distributions from the
Nonqualified Plans will be made to the covered Cable Networks Employees pursuant
to the terms of the applicable Nonqualified Plan.
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Effective as of the Time of Distribution, New Gaylord will assume all
liabilities and obligations attributable to New Gaylord Employees under their
respective employment, consulting and severance agreements with Gaylord, as the
same are in effect immediately prior to the Time of Distribution, subject to the
rights of New Gaylord to alter such agreements, except as otherwise provided in
the Merger Agreement or the Distribution Agreement. Effective as of the Time of
Distribution, the Company will retain all liabilities and obligations
attributable to certain specified Cable Networks Employees under their
respective employment, consulting and severance agreements with the Cable
Networks Companies or the New Gaylord Companies.
Prior to the Time of Distribution, the Company will amend the Company Stock
Plans, make adjustments and take actions (and New Gaylord will take such actions
as are reasonably required to implement the same) with respect to the options,
restricted stock and performance shares which are outstanding immediately prior
to the Time of Distribution to provide that (i) effective immediately prior to
the Time of Distribution, all restrictions with respect to restricted stock will
lapse and all performance criteria with respect to performance shares will be
deemed satisfied (as though the Company had achieved 100% of the applicable
performance targets), (ii) any such options to acquire Company Common Stock
which are held by New Gaylord Employees will become fully vested and exercisable
and will be converted into and represent options to acquire shares of New
Gaylord Common Stock, under the New Gaylord Stock Plan, with such other
amendments and adjustments as are reasonable and appropriate, and (iii) the
terms and/or number of such options to acquire Company Common Stock which are
held by Cable Networks Employees will be adjusted and become options to acquire
Westinghouse Common Stock in accordance with the Merger Agreement. See "THE
MERGER AGREEMENT--Employee Matters and Stock Options."
The Company has entered into severance agreements with certain members of
management (the "Severance Agreements"). These Severance Agreements become
effective following a "Change in Control" (as defined therein) and provide for a
two year employment agreement thereafter. In the event a person covered by one
of the Severance Agreements is terminated or such person's compensation is
reduced during such two year period, he or she is entitled to a lump sum payment
equal to between 150% and 250% of the sum of base salary and cash incentive
bonus. The Merger will constitute a Change in Control for purposes of the
Severance Agreements. Accordingly, all persons party thereto will have two year
employment agreements with a member of the Westinghouse Group or New Gaylord, as
applicable.
Conditions to Consummation of the Company Distribution. The obligations of
the Company and New Gaylord to consummate the Company Distribution will be
subject to the fulfillment or waiver of each of the following conditions: (i)
the Recapitalization shall have been consummated in accordance with the terms of
the Distribution Agreement in all material respects, (ii) the Tax Disaffiliation
Agreement shall have been executed and delivered by each of the Company, New
Gaylord and Westinghouse, (iii) the Restructuring shall have been consummated in
accordance with the terms of the Distribution Agreement in all material
respects, (iv) each condition to the closing of the Merger set forth in the
Merger Agreement, other than (a) the condition to each party's obligations set
forth therein as to the consummation of the transactions contemplated by the
Distribution Agreement and (b) the condition to Westinghouse's obligation set
forth therein as to the satisfaction of conditions contained in the Distribution
Agreement, shall have been satisfied or waived by the party for whose benefit
such provision exists and (v) the Company Board shall be reasonably satisfied
that, after giving effect to the Restructuring, (a) the Company will not be
insolvent and will not have unreasonably small capital with which to engage in
its businesses and (b) the Company's surplus will be sufficient to permit,
without violation of Section 170 of the DGCL, the Company Distribution.
TERMS OF THE ANCILLARY AGREEMENTS
General. Pursuant to the Distribution Agreement, prior to the Time of
Distribution, one or more of the Cable Networks Companies will enter into the
Ancillary Agreements described below with one or more of the New Gaylord
Companies. The Ancillary Agreements relate to the future relationship between
the Cable Networks Companies and the New Gaylord Companies. For the purposes of
this section, "New Gaylord" shall mean one or more of the New Gaylord Companies
and the "Company" shall mean one or more of the Cable Networks Companies.
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Leases. Prior to the Time of Distribution, New Gaylord and the Company will
enter into various five year leases (each a "Lease", and collectively, the
"Leases") of certain properties (each a "Leased Property", and collectively, the
"Leased Properties"), which Leased Properties are currently used by the Cable
Networks Business but which will be transferred to or retained by the New
Gaylord Companies in the Restructuring. Each Lease will be on the terms set
forth in the Annexes to the Distribution Agreement.
Production and Promotional Services. Prior to the Time of Distribution, the
Company and New Gaylord will enter into an agreement whereby the Company will
provide to New Gaylord certain production, exhibition and promotional services,
on the terms set forth in the Annexes to the Distribution Agreement, including
but not limited to the following: (i) producing and exhibiting at the Company's
expense the program "Grand Ole Opry Live", which will consist of (a) airing
Grand Ole Opry Live, on a weekly basis for a period of five years from the
Closing Date, each Saturday live at 8:30 pm EST and again at 11:30 pm EST as a
rerun and (b) promoting the program on TNN and otherwise; and (ii) for so long
as New Gaylord retains a 33-1/3% or greater ownership interest in the Wildhorse
Saloon, (a) producing and exhibiting in prime-time at least four one-hour
television specials originating from the Wildhorse Saloon each year for five
years from the Closing Date, (b) promoting such specials on TNN and otherwise
and (c) providing additional ongoing promotion of the Wildhorse Saloon
restaurants on TNN and CMT.
Promotional Advertising Services. Prior to the Time of Distribution, the
Company and New Gaylord will enter into an agreement whereby the Company will
provide to New Gaylord, for a period of five years from the Closing Date,
certain promotional advertising services for the New Gaylord Business, on the
terms set forth in the Annexes to the Distribution Agreement, including but not
limited to: (i) exhibiting eight thirty-second commercial announcements per day
on TNN, inserted in local breaks throughout the day and (ii) exhibiting five
thirty-second commercial announcements on CMT, inserted in local breaks
throughout the day.
Intercompany Services to CMT International. Prior to the Time of
Distribution, the Company and New Gaylord will enter into an agreement whereby
the Company will provide, at New Gaylord's request, for a period of five years
from the Closing Date, certain programming, operating, and management services
to CMT International on the terms set forth in the Annexes to the Distribution
Agreement.
Transponder Use. Westinghouse, as successor in interest to Group W
Television, Inc. ("Group W Television"), will provide to Z Music, for a period
of five years from the Closing Date, the use of the GI-R transponder number 6
(the "Transponder") for the distribution of Z Music. Furthermore, the Company
will provide uplink services to Z Music from Nashville, Tennessee, for such five
year period, regardless of whether the use of the Transponder is terminated.
Trademark License Agreements. Prior to the Time of Distribution, the
Company and New Gaylord will enter various license agreements whereby: (i) the
Company will grant to New Gaylord the exclusive, irrevocable, perpetual,
royalty-free right to use all CMT trade marks and service marks in jurisdictions
other than the U.S. and Canada and (ii) New Gaylord will grant to the Company
the exclusive, worldwide, royalty-free right to use, for a period of one year
from the Closing Date, the Opryland Productions Duplicating Services with
mandolin design mark, in each case on the terms set forth in the Annexes to the
Distribution Agreement.
Software License Agreements. Prior to the Time of Distribution, the Company
and New Gaylord will enter into an agreement whereby New Gaylord will grant to
the Company the non-exclusive, worldwide, perpetual, irrevocable, royalty-free
license to use certain software packages, in each case on the terms set forth in
the Annexes to the Distribution Agreement.
Transition Services Agreements. Prior to the Time of Distribution, the
Company and New Gaylord will enter into an agreement whereby New Gaylord, at the
request and expense of the Company, will provide, for a period of five years
from the Closing Date (unless otherwise stated in the Annexes to the
Distribution Agreement), certain goods and services on the terms set forth in
the Annexes to the Distribution Agreement including (but not limited to) access
to and use of the Opryland Hotel, the Opry House, the Wildhorse Saloon, Opryland
theme park and the Ryman Auditorium.
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Furthermore, prior to the Time of Distribution, the Company and New Gaylord
will enter into an agreement whereby the Company, at the request and expense of
New Gaylord, will provide, for a period of five years from the Closing Date
(unless otherwise stated in the Annexes to the Distribution Agreement) certain
goods and services on the terms set forth in the Annexes to the Distribution
Agreement including (but not limited to) access to and use of its production
facilities, including, without limitation, studio, edit, post-production, remote
units and staff.
THE POST-CLOSING COVENANTS AGREEMENT
The description of the Post-Closing Covenants Agreement contained in this
Proxy Statement/Prospectus does not purport to be complete and is qualified in
its entirety by reference to the Post-Closing Covenants Agreement, the form of
which is attached as Annex IV and is incorporated herein by reference.
INDEMNIFICATION
Indemnification by the New Gaylord Indemnitors. New Gaylord and certain of
its subsidiaries (the "New Gaylord Indemnitors") will jointly and severally
indemnify, defend and hold harmless Westinghouse, each affiliate of
Westinghouse, including any of its direct or indirect subsidiaries (including,
after the Effective Time, the Cable Networks Companies), and each of their
respective representatives and each of the heirs, executors, successors and
assigns of any of the foregoing (the "Westinghouse Indemnitees", and, together
with the New Gaylord Indemnitees (as defined below), the "Indemnitees") from and
against, and pay or reimburse the Westinghouse Indemnitees for, all losses,
liabilities, damages, deficiencies, obligations, fines, expenses, claims,
demands, actions, suits, proceedings, judgments or settlements, whether or not
resulting from third party claims, including interest and penalties recovered by
a third party with respect thereto and out-of-pocket expenses and reasonable
attorneys' and accountants' fees and expenses incurred in the investigation or
defense of any of the same or in asserting, preserving or enforcing any of the
Indemnitee's rights thereunder, suffered or incurred by an Indemnitee
("Indemnifiable Losses"), as incurred: (i) relating to or arising from the New
Gaylord Business, the assets of the New Gaylord Business or the Assumed
Liabilities (including the failure by New Gaylord or any New Gaylord Company to
pay, perform or otherwise discharge any of the Assumed Liabilities in accordance
with their terms), whether such Indemnifiable Losses relate to or arise from
events, occurrences, actions, omissions, facts or circumstances occurring,
existing or asserted before, at or after the Effective Time; (ii) relating to or
arising from any untrue statement or alleged untrue statement of a material fact
contained in any of the Registration Statements, this Proxy Statement/Prospectus
and any other document filed or required to be filed with the SEC in connection
with the transactions contemplated by the Transaction Agreements, or any
preliminary or final form thereof or any amendment thereto (the "Filings"), or
any omission or alleged omission to state therein 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; but only in each case
with respect to information provided by the Company relating to the Company or
any of its subsidiaries (including the Cable Networks Subsidiaries) contained in
or omitted from the Filings; (iii) relating to or arising from the breach by any
New Gaylord Company of any agreement or covenant contained in any Transaction
Agreement (other than the Tax Disaffiliation Agreement, the Ancillary Agreements
and the Stockholder Agreement) which by its express terms is to be performed or
complied with after the Effective Time; or (iv) relating to or arising from any
breach or inaccuracy of any representation or warranty of the Company contained
in the Merger Agreement. The New Gaylord Indemnitors will not have any liability
under the above clause (iv) unless the aggregate of all Indemnifiable Losses for
which the New Gaylord Indemnitors would be liable under such clause (iv) exceed,
on a cumulative pre-tax basis, an amount equal to $8.25 million.
Indemnification by Westinghouse. Westinghouse will indemnify, defend and
hold harmless New Gaylord, each affiliate of New Gaylord, including any of its
direct or indirect subsidiaries, and each of their respective representatives
and each of the heirs, executors, successors and assigns of any of the foregoing
(the "New Gaylord Indemnitees") from and against, and pay or reimburse the New
Gaylord Indemnitees for, all Indemnifiable Losses, as incurred: (i) subject to
the provisions of clause (iv) in the immediately preceding paragraph, relating
to or arising from the Cable Networks Business, the Cable Networks Assets or the
Cable
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Networks Liabilities (including the failure by any Cable Networks Company to
pay, perform or otherwise discharge any of the Cable Networks Liabilities in
accordance with their terms), whether such Indemnifiable Losses relate to or
arise from events, occurrences, actions, omissions, facts or circumstances
occurring, existing or asserted before, at or after the Effective Time; (ii)
relating to or arising from any untrue statement or alleged untrue statement of
a material fact contained in any of the Filings, or any omission or alleged
omission to state therein 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; but only in each case with respect to
information provided by Westinghouse relating to Westinghouse or any of its
subsidiaries other than the Cable Networks Companies contained in or omitted
from the Filings; or (iii) relating to or arising from the breach by
Westinghouse or any Cable Networks Company of any agreement or covenant
contained in any Transaction Agreement (other than the Tax Disaffiliation
Agreement, the Ancillary Agreements and the Stockholder Agreement) which by its
express terms is to be performed or complied with after the Effective Time.
AGREEMENT NOT TO COMPETE
Agreement of New Gaylord. Commencing at the Effective Time and continuing
for a period of 5 years thereafter, New Gaylord will not, and will not permit
any of its subsidiaries to, engage in, directly or indirectly, alone or in
association with any other person, the business of (i) owning or operating
retail stores with a motor sports theme other than those located in the Opryland
complex, (ii) owning or operating a Cable Network (as defined below) featuring
country music videos and/or a significant amount of musical, sports (including,
but not limited to, motor sports and outdoor sports), variety or other
entertainment features or series the theme of which is perceived by the viewing
public as being, or related to, that which is commonly known as "country
entertainment" programming (the "Theme"), or owning, sharing in the earnings of,
financing or investing in the capital stock of any person engaged in such
business or (iii) providing or otherwise making available for viewing on a Cable
Network or an over-the-air broadcast television station or network programming
featuring or related to the Theme (other than occasional (not regularly
scheduled) country music related specials for viewing on an over-the-air
broadcast television station or network), or owning, sharing in the earnings of,
financing or investing in the capital stock of any person engaged in such
business. Notwithstanding the foregoing, the New Gaylord Companies will not be
prohibited from owning or operating CMT International in any area outside of the
United States and Canada provided that, other than country music videos, CMT
International's programming will not primarily consist of programming featuring
or related to the Theme. In addition, pursuant to the Post-Closing Covenants
Agreement, for a period of one year from the Effective Time, New Gaylord will
not, and will cause its subsidiaries not to, directly or indirectly, (i) induce
any Cable Networks Employee to leave the employ of the Cable Networks Companies,
or recommend to any other person that they employ or solicit for employment any
such employee, or (ii) knowingly hire any such employee, unless such employee is
no longer employed by the Cable Networks Companies. As used herein, "Cable
Network" means a television network making programming available for viewing by
any technology other than over-the-air broadcast (whether or not retransmitted
via cable), including, without limitation, cable television, MMDS, SMATV, DBS,
TVRO and so-called "superstations."
Agreement of Westinghouse. Commencing at the Effective Time and continuing
for a period of 5 years thereafter, Westinghouse will not, and will not permit
any of its subsidiaries to, engage in, directly or indirectly, alone or in
association with any other person, the business of owning or operating a Cable
Network that is telecast outside of the United States and Canada and that
primarily features country music videos and occasional country music-related
specials. Notwithstanding the foregoing, the Westinghouse Group will not be
prohibited from owning or operating for viewing outside of the United States and
Canada a Cable Network featuring the Theme or otherwise of a type that is
currently featured on the TNN network. Westinghouse will not be deemed in breach
of such agreements or of the license described in clause (i) of the first
paragraph of "Trademark License Agreements" (see "THE COMPANY DISTRIBUTION AND
RELATED TRANSACTIONS--Terms of the Ancillary Agreements") by virtue of the
Westinghouse Group having licensed or having renewed the licenses of any current
distributors of CMT in markets that are outside the United States and Canada;
provided, however, that Westinghouse has agreed that the Westinghouse Group will
not license any additional distributors of CMT in such markets.
60
<PAGE> 67
WORKING CAPITAL ADJUSTMENT
After the Closing Date Westinghouse and New Gaylord will agree on Working
Capital (as defined below) for the Cable Networks Companies as of the Effective
Time ("Closing Working Capital"). If the Closing Working Capital is less than
$53.798 million (the "WC Amount"), New Gaylord will, and if the Closing Working
Capital is greater than the WC Amount, Westinghouse will, make payment by wire
transfer of immediately available funds of the amount of such difference
together with interest.
As used herein, the term "Working Capital" means Current Assets minus
Current Liabilities (in each case as defined below). The WC Amount equals
Working Capital as set forth on the Cable Networks Business Balance Sheet (as
defined in the Merger Agreement) for December 31, 1996, provided to Westinghouse
by the Company prior to the execution of the Merger Agreement. The terms
"Current Assets" and "Current Liabilities" mean the current assets and current
liabilities of the Cable Networks Business calculated in accordance with GAAP
except that (i) accruals for taxes are excluded, (ii) all programming assets are
treated as Current Assets and all programming liabilities are treated as Current
Liabilities (with programming assets amortized on a basis consistent with the
method of amortization followed in the financial statements of the Cable
Networks Business provided by the Company to Westinghouse as part of the Company
Disclosure Schedule pursuant to the Merger Agreement), (iii) certain cash held
by certain entities immediately prior to the Time of Distribution will not be
treated as Current Assets, (iv) any Unspent Amount will be treated as Current
Liabilities, (v) any NASCAR Expenditures will be treated as Current Assets, and
(vi) purchase accounting adjustments will not be made.
OTHER AGREEMENTS
Insurance. In the event that prior to the Effective Time any Cable Networks
Asset suffers any damage, destruction or other casualty loss, New Gaylord will,
or will cause one of its subsidiaries to, surrender to Westinghouse (i) all
insurance proceeds received with respect to such damage, destruction or loss and
(ii) all rights of the New Gaylord Companies with respect to any causes of
action, whether or not litigation has commenced as of the Effective Time, in
connection with such damage, destruction or loss. Furthermore, pursuant to the
Post-Closing Covenants Agreement New Gaylord will, and will cause each of its
subsidiaries to, make available to the Cable Networks Companies the benefit of
any workers' compensation, general liability, product liability, automobile
liability, umbrella (excess) liability or crime or other insurance policy
covering the Company or any of its subsidiaries (including the Cable Networks
Companies) and relating to the Cable Networks Business with respect to insured
events or occurrences prior to the Effective Time (whether or not claims
relating to such events or occurrences are made prior to or after the Effective
Time); provided, however, that (i) all of New Gaylord's costs and expenses
incurred in connection with the foregoing are promptly paid by Westinghouse and
(ii) such benefit will be subject to (and recovery thereon will be reduced by
the amount of) any applicable deductibles and co-payments provisions or any
payment or reimbursement obligations of New Gaylord or any of its subsidiaries
or affiliates in respect thereof. Pursuant to the Post-Closing Covenants
Agreement, the New Gaylord Companies will promptly pay to Westinghouse all
insurance proceeds relating to the Cable Networks Business received by any New
Gaylord Company under any insurance policy.
Expenses. Except as otherwise expressly provided in the Transaction
Agreements, New Gaylord will be responsible for and will pay all expenses of
Gaylord directly related to the Restructuring, the Company Distribution and the
Merger.
Third Party Rights. If, after the Effective Time any of the New Gaylord
Companies holds any right to indemnification or any other contractual or other
right (a "Recourse Right") with respect to any Cable Networks Liability or any
Assumed Liability for which any of the Cable Networks Companies are held
responsible, then, to the extent possible such Recourse Right will be deemed to
be held as a shared right of the applicable New Gaylord Companies and the
applicable Cable Networks Companies against such liability, and, to the extent
not so possible, the New Gaylord Companies will assert or otherwise make
available to the Cable Networks Companies the full benefit of such Recourse
Right by making a claim on behalf of the Cable Networks Companies or taking
other steps reasonable requested by the Cable Networks Companies.
61
<PAGE> 68
THE TAX DISAFFILIATION AGREEMENT
The description of the Tax Disaffiliation Agreement contained in this Proxy
Statement/Prospectus does not purport to be complete and is qualified in its
entirety by reference to the Tax Disaffiliation Agreement, the form of which is
attached as Annex V and is incorporated herein by reference.
TERMS OF THE TAX DISAFFILIATION AGREEMENT
Prior to the Company Distribution, the Company, New Gaylord and
Westinghouse will enter into the Tax Disaffiliation Agreement which sets forth
each party's rights and obligations with respect to federal, state, local and
foreign taxes for periods before and after the Merger, and related matters such
as the filing of tax returns and the conduct of audits and other tax
proceedings.
In general, except as provided in the following paragraph, New Gaylord will
be responsible for (i) any tax liability relating to the Company Distribution
and the Restructuring, (ii) any tax liability of the Company and its
subsidiaries for any taxable period (or portion thereof) ending on or prior to
the date of the Merger, (iii) any tax liability of New Gaylord and its
Subsidiaries for any taxable period (or portion thereof) beginning after the
Merger and (iv) certain other tax liabilities imposed on Westinghouse or any of
its subsidiaries after the Merger that are related to the tax position of the
Company or its subsidiaries at the time of the Merger. New Gaylord will be
entitled to any refunds or tax attributes that relate to those liabilities.
Moreover, New Gaylord generally will be entitled to any tax benefits derived
from carrying back any tax attributes relating to its business from a taxable
period beginning after the Merger to a taxable period ending on or prior to the
date of the Merger.
Under the Tax Disaffiliation Agreement, Westinghouse will generally be
responsible for (i) any liability for taxes incurred as a result of the Company
Distribution or the Restructuring if such incurrence of taxes results from an
action taken by Westinghouse, the Company or any of their respective
subsidiaries after the Closing Date unless such action is contemplated by the
Transaction Agreements or taken with the participation of New Gaylord, any of
New Gaylord's subsidiaries or Edward L. Gaylord, (ii) 33% of any liability for
taxes attributable to O&W Corporation, NV International Inc. or any of their
subsidiaries for any taxable period (or portion thereof) ending on or prior to
the Closing Date (other than taxes incurred in the Restructuring), and (iii)
subject to exceptions described in the preceding paragraph, all tax liabilities
of Westinghouse and its subsidiaries for any taxable period (or portion thereof)
beginning after the Merger. Westinghouse generally will be entitled to retain
any tax benefits derived from carrying back any tax attribute relating to the
Cable Networks Business from a taxable period beginning after the Merger to a
taxable period ending on or prior to the date of the Merger.
62
<PAGE> 69
COMPARATIVE PER SHARE MARKET INFORMATION
Westinghouse Common Stock is listed for trading under the symbol "WX" on
the NYSE, the CSE, the PSE, the BSE and the PHSE. Company Class A Common Stock
is listed for trading under the symbol "GET" on the NYSE. The following table
sets forth, for the periods indicated, the range of the high and low sales
prices of Westinghouse Common Stock and Company Class A Common Stock, as
reported on the NYSE Composite Transactions List, together with the per share
dividends declared on Westinghouse Common Stock and Company Class A Common
Stock, as well as the Company pro forma per share equivalent data. The sales
prices set forth below for Company Class A Common Stock have been adjusted to
reflect a 5% stock dividend paid to the Company's stockholders in each of June
1995 and June 1996.
The Company pro forma per share equivalent data is derived from the
information of Westinghouse and is based upon an assumed Per Share Merger
Consideration of 0.673 shares of Westinghouse Common Stock. This Per Share
Merger Consideration is based on the value of the Westinghouse Common Stock
payable in consideration of the Cable Networks Business under the terms of the
Merger Agreement ($1.55 billion) and the assumptions that (i) the number of
shares of Company Common Stock outstanding on the Effective Date will be
97,275,690, which is the total number of such shares outstanding at July 15,
1997, and (ii) the Market Price of Westinghouse Common Stock on the Effective
Date will be equal to the average of the daily closing prices per share of
Westinghouse Common Stock as reported on the NYSE Composite Transactions List
for the 15 day trading period ended July 15, 1997 ($23.688). The Company Pro
Forma Per Share Equivalent data in the table below do not reflect the value of
shares of New Gaylord Common Stock to be received by the Company's stockholders
in the Company Distribution.
<TABLE>
<CAPTION>
WESTINGHOUSE COMPANY COMPANY
COMMON STOCK CLASS A COMMON STOCK PRO FORMA PER SHARE EQUIVALENT
------------------------------ ------------------------------ ------------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------- ------- -------- ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiscal 1994
First Quarter...... $15.250 $11.500 $ 0.05 $29.478 $22.222 $0.054 $10.263 $ 7.740 $0.034
Second Quarter..... 13.250 10.875 0.05 24.376 19.955 0.054 8.917 7.319 0.034
Third Quarter...... 14.375 11.500 0.05 22.222 18.367 0.063 9.674 7.740 0.034
Fourth Quarter..... 14.625 11.750 0.05 21.995 17.574 0.063 9.843 7.908 0.034
Fiscal 1995
First Quarter...... $16.000 $12.125 $ 0.05 $25.737 $19.274 $0.073 $10.768 $ 8.160 $0.034
Second Quarter..... 16.375 13.875 0.05 25.833 20.408 0.073 11.020 9.338 0.034
Third Quarter...... 15.500 12.625 0.05 27.619 23.095 0.076 10.432 8.497 0.034
Fourth Quarter..... 17.875 13.375 0.05 26.429 21.310 0.076 12.030 9.001 0.034
Fiscal 1996
First Quarter...... $21.000 $16.625 $ 0.05 $26.310 $23.452 $0.086 $14.133 $11.189 $0.034
Second Quarter..... 20.125 17.375 0.05 28.250 24.048 0.086 13.544 11.693 0.034
Third Quarter...... 19.000 15.375 0.05 28.250 22.375 0.090 12.787 10.347 0.034
Fourth Quarter..... 21.125 17.000 0.05 23.250 18.750 0.100 14.217 11.441 0.034
Fiscal 1997
First Quarter...... $20.375 $16.750 $ 0.05 $26.500 $20.125 $0.100 $13.712 $11.273 $0.034
Second Quarter..... 23.813 16.000 0.05 23.250 20.375 0.100 16.026 10.768 0.034
Third Quarter
(through July
15).............. 25.063 22.750 -- 23.500 22.625 -- 16.867 15.311 --
</TABLE>
Set forth below are the last reported sales prices for Westinghouse Common
Stock and Company Class A Common Stock on February 7, 1997, the last trading day
prior to the execution of the Merger Agreement, as reported on the NYSE
Composite Transactions List, and the equivalent pro forma sales price of Company
Class A Common Stock on such date, as determined by multiplying such last
reported sales price of Westinghouse Common Stock by 0.673, the assumed Per
Share Merger Consideration as described above:
<TABLE>
<S> <C>
Westinghouse Common Stock......................................... $ 17.750
Company Class A Common Stock...................................... $ 25.375
Company Pro Forma Per Share Equivalent............................ $ 11.946
</TABLE>
On July 15, 1997, the last trading date prior to the printing of this Proxy
Statement/Prospectus, the last reported sales prices for Westinghouse Common
Stock and Company Class A Common Stock, as reported on the NYSE Composite
Transactions List, were $24.625 and $23.063, respectively, and the Company pro
forma per share equivalent sales price based on the assumed Per Share Merger
Consideration described above was $16.573. For current price information,
Company stockholders are urged to consult publicly available sources.
63
<PAGE> 70
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Index to Unaudited Pro Forma Combined Condensed Financial Statements
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Pro Forma Combined Condensed Balance Sheet as of March 31, 1997
for Westinghouse and the Cable Networks Business................................... 66
Unaudited Pro Forma Combined Condensed Statement of Operations for the Three
Months Ended March 31, 1997 for Westinghouse and the Cable Networks Business....... 67
Unaudited Pro Forma Combined Condensed Statement of Operations for the Year
Ended December 31, 1996 for Westinghouse and the Cable Networks Business........... 68
Notes to Unaudited Pro Forma Combined Condensed Financial Statements................. 69
</TABLE>
64
<PAGE> 71
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements
are presented using the purchase method of accounting for the Merger and for the
acquisition by Westinghouse of Infinity (which was consummated on December 31,
1996), and reflect the combination of consolidated historical financial data of
Westinghouse and the Cable Networks Business.
The unaudited pro forma combined condensed balance sheet as of March 31,
1997 is presented as if the Merger had occurred on March 31, 1997. The unaudited
pro forma combined condensed statements of operations are presented as if the
Merger had occurred on January 1 of each period presented and, in the case of
the unaudited pro forma combined condensed statement of operations for the year
ended December 31, 1996, as if the acquisition by Westinghouse of Infinity had
occurred on January 1, 1996. In the opinion of Westinghouse management, all
adjustments considered necessary for a fair presentation of the pro forma data
have been made.
These unaudited pro forma combined condensed financial statements should be
read in conjunction with: (i) the restated consolidated financial statements and
the notes thereto for the year ended and as of December 31, 1996 of Westinghouse
and Management's Discussion and Analysis included in Westinghouse's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996, as amended by
Form 10-K/A Amendment No. 1 filed on July 14, 1997, which is incorporated by
reference in this Proxy Statement/ Prospectus (see "INCORPORATION OF DOCUMENTS
BY REFERENCE"); (ii) the Combined Financial Statements and the notes thereto of
the Cable Networks Business as of December 31, 1996 and 1995 and for each of the
years in the three-year period ended December 31, 1996, and Management's
Discussion and Analysis of Financial Condition and Results of Operations of the
Cable Networks Business, each included elsewhere in this Proxy
Statement/Prospectus; (iii) Westinghouse's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997, as amended by Form 10-Q/A Amendment No. 1
filed on July 14, 1997, which is incorporated by reference in this Proxy
Statement/Prospectus; and (iv) the unaudited combined condensed financial
statements of the Cable Networks Business as of March 31, 1997 and for the
quarters ended March 31, 1997 and 1996 included elsewhere in this Proxy
Statement/Prospectus. These unaudited pro forma combined condensed financial
statements are presented for illustrative purposes only and are not necessarily
indicative of the operating results or financial position that would have been
achieved had the Merger or the acquisition by Westinghouse of Infinity been
consummated as of the dates indicated or of the results that may be obtained in
the future.
65
<PAGE> 72
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1997 FOR WESTINGHOUSE AND THE CABLE NETWORKS BUSINESS
<TABLE>
<CAPTION>
CABLE
NETWORKS PRO FORMA PRO FORMA
WESTINGHOUSE BUSINESS ADJUSTMENTS COMBINED
------------ -------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents..................... $ 89 $ 2 $ (2)(3) $ 89
Customer receivables.......................... 1,686 58 (19)(4) 1,725
Inventories................................... 863 863
Uncompleted contracts costs over related
billings.................................... 661 661
Program rights................................ 460 27 (8)(3) 479
Deferred income taxes......................... 792 792
Prepaid and other current assets.............. 172 3 175
-------- ---- ------ --------
Total current assets...................... 4,723 90 (29) 4,784
Plant and equipment, net...................... 1,841 54 1,895
Goodwill, net................................. 8,736 28 1,151(3) 9,887
(28)(3)
Other intangible and noncurrent assets........ 4,531 21 500(3) 4,832
(24)(4)
(5)(4)
(203)(3)
12(3)
Net assets of discontinued operations......... 53 53
-------- ---- ------ --------
Total assets.............................. $ 19,884 $193 $ 1,374 $21,451
======== ==== ====== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Short-term debt............................... $ 153 $ $ $ 153
Current maturities of long-term debt.......... 34 34
Accounts payable.............................. 561 11 572
Uncompleted contracts billings over related
costs....................................... 410 410
Other current liabilities..................... 2,335 22 (19)(4) 2,343
5(3)
-------- ---- ------ --------
Total current liabilities................. 3,493 33 (14) 3,512
Long-term debt................................ 6,128 5 (5)(4) 6,128
Pension liability............................. 1,159 1,159
Other noncurrent liabilities.................. 3,497 2 3,499
-------- ---- ------ --------
Total liabilities......................... 14,277 40 (19) 14,298
Minority interest in equity of consolidated
subsidiaries................................ 12 25 (24)(4) 13
Shareholders' equity:
Preferred stock............................... 4 4
Common stock.................................. 612 65(3) 677
Capital in excess of par value................ 5,418 1,480(3) 6,898
Divisional equity............................. -- 128 (128)(3) --
Common stock held in treasury................. (533) (533)
Minimum pension liability adjustment.......... (796) (796)
Cumulative foreign currency translation
adjustments................................. (4) (4)
Retained earnings............................. 894 894
-------- ---- ------ --------
Total shareholders' equity................ 5,595 128 1,417 7,140
-------- ---- ------ --------
Total liabilities and shareholders' equity.... $ 19,884 $193 $ 1,374 $21,451
======== ==== ====== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
66
<PAGE> 73
UNAUDITED COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 FOR WESTINGHOUSE AND THE CABLE
NETWORKS BUSINESS
<TABLE>
<CAPTION>
CABLE
NETWORKS PRO FORMA PRO FORMA
WESTINGHOUSE BUSINESS ADJUSTMENTS COMBINED
------------- --------- ------------ ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales of services and products.......... $ 2,223 $ 80 $ (22)(4) $ 2,281
Costs of services and products.......... (1,590) (45) 22(4) (1,613)
Marketing, administrative and general
expenses.............................. (763) (15) (19)(5) (797)
Other income and expenses, net.......... 34 (1)(4) 33
Interest expense........................ (114) (114)
--------- ----- ------ --------
(Loss) income from Continuing Operations
before income taxes and minority
interest in income of consolidated
subsidiaries.......................... (210) 20 (20) (210)
Income tax benefit (expense)............ 59 (8) 5(6) 56
Minority interest in income of
consolidated subsidiaries............. (1) 1(4)
--------- ----- ------ --------
(Loss) income from Continuing
Operations............................ $ (151) $ 11 $ (14) $ (154)
========= ===== ====== ========
(Loss) per common share from Continuing
Operations............................ $ (0.23) $ (0.22)
========= ========
Average common and common stock
equivalent shares outstanding (in
thousands) (See Note 7)............... 641,562 65,434 706,996
========= ====== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
67
<PAGE> 74
UNAUDITED COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 FOR WESTINGHOUSE AND THE CABLE NETWORKS
BUSINESS
<TABLE>
<CAPTION>
WESTINGHOUSE, CABLE
AS ADJUSTED NETWORKS PRO FORMA PRO FORMA
(SEE NOTE 9) BUSINESS ADJUSTMENTS COMBINED
------------- --------- ------------ ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales of services and products.......... $ 9,356 $ 321 $ (86)(4) $ 9,591
Costs of services and products.......... (6,365) (182) 86(4) (6,461)
Restructuring, litigation and other
matters............................... (979) (979)
Marketing, administrative and general
expenses.............................. (2,552) (50) (80)(5) (2,682)
Other income and expenses, net.......... (83) 4(4) (84)
(5)(4)
Interest expense........................ (537) (537)
--------- ----- ------ --------
(Loss) income from Continuing Operations
before income taxes and minority
interest in income of consolidated
subsidiaries.......................... (1,160) 89 (81) (1,152)
Income tax benefit (expense)............ 375 (35) 20(6) 360
Minority interest in income of
consolidated subsidiaries............. (6) (6) 5(4) (7)
--------- ----- ------ --------
(Loss) income from Continuing
Operations............................ $ (791) $ 48 $ (56) $ (799)
========= ===== ====== ========
(Loss) per common share from Continuing
Operations (See Note 8)............... $ (1.24) $ (1.14)
========= ========
Average common and common stock
equivalent shares outstanding (in
thousands) (See Note 7)............... 635,980 65,434 701,414
========= ====== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
68
<PAGE> 75
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(tables in millions, except share data)
(1) Basis of Presentation
The purchase method of accounting has been used in the preparation of the
accompanying unaudited pro forma combined condensed financial statements.
Under this method of accounting, the purchase price is allocated to assets
acquired and liabilities assumed based on their estimated fair values. For
purposes of the unaudited pro forma combined condensed financial statements,
the preliminary fair values of the Cable Networks Business' assets and
liabilities were estimated by Westinghouse management based primarily on
information furnished by the management of Gaylord. The final allocation of
the purchase price will be determined after the consummation of the Merger
and will be based on a final evaluation of assets acquired and liabilities
assumed of the Cable Networks Business.
(2) Purchase Price Information
Pursuant to the Merger Agreement, stockholders of the Company will receive
shares of Westinghouse Common Stock valued at the agreed upon transaction
price of $1.55 billion, at a per share consideration to be determined based
upon the average of the daily closing prices per share of Westinghouse
Common Stock as reported on the NYSE Composite Transaction List for the
Averaging Period.
For purposes of computing the estimated number of shares to be issued
pursuant to the Merger Agreement for the pro forma combined condensed
financial statements, the average of the daily closing prices per share of
Westinghouse Common Stock for the 15 day trading period ended July 15, 1997
was used. This per share amount was $23.688 per share.
<TABLE>
<S> <C>
Estimated number of shares of Westinghouse Common Stock to be
issued in connection with the Merger based on a value of
$23.688 per share............................................ 65,433,975
Purchase price:
Value of Westinghouse Common Stock to be issued in connection
with the Merger.............................................. $ 1,550
Legal, accounting and other professional fees reducing
equity....................................................... (5)
-----------
Net increase in equity......................................... $ 1,545
==========
</TABLE>
Adjustments to Unaudited Pro Forma Combined Condensed Balance Sheet
The accompanying unaudited pro forma combined condensed balance sheet as of
March 31, 1997 assumes that the Merger was consummated on March 31, 1997 and
reflects the following pro forma adjustments:
69
<PAGE> 76
(3) To record the purchase price paid in connection with the Merger as described
in Notes (1) and (2) above and to eliminate certain historical Cable
Networks Business balances as follows:
<TABLE>
<S> <C>
Issuance of new Westinghouse equity (see Note 2) (65,433,975
shares at $23.688) allocated as follows:
Common stock, par value $1.00 per share...................... $ 65
Capital in excess of par value on stock issued, net of
registration costs.......................................... 1,480
--------
Net increase in equity (see Note 2).......................... $ 1,545
--------
Less: Fair value of net assets acquired:
Divisional equity.......................................... 128
Adjustments:
Cash not to be acquired.................................... (2)
Adjustment of program rights............................... (8)
Elimination of Cable Networks Business existing goodwill,
net....................................................... (28)
Subscriber agreements...................................... 500
Deferred tax liabilities................................... (203)
--------
Fair value of net assets acquired............................ $ 387
--------
Less: Westinghouse's investment in CMT International (See
Note 4)..................................................... 12
Add: Accrued transaction costs............................... 5
--------
Excess purchase price over fair value of net assets
acquired.................................................... $ 1,151
========
</TABLE>
(4) Existing Relationship Between Westinghouse and the Cable Networks Business
Westinghouse, through its divisions and subsidiaries, has the exclusive right to
market and distribute the cable television programming produced by TNN.
Westinghouse is primarily responsible for promoting, marketing, and selling
advertising time on TNN, as well as providing a satellite transponder to deliver
TNN's programming to cable systems. Under the Group W Distribution Agreement,
Westinghouse is entitled to receive a commission of 33% of applicable gross
receipts, net of agency commissions.
In 1991, Gaylord acquired a 67% interest in CMT and, at the same time,
Westinghouse acquired a 33% interest therein. CMT launched CMT International in
1992. Westinghouse provides sales and marketing services to CMT and CMT
International similar to those provided to TNN, and currently receives a
commission of 10% of CMT's gross receipts, net of agency commissions. In
connection with the Restructuring, New Gaylord will assume Westinghouse's 33%
ownership of CMT International.
The following adjustments have been made to eliminate the balances associated
with the transactions between Westinghouse and the Cable Networks Business and
to eliminate the operating results of CMT International as of March 31, 1997,
for the three months ended March 31, 1997 and for the year ended December 31,
1996.
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1997
--------------
<S> <C>
BALANCE SHEET
Current assets/current liabilities......................... $ 19
Equity investment in CMT/minority interest in equity of
consolidated subsidiaries............................... 24
Non-current receivable/long-term debt...................... 5
</TABLE>
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<PAGE> 77
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
STATEMENT OF OPERATIONS
Commission revenue/commission expense...................... $22 $ 86
Other income/minority interest in income of consolidated
subsidiaries............................................ 1 5
CMT International operating loss........................... -- 4
</TABLE>
Subsequent to the Merger, Westinghouse and Gaylord will enter into a number
of agreements to exchange certain services. The net cost of such services to
Westinghouse is not expected to be material.
Adjustments to Unaudited Pro Forma Combined Condensed Statements of Operations
The accompanying pro forma combined condensed statements of operations have been
prepared as if the Merger occurred as of January 1 of each period presented and,
in the case of the pro forma combined condensed statement of operations for the
year ended December 31, 1996, as if the acquisition by Westinghouse of Infinity
(See Note 9) occurred as of January 1, 1996 and reflect the following pro forma
adjustments:
(5) Amortization of other intangibles and goodwill, on a straight-line basis
over periods ranging from 10 to 40 years.
(6) Income tax benefit on the pro forma adjustments, excluding non-deductible
goodwill amortization, at a 40% rate.
(7) The average common and common stock equivalent shares outstanding used in
calculating pro forma loss per common share from continuing operations are
calculated assuming the estimated number of shares of Westinghouse Common
Stock to be issued in connection with the Merger were outstanding from
January 1 of each period presented and, in the case of the average common
and common stock equivalent shares outstanding used in calculating pro forma
loss per common share from continuing operations for the year ended December
31, 1996, assuming the Westinghouse Common Stock issued in connection with
the acquisition by Westinghouse of Infinity were outstanding from January 1,
1996.
(8) The results of operations from Continuing Operations for Westinghouse for
the year ended December 31, 1996 include special charges of approximately
$979 million related to restructuring projects, litigation, recoverability
of certain long-lived assets, divested businesses and environmental
remediation obligations. For additional information, see the 1996
Westinghouse 10-K.
(9) The following pro forma combined condensed statement of operations for the
year ended December 31, 1996 reflects the acquisition by Westinghouse of
Infinity for an aggregate purchase price of $4.7 billion. This acquisition
has been accounted for under the purchase method of accounting.
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<PAGE> 78
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 FOR WESTINGHOUSE
<TABLE>
<CAPTION>
INFINITY, AS PRO FORMA WESTINGHOUSE,
WESTINGHOUSE ADJUSTED ADJUSTMENTS AS ADJUSTED
------------ ------------ ----------- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Sales of services and products......... $ 8,605 $ 751 $ $ 9,356
Costs of services and products......... (5,868) (497) (6,365)
Restructuring, litigation and other
matters.............................. (979) (979)
Marketing, administrative and general
expenses............................. (2,406) (101) (45) (a) (2,552)
Other income and expense, net.......... (86) 3 (83)
Interest expense....................... (456) (81) (537)
-------- ------ ----- --------
(Loss) income from Continuing
Operations before income taxes and
minority interest in income of
consolidated subsidiaries............ (1,190) 75 (45) (1,160)
Income tax benefit (expense)........... 423 (4) (44) (b) 375
Minority interest in income of
consolidated subsidiaries............ (6) (6)
-------- ------ ----- --------
(Loss) income from Continuing
Operations........................... $ (773) $ 71 $ (89) $ (791)
======== ====== ===== ========
</TABLE>
Pro forma adjustments giving effect to the acquisition by Westinghouse of
Infinity in the unaudited pro forma combined condensed statement of operations
reflects the following:
(a) Amortization of goodwill and other intangibles, on a straight-line
basis over periods ranging from 20 to 40 years.
(b) Income tax expense on the pro forma results of operations of Infinity
and the pro forma adjustments, excluding non-deductible goodwill
amortization, at a 40% rate.
The historical operating results of Infinity for the year ended December
31, 1996 have been adjusted to include the results of operations of the radio
stations and other media properties acquired by Infinity in the first half of
1996.
The operating results of Westinghouse for the year ended December 31, 1996
reflect the restatement of certain amounts as discussed in Westinghouse's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996, as amended by
Form 10-K/A Amendment No. 1 filed on July 14, 1997.
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<PAGE> 79
APPROVAL AND ADOPTION OF THE
NEW GAYLORD STOCK PLAN
GENERAL
New Gaylord's success will be largely dependent upon the efforts of its
directors and key employees. In order to attract, motivate, and retain
outstanding employees and directors, the Board of Directors of the Company
believes that it is essential to provide compensation incentives to the
directors and officers of New Gaylord that are competitive with those provided
by other companies. In addition, the Company Board believes that it is important
to further the identity of interests of officers, directors, and key employees
with those of the stockholders by encouraging equity ownership of New Gaylord.
In addition, in connection with the Company Distribution, certain options to
acquire shares of Company Class A Common Stock will be converted into options to
acquire shares of New Gaylord Common Stock. Accordingly, the Board of Directors
of New Gaylord has approved, subject to the approval and adoption of the
Company's stockholders, and the Company Board has recommended for approval and
adoption by the Company's stockholders, the New Gaylord Stock Plan as summarized
below.
Under the New Gaylord Stock Plan, directors, officers and other key
employees of New Gaylord would be eligible to receive awards of stock options,
stock appreciation rights and restricted stock. Options granted under the New
Gaylord Stock Plan may be "incentive stock options" ("ISOs"), within the meaning
of Section 422 of the Code, or nonqualified stock options ("NQSOs"). Stock
Appreciation Rights ("SARs") may be granted simultaneously with the grant of an
option or (in the case of NQSOs) at any time during its term. No stock options
or shares of restricted stock will be awarded under the New Gaylord Stock Plan
prior to the Closing Date.
SUMMARY OF THE NEW GAYLORD STOCK PLAN
The following is a summary of the New Gaylord Stock Plan. This summary is
qualified in its entirety by the actual terms of the New Gaylord Stock Plan,
which is attached as Annex VII and incorporated herein by reference.
Administration. Unless otherwise determined by the Board of Directors of
New Gaylord (the "New Gaylord Board"), the New Gaylord Stock Plan will be
administered by the Compensation Committee established by the New Gaylord Board,
which will be comprised solely of "nonemployee directors" within the meaning of
Rule 16b-3 under the Exchange Act, or by the Board of Directors of New Gaylord
if the Compensation Committee is not so comprised (any entity administering the
New Gaylord Stock Plan, hereinafter referred to as the "Committee"). It is
currently anticipated that the members of the Committee will also be "outside
directors" within the meaning of Section 162(m) of the Code. Subject to the
provisions of the New Gaylord Stock Plan, the Committee will determine the type
of award, when and to whom awards will be granted, and the number of shares
covered by each award. The Committee also will determine the terms, provisions,
and kind of consideration payable (if any), with respect to awards. In addition,
the Commit tee will have sole discretionary authority to interpret the New
Gaylord Stock Plan and to adopt and amend rules and regulations related thereto.
In determining the persons to whom awards will be granted and the number of
shares covered by each award, the Committee will take into account the
contribution to the management, growth, and profitability of the business of New
Gaylord by the respective persons and such other factors as the Committee deems
relevant.
New Gaylord Stock Plan Participants. To be eligible to participate in the
New Gaylord Stock Plan, individuals must be officers, directors, or key
employees of New Gaylord. The selection of persons who are eligible to
participate in the New Gaylord Stock Plan will be within the sole discretion of,
and grants to those persons will be determined by, the Committee.
Shares Subject to the New Gaylord Stock Plan. The New Gaylord Stock Plan
provides that awards may be granted covering up to 3 million shares of New
Gaylord Common Stock (including shares of New Gaylord Common Stock reserved for
the grant of awards to be issued upon conversion of outstanding Company stock
options pursuant to the Distribution Agreement) and that any shares of New
Gaylord Common Stock covered by an award that terminates unexercised will be
available for additional awards. The New Gaylord Stock Plan
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<PAGE> 80
also provides for adjustment in the number of shares subject to the New Gaylord
Stock Plan, the Performance Goals (as defined below) and the option price or
applicable market value of outstanding awards in the event of a stock split,
combination of shares, recapitalization, or other change in the capitalization
of New Gaylord. The New Gaylord Stock Plan limits the number of shares with
respect to which awards (including options, SARs, and restricted stock) may be
granted to any individual to no more than 500,000 shares (subject to adjustment)
in any given three year period. Unless the New Gaylord Stock Plan is terminated
earlier by the New Gaylord Board of Directors, awards may be granted for a
period of ten years from the date of the Distribution, provided that awards
granted prior to the tenth anniversary of such date may continue in effect
beyond the tenth anniversary of the Distribution.
Stock Options. The Committee will determine, in its sole discretion, the
purchase price of the shares of stock covered by an option and the kind of
consideration payable with respect to any awards at the time such option or
award is granted; provided, that in the case of ISOs, the option price must be
not less than 100% of the Fair Market Value (as defined in the New Gaylord Stock
Plan) of a share of New Gaylord Common Stock on the date of grant of the option,
and provided further that the option price must be 110% of the Fair Market Value
of a share of New Gaylord Common Stock in the case of ISOs granted to Ten
Percent Stockholders (as defined in the New Gaylord Stock Plan).
Each option granted under the New Gaylord Stock Plan will be exercisable at
such times and under such conditions as the Committee determines, provided that
in the case of ISOs, such exercise period may not exceed ten years from the date
of grant, and provided further, that in the case of ISOs granted to Ten Percent
Stockholders, such exercise period may not exceed five years from the date of
grant. The aggregate Fair Market Value of the shares with respect to which ISOs
granted under the New Gaylord Stock Plan and other option plans of any "parent"
(as defined in the New Gaylord Stock Plan) or any "subsidiary" (as defined in
the New Gaylord Stock Plan) exercisable for the first time by each grantee
during any calendar year may not exceed $100,000.
Stock options may be exercised, at the discretion of the Committee, by
delivery of consideration to New Gaylord equal to the exercise price in the form
of cash, New Gaylord Common Stock or a combination of both.
The Committee will determine when such options expire. The New Gaylord
Stock Plan generally provides that the options which are unexercisable upon
termination of employment of the option holder terminate on the date of such
termination of employment and options which are exercisable on the date of
termination of employment of the option holder terminate 90 days after the
termination of the employment of the option holder (unless earlier terminated in
accordance with the option's terms), unless employment is terminated by New
Gaylord for cause in which case the options expire immediately upon termination,
unless extended by the Committee. If the option holder's employment is
terminated due to retirement, the option holder's then exercisable options
remain exercisable for the remainder of the option term. In addition, the New
Gaylord Stock Plan generally provides that in the event of the death or
disability of the option holder while in the employ of New Gaylord, or within 90
days after termination of such employment, the option will become fully
exercisable and will remain exercisable until the expiration of the stated term
of the option.
Stock Appreciation Rights. The New Gaylord Stock Plan also permits the
Committee to grant SARs with respect to all or any portion of the shares of New
Gaylord Common Stock covered by options. Each SAR will confer a right to receive
an amount with respect to each share subject thereto, upon exercise thereof,
equal to the excess of (i) the Fair Market Value of one share of New Gaylord
Common Stock on the date of exercise over (ii) the grant price of the SAR. The
grant price of any SAR granted in tandem with an option will be equal to the
exercise price of the underlying option, and the grant price of any other SAR
will be such price as the Committee determines. The Committee may, in its sole
discretion, condition the exercise of any SAR upon the attainment of specified
Performance Goals (as defined below).
Restricted Stock. The New Gaylord Stock Plan further provides for the
granting of restricted stock awards, which are awards of New Gaylord Common
Stock that may not be transferred or otherwise disposed of for such period as
the Committee determines. The Committee may also impose such other conditions
and restrictions on the shares of restricted stock as it deems appropriate,
including the satisfaction of one or more
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<PAGE> 81
of the following performance criteria: (i) pre-tax income or after-tax income;
(ii) operating cash flow; (iii) operating profit; (iv) return on equity, assets,
capital, or investment; (v) earnings or book value per share; (vi) sales or
revenues; (vii) operating expenses; (viii) New Gaylord Common Stock price
appreciation; and (ix) implementation or completion of critical projects or
processes (the "Performance Goals"). The Performance Goals may include a
threshold level of performance below which no payment will be made (or no
vesting will occur), levels of performance at which specified payments will be
made (or specified vesting will occur), and a maximum level of performance above
which no additional payment will be made (or at which full vesting will occur).
Each of the Performance Goals will be determined, to the extent applicable, in
accordance with generally accepted accounting principles and will be subject to
certification by the Committee; provided, that the Committee will have the
authority to make equitable adjustments to the Performance Goals in recognition
of unusual or non-recurring events affecting New Gaylord. The Committee may
provide that such restrictions will lapse with respect to specified percentages
of the awarded shares of restricted stock on successive future dates. The
Committee has the further authority to cancel all or any portion of the
restriction with respect to restricted stock on such terms and conditions as it
deems appropriate.
Amendment and Termination. The New Gaylord Board at any time and from time
to time may suspend, terminate, modify, or amend the New Gaylord Stock Plan,
without stockholder approval to the fullest extent permitted by the Exchange Act
and the rules and regulations thereunder; provided, however, that no suspension,
termination, modification, or amendment of the New Gaylord Stock Plan may
adversely affect any award previously granted under the New Gaylord Stock Plan,
unless written consent of the grantee is obtained.
Change in Control. In the event of a Change in Control of New Gaylord, the
awards granted under the New Gaylord Stock Plan will become immediately
exercisable or otherwise nonforfeitable in full, notwithstanding terms of the
awards providing otherwise. Change in Control is defined in the New Gaylord
Stock Plan to mean, among other things, the acquisition of securities
representing a majority of the combined voting power of New Gaylord by any
person (other than New Gaylord and other related entities); the approval by the
stockholders of New Gaylord of a merger or consolidation of New Gaylord into or
with another entity (with certain exceptions), or a sale or other disposition of
all or substantially all of New Gaylord's assets, or a plan of liquidation, or a
change in the composition of the New Gaylord Board in any two-year period such
that individuals who were members of the New Gaylord Board at the beginning
cease to constitute a majority thereof (with certain exceptions).
Transferability. ISOs (and any SAR related thereto) are not transferable
otherwise than by will or by the laws of descent and distribution, and all ISOs
are exercisable during the grantee's lifetime only by the grantee. NQSOs (and
any SAR related thereto) are not transferable without the prior consent of the
Committee, other than by will or the laws of descent and distribution, by a
grantee to an immediate family member (as defined in the New Gaylord Stock
Plan), or by a grantee to a trust for the benefit of an immediate family member.
Awards of restricted stock will be transferable only to the extent set forth in
the instruments evidencing such awards.
New Benefits. Pursuant to the Distribution Agreement, all options to
acquire Company Common Stock which are held by New Gaylord Employees immediately
prior to the Time of Distribution will become fully vested and exercisable and
will be converted into and represent options to acquire shares of New Gaylord
Common Stock under the New Gaylord Stock Plan, with such amendments and
adjustments as are reasonable and appropriate based, in part, on the Per Share
Merger Consideration and the fair market value of the New Gaylord Common Stock
immediately following the Distribution. As a result, the number of options for
New Gaylord Common Stock to be granted upon the conversion of options to acquire
shares of Company Class A Common Stock is not presently determinable.
Furthermore, the future selection of persons who are eligible to
participate in the New Gaylord Stock Plan is within the discretion of, and
grants to those persons will be determined by, the Committee. Accordingly,
additional benefits that will be granted to the executive officers, directors
and other employees are not presently determinable.
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<PAGE> 82
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain U.S. Federal income tax aspects
of options awarded under the New Gaylord Stock Plan based upon the federal
income tax laws in effect on the date hereof. This summary is not intended to be
exhaustive and the exact tax consequences to any grantee will depend upon his or
her particular circumstances and other factors. New Gaylord Stock Plan
participants must consult their tax advisors with respect to any state, local
and foreign tax considerations or particular federal tax implications of options
granted under the New Gaylord Stock Plan.
Incentive Stock Options. Neither the grant nor the exercise of an ISO will
result in taxable income to the employee. The tax treatment on sale of shares of
New Gaylord Common Stock acquired upon exercise of an ISO depends on whether the
holding period requirement is satisfied. The holding period is met if the
disposition by the employee occurs (i) at least two years after the date of
grant of the option, (ii) at least one year after the date the shares were
transferred to the employee, and (iii) while the employee remains employed by
New Gaylord or not more than three months after his or her termination of
employment (or not more than one year in the case of a disabled employee). If
the holding period requirement is satisfied, the excess of the amount realized
upon sale of the shares of New Gaylord Common Stock acquired upon the exercise
of the ISO over the price paid for these shares will be treated as a long-term
capital gain. If the employee disposes of the New Gaylord Common Stock acquired
upon the exercise of the ISO before the holding period requirement is met (a
"disqualifying disposition"), the excess of the fair market value of the shares
on the date of exercise or, if less, the fair market value on the date of
disposition, over the exercise price will be taxable as ordinary, compensation
income to the employee at the time of disposition, and New Gaylord will be
entitled to a corresponding deduction. The balance of the gain, if any, will be
a capital gain for the employee. Any capital gain recognized by the employee
will be a long-term capital gain if the employee's holding period for the shares
of New Gaylord Common Stock at the time of disposition is more than one year.
Although the exercise of an ISO will not result in taxable income to the
employee, the excess of the fair market value of the New Gaylord Common Stock on
the date of exercise over the exercise price will be included in the employee's
"alternative minimum taxable income" under the Code.
Nonqualified Stock Options. There will be no federal income tax
consequences to New Gaylord or to the grantee upon the grant of NQSO's under the
New Gaylord Stock Plan. However, upon the exercise of an NQSO under the New
Gaylord Stock Plan, the grantee will recognize ordinary compensation income for
federal income tax purposes in an amount equal to the excess of the fair market
value of the shares of New Gaylord Common Stock purchased over the exercise
price. New Gaylord will generally be entitled to a tax deduction at such time
and in the same amount that the employee recognizes ordinary income. If the
shares of New Gaylord Common Stock so acquired are later sold or exchanged, the
difference between the amount realized from such sale or exchange and the fair
market value of such stock on the date of exercise of the option is generally
taxable as long-term or short-term capital gain or loss depending upon whether
the shares of New Gaylord Common Stock have been held for more than one year
after such date.
Exercise with Shares. A grantee who pays the exercise price upon exercise
of an ISO or NQSO, in whole or in part, by delivering shares of New Gaylord
Common Stock already owned by him or her will recognize no gain or loss for
federal income tax purposes to the extent of the fair market value of the shares
surrendered, but with respect to shares received in excess of such exercise
price, a grantee will recognize ordinary compensation income equal to the fair
market value of such shares. Shares of New Gaylord Common Stock acquired upon
exercise which are equal in number to the shares surrendered will have a tax
basis equal to the tax basis of the shares surrendered, and (except as noted
below with respect to disqualifying dispositions) the holding period of such
shares will include the holding period of the shares surrendered. In the case of
an NQSO, the basis of additional shares received upon exercise of the NQSO will
be equal to the fair market value of such shares on the date of exercise, and
the holding period for such additional shares will commence on the date the
option is exercised. In the case of an ISO, the tax basis of the additional
shares received will be zero, and the holding period of such shares will
commence on the date of the exchange. If any of the shares received upon
exercise of the ISO are disposed of within two years of the date of grant of the
ISO or within
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<PAGE> 83
one year after exercise, the shares with the lowest (i.e., zero) basis will be
deemed to be disposed of first, and such disposition will be a disqualifying
disposition giving rise to ordinary income as previously discussed above.
Under Section 162(m) of the Code and the rules of the NYSE, the approval
and adoption of the New Gaylord Stock Plan requires the affirmative vote of the
holders of a majority of the total votes cast on such Proposal by the holders of
the outstanding shares of Company Class A Common Stock and Company Class B
Common Stock, voting as a single class, provided that the total number of votes
cast on such Proposal represents over 50% of the number of votes entitled to be
cast on such Proposal. The Company Board recommends that the stockholders vote
FOR the approval and adoption of the New Gaylord Stock Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the formation and launch of TNN, Gaylord and
Westinghouse formed a relationship whereby Westinghouse, through certain
divisions and subsidiaries, has the exclusive right to market and distribute the
cable television programming produced by TNN. As a result, Westinghouse is
primarily responsible for promoting, marketing and selling advertising time on
TNN, as well as providing a satellite transponder to deliver TNN's programming
to cable systems. Under the Group W Distribution Agreement, Westinghouse is
entitled to receive a commission of 33% of applicable gross receipts, net of
agency commissions.
In 1991, Gaylord acquired a 67% interest in CMT and, at the same time,
Westinghouse acquired a 33% interest therein. CMT launched CMT International in
1992. Pursuant to the Group W Services Arrangement, Westinghouse provides sales
and marketing services to CMT and CMT International similar to those provided to
TNN, and Westinghouse currently receives a commission of 10% of CMT's gross
receipts, net of agency commissions.
In January 1990, Westinghouse purchased two satellite transponders which
became the subject of a participation agreement pursuant to which Opryland USA
Inc acquired a 33% interest in the transponders. The transponders are used by
TNN pursuant to the Group W Distribution Agreement and by Z Music pursuant to a
license agreement.
DESCRIPTION OF WESTINGHOUSE CAPITAL STOCK
Under the Restated Articles of Incorporation of Westinghouse, as amended,
(the "Westinghouse Charter"), Westinghouse is currently authorized to issue 25
million shares of preferred stock, par value $1.00 per share (the "Preferred
Stock") and 1.1 billion shares of Westinghouse Common Stock. At July 11, 1997,
646,005,362 shares of Westinghouse Common Stock were issued and outstanding.
Common Stock. Each holder of Westinghouse Common Stock is entitled to one
vote per share on all matters submitted to a vote of stockholders. In the
election of directors, no stockholder has cumulative voting rights. Each share
of Westinghouse Common Stock is entitled to share equally in dividends from
sources legally available therefor when, as, and if declared by the Westinghouse
Board. Upon liquidation or dissolution of Westinghouse, whether voluntary or
involuntary, each share of Westinghouse Common Stock is entitled to share
equally in the assets of Westinghouse available for distribution to the holders
of the Westinghouse Common Stock. No conversion or preemptive rights or
redemption or sinking fund provisions are applicable to the Westinghouse Common
Stock. The First Chicago Trust Company of New York (the "Trust Company") is the
Transfer Agent for the Westinghouse Common Stock, and is also Westinghouse's
Registrar.
Preferred Stock. Shares of Preferred Stock may be issued from time to time
in one or more series with such designations, voting powers, dividend rights,
rights of redemption, conversion rights, other special rights, preferences and
limitations as may be stated in the resolutions providing for the issue of such
shares of Preferred Stock adopted by the Westinghouse Board.
Series A Preferred Stock--Rights Plan. In December 1995, the Westinghouse
Board adopted a Shareholder Rights Plan (the "Rights Plan") and in connection
therewith Westinghouse entered into the Westinghouse Rights Agreement. To effect
the Rights Plan, the Westinghouse Board declared a dividend
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<PAGE> 84
distribution of one Preferred Stock Purchase Right ("Right") on each outstanding
share of Westinghouse Common Stock on January 9, 1996. The Rights also attach to
each share of Westinghouse Common Stock issued after January 9, 1996. Each right
entitles the registered holder to purchase from Westinghouse one one-hundredth
of a share (subject to adjustment) of Series A Preferred Stock at a price (the
"Exercise Price") of $64.00 (subject to adjustment). As of the date hereof,
there are no shares of Series A Preferred Stock outstanding.
The Rights, unless earlier redeemed by the Westinghouse Board, become
exercisable upon the close of business on the day (the "Distribution Date")
which is the earlier of (i) the tenth day following a public announcement that a
person or group of affiliated or associated persons, with certain exceptions set
forth below, has acquired beneficial ownership of 15% or more of the outstanding
voting stock of Westinghouse (an "Acquiring Person") and (ii) the tenth business
day (or such later date as may be determined by the Westinghouse Board prior to
such time as any person or group of affiliated or associated persons becomes an
Acquiring Person) after the date of the commencement or announcement of a
person's or group's intention to commence a tender or exchange offer the
consummation of which would result in the ownership of 30% or more of
Westinghouse's outstanding voting stock (even if no shares are actually
purchased pursuant to such offer); prior thereto, the Rights will not be
exercisable, will not be represented by separate certificates, and will not be
transferable apart from the Westinghouse Common Stock, but will instead be
evidenced, with respect to any of the Westinghouse Common Stock certificates
outstanding, by such Westinghouse Common Stock certificates. An Acquiring Person
does not include (A) Westinghouse, (B) any subsidiary of Westinghouse, (C) any
employee benefit plan, employee stock or deferral plan or director compensation
plan of Westinghouse or of any subsidiary of Westinghouse, or any trust or other
entity organized, appointed, established or holding Westinghouse Common Stock
for or pursuant to the terms of any such plan or (D) any person or group whose
ownership of 15% or more of the shares of voting stock of Westinghouse then
outstanding results solely from (i) any action or transaction or transactions
approved by the Westinghouse Board before such person became an Acquiring Person
or (ii) a reduction in the number of issued and outstanding shares of voting
stock of Westinghouse pursuant to a transaction or Transactions approved by the
Westinghouse Board (provided that any person or group that does not become an
Acquiring Person by reason of clause (i) or (ii) above will become an Acquiring
Person upon acquisition of an additional 1% or more of Westinghouse's
outstanding voting stock unless such acquisition of additional voting stock will
not result in such person or group becoming an Acquiring Person by reason of
such clause (i) or (ii)).
The Rights are not exercisable until the Distribution Date. The Rights will
expire at the close of business on January 9, 2006, unless earlier redeemed by
Westinghouse as described below. At its May 1997 meeting, the Westinghouse Board
adopted a resolution affirming its intention to redeem the Rights in January
2001.
The Series A Preferred Stock is nonredeemable and, unless otherwise
provided in connection with the creation of a subsequent series of preferred
stock, subordinate to any other series of Westinghouse's preferred stock,
including the Series C Preferred Stock. The Series A Preferred Stock may not be
issued except upon exercise of the Rights. Each share of Series A Preferred
Stock is entitled to receive, when, as and if declared, a dividend in an amount
equal to (i) 100 times the per share amount of any cash dividend declared on the
Westinghouse Common Stock and (ii) a quarterly preferred cash dividend of $1.00
less the per share amount of all cash dividends declared on the preferred stock
pursuant to clause (i) of this sentence. In addition, Series A Preferred Stock
is entitled to 100 times any non-cash dividends (other than dividends payable in
equity securities or certain rights or warrants) declared on the Westinghouse
Common Stock, in like kind. In the event of the liquidation of Westinghouse, the
holder of Series A Preferred Stock will be entitled to receive, for each share
of Series A Preferred Stock, a payment in an amount equal to the greater of
$100.00 or 100 times the payment made per share of Westinghouse Common Stock.
Each share of Series A Preferred Stock has 100 votes, voting together with the
Westinghouse Common Stock. In the event of any merger, consolidation or other
transaction in which Westinghouse Common Stock is exchanged, each share of
Series A Preferred Stock will be entitled to receive 100 times the amount
received per share of Westinghouse Common Stock. The rights of Series A
Preferred Stock as to dividends, liquidation and voting are protected by
anti-dilution provisions.
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Unless the Rights are earlier redeemed or the transaction is approved by
the Westinghouse Board and the Continuing Directors (as defined in the
Westinghouse Rights Agreement), if Westinghouse at any time after the
Distribution Date were to be acquired in a merger or other fundamental
transaction (in which any shares of Westinghouse Common Stock are changed into
or exchanged for other securities or assets) or more than 50% of the assets or
earning power of Westinghouse and its subsidiaries (taken as a whole) were to be
sold or transferred in one or a series of related transactions, the Westinghouse
Rights Agreement provides that proper provisions will be made so that each
holder of record of a Right will from and after such date have the right to
receive, upon payment of the Exercise Price, that number of shares of common
stock of the acquiring company having a market value at the time of such
transaction equal to two times the Exercise Price. In addition, unless the
Rights are earlier redeemed, in the event that a person or group becomes the
beneficial owner of 15% or more of Westinghouse's voting stock (other than
pursuant to a tender or exchange offer (a "Qualifying Tender Offer") for all
outstanding shares of Westinghouse Common Stock that is approved by the
Westinghouse Board after taking into account the long-term value of Westinghouse
and all other factors they consider relevant in the circumstances), the
Westinghouse Rights Agreement provides that proper provisions will be made so
that each holder of record of a Right, other than the Acquiring Person (whose
Rights will thereupon become null and void), will thereafter have the right to
receive, upon payment of the Exercise Price, that number of shares of Series A
Preferred Stock having a market value at the time of the transaction equal to
two times the Exercise Price (such market value to be determined with reference
to the market value of the Westinghouse Common Stock as provided in the
Westinghouse Rights Agreement).
At any time on or prior to the close of business on the earlier of (i) the
tenth day after the time that a person has become an Acquiring Person (or such
later date as a majority of the Westinghouse Board and, if applicable, a
majority of the Continuing Directors (as defined in the Rights Agreement) may
determine) or (ii) January 9, 2006, Westinghouse may redeem the Rights in whole,
but not in part, at a value of $.01 per Right, subject to adjustment (the
"Redemption Price"). The Rights may be redeemed after the time that any Person
has become an Acquiring Person only if approved by a majority of the Continuing
Directors. Immediately upon the effective time of the action of the Westinghouse
Board authorizing redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
For as long as the Rights are then redeemable, Westinghouse may, except
with respect to the Redemption Price or date of expiration of the Rights, amend
the Rights in any manner, including an amendment to extend the time period in
which the Rights may be redeemed. At any time when the Rights are not then
redeemable, Westinghouse may amend the Rights in any manner that does not
materially adversely affect the interests of a holder of the Rights as such.
Amendments to the Westinghouse Rights Agreement from and after the time that any
person becomes an Acquiring Person require the approval of a majority of the
Continuing Directors.
Until a Right is exercised, the holder, as such, will have no rights as a
stockholder of Westinghouse, including, without limitation, the right to vote or
to receive dividends.
COMPARISON OF THE RIGHTS OF WESTINGHOUSE
AND COMPANY STOCKHOLDERS
The statements set forth under this heading with respect to the
Pennsylvania Business Corporation Law (the "PBCL"), the DGCL, the Westinghouse
Charter, the Westinghouse By-Laws, the Company Charter and the Company By-Laws
are brief summaries thereof and do not purport to be complete; such statements
are qualified by reference to the full text of the relevant provisions of the
PBCL, the DGCL, the Westinghouse Charter, the Westinghouse By-Laws, the Company
Charter and the Company By-Laws. See "AVAILABLE INFORMATION."
The following summary compares certain rights of the holders of
Westinghouse Common Stock to the rights of the holders of Company Common Stock.
The rights of stockholders of the Company are governed principally by the DGCL,
the Company Charter and the Company By-Laws. Upon consummation of the
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Merger, such stockholders will become holders of Westinghouse Common Stock, and
their rights will be governed principally by the PBCL, the Westinghouse Charter
and the Westinghouse By-Laws.
Dividend Rights
Under the PBCL, a corporation is prohibited from making a distribution to
stockholders if, after giving effect thereto: (i) such corporation would be
unable to pay its debts as they become due in the usual course of its business;
or (ii) the total assets of such corporation would be less than the sum of its
total liabilities plus (unless otherwise provided in the Westinghouse Charter)
the amount that would be needed, if such corporation were then dissolved, to
satisfy the rights of stockholders having superior preferential rights upon
dissolution to the stockholders receiving such distribution. Under the DGCL, a
corporation may pay dividends out of surplus (defined as the excess, if any, of
net assets over capital) or, if no such surplus exists, out of its net profits
for the fiscal year in which such dividends are declared and/or for its
preceding fiscal year, provided, however, that dividends may not be paid out of
net profits if the capital of such corporation is less than the aggregate amount
of capital represented by the issued and outstanding stock of all classes having
a preference upon the distribution of assets.
Holders of both Westinghouse Common Stock and Company Common Stock are
entitled to receive such dividends as may be declared by the Westinghouse Board
and the Company Board, respectively, out of funds legally available for such
purpose. As is the case with respect to Company Common Stock, no dividends may
be paid on shares of Westinghouse Common Stock if dividends on Preferred Stock
are in arrears. With respect to the Company, no dividends may be declared or
paid in cash, property or Company securities on any share of any class of
Company Common Stock, however, unless simultaneously the same dividend is
declared or paid on each share of the other class of Company Common Stock;
provided, however, that, in the case of dividends or distributions payable in
Company Common Stock, including pursuant to stock splits or divisions, only
shares of Company Class A Common Stock will be distributed with respect to
Company Class A Common Stock, and only shares of Company Class B Common Stock
will be distributed with respect to Company Class B Common Stock.
Voting Rights
Holders of Westinghouse Common Stock vote as a single class on all matters
submitted to a vote of the common stockholders, with each share entitled to one
vote. Except as otherwise provided by law, the Westinghouse Charter or the
Westinghouse By-Laws, matters submitted to a vote of the Westinghouse common
stockholders must be approved by a majority of the votes cast by the holders of
Westinghouse Common Stock. Holders of Westinghouse Common Stock are not entitled
to cumulative votes in the election of directors.
The Westinghouse Charter provides that certain Business Combinations (as
defined in Article SIXTH of the Westinghouse Charter) involving an Interested
Stockholder (as defined in the Westinghouse Charter) require the affirmative
vote of the holders of at least 80% of the combined voting power of the then
outstanding shares of Westinghouse stock entitled to vote generally in an
election of directors ("Voting Stock") and the holders of at least a majority of
the combined voting power of the then outstanding shares of Voting Stock held by
Disinterested Stockholders (as defined in the Westinghouse Charter) unless such
transaction is approved by a majority of the Disinterested Directors (as defined
in the Westinghouse Charter) or meets certain "fair value" criteria set forth in
the Westinghouse Charter. Article SIXTH of the Westinghouse Charter also
provides that such Article cannot be amended without the same stockholder vote
described above to approve a Business Combination. The Westinghouse Charter also
provides that, in addition to any requirements of law, other provisions of the
Westinghouse Charter or the terms or provisions of any series of Preferred
Stock, the affirmative vote of holders of 80% or more of the outstanding Voting
Stock is required to take stockholder action to: (i) remove a director without
cause; (ii) adopt, amend, alter or repeal any provision of the Westinghouse
By-Laws, except that By-Law XVI (relating to employee stock option and purchase
plans) may be amended or altered by a majority vote of the outstanding Voting
Stock if a majority of the entire Westinghouse Board has first recommended the
amendment or alteration for approval by the Westinghouse stockholders; (iii)
amend, alter or repeal, or adopt any provision inconsistent with, Articles
SEVENTH
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(relating to the determination of the number, qualification, term of office,
compensation, powers and duties and classification of directors, pursuant to the
Westinghouse By-Laws, except as otherwise determined by the terms of the
Preferred Stock), EIGHTH (relating to the adoption, repeal, alteration or
amendment of the Westinghouse By-Laws by the Westinghouse Board) or NINTH
(relating to the stockholder vote required for stockholder action to remove
directors without cause and to adopt, amend, alter or repeal certain provisions
of the Westinghouse Charter or the Westinghouse By-Laws) of the Westinghouse
Charter or (iv) amend, alter or repeal or adopt any provision inconsistent with
any provision, other than Articles SIXTH (relating to supermajority stockholder
voting in respect of certain business combinations), SEVENTH, EIGHTH or NINTH of
the Westinghouse Charter, unless first recommended and approved by a majority of
the entire Westinghouse Board or, if there is an Interested Stockholder, by a
majority of the Disinterested Directors, in which cases a majority vote of the
outstanding Voting Common Stock is required.
Holders of Company Common Stock vote as a single class on all matters
submitted to a vote of stockholders, with each share of Company Class A Common
Stock entitled to one vote and each share of Company Class B Common Stock
entitled to five votes, except as otherwise provided by law. Holders of Company
Common Stock are not entitled to cumulative votes in the election of directors.
Article IX of the Company Charter provides that, in addition to any other
provisions of the Company Charter, the affirmative vote of holders of 66 2/3% or
more of the issued and outstanding stock having the power to vote at a
stockholder meeting duly called for the purpose, voting together as a single
class, is required to amend, repeal or adopt any provision inconsistent with the
following Articles of the Company Charter: (i) Article VII(B)(i), establishing a
classified board of directors; (ii) Article VIII, prohibiting the use of
stockholder consents in lieu of a meeting of stockholders and establishing the
parties who may call a special meeting of stockholders; (iii) Article IX,
granting certain powers to the Company Board, including (A) the power to
establish working capital reserves, (B) the power to sell, lease or exchange the
Company's property with the consent of the Company's stockholders, (C) the power
to adopt, repeal or amend the Company's By-Laws and (D) the power to impose
restrictions on the sale or transfer of the Company's stock, and establishing
super-majority voting requirements for the repeal or amendment of certain
provisions of the Company Charter; (iv) Article X, eliminating personal
liability of directors for certain breaches of fiduciary duty; and (v) Article
XI, providing for certain procedures for the compromise of claims resulting from
the insolvency of the Company. The affirmative vote of the holders of at least a
majority of the outstanding shares of Company Class A Common Stock and the
affirmative vote of at least a majority of the outstanding shares of Company
Class B Common Stock, each voting separately as a class, is required to amend
Article IV(C)(5) of the Company Charter which relates to the automatic
conversion of Company Class B Common Stock.
Under the DGCL, the affirmative vote of a majority of the outstanding
shares of any class of common stock is required to approve, among other things,
a change in the aggregate number of authorized shares of such class, the par
value of the shares of such class, or the powers, preferences or special rights
of the shares of such class in a manner adversely affecting such shares.
Directors
Number and Election of Directors. Under both the PBCL and the DGCL, the
charter document or by-laws of a corporation may specify the number of
directors. The Westinghouse By-Laws currently provide that the Westinghouse
Board is to consist of not less than three nor more than twenty-four directors,
each serving for a term of one year, with the Westinghouse Board determining the
exact number of directors (subject to the rights of holders of Preferred Stock,
in certain circumstances, to elect two directors). The Westinghouse By-Laws also
provide that nominees for director be such that a majority of directors on the
Westinghouse Board, assuming the election of such nominees, would be Independent
Directors (as defined in the Westinghouse By-Laws). The Westinghouse Board may
fill vacancies and newly created directorships, subject to any rights of holders
of Preferred Stock.
The Westinghouse Charter provides that cumulative voting will not apply to
the election of directors. The Westinghouse By-Laws provide that, subject to the
rights of holders of Preferred Stock, nominations for directors can be made by
the Westinghouse Board or by any stockholder entitled to vote for the election
of
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directors at a stockholder meeting. Any such stockholder may nominate persons
for election as directors only if written notice of such holder's intent to make
such nomination at such meeting is received by the Secretary of Westinghouse in
the manner and within the time period specified in the Westinghouse By-Laws.
The Company By-Laws provide that the Company Board is to consist of five to
fifteen directors, provided that the number may be modified by vote of the
Company Board. The Company Board currently consists of seven members. Subject to
applicable law and the Company Charter, any vacancies on the board, howsoever
resulting, may be filled by a majority of the directors then in office, even if
less than a quorum, or by a sole remaining director. The Company Charter
provides for the Company Board to be divided into three classes of directors
serving staggered three-year terms. As a result, approximately one-third of the
Company Board is elected each year. The Company By-Laws provide that, subject to
the rights of holders of Preferred Stock, nominations may be made at any annual
meeting of stockholders or at any special meeting of stockholders called for the
purpose of electing directors, by or at the direction of the Company Board or by
any stockholder of the Company who is a stockholder of record on the date of the
giving of notice required for the nomination of a director pursuant to the
Company By-Laws, who is entitled to vote at such meeting and who provides
written notice to the Company secretary in the manner and within the time period
specified by the Company By-Laws.
Fiduciary Duties of Directors. Under the PBCL, directors have a fiduciary
relationship to their corporation and, as such, are required to perform their
duties in good faith, in a manner they reasonably believe to be in the best
interests of such corporation, and with such care, including reasonable inquiry,
skill and diligence, as a person of ordinary prudence would use under similar
circumstances. In discharging their duties, directors may, in considering the
best interests of their corporation, consider the effects of any action upon
employees, suppliers and customers of such corporation, and upon communities in
which offices or other establishments of such corporation are located and all
other pertinent factors. Absent a breach of fiduciary duty, a lack of good faith
or self-dealing, any act of the board of directors, a committee thereof or an
individual director is presumed to be in the best interests of such corporation.
Under the DGCL, the business and affairs of a corporation are managed by or
under the direction of its board of directors. In exercising their powers,
directors are charged with an unyielding fiduciary duty to protect the interests
of the corporation and to act in the best interests of its stockholders. In
recognition of the managerial prerogatives granted to the directors of a
Delaware corporation, Delaware law presumes that, in making a business decision,
such directors are disinterested and act on an informed basis, in good faith and
in the honest belief that the action taken was in the best interests of the
corporation and its stockholders, which presumption is known as the "business
judgment rule." A party challenging the propriety of a decision of a board of
directors bears the burden of rebutting the applicability of the presumption of
the business judgment rule by demonstrating that, in reaching their decision,
the directors breached one or more of their fiduciary duties--good faith,
loyalty and due care. If the presumption is not rebutted, the business judgment
rule attaches to protect the directors and their decisions, and their business
judgments will not be judicially second guessed. Where, however, the presumption
is rebutted, the directors bear the burden of demonstrating the entire fairness
of the relevant transaction. Notwithstanding the foregoing, Delaware courts
subject directors' conduct to enhanced scrutiny in respect of defensive actions
taken in response to a threat to corporate control and approval of a transaction
resulting in a sale of such control.
Liability of Directors. Both the PBCL and the DGCL permit a corporation to
limit the personal liability of its directors, with specified exceptions. The
PBCL permits a corporation to include in its by-laws a provision, adopted by
vote of its stockholders, which eliminates the personal liability of its
directors, as such, for monetary damages for any action taken or failure to take
any action unless (i) such directors have breached or failed to perform their
duties as directors and (ii) the breach or failure to perform constitutes self-
dealing, willful misconduct or recklessness. However, a Pennsylvania corporation
is not empowered to eliminate personal liability where the responsibility or
liability of a director is pursuant to any criminal statute or is for the
payment of taxes pursuant to any federal, state or local law. The Westinghouse
Charter and the Westinghouse By-Laws eliminate director liability to the maximum
extent permitted by the PBCL.
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The DGCL permits a corporation to include in its certificate of
incorporation a provision limiting or eliminating the liability of its directors
to such corporation or its stockholders for monetary damages arising from a
breach of fiduciary duty, except for: (i) a breach of the duty of loyalty to the
corporation, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) a declaration of a
dividend or the authorization of the repurchase or redemption of stock in
violation of the DGCL or (iv) any transaction from which the director derived an
improper personal benefit. The Company Charter eliminates director liability to
the maximum extent permitted by the DGCL.
Call of Special Meetings
The PBCL permits a special meeting of stockholders to be called by the
board of directors or by such officers or other persons as may be provided in
the by-laws. The PBCL also permits such meetings to be called by stockholders
entitled to cast at least 20% of the votes entitled to be cast at the meeting.
However, as a company with a class of stock entitled to vote generally in an
election of directors registered under the Exchange Act (a "registered
corporation"), the stockholder portion of such provision is inapplicable to
Westinghouse (except in the context of stockholder approval of certain business
combinations with interested shareholders under Section 2555 of the PBCL). Under
the DGCL, a special meeting of the stockholders may be called by the board of
directors or such other person as may be authorized by the certificate of
incorporation or by-laws.
Special meetings of the stockholders of Westinghouse, subject to the rights
of holders of Preferred Stock, may be called only by the Westinghouse Board or
the Chairman of the Westinghouse Board. Special meetings of the stockholders of
the Company may be called by the Chairman of the Company Board or by a majority
of the members of the Company Board.
Action by Stockholders Without a Meeting
Under the PBCL, stockholders of a registered corporation such as
Westinghouse may authorize an action without a meeting by less than unanimous
consent only if such action without a meeting is permitted by the corporation's
articles of incorporation. The Westinghouse Charter does not currently permit
such less than unanimous action by stockholders without a meeting. Under the
DGCL, unless otherwise provided in the certificate of incorporation,
stockholders having not less than the minimum number of votes that would be
necessary to authorize or take a corporate action at a meeting at which all
shares entitled to vote thereon were present and voted may take such action by
consenting to such action in writing. The Company Charter does not currently
permit any action required or permitted to be taken at any annual meeting or
special meeting of stockholders of the Company to be taken other than at an
annual or special meeting duly noticed and called.
Amendment to Charter Document
Under the PBCL, stockholders of a registered corporation such as
Westinghouse are not entitled to propose amendments to the articles of
incorporation of such corporation; any such amendment must be initiated by the
corporation's board of directors. Under the Westinghouse Charter, except as
provided in the PBCL or as described under "--Voting Rights," and subject to any
rights of Preferred Stock, any provision thereof may be amended by approval of
the Westinghouse Board and the affirmative vote of a majority of the outstanding
Voting Stock.
Under the Company Charter and the DGCL, any provision of the Company
Charter may be amended by approval of the Company Board and the affirmative vote
of a majority of the combined voting power of the outstanding shares of Company
stock entitled to vote thereon except as described under "--Voting Rights."
Amendment to By-Laws
The Westinghouse By-Laws may be amended by the Westinghouse Board upon the
affirmative vote of a majority of the entire Westinghouse Board, or by the
Westinghouse stockholders upon the affirmative vote of the holders of 80% of the
Westinghouse stock entitled to vote thereon.
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The Company By-Laws may be amended by a majority of the directors in
office. The Company By-Laws also may be amended by the vote of 66 2/3% of the
combined voting power of the issued and outstanding capital stock of the Company
entitled to vote thereon.
Approval of Mergers and Asset Sales
Under the PBCL, unless required by the by-laws of a constituent corporation
(the Westinghouse By-Laws contain no such requirement), stockholder approval is
not required for a plan of merger or consolidation if: (i)(A) the surviving or
new corporation is a domestic corporation whose articles of incorporation
(defined in the PBCL and hereinafter referred to as "Articles") are identical to
the Articles of such constituent corporation (except changes which may be made
without stockholder approval under the PBCL); (B) each share of such constituent
corporation outstanding immediately prior to the merger or consolidation will
continue as or be converted into (except as otherwise agreed to by the holder
thereof) an identical share of the surviving or new corporation; and (C) such
plan provides that the stockholders of such constituent corporation will hold in
the aggregate shares of the surviving or new corporation having a majority of
the votes entitled to be cast generally in an election of directors; (ii)
immediately prior to the adoption of such plan, another corporation that is a
party to such merger or consolidation owns directly or indirectly 80% or more of
the outstanding shares of each class of such constituent corporation; or (iii)
no shares of the constituent corporation have been issued prior to the adoption
of the plan of merger or consolidation by the board of directors pursuant to
Section 1922 of the PBCL. Under the PBCL, stockholder approval is required for
the sale, lease, exchange or other disposition (other than by means of a
distribution to stockholders or by a division) of all, or substantially all, of
the property and assets of a corporation when not made in the usual and regular
course of the business of such corporation or for the purpose of relocating the
business of such corporation or in certain transactions with subsidiaries. Under
the PBCL, stockholder approval is required for the division of a domestic
corporation into two or more domestic or foreign business corporations unless:
(i) the dividing corporation has only one class of shares outstanding and the
shares and other securities, if any, of each resulting corporation are
distributed pro rata to the stockholders of the dividing corporation; (ii) the
dividing corporation survives the division and all the shares and other
securities and obligations, if any, of the new corporations resulting from the
division are owned solely by the surviving corporation; or (iii) the transfer
effected by the division, if effected by means of a sale, lease, exchange or
other disposition, would not require stockholder approval. In cases where
stockholder approval is required, a merger, consolidation, division, sale,
lease, exchange or other disposition must be approved by a majority of the votes
cast by the holders of the securities entitled to vote thereon, unless the
corporation's articles require a higher vote.
Under the DGCL, unless required by its certificate of incorporation (the
Company Charter contains no such requirement), no vote of the stockholders of a
constituent corporation surviving a merger is necessary to authorize such merger
if: (i) the agreement of merger does not amend in any respect the certificate of
incorporation of such constituent corporation; (ii) each share of stock of such
constituent corporation outstanding prior to such merger is to be an identical
outstanding or treasury share of the surviving corporation after such merger;
(iii) either no shares of common stock of the surviving corporation and no
shares, securities or obligations convertible into such common stock are to be
issued or delivered under such agreement of merger, or the number of shares of
common stock issued or so issuable does not exceed 20% of the number thereof
outstanding immediately prior to such merger; and (iv) certain other conditions
are satisfied. In addition, the DGCL provides that a parent corporation that is
the record holder of at least 90% of the outstanding shares of each class of
stock of a subsidiary may merge such subsidiary into such parent corporation or
merge such parent corporation into such subsidiary without the approval of such
subsidiary's stockholders or board of directors. Whenever the approval of the
stockholders of a corporation is required for an agreement of merger or
consolidation or for a sale, lease or exchange of all or substantially all of
its assets, such agreement, sale, lease or exchange must be approved by the
affirmative vote of the holders of a majority of outstanding shares of such
corporation entitled to vote thereon; provided, however, that under the DGCL,
where a corporation's certificate of incorporation provides for more or less
than one vote per share on any matter, the required vote is a majority of the
combined voting power of the corporation's stock. Thus, an agreement by the
Company for a merger or consolidation, or the sale, lease or exchange by the
Company of all or substantially all of its assets, must be approved by the
affirmative vote of a majority of the combined voting power of the outstanding
shares of Company Common Stock entitled to vote thereon.
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Rights of Appraisal
The PBCL provides that stockholders of a corporation have a right of
appraisal (i.e., the right to dissent from a proposed corporate action and to
obtain payment of the judicially-determined "fair value" of their shares) with
respect to specified corporate actions, including: (i) certain plans of merger,
consolidation, division (within the meaning of Section 1951 of the PBCL), share
exchange (within the meaning of Section 1931 of the PBCL) or conversion (within
the meaning of Section 1961 of the PBCL); (ii) certain other plans or amendments
to its Articles in which disparate treatment is accorded to the holders of
shares of the same class or series; and (iii) certain sales or transfers of all
or substantially all of such corporation's assets. However, appraisal rights are
not provided to the holders of shares of any class or series that is either
listed on a national securities exchange or held of record by more than 2,000
stockholders (such as Westinghouse Common Stock) unless (i) such shares are not
converted solely into shares of the acquiring, surviving, new or other
corporation and cash in lieu of fractional shares; (ii) if such shares
constitute a preferred or special class of stock, the articles of such
corporation, the corporate action under consideration or the express terms of
the transaction encompassed in such corporate action do not entitle all holders
of the shares of such class to vote thereon and require for the adoption thereof
the affirmative vote of a majority of the votes cast by all stockholders of such
class; or (iii) if such shares constitute a group of a class or series which are
to receive the same special treatment in the corporate action under
consideration, the holders of such group are not entitled to vote as a special
class in respect of such corporate action.
The DGCL provides for appraisal rights on the part of the stockholders of a
corporation only in the case of certain mergers or consolidations and not
(unless the certificate of incorporation of a corporation so provides, which the
Company Charter does not) in the case of other mergers, a sale or transfer of
all or substantially all of such corporation's assets or an amendment to such
corporation's certificate of incorporation. Moreover, the DGCL does not provide
for appraisal rights in connection with a merger or consolidation (unless the
certificate of incorporation so provides, which the Company Charter does not) to
the holders of shares of a constituent corporation listed on a national
securities exchange (or designated as a national market system security by the
National Association of Securities Dealers, Inc.) or held of record by more than
2,000 stockholders (such as Company Class A Common Stock), unless the applicable
agreement of merger or consolidation requires the holders of such shares to
receive, in exchange for such shares, any property other than shares of stock of
the resulting or surviving corporation, shares of stock of any other corporation
listed on a national securities exchange (or designated as described above) or
held of record by more than 2,000 holders, cash in lieu of fractional shares (or
fractional depository receipts) or any combination of the foregoing. In
addition, the DGCL denies appraisal rights to the stockholders of the surviving
corporation in a merger if such merger did not require for its approval the vote
of the stockholders of such surviving corporation. See "-- Approval of Mergers
and Asset Sales."
Indemnification of Directors and Officers
The PBCL provides in general that a corporation may indemnify any person,
including its directors, officers and employees, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding (a "Proceeding"), whether civil, criminal, administrative or
investigative (other than actions by or in the right of the corporation) by
reason of the fact that he or she is or was a representative of or serving at
the request of the corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or her in connection with the action or proceeding if he or she acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The PBCL permits similar indemnification in the case of actions by or
in the right of the corporation, provided that indemnification is not permitted
in respect of any claim, issue or matter as to which the person has been
adjudged to be liable to the corporation unless there is a judicial
determination that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for the expenses that the court
deems proper. In any case, to the extent that a representative of the
corporation has been successful on the merits or otherwise in defense of any
claim, issue or matter, he or she will be indemnified against expenses
(including attorneys' fees) actually and reasonably
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incurred by him or her in connection therewith. The PBCL also provides that the
indemnification permitted or required by the PBCL is not exclusive of any other
rights to which a person seeking indemnification may be entitled; provided that
indemnification may not be made in any case where the act or failure to act
giving rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness.
The Westinghouse Charter and the Westinghouse By-laws provide in effect
that, with respect to Proceedings based on acts or omissions on or after January
27, 1987, and unless prohibited by applicable law, Westinghouse will indemnify
directors and officers against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any such Proceedings (subject to certain limitations in the
case of actions by such persons against Westinghouse) in which they were
involved by reason of representing Westinghouse or other entities at
Westinghouse's request. The Westinghouse Charter also provides that Westinghouse
will advance amounts to any director or officer during the pendency of any such
Proceedings against expenses incurred, provided that, if required by law,
Westinghouse receives an undertaking to repay such amounts if it is ultimately
determined that such person is not entitled to such indemnification. The
indemnification provided for in the Westinghouse Charter and the Westinghouse
By-Laws is in addition to any rights to which any director or officer may
otherwise be entitled. The Westinghouse By-Laws also provide that the right of a
director or officer to indemnification and advancement of expenses will be a
contract right and further provides procedures for the enforcement of such
right.
Westinghouse has purchased directors' and officers' liability insurance
policies indemnifying its officers and directors and the officers and directors
of its subsidiaries against claims and liabilities (with stated exceptions) to
which they may become subject by reason of their positions with Westinghouse or
its subsidiaries as directors and officers.
The provisions of the DGCL regarding indemnification are substantially
similar to those of the PBCL. The Company Charter and the Company By-Laws
provide for indemnification of directors and officers of the Company to the
maximum extent permitted under the DGCL. The Company By-Laws further provide for
the advancement of certain expenses in accordance with the DGCL, subject to
certain limitations, including the delivery of an undertaking to reimburse all
amounts so advanced to which a person is determined by a court not to be
entitled.
The Company has purchased directors' and officers' liability insurance
policies indemnifying its officers and directors and the officers and directors
of its subsidiaries against claims and liabilities (with stated exceptions) to
which they may become subject by reason of their positions with the Company or
its subsidiaries as directors and officers.
Anti-Takeover Provisions
Chapter 25 of the PBCL contains several anti-takeover provisions which
apply to "registered" corporations, including Westinghouse.
Transactions with Interested Shareholders. Section 2538 of the PBCL
provides that if (i) an "interested shareholder" (as such term is defined in the
PBCL) of a "registered" corporation (together with others acting jointly or in
concert therewith and affiliates thereof) is to be a party to a merger or
consolidation, a share exchange or certain sales of assets involving such
corporation or a subsidiary thereof; (ii) such interested shareholder is to
receive a disproportionate amount of any of the securities of any corporation
surviving or resulting from a division of such corporation; (iii) such
interested shareholder is to be treated differently from others holding shares
of the same class in a voluntary dissolution of such corporation; or (iv) such
interested shareholder's percentage of voting or economic share interest in such
corporation is materially increased relative to substantially all other
shareholders in a reclassification; then the transactions being proposed must be
approved by the affirmative vote of the holders of shares representing at least
a majority of the votes that all shareholders (other than the interested
shareholder) are entitled to cast with respect to such transaction, excluding
all such voting shares beneficially owned by such interested shareholder. Such
special voting requirement does not apply if the transaction being proposed has
been approved in a prescribed manner by
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such corporation's board of directors or certain other conditions (including the
amount of consideration to be paid to certain shareholders) are satisfied or the
transaction involves certain subsidiaries.
Section 2555 of the PBCL may apply to a transaction between a registered
corporation and an interested shareholder thereof, notwithstanding that Section
2538 is also applicable. Section 2555 prohibits such a corporation from engaging
in a "business combination" (as such term is defined in the PBCL) with an
interested shareholder unless: (i) the board of directors of such corporation
gives prior approval to the proposed transaction or gives prior approval to the
interested shareholder's acquisition of 20% of the shares entitled to vote in an
election of directors of such corporation, (ii) the interested shareholder owns
at least 80% of the stock of such corporation entitled to vote in an election of
directors and, no earlier than three months after such interested shareholder
reaches such 80% level, the majority of the remaining shareholders approve the
proposed transaction and shareholders receive a minimum "fair price" for their
shares in the transaction, and the other conditions of Section 2556 of the PBCL
are met, (iii) holders of all outstanding common stock approve the transaction,
(iv) no earlier than 5 years after the interested shareholder acquired the 20%,
a majority of the remaining shares entitled to vote in an election of directors
approve the transaction, or (v) no earlier than 5 years after the interested
shareholder acquired the 20%, a majority of all the shares approve the
transaction, all shareholders receive a minimum "fair price" for their shares
(as set forth in Section 2556 of the PBCL), and certain other conditions are
met.
Stockholder "Put" in Control Transactions. Under Sections 2542 through
2548 of the PBCL, when a person or group of persons acting in concert holds 20%
of the shares of a registered corporation entitled to vote in the election of
directors (a "control group"), on the occurrence of the transaction that makes
the group a control group, any other stockholder of the registered corporation
who objects can, under procedures set forth in the statute, require the control
group to purchase his or her shares at "fair value" as defined in the PBCL.
Certain Share Acquisitions. The PBCL also contains certain provisions
applicable to a "registered" corporation such as Westinghouse which, under
certain circumstances, permit a corporation to redeem Control Shares (as defined
in the PBCL), remove the voting rights of Control Shares and require the
disgorgement of profits by a Controlling Person (as defined in the PBCL). The
Westinghouse By-Laws expressly provide that each such provision is not
applicable to Westinghouse.
Section 203 of the DGCL applies to a broad range of business combinations
(as defined in the DGCL) between a Delaware corporation and an interested
stockholder (as defined). The DGCL definition of "business combination" includes
mergers, sales of assets, issuance of voting stock and certain other
transactions. An "interested stockholder" is defined as any person who owns,
directly or indirectly, 15% or more of the outstanding voting stock of a
corporation. The DGCL prohibits a corporation from engaging in a business
combination with an interested stockholder for a period of three years following
the date on which the stockholder became an interested stockholder, unless (i)
the board of directors approved the business combination before the stockholder
became an interested stockholder, or the board of directors approved the
transaction that resulted in the stockholder becoming an interested stockholder,
(ii) upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, such stockholder owned at least 85% of the
voting stock outstanding when the transaction began other than shares held by
directors who are also officers and by certain employee stock plans, or (iii)
the board of directors approved the business combination after the stockholder
became an interested stockholder and the business combination was approved at a
meeting by at least two-thirds of the outstanding voting stock not owned by such
stockholder.
Rights of Inspection
Under both the PBCL and the DGCL, every stockholder, upon proper written
demand stating the purpose thereof, may inspect the corporate books and records
during usual business hours as long as such inspection is for a proper purpose
and during normal business hours. Under both statutes, a "proper purpose" is any
purpose reasonably related to the interest of the inspecting person as a
stockholder.
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Liquidation Rights
The rights of the holders of Westinghouse Common Stock upon the liquidation
or dissolution of Westinghouse are substantially the same as the holders of
Company Common Stock upon the liquidation or dissolution of the Company.
Case Law and Court Systems
There is a substantial body of case law in Delaware interpreting the
corporation laws of that state. A comparable body of judicial interpretation
does not yet exist in Pennsylvania. Delaware also has established a system of
Chancery Courts to adjudicate matters arising under the DGCL. In Pennsylvania,
matters arising under the PBCL are adjudicated by the general state courts. As a
result of these factors, there may be less certainty as to the outcome of
matters governed by the PBCL, and therefore it may be more difficult to obtain
legal guidance as to such matters, than would be the case under Delaware law.
BUSINESS OF THE WESTINGHOUSE GROUP
Westinghouse is a global company which operates its businesses through the
Westinghouse/CBS Group and the Industries & Technology Group. The
Westinghouse/CBS Group combines the media operations of CBS, which Westinghouse
acquired in 1995, Infinity, which Westinghouse acquired in 1996, and Group W
Broadcasting Company, Inc. The Westinghouse/CBS Group operates in the principal
business areas of television and radio station ownership and broadcast and cable
programming. The Industries & Technology Group provides services, fuel and
equipment for the nuclear energy market, services and equipment for the power
generation market, transport temperature control equipment and management
services at government-owned facilities. In addition, Westinghouse has
classified a number of businesses as "Discontinued Operations." See the 1996
Westinghouse 10-K.
Westinghouse/CBS Group
The Westinghouse/CBS Group includes the CBS Television Network; CBS
Television Stations; CBS Radio; CBS Cable; and EYEMARK Entertainment.
Through the CBS Television Network, the Westinghouse/CBS Group distributes
a comprehensive schedule of news and public affairs broadcasts, entertainment
and sports programming and feature films to more than 200 domestic affiliates
and to certain overseas affiliated stations. The CBS Television Network's
domestic affiliates include independently-owned affiliated stations and the
Westinghouse/CBS Group's 14 owned and operated television stations. These
affiliates serve, in the aggregate, the 50 states and the District of Columbia.
The CBS Television Network is responsible for sales of advertising time for the
CBS Television Network broadcasts and related merchandising and sales promotion
activities.
CBS Television Network includes CBS Entertainment, News and Sports. CBS
Entertainment produces and otherwise acquires entertainment series and other
programs for all time periods and acquires feature films for broadcast by the
CBS Television Network. CBS News operates a worldwide news gathering and
production organization which produces regularly scheduled news and public
affairs broadcasts and special reports for CBS Television Stations and CBS
Radio. This unit also produces, for the CBS Television Network, certain
news-oriented programming for broadcast in the early morning and in designated
hours during primetime. A unit of CBS News produces documentaries for sale to
other media outlets. CBS Sports produces and otherwise acquires sports programs
for broadcast by the CBS Television Network.
CBS Television Stations currently operates the 14 television stations owned
by Westinghouse/CBS. The larger markets served by the owned television stations
include New York, Los Angeles, Chicago, Philadelphia, San Francisco and Boston.
CBS Television Stations operates in seven of the nation's ten largest markets
and ten of the nation's top 20 markets, reaching approximately 33% of all U.S.
households.
CBS Radio currently owns and operates 79 AM and FM radio stations in 16
markets (including 40 AM and FM radio stations that were acquired as part of the
Infinity acquisition), with 64 stations in the nation's
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ten largest radio markets. CBS Radio stations include leading franchises in
news, sports and personality programming. The CBS Radio Network serves
approximately 585 affiliated stations nationwide. Westinghouse also has an
indirect minority equity investment in Westwood One, which Infinity manages
pursuant to a management agreement. Westwood One is a leader in producing and
distributing syndicated and network radio programming.
CBS Radio also includes an out-of-home media business through a wholly
owned subsidiary, TDI Worldwide, Inc. ("TDI"). TDI is one of the largest
out-of-home media companies in the U.S. operating some 100 franchises, the
majority of which are in large metropolitan areas. TDI sells space on various
media including buses, trains, train platforms and terminals throughout commuter
rail systems, painted billboards, thirty-sheet billboards and phone booths. TDI
also has the franchise to manage advertising space within the London Underground
and on certain London buses and has the exclusive rights to all transit
advertising in Ireland.
CBS Cable (formerly known as Group W Satellite Communications) provides
programming and distribution services to the cable television industry, provides
satellite distribution services, operates CBS TeleNoticias, a 24-hour,
Spanish-language news service which is distributed to over 200 million homes in
22 countries, and recently launched a new cable information and entertainment
channel, Eye on People. CBS Cable also currently provides regional sports
programming and marketing and advertising services for TNN and CMT. TNN and CMT,
which will be acquired by Westinghouse in the Merger, will be included in CBS
Cable. Also part of CBS Cable, Group W Network Services is a global provider of
production, post-production and satellite services to broadcast, cable and
corporate networks.
EYEMARK Entertainment produces, markets and distributes first-run and
off-network syndicated programming for the domestic and international television
marketplace. EYEMARK Entertainment combines the activities of MAXAM
Entertainment, a distribution and production company acquired in February 1996,
and Group W Productions.
Industries & Technology Group
The Industries & Technology Group includes Power Systems, Thermo King, and
Government Operations.
Power Systems. The Power Systems segment consists of the Energy Systems
and Power Generation business units which together serve the worldwide market
for electrical power generation.
The Energy Systems business unit serves the domestic and international
electric power industry by supplying fuel and a wide range of other products and
services to the owners and operators of nuclear power plants. Approximately 40%
of the world's operating commercial nuclear power plants incorporate
Westinghouse's technology. The business unit supplies a wide range of operating
plant services, ranging from performance-based maintenance programs, including
operational and safety upgrades, to new products and services that enhance plant
performance. It also has complete capabilities for supplying customers with
nuclear fuel for pressurized water reactors.
The Process Control Division ("PCD") provides distributed control,
communications, data acquisition and information systems to domestic and
international nuclear and fossil-fuel electric utilities, and to chemical
processors, water and waste water treatment facilities and the steel industry.
PCD financial results are included for reporting purposes as part of Energy
Systems.
The Power Generation business unit designs, manufactures and services steam
turbine-generators for nuclear and fossil-fueled power plants and combustion
turbine-generators for natural gas and oil-fired power plants. Power Generation
also constructs turn-key fossil-fueled power plants worldwide. In addition to
serving the electric utility industry, the business unit supplies services to,
and operates power plants for, independent power producers and supplies power
generator equipment and services to other non-utility customers.
Thermo King. Thermo King designs, manufacturers and distributes transport
temperature control equipment, including units and their associated service
parts, for trucks, trailers, seagoing containers, buses and rail cars. The
transport refrigeration units are powered by diesel, gasoline or propane fueled
engines, or
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electricity. These products provide air conditioning for people and preserve not
only food, but pharmaceuticals, flowers, cosmetics, electronic gear and many
other temperature-sensitive goods and products by heating or cooling as
necessary. Thermo King supplies units for both long distance transportation and
local distribution of all these cargoes. As an industry leader in its product
technology, Thermo King serves its customers through a network of 14
manufacturing operations and approximately 400 sales and service dealers as well
as a network of authorized service locations throughout the world.
Government Operations. Westinghouse's Government Operations business unit
includes management services for certain government-owned facilities under
contracts with the Department of Energy, management of the nuclear reactors
program for the U.S. Navy, and management of a chemical agent and weapons
destruction program for the Department of Defense.
See "RECENT DEVELOPMENTS" for information concerning Westinghouse's
announced intention to separate its power-related and non-power-related
businesses. Additional information concerning the Westinghouse Group is included
in the documents incorporated by reference in this Proxy Statement/ Prospectus.
See "AVAILABLE INFORMATION" and "INCORPORATION OF DOCUMENTS BY REFERENCE."
BUSINESS OF GAYLORD AND THE CABLE NETWORKS BUSINESS
Gaylord
Gaylord is a diversified entertainment and communications company whose
businesses include cable networks, hospitality, attractions, music and
television and radio stations. Gaylord's cable networks businesses consist
primarily of TNN, CMT, CMT International and the management of and option to
acquire 95% of Z Music, all of which, other than CMT International and the
management of and option to acquire 95% of Z Music, will be acquired by
Westinghouse in the Merger. Gaylord's hospitality and attractions operations
consists of an interrelated group of businesses based in Nashville, Tennessee
including the Grand Ole Opry, the Opryland Hotel, the Opryland theme park, the
Wildhorse Saloon, the Ryman Auditorium, the General Jackson (an entertainment
showboat) and related businesses. Gaylord's music business includes recorded
music and music publishing and consists primarily of Word Entertainment and
Opryland Music Group. Gaylord's broadcasting operations include broadcast
television station KTVT (Fort Worth-Dallas, Texas), and three radio stations:
WSM-AM, WSM-FM, and WWTN-FM, all of which are based in Nashville.
Cable Networks Business
The Cable Networks Business consists primarily of TNN and CMT. TNN is an
advertiser-supported cable network featuring country lifestyles and
entertainment. TNN's programming is offered mainly through contracts with cable
television system operators as part of their basic programming and is
transmitted by way of communications satellites to these cable systems. TNN's
programming includes country music performances, interviews with country music
artists and personalities, specials, variety shows, talk shows, news, and sports
programming that is of interest to its general audience. TNN's weekend
programming focuses on outdoor sports, such as hunting and fishing, and motor
sports, some of which, including a portion of the NASCAR Winston Cup Series, is
broadcast live. TNN telecasts 18 hours of programming per day, which includes an
average of approximately 11 hours of first-run programming. A significant
portion of TNN's programming (approximately 2,450 hours in 1996) is produced by,
or specifically for, Gaylord. According to a December 1996 report issued by A.
C. Nielsen Company ("Nielsen"), TNN served approximately 68.3 million
subscribers.
Since it was launched in 1983, TNN has been marketed and distributed by
Westinghouse. Pursuant to the Group W Distribution Agreement, Westinghouse has
the exclusive right to market and distribute TNN to cable television systems in
the United States and Canada and is primarily responsible for promoting,
marketing, and selling advertising time on TNN under the supervision and with
the approval of the Company, as well as providing a satellite transponder to
deliver TNN's programming to cable systems. Gaylord is responsible for providing
original, quality, first-run programming and a satellite uplink (or alternative
means of
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transmission). Under the Group W Distribution Agreement, Westinghouse is
entitled to receive a commission of 33% of applicable gross receipts, net of
agency commissions.
In 1991, Gaylord acquired a 67% interest in CMT, an advertiser-supported
24-hour basic cable network with a country music video format that broadcasts in
the United States and Canada. At the same time, Westinghouse acquired a 33%
interest in CMT. The country music video format of CMT is directed primarily to
a younger audience, 18 to 34 years of age, which is of particular interest to
certain advertisers. According to a December 1996 report issued by Nielsen, CMT
served approximately 37.3 million subscribers.
Westinghouse provides sales and marketing services for CMT similar to those
provided to TNN, also subject to the supervision and approval of the Company.
Westinghouse currently receives a commission of 10% of CMT's gross receipts, net
of agency commissions, up to a current maximum of $3.8 million annually. The
Company also receives a commission equal to 5% of gross receipts, net of agency
commissions.
In addition to TNN and CMT, the Cable Networks Business includes certain
other subsidiaries and operations of Gaylord including the following: (i) World
Sports Enterprises, a motor sports production company that produces races and
motor sports programs for TNN and outside third parties, which is currently 51%
owned by Gaylord, (ii) Outdoor Entertainment, Inc., a programming company that
produces outdoor sports programs that are broadcast on TNN, which is currently
67% owned by Gaylord and 33% owned by Westinghouse, (iii) World of Outlaws, a
sanctioning body for "sprint-car" motor sports races, which is currently 15%
owned by Gaylord, (iv) Country.com, an Internet site whose content is focused on
country music and the country lifestyle and is intended to be used as a
promotion venue for TNN and CMT, which is currently owned 100% by Gaylord, (v)
Peppercorn Productions, Inc. ("PPI"), a puppeteer company whose characters are
featured in certain TNN programming and a yet-to-be-released feature film, that
is to be produced and owned by a 50-50 joint venture between PPI, which is owned
100% by Gaylord, and Greystone Communications, Inc., (vi) Opryland Production
Duplicating Services, a videotape duplicating company which provides its
services to TNN, CMT and outside third parties, which is currently owned 100% by
Gaylord, and (vii) NASCAR Thunder, a chain of auto racing-themed retail stores,
which is owned 100% by Gaylord, with stores currently located in Atlanta, GA,
Knoxville, TN, Winston-Salem, NC and Dallas, TX, and operated under an exclusive
licensing agreement with NASCAR.
Additional information concerning Gaylord and the Cable Networks Business
is included in the documents incorporated by reference in this Proxy
Statement/Prospectus. See "AVAILABLE INFORMATION" and "INCORPORATION OF
DOCUMENTS BY REFERENCE."
STOCKHOLDER PROPOSALS
If the Merger is not consummated for any reason, a proposal submitted by a
stockholder of the Company in accordance with applicable rules and regulations
for presentation at the Company's Annual Meeting of Stockholders in 1998 and
received at the Company's executive offices no later than January 1, 1998, will
be considered for inclusion in the Company's Proxy Statement and form of proxy
relating to such annual meeting.
EXPERTS
The consolidated financial statements of Westinghouse and its subsidiaries
as of December 31, 1996 and for the year then ended have been incorporated by
reference in this Proxy Statement/Prospectus in reliance on the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. The report of KPMG Peat Marwick LLP refers to a restatement of the
1996 consolidated financial statements.
The consolidated financial statements of Westinghouse and its subsidiaries
as of December 31, 1995 and for each of the two years in the period ended
December 31, 1995 incorporated in this Proxy Statement/ Prospectus by reference
to the 1996 Westinghouse 10-K have been so incorporated in reliance on the
report of
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Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
The consolidated financial statements of the Company and its subsidiaries
incorporated in this Proxy Statement/Prospectus by reference to the consolidated
financial statements as of December 31, 1996 and 1995 and for each of the three
years in the period ended December 31, 1996 included in the 1996 Company 10-K
have been so incorporated in reliance on the report of Arthur Andersen LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The combined financial statements of the Cable Networks Business as of
December 31, 1996 and 1995 and for each of the three years ended December 31,
1996 included in this Proxy Statement/Prospectus have been included in reliance
on the report of Arthur Andersen LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
LEGAL OPINIONS
The validity of the shares of Westinghouse Common Stock to be issued
pursuant to the terms of the Merger Agreement will be passed upon for
Westinghouse by Louis J. Briskman, Senior Vice President and General Counsel of
Westinghouse. As of July 15, 1997, Mr. Briskman beneficially owned 300,594
shares of Westinghouse Common Stock (including 298,490 shares issuable upon the
exercise of stock options).
OTHER MATTERS
One or more representatives of Arthur Andersen LLP, the Company's
independent accountants, are expected to be present at the Special Meeting and
will be available to answer questions.
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INDEX TO CABLE NETWORKS BUSINESS COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CABLE NETWORKS BUSINESS COMBINED FINANCIAL STATEMENTS
Report of Independent Public Accountants........................................... F-2
Combined Statements of Income and Divisional Equity for the Years Ended
December 31, 1996, 1995, 1994................................................... F-3
Combined Balance Sheets as of December 31, 1996 and 1995........................... F-4
Combined Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and
1994............................................................................ F-5
Notes to Combined Financial Statements............................................. F-6
CABLE NETWORKS BUSINESS UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
Condensed Combined Statements of Income for the Three Months Ended
March 31, 1997 and 1996......................................................... F-11
Condensed Combined Balance Sheets as of March 31, 1997 and December 31, 1996....... F-12
Condensed Combined Statements of Cash Flows for the Three Months Ended
March 31, 1997 and 1996......................................................... F-13
Notes to Condensed Combined Financial Statements................................... F-14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS......................................................................... F-15
</TABLE>
F-1
<PAGE> 100
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO GAYLORD ENTERTAINMENT COMPANY:
We have audited the accompanying combined balance sheets of the Cable
Networks Business, which has been accounted for as a division of Gaylord
Entertainment Company, a Delaware corporation, as of December 31, 1996 and 1995,
and the related combined statements of income and divisional equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of Gaylord Entertainment Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements of the Cable Networks Business have
been prepared from the separate records of the Cable Networks Business
maintained by Gaylord Entertainment Company and may not necessarily reflect the
combined results of operations, financial position and cash flows of the Cable
Networks Business if the Cable Networks Business had been operated on a stand
alone basis. Portions of certain expenses represent corporate allocations made
from parent company items applicable to Gaylord Entertainment Company as a
whole. Additionally, certain assets, liabilities and income and expense items
have been excluded from the Cable Networks Business' historical financial
statements in order to present the accompanying financial statements in
accordance with the basis of presentation discussed in Note 1.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Cable Networks Business
as of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Nashville, Tennessee
April 4, 1997
F-2
<PAGE> 101
CABLE NETWORKS BUSINESS
(ACCOUNTED FOR AS A DIVISION OF
GAYLORD ENTERTAINMENT COMPANY)
COMBINED STATEMENTS OF INCOME
AND DIVISIONAL EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Revenues................................................... $320,612 $273,824 $237,527
Operating expenses:
Operating costs.......................................... 182,061 157,997 139,547
Selling, general and administrative...................... 29,531 25,162 21,608
Corporate overhead expenses.............................. 8,563 6,817 5,674
Depreciation and amortization............................ 10,415 8,677 7,141
-------- -------- --------
Operating income...................................... 90,042 75,171 63,557
Interest expense........................................... (562) (610) (556)
Minority interest.......................................... (6,454) (5,564) (2,677)
Other gains (losses)....................................... (65) (53) 55
-------- -------- --------
Income before provision for income taxes................. 82,961 68,944 60,379
Provision for income taxes................................. 34,538 28,163 24,180
-------- -------- --------
Net income............................................... 48,423 40,781 36,199
Divisional equity, beginning of year....................... 103,211 89,386 85,078
Contributions to the Company, net.......................... (33,793) (26,956) (31,891)
-------- -------- --------
Divisional equity, end of year............................. $117,841 $103,211 $ 89,386
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 102
CABLE NETWORKS BUSINESS
(ACCOUNTED FOR AS A DIVISION OF
GAYLORD ENTERTAINMENT COMPANY)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................ $ 4,758 $ 4,265
Trade receivables, less allowance of $1,587 and $1,580,
respectively..................................................... 56,541 53,906
Programming......................................................... 24,970 22,518
Other current assets................................................ 2,396 2,822
-------- --------
Total current assets............................................. 88,665 83,511
-------- --------
Long-term programming................................................. 9,000 --
Property and equipment, net of accumulated depreciation............... 52,105 41,057
Intangible assets, net of accumulated amortization.................... 32,768 31,106
Other long-term assets................................................ 4,993 1,416
-------- --------
Total assets..................................................... $187,531 $157,090
======== ========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable and accrued liabilities............................ $ 11,122 $ 12,215
Commissions payable to Westinghouse................................. 15,140 15,064
Programming contracts payable....................................... 5,462 216
Other current liabilities........................................... 675 620
-------- --------
Total current liabilities........................................ 32,399 28,115
-------- --------
Notes payable......................................................... 6,017 7,048
Long-term programming contracts payable............................... 6,597 --
Other long-term liabilities........................................... 156 8
Minority interest..................................................... 24,521 18,708
Commitments and contingencies
Divisional equity..................................................... 117,841 103,211
-------- --------
Total liabilities and divisional equity.......................... $187,531 $157,090
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
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CABLE NETWORKS BUSINESS
(ACCOUNTED FOR AS A DIVISION OF
GAYLORD ENTERTAINMENT COMPANY)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1996 1995 1994
------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.................................................. $48,423.. $40,781 $36,199
Amounts to reconcile net income to net cash flows provided
by operating activities:
Depreciation and amortization............................ 10,415 8,677 7,141
Provision for deferred income taxes...................... 1,194 2,155 2,189
Minority interest........................................ 6,454 5,564 2,677
Changes in:
Trade receivables...................................... (2,635) (7,325) (7,201)
Programming assets and contracts payable............... 391 (4,125) (3,537)
Accounts payable and accrued liabilities............... (1,009) 3,353 6,065
Other, net............................................. (2,918) (2,853) (653)
------- ------- -------
Net cash flows provided by operating activities..... 60,315 46,227 42,880
------- ------- -------
Cash Flows from Investing Activities:
Investments in affiliates, net.............................. (452) -- --
Purchases of property and equipment, net.................... (19,126) (12,875) (7,408)
Other, net.................................................. (2,284) (1,268) (147)
------- ------- -------
Net cash flows used in investing activities......... (21,862) (14,143) (7,555)
------- ------- -------
Cash Flows from Financing Activities:
Net borrowings (payments) under notes payable............... (1,031) (453) 17
Cash contributions to the Company, net...................... (36,929) (29,111) (34,080)
------- ------- -------
Net cash flows used in financing activities......... (37,960) (29,564) (34,063)
------- ------- -------
Net change in cash............................................ 493 2,520 1,262
Cash, beginning of year....................................... 4,265 1,745 483
------- ------- -------
Cash, end of year............................................. $ 4,758 $ 4,265 $ 1,745
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 104
CABLE NETWORKS BUSINESS
(ACCOUNTED FOR AS A DIVISION OF
GAYLORD ENTERTAINMENT COMPANY)
NOTES TO COMBINED FINANCIAL STATEMENTS
(Amounts in thousands)
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Cable Networks Business, which is accounted for as a division of
Gaylord Entertainment Company (the "Company"), consists primarily of The
Nashville Network ("TNN"), the United States and Canadian operations of Country
Music Television ("CMT") and certain other related businesses. TNN and CMT are
advertiser-supported cable networks featuring country lifestyles and
entertainment. Subsequent to December 31, 1996, the Company entered into a
definitive agreement with Westinghouse Electric Corporation ("Westinghouse")
pursuant to which the Cable Networks Business will be acquired by Westinghouse
as a result of a merger of the Company and a wholly owned subsidiary of
Westinghouse (the "Merger"). Prior to the Merger, the Company will be
restructured so that the assets and liabilities that are part of the Company's
hospitality, attractions, music, and television and radio businesses, as well as
Country Music Television's cable networks operations outside of the United
States and Canada (collectively, "CMT International"), will be transferred to or
retained by a separate wholly owned subsidiary of the Company ("New Gaylord").
New Gaylord will then be spun off to the Company's stockholders prior to the
consummation of the Merger.
BASIS OF PRESENTATION
The combined balance sheets reflect the operating assets and liabilities of
the Cable Networks Business which are to be acquired by Westinghouse in the
Merger. The combined financial statements have been prepared using the
historical basis in the assets and liabilities and historical results of
operations related to the Cable Networks Business. The Cable Networks Business
has been accounted for as a division of the Company. Additionally, the results
of operations contain corporate overhead expenses consisting primarily of senior
management salaries and benefits, accounting, data processing and other
administrative costs which are based on management's estimate of matching such
expenses with the benefit received by the Cable Networks Business using an
allocation method based upon revenues which is considered reasonable to
approximate the expenses which would have been incurred had the Cable Networks
Business operated on a stand-alone basis. Corporate overhead expenses also
include allocated depreciation expense of $1,142, $877 and $636 in 1996, 1995
and 1994, respectively. The financial information included herein may not
necessarily reflect the combined results of operations, financial position and
cash flows of the Cable Networks Business in the future or what the combined
results of operations, financial position and cash flows would have been had it
been a separate, stand-alone entity during the periods presented. All
significant intercompany accounts and transactions within the Cable Networks
Business have been eliminated.
PROGRAMMING ASSETS AND LIABILITIES
The Cable Networks Business acquires exhibition rights for certain programs
and produces programming internally for airing on its cable networks. The
programming assets and liabilities are recorded at cost when certain conditions
are met, including availability of the program for telecast. The programming
assets are amortized at a rate based upon the telecast periods of the programs
and the revenues estimated to be earned over those periods. Programming assets
are continually evaluated for impairment based upon undiscounted cash flows to
be derived from the related programming assets. The current portion of
programming assets represents programming currently available for telecast which
will be amortized in the succeeding year. The current portion of programming
contracts payable represents those liabilities expected to be paid within one
year.
F-6
<PAGE> 105
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, including interest on funds
borrowed to finance the construction of major capital additions, and are
depreciated or amortized using straight-line and accelerated methods over the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings...................................................... 40 years
Leasehold improvements......................................... Life of lease
Furniture, vehicles and equipment.............................. 3-8 years
</TABLE>
Effective January 1, 1994, the Cable Networks Business changed to the
straight-line method of depreciation for substantially all newly acquired
property. Maintenance and repairs are charged to expense as incurred.
INTANGIBLE ASSETS
Intangible assets consist primarily of goodwill which is amortized using
the straight-line method over a period not to exceed 40 years. The Company
continually evaluates whether later events and circumstances have occurred that
indicate the remaining balance of goodwill may not be recoverable. In evaluating
any possible impairment, the Company uses the most appropriate method of
evaluation given the circumstances surrounding the particular acquisition, which
has generally been an estimate of the related business unit's undiscounted
operating income before interest and taxes over the remaining life of the
goodwill.
Amortization expense related to intangible assets for 1996, 1995 and 1994
was $2,156, $2,133 and $1,836, respectively. At December 31, 1996 and 1995,
accumulated amortization of intangible assets was $7,088 and $8,633,
respectively.
OTHER ASSETS
Other current and long-term assets consist primarily of other receivables,
deferred preopening expenses and merchandise inventories. Other receivables were
$3,363 and $1,911 in 1996 and 1995, respectively. To provide for a better
matching of revenues and expenses, the Company defers expenses prior to a new
venture becoming operational. These deferred preopening expenses, $2,752 and
$1,366 in 1996 and 1995, respectively, are amortized on a straight-line basis.
Inventories of $969 and $387 in 1996 and 1995, respectively, consist primarily
of merchandise held for resale and are priced at the lower of average cost or
market.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at December 31 consisted of:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Trade accounts payable.................................. $ 977 $ 243
Accrued royalties....................................... 6,055 7,252
Accrued salaries and benefits........................... 1,250 665
Other accrued liabilities............................... 2,840 4,055
------- -------
Total accounts payable and accrued liabilities..... $11,122 $12,215
======= =======
</TABLE>
Accrued royalties consist primarily of music royalties and licensing fees.
STOCK PLANS AND STOCK BASED COMPENSATION
The Company provides stock option and incentive plans in which certain of
the Cable Networks Business' key employees are eligible to participate. SFAS No.
123, "Accounting for Stock-Based Compensation," encourages, but does not
require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Cable Networks Business has chosen to
continue to account for stock-based compensation using the intrinsic value
method as prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees." In addition, based on the number of the options
outstanding and
F-7
<PAGE> 106
the historical and expected future trends of factors affecting valuation of
those options, management believes that any compensation cost which would be
expected on the Cable Networks Business' financial statements under SFAS No.123
attributable to options granted is immaterial.
RETIREMENT PLANS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides a noncontributory defined benefit pension plan in
which substantially all of the Cable Networks Business' employees are eligible
to participate upon meeting the pension plan's participation requirements. The
benefits are based on years of service and compensation levels.
In addition, the Company has contributory retirement savings plans in which
substantially all of the Cable Networks Business' employees are eligible to
participate. The Company contributes an amount equal to the lesser of one-half
of the amount of the employee's contribution or 3% of the employee's salary. The
Cable Networks Business recorded expenses of $436, $386 and $342 in 1996, 1995
and 1994, respectively, related to the retirement savings plans.
The Company also sponsors unfunded defined benefit postretirement health
care and life insurance plans for certain of the Cable Networks Business'
employees. Under this plan, the Company contributes toward the cost of health
insurance benefits and contributes the full cost of providing life insurance
benefits. In order to be eligible for these postretirement benefits, an employee
must retire after attainment of age 55 and completion of 15 years of service, or
attainment of age 65 and completion of 10 years of service.
All of the plans discussed above are administered and funded by the Company
which also maintains the related assets and liabilities on its records. The
Cable Networks Business' combined statements of income include applicable
expenses related to these plans.
INCOME TAXES
The provision for income taxes is reflected in the Cable Networks Business'
results of operations in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes" and the provision is
computed as if the Cable Networks Business operated on a stand-alone basis.
Current and deferred tax liabilities are maintained on the Company's records and
thus, have been transferred to the Company through divisional equity.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
2. PROPERTY AND EQUIPMENT:
Property and equipment at December 31 is recorded at cost and summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Buildings............................................... $ 130 $ 130
Leasehold improvements.................................. 1,940 423
Furniture, vehicles and equipment....................... 94,709 78,975
Construction in progress................................ 2,032 185
------- -------
98,811 79,713
Accumulated depreciation................................ 46,706 38,656
------- -------
Property and equipment, net............................. $52,105 $41,057
======= =======
</TABLE>
Depreciation expense for 1996, 1995, and 1994 was $8,078, $6,513, and
$5,289, respectively.
F-8
<PAGE> 107
3. INCOME TAXES:
The provision for income taxes for the years ended December 31 consisted
of:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Current:
Federal provision........................... $27,958 $22,067 $18,385
State provision............................. 5,386 3,941 3,606
------- ------- -------
Total current provision.................. 33,344 26,008 21,991
------- ------- -------
Deferred:
Federal provision........................... 963 1,825 1,851
State provision............................. 231 330 338
------- ------- -------
Total deferred provision................. 1,194 2,155 2,189
------- ------- -------
Total provision for income taxes.............. $34,538 $28,163 $24,180
======= ======= =======
</TABLE>
The effective tax rate as applied to income before provision for income
taxes for the years ended December 31 differed from the statutory federal rate
due to the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory federal rate.............................. 35% 35% 35%
State taxes......................................... 4 4 4
Other items, net.................................... 3 2 1
---- ---- ----
42% 41% 40%
==== ==== ====
</TABLE>
Provision is made for deferred federal and state income taxes in
recognition of certain temporary differences in reporting items of income and
expense for financial statement purposes and income tax purposes. All current
and deferred tax liabilities have been transferred to the Company and are not
included in the combined balance sheets of the Cable Networks Business.
4. RELATED PARTY TRANSACTIONS:
The Company has a centralized cash management system whereby all cash
transactions of the Cable Networks Business are executed on behalf of the Cable
Networks Business by the Company. The net effect of these cash transactions is
included in divisional equity in the combined balance sheets and is presented as
contributions to the Company in the combined statements of cash flows.
Westinghouse, through certain divisions and subsidiaries, is primarily
responsible for promoting and marketing TNN, CMT and CMT International, selling
advertising time on TNN and CMT, marketing TNN and CMT to cable operators and
providing a satellite transponder to deliver TNN programming to cable systems.
In addition Westinghouse owns 33% of CMT and CMT International. Westinghouse
receives a commission of 33% of TNN's applicable gross receipts, net of agency
commissions, and a commission of 10% of CMT's gross receipts, net of agency
commissions, up to a current maximum of $3,800 annually with regard to CMT, for
its services. Westinghouse's commissions under these agreements were $85,725,
$73,720 and $65,877 in 1996, 1995 and 1994, respectively. The Cable Networks
Business has reflected Westinghouse's ownership as minority interest in the
combined financial statements. Additionally, the Cable Networks Business has
outstanding notes payable to Westinghouse of $6,017 and $7,048 at December 31,
1996 and 1995, respectively. The notes payable bear interest at the prime rate,
are due on demand, and mature in 2003.
F-9
<PAGE> 108
5. COMMITMENTS AND CONTINGENCIES:
Rental expense was $1,485, $1,270 and $649 for 1996, 1995 and 1994,
respectively. Future minimum lease commitments under all noncancelable operating
leases in effect as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997................................................................ $1,414
1998................................................................ 970
1999................................................................ 696
2000................................................................ 701
2001................................................................ 667
Years thereafter.................................................... 2,919
------
Total............................................................. $7,367
======
</TABLE>
The Cable Networks Business is involved in certain legal actions and claims
on a variety of matters. It is the opinion of management that such legal actions
will not have a material effect on the results of operations, financial
condition or liquidity of the Cable Networks Business.
F-10
<PAGE> 109
CABLE NETWORKS BUSINESS
(ACCOUNTED FOR AS A DIVISION OF
GAYLORD ENTERTAINMENT COMPANY)
CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------
1997 1996
------- -------
(AMOUNTS IN
THOUSANDS)
<S> <C> <C>
Revenues.............................................................. $79,962 $72,309
Operating expenses:
Operating costs..................................................... 45,360 42,852
Selling, general and administrative................................. 10,048 7,504
Corporate overhead expenses......................................... 2,234 2,099
Depreciation and amortization....................................... 2,812 2,301
------- -------
Operating income................................................. 19,508 17,553
Interest expense...................................................... (53) (145)
Minority interest..................................................... (1,447) (917)
Other gains (losses).................................................. 112 69
------- -------
Income before provision for income taxes............................ 18,120 16,560
Provision for income taxes............................................ 7,538 6,889
------- -------
Net income.......................................................... $10,582 $ 9,671
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-11
<PAGE> 110
CABLE NETWORKS BUSINESS
(ACCOUNTED FOR AS A DIVISION OF
GAYLORD ENTERTAINMENT COMPANY)
CONDENSED COMBINED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................................. $ 2,080 $ 4,758
Trade receivables, less allowance of $1,695 and $1,587,
respectively................................................... 58,328 56,541
Programming....................................................... 26,929 24,970
Other current assets.............................................. 3,044 2,396
--------- ------------
Total current assets........................................... 90,381 88,665
--------- ------------
Long-term programming............................................... 10,008 9,000
Property and equipment, net of accumulated depreciation............. 54,296 52,105
Intangible assets, net of accumulated amortization.................. 32,270 32,768
Other long-term assets.............................................. 5,959 4,993
--------- ------------
Total assets................................................... $ 192,914 $187,531
--------- ------------
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable and accrued liabilities.......................... $ 10,615 $ 11,122
Commissions payable to Westinghouse............................... 16,004 15,140
Programming contracts payable..................................... 5,634 5,462
Other current liabilities......................................... 1,077 675
--------- ------------
Total current liabilities...................................... 33,330 32,399
--------- ------------
Notes payable....................................................... 4,559 6,017
Long-term programming contracts payable............................. 1,773 6,597
Other long-term liabilities......................................... 141 156
Minority interest................................................... 25,458 24,521
Commitments and contingencies
Divisional equity................................................... 127,653 117,841
--------- ------------
Total liabilities and divisional equity........................ $ 192,914 $187,531
======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-12
<PAGE> 111
CABLE NETWORKS BUSINESS
(ACCOUNTED FOR AS A DIVISION OF
GAYLORD ENTERTAINMENT COMPANY)
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
------- -------
(AMOUNTS IN
THOUSANDS)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income............................................................ $10,582 $ 9,671
Amounts to reconcile net income to net cash flows provided by
operating activities:
Depreciation and amortization...................................... 2,812 2,301
Minority interest.................................................. 1,447 917
Changes in:
Trade receivables................................................ (1,787) 250
Programming assets and contracts payable......................... (7,619) (2,032)
Accounts payable and accrued liabilities......................... 357 (558)
Other, net....................................................... (1,461) 741
------- -------
Net cash flows provided by operating activities............... 4,331 11,290
------- -------
Cash Flows from Investing Activities:
Purchases of property and equipment, net.............................. (4,448) (4,266)
Other, net............................................................ (333) (1,450)
------- -------
Net cash flows used in investing activities................... (4,781) (5,716)
------- -------
Cash Flows from Financing Activities:
Net borrowings (payments) under notes payable......................... (1,458) 151
Cash contributions to the Company, net................................ (770) (4,102)
------- -------
Net cash flows used in financing activities................... (2,228) (3,951)
------- -------
Net change in cash...................................................... (2,678) 1,623
Cash, beginning of period............................................... 4,758 4,265
------- -------
Cash, end of period..................................................... $ 2,080 $ 5,888
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-13
<PAGE> 112
CABLE NETWORKS BUSINESS
(ACCOUNTED FOR AS A DIVISION OF
GAYLORD ENTERTAINMENT COMPANY)
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Cable Networks Business, which is accounted for as a division of
Gaylord Entertainment Company (the "Company"), consists primarily of The
Nashville Network ("TNN"), the United States and Canadian operations of Country
Music Television ("CMT") and certain other related businesses. TNN and CMT are
advertiser-supported cable networks featuring country lifestyles and
entertainment. In the first quarter of 1997, the Company entered into a
definitive agreement with Westinghouse Electric Corporation ("Westinghouse")
pursuant to which the Cable Networks Business will be acquired by Westinghouse
as a result of a merger of the Company and a wholly owned subsidiary of
Westinghouse (the "Merger"). Prior to the Merger the Company will be
restructured so that the assets and liabilities that are part of the Company's
hospitality, attractions, music, and television and radio businesses, as well as
Country Music Television's cable networks operations outside of the United
States and Canada (collectively, "CMT International"), will be transferred to or
retained by a separate wholly owned subsidiary of the Company ("New Gaylord").
New Gaylord will then be spun off to the Company's stockholders prior to the
consummation of the Merger.
BASIS OF PRESENTATION
The unaudited condensed combined balance sheets reflect the operating
assets and liabilities of the Cable Networks Business which are to be acquired
by Westinghouse in the Merger. The unaudited condensed combined financial
statements have been prepared using the historical basis in the assets and
liabilities and historical results of operations related to the Cable Networks
Business. The Cable Networks Business has been accounted for as a division of
the Company. The unaudited condensed combined financial statements include the
accounts of the Cable Networks Business and have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Cable Networks Business believes that the disclosures are adequate to make
the financial information presented not misleading. It is suggested that these
unaudited condensed combined financial statements be read in conjunction with
the audited combined financial statements and notes thereto of the Cable
Networks Business as of December 31, 1996 and 1995 and for each of the three
years in the period ended December 31, 1996. In the opinion of management, all
adjustments necessary for a fair statement of the results of operations for the
interim periods have been included. However, the unaudited condensed combined
financial statements included herein may not necessarily reflect the combined
results of operations, financial position, and cash flows of the Cable Networks
Business in the future or what such financial information would have been had
the Cable Networks Business been a separate, stand-alone entity during the
periods presented. The results of operations for such interim periods are not
necessarily indicative of the results for a full year.
F-14
<PAGE> 113
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Cable Networks Business, which is accounted for as a division of
Gaylord Entertainment Company (the "Company"), consists primarily of The
Nashville Network ("TNN"), the United States and Canadian operations of Country
Music Television ("CMT") and certain other related businesses. TNN and CMT are
advertiser-supported cable networks featuring country lifestyles and
entertainment. Subsequent to December 31, 1996, the Company entered into a
definitive agreement with Westinghouse Electric Corporation ("Westinghouse")
pursuant to which the Cable Networks Business will be acquired by Westinghouse
(the "Merger"). Prior to the Merger the Company will be restructured so that the
assets and liabilities that are part of the Company's hospitality, attractions,
music, and television and radio businesses, as well as Country Music
Television's cable networks operations outside of the United States and Canada
(collectively, "CMT International"), will be transferred to or retained by a
separate wholly owned subsidiary of the Company ("New Gaylord"). New Gaylord
will then be spun off to the Company's stockholders prior to the consummation of
the Merger.
The combined financial statements of the Cable Networks Business, which are
discussed below, reflect the results of operations, financial position and cash
flows of the Cable Networks Business which have been derived from the financial
statements of the Company using the historical results of operations and
historical basis of the assets and liabilities of the Cable Networks Business.
Additionally, the combined financial statements of the Cable Networks Business
include certain corporate overhead expenses consisting primarily of senior
management salaries and benefits, accounting, data processing and other
administrative costs which are based on management's estimate of matching such
expenses with the benefit received by the Cable Networks Business using a
reasonable allocation method to approximate the expenses the Cable Networks
Business would have incurred had the Cable Networks Business operated on a
stand-alone basis. The financial information included herein, however, may not
necessarily reflect the combined results of operations, financial position and
cash flows of the Cable Networks Business in the future or what the results of
operations, financial position and cash flows would have been had the Cable
Networks Business been a separate, stand-alone entity during the periods
presented.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
The following table contains unaudited selected income statement data for
the periods ended March 31, 1997 and 1996 (in thousands). The table also shows
the percentage relationships to total revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------
1997 % 1996 %
------- ----- ------- -----
<S> <C> <C> <C> <C>
Revenues............................................. $79,962 100.0% $72,309 100.0%
------- ----- ------- -----
Operating costs...................................... 45,360 56.7 42,852 59.2
Selling, general and administrative.................. 10,048 12.6 7,504 10.4
Corporate overhead expenses.......................... 2,234 2.8 2,099 2.9
Depreciation and amortization........................ 2,812 3.5 2,301 3.2
------- ----- ------- -----
Total operating expenses........................ 60,454 75.6 54,756 75.7
------- ----- ------- -----
Total operating income.......................... $19,508 24.4% $17,553 24.3%
======= ===== ======= =====
</TABLE>
REVENUES--Revenues increased $7.7 million, or 10.6%, to $80.0 million in
the first quarter of 1997. Advertising revenues increased $3.2 million, or
10.5%, to $33.9 million during the first quarter of 1997 at TNN due to increased
advertising rates. Subscriber revenues at TNN increased $1.7 million, or 6.2%,
to $28.8 million in the first quarter of 1997 as the number of U.S. subscribers
increased 6.4% to 69.0 million in March 1997 from 64.8 million in March 1996.
Revenues related to the United States distribution of CMT
F-15
<PAGE> 114
increased $2.2 million, or 21.9%, to $12.2 million in the first quarter of 1997
due to growth in both advertising and subscriber revenues. CMT subscribers
increased to 38.3 million in March 1997 from 33.0 million in March 1996.
TOTAL OPERATING EXPENSES--Total operating expenses increased $5.7 million,
or 10.4%, to $60.5 million in the first quarter of 1997. Operating costs, as a
percentage of revenues, decreased to 56.7% during the first quarter of 1997 as
compared to 59.2% during the first quarter of 1996. Selling, general and
administrative expenses, as a percentage of revenues, increased to 12.6% during
the first quarter of 1997 as compared to 10.4% in the first quarter of 1996.
OPERATING COSTS--Operating costs increased $2.5 million, or 5.9%, to $45.4
million in the first quarter of 1997. Increased operating costs are attributable
to the continued growth of the cable networks, including a $1.5 million increase
in Westinghouse commissions at TNN and a $1.2 million increase in programming
costs at TNN. Because of the Company's agreements with Westinghouse, certain
operating costs increase or decrease proportionately with revenues.
SELLING, GENERAL AND ADMINISTRATIVE--Selling, general and administrative
expenses increased $2.5 million, or 33.9%, to $10.0 million in the first quarter
of 1997. The increase is primarily attributable to increased promotional costs
at CMT of $1.2 million, and increased promotional and administrative expenses
related to the continued expansion of a chain of racing-themed retail stores of
$0.9 million.
DEPRECIATION AND AMORTIZATION--Depreciation and amortization increased $0.5
million to $2.8 million in the first quarter of 1997. The increase was primarily
attributable to the continued growth of the Cable Networks Business.
OPERATING INCOME--Operating income increased $2.0 million, or 11.1%, to
$19.5 million during the first quarter of 1997. Operating income increased to
24.4% of revenues in the first quarter of 1997 from 24.3% of revenues in the
first quarter of 1996. Operating income at TNN increased $0.9 million to $15.0
million in the first quarter of 1997 as compared to the first quarter of 1996.
CMT's operating income increased $1.0 million to $4.6 million in the first
quarter of 1997 over the first quarter of 1996.
MINORITY INTEREST--Minority interest increased $0.5 million to $1.4 million
in the first quarter of 1997. This increase primarily results from the increased
profitability of CMT, which is owned 33% by Westinghouse.
INCOME TAXES--The Cable Networks Business' provision for income taxes was
$7.5 million for the first quarter of 1997 compared to $6.9 million for the
first quarter of 1996. The Cable Networks Business' effective tax rate on its
income before provision for income taxes was 41.6% for both the first quarters
of 1997 and 1996. The Cable Networks Business' provision for income taxes was
computed as if the Cable Networks Business operated on a stand-alone basis.
F-16
<PAGE> 115
YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995
The following table contains selected income statement data for each of the
three years ended December 31, 1996, 1995 and 1994 (in thousands). The table
also shows the percentage relationships to total revenues.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1996 % 1995 % 1994 %
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues......................... $320,612 100.0 $273,824 100.0 $237,527 100.0
-------- ----- -------- ----- -------- ----
Operating costs.................. 182,061 56.8 157,997 57.7 139,547 58.7
Selling, general and
administrative................. 29,531 9.2 25,162 9.2 21,608 9.1
Corporate overhead expenses...... 8,563 2.7 6,817 2.5 5,674 2.4
Depreciation and amortization.... 10,415 3.2 8,677 3.1 7,141 3.0
-------- ----- -------- ----- -------- ----
Total operating expenses.... 230,570 71.9 198,653 72.5 173,970 73.2
-------- ----- -------- ----- -------- ----
Total operating income...... $ 90,042 28.1 $ 75.171 27.5 $ 63,557 26.8
======== ===== ======== ===== ======== ====
</TABLE>
REVENUES--Revenues increased $46.8 million, or 17.1%, to $320.6 million in
1996. Advertising revenues increased $22.9 million, or 19.6%, to $139.9 million
during 1996 at TNN due to increased advertising rates. Subscriber revenues at
TNN increased $12.1 million, or 12.2%, to $111.6 million in 1996 due to a 6.1%
increase in the number of U.S. subscribers to 68.3 million in December 1996 from
64.4 million in December 1995 and increased revenues from satellite customers.
Revenues related to the United States distribution of CMT increased $6.7
million, or 19.3%, to $41.5 million in 1996 due to growth in both advertising
and subscriber revenues. CMT subscribers increased to 37.3 million in December
1996 from 31.7 million in December 1995.
TOTAL OPERATING EXPENSES--Total operating expenses increased $31.9 million,
or 16.1%, to $230.6 million in 1996. Operating costs, as a percentage of
revenues, decreased to 56.8% during 1996 as compared to 57.7% during 1995.
Selling, general and administrative expenses, as a percentage of revenues,
remained unchanged at 9.2% in both 1996 and 1995.
OPERATING COSTS--Operating costs increased $24.1 million, or 15.2%, to
$182.1 million in 1996. Increased operating costs are attributable to the
continued growth of the cable networks, including a $12.0 million increase in
commissions to Westinghouse, a $9.3 million increase in programming costs at TNN
and a $1.1 million operating cost increase relating to the opening of a chain of
racing themed retail stores. Because of the Company's agreements with
Westinghouse, certain operating costs increase or decrease proportionately with
revenues.
SELLING, GENERAL AND ADMINISTRATIVE--Selling, general and administrative
expenses increased $4.4 million, or 17.4%, to $29.5 million in 1996. The
increase is primarily attributable to higher management and administrative
salaries and benefits at TNN of $2.1 million due in part to increased staffing
related to continued growth, higher promotional costs at CMT of $1.5 million and
a $1.1 million increase relating to the opening of a chain of racing themed
retail stores in 1996.
DEPRECIATION AND AMORTIZATION--Depreciation and amortization increased $1.7
million, or 20.0%, to $10.4 million in 1996. The increase was primarily
attributable to the continued growth of the Cable Networks Business.
OPERATING INCOME--Operating income increased $14.9 million, or 19.8%, to
$90.0 million during 1996. Operating income increased to 28.1% of revenues in
1996 from 27.5% of revenues in 1995. Operating income increased $8.9 million in
1996 to $68.6 million at TNN and increased $4.7 million in 1996 to $19.2 million
at CMT.
MINORITY INTEREST--Minority interest increased $0.9 million to $6.5 million
in 1996. This increase primarily results from the increased profitability of
CMT, which is 33% owned by Westinghouse.
F-17
<PAGE> 116
INCOME TAXES--The Cable Networks Business' provision for income taxes was
$34.5 million for 1996 compared to $28.2 million for 1995. The Cable Networks
Business' effective tax rate on its income before provision for income taxes was
41.6% for 1996 compared to 40.8% for 1995. The Cable Networks Business'
provision for income taxes was computed as if the Cable Networks Business
operated on a stand-alone basis.
YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994
REVENUES--Revenues increased $36.3 million, or 15.3%, to $273.8 million in
1995. Advertising revenues increased $13.0 million, or 12.5%, to $117.0 million
at TNN in 1995 due to higher advertising rates. TNN subscriber revenues
increased $7.8 million, or 8.5%, to $99.5 million due to an increase in the
number of subscribers to 64.4 million at the end of 1995 from 58.7 million at
the end of 1994, an increase in subscriber rates, and an increase in revenue
from satellite customers. Revenues at CMT increased $7.0 million, or 25.1%, to
$34.8 million in 1995 due to increased advertising and subscriber revenues. The
number of CMT subscribers increased by 27.4% to 31.7 million at the end of 1995
from 24.9 million at the end of 1994.
TOTAL OPERATING EXPENSES--Total operating expenses increased $24.7 million,
or 14.2%, to $198.7 million in 1995. As a percentage of revenues, operating
costs decreased to 57.7% in 1995 compared to 58.7% in 1994. As a percentage of
revenues, selling, general and administrative expenses increased slightly to
9.2% in 1995 from 9.1% in 1994.
OPERATING COSTS--Operating costs increased $18.5 million, or 13.2%, to
$158.0 million in 1995. The increase is attributable to increased Westinghouse
commissions of $7.8 million, higher programming costs at TNN of $5.8 million and
increased operating costs related to the Cable Networks Business' motor sports
production of $5.0 million.
SELLING, GENERAL AND ADMINISTRATIVE--Selling, general and administrative
expenses increased $3.6 million, or 16.4%, to $25.2 million in 1995. The
increase is attributable to higher administrative costs, including increased
administrative salaries and benefits, at TNN and CMT of $1.5 million and $1.4
million, respectively. In addition, administrative costs related to the Cable
Networks Business' motor sports production business increased $0.6 million.
DEPRECIATION AND AMORTIZATION--Depreciation and amortization increased $1.5
million, or 21.5% to $8.7 million in 1995 due to growth in the Cable Networks
Business.
OPERATING INCOME--Operating income increased $11.6 million, or 18.3%, to
$75.2 million in 1995. Operating income increased to 27.5% of revenues in 1995
from 26.8% of revenues in 1994. Operating income increased $4.5 million in 1995
to $59.8 million at TNN and increased $5.9 million in 1995 to $14.6 million at
CMT.
MINORITY INTEREST--Minority interest increased $2.9 million to $5.6 million
in 1995. This increase primarily results from the increased profitability of
CMT.
INCOME TAXES--The Cable Networks Business' provision for income taxes was
$28.2 million for 1995 compared to $24.2 million for 1994. The Cable Networks
Business' effective tax rate on its income before provision for income taxes was
40.8% for 1995 compared to 40.0% for 1994. The Cable Networks Business'
provision for income taxes was computed as if the Cable Networks Business
operated on a standalone basis.
F-18
<PAGE> 117
LIQUIDITY AND CAPITAL RESOURCES
The Cable Networks Business currently projects capital expenditures of
approximately $15 million for 1997. During 1996, net cash flows generated from
the Cable Networks Business' operations exceeded the amount required to fund its
net investing and financing activities. The Cable Networks Business believes
that net cash flows from operations will continue to exceed its net investing
and financing requirements.
The Company has a centralized cash management system whereby all cash
transactions of the Cable Networks Business are executed on behalf of the Cable
Networks Business by the Company. The net effect of these cash transactions is
included in divisional equity in the combined balance sheets and is presented as
contributions to the Company in the combined statements of cash flows.
The Cable Networks Business has outstanding notes payable to Westinghouse
of $4.6 million at March 31, 1997. The notes payable bear interest at the prime
rate, are due on demand, and mature in 2003.
F-19
<PAGE> 118
ANNEXES TO THE PROXY STATEMENT/PROSPECTUS
ANNEX I AGREEMENT AND PLAN OF MERGER DATED AS OF FEBRUARY 9, 1997
ANNEX II FORM OF DISTRIBUTION AGREEMENT
ANNEX III STOCKHOLDER AGREEMENT DATED AS OF FEBRUARY 9, 1997
ANNEX IV FORM OF POST-CLOSING COVENANTS AGREEMENT
ANNEX V FORM OF TAX DISAFFILIATION AGREEMENT
ANNEX VI OPINION OF MERRILL LYNCH & CO.
ANNEX VII NEW GAYLORD STOCK PLAN
<PAGE> 119
ANNEX I
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 9, 1997
AMONG
WESTINGHOUSE ELECTRIC CORPORATION,
G ACQUISITION CORP.
AND
GAYLORD ENTERTAINMENT COMPANY
<PAGE> 120
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.......................................................... I-2
SECTION 1.02. Closing............................................................. I-2
SECTION 1.03. Effective Time...................................................... I-2
SECTION 1.04. Effects of the Merger............................................... I-2
SECTION 1.05. Certificate of Incorporation and By-laws............................ I-2
SECTION 1.06. Directors........................................................... I-2
SECTION 1.07. Officers............................................................ I-2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. Effect on Capital Stock............................................. I-3
SECTION 2.02. Exchange of Certificates............................................ I-3
ARTICLE III
RELATED TRANSACTIONS
SECTION 3.01. Restructuring Agreements............................................ I-5
SECTION 3.02. Ancillary Agreements................................................ I-6
SECTION 3.03. Restructuring of Assets and Assumption of Liabilities............... I-6
SECTION 3.04. Company Distribution................................................ I-6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company....................... I-6
SECTION 4.02. Representations and Warranties of Parent and Sub.................... I-19
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. Conduct of Business................................................. I-23
SECTION 5.02. No Solicitation..................................................... I-26
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Preparation of the Registration Statements and the Proxy Statement-
Prospectus; Company Stockholders Meeting; Parent Shareholders
Meeting........................................................... I-27
SECTION 6.02. Letters of the Company's Accountants................................ I-28
SECTION 6.03. Letters of Parent's Accountants..................................... I-28
SECTION 6.04. Access to Information; Confidentiality.............................. I-28
SECTION 6.05. Reasonable Best Efforts............................................. I-28
SECTION 6.06. Stock Options....................................................... I-29
SECTION 6.07. Fees and Expenses................................................... I-29
SECTION 6.08. Public Announcements................................................ I-29
SECTION 6.09. Affiliates.......................................................... I-29
</TABLE>
I-i
<PAGE> 121
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
SECTION 6.10. NYSE Listing........................................................ I-29
SECTION 6.11. Stockholder Litigation.............................................. I-30
SECTION 6.12. Cooperation with Respect to Internal Revenue Service Rulings and Tax
Opinions of Counsel............................................... I-30
SECTION 6.13. Indebtedness........................................................ I-30
SECTION 6.14. Distribution Agreement.............................................. I-30
SECTION 6.15. Employee Matters.................................................... I-30
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger.......... I-31
SECTION 7.02. Conditions to Obligations of Parent and Sub......................... I-32
SECTION 7.03. Conditions to Obligation of the Company............................. I-33
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination......................................................... I-34
SECTION 8.02. Effect of Termination............................................... I-35
SECTION 8.03. Amendment........................................................... I-35
SECTION 8.04. Extension; Waiver................................................... I-35
SECTION 8.05. Procedure for Termination, Amendment, Extension or Waiver........... I-36
ARTICLE IX
ALTERNATIVE TRANSACTION
SECTION 9.01. Circumstances....................................................... I-36
SECTION 9.02. Alternative Per Share Merger Consideration.......................... I-36
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Survival of Representations and Warranties.......................... I-36
SECTION 10.02. Notices............................................................. I-37
SECTION 10.03. Definitions......................................................... I-37
SECTION 10.04. Interpretation...................................................... I-38
SECTION 10.05. Counterparts........................................................ I-39
SECTION 10.06. Entire Agreement; No Third-Party Beneficiaries...................... I-39
SECTION 10.07. Governing Law....................................................... I-39
SECTION 10.08. Assignment.......................................................... I-39
SECTION 10.09. Disclosure Schedules................................................ I-39
SECTION 10.10. Severability........................................................ I-39
SECTION 10.11. Enforcement......................................................... I-39
</TABLE>
ANNEX A--Agreement and Plan of Distribution
ANNEX B--Tax Disaffiliation Agreement
ANNEX C--Post-Closing Covenants Agreement
ANNEX D--Retained Business
ANNEX E--Affiliate Letter
SCHEDULE 5.01(a)(vii)--Capital Expenditures
I-ii
<PAGE> 122
AGREEMENT AND PLAN OF MERGER dated as of February 9, 1997, among
WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation ("Parent"), G
ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and GAYLORD ENTERTAINMENT COMPANY, a Delaware corporation
(the "Company").
WHEREAS the Board of Directors of the Company has approved an Agreement and
Plan of Distribution in the form of Annex A attached hereto with such changes as
may be made in accordance with Section 6.14 (the "Distribution Agreement"),
which will be entered into prior to the Effective Time (as defined in Section
1.03) subject to the issuance of the Tax Rulings (as such term is defined in
Section 10.03), pursuant to and subject to the terms of which (a) the assets and
businesses of the Company and its subsidiaries (as defined in Section 10.03)
will be restructured as a result of which (i) all the assets of the Company and
its subsidiaries, other than the Retained Assets (as defined in Section 10.03),
will be held by Gaylord Broadcasting Company, a Delaware corporation and a
wholly owned subsidiary of the Company ("GBC"), or one or more of GBC's
subsidiaries and (ii) all the liabilities of the Company and its subsidiaries,
other than the Retained Liabilities (as defined in Section 10.03), will be
assumed by GBC or one or more of GBC's subsidiaries, (b) GBC will be
recapitalized in accordance with Article II of the Distribution Agreement and
(c) following such restructuring and recapitalization, the Company will
distribute (the "Company Distribution") to each holder of record of shares of
Class A Common Stock, $.01 par value, of the Company ("Company Class A Common
Stock") and Class B Common Stock, $.01 par value, of the Company ("Company Class
B Common Stock" and, together with the Company Class A Common Stock, "Company
Common Stock") a number of shares of Common Stock, $.01 par value, of GBC ("New
GBC Common Stock") equal to one-third of the number of shares of Company Common
Stock held by such holder;
WHEREAS the respective Boards of Directors of Parent, Sub and the Company
have, and Parent acting as the sole stockholder of Sub has, approved the merger
of Sub with and into the Company (the "Merger") following the Restructuring (as
defined in Section 3.03) and the Company Distribution, and otherwise upon the
terms and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding share of Company Common Stock, other than shares owned
directly or indirectly by the Company, will be converted into the right to
receive the Per Share Merger Consideration (as defined in Section 2.01(c));
WHEREAS as a condition of the willingness of Parent to enter into this
Agreement, those individuals and trusts set forth on Schedule A attached to the
Stockholder Agreement (as defined below) and the trustees of the Trust (as
defined in the Stockholder Agreement)(collectively, the "Principal
Stockholders"), have entered into a Stockholder Agreement dated as of the date
hereof (the "Stockholder Agreement") with Parent, which provides, among other
things, that, subject to the terms and conditions thereof, each Principal
Stockholder will vote his, her or its shares of Company Common Stock and the
shares of Company Common Stock held by any trust of which such Principal
Stockholder is a trustee (including the Trust) in favor of the Merger and the
approval and adoption of this Agreement;
WHEREAS the Board of Directors of the Company has approved the terms of the
Stockholder Agreement solely for the purpose of rendering Section 203 of the
DGCL (as defined in Section 1.01) inapplicable to the transactions contemplated
hereby;
WHEREAS it is the intention of the parties to this Agreement that (a) the
Company Distribution shall qualify as a transaction described in Section 355 of
the Internal Revenue Code of 1986, as amended (the "Code"), and shall be
immediately preceded by a transfer of assets and related liabilities that
qualifies as a transaction described in Section 351 or Section 368(a)(1)(D) of
the Code, (b) the recapitalization of GBC and certain other transactions that
are part of the Restructuring shall be tax-free transactions under the Code and
(c) the Merger shall qualify as a "reorganization" within the meaning of Section
368(a)(1)(B) of the Code;
WHEREAS it is currently anticipated that Parent will effect a distribution
(the "Parent Distribution") of the Common Stock of a subsidiary formed for the
purpose, which it is currently anticipated will own Parent's Thermo King, Power
Generation, Energy Systems and Government Operations business units, to its
shareholders during the third quarter of 1997, and it is the intention of the
parties to this Agreement that the Merger will be consummated prior to the
Parent Distribution; and
I-1
<PAGE> 123
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 the Merger;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained in this Agreement, the parties
hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. (a) Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), Sub shall be merged with and into the Company at
the Effective Time. Following the Effective Time, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the DGCL.
(b) At the election of Parent, any direct wholly owned subsidiary of Parent
may be substituted for Sub as a constituent corporation in the Merger. In such
event, the parties agree to execute an appropriate amendment to this Agreement
in order to reflect such substitution.
SECTION 1.02. CLOSING. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which (subject to satisfaction or waiver of the conditions set forth in
Sections 7.01, 7.02 and 7.03) shall be no later than the third New York Stock
Exchange ("NYSE") trading day after satisfaction or waiver of the conditions set
forth in Section 7.01, at the offices of Cravath, Swaine & Moore, Worldwide
Plaza, 825 Eighth Avenue, New York, New York 10019, unless another time, date or
place is agreed to in writing by the parties hereto.
SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date the parties shall file with
the Secretary of State of the State of Delaware a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger") executed
in accordance with the relevant provisions of the DGCL and shall make all other
filings or recordings required under the DGCL to consummate the Merger. The
Certificate of Merger shall specify that the Merger shall become effective at
12:01 a.m. on the day following the Closing Date or at such other time as Parent
and the Company shall agree should be specified in the Certificate of Merger
(the time the Merger becomes effective being hereinafter referred to as the
"Effective Time").
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 1.05. CERTIFICATE OF INCORPORATION AND BY-LAWS. (a) The Restated
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended as of the Effective Time so that Article I
thereof shall read in its entirety as follows: "The name of this Corporation is
G Corp. (the "Corporation").", and, as so amended, such Restated Certificate of
Incorporation shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) The By-laws of Sub, as in effect at the Effective Time, shall be the
by-laws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
SECTION 1.06. DIRECTORS. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be. The directors of Sub shall be
apportioned among the classes of the board of directors of the Surviving
Corporation so that the number of directors in each class shall be as nearly
equal as possible.
SECTION 1.07. OFFICERS. The officers of Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
I-2
<PAGE> 124
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. As of 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 any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one validly issued,
fully paid and nonassessable share of Common Stock, par value $.01 per
share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Company Common
Stock that is owned by the Company or by any subsidiary of the Company
shall automatically be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.02(e),
each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.01(b)) shall be
converted into the right to receive that number (subject to the proviso to
this sentence and to Section 9.02, the "Per Share Merger Consideration") of
duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock, par value $1.00 per share, of Parent ("Parent Common Stock")
equal to the quotient, rounded to the nearest thousandth, or if there shall
not be a nearest thousandth, the next higher thousandth, of (i) the
quotient of (x) $1,550,000,000 divided by (y) the number (the "Outstanding
Number") of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled
in accordance with Section 2.01(b)), divided by (ii) the Market Price (as
defined below) of Parent Common Stock on the date on which the Effective
Time shall occur; provided, however, that in the event that the product of
the Per Share Merger Consideration multiplied by the Outstanding Number
would exceed 110,000,000 (the "Maximum Number of Shares"), then the Per
Share Merger Consideration shall mean the highest number (after taking into
account the rounding provision of this sentence) that would not result in
the product of such number multiplied by the Outstanding Number exceeding
110,000,000. The "Market Price" of Parent Common Stock on any date means
the average of the daily closing prices per share of Parent Common Stock as
reported on the NYSE Composite Transactions List (as reported by the Wall
Street Journal or, if not reported thereby, by another authoritative source
mutually selected by Parent and the Company) for the 15 consecutive full
NYSE trading days (the "Averaging Period") immediately preceding the third
full NYSE trading day prior to such date; provided that (A) if the Board of
Directors of Parent declares a dividend on the outstanding shares of Parent
Common Stock having a record date after the Effective Time but an
ex-dividend date (based on "regular way" trading on the NYSE of shares of
Parent Common Stock (the "Ex-Date")) that occurs during the Averaging
Period, then for purposes of computing the Market Price, the closing price
on the Ex-Date and any trading day in the Averaging Period after the
Ex-Date will be adjusted by adding thereto the amount of such dividend and
(B) if the Board of Directors of Parent declares a dividend on the
outstanding shares of Parent Common Stock having a record date before the
Effective Time and an Ex-Date that occurs during the Averaging Period, then
for purposes of computing the Market Price, the closing price on any
trading day before the Ex-Date will be adjusted by subtracting therefrom
the amount of such dividend. For purposes of the immediately preceding
sentence, the amount of any non-cash dividend will be the fair market value
thereof on the payment date for such dividend as determined in good faith
by mutual agreement of Parent and the Company. As of the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares of Company Common
Stock shall cease to have any rights with respect thereto, except the right
to receive the Per Share Merger Consideration and any cash in lieu of
fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance
with Section 2.02, without interest.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) Exchange Agent. As of the
Effective Time, Parent shall enter into an agreement with such bank or trust
company as may be designated by Parent and shall not have been
I-3
<PAGE> 125
reasonably disapproved of by the Company (the "Exchange Agent"), which shall
provide that Parent shall deposit with the Exchange Agent as of the Effective
Time, for the benefit of the holders of shares of Company Common Stock, for
exchange in accordance with this Article II, through the Exchange Agent,
certificates representing the shares of Parent Common Stock (such shares of
Parent Common Stock, together with any dividends or distributions with respect
thereto with a record date after the Effective Time and any cash payable in lieu
of any fractional shares of Parent Common Stock, being hereinafter referred to
as the "Exchange Fund") issuable pursuant to Section 2.01 in exchange for
outstanding shares of Company Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (the "Certificates")
whose shares were converted into the right to receive the Per Share Merger
Consideration pursuant to Section 2.01, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent and the
Company may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Per Share Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of Parent Common Stock, and cash and dividends or
other distributions, if any, which such holder has the right to receive pursuant
to the provisions of this Article II, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Company Common
Stock which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Parent Common Stock may
be issued to a person other than the person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such issuance
shall pay any transfer or other Taxes (as defined in Section 10.03) required by
reason of the issuance of shares of Parent Common Stock to a person other than
the registered holder of such Certificate or establish to the satisfaction of
Parent that such Tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.02, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender shares of Parent Common Stock and cash and dividends or other
distributions, if any, which the holder thereof has the right to receive in
respect of such Certificate pursuant to the provisions of this Article II. No
interest will be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II. Parent shall pay the
charges and expenses of the Exchange Agent in connection with the exchange of
Certificates for certificates representing shares of Parent Common Stock and
cash and dividends or other distributions.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.02(e), and all such dividends, other distributions and
cash in lieu of fractional shares of Parent Common Stock shall be paid by Parent
to the Exchange Agent and shall be included in the Exchange Fund, in each case
until the surrender of such Certificate in accordance with this Article II.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the holder of the certificate representing
whole shares of Parent Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any cash payable in
lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 2.02(e) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of Parent
Common Stock.
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(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any cash paid pursuant
to this Article II) shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been declared or
made by the Company on such shares of Company Common Stock in accordance with
the terms of this Agreement or prior to the date of this Agreement and which
remain unpaid at the Effective Time, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II, except as otherwise
provided by law.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or other distribution of Parent shall
relate to such fractional share interests and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a shareholder of
Parent.
(ii) Notwithstanding any other provision of this Agreement, each holder of
shares of Company Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Parent Common
Stock (after taking into account all Certificates delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of Parent Common Stock multiplied by the closing
price of a share of Parent Common Stock on the NYSE Composite Transactions List
(as reported by the Wall Street Journal or, if not reported thereby, by another
authoritative source mutually selected by Parent and the Company) on the Closing
Date.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for payment of their claim for the shares of
Parent Common Stock and cash and dividends or other distributions, if any,
pursuant to this Article II.
(g) No Liability. None of Parent, Sub, the Company or the Exchange Agent
shall be liable to any person in respect of any shares of Parent Common Stock or
any cash or dividends or other distributions from the Exchange Fund delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificate shall not have been surrendered prior to seven
years after the Effective Time (or immediately prior to such earlier date on
which any shares of Parent Common Stock, any cash or any dividends or other
distributions payable to the holder of such Certificate pursuant to this Article
II would otherwise escheat to or become the property of any Governmental Entity
(as defined in Section 4.01(d))), any such shares, cash, dividends or other
distributions shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
ARTICLE III
RELATED TRANSACTIONS
SECTION 3.01. RESTRUCTURING AGREEMENTS. Prior to the Company Distribution,
the Company shall (a) execute and deliver the Distribution Agreement, a Tax
Disaffiliation Agreement in the form of Annex B attached hereto with such
changes as may be approved by Parent and the Company (the "Tax Disaffiliation
Agreement") and a Post-Closing Covenants Agreement in the form of Annex C
attached hereto with such changes as may be approved by Parent and the Company
(the "Post-Closing Covenants Agreement"),
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(b) cause GBC to execute and deliver the Distribution Agreement, the Tax
Disaffiliation Agreement and the Post-Closing Covenants Agreement and (c) cause
each GBC Subsidiary which Parent shall designate to execute and deliver the
Post-Closing Covenants Agreement. Prior to the Company Distribution, Parent will
execute and deliver the Tax Disaffiliation Agreement and the Post-Closing
Covenants Agreement.
SECTION 3.02. ANCILLARY AGREEMENTS. Prior to the Company Distribution, the
Company shall, and the Company shall cause GBC (and, if applicable, one or more
of its subsidiaries) to, execute and deliver the Ancillary Agreements (as
defined in the Distribution Agreement, and, together with this Agreement, the
Stockholder Agreement, the Distribution Agreement, the Tax Disaffiliation
Agreement and the Post-Closing Covenants Agreement, the "Transaction
Agreements").
SECTION 3.03. RESTRUCTURING OF ASSETS AND ASSUMPTION OF LIABILITIES. Prior
to the Company Distribution and pursuant to the terms of the Distribution
Agreement, the Company and its subsidiaries will consummate the restructuring of
the assets and businesses of the Company and its subsidiaries and the related
assumption of liabilities by GBC and its subsidiaries contemplated by Article IV
of the Distribution Agreement and cause GBC to be recapitalized as contemplated
by Article II of the Distribution Agreement (collectively, the "Restructuring").
SECTION 3.04. COMPANY DISTRIBUTION. Prior to the Effective Time, and
pursuant to the terms of Article II of the Distribution Agreement, the Company
will effect the Company Distribution.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As used in
this Agreement, (i) any reference to the Company and its subsidiaries means the
Company and each of its subsidiaries (including for this purpose, at any time
prior to the Effective Time, the GBC Companies (as defined below)), (ii) any
reference to the "Retained Business" means the Company's businesses included in
its cable networks segment excluding certain businesses as described in Annex D
hereto, (iii) any reference to the "Retained Company" and its subsidiaries or
the Surviving Corporation and its subsidiaries or the "Retained Companies" means
the Company and its subsidiaries, other than GBC and its subsidiaries
(determined after giving effect to the transactions contemplated by Article IV
of the Distribution Agreement), (iv) any reference to the "Retained
Subsidiaries" means the direct and indirect subsidiaries of the Company included
in the Retained Business, (v) any reference to GBC and its subsidiaries or the
"GBC Companies" means GBC and its subsidiaries (determined after giving effect
to the transactions contemplated by Article IV of the Distribution Agreement)
and (vi) any reference to "GBC Subsidiaries" means the direct and indirect
subsidiaries of GBC (determined after giving effect to the transactions
contemplated by Article IV of the Distribution Agreement).
Except as set forth with respect to a specifically identified
representation and warranty on the disclosure schedule delivered by the Company
to Parent simultaneously with the execution of this Agreement (the "Company
Disclosure Schedule"), the Company represents and warrants to Parent and Sub as
follows:
(a) Organization, Standing and Corporate Power. Each of the Company
and GBC is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Each Retained Subsidiary
is, and each other subsidiary of the Company that will be a significant
subsidiary (as defined in Section 10.03) of GBC as of the Closing Date is,
a corporation or other legal entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization as set
forth in Section 4.01(b) of the Company Disclosure Schedule. Each of the
Company, the Retained Subsidiaries and GBC is, and each other subsidiary of
the Company that will be a significant subsidiary of GBC as of the Closing
Date is, duly qualified or licensed to do business and in good standing in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed or to be in good standing individually or in the aggregate would
not have a material adverse effect (as defined in Section 10.03) on the
Retained Companies or on the GBC Companies or impair the ability of the
Retained Companies or the GBC Companies to consummate the transactions
contemplated by, or
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to satisfy their obligations under, the Transaction Agreements. Each of the
Company and each Retained Subsidiary has, and GBC and each other subsidiary
of the Company that will be a significant subsidiary of GBC as of the
Closing Date has, the requisite corporate or other power, as the case may
be, and authority to carry on its businesses as they are now being or will
be conducted at the Effective Time. The Company has delivered or made
available to Parent prior to the execution of this Agreement complete and
correct copies of its Restated Certificate of Incorporation and By-laws and
the certificates of incorporation and by-laws (or comparable organizational
documents) of each of the Retained Subsidiaries and each other subsidiary
of the Company that will be a significant subsidiary of GBC as of the
Closing Date, in each case as amended to the date hereof.
(b) Subsidiaries. Section 4.01(b) of the Company Disclosure Schedule
sets forth a true and complete list of each subsidiary of the Company that
indicates which subsidiaries are Retained Subsidiaries. Except as set forth
in Section 4.01(b) of the Company Disclosure Schedule, all the outstanding
shares of capital stock of, or other ownership interests in, each of the
Retained Subsidiaries have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by the Company, free and
clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens"). Except
for the capital stock of its subsidiaries and except as set forth in
Section 4.01(b) of the Company Disclosure Schedule, the Company does not
own, directly or indirectly, as of the date of this Agreement, and the
Retained Company will not own, directly or indirectly, as of the Effective
Time, any capital stock or other ownership interest in any corporation,
partnership, limited liability company, joint venture or other entity.
(c) Capital Structure. The authorized capital stock of the Company
consists of 300,000,000 shares of Company Class A Common Stock, 150,000,000
shares of Company Class B Common Stock and 100,000,000 shares of preferred
stock, $.01 par value, of the Company ("Company Preferred Stock"). At the
close of business on January 31, 1997, (i) 44,957,557 shares of Company
Class A Common Stock were issued and outstanding, (ii) 51,407,868 shares of
Company Class B Common Stock were issued and outstanding, (iii) no shares
of Company Preferred Stock were issued and outstanding, (iv) 300,300 shares
of Company Class A Common Stock were held by the Company in its treasury,
(v) 5,512,500 shares of Company Class A Common Stock were reserved for
issuance pursuant to the Company's Amended and Restated 1991 Stock Option
and Incentive Plan and the Company's Amended and Restated 1993 Stock Option
and Incentive Plan (the "Company Stock Plans") and (vi) 51,407,868 shares
of Company Class A Common Stock were reserved for issuance upon conversion
of Company Class B Common Stock in accordance with the terms of the
Company's Restated Certificate of Incorporation. Except as set forth above,
at the close of business on January 31, 1997, no shares of capital stock or
other voting securities of the Company were issued, reserved for issuance
or outstanding. There are no outstanding stock appreciation rights or
rights (other than options to acquire Company Class A Common Stock granted
under the Company Stock Plans ("Employee Stock Options")) to receive shares
of Company Common Stock on a deferred basis granted under the Company Stock
Plans or otherwise. Section 4.01(c) of the Company Disclosure Schedule sets
forth a complete and correct list, as of January 31, 1997, of the holders
of all Employee Stock Options, the number of shares subject to each such
option and the exercise prices thereof. All outstanding shares of capital
stock of the Company are, and all shares which may be issued will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. There are no notes, bonds, debentures or
other indebtedness (as defined in Section 10.03) of the Company having the
right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of the Company may
vote. Except as set forth above and except as set forth in Section 4.01(c)
of the Company Disclosure Schedule, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of its subsidiaries is
a party or by which any of them is bound obligating the Company or any of
its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of the Company or of any of the Retained Subsidiaries or
obligating the Company or any of its subsidiaries to issue, grant, extend
or enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Except as set forth in Section
4.01(c) of the
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Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company or any of the Retained Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries. There are no outstanding contractual
obligations of the Company or any of the Retained Subsidiaries to vote or
to dispose of any shares of the capital stock of the Company or any of its
subsidiaries. As of the date of this Agreement, the Principal Stockholders
are the record owners of a number of shares of Company Common Stock that in
the aggregate constitutes not less than 60% of the votes entitled to be
cast at the Company Stockholders Meeting (as defined in Section 6.01(b)).
(d) Authority; Noncontravention. Each of the Company, the Retained
Subsidiaries and the GBC Companies has the requisite corporate or other
power and authority to execute, deliver and perform each Transaction
Agreement to which it is or will be a party and to consummate the
transactions contemplated thereby (other than, with respect to the Merger,
the approval and adoption of this Agreement by the affirmative vote of the
holders of a majority of the voting power of all outstanding shares of
Company Class A Common Stock and Company Class B Common Stock, voting
together as a single class, at the Company Stockholders Meeting (the
"Company Stockholder Approval"), and, with respect to the Company
Distribution, formal declaration of the Company Distribution by the
Company's Board of Directors). The execution, delivery and performance by
the Company and GBC of each Transaction Agreement and the consummation by
the Company and GBC of the Restructuring, the Company Distribution and the
Merger and of the other transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of the Company and
GBC, and no other corporate proceedings on the part of the Company or GBC
are necessary to authorize any Transaction Agreement or for the Company or
GBC to consummate the Restructuring, the Company Distribution, the Merger
or the other transactions so contemplated (other than, with respect to the
Merger, the Company Stockholder Approval, and, with respect to the Company
Distribution, formal declaration of the Company Distribution by the
Company's Board of Directors). The execution, delivery and performance by
each Retained Subsidiary and each GBC Subsidiary of each Transaction
Agreement to which it will be a party and the consummation by it of the
transactions contemplated thereby has been, or prior to the execution and
delivery of the Distribution Agreement will be, duly authorized by all
necessary corporate or other action on the part of such entity and all
necessary action on the part of its stockholders, if required, and no other
corporate or other proceedings on the part of such entity are or will be
necessary to authorize any Transaction Agreement to which it will be a
party or for it to consummate the transactions so contemplated. This
Agreement has been duly executed and delivered by the Company and, assuming
this Agreement constitutes a valid and binding obligation of Parent and
Sub, constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms. Each Transaction
Agreement (other than this Agreement) to which the Company, any Retained
Subsidiary or any GBC Company will be a party when executed and delivered
will, assuming that such Transaction Agreement will constitute a valid and
binding obligation of Parent, if Parent will be a party thereto, constitute
a valid and binding obligation of such entity, enforceable against such
entity in accordance with its terms. Except as set forth in Section 4.01(d)
of the Company Disclosure Schedule, none of the execution, delivery or
performance by the Company, the Retained Subsidiaries and the GBC Companies
of each Transaction Agreement to which any of them is or will be a party or
the consummation by the Company, the Retained Subsidiaries and the GBC
Companies of the transactions contemplated thereby will conflict with, or
result in a violation or breach of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
amendment, cancellation or acceleration of any obligation or loss of a
material benefit under, or result in the creation of any Lien upon any of
the properties or assets of the Company, any Retained Subsidiary or any GBC
Company under, (i) the Restated Certificate of Incorporation or Restated
By-laws of the Company or the certificate of incorporation or by-laws (or
comparable organizational documents) of any Retained Subsidiary or any GBC
Company, (ii) any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract, agreement, obligation, understanding,
commitment or other arrangement (a "Contract") or of any license,
franchise, permit, concession, certificate of authority, order, approval,
application or registration from, of or with a Governmental Entity (as
defined below) (a "Permit") to which the Company, any Retained Subsidiary
or any GBC Company is a party or by which any of their respective
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properties or assets may be bound or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company, any Retained Subsidiary or any GBC Company or
their respective properties or assets, other than any such conflicts,
violations, breaches, defaults, rights or Liens (A) relating to (x)
Contracts the parties to which consist solely of Parent or any of its
subsidiaries, on the one hand, and the Company or any of its subsidiaries,
on the other hand, and (y) Contracts executed by Parent or one of its
subsidiaries on behalf of the Company or a subsidiary of the Company, and
(B) in the case of clause (ii) or (iii), that individually or in the
aggregate would not (x) have a material adverse effect on the Retained
Companies or on the GBC Companies, (y) impair in any material respect the
ability of the Retained Companies or the GBC Companies, as the case may be,
to consummate the transactions contemplated by, or to satisfy their
obligations under, the Transaction Agreements or (z) delay in any material
respect or prevent the consummation of any of the transactions contemplated
by the Transaction Agreements. Except for consents, approvals, orders,
authorizations, registrations, declarations or filings as may be required
under, and other applicable requirements of, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Securities Act of 1933, as
amended (the "Securities Act"), the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and any foreign
competition laws, filings under state securities or "blue sky" laws,
filings with the NYSE, approvals of and filings with the Federal
Communications Commission or any successor entity (the "FCC") under the
Communications Act of 1934 (the "Communications Act") and the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware
and appropriate documents with the relevant authorities of other
jurisdictions in which the Company is qualified to do business and other
consents, approvals, orders, authorizations, registrations, declarations,
filings and agreements expressly provided for in the Transaction
Agreements, no consent, approval, order or authorization of, or
registration, declaration or filing with, any federal, state or local
government, or any court, administrative or regulatory agency or commission
or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by or with respect to the Company, any
Retained Subsidiary or any GBC Company in connection with the execution,
delivery or performance by the Company, any Retained Subsidiary or any GBC
Company of each Transaction Agreement to which any of them is or will be a
party or the consummation by the Company, any Retained Subsidiary or any
GBC Company of the transactions contemplated thereby (except where the
failure to obtain such consents, approvals, orders or authorizations, or to
make such registrations, declarations or filings, would not, individually
or in the aggregate, have a material adverse effect on the Retained
Companies or on the GBC Companies or impair the ability of the Retained
Companies or the GBC Companies, as the case may be, to consummate the
transactions contemplated by, or to satisfy their obligations under, the
Transaction Agreements).
(e) SEC Documents; Undisclosed Liabilities. The Company has filed all
reports, schedules, forms, statements and other documents required to be
filed by it with the Securities and Exchange Commission (the "SEC") since
January 1, 1995 (the "SEC Documents"). As of their respective dates, the
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 promulgated thereunder applicable to such SEC
Documents except as set forth in Section 4.01(e) of the Company Disclosure
Schedule, and none of the SEC Documents when filed contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Except to the extent that information contained in any SEC Document has
been revised or superseded by a later filed SEC Document, none of the SEC
Documents contains any untrue statement of a material fact or omits 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 were made, not misleading. The financial statements of the Company
included in the SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") (except,
in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all
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material respects the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal recurring year-end
audit adjustments). Except as set forth in the Filed SEC Documents (as
defined in Section 4.01(h)), and except for liabilities and obligations
incurred in the ordinary course of business consistent with past practice
since the date of the most recent consolidated balance sheet included in
the Filed SEC Documents, neither the Company nor any of its subsidiaries
has any material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be recognized or
disclosed on a consolidated balance sheet of the Company and its
consolidated subsidiaries or in the notes thereto.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with
the SEC by Parent in connection with the issuance of shares of Parent
Common Stock in the Merger (the "Parent Form S-4") or the registration
statement on Form 10 to be filed with the SEC by GBC in connection with the
distribution of shares of New GBC Common Stock in the Company Distribution
(the "GBC Form 10" and, together with the Parent Form S-4, the
"Registration Statements") will, at the time the Registration Statements
become effective under the Securities Act or the Exchange Act, as
applicable, at the time of any post-effective amendments or supplements
thereto, at the Effective Time and at the time of the Parent Shareholders
Meeting (as defined in Section 6.01(c)), if applicable, in the case of the
Parent Form S-4, or at the time of the Company Stockholders Meeting and the
Time of Distribution (as defined in the Distribution Agreement), in the
case of the GBC Form 10, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading or (ii) the proxy statement-
prospectus relating to the Company Stockholders Meeting and, if the Parent
Shareholder Approval (as defined in Section 4.02(c)) is required by the
applicable rules of the NYSE, the Parent Shareholders Meeting (the "Proxy
Statement-Prospectus") will, at the date it is first mailed to the
Company's stockholders or, if applicable, Parent's shareholders, or at the
time of the Company Stockholders Meeting or, if applicable, the Parent
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. The GBC Form 10 and the Proxy
Statement-Prospectus will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Sub specifically for
inclusion or incorporation by reference in the GBC Form 10 or the Proxy
Statement-Prospectus.
(g) Retained Business Financial Statements. (i) Included in Section
4.01(g) of the Company Disclosure Schedule is a combined and combining
balance sheet of the Retained Companies as of December 31, 1996 (including
the notes thereto, the "Retained Business Balance Sheet") and a combined
and combining operating income statement for the year ended December 31,
1996 (including the notes thereto, and together with the Retained Business
Balance Sheet, the "Retained Business Financial Statements"). There has
been no change in the combined financial position of the Retained Companies
since December 31, 1996 except for changes that individually or in the
aggregate have not had and would not reasonably be expected to have a
material adverse effect on the Retained Companies. The Retained Business
Balance Sheet fairly presents in all material respects the combined
financial position of the Retained Business as of December 31, 1996, and
the operating income statement included in the Retained Business Financial
Statements fairly presents in all material respects the results of
operations of the Retained Business for the year ended December 31, 1996,
in each case after giving effect to the Restructuring and the Company
Distribution (assuming that the Restructuring and the Company Distribution
had occurred on December 31, 1996 and January 1, 1996, respectively) and in
accordance with GAAP applied on a basis consistent with the most recent
audited financial statements of the Company included in the Filed SEC
Documents, except as indicated in the notes thereto. Except as contemplated
by this Agreement, at December 31, 1996 none of the Retained Companies had,
and since such date none of the Retained Companies has incurred, any
liabilities or obligations of any nature
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(whether absolute, accrued, contingent or otherwise) except liabilities or
obligations (a) which are accrued or reserved against in the Retained
Business Balance Sheet, (b) for current or deferred Taxes with respect to
current operations, (c) which were incurred after December 31, 1996 in the
ordinary course of business, or (d) which would not in the aggregate have a
material adverse effect on the Retained Companies or have been discharged
or paid in full prior to the date hereof and taking into account, in the
case of contingent liabilities, both the probability of the realization of
the contingency and the likely resultant liability. The Retained Companies
do not have any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) with respect to any former or
discontinued business of the Company or any of its subsidiaries (other than
any liabilities or obligations that constitute Assumed Liabilities (as
defined in the Distribution Agreement)).
(ii) Except for the excluded assets described in Section 4.01(g) of
the Company Disclosure Schedule (the "Excluded Assets"), the Retained
Business includes all the Company's right, title and interest (including
minority interests) in and to (x) all assets of the Company, any of the
Retained Subsidiaries or any of the GBC Companies that are used in or that
are being held for use in the Retained Business as presently conducted and
(y) whether or not included within the assets set forth in clause (x)
above, all assets (including, without limitation, capital stock and
partnership and ownership interests) reflected on the Retained Business
Balance Sheet, except those disposed of in the ordinary course of business
since the date of the Retained Business Balance Sheet).
(h) Absence of Certain Changes or Events. Except as disclosed in the
SEC Documents filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the "Filed SEC
Documents") or in Section 4.01(h) of the Company Disclosure Schedule or as
otherwise expressly contemplated by the Transaction Agreements, since the
date of the most recent audited financial statements included in the Filed
SEC Documents, the Company and its subsidiaries have conducted the Retained
Business only in the ordinary course of business consistent with past
practice, and there has not been (i) any event, change or development which
individually or in the aggregate has had or would reasonably be expected to
have a material adverse effect on the Retained Companies or on the GBC
Companies or would impair the ability of the Retained Companies or the GBC
Companies, as the case may be, to consummate the transactions contemplated
by, or to satisfy their obligations under, the Transaction Agreements, (ii)
any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
the Company's capital stock, other than regular quarterly cash dividends,
(iii) any split, combination or reclassification of any of the Company's
capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock, (iv) (x) any granting by the Company or any of its
subsidiaries to any employee who will be a Retained Employee (as defined in
the Distribution Agreement) of any increase in compensation, except for
increases in the ordinary course of business consistent with past practice,
(y) any granting by the Company or any of its subsidiaries to any such
employee of any increase in severance or termination pay, except in the
ordinary course of business consistent with past practice or as was
required under any employment, severance or termination agreements in
effect as of the date of the most recent audited financial statements
included in the Filed SEC Documents, or (z) any entry by the Company or any
of its subsidiaries into any employment, consulting, severance, termination
or indemnification agreement with any such employee, (v) any damage,
destruction or loss, whether or not covered by insurance, that has had or
would reasonably be expected to have a material adverse effect on the
Retained Companies or on the GBC Companies or (vi) except insofar as may
have been disclosed in the Filed SEC Documents or required by a change in
GAAP, any change in accounting methods, principles or practices by the
Company materially affecting the assets, liabilities or businesses of the
Retained Companies.
(i) Title to Assets. (i) The Company and its subsidiaries have, and
as of the Effective Time the Retained Companies will have, good and valid
title to all assets reflected on the Retained Business Balance Sheet or
thereafter acquired, except those sold or otherwise disposed of for fair
value since the date of the Retained Business Balance Sheet in the ordinary
course of business consistent with past practice and not in violation of
this Agreement, in each case free and clear of all Liens except Permitted
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Liens (as defined below). Section 4.01(i) of the Company Disclosure
Schedule sets forth a true and complete list of all assets properly
categorized as plant, property and equipment reflected on the Retained
Business Balance Sheet.
All the material tangible personal property to be owned by any
Retained Company as of the Effective Time has been maintained in all
material respects in accordance with the past practice of the Company and
its subsidiaries and generally accepted industry practice, is in good
working order (normal wear and tear excepted) and is suitable in all
material respects for the purposes for which it is being used. All personal
property to be leased by any Retained Company as of the Effective Time is
in all material respects in the condition required of such property by the
terms of the lease applicable thereto during the term of the lease and upon
the expiration thereof.
(ii) As of the Effective Time, the Retained Companies will not own in
fee any real property or interests in real property. Section 4.01(i) of the
Company Disclosure Schedule sets forth a complete list of all leases of
real property or interests in real property other than those which
constitute Ancillary Agreements to which any of the Retained Companies will
be a party as of the Effective Time (individually, a "Leased Property") and
identifies any material base leases and reciprocal easement or operating
agreements relating thereto. The Company and its subsidiaries have, and as
of the Effective Time the Retained Companies will have, good and valid
title to the lease hold estates in all Leased Property, in each case free
and clear of all Liens except for Permitted Liens.
(iii) Except for the Excluded Assets and except as expressly
contemplated by one or more of the Transaction Agreements, as of the
Effective Time none of the GBC Companies will use in the conduct of any of
its businesses or own or have rights to use any assets or property, whether
tangible or intangible, which are also used in the conduct of the Retained
Business. As of the Effective Time, no GBC Company will be a party to any
Contract with any Retained Company (other than the Transaction Agreements),
including, without limitation, any Contract providing for the furnishing of
services or rental of real or personal property to or from, or otherwise
relating to the business or operations of, the Retained Companies or
pursuant to which any Retained Company may have any obligation or
liability. As of the Effective Time, no Retained Company will have any
liability or obligation of any nature (whether accrued, absolute,
contingent or other wise) in any way relating to the business, operations,
indebtedness, assets or liabilities of any of the GBC Companies.
(iv) "Permitted Liens" shall mean those Liens (A) referred to in
Section 4.01(i) of the Company Disclosure Schedule, (B) for Taxes not yet
due or payable or being contested in good faith, (C) that constitute
easements, covenants, rights-of-way and other similar matters of record,
(D) that constitute mechanics', carriers', workers' or like liens incurred
in the ordinary course of business consistent with past practices, (E)
which constitute other imperfections of title or encumbrances which do not
individually or in the aggregate materially impair the continued use and
operation of the assets to which they relate in the Retained Business as
presently conducted or (F) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and social security, retirement and other similar legislation
relating to amounts not yet due or payable.
(j) Litigation. Except as disclosed in the Filed SEC Documents and as
set forth in Section 4.01(j) of the Company Disclosure Schedule, there is
no suit, action, proceeding or investigation pending or, to the knowledge
of the Company, threatened against or affecting the Company or any of its
subsidiaries that individually or in the aggregate would reasonably be
expected to (i) have a material adverse effect on the Retained Companies or
on the GBC Companies, (ii) impair the ability of the Retained Companies or
the GBC Companies, as the case may be, to consummate the transactions
contemplated by, or to satisfy their obligations under, the Transaction
Agreements or (iii) delay in any material respect or prevent the
consummation of any of the transactions contemplated by the Transaction
Agreements, nor is there any judgment, order, decree, statute, law,
ordinance, rule or regulation of any Governmental Entity or arbitrator
outstanding against the Company or any of its subsidiaries having, or which
would reasonably be expected to have, any effect referred to in clause (i),
(ii) or (iii) above.
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(k) Absence of Changes in Benefit Plans. Except (i) as disclosed in
the Filed SEC Documents, (ii) for normal increases in the ordinary course
of business consistent with past practice or as required by law or (iii) as
contemplated by the Distribution Agreement, since the date of the most
recent audited financial statements included in the Filed SEC Documents,
there has not been any adoption or amendment in any material respect by any
of the Retained Companies of any collective bargaining agreement or any
bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other material plan providing material benefits
to any current or former employee, officer or director of, or consultant
to, the Company or any of its subsidiaries who, at the Effective Time, will
be a Retained Employee. Except as disclosed in the Filed SEC Documents or
Section 4.01(k) of the Company Disclosure Schedule, there exist no
consulting, employment, severance or termination agreements currently in
effect between the Company or any of its subsidiaries and any current or
former employee, officer or director of the Company or any of its
subsidiaries who, at the Effective Time, will be a Retained Employee.
(l) ERISA Compliance. (i) Section 4.01(l) of the Company Disclosure
Schedule lists each "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (a "Pension Plan"), each "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) (a "Welfare Plan"), each bonus, stock
ownership, stock purchase, stock option, stock bonus, restricted stock,
deferred compensation plan or arrangement and each other employee fringe
benefit plan or arrangement maintained, contributed to or required to be
maintained or contributed to by the Company or any of its subsidiaries or
any other person or entity that, together with the Company, is or was
treated as a single employer under Section 414(b), (c), (m) or (o) of the
Code (each, a "Commonly Controlled Entity") which is currently in effect
for the benefit of any current or former employees, officers, directors or
independent contractors of (x) any of the Retained Companies or (y) GBC or
any of its subsidiaries, in each case except for any plan, arrangement or
policy in respect of which all liabilities will be Assumed Liabilities (the
"Benefit Plans"). The Company has delivered or made available to Parent
true, complete and correct copies of (x) the two most recent annual reports
on Form 5500 filed with the Internal Revenue Service with respect to each
Benefit Plan (if any such report was required), (y) the most recent summary
plan description for each Benefit Plan for which such summary plan
description is required and (z) each currently effective trust agreement,
insurance or group annuity contract and each other funding or financing
arrangement relating to any Benefit Plan.
(ii) Each Benefit Plan has been administered and operated in
compliance with its terms, the terms of each applicable collective
bargaining agreement and the applicable provisions of ERISA, the Code and
all other applicable laws except where the failure to be in compliance
would not have a material adverse effect on the Retained Companies. Neither
the Company, any of its subsidiaries nor any Commonly Controlled Entity has
any liability related to any Benefit Plan (other than (x) claims for
benefits in the ordinary course and (y) claims for contributions in the
ordinary course) which would have a material adverse effect on the Retained
Companies.
(iii) Consummation of the transactions contemplated by the Transaction
Agreements will not give rise to any liability (including any withdrawal
liability under Title IV of ERISA) with respect to any Benefit Plan under
the terms of such Benefit Plan, ERISA, the Code or any other applicable law
which would have a material adverse effect on the Retained Companies.
(iv) Except as set forth in Section 4.01(l) of the Company Disclosure
Schedule or as provided in this Agreement or in the Distribution Agreement,
no Retained Employee will be entitled to any additional benefits or any
acceleration of the time of payment or vesting of any benefits under any
Benefit Plan or under any employment, severance, termination or
compensation agreement or as a result of the transactions contemplated by
the Transaction Agreements.
(v) All Benefit Plans covering foreign employees comply in all
material respects with applicable local law, except where the failure to so
comply would not have a material adverse effect on the Retained Companies.
The Company and its subsidiaries have no unfunded liabilities in any amount
with respect to
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any Benefit Plan covering foreign employees that would have a material
adverse effect on the Retained Companies.
(vi) As of the Effective Time, (A) the Retained Companies will employ
only employees who are Retained Employees and (B) the Retained Companies
will not sponsor, or have any liability with respect to, any Benefit Plan
or Retained Employee other than as provided in this Agreement, the
Distribution Agreement or the Post-Closing Covenants Agreement.
(m) Taxes. Except as set forth in Section 4.01(m) of the Company
Disclosure Schedule:
(i) As used in this Agreement, "Treasury Regulations" refer to the
Treasury Department regulations promulgated under the Code;
(ii) No Liens for Taxes exist with respect to any of the assets or
properties of any of the Retained Companies, except for statutory Liens for
Taxes not yet due or payable or that are being contested in good faith;
(iii) All federal, state and local, domestic and foreign, material Tax
Returns required to be filed by or on behalf of any of the Retained
Companies, or any consolidated, combined, affiliated or unitary group of
which any of the Retained Companies is or has ever been a member (together,
a "Company Affiliated Group"), have been timely filed or requests for
extensions have been timely filed and any such extensions have been granted
and have not expired;
(iv) Each such Tax Return was complete and correct in all material
respects;
(v) All material Taxes with respect to taxable periods covered by such
Tax Returns and all other material Taxes for which any of the Retained
Companies is liable (together, the "Relevant Taxes") have been paid in
full, or reserves therefor have been established in accordance with GAAP on
the balance sheet contained in the Filed SEC Documents;
(vi) All U.S. Federal income Tax Returns filed by or on behalf of each
Company Affiliated Group have been examined by and settled with the
Internal Revenue Service, or the statute of limitations with respect to the
relevant Tax liability has expired, for all taxable periods through and
including the period ended on the date on which the Effective Time occurs;
(vii) All Relevant Taxes due with respect to any completed and settled
audit, examination or deficiency litigation with any Tax Authority have
been paid in full;
(viii) There is no audit, examination, deficiency, or refund
litigation pending with respect to any Relevant Taxes and during the past
three years no Tax Authority has given written notice of the commencement
of any audit, examination or deficiency litigation, with respect to any
Relevant Taxes;
(ix) None of the Retained Companies is bound by any currently
effective private ruling, closing agreement or similar agreement with any
Tax Authority relating to a material amount of Taxes;
(x) To the best knowledge of the Company, none of the Retained
Companies shall be required to include in a taxable period ending after the
Effective Time, any taxable income attributable to income that economically
accrued in a prior taxable period as a result of Section 481 of the Code,
the installment method of accounting or any comparable provision of state
or local Tax law;
(xi) To the best knowledge of the Company, (A) no person has made with
respect to any of the Retained Companies, or with respect to any property
held by any of the Retained Companies, any consent under Section 341 of the
Code, (B) no material amount of property of the Retained Companies is "tax
exempt property" within the meaning of Section 168(h) of the Code, (C) no
material amount of assets of the Retained Companies are subject to a lease
under Section 7701(h) of the Code, and (D) none of the Retained Companies
is a party to any material lease made pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect prior to the date
of enactment of the Tax Equity and Fiscal Responsibility Act of 1982;
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(xii) None of the Retained Companies has been a member for any taxable
period ending after 1991 of any affiliated, consolidated, combined or
unitary group for purposes of filing Tax Returns or paying Taxes other than
the group of which it is presently a member;
(xiii) To the best knowledge of the Company, immediately following the
Merger, none of the Retained Companies will have any material amount of
income or gain that has been deferred under Treasury Regulation Section
1.1502-13, or any material excess loss account in another Retained Company
under Treasury Regulation Section 1.1502-19; and
(xiv) The Company is not aware of any action that it has taken which
would disqualify the Company Distribution as a transaction described in
Section 355 of the Code and/or as part of a transaction described in
Section 368(a)(1)(D) of the Code or disqualify the Merger as a
"reorganization" within the meaning of Section 368(a)(1)(B) of the Code.
(xv) There are no material undisclosed liabilities in respect of the
Benefits Plans that individually or in the aggregate would have a material
adverse effect on the GBC Companies.
(n) Voting Requirements. The Company Stockholder Approval is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve and adopt this Agreement and approve the other
Transaction Agreements and the transactions contemplated hereby and
thereby.
(o) State Takeover Statutes. The Board of Directors of the Company
has approved the terms of this Agreement and the other Transaction
Agreements and the consummation of the Merger and the other transactions
contemplated by this Agreement and the other Transaction Agreements
(solely, in the case of the Stockholder Agreement, for the purpose of
rendering Section 203 of the DGCL inapplicable to the Merger and the other
transactions contemplated hereby), and such approval is sufficient to
render inapplicable to the Merger and the other transactions contemplated
by this Agreement and the other Transaction Agreements the provisions of
Section 203 of the DGCL. To the best of the Company's knowledge, no other
state takeover statute or similar statute or regulation applies or purports
to apply to the Merger, this Agreement, the other Transaction Agreements or
any of the transactions contemplated by this Agreement or the other
Transaction Agreements and no provision of the Restated Certificate of
Incorporation or Restated By-laws of the Company or certificate of
incorporation or by-laws (or comparable organizational documents) of any
Retained Subsidiary or any GBC Company would, directly or indirectly,
restrict or impair the ability of Parent to vote, or otherwise to exercise
the rights of a stockholder with respect to, shares of any Retained Company
that may be acquired or controlled by Parent.
(p) Labor Matters. Neither the Company nor any of the Retained
Subsidiaries is the subject of any suit, action or proceeding which is
pending or, to the knowledge of the Company, threatened, asserting that the
Company or any Retained Subsidiary has committed an unfair labor practice
(within the meaning of the National Labor Relations Act or applicable state
statutes) or seeking to compel the Company or any Retained Subsidiary to
bargain with any labor organization as to wages and conditions of
employment, in any such case, that is reasonably expected to result in a
material liability of the Retained Companies. No strike or other labor
dispute involving the Company or any of the Retained Subsidiaries is
pending or, to the knowledge of the Company, threatened, and, to the
knowledge of the Company, there is no activity involving any employees of
the Company or its subsidiaries who, as of the Effective Time, will be
Retained Employees seeking to certify a collective bargaining unit or
engaging in any other organizational activity, except for any such dispute
or activity which would not have a material adverse effect on the Retained
Companies. Except as set forth in Section 4.01(p) of the Company Disclosure
Schedule, neither the Company nor any of the Retained Subsidiaries is a
party to, or bound by, any collective bargaining agreement or other
Contract with a labor union or labor organization. The Company and the
Retained Subsidiaries have complied in all material respects with all laws
relating to wages, hours, collective bargaining and the payment of social
security and similar Taxes, and no person has, to the knowledge of the
Company, asserted that the Company or any Retained Subsidiary is liable in
any material amount for any arrears of wages or any Taxes or penalties for
failure to comply with any of the foregoing.
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(q) Brokers. No broker, investment banker, financial advisor or other
person, other than Merrill Lynch & Co., the fees and expenses of which will
be paid by GBC, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated by the Transaction Agreements based upon arrangements made by
or on behalf of the Company or any of its subsidiaries. The Company has
furnished to Parent true and complete copies of all agreements under which
any such fees or expenses may be payable and all indemnification and other
agreements related to the engagement of the persons to whom such fees may
be payable.
(r) Opinion of Financial Advisor. The Company has received the
opinion of Merrill Lynch & Co., dated the date of this Agreement, to the
effect that, as of such date, the consideration to be received by the
Company's stockholders in the Merger is fair to such stockholders from a
financial point of view, and a signed copy of such opinion has been
delivered to Parent.
(s) Compliance with Applicable Laws. The Company and its subsidiaries
have, and as of the Effective Time each of the Retained Companies will
have, in effect all Permits necessary for them to own, lease or operate
their properties and assets and to carry on the Retained Business as now
conducted, and there has occurred no default under any such Permit, except
for the lack of Permits and for defaults under Permits which lack or
defaults individually or in the aggregate would not have a material adverse
effect on the Retained Companies. Except as disclosed in the Filed SEC
Documents, the Company and its subsidiaries are in compliance with all
judgments, orders, decrees, statutes, laws, ordinances, rules and
regulations of any Governmental Entity applicable to them, except for
possible noncompliance which individually or in the aggregate would not
have a material adverse effect on the Retained Companies or on the GBC
Companies or impair the ability of the Retained Companies or the GBC
Companies, as the case may be, to consummate the transactions contemplated
by, or to satisfy their obligations under, the Transaction Agreements.
Nothing in this Section 4.01(s) shall relate to compliance with or Permits
under Environmental Laws (as defined in Section 4.01(t)), which is the
subject of Section 4.01(t).
(t) Environmental Matters. (i) Except as disclosed in the Filed SEC
Documents, the Company and its subsidiaries are in compliance with all
applicable Environmental Laws, which compliance includes the pos session of
permits and governmental authorizations re quired under applicable
Environmental Laws ("Environmental Permits") and compliance with the terms
and conditions thereof, in each case with respect to the Retained Business,
except where such non-compliance individually or in the aggregate would not
result in a material adverse effect on the Retained Companies.
(ii) Except as disclosed in the Filed SEC Documents or as set forth in
Schedule 4.01(t) of the Company Disclosure Schedule, there are no
Environmental Claims (as defined below) pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries, in each
case with respect to the Retained Business, that would reasonably be
expected to result in a material adverse effect on the Retained Companies.
(iii) Except as disclosed in the Filed SEC Documents or as set forth
in Section 4.01(t) of the Company Disclosure Schedule, the properties
presently or, to the knowledge of the Company, formerly owned, leased or
operated by the Company or its subsidiaries (including groundwater under
the properties) (the "Properties") do not contain any Hazardous Substance
(as defined below) other than as permitted under applicable Environmental
Law, do not, and have not, contained any underground storage tanks and have
not been used as a disposal site; provided, however, that with respect to
Properties formerly owned, leased or operated by the Company or its
subsidiaries, such representation is limited to the period prior to the
disposition of such Properties by the Company or its subsidiaries;
(iv) Except as disclosed in the Filed SEC Documents or as set forth in
Section 4.01(t) of the Company Disclosure Schedule, no Hazardous Substance
has been disposed of or transported from any of the Properties during the
time any such Property was owned, leased or operated by the Company or any
of its subsidiaries, other than as permitted under applicable Environmental
Law;
(v) Except as disclosed in the Filed SEC Documents or as set forth in
Section 4.01(t) of the Company Disclosure Schedule, the Company and the
Retained Subsidiaries have not become obligated,
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whether by operation of law or through contractual agreement, to indemnify
any other person or otherwise to assume liability for any claim brought
pursuant to any Environmental Law;
(vi) Except as disclosed in the Filed SEC Documents or as set forth in
Section 4.01(t) of the Company Disclosure Schedule, all rights to
contractual indemnification for the benefit of the Company or any Retained
Subsidiary relating to any Retained Liability resulting from any claim
under Environmental Law are freely transferable and enforceable in
connection with the Merger; and
(vii) As used in this Agreement:
(A) the term "Environmental Claim" means any claim, action,
investigation or written notice to the Company or any of its
subsidiaries by any person alleging potential liability (including, with
out limitation, potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resource damages, personal
injuries or penalties) arising out of, based on or resulting from (a)
the presence, or release into the environment, of any Hazardous
Substance at any location, whether or not owned or operated by the
Company or any of its subsidiaries or (b) circumstances forming the
basis of any violation or alleged violation of any applicable
Environmental Law;
(B) the term "Environmental Laws" means all federal, state and
local, domestic and foreign, laws and regulations, as in effect and as
interpreted as of the date of this Agreement, relating to pollution,
protection of the environment, including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Substances, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances; and
(C) the term "Hazardous Substance" means chemicals, pollutants,
contaminants, hazardous wastes, toxic substances, polychlorinated
biphenyls, radon, asbestos and oil and petroleum products, by-products
and fractions.
(u) Intellectual Property. As used herein, "Intellectual Property"
means domestic and foreign patents, patent applications, written invention
disclosures to be filed or awaiting filing determinations, trademark and
service mark applications, registered trademarks, registered service marks,
registered copyrights, trademarks, service marks and trade names. Section
4.01(u) of the Company Disclosure Schedule sets forth a list of all
material registered Intellectual Property in which the Company or any of
its subsidiaries has an interest as of the date hereof and which is used in
connection with the Retained Business as currently conducted. Except as set
forth in Section 4.01(u) of the Company Disclosure Schedule, the Company
and its subsidiaries own or have the right to use, and as of the Effective
Time the Retained Companies will own or have the right to use, all material
Intellectual Property and material trade secrets, inventions, know-how,
formulae, processes, procedures, research records, computer software (other
than any licensed third party software), records of inventions, test
information, market surveys, marketing know-how and unregistered copyrights
("Technology") used in connection with the Retained Business as currently
conducted. The Company and its subsidiaries have used commercially
reasonable measures to protect the secrecy, confidentiality and value of
any Technology used in connection with the Retained Business. To the
Company's knowledge, no Technology used in connection with the Retained
Business has been used, divulged or appropriated for the benefit of any
person other than the Retained Companies, except where such use, divulgence
or appropriation would not individually or in the aggregate have a material
adverse effect on the Retained Companies. Except as set forth in Section
4.01(u) of the Company Disclosure Schedule, as of the date hereof, neither
the Company nor any of its subsidiaries has made any pending claim in
writing of a violation, infringement, misuse or misappropriation by others
of rights of the Company and its subsidiaries to or in connection with any
material Intellectual Property or Technology used in connection with the
Retained Business. There are no interferences or other contested inter
partes proceedings, either pending or, to the knowledge of the Company,
threatened, in any domestic copyright office, patent and trademark office
or any other domestic Governmental Entity relating to any pending
application with respect to any material Intellectual Property used in
connection with the Retained Business that would have a material adverse
effect on the Retained Companies. As used in this Section 4.01(u), the term
"material", when applied to Intellectual
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Property or Technology, means that the Intellectual Property or Technology,
as the case may be, is used in a significant manner to conduct the Retained
Business as it is currently conducted.
(v) Contracts. Except for (w) Contracts executed by Parent or one of
its subsidiaries on behalf of the Company or a subsidiary of the Company,
(x) Contracts the parties to which consist solely of Parent or any of its
subsidiaries, on the one hand, and the Company or any of its subsidiaries,
on the other hand, (y) the Transaction Agreements or (z) as set forth in
Section 4.01(v) of the Company Disclosure Schedule, neither the Company nor
any of its subsidiaries with respect to the Retained Business is, and none
of the Retained Companies will be as of the Effective Time, a party to or
bound by any of the following:
(i) employment Contract that has an aggregate future liability in
excess of $100,000 and is not terminable by one of the Retained Companies
by notice of not more than 60 days for a cost of less than $100,000;
(ii) covenant not to compete (other than pursuant to any radius
restriction contained in any lease, reciprocal easement or development,
construction, operating or similar agreement);
(iii) Contract with any current or former employee, officer or
director of the Company or any of its subsidiaries (other than employment
agreements covered by clause (i) above);
(iv) lease, sublease or similar agreement with any person (other than
any of the Retained Companies) under which any of the Retained Companies is
a lessor or sublessor of, or makes available for use to any person (other
than the Retained Companies), (A) any property of the Retained Companies or
(B) any portion of the premises otherwise occupied by any of the Retained
Companies;
(v) lease, sublease or similar agreement with any person (other than
any of the Retained Companies) under which (A) any of the Retained
Companies is a lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible personal property owned by any person or (B) any
of the Retained Companies is a lessor or sublessor of, or makes available
for use by any person, any tangible personal property owned or leased by
any of the Retained Companies, in any such case which has an aggregate
future liability or receivable, as the case may be, in excess of $50,000
and is not terminable by one of the Retained Companies by notice of not
more than 60 days for a cost of less than $50,000;
(vi) (A) continuing Contract for the future purchase of materials,
supplies or equipment, (B) management, service, consulting or other similar
type of Contract or (C) advertising Contract, in any such case which has an
aggregate future liability to any person (other than any of the Retained
Companies) in excess of $50,000 and is not terminable by one of the
Retained Companies by notice of not more than 60 days for a cost of less
than $50,000;
(vii) material license, option or other Contract relating in whole or
in part to the Intellectual Property set forth in Section 4.01(u) of the
Company Disclosure Schedule or other material trademarks or copyrights or
computer software used primarily in connection with the Retained Business
as currently conducted (other than licenses for the use of readily
available, off-the-shelf software);
(viii) Contract under which any of the Retained Companies has borrowed
any money from, or issued any note, bond, debenture or other evidence of
indebtedness to, any person (other than any of the Retained Companies) or
any other note, bond, debenture or other evidence of indebtedness issued to
any person (other than any of the Retained Companies);
(ix) Contract (including so-called take-or-pay or keepwell agreements)
under which (A) any person (including any of the Retained Companies) has
directly or indirectly guaranteed indebtedness, liabilities or obligations
of any of the Retained Companies or the GBC Companies or (B) any of the
Retained Companies has directly or indirectly guaranteed indebtedness,
liabilities or obligations of any person (in each case other than
endorsements for the purpose of collection in the ordinary course of
business);
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(x) Contract under which any of the Retained Companies has, directly
or indirectly, made any loan, advance, extension of credit or capital
contribution to, or investment in, any person (other than any of the
Retained Companies and other than to officers and employees of the Retained
Companies for travel, business or relocation expenses in the ordinary
course of business);
(xi) mortgage, pledge, security agreement, deed of trust or other
instrument granting a Lien upon any property of any of the Retained
Companies;
(xii) Contract under which any of the Retained Companies is or may
become obligated to indemnify any other person (other than any of the
Retained Companies) or otherwise to assume any material liability with
respect to liabilities relating to any current or former business of the
Company, any of its subsidiaries or any predecessor person;
(xiii) programming agreement that has an aggregate future liability
that the Retained Companies are obligated to pay in excess of $75,000; or
(xiv) other Contract which has an aggregate future liability to any
person (other than the Retained Companies) in excess of $75,000 and is not
terminable by one of the Retained Companies by notice of not more than 60
days for a cost of less than $75,000.
Except as set forth in Section 4.01(v) of the Company Disclosure Schedule
and subject to obtaining the consents set forth in Section 4.01(d) of the
Company Disclosure Schedule, all Contracts listed in Section 4.01(v) of the
Company Disclosure Schedule are valid, binding and in full force and effect
and are enforceable by the Company or its relevant subsidiary (and, at the
Effective Time, will be enforceable by one of the Retained Companies) in
accordance with its terms. The Company and its subsidiaries have performed
all material obligations required to be performed by them to date under the
Contracts listed in the Company Disclosure Schedule and they are not (with
or without the lapse of time or the giving of notice, or both) in breach or
default in any material respect thereunder and, to the knowledge of the
Company, no other party to any of the Contracts listed in the Company
Disclosure Schedule is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder.
(w) Tax Representations. The Company does not have any reason to
believe that it or any of its subsidiaries will not be able to give
appropriate representations (i) to the Internal Revenue Service necessary
to receive the Tax Rulings or (ii) to Skadden, Arps, Slate, Meagher & Flom
LLP, counsel to the Company, and to Cravath, Swaine & Moore, counsel to
Parent, if opinions of counsel will be received in lieu of any Merger
Ruling pursuant to Section 7.01(g).
SECTION 4.02. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Except as
set forth with respect to a specifically identified representation and warranty
on the disclosure schedule delivered by Parent to the Company simultaneously
with the execution of this Agreement (the "Parent Disclosure Schedule"), Parent
and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and
Sub is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated. Each of
Parent and Sub is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to
be so qualified or licensed or to be in good standing individually or in
the aggregate would not have a material adverse effect on Parent and its
subsidiaries. Each of Parent and Sub has the requisite corporate power and
authority to carry on its businesses as they are now being conducted.
Parent has delivered or made available to the Company prior to the
execution of this Agreement complete and correct copies of its Restated
Articles of Incorporation and By-laws and the Certificate of Incorporation
and By-laws of Sub, in each case as amended to the date hereof.
(b) Capital Structure. The authorized capital stock of Parent
consists of 1,100,000,000 shares of Parent Common Stock and 25,000,000
shares of preferred stock, par value $1.00 per share ("Parent
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Preferred Stock"). At the close of business on January 31, 1997, (i)
607,377,291 shares of Parent Common Stock were issued and outstanding, (ii)
3,600,000 shares of Parent Preferred Stock, all denominated as Series C
Conversion Preferred Stock, were issued and outstanding, (iii) 3,152,752
shares of Parent Common Stock were held by Parent in its treasury, (iv)
88,147,350 shares of Parent Common Stock were reserved for issuance
pursuant to Parent's 1993 Long Term Incentive Plan, Parent's 1991 Long Term
Incentive Plan, Parent's 1984 Long Term Incentive Plan and Parent's
Deferred Compensation and Stock Plan for Directors and other stock-based
plans and agreements (the "Parent Stock Plans"), (v) 36,000,000 shares of
Parent Common Stock were reserved for issuance upon conversion of the
Series C Conversion Preferred Stock and (vi) 5,000,000 shares of Parent
Preferred Stock, all denominated as Series A Participating Preferred Stock
(subject to increase and adjustment as set forth in the Rights Agreement
(as defined below) and the Certificate of Designations attached as an
exhibit thereto) were reserved for issuance in connection with the rights
(the "Rights") to purchase shares of Parent Preferred Stock pursuant to the
Rights Agreement dated as of December 28, 1995, between Parent and First
Chicago Trust Company of New York, as Rights Agent (the "Rights
Agreement"). Except as set forth above, at the close of business on January
31, 1997, no shares of capital stock or other voting securities of Parent
were issued, reserved for issuance or outstanding. All outstanding shares
of capital stock of Parent are, and all shares which may be issued pursuant
to this Agreement will be, when issued, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights. At the
close of business on January 31, 1997, there were no notes, bonds,
debentures or other indebtedness of Parent having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote)
on any matters on which shareholders of Parent may vote. Except as set
forth above or as otherwise contemplated by this Agreement, at the close of
business on January 31, 1997, there were no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Parent is a party or by which it is bound
obligating Parent to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of Parent or obligating Parent to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. At the close of business on January
31, 1997, there were no outstanding contractual obligations of Parent to
repurchase, redeem or otherwise acquire any shares of capital stock of
Parent. As of the date of this Agreement, the authorized capital stock of
Sub consists of 1,000 shares of common stock, par value $1.00 per share,
all of which have been validly issued, are fully paid and nonassessable and
are owned by Parent free and clear of any Lien.
(c) Authority; Noncontravention. Each of Parent and Sub has the
requisite corporate power and authority to execute, deliver and perform
each Transaction Agreement to which it is or will be a party and to
consummate the transactions contemplated thereby. The execution, delivery
and performance by Parent and Sub of each Transaction Agreement to which it
is or will be a party and the consummation by Parent and Sub of the
transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of Parent and Sub, and no other
corporate proceedings on the part of Parent or Sub are necessary to
authorize any Transaction Agreement to which it is or will be a party or
for Parent or Sub to consummate the transactions so contemplated (other
than, if required by the applicable rules of the NYSE, the affirmative vote
of the holders of a majority of the votes cast at the Parent Shareholders
Meeting to authorize the issuance of Parent Common Stock in connection with
the Merger, provided that the total number of votes cast at the Parent
Shareholders Meeting on the proposal represents more than 50% of the
outstanding shares of Parent Common Stock entitled to vote generally in an
annual election of directors (the "Parent Shareholder Approval")). This
Agreement has been duly executed and delivered by Parent and Sub and the
Stockholder Agreement has been duly executed and delivered by Parent and,
assuming this Agreement and the Stockholder Agreement constitute a valid
and binding obligation of the Company or the Principal Stockholders, as
applicable, each constitutes a valid and binding obligation of Parent and
Sub, as applicable, enforceable against Parent and Sub, as applicable, in
accordance with its terms. Each Transaction Agreement (other than this
Agreement and the Stockholder Agreement) to which Parent will be a party
when executed and delivered will, assuming that such Transaction Agreement
will constitute a valid and binding obligation of each Retained Company or
GBC Company
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party thereto, constitute a valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms. None of the
execution, delivery or performance by Parent and Sub of each Transaction
Agreement to which either of them is or will be a party or the consummation
by Parent and Sub of the transactions contemplated thereby will conflict
with, or result in a violation or breach of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, amendment, cancellation or acceleration of any obligation or
loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of Parent, Sub or any of Parent's
other subsidiaries under, (i) the Restated Articles of Incorporation or
By-laws of Parent, the Certificate of Incorporation or By-laws of Sub or
the certificate of incorporation or by-laws (or comparable organizational
documents) of such other subsidiary, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease, contract or other agreement,
instrument, license, franchise, permit or concession applicable to Parent,
Sub or such other subsidiary or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Sub or such other
subsidiary or their respective properties or assets, other than, in the
case of clauses (ii) and (iii), any such conflicts, violations, breaches,
defaults, rights or Liens that individually or in the aggregate would not
(x) have a material adverse effect on Parent and its subsidiaries, (y)
impair in any material respect the ability of Parent and Sub to consummate
the transactions contemplated by, or to satisfy their obligations under,
the Transaction Agreements or (z) delay in any material respect or prevent
the consummation of any of the transactions contemplated by the Transaction
Agreements. Except for consents, approvals, orders, authorizations,
registrations, declarations or filings as may be required under, and other
applicable requirements of, the Exchange Act, the Securities Act, the HSR
Act and any foreign competition laws, filings under state securities or
"blue sky" laws, filings with the NYSE, approvals of and filings with the
FCC under the Communications Act and the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other jurisdictions in which the
Company is qualified to do business and other consents, approvals, orders,
authorizations, registrations, declarations, filings and agreements
expressly provided for in the Transaction Agreements, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent or Sub in
connection with the execution, delivery or performance by Parent and Sub of
each Transaction Agreement to which either of them is or will be a party or
the consummation by Parent and Sub of the transactions contemplated thereby
(except where the failure to obtain such consents, approvals, orders or
authorizations, or to make such registrations, declarations or filings,
would not, individually or in the aggregate, have a material adverse effect
on Parent and its subsidiaries or impair the ability of Parent and Sub to
consummate the transactions contemplated by, or to satisfy their
obligations under, the Transaction Agreements).
(d) SEC Documents; Undisclosed Liabilities. Parent has filed all
reports, schedules, forms, statements and other documents required to be
filed by it with the SEC since January 1, 1995 (the "Parent SEC
Documents"). As of their respective dates, the Parent 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 promulgated thereunder applicable to such Parent SEC Documents,
and none of the Parent SEC Documents when filed contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Except to the extent that information contained in any Parent SEC Document
has been revised or superseded by a later filed Parent SEC Document, none
of the Parent SEC Documents contains any untrue statement of a material
fact or omits 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 were made, not misleading. The financial
statements of Parent included in the Parent SEC Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material
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respects the consolidated financial position of Parent and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the Filed Parent SEC Documents (as defined in Section
4.02(f)), and except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since the date of
the most recent consolidated balance sheet included in the Filed Parent SEC
Documents, neither Parent nor any of its subsidiaries has any material
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be recognized or disclosed on
a consolidated balance sheet of Parent and its consolidated subsidiaries or
in the notes thereto.
(e) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Registration Statements will, at the time they become
effective under the Securities Act or the Exchange Act, as applicable, at
the time of any post-effective amendments or supplements thereto, at the
Effective Time and at the time of the Parent Shareholders Meeting, if
applicable, in the case of the Parent Form S-4, or at the time of the
Company Stockholders Meeting and the Time of Distribution, in the case of
the GBC Form 10, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, or (ii) the Proxy
Statement-Prospectus will, at the date it is first mailed to the Company's
stockholders or, if applicable, Parent's shareholders, or at the time of
the Company Stockholders Meeting or, if applicable, the Parent 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. The Parent Form S-4 will comply as to form in all
material respects with the requirements of the Securities Act and the rules
and regulations thereunder, and, if the Parent Shareholder Approval is
required, the Proxy Statement-Prospectus will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made
by Parent or Sub with respect to statements made or incorporated by
reference in the Parent Form S-4 or the Proxy Statement-Prospectus based on
information supplied by the Company specifically for inclusion or
incorporation by reference therein.
(f) Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Documents filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the "Filed Parent SEC
Documents"), in connection with the Parent Distribution or as otherwise
expressly contemplated by the Transaction Agreements, since the date of the
most recent audited financial statements included in the Filed Parent SEC
Documents, there has not been any event, change or development which
individually or in the aggregate has had or would reasonably be expected to
have a material adverse effect on Parent and its subsidiaries or impair the
ability of Parent and Sub to consummate the transactions contemplated by,
or to satisfy their obligations under, the Transaction Agreements.
(g) Litigation. Except as disclosed in the Filed Parent SEC
Documents, there is no suit, action, proceeding or investigation pending
or, to the knowledge of Parent, threatened against or affecting Parent or
any of its subsidiaries that individually or in the aggregate would
reasonably be expected to (i) have a material adverse effect on Parent and
its subsidiaries, (ii) impair the ability of Parent and Sub to consummate
the transactions contemplated by, or to satisfy their obligations under,
the Transaction Agreements or (iii) delay in any material respect or
prevent the consummation of any of the transactions contemplated by the
Transaction Agreements, nor is there any judgment, order, decree, statute,
law, ordinance, rule or regulation of any Governmental Entity or arbitrator
outstanding against Parent or any of its subsidiaries having, or which
would reasonably be expected to have, any effect referred to in clause (i),
(ii) or (iii) above.
(h) Taxes. (i) All federal, state and local, domestic and foreign,
material Tax Returns required to be filed by or on behalf of any of Parent
or any of its subsidiaries, or any consolidated, combined, affiliated or
unitary group of which any of Parent or any of its subsidiaries is or has
ever been a member, have been
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timely filed or requests for extensions have been timely filed and any such
extensions have been granted and have not expired;
(ii) Each such Tax Return was complete and correct in all material
respects;
(iii) All material Taxes with respect to taxable periods covered by
such Tax Returns and all other material Taxes for which any of Parent or
any of its subsidiaries are liable have been paid in full, or reserves
therefor have been established in accordance with GAAP on the balance sheet
contained in the Parent Filed SEC Documents; and
(iv) Parent is not aware of any action that it or any of its
subsidiaries has taken which would disqualify the Company Distribution as a
transaction described in Section 355 of the Code and/or as part of a
transaction described in Section 368(a)(1)(D) of the Code or disqualify the
Merger as a "reorganization" within the meaning of Section 368(a)(1)(B) of
the Code.
(i) Voting Requirements. If required by the applicable rules of the
NYSE, the Parent Shareholder Approval is the only vote of the holders of
any class or series of Parent's capital stock necessary to authorize the
issuance of Parent Common Stock in connection with the Merger.
(j) Brokers. No broker, investment banker, financial advisor or other
person, other than Evercore Partners Inc., the fees and expenses of which
will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by the Transaction Agreements based upon
arrangements made by or on behalf of Parent or Sub.
(k) Compliance with Applicable Laws. Parent and its subsidiaries have
in effect all Permits necessary for them to own, lease or operate their
properties and assets and to carry on their businesses as now conducted,
and there has occurred no default under any such Permit, except for the
lack of Permits and for defaults under Permits which lack or defaults
individually or in the aggregate would not have a material adverse effect
on Parent and its subsidiaries. Except as disclosed in the Filed Parent SEC
Documents, Parent and its subsidiaries are in compliance with all
judgments, orders, decrees, statutes, laws, ordinances, rules and
regulations of any Governmental Entity applicable to them, except for
possible noncompliance which individually or in the aggregate would not
have a material adverse effect on Parent and its subsidiaries.
(l) Tax Representations. Parent does not have any reason to believe
that it or any of its subsidiaries will not be able to give appropriate
representations (i) to the Internal Revenue Service necessary to receive
the Tax Rulings or (ii) to Skadden, Arps, Slate, Meagher & Flom LLP,
counsel to the Company, and to Cravath, Swaine & Moore, counsel to Parent,
if opinions of counsel will be received in lieu of any Merger Ruling
pursuant to Section 7.01(g).
(m) Interim Operations of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby and has engaged in no
other business other than incident to its creation and this Agreement and
the transactions contemplated hereby.
(n) Ownership of Company Common Stock. As of the date of this
Agreement, none of Parent or any of its subsidiaries own any shares of
capital stock of the Company.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. CONDUCT OF BUSINESS. (a) Conduct of Business by the Company.
During the period from the date of this Agreement to the Effective Time, the
Company shall, and shall cause its subsidiaries to, carry on the Retained
Business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted (including, without limitation, not taking any
actions out of the ordinary course of business to generate cash, such as
delaying payables or accelerating receivables) and in compliance in all material
respects with all applicable laws and regulations and, to the extent consistent
therewith, use all reasonable efforts to preserve intact the current business
organizations of the Retained Business, use reasonable efforts to
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keep available the services of the current officers and other key employees of
the Retained Business and preserve its relationships with those persons having
business dealings with the Retained Business to the end that the goodwill and
ongoing businesses of the Retained Business shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing, during the period from
the date of this Agreement to the Effective Time, the Company agrees as to
itself and its subsidiaries that except for the Restructuring and the Company
Distribution or as otherwise expressly contemplated by the Transaction
Agreements:
(i) Dividends. The Company and its subsidiaries shall not (x)
declare, set aside or pay any dividends or other distributions (whether in
cash, stock or property) with respect to any of the Company s capital
stock, other than regular quarterly cash dividends or (y) split, combine or
reclassify any of the Company's capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock.
(ii) Issuance of Securities. The Company and its subsidiaries shall
not issue, deliver, sell, pledge or otherwise encumber any shares of
capital stock of any of the Retained Companies, any other voting securities
or any securities convertible into, or any options, warrants or rights to
acquire, any such shares, voting securities or convertible securities
(other than (x) the issuance of Company Class A Common Stock upon the
exercise of Employee Stock Options outstanding on the date of this
Agreement and in accordance with their present terms and (y) the issuance
of Company Class A Common Stock pursuant to the conversion of Company Class
B Common Stock in accordance with the terms of the Company's Restated
Certificate of Incorporation, but only if such conversion does not involve
a violation of the Stockholder Agreement).
(iii) Governing Documents. The Company shall not amend its Restated
Certificate of Incorporation or Restated By-laws, nor shall it permit any
Retained Subsidiary to amend its certificate of incorporation, by-laws or
other comparable organizational documents.
(iv) No Acquisitions. The Company and the Retained Subsidiaries shall
not acquire or agree to acquire (x) by merging or consolidating with, or by
purchasing a substantial portion of the capital stock or assets of, or by
any other manner, any business or any corporation, limited liability
company, partnership, joint venture, association or other business
organization or division thereof, (y) any assets that individually or in
the aggregate are material to the Retained Business or (z) any Trust
Certificates (as defined in the Stockholder Agreement).
(v) No Dispositions. The Company and its subsidiaries shall not sell,
lease, license, or otherwise encumber or subject to any Lien or otherwise
dispose of any of the properties or assets of the Retained Business, other
than in the ordinary course of business consistent with past practice or
pursuant to existing contractual obligations set forth in the Company
Disclosure Schedule.
(vi) Indebtedness. The Company and the Retained Subsidiaries shall
not (x) incur any indebtedness except in the case of the Company for
indebtedness incurred in the ordinary course of business consistent with
past practice which is either repaid or retired prior to the Effective Time
or which becomes an Assumed Liability pursuant to the terms of the
Distribution Agreement or (y) make any loans, advances, extensions of
credit or capital contributions to, or investments in, any other person,
other than to officers and employees of the Retained Companies for travel,
business or relocation expenses in the ordinary course of business and
other than investments in any entity that was a wholly owned Retained
Subsidiary before giving effect to such investment.
(vii) Capital Expenditures. During the period from the date of this
Agreement to the Closing Date, the Company and its subsidiaries will
continue to make capital expenditures with respect to the Retained Business
in the ordinary course of business (other than with respect to additional
NASCAR Thunder retail stores) in an amount of up to $14,599,903 (in
accordance with Schedule 5.01(a)(vii) hereto) on an annualized basis (the
"Total Expenditure Amount; any portion of the Total Expenditure Amount not
spent during the period from January 1, 1997 to the Closing Date is
referred to herein as the "Unspent Amount"); provided, however, that the
Company and its subsidiaries shall not make or agree to make any capital
expenditure or capital expenditures relating to a single project in excess
of $100,000 without
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the prior written consent of Parent. The Company and its subsidiaries shall
(A) make all capital expenditures necessary to complete the build-out and
opening of the NASCAR Thunder retail store to be located in Cincinnati and
(B) make such capital expenditures as Parent requests related to the
acquisition of leases for, or the build-out and opening of, other NASCAR
Thunder retail stores (such capital expenditures made in connection with
this clause (B), the "NASCAR Expenditures"), and in each case such capital
expenditures shall not be included in the calculation of the Total
Expenditure Amount or of the Unspent Amount.
(viii) Tax Matters. With respect to the Retained Companies, the
Company and its subsidiaries shall not make any Tax election that would
reasonably be expected to have a material adverse effect on the Retained
Companies or settle or compromise any material income Tax liability.
(ix) Contracts. The Company and its subsidiaries shall not enter into
any programming agreements with a term of more than one year to which any
Retained Company will be a party or subject. Except in the ordinary course
of business or except as would not reasonably be expected to have a
material adverse effect on the Retained Companies, the Company and the
Retained Subsidiaries shall not modify, amend or terminate any material
Contract to which the Company or any Retained Subsidiary is, or at the
Effective Time will be, a party or waive, release or assign any material
rights or claims thereunder.
(x) Employee Matters. Except as required by law or in the ordinary
course of business consistent with past practice, the Company will not, nor
will it permit any of its subsidiaries to, (i) increase the compensation of
any Retained Employee, (ii) enter into any Contract with any Retained
Employee regarding his employment, compensation or benefits, or (iii) adopt
any plan, arrangement or policy which would become a Benefit Plan or amend
any Benefit Plan to the extent such adoption or amendment would create or
increase any material liability or obligation on the part of the Retained
Companies that will not either (x) be fully performed or satisfied prior to
the Effective Time or (y) be an Assumed Liability pursuant to the
Distribution Agreement.
(xi) Accounting Policies and Procedures. The Company and the Retained
Subsidiaries shall not make any change to their accounting methods,
principles or practices, except as may be required by GAAP or Regulation
S-X promulgated by the SEC or as relates only to the GBC Companies.
(xii) Company Distribution and Merger. The Company and its
subsidiaries shall not take or cause or permit to be taken any action prior
to the Effective Time that would disqualify the Company Distribution as a
transaction described in Section 355 of the Code or disqualify the Merger
as a "reorganization" within the meaning of Section 368(a)(1)(B) of the
Code. The Company shall use reasonable efforts to do everything reasonably
necessary to have the Company Distribution and the Merger qualify as
aforesaid.
(xiii) Liens. The Company shall not, and shall not permit any of its
subsidiaries to, create, incur, suffer to exist or assume any Lien on any
Retained Asset, except for Permitted Liens.
(xiv) Maintenance of Properties. The Company and the Retained
Subsidiaries shall continue to maintain and repair all property material to
the operation of the Retained Business in a manner consistent with past
practice.
(xv) Intercompany Transfers. The Company shall (i) not engage in or
allow transfers of assets or liabilities or engage or enter into other
transactions between any of the Retained Companies, on the one hand, and
any of the GBC Companies, on the other hand, except as contemplated by the
Distribution Agreement, (ii) from and after the time of execution of any
Transaction Agreement, abide and cause the GBC Companies to abide by their
respective obligations under such Transaction Agreements and (iii) not
terminate or amend, or waive compliance with any obligations under, the
Distribution Agreement; provided that nothing herein shall prohibit
transfers of cash between the Retained Companies and the GBC Companies, so
long as such transfers are properly recorded on the intercompany accounts
of the Retained Companies.
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(xvi) No Change in Nature of Business. The Company and its
subsidiaries shall not make any change in their lines of business as of the
date hereof that would, based on the facts and circumstances and conduct of
the particular business, materially increase the potential liability of any
of the Retained Companies under statutes or legal doctrines permitting the
imposition of liability on a parent corporation in respect of the
liabilities of its subsidiaries.
(xvii) Authorizations. The Company and its subsidiaries shall not
authorize, or commit or agree to take, any of the foregoing actions.
Notwithstanding anything in this Agreement to the contrary, the Company shall
cause the Closing Working Capital (as defined in the Post-Closing Covenants
Agreement) of the Retained Business to be positive as of the Effective Time.
(b) Actions by Parent. During the period from the date of this Agreement
to the Effective Time, Parent and its subsidiaries shall not take or cause or
permit to be taken any action that would disqualify the Company Distribution as
a transaction described in Section 355 of the Code or disqualify the Merger as a
"reorganization" within the meaning of Section 368(a)(1)(B) of the Code. Parent
shall use reasonable efforts to do everything reasonably necessary to have the
Company Distribution and the Merger qualify as aforesaid.
(c) Other Acquisitions. During the period from the date of this Agreement
to the Effective Time, Parent and its subsidiaries shall not make any material
acquisitions except as previously discussed with the Company.
(d) Certain Services. During the period from the date of this Agreement to
the Effective Time, Parent shall continue to provide advertising sales services
and billing, collection and cash management services to the Company and its
subsidiaries that it is currently providing consistent with past practice.
(e) Other Actions. During the period from the date of this Agreement to
the Effective Time, the Company and Parent shall not, and shall not permit any
of their respective subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii) any
of the conditions to the Merger set forth in Article VII not being satisfied.
(f) Advice of Changes. The Company and Parent shall promptly advise the
other party orally and in writing of (i) any representation or warranty made by
it contained in this Agreement that is qualified as to materiality becoming
untrue or inaccurate in any respect or any such representation or warranty that
is not so qualified becoming untrue or inaccurate in any material respect, (ii)
the failure by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or (iii) any change or event (x) having, or which, insofar as can
reasonably be foreseen, would have, a material adverse effect on, in the case of
Parent, Parent and its subsidiaries and, in the case of the Company, the
Retained Companies or the GBC Companies, (y) having, or which, insofar as can
reasonably be foreseen, would have, the effect set forth in clause (i) above, or
(z) which has resulted, or which, insofar as can reasonably be foreseen, would
result, in any of the conditions set forth in Article VII not being satisfied;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
SECTION 5.02. NO SOLICITATION. (a) The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any
employee, officer or director of or any investment banker, attorney or other
advisor or representative of, the Company or any of its subsidiaries to,
directly or indirectly, (i) solicit, initiate or encourage the submission of any
takeover proposal (as defined below), (ii) enter into any agreement with respect
to any takeover proposal or give any approval of the type referred to in Section
4.01(o) with respect to any takeover proposal or (iii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any takeover proposal; provided, however, that nothing contained in the
preceding portion of this sentence shall prohibit the Company from taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
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sentence by any employee, officer or director of the Company or any of its
subsidiaries or any investment banker, attorney or other advisor or
representative of the Company or any of its subsidiaries, whether or not such
person is purporting to act on behalf of the Company or any of its subsidiaries
or otherwise, shall be deemed to be a breach of this Section 5.02(a) by the
Company. For purposes of this Agreement, "takeover proposal" means any proposal
for a merger, consolidation or other business combination involving the Company
or any of its subsidiaries or any proposal or offer to acquire in any manner,
directly or indirectly, an equity interest in or any voting securities of the
Company or any of its subsidiaries or a substantial portion of the assets of the
Company and its subsidiaries taken as a whole, other than the transactions
contemplated by this Agreement.
(b) Neither the Board of Directors of the Company nor any committee thereof
shall (x) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent, the approval or recommendation by such Board of Directors or
such committee of this Agreement or the Merger or (y) approve or recommend, or
propose to approve or recommend, any takeover proposal.
(c) The Company promptly shall advise Parent orally and in writing of any
request for information or of any takeover proposal or any inquiry with respect
to or which would reasonably be expected to lead to any takeover proposal, the
identity of the person making any such request, takeover proposal or inquiry and
all the terms and conditions thereof. The Company will keep Parent fully
informed of the status and details (including amendments or proposed amendments)
of any such request, takeover proposal or inquiry.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. PREPARATION OF THE REGISTRATION STATEMENTS AND THE PROXY
STATEMENT-PROSPECTUS; COMPANY STOCKHOLDERS MEETING; PARENT SHAREHOLDERS MEETING.
(a) As soon as reasonably practicable following the date of this Agreement,
Parent and the Company shall prepare and file with the SEC the Proxy Statement-
Prospectus, the Company shall prepare and file with the SEC the GBC Form 10 and
Parent shall prepare and file with the SEC the Parent Form S-4, in which the
Proxy Statement-Prospectus will be included as a prospectus (in each case
including the respective financial statements and pro forma financial statements
of the parties required to be set forth therein). Each of Parent and the Company
shall use all reasonable efforts to have the Registration Statements declared
effective under the Securities Act or the Exchange Act, as applicable, as
promptly as practicable after such filing. The Company will use all reasonable
efforts to cause the Proxy Statement-Prospectus to be mailed to the Company's
stockholders as promptly as practicable after it has been cleared by the SEC. If
the Parent Shareholder Approval is required by the applicable rules of the NYSE,
Parent will use all reasonable efforts to cause the Proxy Statement-Prospectus
to be mailed to Parent's shareholders as promptly as practicable after it has
been cleared by the SEC. Each of Parent and the Company shall also take any
action (other than qualifying to do business in any jurisdiction in which it is
not now so qualified or to file a general consent to service of process)
required to be taken under any applicable state securities laws in connection
with the issuance of New GBC Common Stock in connection with the Company
Distribution, in the case of the Company, and the issuance of Parent Common
Stock in connection with the Merger, in the case of Parent. The Company shall
furnish all information concerning the Company, its subsidiaries and the holders
of the Company Common Stock and Parent shall furnish all information concerning
Parent and its subsidiaries, in each case as may be reasonably requested in
connection with any such action.
(b) The Company will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Company Stockholders Meeting") for the purpose of obtaining
the Company Stockholder Approval. Without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to the first
sentence of this Section 6.01(b) shall not be affected by the commencement,
public proposal, public disclosure or communication to the Company of any
takeover proposal. The Company will, through its Board of Directors, recommend
to its stockholders the approval and adoption of this Agreement and the
transactions contemplated hereby.
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(c) If the Parent Shareholder Approval is required by the applicable rules
of the NYSE, Parent will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Parent Shareholders Meeting") for the purpose of obtaining
the Parent Shareholder Approval. If so required, Parent will, through its Board
of Directors, recommend to its shareholders the authorization of the issuance of
Parent Common Stock in connection with the Merger.
SECTION 6.02. LETTERS OF THE COMPANY'S ACCOUNTANTS. The Company shall use
all reasonable efforts to cause to be delivered to Parent letters of Arthur
Andersen LLP, the Company's independent public accountants, dated a date within
two business days before the date on which each Registration Statement shall
become effective and a letter of Arthur Andersen LLP dated a date within two
business days before the Closing Date, each addressed to Parent, in form and
substance reasonably satisfactory to Parent and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statements.
SECTION 6.03. LETTERS OF PARENT'S ACCOUNTANTS. Parent shall use all
reasonable efforts to cause to be delivered to the Company letters of KPMG Peat
Marwick LLP and Price Waterhouse LLP, Parent's independent public accountants
for the relevant periods prior to the date hereof, dated a date within two
business days before the date on which each Registration Statement shall become
effective and letters of KPMG Peat Marwick LLP and Price Waterhouse LLP dated a
date within two business days before the Closing Date, each addressed to the
Company, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statements.
SECTION 6.04. ACCESS TO INFORMATION; CONFIDENTIALITY. Subject to the
Confidentiality Agreement (as defined below) and upon reasonable notice, the
Company shall, and shall cause each of its subsidiaries to, (i) afford to
Parent, its subsidiaries and their employees, officers, accountants, counsel,
financial advisors and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to all of its
properties, books, Contracts, personnel and records relating to the Retained
Companies, the Retained Business, the Retained Assets or the Retained
Liabilities and (ii) furnish promptly to Parent all other information concerning
the business, properties and personnel of the Company and its subsidiaries as
Parent may reasonably request; provided, however, that such access shall not
unreasonably interfere with the normal operations of the Company and its
subsidiaries. During such period, each of Parent and the Company shall, and
shall cause each of its respective subsidiaries to, furnish promptly to the
other party a copy of each report, schedule, registration statement and other
document required to be filed by it during such period pursuant to the
requirements of U.S. Federal or state securities laws. Each of Parent and the
Company will hold, and will cause its respective employees, officers,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in accordance with the terms of
the Confidentiality Agreement dated as of January 8, 1997, between Parent and
the Company (the "Confidentiality Agreement").
SECTION 6.05. REASONABLE BEST EFFORTS. (a) Upon the terms and subject to
the conditions set forth in this Agreement, Parent, Sub and the Company each
agrees to use reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable and prior to the
consummation of the Parent Distribution, the Restructuring, the Company
Distribution and the Merger and the other transactions contemplated by the
Transaction Agreements, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents, approvals, orders and authorizations from
Governmental Entities and the making of all necessary registrations,
declarations and filings and the taking of all steps as may be necessary to
obtain an approval, waiver, order or authorization from, or to avoid an action
or proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
waivers, consents, approvals, orders or authorizations from third parties, (iii)
the defending of any suit, action or proceeding, whether judicial or
administrative, challenging any Transaction Agreement or the consummation of any
of the transactions contemplated by any Transaction Agreement, including seeking
to have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and
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(iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, the Transaction Agreements.
(b) In connection with and without limiting the foregoing, the Company and
its Board of Directors shall (i) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable
to any of the Transaction Agreements or any of the transactions contemplated
thereby and (ii) if any state takeover statute or similar statute or regulation
becomes applicable to any of the Transaction Agreements or any of the
transactions contemplated thereby, take all action necessary to ensure that the
transactions contemplated by the Transaction Agreements may be consummated as
promptly as practicable on the terms contemplated by the Transaction Agreements
and otherwise to minimize the effect of such statute or regulation on the
transactions contemplated by the Transaction Agreements.
SECTION 6.06. STOCK OPTIONS. Each Employee Stock Option that is held by any
Retained Employee, that is out standing immediately prior to the Effective Time
and that is not required to be assumed by GBC in accordance with Article VII of
the Distribution Agreement, whether or not then vested or exercisable, shall,
effective as of the Effective Time, be assumed by Parent and become and
represent an option to acquire the number of shares of Parent Common Stock (a
"Substitute Option"), rounded up to the nearest whole share, determined in a
manner that will preserve the spread between the option exercise price and the
fair market value of the Company Class A Common Stock subject to such option and
the ratio of the spread to the exercise price of such option as provided in
Section 425 of the Code and the regulations promulgated thereunder; provided,
however, that in the case of any Employee Stock Option to which Section 421 of
the Code applies by reason of its qualification as an incentive stock option
under Section 422 of the Code, the conversion formula shall be adjusted if
necessary to comply with Section 424(a) of the Code. After the Effective Time,
each Substitute Option shall be exercisable upon the same terms and conditions
as were applicable to the related Employee Stock Option immediately prior to the
Effective Time. Parent, in its sole discretion, shall determine whether such
Substitute Options shall be issued under an existing or newly established plan
of Parent, the Company or any of their respective subsidiaries.
SECTION 6.07. FEES AND EXPENSES. Except as provided elsewhere herein and in
the Tax Disaffiliation Agreement, whether or not the Merger is consummated, all
fees, costs and expenses incurred in connection with the Transaction Agreements
and the transactions contemplated thereby shall be paid by the party incurring
such fees, costs or expenses, except that each of Parent and the Company shall
bear and pay one-half of (i) the fees, costs and expenses incurred in connection
with filing, printing and mailing the Registration Statements and the Proxy
Statement-Prospectus and (ii) all filing fees incurred under the HSR Act.
SECTION 6.08. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand, and
the Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review, comment upon and concur with, any
press release or other public statements with respect to the transactions
contemplated by the Transaction Agreements, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law, court process or by obligations pursuant to
any listing agreement with any national securities exchange. The parties agree
that the initial press release to be issued with respect to the transactions
contemplated by the Transaction Agreements shall be in the form heretofore
agreed to by the parties.
SECTION 6.09. AFFILIATES. Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying all persons who are, at the time the
Merger is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use reasonable efforts to cause each such person to deliver to
Parent on or prior to the Closing Date a written agreement in the form of Annex
E hereto. The Company shall not register, and shall instruct its transfer agent
not to register, the transfer of any certificate representing Company Common
Stock held by a Principal Stockholder, unless such transfer is made in
compliance with the terms of the Stockholder Agreement.
SECTION 6.10. NYSE LISTING. Parent shall use all reasonable efforts to
cause the shares of Parent Common Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance, prior
to the Closing Date.
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SECTION 6.11. STOCKHOLDER LITIGATION. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to the transactions
contemplated by the Transaction Agreements; provided, however, that no such
settlement involving a remedy other than money damages that will be an Assumed
Liability shall be agreed to without Parent's consent, which consent shall not
be unreasonably withheld.
SECTION 6.12. COOPERATION WITH RESPECT TO INTERNAL REVENUE SERVICE RULINGS
AND TAX OPINIONS OF COUNSEL. As soon as practicable after the date hereof,
Parent and the Company shall submit to the Internal Revenue Service a request
(the "Ruling Request") for the Tax Rulings.
The initial Ruling Request and any supplements or materials submitted to
the Internal Revenue Service relating thereto (each, an "IRS Submission") shall
be prepared by the Company, shall be true and correct in all material respects,
and all material facts relating to the requested rulings shall be disclosed to
the Internal Revenue Service. The Company shall provide Parent with a reasonable
opportunity to review and comment on each IRS Submission prior to the filing of
such IRS Submission with the Internal Revenue Service, and no IRS Submission
shall be filed with the Internal Revenue Service unless (a) the Company and
Parent shall have agreed as to the contents of such IRS Submission prior to such
filing as it relates to the Merger and (b) Parent shall have consented to the
contents of such IRS Submission as it relates to the Restructuring and/or the
Company Distribution, which consent will not be unreasonably withheld or
delayed. The Company shall promptly provide Parent with copies of each IRS
Submission as filed with the Internal Revenue Service. Neither the Company nor
the Company's representatives shall conduct any communications with the Internal
Revenue Service concerning such Ruling Request, including meetings or
conferences with Internal Revenue Service personnel, whether telephonically or
in person or otherwise, without first notifying Parent or Parent's
representatives and giving Parent (or Parent's representatives) an opportunity
to participate. Parent, Sub and the Company each agrees to use reasonable best
efforts to obtain the Tax Rulings and, if any opinions of counsel are to be
obtained in lieu of one or more Merger Rulings pursuant to the provisions of
Section 7.01(g), to obtain any such opinions.
SECTION 6.13. INDEBTEDNESS. The Company agrees that immediately prior to
the Effective Time, after giving effect to the Restructuring and the other
transactions contemplated by the Transaction Agreements, there will not be
outstanding any indebtedness in respect of which any of the Retained Companies
is obligated.
SECTION 6.14. DISTRIBUTION AGREEMENT. Notwithstanding anything herein to
the contrary, prior to the execution of the Distribution Agreement, the Company
may, with reasonable prior notice to Parent, make such changes to Article IV of
the Distribution Agreement as it deems necessary or appropriate, provided that
such changes do not in any respect adversely affect Parent, any of its
subsidiaries, any of the Retained Companies or the Retained Business, or the
ability of any of the parties to any of the Transaction Agreements to consummate
any of the transactions contemplated thereby. Except as set forth in the
immediately preceding sentence, none of the Transaction Agreements will be
amended in any manner without Parent's prior consent.
SECTION 6.15. EMPLOYEE MATTERS. (a) As of the Effective Time, the Retained
Employees shall participate in the applicable employee benefit plans or programs
of CBS, Inc. on the same basis as similarly situated employees of CBS, Inc.
(b) Parent will, or will cause the Retained Companies to, continue to
employ, with comparable compensation, as of the Effective Time, all of the
Retained Employees, including all such Retained Employees covered by any
collective bargaining agreement. Nothing herein is intended to confer upon any
Retained Employee any right to continued employment or any guaranteed level of
compensation by Parent or the Retained Companies following the Effective Time.
Any Retained Employee whose employment is involuntarily terminated within a
period of 90 days following the Effective Time shall be entitled to severance
from Parent or the Company on a basis no less favorable than the severance that
would have been provided to such individual under the applicable severance
policy or program of the Company in effect on the date of this Agreement had
such Retained Employee been terminated while covered by such policy or program.
Parent will, or will cause the Company to, give Retained Employees full credit
for purposes of eligibility and vesting (and for purposes of calculating any
severance, vacation, holiday and sick day entitlements) under any
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employee benefit plans or arrangements maintained by Parent, the Company or any
subsidiary of Parent or the Company to the same extent recognized by the Company
immediately prior to the Effective Time.
(c) Parent agrees to honor, or cause the Company to honor, the terms of the
Company's annual incentive bonus program as in effect as of the date hereof so
that, upon completion of the calendar year in which the Effective Time occurs,
each Retained Employee who would have been entitled to a bonus thereunder had
the transactions contemplated under this Agreement and the Distribution
Agreement not been consummated shall receive an annual incentive bonus in an
amount not less than the annual bonus such Retained Employee would have received
had such transactions not been consummated (prorated to the extent that the
employment of any such Retained Employee is involuntarily terminated by the
Company prior to December 31 of the calendar year in which the Effective Time
shall occur). The Company agrees to continue to make accruals for such bonuses
in accordance with past practice and that such accruals will be included in the
Closing Balance Sheet (as defined in the Post-Closing Covenants Agreement).
(d) During the period from the date of this Agreement through the Closing
Date, Parent and the Company will use their reasonable efforts to agree upon
those Retained Employees who also perform financial, human resources and
purchasing services for the GBC Companies to whom the GBC Companies may offer
employment without violating the restrictions contained in Section 3.04(a) of
the Post-Closing Covenants Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Approvals. The Company Stockholder Approval and, if required by
the applicable rules of the NYSE, the Parent Shareholder Approval shall
have been obtained.
(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 judgment, order, decree,
statute, law, ordinance, rule, regulation, executive order, decree,
temporary restraining order, preliminary or permanent injunction or other
order enacted, entered, promulgated, enforced or issued by any court of
competent jurisdiction or other Governmental Entity or other legal
restraint or prohibition preventing the consummation of the Merger shall be
in effect.
(d) Registration Statements. The Registration Statements shall have
become effective under the Securities Act or the Exchange Act, as
applicable, no stop order suspending the effectiveness of either of the
Registration Statements shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC.
(e) NYSE Listing. The shares of Parent Common Stock issuable to the
Company's stockholders in connection with the Merger shall have been
approved for listing on the NYSE, subject to official notice of issuance.
(f) Pre-Merger Transactions. The transactions contemplated by Article
III, including, without limitation, the Restructuring, the Company
Distribution and the execution and delivery of the Transaction Agreements
not executed on the date hereof, shall have been consummated in accordance
with the terms of this Agreement and the Distribution Agreement (which
includes additional conditions to such consummation).
(g) Tax Rulings. The Internal Revenue Service shall have issued and
not revoked the Tax Rulings, reasonably satisfactory in form and substance
to Parent and the Company. In the event that the Internal Revenue Service
shall have issued all of the Tax Rulings except for one or more of the
Merger Rulings,
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then, in lieu of each such Merger Ruling, the conditions of this Section
7.01(g) shall be satisfied if, as to the Company, the Company shall have
received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
the Company, and, as to Parent, if Parent shall have received an opinion of
Cravath, Swaine & Moore, counsel to Parent, in each case to the same effect
as each such Merger Ruling, reasonably satisfactory in form and substance
to the Company or Parent, as the case may be, and dated as of the Closing
Date.
(h) Alternative Transaction. If the Alternative Transaction (as
defined in Section 9.01) is to be consummated, the Parent Distribution
shall have been consummated not less than 75 days prior to the Closing
Date.
(i) No Adverse Tax Development. There shall not be outstanding as of
the Closing Date any Adverse Tax Development.
For purposes of this Section 7.01(i), an "Adverse Tax Development"
shall mean (x) the enactment of any legislation, the passage of any bill by
either House of Congress or the introduction of a bill by any Member of
Congress; (y) that has not been withdrawn or modified so as not to be an
Adverse Tax Development; and (z) with respect to which either Parent or the
Company provides the other with an opinion of Cravath, Swaine & Moore, in
the case of Parent, or Skadden, Arps, Slate, Meagher & Flom LLP, in the
case of the Company, to the effect that such legislation, as enacted, has,
or if such bill were enacted into law with the effective date and
transition rules contained therein, such bill would have, the effect of
amending the Code so as to cause the Company Distribution to be taxable for
U.S. Federal income tax purposes to, and result in a material increase in
the U.S. Federal income tax liability of, the Company or its stockholders;
provided, however, that if the Adverse Tax Development does not by its
terms apply to contracts that are binding on the date of this Agreement (or
on a later date), and if under the terms of such bill or legislation
constituting an Adverse Tax Development contracts are considered binding
despite conditions or contractual provisions that are referred to in such
bill or legislation as "customary" or "normal" or other language to the
same effect ("Customary Conditions"), then such opinion shall be required
to reach its conclusion on the assumption that all conditions to the
parties' obligations to effect the Merger (including but not limited to
this Section 7.01(i)) and all provisions of the Transaction Agreements are
Customary Conditions.
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligations
of Parent and Sub to effect the Merger are further subject to satisfaction or
waiver (by Parent) on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement that are qualified as
to materiality shall be true and correct, and the representations and
warranties of the Company set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except to the extent such representations
and warranties expressly relate to an earlier date (in which case as of
such date), and Parent shall have received a certificate signed on behalf
of the Company by the chief executive officer and the chief financial
officer of the Company to such effect.
(b) Performance of Obligations of the Company. Each of the Company
and its subsidiaries shall have performed in all material respects all
obligations required to be performed by it under the Transaction Agreements
at or prior to the Closing Date, and Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer
and the chief financial officer of the Company to such effect.
(c) Letters from Company Affiliates. Parent shall have received from
each person identified in the letter referred to in Section 6.09 an
executed copy of an agreement in the form of Annex E hereto.
(d) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (i) challenging the
acquisition by Parent of any shares of capital stock of any of the Retained
Companies, seeking to restrain or prohibit the consummation of the Merger
or any of the other
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transactions contemplated by the Transaction Agreements or seeking to
obtain from the Company or Parent or any of their respective subsidiaries
any damages that are material in relation to the Retained Companies taken
as a whole or Parent and its subsidiaries taken as a whole, (ii) seeking to
prohibit or limit the ownership or operation by the Retained Companies or
by Parent or any of its subsidiaries of any material portion of the
Retained Business or of the business or assets of Parent and its
subsidiaries, taken as a whole, as applicable, or to compel the Retained
Companies or Parent or any of its subsidiaries to dispose of or hold
separate any material portion of the Retained Business or of the business
or assets of Parent and its subsidiaries, taken as a whole, as applicable,
as a result of the transactions contemplated by the Transaction Agreements,
(iii) seeking to impose limitations on the ability of Parent to acquire or
hold, or exercise full rights of ownership of, any shares of capital stock
of any of the Retained Companies or the Surviving Corporation, (iv) seeking
to prohibit Parent and its subsidiaries from effectively controlling in any
material respect the Retained Business, or (v) which otherwise would
reasonably be expected to have a material adverse effect on the Retained
Companies or on Parent and its subsidiaries (excluding for this purpose the
Retained Companies). In addition, there shall not be any judgment, order,
decree, statute, law, ordinance, rule, regulation, executive order, decree,
temporary restraining order, preliminary or permanent injunction or other
order enacted, entered, promulgated, enforced or issued that is reasonably
likely to result, directly or indirectly, in any of the consequences
referred to in clauses (ii) through (iv) above.
(e) Company Distribution. The conditions to the obligations of the
Company to consummate the Company Distribution set forth in Article VIII of
the Distribution Agreement shall have been satisfied (without giving effect
to any waiver of any such condition not approved by Parent).
(f) FCC and Other Governmental and Regulatory Consents. All consents,
approvals, orders and authorizations of, and all registrations,
declarations or filings with, any Governmental Entity (including, without
limitation, approvals of and filings with the FCC relating to the transfer
of licenses) required to be obtained prior to the Closing Date in
connection with the execution, delivery and performance of the Transaction
Agreements shall have been obtained or made, except where the failure to
obtain or make the same individually or in the aggregate would not be
reasonably likely to have a material adverse effect on the Retained
Companies or on Parent and its subsidiaries.
(g) Noncompetition Agreements. Each of Edward L. Gaylord and Edward
K. Gaylord shall have entered into noncompetition agreements with Parent
with substantially the terms applicable to GBC set forth in Section 3.04 of
the Post-Closing Covenants Agreement and such agreements shall be in full
force and effect.
(h) No Material Adverse Change. Except as disclosed in the Filed SEC
Documents, Section 4.01(h) of the Company Disclosure Schedule or as
otherwise expressly contemplated by the Transaction Agreements, since the
date of the most recent audited financial statements included in the Filed
SEC Documents, there shall not have been any event, change or development
which individually or in the aggregate has had or would reasonably be
expected to have a material adverse effect on the Retained Companies or on
the GBC Companies or would impair the ability of the Retained Companies or
the GBC Companies, as the case may be, to consummate the transactions
contemplated by, or to satisfy their obligations under, the Transaction
Agreements.
SECTION 7.03. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Merger is further subject to satisfaction or waiver
(by the Company) on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub set forth in this Agreement that are qualified
as to materiality shall be true and correct, and the representations and
warranties of Parent and Sub set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except to the extent such representations
and warranties expressly relate to an earlier date (in which case as of
such date), and the Company shall have received a certificate signed on
behalf of Parent by an executive officer of Parent to such effect.
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(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required to
be performed by them under the Transaction Agreements at or prior to the
Closing Date, and the Company shall have received a certificate signed on
behalf of Parent by an executive officer of Parent to such effect.
(c) FCC and Other Governmental and Regulatory Consents. All consents,
approvals, orders and authorizations of, and all registrations,
declarations or filings with, any Governmental Entity (including, without
limitation, approvals of and filings with the FCC relating to the transfer
of licenses) required to be obtained prior to the Closing Date in
connection with the execution, delivery and performance of the Transaction
Agreements shall have been obtained or made, except where the failure to
obtain or make the same individually or in the aggregate would not be
reasonably likely to have a material adverse effect on the GBC Companies.
(d) No Material Adverse Change. Except as disclosed in the Filed
Parent SEC Documents, in connection with the Parent Distribution or as
otherwise expressly contemplated by the Transaction Agreements, since the
date of the most recent audited financial statements included in the Filed
Parent SEC Documents, there shall not have been any event, change or
development which individually or in the aggregate has had or would
reasonable be expected to have a material adverse effect on Parent and its
subsidiaries or impair the ability of Parent and Sub to consummate the
transactions contemplated by, or to satisfy their obligations under, the
Transaction Agreements.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Stockholder
Approval or the Parent Shareholder Approval:
(a) by mutual written consent of Parent, Sub and the Company; or
(b) by either Parent or the Company:
(i) if, upon a vote at a duly held Company Stockholders Meeting or
any adjournment thereof at which the Company Stockholder Approval shall
have been voted upon, the Company Stockholder Approval shall not have
been obtained;
(ii) if, upon a vote at a duly held Parent Shareholders Meeting or
any adjournment thereof at which the Parent Shareholder Approval shall
have been voted upon, the Parent Shareholder Approval shall not have
been obtained;
(iii) if the Merger shall not have been consummated on or before
February 9, 1998, unless the failure to consummate the Merger is the
result of a wilful and material breach of any Transaction Agreement by
the party seeking to terminate this Agreement or any of its
subsidiaries, and, in the case of a termination by the Company, unless
the failure to consummate the Merger is the result of a wilful and
material breach of the Stockholder Agreement by any Principal
Stockholder; provided, however, that the passage of such period shall be
tolled for any part thereof (but not exceeding 60 calendar days in the
aggregate) during which any party shall be subject to a nonfinal order,
decree, ruling, injunction or action restraining, enjoining or otherwise
prohibiting the consummation of the Merger or the calling or holding of
the Company Stockholders Meeting or, if the Parent Shareholder Approval
is required by the applicable rules of the NYSE, the Parent Shareholders
Meeting;
(iv) if any Governmental Entity shall have issued an order, decree,
ruling or injunction or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Merger and such order, decree,
ruling, injunction or other action shall have become final and
nonappealable; or
(v) in the event of a breach by the other party or any of its
subsidiaries of any representation, warranty, covenant or other
agreement contained in the Transaction Agreements which (A) would give
rise to the failure of a condition set forth in Section 7.02(a) or (b)
or Section 7.03(a) or (b), as
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applicable, and (B) cannot be or has not been cured within 30 days after
the giving of written notice to the breaching party of such breach (a
"Material Breach") (provided that the terminating party is not then in
Material Breach of any representation, warranty, covenant or other
agreement contained in the Transaction Agreements);
(c) by the Company in the event that the product of the Per Share
Merger Consideration determined in accordance with Section 2.01(c)
multiplied by the Outstanding Number would be greater than the Maximum
Number of Shares but for the proviso to the first sentence of Section
2.01(c), by written notice to Parent (the "Company Termination Intent
Notice") at least two days prior to the Closing Date that the Company is
unwilling to accept the Per Share Merger Consideration calculated in
accordance with Section 2.01(c); provided, however, that no right of
termination shall arise under this Section 8.01(c) if Parent shall have
given written notice to the Company, at any time within 24 hours of its
receipt of the Company Termination Intent Notice, that Parent elects to
increase the Per Share Merger Consideration to the Per Share Merger
Consideration calculated in accordance with Section 2.01(c) without giving
effect to the proviso to the first sentence thereof, in which case the Per
Share Merger Consideration shall be so calculated; or
(d) by the Company in the event that (i) the Merger is to be
consummated after the consummation of the Parent Distribution in accordance
with Section 9.01, and (ii) the product of the Per Share Merger
Consideration determined in accordance with Section 9.02 multiplied by the
Outstanding Number would be greater than the Maximum Number of Alternative
Shares (as defined in Section 9.02) but for the proviso thereto, by written
notice to Parent (the "Alternative Termination Intent Notice") at least two
days prior to the Closing Date that the Company is unwilling to accept the
Per Share Merger Consideration calculated in accordance with Section 9.02;
provided, however, that no right of termination shall arise under this
Section 8.01(d) if Parent shall have given written notice to the Company,
at any time within 24 hours of its receipt of the Alternative Termination
Intent Notice, that Parent elects to increase the Per Share Merger
Consideration to the Per Share Merger Consideration calculated in
accordance with Section 9.02 without giving effect to the proviso thereto,
in which case the Per Share Merger Consideration shall be so calculated.
SECTION 8.02. EFFECT OF TERMINATION. In the event of termination of this
Agreement and the abandonment of the Merger pursuant to this Article VIII, no
party to the Transaction Agreements (or any of its directors or officers) shall
have any liability or further obligation to any other party, except as set forth
in Sections 4.01(q), 4.02(j) and 6.07, the last sentence of Section 6.04, this
Section 8.02 and Article X, all of which shall survive such termination, and
except that nothing herein shall relieve any party from liability for any
material and wilful breach of any of its representations, warranties, covenants
or agreements set forth in any of the Transaction Agreements.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties at
any time before or after the Company Stockholder Approval or the Parent
Shareholder Approval subject, if required by the Stockholder Agreement, to the
prior approval of the Principal Stockholders; provided, however, that after any
such approval, there shall not be made any amendment that by law requires
further approval by the stockholders of the Company without the further approval
of such stockholders. The parties agree to attempt to obtain the Company
Stockholder Approval in such a manner that in the event that the Merger is to be
consummated after the consummation of the Parent Distribution in accordance with
Section 9.01 no further approval of the Company s stockholders would be
required. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
SECTION 8.04. EXTENSION; WAIVER. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in the Transaction
Agreements or in any document delivered pursuant to the Transaction Agreements
or (c) subject to the proviso to the first sentence of Section 8.03, waive
compliance by the other parties with any of the agreements or conditions
contained in the Transaction Agreements. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to the
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Transaction Agreements to assert any of its rights under the Transaction
Agreements or otherwise shall not constitute a waiver of such rights.
SECTION 8.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 8.01, an amendment of this
Agreement pursuant to Section 8.03 or an extension or waiver pursuant to Section
8.04 shall, in order to be effective, require in the case of Parent, Sub or the
Company, action by its Board of Directors or, except in the case of the Company
or Sub with respect to any amendment to this Agreement, the duly authorized
designee of its Board of Directors.
ARTICLE IX
ALTERNATIVE TRANSACTION
SECTION 9.01. CIRCUMSTANCES. Notwithstanding any provision of this
Agreement to the contrary, in the event that (i) the Internal Revenue Service
fails to issue all of the Tax Rulings in form and substance reasonably
satisfactory to Parent and the Company and a representative of the Internal
Revenue Service has indicated that, or Parent and the Company reasonably believe
that, all of the Tax Rulings (without regard to the Merger Rulings as to which
the provisions of Section 7.01(g) shall apply) could be obtained if the Merger
was delayed until after the consummation of the Parent Distribution, or (ii)
Parent, in its sole discretion, determines to consummate the Parent Distribution
prior to the consummation of the transactions contemplated by this Agreement,
then (and only then) (x) the Merger shall not be consummated until after the
consummation of the Parent Distribution and (y) Parent and the Company shall
attempt to obtain the Tax Rulings based on the Merger being consummated after
the Parent Distribution (the "Alternative Transaction").
SECTION 9.02. ALTERNATIVE PER SHARE MERGER CONSIDERATION. In the event
that, as a result of the circumstances described in Section 9.01, the Merger is
to be consummated after the consummation of the Parent Distribution, then, for
all purposes of this Agreement, "Per Share Merger Consideration" shall mean that
number of duly authorized, validly issued, fully paid and nonassessable shares
of Parent Common Stock equal to the quotient, rounded to the nearest thousandth,
or if there shall not be a nearest thousandth, the next higher thousandth, of
(i) the quotient of (x) $1,550,000,000 divided by (y) the Outstanding Number,
divided by (ii) the Market Price of Parent Common Stock on the date on which the
Effective Time shall occur; provided, however, that in the event that the
product of the Per Share Merger Consideration multiplied by the Outstanding
Number would exceed 88,000,000 (the "Maximum Number of Alternative Shares"),
then the Per Share Merger Consideration shall mean the highest number (after
taking into account the rounding provision of this sentence) that would not
result in the product of such number multiplied by the Outstanding Number
exceeding 88,000,000.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time; provided, however,
that the representations and warranties of the Company contained herein shall
survive the Effective Time until 11:59 p.m. (New York City time) on the second
anniversary of the Effective Time; provided, further, that the representations
and warranties of the Company set forth in Section 4.01(m) shall not survive the
Effective Time. This Section 10.01 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Effective
Time.
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SECTION 10.02. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Westinghouse Electric Corporation
11 Stanwix Street
Pittsburgh, PA 15222-1384
Telecopy No.: (412) 642-5224
Attention: Louis J. Briskman, Esq.
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Telecopy No.: (212) 474-3700
Attention: Peter S. Wilson, Esq.; and
(b) if to the Company, to
Gaylord Entertainment Company
One Gaylord Drive
Nashville, TN 37214
Telecopy No.: (615) 316-6060
Attention: Frank M. Wentworth, Esq.
with a copy to:
Skadden, Arps, Slate, Meagher & Flom (Delaware)
One Rodney Square
Wilmington, Delaware 19801
Telecopy No.: (302) 651-3001
Attention: Richard L. Easton, Esq.
SECTION 10.03. DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "indebtedness" means, with respect to any person, without
duplication, (i) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind to such person, (ii) all
obligations of such person evidenced by notes, bonds, debentures or similar
instruments, including warrants or rights to acquire such instruments,
(iii) all obligations of such person under conditional sale or other title
retention agreements relating to property purchased by such person, (iv)
all obligations of such person issued or assumed as the deferred purchase
price of property or services (excluding obligations of such person to
creditors for raw materials, inventory, services and supplies incurred in
the ordinary course of such person's business), (v) all capitalized lease
obligations of such person, (vi) all obligations of others secured by any
Lien on property or assets owned or acquired by such person, whether or not
the obligations secured thereby have been assumed, (vii) all obligations of
such person under interest rate or currency hedging transactions (valued at
the termination value thereof), (viii) all letters of credit issued for the
account of such person and (ix) all guarantees and arrangements having the
economic effect of a guarantee of such person of any indebtedness of any
other person;
(c) "material adverse effect" means, when used in connection with an
entity or a group of entities, any change, effect, event or occurrence that
is materially adverse to the business, properties, assets, financial
condition, results of operations or prospects of such entity or group,
taken as a whole, other than any change, effect, event or occurrence
relating to the United States economy in general, to United States
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stock market conditions in general or to the entity's or group's industry
or industries in general, and not specifically relating to such entity or
group or their respective subsidiaries;
(d) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(e) a "subsidiary" means, with respect to any person, any corporation
or other organization, whether incorporated or unincorporated, of which (i)
such person or any other subsidiary of such person is a general partner or
(ii) at least 50% of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or
other organization or at least 50% of the value of the outstanding equity
is directly or indirectly owned or controlled by such person or by any one
or more of its subsidiaries, or by such person and one or more of its
subsidiaries;
(f) a "significant subsidiary" of any person means any subsidiary of
such person that constitutes a significant subsidiary within the meaning of
Rule 1-02 of Regulation S-X of the SEC;
(g) "Taxes", "Tax Return" and "Tax Authority" have the meanings
assigned thereto in the Tax Disaffiliation Agreement;
(h) "Tax Rulings" mean the rulings contained in the private letter
ruling issued by the Internal Revenue Service in response to the Ruling
Request substantially to the effect that, for U.S. Federal income tax
purposes, (i) the Company Distribution will be a transaction described in
Section 355(a) of the Code and the transfer of assets and liabilities to
GBC immediately preceding the Company Distribution will be a transaction
described in Section 351 or 368(a)(1)(D) of the Code; (ii) the distribution
by GBC of all the capital stock of NEI to the Company will be a transaction
described in Section 355(a) of the Code and the transfer of assets and
liabilities to NEI immediately preceding such distribution will be a
transaction described in Section 351 or 368(a)(1)(D) of the Code; (iii) the
Merger will be treated as a reorganization within the meaning of Section
368(a) of the Code; and (iv) each of the mergers of Opryland USA, Inc.,
WSM, Incorporated and Word Entertainment, Inc. with their respective parent
corporations (A) will be treated as a reorganization within the meaning of
Section 368(a) of the Code or a liquidation within the meaning of Section
332 of the Code, taking into account the transactions described in clause
(ii) of this definition, or (B) will not fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code or a
liquidation within the meaning of Section 332 of the Code by reason of the
transactions described in clause (ii) of this definition;
(i) "Merger Rulings" shall mean the rulings described in Section
10.03(h)(ii) and (iv);
(j) "Retained Assets" means the assets of the Company and its
subsidiaries after giving effect to the transactions contemplated by
Article IV of the Distribution Agreement; and
(k) "Retained Liabilities" has the meaning assigned thereto in the
Distribution Agreement.
SECTION 10.04. INTERPRETATION. When a reference is made in this Agreement
to an Article, Section or Annex, such reference shall be to an Article or
Section of, or an Annex to, this Agreement unless otherwise indicated. The table
of contents 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 words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. 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 terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or
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statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. References to a person
are also to its permitted successors and assigns and, in the case of an
individual, to his heirs and estate, as applicable.
SECTION 10.05. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 10.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. The
Transaction Agreements (including the documents and instruments referred to
herein, the Annexes hereto, the Parent Disclosure Schedule and the Company
Disclosure Schedule) and the Confidentiality Agreement (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof and (b) except as set forth in the other Transaction Agreements, are not
intended to confer upon any person other than the parties any rights or
remedies.
SECTION 10.07. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 10.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct wholly owned subsidiary of Parent, but no
such assignment shall relieve Sub of any of its obligations under this
Agreement. Any assignment in violation of the preceding sentence shall be void.
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.
SECTION 10.09. DISCLOSURE SCHEDULES. Matters reflected on the Company
Disclosure Schedule and the Parent Disclosure Schedule are not necessarily
limited to matters required by this Agreement to be reflected therein and the
inclusion of such matters shall not be deemed an admission that such matters
were required to be reflected on the Company Disclosure Schedule or the Parent
Disclosure Schedule, as the case may be. Such additional matters are set forth
for informational purposes only and do not necessarily include other matters of
a similar nature. Capitalized terms used in the Company Disclosure Schedule or
the Parent Disclosure Schedule, as the case may be, but not otherwise defined
therein shall have the respective meanings assigned to such terms in this
Agreement.
SECTION 10.10. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby. Upon any such determination, the
parties shall negotiate in good faith in an effort to agree upon a suitable and
equitable substitute provision to effect the original intent of the parties.
SECTION 10.11. ENFORCEMENT. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any U.S. Federal court located in
the State of Delaware or in Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any U.S. Federal court located in the State of Delaware or any Delaware state
court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such
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court and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a U.S. Federal court sitting in the State of Delaware or a Delaware
state court. The provisions of this Section 10.11 shall not apply to any of the
other Transaction Agreements unless the terms of such Transaction Agreements
expressly state that such provisions shall apply.
IN WITNESS WHEREOF, Parent, Sub and the Company 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/ FREDRIC G. REYNOLDS
------------------------------------
Fredric G. Reynolds
Executive Vice President,
Chief Financial Officer
G ACQUISITION CORP.,
by /s/ LOUIS J. BRISKMAN
------------------------------------
Louis J. Briskman
Vice President, Secretary
GAYLORD ENTERTAINMENT COMPANY,
by /s/ TERRY E. LONDON
------------------------------------
Terry E. London
Senior Vice President, Chief
Financial &
Administrative Officer
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ANNEX II
AGREEMENT AND PLAN OF DISTRIBUTION, dated as of , 199 (this
"Distribution Agreement"), between GAYLORD ENTERTAINMENT COMPANY, a
Delaware corporation (the "Company"), and NEW GAYLORD ENTERTAINMENT COMPANY
(formerly known as Gaylord Broadcasting Company), a Delaware corporation
and a direct wholly owned subsidiary of the Company ("New Gaylord").
WHEREAS the Company, Westinghouse Electric Corporation, a Pennsylvania
corporation ("Parent"), and G Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), have entered into an Agreement and
Plan of Merger, dated as of February 9, 1997 (the "Merger Agreement"), providing
for the Merger (as defined in the Merger Agreement) of Sub with and into the
Company, with the Company as the surviving corporation;
WHEREAS the Board of Directors of the Company has approved this
Distribution Agreement, which is being entered into prior to the Effective Time
(as defined in Section 1.03 of the Merger Agreement), subject to the issuance of
the Tax Rulings (as defined in Section 10.03 of the Merger Agreement), pursuant
to and subject to the terms of which the Restructuring and the Company
Distribution (as such terms are hereinafter defined) will be consummated;
WHEREAS after the Restructuring and the New Gaylord Recapitalization (as
hereinafter defined) and on the day immediately prior to the Effective Time,
subject to the satisfaction or waiver of the conditions set forth in Article
VIII of this Distribution Agreement, the Company will distribute (the "Company
Distribution") to each holder of record of shares of Class A Common Stock, $.01
par value, of the Company ("Company Class A Common Stock") and Class B Common
Stock, $.01 par value, of the Company ("Company Class B Common Stock" and,
together with the Company Class A Common Stock, "Company Common Stock") a number
of shares of Common Stock, $.01 par value, of New Gaylord ("New Gaylord Common
Stock") equal to one-third of the number of shares of Company Common Stock held
by such holder;
WHEREAS the purpose of the Restructuring and the Company Distribution is to
make possible the Merger by divesting the Company of all businesses and
operations (other than the Retained Business (as hereinafter defined)) conducted
by the Company and its Subsidiaries which Parent is unwilling to acquire. This
Distribution Agreement sets forth or provides for certain agreements among the
Company and New Gaylord in consideration of the separation of their ownership;
and
WHEREAS it is the intention of the parties to this Distribution Agreement
that (a) the Company Distribution shall qualify as a transaction described in
Section 355 of the Internal Revenue Code of 1986, as amended (the "Code") and
shall be immediately preceded by a transfer of assets and related liabilities
that qualifies as a transaction described in Section 351 or 368(a)(1)(D) of the
Code, (b) the New Gaylord Recapitalization and certain other transactions that
are part of the Restructuring shall be tax-free transactions under the Code and
(c) the Merger shall qualify as a "reorganization" within the meaning of Section
368(a)(1)(B) of the Code.
NOW, THEREFORE in consideration of the premises, and of the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Distribution Agreement, the following
terms shall have the following respective meanings (capitalized terms used but
not defined herein shall have the respective meanings ascribed to them in the
Merger Agreement):
"Affiliate" of any Person means another Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first Person; provided, however, that for the purposes
of this Distribution Agreement and the Post-Closing Covenants Agreement,
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from and after the Time of Distribution, none of the Retained Companies or the
New Gaylord Companies shall be deemed to be an Affiliate of any New Gaylord
Company or Retained Company, respectively.
"Ancillary Agreements" shall mean the documents listed in clauses (a)-(i)
of Section 5.1 hereof.
"Assumed Liabilities" shall have the meaning set forth in Section 4.2
hereof.
"Business Stationery" shall have the meaning set forth in Section 5.2
hereof.
"Change in Control" shall have the meaning set forth in the Listed
Agreements.
"Closing Balance Sheet" shall have the meaning set forth in Section 3.05 of
the Post-Closing Covenants Agreement.
"Closing Date" shall have the meaning set forth in Section 1.02 of the
Merger Agreement.
"CMT" shall have the meaning set forth in Section 4.1(c)(i) hereof.
"CMT Asset Transfer" shall have the meaning set forth in Section 4.1(c)(ii)
hereof.
"CMT International Assets" shall have the meaning set forth in Section
4.1(c)(ii) hereof.
"CMTV" shall mean the Country Music Television cable television network.
"Code" shall have the meaning set forth in the Recitals.
"Company" shall have the meaning set forth in the Preamble.
"Company Class A Common Stock" shall have the meaning set forth in the
Recitals.
"Company Class B Common Stock" shall have the meaning set forth in the
Recitals.
"Company Common Stock" shall have the meaning set forth in the Recitals.
"Company Disclosure Schedule" shall have the meaning set forth in Section
4.01 of the Merger Agreement.
"Company Distribution" shall have the meaning set forth in the Recitals.
"Company Stock Plans" shall mean the GEC Amended and Restated 1993 Stock
Option and Incentive Plan and the GEC Amended and Restated 1991 Stock Option and
Incentive Plan.
"Company VEBA" shall mean the Gaylord Entertainment Company VEBA.
"Contracts" shall have the meaning set forth in Section 4.01(d) of the
Merger Agreement.
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"Distribution Agreement" shall have the meaning set forth in the Preamble.
"Effective Time" shall have the meaning set forth in Section 1.03 of the
Merger Agreement.
"Entertainment Business" shall mean all of the businesses conducted at or
at any time prior to the Effective Time by the Company or any of its
Subsidiaries, excluding the Retained Business.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"New Gaylord" shall have the meaning set forth in the Preamble.
"New Gaylord Companies" shall mean New Gaylord and its Subsidiaries
(determined after giving effect to the transactions contemplated by Article IV
of this Distribution Agreement).
"New Gaylord Employees" shall mean all current and former employees of the
Company and its Subsidiaries other than the Retained Employees.
"New Gaylord Old Class B Common Stock" shall have the meaning set forth in
Section 2.1 hereof.
"New Gaylord Old Common Stock" shall have the meaning set forth in Section
2.1 hereof.
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"New Gaylord Pension Plan" shall have the meaning set forth in Section
7.3(a) hereof.
"New Gaylord Recapitalization" shall have the meaning set forth in Section
2.2 hereof.
"New Gaylord Savings Plan" shall have the meaning set forth in Section
7.3(b) hereof.
"New Gaylord Welfare Plans" shall have the meaning set forth in Section
7.3(c) hereof.
"Information" of a party shall mean any and all information that such party
or any of its Representatives furnish or have furnished to the receiving party
or any of its Representatives whether furnished orally or in writing or by any
other means or gathered by inspection and regardless of whether the same is
specifically marked or designated as "confidential" or "proprietary", together
with any and all notes, memoranda, analyses, compilations, studies or other
documents (whether in hard copy or electronic media) prepared by the receiving
party or any of its Representatives which contain or otherwise reflect such
Information, together with any and all copies, extracts or other reproductions
of any of the same; provided, however, that for the purposes hereof all
information relating to the Retained Companies and the Retained Business in the
possession of any New Gaylord Company at the Time of Distribution shall be
deemed to have been furnished by the Retained Companies and all information
relating to the New Gaylord Companies and the Entertainment Business in the
possession of any Retained Company at the Time of Distribution shall be deemed
to have been furnished by the New Gaylord Companies; provided, further, however,
that the term "Information" does not include information that:
(a) is or becomes generally available to the public through no
wrongful act of the receiving party or its Representatives;
(b) is or becomes available to the receiving party on a
non-confidential basis from a source other than the providing party or its
Representatives, provided that such source is not known by the receiving
party to be subject to a confidentiality agreement with the providing
party; or
(c) has been independently acquired or developed by the receiving
party without violation of any of the obligations of the receiving party or
its Representatives under this Distribution Agreement.
"Intercompany Receivable" shall have the meaning set forth in Section
4.1(j) hereof.
"IRS" shall mean the United States Internal Revenue Service.
"Liabilities" shall mean any and all debts, liabilities, commitments and
obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown, whenever
or however arising and whether or not the same would be required by generally
accepted accounting principles to be reflected in financial statements or
disclosed in the notes thereto.
"Listed Agreements" shall have the meaning set forth in Section 7.6 hereof.
"Merger" shall have the meaning set forth in the Recitals to the Merger
Agreement.
"Merger Agreement" shall have the meaning set forth in the Recitals.
"Person" shall have the meaning set forth in Section 10.03 of the Merger
Agreement.
"NEI" shall have the meaning set forth in Section 4.1(d) hereof.
"New CMT" shall have the meaning set forth in Section 4.1(c)(ii) hereof.
"New Gaylord Common Stock" shall have the meaning set forth in the
Recitals.
"Nonqualified Plans" shall have the meaning set forth in Section 7.3(e)
hereof.
"NYSE" shall mean The New York Stock Exchange, Inc.
"OKC" shall have the meaning set forth in Section 4.1(h)(ii)(A) hereof.
"Opryland USA" shall have the meaning set forth in Section 4.1(a) hereof.
"O&W" shall have the meaning set forth in Section 4.1(c)(i) hereof.
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"Parent" shall have the meaning set forth in the Recitals.
"Post-Closing Covenants Agreement" shall have the meaning set forth in
Section 3.01 of the Merger Agreement.
"Record Date" shall mean the date designated by or pursuant to the
authorization of the Board of Directors of the Company for closing of the stock
transfer books of the Company for the purpose of determining the stockholders of
the Company entitled to participate in the Company Distribution.
"Replacement Welfare Plans" shall have the meaning set forth in Section
7.2(c) hereof.
"Representatives" of a party shall mean such party's affiliates, directors,
officers, stockholders, partners, employees, agents or other representatives
(including attorneys, accountants and financial advisors).
"Restructuring" shall have the meaning set forth in Section 4.1 hereof.
"Retained Business" shall mean the Company's businesses included in its
cable networks segment excluding certain businesses as described in Annex D to
the Merger Agreement.
"Retained Business Balance Sheet" shall have the meaning set forth in
Section 4.01(g) of the Merger Agreement.
"Retained Companies" shall have the meaning set forth in Section 4.01 of
the Merger Agreement.
"Retained Employees" shall mean those Persons who are employees of the
Retained Companies or the New Gaylord Companies whose names are listed on
SCHEDULE 1.1 attached hereto other than those who continue to be employed after
the Effective Time by one of the New Gaylord Companies as contemplated by
Section 6.15(d) of the Merger Agreement.
"Retained Liabilities" shall have the meaning set forth in Section 4.2
hereof.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Sub" shall have the meaning set forth in the Recitals.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other organization, whether incorporated or unincorporated, of which (i) such
Person or any other Subsidiary of such Person is a general partner or (ii) at
least 50% of the securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization or at
least 50% of the value of the outstanding equity is directly or indirectly owned
or controlled by such Person or by any one or more of its Subsidiaries, or by
such Person and one or more of its Subsidiaries.
"SUDCOMP Plan" shall have the meaning set forth in Section 7.2(e) hereof.
"Tax Disaffiliation Agreement" shall have the meaning set forth in Section
3.1 hereof.
"Taxes" shall have the meaning set forth in Section 1.35 of the Tax
Disaffiliation Agreement.
"Time of Distribution" shall mean the time as of which the Company
Distribution is effective.
"TNN" shall mean the TNN cable television network.
"Transfer Agent" shall mean SunTrust Bank, Atlanta, the transfer agent for
the Company Common Stock.
"WSM" shall have the meaning set forth in Section 4.1(e)(i) hereof.
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ARTICLE II
RECAPITALIZATION OF NEW GAYLORD;
MECHANICS OF COMPANY DISTRIBUTION
2.1 CAPITALIZATION OF NEW GAYLORD. The authorized capital stock of New
Gaylord currently consists of (a) 10,000 shares of common stock, $100.00 par
value ("New Gaylord Old Common Stock"), of which 1,000 shares are issued and
outstanding and owned beneficially and of record by the Company, and (b) 10,000
shares of class B common stock, $.01 par value ("New Gaylord Old Class B Common
Stock"), of which no shares are issued and outstanding.
2.2 RECAPITALIZATION OF NEW GAYLORD. Immediately prior to the Time of
Distribution, the Company shall cause New Gaylord to amend its Certificate of
Incorporation to (a) create the New Gaylord Common Stock, (b) increase the
authorized number of shares of common stock of New Gaylord and convert the
shares of New Gaylord Old Common Stock into that number of shares of New Gaylord
Common Stock equal to one-third the number of shares of Company Common Stock
outstanding immediately prior to the Record Date for the Company Distribution
(the "New Gaylord Recapitalization"), and (c) authorize 100 million shares of
preferred stock, par value $.01 per share.
2.3 MECHANICS OF COMPANY DISTRIBUTION. The Company Distribution shall be
effected by the distribution to each holder of record of shares of Company
Common Stock, as of the Record Date, of certificates representing the number of
shares of New Gaylord Common Stock equal to one-third the number of shares of
Company Common Stock held by such holder; provided, however, that no fractional
shares of New Gaylord Common Stock shall be issued or delivered. In the event
there are holders of Company Common Stock holding of record on the Record Date a
number of shares of Company Common Stock not evenly divisible by three, the
Transfer Agent shall distribute certificates representing shares of New Gaylord
Common Stock to such holders on the basis of the next number of shares of
Company Common Stock held below the actual number of shares held which is evenly
divisible by three. The Transfer Agent shall aggregate all shares of New Gaylord
Common Stock that would be distributable but for the proviso to the first
sentence of this Section 2.3, shall sell such shares in the public market as
soon as practicable after the Time of Distribution and shall distribute the
proceeds of the sale of such shares pro rata among the holders of record of
Company Common Stock holding such numbers of shares of Company Common Stock not
evenly divisible by three.
2.4 TIMING OF THE COMPANY DISTRIBUTION. The Board of Directors of the
Company shall formally declare the Company Distribution and shall authorize the
Company to effect the Company Distribution at the close of business on the
Closing Date, which shall be the day immediately prior to the Effective Time,
subject to the satisfaction or waiver of the conditions set forth in Article
VIII of this Distribution Agreement, by delivery of certificates representing
shares of New Gaylord Common Stock to the Transfer Agent for delivery to the
holders entitled thereto. The Company Distribution shall be deemed to be
effective upon notification by the Company to the Transfer Agent that the
Company Distribution has been declared and that the Transfer Agent is authorized
to proceed with the distribution of shares of New Gaylord Common Stock.
ARTICLE III
TAX MATTERS
3.1 TAX DISAFFILIATION AGREEMENT. Prior to the Time of Distribution, New
Gaylord, the Company and Parent shall enter into an agreement relating to past
and future tax sharing and certain issues associated therewith in the form
attached to the Merger Agreement as Annex B (the "Tax Disaffiliation
Agreement").
3.2 TAX MATTERS. Notwithstanding anything to the contrary in this
Distribution Agreement, Liabilities of the parties for Taxes are subject to the
terms of the Tax Disaffiliation Agreement. All obligations of New Gaylord under
the Tax Disaffiliation Agreement shall be treated as Assumed Liabilities and not
as Retained Liabilities under this Distribution Agreement and all obligations of
the Company under the Tax Disaffiliation Agreement shall be treated as Retained
Liabilities and not as Assumed Liabilities under this Distribution Agreement.
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ARTICLE IV
RESTRUCTURING AND ASSUMED LIABILITIES
4.1 RESTRUCTURING. Prior to the Time of Distribution, the Company and New
Gaylord shall cause the following transactions to occur in the order set forth
below (the "Restructuring"), which transactions are intended to separate the
Entertainment Business from the Retained Business:
(a) The Company shall, effective as of January 6, 1997:
(i) contribute, as a capital contribution to Idea Entertainment,
Inc., a Delaware corporation and a wholly owned subsidiary of the
Company formerly known as Word Entertainment Group, Inc. ("Idea"), (A)
all of the Company's right, title and interest in and to the assets (the
"Word Assets") purchased pursuant to the Asset Purchase Agreement, dated
as of November 21, 1996, by and among Thomas Nelson, Inc., Word,
Incorporated, Word Direct Partners, L.P. and the Company (the "Word
Agreement") and (B) all of the Company's rights and obligations under
the Word Agreement; and
(ii) cause Idea to contribute, as capital contributions to Word
Music Group, Inc., a Tennessee corporation and a wholly owned subsidiary
of Idea ("Word Music"), and to Word Entertainment Direct LLC, a limited
liability company that is 99%-owned by Idea, all or a portion of the
Word Assets. Thereafter, Word Music may contribute all or a portion of
such Word Assets to one or more of its Subsidiaries, which may, in turn,
contribute all or a portion of such assets to one or more of Word
Music's indirect Subsidiaries.
(b) The Company shall sell to a Subsidiary of New Gaylord the
Company's aggregate interest in a minor league baseball franchise,
including, without limitation, the assets set forth below, for an amount of
cash equal to the agreed upon fair market value of such assets:
(i) all of the capital stock of Oklahoma City Athletic Club, Inc.,
an Oklahoma corporation ("OKC"), held by the Company (50%);
(ii) all of the Company's limited partner interest (24.5%) in OKC
Athletic Club, LP, an Oklahoma limited partnership; and
(iii) all of the Company's limited partner interest (24.5%) in OKC
Concession Services Limited Partnership, an Oklahoma limited
partnership.
(c) New Gaylord shall cause its wholly owned Subsidiary, Opryland USA,
Inc., a Delaware corporation ("Opryland USA"), to contribute its entire
limited partner interest in OLH, L.P. to the capital of a Subsidiary of
Opryland USA.
(d) New Gaylord shall cause Opryland USA to be merged upstream with
and into New Gaylord;
(e) New Gaylord shall:
(i) contribute to the capital of O&W Corporation ("O&W"), a
Tennessee corporation, the loans payable to New Gaylord, as successor to
Opryland USA, by each of O&W, Country Music Television Inc., a Tennessee
corporation ("CMT"), and Outdoor Entertainment, Inc., a Tennessee
corporation;
(ii) cause CMT to transfer (A) all assets listed on Schedule
4.1(e)(ii) attached hereto which comprise the assets used in the
business of CMT outside of the United States and Canada (other than the
trademarks and other intellectual property used by CMT outside of the
United States and Canada) (the "CMT International Assets"), together
with all Liabilities associated therewith (other than the loans payable
to Parent or any of its Subsidiaries) which are currently held in the
European, Latin American and Asian divisions of CMT and (B) the excluded
real and personal property reflected on CMT's balance sheet which is
included in Exhibit 1 to Section 4.01(g) of the Company Disclosure
Schedule to a newly formed wholly owned direct Subsidiary corporation of
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CMT ("New CMT") in exchange for all of the issued and outstanding
capital stock of New CMT (the "CMT Asset Transfer");
(iii) cause CMT to distribute, immediately after the CMT Asset
Transfer, all of the issued and outstanding capital stock of New CMT to
O&W, the holder of all of the issued and outstanding capital stock of
CMT; and
(iv) cause O&W to distribute all of the issued and outstanding
capital stock of New CMT to New Gaylord, as successor to Opryland USA,
the holder of 67% of the capital stock of O&W, in redemption of a
portion of the O&W capital stock held by New Gaylord equal to the fair
market value of the then outstanding capital stock of New CMT.
(f) New Gaylord, as successor to Opryland USA, shall contribute, or
shall cause to be contributed, as a capital contribution to Network
Enterprises, Inc., a Tennessee corporation and a wholly owned direct
Subsidiary of New Gaylord ("NEI"), the following assets:
(i) all of the issued and outstanding shares of capital stock of
O&W held by New Gaylord, as successor to Opryland USA;
(ii) all of the issued and outstanding capital stock of Peppercorn
Productions, Inc., a Tennessee corporation and a wholly owned, direct
Subsidiary of New Gaylord, as successor to Opryland USA;
(iii) all of the issued and outstanding shares of capital stock of
NV International, Inc., a Georgia corporation, directly held by New
Gaylord, as successor to Opryland USA;
(iv) all of New Gaylord's contractual rights and obligations under
the Distribution Agreement, dated as of January 1, 1989, as amended,
among New Gaylord, as successor to Opryland USA, and Parent, as
successor to Westinghouse Broadcasting Company, Inc., Group W
Television, Inc. and Group W Satellite Communications;
(v) all of New Gaylord's contractual rights and obligations under
the programming contracts for programs (x) produced for and originally
aired on TNN and/or CMTV or (y) licensed from a third party for
exhibition on TNN and/or CMTV;
(vi) all of New Gaylord's right, title, interest and obligations in
and to the program inventory in its inventory tape library that was
produced for and originally aired on TNN and/or CMTV;
(vii) all of New Gaylord's custodial rights and obligations with
respect to the program inventory in its inventory tape library that was
originally aired on TNN and is held by New Gaylord as custodian; and
(viii) all of New Gaylord's right, title and interest in and to the
assets (and related Liabilities) reflected on the Retained Business
Balance Sheet under the column "GBCI" excluding those assets (and
related Liabilities) disposed of in the ordinary cause of business since
the date of the Retained Business Balance Sheet and including all assets
(and related Liabilities) acquired since the date of the Retained
Business Balance Sheet which would have been reflected under the column
"GBCI" if the Retained Business Balance Sheet were prepared on the date
that such assets were contributed to NEI.
(g) New Gaylord shall:
(i) cause its wholly owned direct Subsidiary, WSM, Incorporated, a
Tennessee corporation ("WSM"), to be merged upstream with and into New
Gaylord;
(ii) cause Hospitality & Leisure Management Company, Inc., a
Delaware corporation and, after the merger of WSM with and into New
Gaylord described in (i) above, a wholly owned direct Subsidiary of New
Gaylord, to be merged upstream with and into New Gaylord; and
(iii) contribute, as a capital contribution to NEI, all of New
Gaylord's and its Subsidiaries' right, title and interest in and to (a)
the trademarks and other owned and registered intellectual
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property relating primarily to the Retained Business, as set forth on
Schedule 4.1(g)(iii) attached hereto, (b) all unregistered intellectual
property used solely by the Retained Business, except that listed on
Schedule 4.1(g)(iii-1) attached hereto, and (c) all FCC licenses used
solely in connection with the Retained Business and FCC license number
E-950243 (which is used in connection with both the Entertainment
Business and the Retained Business).
(h) The Company shall pay the then outstanding balance of the
intercompany note payable and accounts payable owed by the Company to New
Gaylord by transferring to New Gaylord an equal amount of intercompany
notes receivable and accounts receivable owed by New Gaylord or one or more
of its Subsidiaries to the Company, which shall consist of (i) all or a
portion of such receivables owed by NEI and NEI's Subsidiaries to the
Company (to the extent such receivables are to be paid by NEI pursuant to
Section 4.1(i)) and (ii) a portion of such receivables owed by the
Company's Subsidiaries (other than NEI and NEI's Subsidiaries) to the
Company which relate to the Entertainment Business;
(i) New Gaylord shall cause NEI to pay the outstanding balance of
intercompany notes receivable and accounts receivable then owed by NEI and
NEI's Subsidiaries to New Gaylord (which were transferred to New Gaylord
pursuant to Section 4.1(h)(i)) with the following assets that have an
aggregate agreed upon fair market value equal to such balance:
(i) all of NEI's general partner interest (51%) in WHS
Entertainment Ventures, a Tennessee general partnership;
(ii) all of NEI's right, title and interest in and to the Wildhorse
Saloon in Nashville, Tennessee, including all intellectual property
related thereto (other than intellectual property (A) relating primarily
to the Retained Business as set forth on Schedule 4.1(g)(iii) attached
hereto or (B) used solely by the Retained Business and not listed on
Schedule 4.1(g)(iii-1) attached hereto);
(iii) all of NEI's right, title and interest in and to all real
property and improvements thereto owned by NEI, including, without
limitation, the TNN headquarters building, the Greenland building, the
Gaslight building, improvements to the Grand Ole Opry House, the Scenic
Shop, the antenna farm and the broadcast service facilities field shop;
(iv) all of the capital stock of WHS Licensing GP Corporation, a
Tennessee corporation held by NEI (51%);
(v) all of NEI's limited partner interest (50.49%) in WHS Licensing
Limited Partnership, a Tennessee limited partnership;
(vi) all of NEI's or NEI's Subsidiaries' right, title and interest
in and to Z Music, Inc. and the assets thereof;
(vii) all of NEI's right, title and interest in and to the assets
set forth on Schedule 4.1(i)(vii) attached hereto; and
(viii) all of NEI's and NEI's Subsidiaries' right, title and
interest in and to (A) all trademarks and other owned and registered
intellectual property relating primarily to the Entertainment Business
and (B) all unregistered intellectual property other than such
intellectual property used solely by the Retained Business and not
listed on Schedule 4.1(g)(iii-1) attached hereto.
(j) New Gaylord may transfer to one or more of New Gaylord's
Subsidiaries (other than NEI or NEI's Subsidiaries) all or a portion of (i)
the assets received from NEI pursuant to Section 4.1(i) and (ii) any
intercompany notes receivable and accounts receivable then owed by New
Gaylord's Subsidiaries to New Gaylord which were transferred to New Gaylord
pursuant to Section 4.1(h)(ii).
(k) The Company shall contribute, as a capital contribution to New
Gaylord, (i) all of the outstanding capital stock of Idea and (ii) the then
outstanding balance of the intercompany notes receivable and accounts
receivable owed by the Company's Subsidiaries (other than NEI and NEI's
Subsidiaries) to the Company which relate to the Entertainment Business.
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(l) the Company shall contribute, as a capital contribution to New
Gaylord, the following assets:
(i) all of the Company's right, title and interest (other than
NEI's and NEI's Subsidiaries' right, title and interest which is the
subject of Section 4.1(i)(vi)) in and to Z Music, Inc. and the assets
thereof, the option to acquire 95% of the outstanding stock of Z Music,
Inc., the outstanding balance of any note receivable and any accounts
receivable owed by Z Music, Inc. to the Company, and all other related
rights;
(ii) all of the Company's right, title and interest in and to all
of the assets and Liabilities and rights and obligations under any
Contracts of the Company except those assets, Liabilities and
contractual rights and obligations set forth on Schedule 4.1(l)(ii)
attached hereto; and
(iii) all of the Company's right, title and interest in and to (i)
all trademarks and other owned and registered intellectual property
relating primarily to the Entertainment Business and (ii) all
unregistered intellectual property other than such intellectual property
used solely by the Retained Business and not listed on Schedule
4.1(g)(iii-l) attached hereto.
(m) New Gaylord shall assume all then outstanding third-party bank
debt and senior notes of the Company.
(n) New Gaylord shall distribute all of the issued and outstanding
capital stock of NEI to the Company.
4.2 OTHER ASSUMED LIABILITIES. The parties further agree that, except as
otherwise specifically set forth in this Distribution Agreement, the Merger
Agreement, the Post-Closing Covenants Agreement or the Tax Disaffiliation
Agreement, at or prior to the Time of Distribution, New Gaylord shall, or shall
cause the appropriate New Gaylord Subsidiary to, unconditionally assume and
undertake to pay, satisfy and discharge when due in accordance with their terms
all Liabilities (whether arising before or after the Time of Distribution) of
the Company and its Subsidiaries other than the Retained Liabilities
(collectively, the "Assumed Liabilities"), and the Company shall retain, or
shall, or shall cause the appropriate Retained Company to assume, and undertake
to pay, satisfy and discharge when due in accordance with their terms all
Liabilities (whether arising before or after the Time of Distribution
(including, without limitation, all Liabilities to be reflected on the Closing
Balance Sheet)) of the Company and its Subsidiaries to the extent arising out of
the Retained Business (the "Retained Liabilities").
4.3 OPUBCO LIABILITIES. The Company shall have a right of subrogation to
New Gaylord's right (as successor to the Company upon consummation of the
Restructuring) to indemnification pursuant to the Distribution Agreement dated
as of October 30, 1991 between the Company and The Oklahoma Publishing Company
and relating, inter alia, to Liabilities arising out of or related to sites
listed on the National Priorities List under the Comprehensive Environment
Response, Compensation, and Liability Act, including the Hardage/Criner site,
the Mosley Road site and the Double Eagle Refining site.
ARTICLE V
OTHER AGREEMENTS
5.1 ANCILLARY AGREEMENTS. Prior to the Time of Distribution, the Company,
or another of the Retained Companies, and New Gaylord, or another of the New
Gaylord Companies, shall enter into (a) one or more mutually satisfactory
five-year agreements relating to the lease by the New Gaylord Companies to the
Retained Companies subsequent to the Time of Distribution of certain real
property described on ANNEX A attached hereto, with substantially the terms set
forth thereon, (b) a mutually satisfactory five-year agreement relating to
certain productions and promotional activities of the Grand Ole Opry Live and
the Wildhorse Saloon subsequent to the Time of Distribution, with substantially
the terms set forth on ANNEX B attached hereto, (c) a mutually satisfactory
five-year agreement relating to certain promotional advertising services
consisting of the exhibition of the New Gaylord Companies' promotional
advertising on TNN and CMTV subsequent to the Time of Distribution, with
substantially the terms set forth on ANNEX C attached hereto, (d) a mutually
satisfactory five-year agreement relating to certain operational, distribution,
marketing, sales,
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programming and administrative services to be provided to New CMT by the Company
subsequent to the Time of Distribution, with substantially the terms set forth
on ANNEX D attached hereto, (e) a mutually satisfactory five-year agreement
relating to the use by the New Gaylord Companies subsequent to the Time of
Distribution of the GI-R transponder number 6 for Z Music distribution, with
substantially the terms set forth on ANNEX E attached hereto, (f) a mutually
satisfactory perpetual, exclusive (including with respect to the Company),
royalty-free license agreement relating to the use by New Gaylord of the CMT
name outside of the United States and Canada and all related trademarks owned by
the Company with substantially the terms set forth on ANNEX F attached hereto,
(g) a mutually satisfactory one-year license agreement relating to the use by
the Company of the Opryland Duplicating Services with mandolin design mark and
other license agreements as deemed necessary after the Time of Distribution,
with substantially the terms set forth on ANNEX G attached hereto, (h) a
mutually satisfactory perpetual license agreement relating to the use by the
Company of certain software owned by New Gaylord, with substantially the terms
set forth on ANNEX H attached hereto and (i) one or more mutually satisfactory
five-year transition services agreements relating to the services set forth on
ANNEXES I AND J with substantially the terms set forth thereon. Each of the
Company and New Gaylord agree that the annual fair market values of the rights
and benefits to be received pursuant to the Annexes and provisions referred to
in this Section 5.1 by the Retained Companies, on the one hand, and the New
Gaylord Companies, on the other hand, are intended to be equal.
5.2 USE OF "GAYLORD" AND "OPRYLAND" NAMES. From and after the Effective
Time, New Gaylord shall have all rights in and use of the name "Gaylord" and all
derivatives thereof and, except as contemplated by Annex H to this Agreement,
the name "Opryland" and all derivatives thereof. As a result, after completion
of the Restructuring, the Company shall take or cause to be taken all action
necessary to (a) change, immediately prior to the Time of Distribution, the name
of any of the Retained Companies (other than the Company) to eliminate therefrom
the names "Gaylord" and "Opryland" and all respective derivatives thereof and
(b) promptly deliver to New Gaylord all stationery, business cards, brochures
and other documents (collectively, "Business Stationery"), including, without
limitation, invoices and purchase orders, bearing the name "Gaylord" and all
derivatives thereof and, except as contemplated by Annex H to this Distribution
Agreement, the name "Opryland" and all derivatives thereof; provided, however,
that the Company shall not be required to deliver to New Gaylord any Business
Stationery that also contains the name of any of the Retained Businesses or any
derivative thereof, until three (3) months following the Effective Time. Within
three (3) months following the Effective Time, the Company shall cause to be
removed from display from all of its facilities all demountable displays which
contain the names "Gaylord" or "Opryland" and all respective derivatives thereof
or any corporate symbol related thereto and shall cause the removal of all signs
displaying such name and all derivatives thereof.
5.3 BOOKS AND RECORDS. Prior to or as promptly as practicable after
completion of the Restructuring, the Company shall deliver to New Gaylord all
corporate books and records of the New Gaylord Companies in the possession of
the Retained Companies and the relevant portions (or copies thereof) of all
corporate books and records of the Retained Companies relating directly and
primarily to the New Gaylord Companies, the Entertainment Business or the
Assumed Liabilities, including, in each case, all active agreements, active
litigation files and government filings. From and after the completion of the
Restructuring, all such books, records and copies shall be the property of New
Gaylord. The Company may retain copies of all such corporate books and records.
Prior to or as promptly as practicable after the completion of the
Restructuring, New Gaylord shall deliver to the Company all corporate books and
records of the Retained Companies in the possession of any of the New Gaylord
Companies and relevant portions (or copies thereof) of all corporate books and
records of the New Gaylord Companies relating directly and primarily to the
Retained Companies, the Retained Business or the Retained Liabilities,
including, in each case, all active agreements, active litigation files and
government filings. From and after the completion of the Restructuring, all such
books, records and copies shall be the property of the Company. New Gaylord may
retain copies of all such corporate books and records.
5.4 ACCESS. From and after the Time of Distribution, each of the Company
and New Gaylord shall afford to the other and to the other's Representatives
reasonable access and duplicating rights (at the requesting party's expense),
during normal business hours and upon reasonable advance notice, to all
information within
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the possession or control of any of the Retained Companies or any of the New
Gaylord Companies, as the case may be, to the extent relating to the business,
assets or Liabilities of the other as they existed prior to the completion of
the Restructuring or to the extent relating to or arising in connection with the
relationship between any of the Retained Companies or the New Gaylord Companies,
as the case may be, prior to the Restructuring insofar as such access is
reasonably required for a reasonable purpose. Without limiting the foregoing,
information may be requested under this Section 5.4 for audit, accounting,
claims, litigation and tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations.
5.5 RETENTION OF RECORDS. Except as provided in any of the Transaction
Agreements, if any information relating to the businesses, assets or Liabilities
of a Retained Company or a New Gaylord Company is retained by a New Gaylord
Company or Retained Company, respectively, each of the Company and New Gaylord
shall, and shall cause the other Retained Companies and New Gaylord Companies,
respectively, to, retain all such information in the Retained Companies' or New
Gaylord Companies' possession or under its control until such information is at
least ten years old except that if, prior to the expiration of such period, any
Retained Company or New Gaylord Company wishes to destroy or dispose of any such
information that is at least three years old, prior to destroying or disposing
of any of such information, (a) the Company or New Gaylord, on behalf of the
Retained Company or the New Gaylord Company that is proposing to dispose of or
destroy any such information, shall provide no less than 45 days' prior written
notice to the other party, specifying the information proposed to be destroyed
or disposed of, and (b) if, prior to the scheduled date of such destruction or
disposal, the other party requests in writing that any of the information
proposed to be destroyed or disposed of be delivered to such other party, the
Company or New Gaylord, as applicable, promptly shall arrange for the delivery
of the requested information to a location specified by, and at the expense of,
the requesting party.
5.6 CONFIDENTIALITY.
(a) Each party hereto shall keep, and shall cause its Representatives
to keep, the other party's Information strictly confidential and will
disclose such Information only to such of its Representatives who need to
know such Information and who agree to be bound by this Section 5.6 and not
to disclose such Information to any other Person. Without the prior written
consent of the other party, each party and its Representatives shall not
disclose the other party's Information to any Person or entity except as
may be required by law or judicial process and in accordance with this
Section 5.6.
(b) In the event that either party or any of its Representatives
receives a request or is required by law or judicial process to disclose to
a court or other tribunal all or any part of the other party's Information,
the receiving party or its Representatives shall promptly notify the other
party of the request in writing, and consult with and assist the other
party in seeking a protective order or request for other appropriate
remedy. In the event that such protective order or other remedy is not
obtained or the other party waives compliance with the terms hereof, such
receiving party or its Representatives, as the case may be, shall disclose
only that portion of the Information or facts which, in the written opinion
of the receiving party's outside counsel, is legally required to be
disclosed, and will exercise its respective reasonable best efforts to
assure that confidential treatment will be accorded such Information or
facts by the Persons or entities receiving the same. The providing party
will be given an opportunity to review the Information or facts prior to
disclosure.
5.7 LISTING ON NYSE. New Gaylord shall use its reasonable best efforts to
list the shares of New Gaylord Common Stock to be issued pursuant to the Company
Distribution on the NYSE, subject to official notice of issuance, or to have
such shares designated as a national market system security on the interdealer
quotation system by the National Association of Securities Dealers, Inc.
5.8 FURTHER ASSURANCES. The parties agree that if, after the Time of
Distribution, either party holds assets which by the terms hereof or of the
Merger Agreement were intended to be assigned and transferred to, or retained
by, the other party, such party shall, at its expense, promptly assign and
transfer or cause to be assigned and transferred such assets to the other party,
and the parties agree that the transferring party will hold such assets as
trustee of the transferee party and all income and risk of loss of the
transferred assets to the Time of Distribution shall be for the account of the
intended owner. Each of the parties hereto, at its own cost
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and expense, promptly shall execute such documents and other instruments and
take such further actions as may be reasonably required or desirable to carry
out the provisions hereof and to consummate the transactions contemplated
hereby.
5.9 COOPERATION. The parties shall cooperate with each other in all
reasonable respects to ensure (a) that the Restructuring and the assumption of
the Retained Liabilities (to the extent necessary) and the Assumed Liabilities
are consummated in accordance with the terms hereof, (b) the retention by the
Company of the Retained Business, including, without limitation, allocating
rights and obligations under Contracts, if any, of the Retained Companies or the
New Gaylord Companies that relate to the Retained Business, and (c) the
retention by New Gaylord of the Entertainment Business, including, without
limitation, allocating rights and obligations under Contracts, if any, of the
New Gaylord Companies or the Retained Companies that relate to the Entertainment
Business.
ARTICLE VI
RELEASES
6.1 MUTUAL RELEASE. Effective as of the Time of Distribution and except as
otherwise specifically set forth in the Transaction Agreements, each of the
Company, on the one hand, and New Gaylord, on the other hand, releases and
forever discharges the other and its affiliates, and its and their directors,
officers, employees and agents of and from all debts, demands, actions, causes
of action, suits, accounts, covenants, contracts, agreements, damages, and any
and all claims, demands and Liabilities whatsoever of every name and nature,
both in law and in equity, against such other party or any of its assigns, which
the releasing party has or ever had, which arise out of or relate to events,
circumstances or actions taken by such other party prior to the Time of
Distribution; provided, however, that the foregoing general release shall not
apply to this Distribution Agreement, the Merger Agreement or the Tax
Disaffiliation Agreement or the transactions contemplated hereby or thereby and
shall not affect either party's right to enforce this Distribution Agreement or
any other agreement contemplated hereby or thereby in accordance with its terms.
Each party understands and agrees that, except as otherwise specifically
provided herein or in the Merger Agreement or the Tax Disaffiliation Agreement,
neither the other party nor any of its Subsidiaries is, in this Distribution
Agreement or any other agreement or document, representing or warranting to such
party in any way as to the assets, business or Liabilities transferred or
assumed as contemplated hereby or thereby or as to any consents or approvals
required in connection with the consummation of the transactions contemplated by
this Distribution Agreement, the Merger Agreement or the Tax Disaffiliation
Agreement.
ARTICLE VII
EMPLOYEE MATTERS
7.1 EMPLOYEES. Effective as of the Time of Distribution, (a) Retained
Employees shall remain or become employees of the Retained Companies in the same
capacities as then held by such employees (or in such other capacities and upon
such terms and conditions as the Company shall determine in its sole discretion)
and (b) New Gaylord Employees shall remain or become employees of the New
Gaylord Companies in the same capacities as then held by such employees (or in
such other capacities and upon such terms and conditions as New Gaylord shall
determine in its sole discretion). Nothing contained in this Section 7.1 shall
confer on any Retained Employee or any New Gaylord Employee any right to
continued employment after the Time of Distribution, and such employees shall
continue to be employed "at-will".
7.2 OTHER LIABILITIES AND OBLIGATIONS. Effective as of the Time of
Distribution, New Gaylord shall assume and be solely responsible for (i) all
liabilities and obligations related to the New Gaylord Employees and (ii) except
as specifically provided in this Article VII and except to the extent otherwise
provided in this Distribution Agreement, the Merger Agreement or the Post
Closing Covenants Agreement, all liabilities and obligations related to the
Retained Employees that were incurred on or before the Time of Distribution.
Effective as of the Time of Distribution, the Company shall assume and be solely
responsible for (i) all liabilities and obligations related to the Retained
Employees incurred after the Time of Distribution, (ii) all
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holiday, vacation and sick day benefits of the Retained Employees accrued as of
the Time of Distribution to the extent reflected on the Closing Balance Sheet
and (iii) all other liabilities, including without limitation for worker's
compensation and medical benefits, to the extent reflected as a Current
Liability on the Closing Balance Sheet (as those terms are defined in the
Post-Closing Covenants Agreement). For purposes of this Section 7.2, a liability
is "incurred" on either the date the event giving rise to the liability occurs
or, if the liability is related to more than one event, the date the first event
to which the liability relates occurs. Notwithstanding the foregoing, (i) New
Gaylord shall assume all liabilities and obligations related to Retained
Employees who also perform services for the New Gaylord Companies with respect
to whom New Gaylord continues to employ in accordance with Section 6.15(d) of
the Merger Agreement and (ii) the Company shall have no obligation or liability
(including severance liability) thereto. Notwithstanding the foregoing, deferred
directors' fees shall be the sole responsibility of New Gaylord.
7.3 EMPLOYEE BENEFITS. Without limiting the generality of Section 7.2
above:
(a) Effective as of the Time of Distribution, New Gaylord shall assume
sponsorship of the Retirement Plan for Employees of New Gaylord and
Affiliated and Adopting Corporations (the "New Gaylord Pension Plan") and
the trust related thereto. As of the Time of Distribution, Retained
Employees shall cease to participate in the New Gaylord Pension Plan and
shall be fully vested in their benefits accrued thereunder as of the Time
of Distribution, and the accrued benefits of Retained Employees shall be
maintained under the New Gaylord Pension Plan until distributed in
accordance with the terms of the New Gaylord Pension Plan.
(b) Effective as of the Time of Distribution, New Gaylord shall assume
sponsorship of the GEC 401(k) Savings Plan (the "New Gaylord Savings Plan")
and the trust related thereto. As of the Time of Distribution, Retained
Employees shall cease to participate in the New Gaylord Saving Plan, and
shall be fully vested in their account balances thereunder as of the Time
of Distribution, and the account balances of Retained Employees shall be
maintained under the New Gaylord Savings Plan until distributed in
accordance with the terms of the New Gaylord Savings Plan.
(c) Effective as of the Time of Distribution, New Gaylord shall assume
sponsorship of the employee welfare benefit plans (as such term is defined
in ERISA) maintained or sponsored by the Company immediately prior to the
Time of Distribution ("New Gaylord Welfare Plans"). As of the Time of
Distribution, Retained Employees shall cease to participate in the New
Gaylord Welfare Plans and, unless allowed to participate in Parent (or any
of its Subsidiaries) welfare plans, shall commence to participate in
welfare benefit plans of the Company (the "Replacement Welfare Plans"). The
Company will, or shall use its best efforts to cause Parent (or any of its
Subsidiaries) to, (i) waive all limitations as to pre-existing condition
exclusions and waiting periods with respect to participation and coverage
requirements applicable to Retained Employees under the Replacement Welfare
Plans, other than limitations or waiting periods that were in effect with
respect to such employees under the New Gaylord Welfare Plans and that have
not been satisfied as of the Time of Distribution, and (ii) provide each
Retained Employee with credit for any co-payments and deductibles paid
prior to the Time of Distribution in satisfying any deductible or
out-of-pocket requirements under the Replacement Welfare Plans. Effective
as of the Time of Distribution, New Gaylord shall assume sponsorship of the
Company VEBA.
(d) Effective as of the Time of Distribution, with respect to those
collective bargaining agreements to which any of the Retained Companies or
the New Gaylord Companies is a party and which cover New Gaylord Employees,
New Gaylord shall assume liabilities and obligations of the Retained
Companies and the New Gaylord Companies thereunder, to the extent that such
liabilities and obligations relate to New Gaylord Employees and the
Entertainment Business.
(e) Effective as of the Time of Distribution, New Gaylord will assume
sponsorship of the Company's Opryland USA, Inc. Supplemental Deferred
Compensation Plan ("SUDCOMP Plan"), NLT Supplemental Executive Retirement
Plan, GEC Benefit Restoration Plan and the GEC Supplemental Executive
Retirement Plan (collectively, the "Nonqualified Plans"). As of the time of
Distribution, Retained Employees shall cease to participate in the
Nonqualified Plans and shall be fully vested in
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their benefits accrued thereunder or account balances thereunder, as
applicable, as of the Time of Distribution.
7.4 PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS. Except as otherwise
provided in the Merger Agreement or this Distribution Agreement, no provision of
this Distribution Agreement shall be construed as a limitation on the right of
the Company or New Gaylord to amend or terminate any employee benefit plan,
policy, or other perquisite of employment (hereinafter, "Employee Benefit")
which right the Company or New Gaylord would otherwise have under the terms of
such Employee Benefit, and no provision of this Distribution Agreement shall be
construed to create a right in any employee or beneficiary of such Employee
Benefit that such employee or beneficiary would not otherwise have under the
terms of the plan or policy governing the Employee Benefit itself.
7.5 REIMBURSEMENT; INDEMNIFICATION. New Gaylord and the Company acknowledge
that the Company, on the one hand, and New Gaylord, on the other hand, may incur
costs and expenses (including, without limitation, contributions to plans and
the payment of insurance, or other similar premiums) pursuant to any of the
employee benefit or compensation plans, programs or arrangements which are, as
set forth in this Distribution Agreement, the responsibility of the other party.
Accordingly, the Company and New Gaylord agree to reimburse each other, as soon
as practicable but in any event within 30 days of receipt from the other party
of appropriate verification, for all such costs and expenses. All liabilities
retained, assumed or indemnified by New Gaylord pursuant to this Article VII
shall in each case be deemed to be Assumed Liabilities, and all liabilities
retained, assumed or indemnified by the Company pursuant to this Article VII
shall in each case be deemed to be Retained Liabilities, and, in each case,
shall be subject to the indemnification provisions set forth in Article VI
hereof.
7.6 EMPLOYMENT, CONSULTING AND SEVERANCE AGREEMENTS. Effective as of the
Time of Distribution, New Gaylord shall assume all liabilities and obligations
attributable to New Gaylord Employees under their respective employment,
consulting and severance agreements with the Retained Companies or the New
Gaylord Companies, as the same are in effect immediately prior to the Time of
Distribution subject to the rights of New Gaylord to alter such agreements
including, without limitation, the rights described in Sections 7.1 and 7.4
hereof except as otherwise provided in the Merger Agreement or this Distribution
Agreement. Effective as of the Time of Distribution, the Company shall retain
all liabilities and obligations attributable to Retained Employees under their
respective employment, consulting and severance agreements with the Retained
Companies or the New Gaylord Companies to the extent disclosed in Annex L
attached hereto ("Listed Agreements"), as the same are in effect immediately
prior to the Time of Distribution subject to the rights of the Company to alter
such agreements including, without limitation, the rights described in Sections
7.1 and 7.4 hereof except as otherwise provided in the Merger Agreement or this
Distribution Agreement. The Company and New Gaylord agree that the transactions
contemplated by this Distribution Agreement shall not constitute severance of
employment of any Retained Employee or any New Gaylord Employee.
7.7 EQUITY AWARDS. Prior to the Time of Distribution, the Company shall
amend the Company Stock Plans, make adjustments and take actions (and New
Gaylord shall take such actions as are reasonably required to implement the
same) with respect to the options, restricted stock and performance shares which
are outstanding immediately prior to the Time of Distribution to provide that
(i) effective immediately prior to the Time of Distribution all restrictions
with respect to restricted stock shall lapse and all performance criteria with
respect to performance shares shall be deemed satisfied as though the "Company
Performance Target" achieved was 100% pursuant to Exhibit A of the restricted
stock agreement evidencing the award of such performance shares, (ii) any such
options to acquire Company Common Stock which are held by New Gaylord Employees
shall become fully vested and exercisable and will be converted into and
represent options to acquire shares of New Gaylord Common Stock, under an equity
incentive plan to be established by New Gaylord, with such other amendments and
adjustments as are reasonable and appropriate, and (iii) the terms and/or number
of such options to acquire Company Common Stock which are held by Retained
Employees will be adjusted in accordance with the Merger Agreement.
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7.8 CERTAIN AMENDMENTS. Prior to the Time of Distribution, the Company
shall amend the Listed Agreements and take actions (and New Gaylord shall take
such actions as are reasonably required to implement the same) to provide that
"Change in Control" (as such term is used in such Listed Agreements) shall
include the Company Distribution.
7.9 ACTIONS BY NEW GAYLORD. Any action required to be taken under this
Article VII may be taken by any member of the New Gaylord Companies.
ARTICLE VIII
CONDITIONS
The obligations of the Company and New Gaylord to consummate the Company
Distribution shall be subject to the fulfillment of each of the following
conditions:
8.1 NEW GAYLORD RECAPITALIZATION. The New Gaylord Recapitalization shall
have been consummated in accordance with Section 2.2 hereof in all material
respects.
8.2 TAX DISAFFILIATION AGREEMENT. The Tax Disaffiliation Agreement in the
form of attached to the Merger Agreement as Annex B, shall have been executed
and delivered by each of the Company, New Gaylord and Parent.
8.3 CERTAIN TRANSACTIONS. The Restructuring shall have been consummated in
accordance with Article IV in all material respects.
8.4 CONDITIONS TO MERGER SATISFIED. Each condition to the closing of the
Merger set forth in Article VII of the Merger Agreement, other than (i) the
condition to each party's obligations set forth in Section 7.01(f) thereof as to
the consummation of the transactions contemplated by this Distribution Agreement
and (ii) the condition to Parent's obligation set forth in Section 7.02(e)
thereof as to the satisfaction of conditions contained in the Distribution
Agreement shall have been satisfied or waived by the party for whose benefit
such provision exists.
8.5 ADEQUATE SURPLUS. The Board of Directors of the Company shall be
reasonably satisfied that, after giving effect to the Restructuring, (i) the
Company will not be insolvent and will not have unreasonably small capital with
which to engage in its businesses and (ii) the Company's surplus will be
sufficient to permit, without violation of Section 170 of the DGCL, the Company
Distribution.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 MODIFICATION OR AMENDMENT. The parties hereto may modify or amend this
Distribution Agreement by written agreement executed and delivered by authorized
officers of the respective parties.
9.2 WAIVER; REMEDIES. The conditions to the Company's obligation to
consummate the Company Distribution are for the sole benefit of the Company and
may be waived in writing by the Company in whole or in part to the extent
permitted by applicable law. No delay on the part of any party hereto in
exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any waiver on the part of any party hereto of any right, power
or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder, nor will any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. Unless otherwise
provided, the rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which the parties may otherwise have at law
or in equity.
9.3 COUNTERPARTS. For the convenience of the parties hereto, this
Distribution Agreement may be executed in separate counterparts, each such
counterpart being deemed to be an original instrument, and which counterparts
shall together constitute the same agreement.
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9.4 GOVERNING LAW. This Distribution Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to its conflicts of law principles.
9.5 NOTICES. Any notice, request, instruction or other document to be given
hereunder by any party to the other shall be in writing and shall be deemed to
have been duly given (i) on the date of delivery if delivered by facsimile (upon
confirmation of receipt) or personally, (ii) on the first business day following
the date of dispatch if delivered by Federal Express or other next-day courier
service, or (iii) on the third business day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
If to the Company:
Gaylord Entertainment Company
Westinghouse Building
11 Stanwix Street
Pittsburgh, PA 15222-1384
Attn: Louis J. Briskman, Esq.
Facsimile: (412) 642-5224
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attn: Peter S. Wilson, Esq.
Facsimile: (212) 474-3700
If to New Gaylord:
New Gaylord Entertainment Company
One Gaylord Drive
Nashville, Tennessee 37214
Attn: Frank M. Wentworth, Jr., Esq.
Facsimile: (615) 316-6060
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Attn: Richard L. Easton, Esq.
Facsimile: (302) 651-3001
9.6 CAPTIONS. All Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Distribution
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
9.7 ASSIGNMENT. No party to this Distribution Agreement shall convey,
assign or otherwise transfer any of its rights or obligations under this
Distribution Agreement without the express written consent of the other party
hereto in its sole and absolute discretion, except that either party hereto may
assign any of its rights hereunder to a successor to all or any part of its
business or to any of its wholly owned Subsidiaries. Except as aforesaid, any
such conveyance, assignment or transfer without the express written consent of
the other party shall be void ab initio. No assignment of this Agreement or any
rights hereunder shall relieve the assigning party of its obligations hereunder.
9.8 THIRD-PARTY BENEFICIARIES. Parent shall be a third-party beneficiary of
this Distribution Agreement. Nothing contained in this Distribution Agreement is
intended to confer upon any Person or entity other than the parties hereto and
their respective successors and permitted assigns (other than Parent), any
benefit, right
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or remedy under or by reason of this Distribution Agreement, except that the
provisions of Section 6.1 hereof shall inure to the benefit of the Persons
referred to therein.
9.9 CERTAIN OBLIGATIONS. Whenever this Distribution Agreement requires any
of the Subsidiaries of any party to take any action, this Distribution Agreement
will be deemed to include an undertaking on the part of such party to cause such
Subsidiary to take such action.
9.10 SPECIFIC PERFORMANCE. In the event of any actual or threatened default
in, or breach of, any of the terms, conditions and provisions of this
Distribution Agreement, the party or parties who are or are to be thereby
aggrieved shall have the right of specific performance and injunctive relief
giving effect to its or their rights under this Distribution Agreement, in
addition to any and all other rights and remedies at law or in equity, and all
such rights and remedies shall be cumulative. The parties agree that the
remedies at law for any breach or threatened breach, including monetary damages,
are inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived.
9.11 SEVERABILITY. If any provision of this Distribution Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon any such determination, the parties shall negotiate
in good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties.
9.12 ENTIRE AGREEMENT. The Transaction Agreements (including the documents
and the instruments referred to herein and in the Merger Agreement, the Annexes
hereto and to the Merger Agreement, the Parent Disclosure Schedule and the
Company Disclosure Schedule), and the Confidentiality Agreement (as defined in
the Merger Agreement) constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and thereof.
9.13 JURISDICTION. Each of the Company and New Gaylord hereby (i) consents
to be subject to the jurisdiction of the United States District Court for the
District of Delaware and the jurisdiction of the courts of the State of Delaware
in any suit, action or proceeding seeking to enforce any provision of, or based
on any matter arising out of or in connection with, this Distribution Agreement
or the transactions contemplated hereby, (ii) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from any such court, (iii) agrees that it will not bring any action relating to
this Distribution Agreement or the transactions contemplated hereby in any court
other than the United States District Court for the District of Delaware or the
courts of the State of Delaware, (iv) irrevocably waives (x) any objection that
it may have or hereafter have to the changing of venue of any such suit, action
or proceeding in such court and (y) any claim that any such suit, action or
proceeding in any such court has been brought in an inconvenient forum and (v)
irrevocably consents to the service of any and all process in any such suit,
action or proceeding by the delivery of such process to such party at the
address and in the manner provided in Section 9.5 hereof.
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IN WITNESS WHEREOF, this Distribution Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first hereinabove written.
GAYLORD ENTERTAINMENT COMPANY
By:
---------------------------------------
Name:
Title:
NEW GAYLORD ENTERTAINMENT COMPANY
By:
---------------------------------------
Name:
Title:
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ANNEX III
STOCKHOLDER AGREEMENT dated as of February 9, 1997, among WESTINGHOUSE
ELECTRIC CORPORATION, a Pennsylvania corporation ("Parent"), the
individuals and other parties listed on Schedule A attached hereto
(together with any Transferee (as hereinafter defined), each, a
"Stockholder" and, collectively, the "Stockholders"), and Edward L.
Gaylord, Edith Gaylord Harper, Christine Gaylord Everest, Edward K. Gaylord
II and Martin C. Dickinson, as trustees (in such capacity, together with
any New Trustee (as hereinafter defined), each, a "Trustee", and
collectively, the "Trustees") of the Trust (as hereinafter defined).
WHEREAS Parent, G Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"), and Gaylord Entertainment Company, a
Delaware corporation (the "Company"), propose to enter into an Agreement and
Plan of Merger dated as of the date hereof (as the same may be amended in
accordance with Section 1.01(b) thereof or, with the consent of the Trustees,
otherwise amended, the "Merger Agreement"; capitalized terms used but not
defined herein shall have the meanings set forth in the Merger Agreement)
providing for the merger of Sub with and into the Company (the "Merger")
following the Restructuring and the Company Distribution, upon the terms and
subject to the conditions set forth in the Merger Agreement;
WHEREAS as of the date hereof the Trustees constitute all the trustees of
that certain voting trust (the "Trust"), created pursuant to the Agreement dated
as of October 3, 1990, as amended by Amendment No. 1 to Voting Trust Agreement
dated as of October 23, 1991 (as so amended, the "Trust Agreement"), among the
Trustees and certain shareholders of the Company party thereto from time to
time;
WHEREAS as of the date hereof each Stockholder owns of record the number of
shares of Class A Common Stock, $.01 par value, of the Company (the "Class A
Common Stock"), and of Class B Common Stock, $.01 par value, of the Company (the
"Class B Common Stock" and, together with the Class A Common Stock, the "Common
Stock"), set forth opposite his, her or its name on Schedule A attached hereto
(such shares of Common Stock, together with any other shares of capital stock of
the Company acquired by such Stockholder after the date hereof and during the
term of this Agreement, being collectively referred to herein as such
Stockholder's "Non-Trust Shares");
WHEREAS as of the date hereof the Trust owns of record 37,767,956 shares of
Class B Common Stock (such shares of common stock, together with any other
shares of capital stock of the Company deposited in or otherwise acquired by the
Trust after the date of this Agreement, being collectively referred to herein as
the "Trust Shares");
WHEREAS as of the date hereof each Stockholder owns beneficially the number
of Trust Shares set forth opposite his, her or its name on Schedule A attached
hereto (such Trust Shares, together with any other Trust Shares acquired by such
Stockholder after the date hereof and during the term of this Agreement, being
collectively referred to herein as such Stockholder's Trust Shares) and each
Stockholder owns of record Trust Certificates (as such term is defined in the
Trust Agreement) evidencing ownership of such Stockholder's Trust Shares); and
WHEREAS as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that each Stockholder, individually as a
shareholder and as a holder of Trust Certificates, and each Trustee, in his or
her capacity as a trustee of the Trust, enter into this Agreement;
NOW, THEREFORE, to induce Parent to enter into, and in consideration of its
entering into, the Merger Agreement, and in consideration of the premises and
the representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER. Each Stockholder
hereby, severally and not jointly, represents and warrants to Parent in respect
of himself, herself or itself as follows:
(a) Authority. The Stockholder has all requisite power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized,
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<PAGE> 181
executed and delivered by the Stockholder and constitutes a valid and
binding obligation of the Stockholder enforceable in accordance with its
terms, except to the extent limited by bankruptcy, insolvency or other
similar laws of general application affecting the enforcement of creditors'
rights generally or by general principles of equity. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, result
in any violation of, or default (with or without notice or lapse of time or
both) under any provision of, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order,
notice, decree, statute, law, ordinance, rule or regulation applicable to
the Stockholder or to any of the Stockholder's property or assets. If the
Stockholder is married and the Stockholder's Non-Trust Shares or Trust
Shares constitute community property or otherwise are owned or held in a
manner that requires spousal or other approval for this Agreement to be
legal, valid and binding, this Agreement has been duly authorized, executed
and delivered by, and constitutes a valid and binding agreement of, the
Stockholder's spouse or the person giving such approval, enforceable
against such spouse or person in accordance with its terms. No trust of
which the Stockholder is a trustee requires the consent of any beneficiary
to the execution and delivery of this Agreement or to the consummation of
any of the transactions contemplated hereby.
(b) The Non-Trust Shares. The Stockholder is the record and
beneficial owner of, or is trustee of a trust that is the record holder of,
and whose beneficiaries beneficially own, and has good and marketable title
to, the Non-Trust Shares set forth opposite his, her or its name on
Schedule A attached hereto, free and clear of any claims, liens,
encumbrances and security interests whatsoever. The Stockholder does not
own, of record or beneficially, any shares of capital stock of the Company
other than the Non-Trust Shares and the Trust Shares set forth opposite
his, her or its name on Schedule A attached hereto. The Stockholder has the
sole right to vote such Non-Trust Shares, and none of such Non-Trust Shares
is subject to any voting trust or other agreement, arrangement or
restriction with respect to the voting of such Non-Trust Shares, except the
terms of this Agreement.
(c) The Trust Shares. The Stockholder is the beneficial owner of, or
is trustee of a trust whose beneficiaries beneficially own, the Trust
Shares set forth opposite his, her or its name on Schedule A attached
hereto, free and clear of any claims, liens, encumbrances and security
interests whatsoever and has the power to sell, transfer and assign such
Trust Shares and the Trust Certificates evidencing such Trust Shares,
subject to the terms of the Trust Agreement.
(d) Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in respect of this Agreement or in connection
with the transactions contemplated hereby based upon arrangements made by
or on behalf of the Stockholder, other than any financial advisor whose fee
shall be paid by the Stockholder individually.
2. REPRESENTATIONS AND WARRANTIES OF THE TRUSTEES. The Trustees hereby
represent and warrant to Parent in their capacities as Trustees, as follows:
(a) Authority. The Trustees constitute all of the trustees of the
Trust. The Trustees have all requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby on
behalf of the Trust. This Agreement has been duly authorized, executed and
delivered by the Trustees and constitutes a valid and binding obligation of
the Trustees and of the Trust enforceable in accordance with its terms,
except to the extent limited by bankruptcy, insolvency or other similar
laws of general application affecting the enforcement of creditors' rights
generally or by general principles of equity. The execution and delivery of
this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, result
in any violation of, or default (with or without notice or lapse of time or
both) under any provision of, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order,
notice, decree, statute, law, ordinance, rule or regulation applicable to
the Trustees or the Trust or to any of the Trustees' or the Trust's
property or assets. The Trustees do not require the consent of any of the
holders of Trust Certificates or
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<PAGE> 182
any other person (as defined in the Merger Agreement) to the execution and
delivery by the Trustees of this Agreement or to the consummation by the
Trustees of any of the transactions contemplated hereby.
(b) The Trust Shares. The Trustees collectively are the record holder
of, and have legal title to, the Trust Shares, free and clear of any
claims, liens, encumbrances and security interests whatsoever, other than
the express terms of the Trust Agreement (it being understood that no
representation or warranty is made with respect to any claims, liens,
encumbrances or security interests not created by the Trustees and relating
solely to particular Trust Certificates evidencing Trust Shares). There are
no shares of capital stock of the Company deposited in the Trust other than
the Trust Shares. The Trustees have the sole right to vote the Trust Shares
on any and all matters presented to the stockholders of the Company, and
none of the Trust Shares is subject to any agreement, arrangement or
restriction with respect to the voting of the Trust Shares, except the
terms of the Trust Agreement and this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby represents and
warrants to each Stockholder that Parent 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 by Parent, and
the consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of Parent. This
Agreement has been duly executed and delivered by Parent and constitutes a valid
and binding obligation of Parent enforceable in accordance with its terms,
except to the extent limited by bankruptcy, insolvency or other similar laws of
general application affecting the enforcement of creditors' rights generally or
by general principles of equity. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby and compliance
with the terms hereof will not, result in any violation of, or default (with or
without notice or lapse of time or both) under any provision of, the articles of
incorporation or by-laws of Parent, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to Parent or to
any of Parent's property or assets.
4. COVENANTS OF EACH TRUSTEE. Until the termination of this Agreement in
accordance with Section 8, the Trustees hereby agree as follows:
(a) At any meeting of stockholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval (including
by written consent) with respect to the Merger and the Merger Agreement is
sought, the Trustees shall, including by initiating a written consent
solicitation if requested by Parent, vote (or cause to be voted) the Trust
Shares in favor of the Merger, the adoption by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other
transactions contemplated by the Merger Agreement or any of the other
Transaction Agreements.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
stockholder's vote, consent or other approval is sought, the Trustees shall
vote (or cause to be voted) the Trust Shares against (i) any merger
agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the
Company or any other takeover proposal as such term is defined in the
Merger Agreement (a "Takeover Proposal"), or (ii) any amendment of the
Company's certificate of incorporation or by-laws or other proposal or
transaction involving the Company or any of its subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of
the other transactions contemplated by the Merger Agreement or any of the
other Transaction Agreements or change in any manner the voting rights of
each class of Company Common Stock. Subject to Section 10, the Trustees
further agree not to commit or agree to take any action inconsistent with
the foregoing.
(c) The Trustees shall (i) not, without the consent of Parent, vote to
amend, alter or modify the Trust Agreement pursuant to Section 27 of the
Trust Agreement, (ii) not consent to the withdrawal of any Trust Shares
from the Trust pursuant to Section 4 of the Trust Agreement or otherwise,
(iii) not take
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<PAGE> 183
any action that would result in the conversion of any of the Trust Shares
into shares of Class A Common Stock, (iv) not resign from their respective
positions as Trustees, (v) not vote for the removal of any of the other
Trustees pursuant to Section 14 of the Trust Agreement or otherwise, (vi)
not name any new trustee of the Trust unless required to do so pursuant to
Section 15 of the Trust Agreement (such a new trustee, if any, a "New
Trustee") and (vii) appoint only such New Trustees (if any) as are, or will
contemporaneously with election and acceptance of appointment as such
become, parties to this Agreement (and from and after such appointment,
each such New Trustee shall be deemed to be, and be bound as if he or she
had originally executed this Agreement in his or her capacity as, a Trustee
for all purposes of this Agreement). Subject to Section 10, the Trustees
further agree not to covenant or agree to take any action inconsistent with
the foregoing.
5. COVENANTS OF EACH STOCKHOLDER. Until the termination of this Agreement
in accordance with Section 8, each Stockholder, severally and not jointly,
agrees as follows:
(a) At any meeting of stockholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval (including
by written consent) with respect to the Merger and the Merger Agreement is
sought, the Stockholder shall, including by initiating a written consent
solicitation if requested by Parent, vote (or cause to be voted) his, her
or its Non-Trust Shares in favor of the Merger, the adoption by the Company
of the Merger Agreement and the approval of the terms thereof and each of
the other transactions contemplated by the Merger Agreement or any of the
other Transaction Agreements.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
stockholder's vote, consent or other approval is sought, the Stockholder
shall vote (or cause to be voted) his, her or its Non-Trust Shares against
(i) any merger agreement or merger (other than the Merger Agreement and the
Merger), consolidation, combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding up of
or by the Company or any other Takeover Proposal or (ii) any amendment of
the Company's certificate of incorporation or by-laws or other proposal or
transaction involving the Company or any of its subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of
the other transactions contemplated by the Merger Agreement or any of the
other Transaction Agreements or change in any manner the voting rights of
each class of Company Common Stock. Subject to Section 10, the Stockholder
further agrees not to commit or agree to take any action inconsistent with
the foregoing.
(c) The Stockholder agrees not to (i) sell, transfer (including by
gift), pledge, assign or otherwise dispose of or, in the case of any shares
of Class B Common Stock, otherwise Transfer (within the meaning of
paragraph (xii) of Division (C)(5) of Article IV of the Restated
Certificate of Incorporation of the Company) (collectively, "Transfer"), or
enter into any contract, option or other arrangement (including any profit
sharing arrangement) with respect to the Transfer of, his, her or its
Non-Trust Shares and/or Trust Shares to any person other than pursuant to
the terms of the Merger, unless such transferee agrees to be bound by the
terms of this Agreement as if he, she or it had originally executed this
Agreement as a Stockholder (any such person so agreeing to be bound, a
"Transferee") and, in the case of shares of Class B Common Stock, only in a
manner that would not cause such shares of Class B Common Stock to be
converted into shares of Class A Common Stock (it being understood that no
sale, transfer, pledge, assignment, disposition or Transfer that may occur
as the result of the involuntary bankruptcy of the Stockholder will
constitute a breach of this Agreement); provided, however, that not more
than an aggregate of 603,993 shares of Class B Common Stock may be sold or
transferred by all Stockholders collectively to one or more Transferees in
a manner that would cause such shares of Class B Common Stock to be
converted into shares of Class A Common Stock, (ii) enter into any voting
arrangement, whether by proxy, voting agreement or otherwise, in connection
with, directly or indirectly, any Takeover Proposal, (iii) convert, or
cause to be converted, or take any action that would result in the
conversion of, any of his, her or its Non-Trust Shares consisting of Class
B Common Stock into shares of Class A Common Stock (except as permitted in
subsection (i) above), (iv) transfer to the Trustees any Trust Certificates
in connection with the withdrawal of any his, her or its Trust Shares from
the Trust
III-4
<PAGE> 184
pursuant to Section 4 of the Trust Agreement or otherwise or (v) execute
any instrument directing the termination of the Trust pursuant to Section
20 of the Trust Agreement or otherwise. Subject to Section 10, the
Stockholder further agrees not to commit or agree to take any of the
foregoing actions.
(d) Subject to Section 10, during the term of this Agreement, the
Stockholder shall not, nor shall it authorize any investment banker,
attorney or other adviser or representative of the Stockholder to, (i)
directly or indirectly solicit, initiate or encourage the submission of,
any Takeover Proposal or (ii) directly or indirectly participate in any
discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal.
(e) Until after the Merger is consummated or the Merger Agreement is
terminated pursuant to its terms, the Stockholder shall use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and each of the other
transactions contemplated by the Merger Agreement or any of the other
Transaction Agreements.
(f) The Stockholder represents that any proxies heretofore given in
respect of the Stockholder's Non-Trust Shares are not irrevocable, and that
any such proxies are hereby revoked.
(g) In the case of each of Mary I. Gaylord and Louise Gaylord Bennett,
the Stockholder shall not decline appointment as a trustee of the Trust as
contemplated by Section 15 of the Trust Agreement or otherwise unless she
is not legally qualified to be appointed.
6. FURTHER ASSURANCES. Each Stockholder and Trustee will, from time to
time, execute and deliver, or cause to be executed and delivered, such
additional or further consents, documents and other instruments and take such
other actions as Parent may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this Agreement.
7. ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties without the prior
written consent of the other parties, except that Parent may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to any
direct 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.
8. TERMINATION. This Agreement shall terminate upon the earlier of (a) the
Effective Time of the Merger or (b) the time the Merger Agreement is terminated
in accordance with its terms unless the Merger Agreement is terminated (i) by
Parent or the Company pursuant to Section 8.01(b)(i), (ii) by the Company
pursuant to Section 8.01(b)(iv) if at the time of such termination Parent had
the right to terminate the Merger Agreement pursuant to Section 8.01(b)(v),
(iii) by Parent pursuant to Section 8.01(b)(v) or (iv) at a time when one or
more of the Stockholders or Trustees is in breach in any material respect of any
of the terms or provisions of this Agreement and such breach cannot be or has
not been cured within 30 days after the giving of written notice by Parent to
the breaching Stockholder or Trustee of such breach, in all of which cases this
Agreement shall terminate on August 9, 1998.
9. GENERAL PROVISIONS.
(a) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to Parent in accordance
with Section 10.02 of the Merger Agreement and to the Stockholders
(including, if applicable, in his or her capacity as a Trustee) at their
respective addresses set forth on Schedule A attached hereto (or at such
other address for a party as shall be specified by like notice).
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<PAGE> 185
(c) 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 headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
(d) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been
signed by each of the parties and delivered to Parent, it being understood
that each party need not sign the same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i)
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 (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
(f) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware regardless of the
laws that might otherwise govern under applicable principles of conflicts
of law thereof.
10. STOCKHOLDER CAPACITY. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his capacity as such director or officer.
Each Stockholder signs solely in his, her or its capacity as the record holder
and/or beneficial owner of, or the trustee of a trust whose beneficiaries
beneficially own, his, her or its Non-Trust Shares and/or Trust Shares and
nothing herein shall limit or affect any actions taken by such Stockholder in
his or her capacity as an officer or director of the Company. Each Trustee signs
in his or her capacity as a trustee of the Trust and nothing herein shall limit
or affect any actions taken by a Trustee in his or her capacity as an officer or
director of the Company.
11. ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in a Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit such party to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that such party will not
bring any action relating to this Agreement or the transactions contemplated
hereby in any court other than a Federal court sitting in the state of Delaware
or a Delaware state court and (iv) waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this Agreement
or any of the transactions contemplated hereby.
IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by its
officer thereunto duly authorized and each Stockholder, individually as a
shareholder of the Company and as a Trust Certificate holders, and each Trustee,
in his or her capacity as a trustee of the Trust, has signed this Agreement, all
as of the date first written above.
WESTINGHOUSE ELECTRIC CORPORATION
By: /s/ FREDRIC G. REYNOLDS
---------------------------------------
Fredric G. Reynolds
Executive Vice President,
Chief Financial Officer
III-6
<PAGE> 186
STOCKHOLDERS:
/s/ EDWARD L. GAYLORD
--------------------------------------
Edward L. Gaylord
/s/ EDITH GAYLORD HARPER
---------------------------------------
Edith Gaylord Harper
/s/ CHRISTINE GAYLORD EVEREST
---------------------------------------
Christine Gaylord Everest
/s/ EDWARD K. GAYLORD II
---------------------------------------
Edward K. Gaylord II
/s/ LOUISE GAYLORD BENNETT
---------------------------------------
Louise Gaylord Bennett
/s/ MARY I. GAYLORD
---------------------------------------
Mary I. Gaylord
EDWARD L. GAYLORD REVOCABLE TRUST
By: /s/ EDWARD L. GAYLORD
---------------------------------------
Edward L. Gaylord, Trustee
MARTIN C. DICKINSON REVOCABLE TRUST
By: /s/ MARTIN C. DICKINSON
---------------------------------------
Martin C. Dickinson, Trustee
DICKINSON TRUST
By: /s/ MARTIN C. DICKINSON
---------------------------------------
Martin C. Dickinson, Trustee
MARY I. GAYLORD REVOCABLE
LIVING TRUST OF 1985
By: /s/ EDWARD L. GAYLORD
---------------------------------------
Edward L. Gaylord, Trustee
EDITH GAYLORD HARPER 1995
REVOCABLE TRUST
By: /s/ EDITH GAYLORD HARPER
---------------------------------------
Edith Gaylord Harper, Trustee
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<PAGE> 187
TRUSTEES:
/s/ EDWARD L. GAYLORD
--------------------------------------
Edward L. Gaylord
/s/ EDITH GAYLORD HARPER
---------------------------------------
Edith Gaylord Harper
/s/ CHRISTINE GAYLORD EVEREST
---------------------------------------
Christine Gaylord Everest
/s/ EDWARD K. GAYLORD II
---------------------------------------
Edward K. Gaylord II
/s/ MARTIN C. DICKINSON
---------------------------------------
Martin C. Dickinson
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<PAGE> 188
SCHEDULE A
TO STOCKHOLDER AGREEMENT
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMPANY
NAME AND ADDRESS OF STOCKHOLDER COMMON STOCK OWNED OF RECORD
- ------------------------------------------------------ -------------------------------------
<S> <C> <C>
Edward L. Gaylord..................................... Total Class A: 0
P O Box 25125 Total Class B: 0
Oklahoma City, OK 73125-0125 Non-Trust Class B: 0
Trust Class B: 0
Edith Gaylord Harper.................................. Total Class A: 0
9000 Broadway Ext Total Class B: 0
Oklahoma City, OK 73114-3708 Non-Trust Class B: 0
Trust Class B: 0
Christine Gaylord Everest............................. Total Class A: 0
6608 N Pennsylvania Avenue Total Class B: 2,595,489
Oklahoma City, OK 73116-5315 Non-Trust Class B: 0
Trust Class B: 2,595,489
Edward K. Gaylord II.................................. Total Class A: 0
RR 8 Box 104B Total Class B: 1,207,500
Guthrie, OK 73044-9059 Non-Trust Class B: 0
Trust Class B: 1,207,500
Louise Gaylord Bennett................................ Total Class A: 5,512
1604 Dorchester Drive Total Class B: 2,834,730
Oklahoma City, OK 73120-1205 Non-Trust Class B: 0
Trust Class B: 2,834,730
Mary I. Gaylord....................................... Total Class A: 0
P O Box 25125 Total Class B: 0
Oklahoma City, OK 73125-0125 Non-Trust Class B: 0
Trust Class B: 0
Edward L. Gaylord, Trustee............................ Total Class A: 44,100
Edward L. Gaylord Revocable Trust Total Class B: 14,055,577
P O Box 25125 Non-Trust Class B: 147,582
Oklahoma City, OK 73125-0125 Trust Class B: 13,907,995
Edward L. Gaylord, Trustee............................ Total Class A: 0
Mary I. Gaylord Revocable Living Trust of 1985 Total Class B: 2,585,940
P O Box 25125 Non-Trust Class B: 0
Oklahoma City, OK 73125-0125 Trust Class B: 2,585,940
Edith Gaylord Harper, Trustee......................... Total Class A: 0
Edith Gaylord Harper 1995 Revocable Trust Total Class B: 6,400,114
9000 Broadway Ext. Non-Trust Class B: 1,190,802
Oklahoma City, OK 73114-3708 Trust Class B: 5,209,312
Martin C. Dickinson, Trustee.......................... Total Class A: 0
Martin C. Dickinson Revocable Trust Total Class B: 281,477
P O Box 7078 Non-Trust Class B: 82,479
Rancho Santa Fe, California Trust Class B: 198,998
Martin C. Dickinson, Trustee.......................... Total Class A: 0
Dickinson Trust Total Class B: 3,596,615
P O Box 808 Non-Trust Class B: 0
Rancho Santa Fe, California Trust Class B: 3,596,615
</TABLE>
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<PAGE> 189
ANNEX IV
POST-CLOSING COVENANTS AGREEMENT
DATED AS OF , 199 ,
AMONG
WESTINGHOUSE ELECTRIC CORPORATION,
GAYLORD ENTERTAINMENT COMPANY,
NEW GAYLORD ENTERTAINMENT COMPANY
AND
THE SUBSIDIARIES OF
NEW GAYLORD ENTERTAINMENT COMPANY
LISTED ON SCHEDULE A ATTACHED HERETO
<PAGE> 190
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.01. Definitions........................................................... IV-1
ARTICLE II
INDEMNIFICATION
Section 2.01. Indemnification by New Gaylord Indemnitors............................ IV-2
Section 2.02. Indemnification by Parent............................................. IV-2
Section 2.03. Procedures Relating to Indemnification................................ IV-3
Section 2.04. Certain Limitations................................................... IV-4
Section 2.05. Limitation on the New Gaylord Indemnitors' Indemnification Obligation
under Section 2.01(iv).............................................. IV-4
Section 2.06. Exclusivity of Tax Disaffiliation Agreement........................... IV-5
ARTICLE III
OTHER AGREEMENTS
Section 3.01. Insurance............................................................. IV-5
Section 3.02. Expenses.............................................................. IV-5
Section 3.03. Characterization of Payments.......................................... IV-5
Section 3.04. Agreement Not to Compete.............................................. IV-5
Section 3.05. Working Capital Adjustment............................................ IV-6
Section 3.06. Successors............................................................ IV-8
Section 3.07. Third Party Rights.................................................... IV-8
Section 3.08. Joint Defense and Confidentiality Agreement........................... IV-8
ARTICLE IV
MISCELLANEOUS AND GENERAL
Section 4.01. Effectiveness; Modification or Amendment.............................. IV-8
Section 4.02. Waiver; Remedies...................................................... IV-8
Section 4.03. Counterparts.......................................................... IV-9
Section 4.04. Governing Law......................................................... IV-9
Section 4.05. Notices............................................................... IV-9
Section 4.06. Entire Agreement...................................................... IV-10
Section 4.07. Certain Obligations................................................... IV-10
Section 4.08. Assignment............................................................ IV-10
Section 4.09. Captions.............................................................. IV-10
Section 4.10. Severability.......................................................... IV-10
Section 4.11. No Third Party Beneficiaries.......................................... IV-10
Section 4.12. Enforcement........................................................... IV-10
</TABLE>
Schedule A--Subsidiaries of New Gaylord
Annex A--Joint Defense and Confidentiality Agreement
IV-i
<PAGE> 191
POST-CLOSING COVENANTS AGREEMENT dated as of , 199 , among
WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation ("Parent"),
GAYLORD ENTERTAINMENT COMPANY, a Delaware corporation (the "Company"), NEW
GAYLORD ENTERTAINMENT COMPANY (formerly known as Gaylord Broadcasting
Company), a Delaware corporation and a wholly owned subsidiary of the
Company ("New Gaylord"), and THE SUBSIDIARIES OF NEW GAYLORD LISTED ON
SCHEDULE A ATTACHED HERETO (together with New Gaylord, collectively the
"New Gaylord Indemnitors").
WHEREAS, Parent, G Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"), and the Company have entered into an
Agreement and Plan of Merger dated as of February 9, 1997 (the "Merger
Agreement"), providing for the Merger (as defined in the Merger Agreement) of
Sub with and into the Company;
WHEREAS, the Board of Directors of the Company has approved an Agreement
and Plan of Distribution in the form of Annex A attached to the Merger Agreement
with such changes as may be made in accordance with Section 6.14 of the Merger
Agreement (the "Distribution Agreement"), which will be entered into prior to
the Effective Time (as defined in the Merger Agreement) subject to the issuance
of the Tax Rulings (as such term is defined in the Merger Agreement), pursuant
to and subject to the terms of which (a) the assets and businesses of the
Company and its subsidiaries (as defined in the Merger Agreement) will be
restructured as a result of which (i) all the assets of the Company and its
subsidiaries, other than the Retained Assets (as defined in the Merger
Agreement), will be held by New Gaylord or one or more of New Gaylord's
subsidiaries and (ii) all the liabilities of the Company and its subsidiaries,
other than the Retained Liabilities (as defined in the Merger Agreement), will
be assumed by New Gaylord or one or more of New Gaylord's subsidiaries, (b) New
Gaylord will be recapitalized in accordance with Article II of the Distribution
Agreement and (c) following such restructuring and recapitalization, the Company
will distribute (the "Company Distribution") to each holder of record of shares
of Class A Common Stock, $.01 par value, of the Company ("Company Class A Common
Stock") and Class B Common Stock, $.01 par value, of the Company ("Company Class
B Common Stock" and, together with the Company Class A Common Stock, "Company
Common Stock") a number of shares of Common Stock, $.01 par value, of New
Gaylord equal to one-third of the number of shares of Company Common Stock held
by such holder;
WHEREAS, the execution and delivery of this Agreement by the parties hereto
is a condition to the obligations of the parties to the Merger Agreement to
consummate the Merger;
WHEREAS, the execution and delivery of this Agreement by the parties hereto
is a condition to the obligations of the parties to the Distribution Agreement
to consummate the Company Distribution; and
WHEREAS, the parties to this Agreement have determined that it is necessary
and desirable to set forth certain agreements that will govern certain matters
that may arise following the Restructuring (as defined in the Merger Agreement),
the Company Distribution and the Merger.
NOW, THEREFORE, in consideration of the foregoing, and the representations,
warranties, covenants and agreements contained in this Agreement, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used in this Agreement and
not otherwise defined herein shall have the meanings assigned to such terms in
the Merger Agreement or, if not defined in the Merger Agreement, the
Distribution Agreement. As used in this Agreement, the following terms shall
have the following respective meanings:
"Filings" shall mean the Registration Statements, the Proxy
Statement-Prospectus and any other document filed or required to be filed with
the SEC in connection with the transactions contemplated by the Transaction
Agreements, or any preliminary or final form thereof or any amendment or
supplement thereto.
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"New Gaylord Indemnitees" shall mean New Gaylord, each Affiliate (as
defined in the Distribution Agreement) of New Gaylord, including any of its
direct or indirect subsidiaries, and each of their respective Representatives
and each of the heirs, executors, successors and assigns of any of the
foregoing.
"Indemnifiable Losses" shall mean, subject to Section 2.04, all losses,
liabilities, damages, deficiencies, obligations, fines, expenses, claims,
demands, actions, suits, proceedings, judgments or settlements, whether or not
resulting from Third Party Claims (as defined in Section 2.03(a)), including
interest and penalties recovered by a third party with respect thereto and
out-of-pocket expenses and reasonable attorneys' and accountants' fees and
expenses incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of the Indemnitee's rights hereunder,
suffered or incurred by an Indemnitee.
"Indemnitee" shall mean any of the Parent Indemnitees or the New Gaylord
Indemnitees who or which may seek indemnification under this Agreement.
"Parent Indemnitees" shall mean Parent, each Affiliate of Parent, including
any of its direct or indirect subsidiaries (including, after the Effective Time,
the Retained Companies), and each of their respective Representatives and each
of the heirs, executors, successors and assigns of any of the foregoing.
ARTICLE II
INDEMNIFICATION
SECTION 2.01. INDEMNIFICATION BY NEW GAYLORD INDEMNITORS. Subject to the
provisions of this Article II, the New Gaylord Indemnitors shall jointly and
severally indemnify, defend and hold harmless the Parent Indemnitees from and
against, and pay or reimburse the Parent Indemnitees for, all Indemnifiable
Losses, as incurred:
(i) relating to or arising from the Entertainment Business, the assets
of the Entertainment Business or the Assumed Liabilities (including the
failure by New Gaylord or any New Gaylord Company to pay, perform or
otherwise discharge any of the Assumed Liabilities in accordance with their
terms), whether such Indemnifiable Losses relate to or arise from events,
occurrences, actions, omissions, facts or circumstances occurring, existing
or asserted before, at or after the Effective Time;
(ii) relating to or arising from any untrue statement or alleged
untrue statement of a material fact contained in any of the Filings, or any
omission or alleged omission to state therein 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; but only in
each case with respect to information provided by the Company relating to
the Company or any of its subsidiaries (including the Retained
Subsidiaries) contained in or omitted from the Filings;
(iii) relating to or arising from the breach by any New Gaylord
Company of any agreement or covenant contained in any Transaction Agreement
(other than the Tax Disaffiliation Agreement, the Ancillary Agreements and
the Stockholder Agreement) which by its express terms is to be performed or
complied with after the Effective Time; or
(iv) relating to or arising from any breach or inaccuracy of any
representation or warranty of the Company contained in the Merger Agreement
SECTION 2.02. INDEMNIFICATION BY PARENT. Subject to the provisions of this
Article II, Parent shall indemnify, defend and hold harmless the New Gaylord
Indemnitees from and against, and pay or reimburse the New Gaylord Indemnitees
for, all Indemnifiable Losses, as incurred:
(i) subject to the provisions of Sections 2.01(iv), relating to or
arising from the Retained Business, the Retained Assets or the Retained
Liabilities (including the failure by any Retained Company to pay, perform
or otherwise discharge any of the Retained Liabilities in accordance with
their terms), whether such Indemnifiable Losses relate to or arise from
events, occurrences, actions, omissions, facts or circumstances occurring,
existing or asserted before, at or after the Effective Time;
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(ii) relating to or arising from any untrue statement or alleged
untrue statement of a material fact contained in any of the Filings, or any
omission or alleged omission to state therein 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; but only in
each case with respect to information provided by Parent relating to Parent
or any of its subsidiaries other than the Retained Companies contained in
or omitted from the Filings; or
(iii) relating to or arising from the breach by Parent or any Retained
Company of any agreement or covenant contained in any Transaction Agreement
(other than the Tax Disaffiliation Agreement, the Ancillary Agreements and
the Stockholder Agreement) which by its express terms is to be performed or
complied with after the Effective Time.
SECTION 2.03. PROCEDURES RELATING TO INDEMNIFICATION. (a) In order for an
Indemnitee to be entitled to any indemnification provided for under this
Agreement in respect of, arising out of or involving a claim made by any Person
who is not an Indemnitee against the Indemnitee (a "Third Party Claim"), such
Indemnitee must notify the party who may become obligated to provide
indemnification hereunder (the "indemnifying party") in writing, and in
reasonable detail, of the Third Party Claim reasonably promptly, and in any
event within 20 business days after receipt by such Indemnitee of written notice
of the Third Party Claim; provided, however, that failure to give such
notification shall not affect the indemnification provided hereunder except to
the extent the indemnifying party shall have been actually prejudiced as a
result of such failure; provided further, however, that with respect to any
matter for which any New Gaylord Indemnitor is the indemnifying party, such New
Gaylord Indemnitor shall be deemed to have received notice with respect to all
matters by or against any Retained Company that arose prior to, or were
otherwise pending at, the Effective Time. After any required notification (if
applicable), the Indemnitee shall deliver to the indemnifying party, promptly
after the Indemnitee's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnitee relating to the Third Party
Claim.
(b) If a Third Party Claim is made against an Indemnitee, the indemnifying
party will be entitled to participate in the defense thereof and, if it so
chooses, to assume the defense thereof (at the expense of the indemnifying
party) with counsel selected by the indemnifying party and reasonably
satisfactory to the Indemnitee. Should the indemnifying party so elect to assume
the defense of a Third Party Claim, the indemnifying party will not be liable to
the Indemnitee for any legal expenses subsequently incurred by the Indemnitee in
connection with the defense thereof. If the indemnifying party assumes such
defense, the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by the indemnifying party, it being understood that the indemnifying
party shall control such defense. The indemnifying party shall be liable for the
fees and expenses of counsel employed by the Indemnitee for any period during
which the indemnifying party has not assumed the defense thereof (other than
during any period in which the Indemnitee shall have failed to give notice of
the Third Party Claim as provided above). Notwithstanding the foregoing, the
indemnifying party shall not be entitled to assume the defense of any Third
Party Claim (and shall be liable for the fees and expenses of counsel incurred
by the Indemnitee in defending such Third Party Claim) if the Third Party Claim
seeks an order, injunction or other equitable relief or relief for other than
money damages against the Indemnitee which the Indemnitee reasonably determines,
after conferring with its outside counsel, cannot be separated from any related
claim for money damages. If such equitable relief or other relief portion of the
Third Party Claim can be so separated from that for money damages, the
indemnifying party shall be entitled to assume the defense of the portion
relating to money damages. The indemnification required by Section 2.01 or 2.02,
as the case may be, shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or the Indemnifiable Loss is incurred. If the indemnifying party
chooses to defend or prosecute a Third Party Claim, all the parties hereto shall
cooperate in the defense or prosecution thereof, which cooperation shall include
the retention in accordance with the Distribution Agreement and (upon the
indemnifying party's request) the provision to the indemnifying party of records
and information which are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. If the
indemnifying party chooses to defend or prosecute any Third Party Claim, the
Indemnitee will agree to any settlement,
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compromise or discharge of such Third Party Claim which the indemnifying party
may recommend and which by its terms obligates the indemnifying party to pay the
full amount of liability in connection with such Third Party Claim; provided,
however, that, without the Indemnitee's consent, the indemnifying party shall
not consent to entry of any judgment or enter into any settlement (x) that
provides for injunctive or other nonmonetary relief affecting the Indemnitee or
(y) that does not include as an unconditional term thereof the giving by each
claimant or plaintiff to such Indemnitee of a release from all liability with
respect to such claim. If the indemnifying party shall have assumed the defense
of a Third Party Claim, the Indemnitee shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the indemnifying party's prior written consent (which consent shall not be
unreasonably withheld).
(c) In order for an Indemnitee to be entitled to any indemnification
provided for under this Agreement in respect of a claim that does not involve a
Third Party Claim, the Indemnitee shall deliver notice of such claim (in
reasonably sufficient detail to enable the indemnifying party to evaluate such
claim) with reasonable promptness to the indemnifying party. The failure by any
Indemnitee so to notify the indemnifying party shall not relieve the
indemnifying party from any liability which it may have to such Indemnitee under
this Agreement, except to the extent that the indemnifying party shall have been
actually prejudiced by such failure. If the indemnifying party does not notify
the Indemnitee within 20 calendar days following its receipt of such notice that
the indemnifying party disputes its liability with respect to such claim under
Section 2.01 or 2.02, as the case may be, the claim shall be conclusively deemed
a liability of the indemnifying party under Section 2.01 or 2.02, as the case
may be, and the indemnifying party shall pay the amount of such liability to the
Indemnitee on demand or, in the case of any notice in which the amount of the
claim (or any portion thereof) is estimated, on such later date when the amount
of such claim (or such portion thereof) becomes finally determined. If the
indemnifying party has timely disputed its liability with respect to such claim,
as provided above, the indemnifying party and the Indemnitee shall proceed in
good faith to negotiate a resolution of such dispute and, if not resolved
through negotiations, such dispute shall be resolved by litigation in an
appropriate court of competent jurisdiction.
(d) The parties hereto agree that New Gaylord shall be the representative
of the other New Gaylord Indemnitors for all purposes of this Section 2.03, and
as such all deliveries, notices and other communications made or delivered to
New Gaylord shall also be deemed to have been made or delivered to the other New
Gaylord Indemnitors, and all elections, selections of counsel, choices,
agreements and consents made or delivered by New Gaylord shall be deemed to have
also been made or delivered by the other applicable New Gaylord Indemnitors, and
shall be binding thereon. Notwithstanding the foregoing, the parties hereto
agree that nothing contained in this Section 2.03(d) shall in any manner affect,
limit or impair the rights of the Parent Indemnitees to indemnification from any
New Gaylord Indemnitor pursuant to Section 2.01.
SECTION 2.04. CERTAIN LIMITATIONS. (a) The amount of any Indemnifiable
Losses or other liability for which indemnification is provided under this
Agreement or any other amounts payable or reimbursable by one party to another
under this Agreement shall be net of any amounts actually recovered by the
Indemnitee from third parties (including, without limitation, amounts actually
recovered under insurance policies) with respect to such Indemnifiable Losses or
other liability or amounts.
(b) All indemnification payments under this Agreement shall be determined
on a pre-tax basis, i.e., without regard to the tax consequences to the
Indemnitee of making a payment that is indemnified by another party under this
Agreement or of receiving a payment under this Agreement as indemnification
therefor.
SECTION 2.05. LIMITATION ON THE NEW GAYLORD INDEMNITORS' INDEMNIFICATION
OBLIGATION UNDER SECTION 2.01(IV). (a) The New Gaylord Indemnitors shall not
have any liability under Section 2.01(iv) unless the aggregate of all
Indemnifiable Losses for which the New Gaylord Indemnitors would, but for this
Section 2.05, be liable under Section 2.01(iv) exceed on a cumulative pre-tax
basis an amount equal to $8,250,000.
(b) The parties hereto agree that the mere failure to list a Contract on
the Company Disclosure Schedule shall not in and of itself constitute an
Indemnifiable Loss. The parties hereto further agree that the foregoing shall in
no way limit or impair any right of any Parent Indemnitee to indemnification
under Section 2.01 or to recover any Indemnifiable Loss arising out of or
otherwise related to any such Contract or
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the terms thereof, when considered individually or together with the terms of
any other Contract, including with respect to any revenues that may be lower
than otherwise reasonably anticipated by Parent, any expenses that may be higher
than otherwise reasonably anticipated by Parent or any other Indemnifiable Loss
whatsoever resulting from such Contract or its terms. The parties hereto further
agree that this paragraph is not in any way intended to impose any different or
more stringent burden of proof on any Parent Indemnitee in asserting or
enforcing any right than that which may have existed in the absence of the
foregoing.
SECTION 2.06. EXCLUSIVITY OF TAX DISAFFILIATION AGREEMENT. Notwithstanding
anything in this Agreement to the contrary, the Tax Disaffiliation Agreement
shall be the exclusive agreement among the parties with respect to all Tax
matters, including indemnification in respect of Tax matters.
ARTICLE III
OTHER AGREEMENTS
SECTION 3.01. INSURANCE. In the event that prior to the Effective Time any
Retained Asset suffers any damage, destruction or other casualty loss, New
Gaylord shall, or shall cause a New Gaylord Subsidiary to, surrender to Parent
(i) all insurance proceeds received with respect to such damage, destruction or
loss and (ii) all rights of the New Gaylord Companies with respect to any causes
of action, whether or not litigation has commenced as of the Effective Time, in
connection with such damage, destruction or loss. New Gaylord shall, and shall
cause each New Gaylord Subsidiary to, make available to the Retained Companies
the benefit of any workers' compensation, general liability, product liability,
automobile liability, umbrella (excess) liability or crime or other insurance
policy covering the Company or any of its subsidiaries (including the Retained
Subsidiaries) and relating to the Retained Business with respect to insured
events or occurrences prior to the Effective Time (whether or not claims
relating to such events or occurrences are made prior to or after the Effective
Time); provided, however, that (i) all of New Gaylord's costs and expenses
incurred in connection with the foregoing are promptly paid by Parent and (ii)
such benefit shall be subject to (and recovery thereon shall be reduced by the
amount of) any applicable deductibles and co-payments provisions or any payment
or reimbursement obligations of New Gaylord or any of its subsidiaries or
Affiliates in respect thereof. The New Gaylord Companies shall promptly pay to
Parent all insurance proceeds relating to the Retained Business received by any
New Gaylord Company under any insurance policy.
SECTION 3.02. EXPENSES. Except as otherwise expressly provided in the
Transaction Agreements, New Gaylord (and not the Company) shall be responsible
for and agrees to pay all expenses of the Company and its subsidiaries directly
related to the Restructuring, the Company Distribution and the Merger.
SECTION 3.03. CHARACTERIZATION OF PAYMENTS. The payments made pursuant to
this Agreement shall be treated as occurring immediately before the Company
Distribution, and none of the New Gaylord Companies, the Retained Companies and
Parent and its subsidiaries shall take any position inconsistent with such
treatment before any Taxing Authority, except to the extent that a Final
Determination (as defined in the Tax Disaffiliation Agreement) with respect to
the recipient party causes any such payment to not be so treated.
SECTION 3.04. AGREEMENT NOT TO COMPETE. (a) New Gaylord understands that
Parent shall be entitled to protect and preserve the going concern value of the
Retained Business to the extent permitted by law and that Parent would not have
entered into the Merger Agreement absent the provisions of this Section 3.04.
Therefore, New Gaylord agrees that, commencing at the Effective Time and
continuing for a period of 5 years thereafter, it shall not, and shall not
permit any of its subsidiaries to, engage in, directly or indirectly, alone or
in association with any other person, the business of (i) owning or operating
retail stores with a motor sports theme other than those located in the Opryland
complex, (ii) owning or operating a Cable Network (as defined below) featuring
country music videos and/or a significant amount of musical, sports (including,
but not limited to, motor sports and outdoor sports), variety or other
entertainment features or series the theme of which is perceived by the viewing
public as being, or related to, that which is commonly known as "country
entertainment" programming (the "Theme"), or owning, sharing in the earnings of,
financing or investing in the capital stock of any person engaged in such
business or (iii) providing or otherwise making available for viewing on a Cable
Network or an over-the-air broadcast television station or network programming
featuring
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or related to the Theme (other than occasional (not regularly scheduled) country
music related specials for viewing on an over-the-air broadcast television
station or network), or owning, sharing in the earnings of, financing or
investing in the capital stock of any person engaged in such business; provided,
however, that nothing contained herein shall prohibit New Gaylord or its
subsidiaries from owning or operating the CMT International network in any area
outside of the United States and Canada; provided further, however, that other
than country music videos, the CMT International network's programming will not
primarily consist of programming featuring or related to the Theme; provided
further, however, that ownership for investment purposes only of less than 5% of
any class of voting stock of any publicly held corporation shall not constitute
a violation hereof. In addition, New Gaylord agrees that for a period of one
year from the Effective Time it shall not, and shall cause its subsidiaries not
to, directly or indirectly, (i) induce any Retained Employee to leave the employ
of the Retained Companies, or recommend to any other person that they employ or
solicit for employment any such employee, or (ii) knowingly hire any such
employee, unless such employee is no longer employed by the Retained Companies.
As used herein, "Cable Network" shall mean a television network making
programming available for viewing by any technology other than over-the-air
broadcast (whether or not retransmitted via cable), including, without
limitation, cable television, MMDS, SMATV, DBS, TVRO and so-called
"superstations".
(b) Parent understands that New Gaylord shall be entitled to protect and
preserve the going concern value of the CMT International network to the extent
permitted by law. Therefore, Parent agrees that, commencing at the Effective
Time and continuing for a period of 5 years thereafter, it shall not, and shall
not permit any of its subsidiaries to, engage in, directly or indirectly, alone
or in association with any other person, the business of owning or operating a
Cable Network that is telecast outside of the United States and Canada and that
primarily features country music videos and occasional country music-related
specials; provided, however, that nothing contained herein shall prohibit Parent
or its subsidiaries from owning or operating for viewing outside of the United
States and Canada a Cable Network featuring the Theme or otherwise of a type
that is currently featured on the TNN network. Parent shall not be deemed in
breach of this Section 3.04(b) or of the license described in Section 5.1(f) of
the Distribution Agreement by virtue of Parent or any of its subsidiaries having
licensed or renewing the licenses of any current distributors of CMTV in markets
that are outside the United States and Canada; provided, however, that neither
Parent nor any of its subsidiaries shall license any additional distributors of
CMTV in such markets.
SECTION 3.05. WORKING CAPITAL ADJUSTMENT. (a) Within 90 days after the
Closing Date, Parent shall prepare and deliver to New Gaylord (i) an audited
combined balance sheet of the Retained Companies (the "Closing Balance Sheet"),
prepared from the books and records of the Retained Companies, certified by
Parent's independent auditors, and (ii) a statement (the "Closing Statement")
setting forth Working Capital (as defined below) as of the Effective Time
("Closing Working Capital"), together with a certificate of Parent's independent
auditors that the Closing Statement has been prepared in accordance with this
Section 3.05.
During the 30 day period following New Gaylord's receipt of the Closing
Statement, New Gaylord and its independent auditors will be permitted to review
the working papers of Parent's independent auditors relating to the Closing
Balance Sheet and the Closing Statement. The Closing Statement shall become
final and binding upon the parties on the thirtieth day following receipt
thereof, unless New Gaylord gives written notice of its disagreement with the
Closing Statement ("Notice of Disagreement") to Parent prior to such date. Any
Notice of Disagreement shall (i) specify in reasonable detail the nature of any
disagreement so asserted, (ii) only include disagreements based on Closing
Working Capital not being calculated in accordance with this Section 3.05 and
(iii) be accompanied by a certificate of New Gaylord's independent auditors that
they concur with each of the positions taken by New Gaylord in the Notice of
Disagreement. If a Notice of Disagreement is received by Parent in a timely
manner, then the Closing Statement (as revised in accordance with clauses (A) or
(B) below) shall become final on the earlier of (A) the date Parent and New
Gaylord resolve in writing any differences they have with respect to the matters
specified in the Notice of Disagreement or (B) the date any disputed matters are
finally resolved in writing by the Accounting Firm (as defined below).
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During the 30 day period following delivery of a Notice of Disagreement,
Parent and New Gaylord shall seek in good faith to resolve in writing any
differences which they may have with respect to the matters specified in the
Notice of Disagreement. During such period Parent and its independent auditors
shall have access to the working papers relating to the Notice of Disagreement.
At the end of such 30 day period (or such longer period as the parties may
agree), Parent and New Gaylord shall submit to an independent accounting firm
(the "Accounting Firm") for review and resolution any and all matters which
remain in dispute and which were properly included in the Notice of
Disagreement. The Accounting Firm shall be a nationally recognized independent
public accounting firm agreed upon by Parent and New Gaylord in writing. Parent
and New Gaylord shall jointly use all reasonable efforts to cause the Accounting
Firm to render a decision within 30 days following submission. Parent and New
Gaylord agree that judgment may be entered upon the determination of the
Accounting Firm in any court having jurisdiction over the party against which
such determination is to be enforced. The cost of any dispute resolution
(including the fees and expenses of the Accounting Firm and reasonable attorney
fees and expenses of the parties) pursuant to this Section 3.05 shall be borne
by Parent and New Gaylord in inverse proportion as they may prevail on matters
resolved by the Accounting Firm, which proportionate allocations shall also be
determined by the Accounting Firm at the time the determination of the
Accounting Firm is rendered on the merits of the matters submitted. The fees and
disbursements of Parent's independent auditors in connection with their review
of any Notice of Disagreement shall be borne by Parent, and the fees and
disbursements of New Gaylord's independent auditors incurred in connection with
their review of the Closing Statement shall be borne by New Gaylord.
(b) If, the Closing Working Capital is less than $53,798,000 (the "WC
Amount"), New Gaylord shall, and if the Closing Working Capital is greater than
the WC Amount, Parent shall, within 10 business days after the Closing Statement
becomes final and binding on the parties, make payment by wire transfer of
immediately available funds of the amount of such difference together with
interest thereon at the prime rate as reported in the Wall Street Journal on the
date the Closing Statement becomes final and binding on the parties, calculated
on the basis of the actual number of days elapsed divided by 365, from the date
of the Effective Time to the date of actual payment. Notwithstanding the
foregoing, in the event that New Gaylord gives a Notice of Disagreement to
Parent in accordance with this Section 3.05 and either Parent or New Gaylord
shall be required to make a payment to the other regardless of the resolution of
the items contained in the Notice of Disagreement, then Parent or New Gaylord,
as applicable, shall, within 10 business days of the receipt of the Notice of
Disagreement, make payment to the other by wire transfer of immediately
available funds of the lesser of the two amounts that may be owed by Parent or
New Gaylord, as applicable, pending resolution of the items contained in the
Notice of Disagreement together with interest thereon on at the prime rate as
reported in the Wall Street Journal on the date of the Notice of Disagreement,
calculated as described above, and such payment shall be credited against the
payment required pursuant to the first sentence of this paragraph.
(c) The term "Working Capital" shall mean Current Assets minus Current
Liabilities (in each case as defined below). The WC Amount equals Working
Capital as set forth on the Retained Business Balance Sheet (as defined in the
Merger Agreement) for December 31, 1996, provided to Parent by New Gaylord prior
to the execution of the Merger Agreement. The terms "Current Assets" and
"Current Liabilities" shall mean the current assets and current liabilities of
the Retained Business calculated in accordance with GAAP except that (i)
accruals for taxes shall be excluded, (ii) all programming assets shall be
treated as Current Assets and all programming liabilities shall be treated as
Current Liabilities (it being understood that programming assets shall be
amortized on a basis consistent with the method of amortization followed in the
Retained Business Financial Statements), (iii) one-third of any cash held by O&W
Corporation, Country Music Television Inc. and Outdoor Entertainment, Inc.
immediately prior to the Time of Distribution shall not be treated as a Current
Asset (it being understood that 100% of such cash will be a Retained Asset),
(iv) any Unspent Amount (as defined in Section 5.01(vii) of the Merger
Agreement) shall be treated as Current Liabilities, (v) any NASCAR Expenditures
(as defined in Section 5.01(vii)(B) of the Merger Agreement) shall be treated as
Current Assets, and (vi) purchase accounting adjustments shall not be made.
Notwithstanding the foregoing it is understood that cash was not included in the
calculation of the WC Amount. It is understood and agreed to by the parties
hereto that in the event that after the Effective Time any New Gaylord Company
receives checks, cash or other proceeds related to any assets on the Closing
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Balance Sheet, then such New Gaylord Company shall promptly pay or deliver such
checks, cash or proceeds to the Company. It is further understood and agreed to
by the parties hereto that in the event that after the Effective Time any
Retained Company receives checks, cash or other proceeds related to any assets
of the Entertainment Business, then such Retained Company shall promptly pay or
deliver such checks, cash or other proceeds to New Gaylord. It is further
understood and agreed to by the parties hereto that in the event that prior to
the Effective Time checks were written by any of the Retained Companies that
were not presented for payment prior to the Effective Time, then either such
checks will be honored by the New Gaylord Companies or at the Effective Time the
Retained Companies will have sufficient cash to cover such checks. The scope of
the disputes to be resolved by the Accounting Firm is limited to whether the
Closing Statement was prepared in compliance with the requirements of this
Section 3.05, and the Accounting Firm is not to make any other determination.
(d) During the period of time from and after the delivery of the Closing
Statement to New Gaylord through the date the Closing Statement becomes final
and binding on the parties, Parent shall cause the Retained Companies to afford
to New Gaylord and any accountants, counsel or financial advisors retained by
New Gaylord in connection with the adjustment contemplated by this Section 3.05
reasonable access during normal business hours to the Retained Companies' books
and records to the extent relevant to the adjustment contemplated by this
Section 3.05.
SECTION 3.06. SUCCESSORS. None of the New Gaylord Indemnitors shall
consolidate with or merge with or into, or sell, convey, transfer or lease, in
one transaction or a series of transactions, all or substantially all of its
assets to, any person, unless the resulting, surviving or transferee person (the
"Successor Company") shall expressly assume, by an instrument in form and
substance reasonably satisfactory to Parent, all the obligations of such New
Gaylord Indemnitor under this Agreement. The Successor Company shall be the
successor to such New Gaylord Indemnitor and shall succeed to, and be
substituted for, such New Gaylord Indemnitor under this Agreement, but, in the
case of a sale, conveyance, transfer or lease, such New Gaylord Indemnitor shall
not be released from its obligations hereunder.
SECTION 3.07. THIRD PARTY RIGHTS. In the event that after the Effective
Time any of the New Gaylord Companies holds any right to indemnification or any
other contractual or other right (collectively, a "Recourse Right") with respect
to any Retained Liability or any Assumed Liability for which any of the Retained
Companies are held responsible (including, without limitation, rights under the
Distribution Agreement dated as of October 30, 1991 between the Company and The
Oklahoma Publishing Company relating to liabilities arising out of or related to
sites listed on the National Priorities List under the Comprehensive
Environmental Response, Compensation, and Liability Act, including the
Hardage/Criner site, the Mosley Road Site and the Double Eagle Refining site),
then (i) to the extent possible such Recourse Right shall be deemed to be held
as a shared right of the applicable New Gaylord Companies and the applicable
Retained Companies to the extent necessary to protect the Retained Companies
against such Retained Liability, and (ii) to the extent not so possible, New
Gaylord shall, or shall cause a New Gaylord Company to, assert or otherwise make
available to the Retained Companies the full benefit of such Recourse Right by
making a claim on behalf of the Retained Companies or taking other steps
reasonably requested by the Retained Companies.
SECTION 3.08. JOINT DEFENSE AND CONFIDENTIALITY AGREEMENT. Prior to the
Effective Time, Parent and New Gaylord shall enter into the Joint Defense and
Confidentiality Agreement substantially in the form attached hereto as Annex A.
ARTICLE IV
MISCELLANEOUS AND GENERAL
SECTION 4.01. EFFECTIVENESS; MODIFICATION OR AMENDMENT. The parties hereto
agree that this Agreement will become effective at the Effective Time. The
parties hereto may modify or amend this Agreement only by written agreement
executed and delivered by duly authorized officers of the respective parties.
SECTION 4.02. WAIVER; REMEDIES. No delay on the part of any party hereto
in exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any waiver on the part of any party hereto of
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any right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder, nor will any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. No
waiver will be effective hereunder unless it is in writing. Unless otherwise
provided, the rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which the parties may otherwise have at law
or in equity.
SECTION 4.03. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 4.04. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 4.05. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent, to
Westinghouse Electric Corporation
11 Stanwix Street
Pittsburgh, PA 15222-1384
Telecopy No.: (412) 642-5224
Attention: Louis J. Briskman, Esq.
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Telecopy No.: (212) 474-3700
Attention: Peter S. Wilson, Esq.;
(b) if to the Company, to
G Corp.
11 Stanwix Street
Pittsburgh, PA 15222
Telecopy No.: (412) 642-5224
Attention: Louis J. Briskman, Esq.
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Telecopy No.: (212) 474-3700
Attention: Peter S. Wilson, Esq.;
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(c) if to New Gaylord, to
New Gaylord Entertainment Company
One Gaylord Drive
Nashville, TN 37214
Telecopy No.: (615) 316-6060
Attention: Frank M. Wentworth, Esq.
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, DE 19801
Telecopy No.: (302) 651-3001
Attention: Richard L. Easton, Esq.
SECTION 4.06. ENTIRE AGREEMENT. The Transaction Agreements (including the
documents and instruments referred to therein, the Annexes thereto, the Parent
Disclosure Schedule and the Company Disclosure Schedule) and the Confidentiality
Agreement constitute the entire agreement, and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof.
SECTION 4.07. CERTAIN OBLIGATIONS. Whenever this Agreement requires any of
the subsidiaries of any party to take any action, this Agreement will be deemed
to include an undertaking on the part of such party to cause such subsidiary to
take such action; provided, however, that for this purpose New Gaylord Companies
shall not be considered to be subsidiaries of the Company.
SECTION 4.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Any assignment in violation of the
preceding sentence shall be void. 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.
SECTION 4.09. CAPTIONS. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
SECTION 4.10. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other provision hereof or
the application of such provision to any other persons or circumstances. In the
event that the terms and conditions of this Agreement are materially altered as
a result of this Section the parties shall negotiate in good faith to agree upon
a suitable and equitable substitute provision to effect the original intent of
the parties.
SECTION 4.11. NO THIRD PARTY BENEFICIARIES. Nothing contained in this
Agreement is intended to confer upon any person or entity other than the parties
hereto and their respective successors and permitted assigns, any benefit, right
or remedies under or by reason of this Agreement, except that the provisions of
Article II hereof shall inure to the benefit of Indemnitees.
SECTION 4.12 ENFORCEMENT. Notwithstanding any other provision of this
Agreement to the contrary, the parties agree that irreparable damage would occur
and the remedy of indemnification pursuant to Section 2.01 or 2.02, as the case
may be, and other remedies at law will by inadequate in the event that any of
the provisions of this Agreement, including but not limited to Section 3.04,
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of the Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto on the date first hereinabove
written.
WESTINGHOUSE ELECTRIC CORPORATION
By:
----------------------------------------
Name:
Title:
GAYLORD ENTERTAINMENT COMPANY
By:
----------------------------------------
Name:
Title:
NEW GAYLORD ENTERTAINMENT COMPANY
By:
----------------------------------------
Name:
Title:
[add signature lines for other New
Gaylord Indemnitors]
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ANNEX V
TAX DISAFFILIATION AGREEMENT dated as of , 1997 by and among
GAYLORD ENTERTAINMENT COMPANY, a Delaware corporation ("GEC"), NEW GAYLORD
ENTERTAINMENT COMPANY (formerly known as Gaylord Broadcasting Company), a
Delaware corporation and a direct, wholly-owned subsidiary of GEC ("NEW
GAYLORD"), and WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania
corporation ("Parent").
WHEREAS, GEC is the common parent of an affiliated group of corporations
(the "GEC Group") within the meaning of Section 1504(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the members of the GEC Group have
heretofore joined in filing consolidated federal income Tax Returns;
WHEREAS, GEC expects, pursuant to the Agreement and Plan of Distribution
dated as of , 1997 (the "Distribution Agreement") by and between GEC
and New Gaylord, to spin off to GEC's stockholders GEC's interest in certain
assets. In furtherance of this plan, among other things, and as more fully set
forth in the Distribution Agreement, GEC will (i) effect the recapitalization
described in Article II of the Distribution Agreement and the restructuring
transactions described in Article IV of the Distribution Agreement (together,
the "Restructuring") and (ii) distribute (the "Distribution") on the
Distribution Date (as defined below) to the holders of GEC Common Stock all of
the outstanding shares of New Gaylord Common Stock (as defined below);
WHEREAS, on the day after the Distribution Date, G Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary ("Sub") of Parent, will merge
with and into GEC with GEC surviving (the "Merger"), as contemplated by the
Agreement and Plan of Merger dated as of February , 1997 (the "Merger
Agreement") by and among GEC, Sub and Parent, pursuant to which the holders of
GEC Common Stock (as defined below) will receive solely common stock of Parent
in exchange for their GEC Common Stock
WHEREAS, GEC and New Gaylord intend the Distribution to be a tax-free
transaction under Section 355 of the Code, after which neither New Gaylord nor
any of its Subsidiaries (as defined below) will be a member of the GEC Group for
federal income tax purposes;
WHEREAS, GEC, Sub and Parent intend the Merger to be a reorganization
within the meaning of Section 368(a)(1)(B) of the Code; and
WHEREAS, GEC and New Gaylord desire on behalf of themselves, their
Subsidiaries and their successors to set forth their rights and obligations with
respect to Taxes relating to taxable periods before and after the Distribution.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement,
1.1 "Acquired Business" shall mean the Retained Business, as defined in
the Merger Agreement.
1.2 "Acquired Group" shall mean, for any Post-Distribution Period, GEC and
its Subsidiaries.
1.3 "Ancillary Agreements" shall have the meaning set forth in the
Distribution Agreement.
1.4 "Code" shall have the meaning set forth in the Recitals.
1.5 "Dispose" (and, with correlative meaning, "Disposition") shall mean
pay, discharge, settle or otherwise dispose.
1.6 "Distributed Business" shall mean the Entertainment Business, as
defined in the Distribution Agreement.
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1.7 "Distribution" shall have the meaning set forth in the Recitals.
1.8 "Distribution Agreement" shall have the meaning set forth in the
Recitals.
1.9 "Distribution Date" shall mean the last day on which, due to the
Distribution, New Gaylord could be considered a member of the GEC Group for
federal income Tax purposes.
1.10 "Due Date" shall mean, with respect to any Tax Return or payment, the
date on which such Tax Return is due to be filed with or such payment is due to
be made to the appropriate Tax Authority pursuant to applicable law, giving
effect to any applicable extensions of the time for such filing or payment.
1.11 "Effective Time" shall have the meaning set forth in the Merger
Agreement.
1.12 "Final Determination" shall mean (1) the entry of a decision of a
court of competent jurisdiction at such time as an appeal may no longer be taken
from such decision or (2) the execution of a closing agreement or its equivalent
between the particular taxpayer and the relevant Tax Authority.
1.13 "New Gaylord" shall have the meaning set forth in the Preamble.
1.14 "New Gaylord Group" shall mean, for any Post-Distribution Period, the
affiliated group of corporations (within the meaning of Section 1504(a) of the
Code) of which New Gaylord is the common parent and which join in filing
consolidated federal income Tax Returns.
1.15 "GEC" shall have the meaning set forth in the Preamble.
1.16 "GEC Common Stock" shall have the same meaning as "Company Common
Stock" set forth in the Distribution Agreement.
1.17 "GEC Group" shall have the meaning set forth in the Recitals.
1.18 "Merger" shall have the meaning set forth in the Recitals.
1.19 "Merger Agreement" shall have the meaning set forth in the Recitals.
1.20 "New Gaylord Common Stock" shall have the meaning set forth in the
Distribution Agreement.
1.21 "NV" shall mean NV International, Inc., a Georgia corporation.
1.22 "O&W" shall mean O&W Corporation, a Tennessee corporation.
1.23 "Parent" shall have the meaning set forth in the Recitals.
1.24 "Payee" shall have the meaning set forth in Section 4.7 hereof.
1.25 "Payor" shall have the meaning set forth in Section 4.7 hereof.
1.26 "Post-Distribution Period" shall mean any taxable period beginning
after the Distribution Date (or, if the Effective Time occurs later than the day
immediately following the Distribution Date, the last day that GEC is the common
parent of the GEC Group) and, in the case of any Straddle Period, that portion
of such Straddle Period that begins on the day immediately following the
Distribution Date (or, if the Effective Time occurs later than the day
immediately following the Distribution Date, the day immediately following the
last day that GEC is the common parent of the GEC Group).
1.27 "Pre-Distribution Period" shall mean any taxable period that ends on
or prior to the Distribution Date (or, if the Effective Time occurs later than
the day immediately following the Distribution Date, the last day that GEC is
the common parent of the GEC Group) and, in the case of any Straddle Period,
that portion of such Straddle Period ending on and including the Distribution
Date (or, if the Effective Time occurs later than the day immediately following
the Distribution Date, the last day that GEC is the common parent of the GEC
Group).
1.28 "Restructuring" shall have the meaning set forth in the Recitals.
1.29 "Straddle Period" shall mean any taxable period that begins before or
on and ends after the Distribution Date (or, if the Effective Time occurs later
than the day immediately following the Distribution
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Date, any taxable period that begins before or on and ends after the last day
that GEC is the common parent of the GEC Group).
1.30 "Sub" shall have the meaning set forth in the Recitals.
1.31 "Subsidiary" shall mean a subsidiary, as defined in the Merger
Agreement.
1.32 "Tax Attribute" shall mean any net operating loss, investment tax
credit, foreign tax credit, or other credit, deduction or tax attribute
(including basis).
1.33 "Tax Authority" shall mean the Internal Revenue Service and any other
state, local or foreign governmental authority responsible for the
administration of Taxes.
1.34 "Tax Claim" shall mean a notice of deficiency, proposed adjustment,
assessment, audit, examination, suit, dispute or other claim with respect to
Taxes or a Tax Return.
1.35 "Taxes" (and, with correlative meaning, "Tax") means all taxes,
charges, fees, levies, imposts, duties and other assessments, including, without
limitation, income, gross receipts, excise, personal property, real property,
sales, ad valorem, value-added, withholding, social security, occupation, use,
service, service use, leasing, leasing use, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by any Tax Authority,
whether computed on a separate, consolidated, unitary, combined or any other
basis, together with any interest, fines, penalties and additional amounts
attributable to, imposed on, or with respect to, any such taxes, charges, fees,
levies, imposts, duties or other assessments, and interest thereon.
1.36 "Tax Returns" (and, with correlative meaning, "Tax Return") shall
mean all returns, reports, declarations, information, estimates, schedules,
filings or documents (including any related or supporting information) filed or
required by any Tax Authority to be filed with respect to Taxes, including,
without limitation, all information returns, claims for refund, amended returns,
declarations of estimated Tax, and requests for extensions of time to file any
item described in this paragraph.
1.37 "Transaction Agreements" shall have the meaning set forth in the
Merger Agreement
1.38 "Transfer Tax" shall mean any real property transfer Tax, sales Tax,
use Tax, stamp Tax, stock transfer Tax, or other similar Tax.
1.39 "Underpayment Rate" shall mean the interest rate specified under
Section 6621(a)(2) of the Code.
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
2.1 PREPARATION OF PRE-DISTRIBUTION PERIOD TAX RETURNS AND CERTAIN STRADDLE
PERIOD TAX RETURNS. New Gaylord, with the cooperation of Parent, GEC and any
member of the Acquired Group (as provided for in Article VII hereof), shall
prepare (or cause to be prepared) all Tax Returns with respect to any Pre-
Distribution Period or Straddle Period that include GEC or any of its
Subsidiaries (including all Tax Returns filed on a consolidated, combined or
unitary basis). New Gaylord shall have sole discretion as to the positions in
and with respect to any Tax Returns described in this Section 2.1 to the extent
that such positions relate to a Pre-Distribution Period or the Restructuring.
2.2 FILING OF CERTAIN PRE-DISTRIBUTION PERIOD TAX RETURNS. At least 20 days
before the Due Date of any Tax Return which New Gaylord is required to prepare
(or cause to be prepared) pursuant to Section 2.1 hereof and Parent, GEC or a
member of the Acquired Group is required to file, New Gaylord shall deliver to
GEC such Tax Return. Parent or GEC shall timely file (or cause to be filed) any
such Tax Return as prepared by New Gaylord with the appropriate Tax Authority.
2.3 PREPARATION AND FILING OF CERTAIN STRADDLE PERIOD TAX RETURNS. With
respect to any Straddle Period Tax Return required to be filed by New Gaylord or
any of New Gaylord's Subsidiaries with respect to which Parent or GEC is liable
for any Tax shown to be due thereon pursuant to this Agreement, New Gaylord
shall prepare (or cause to be prepared) such Tax Return and, at least 20 days
prior to the Due Date thereof, shall
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deliver such Tax Return (or cause such Tax Return to be delivered) to GEC for
its review, together with a statement showing in reasonable detail New Gaylord's
calculation of any Taxes attributable to a Pre-Distribution Period. New Gaylord
shall file such Tax Return, with GEC's prior written consent, which shall not be
unreasonably withheld or delayed.
2.4 PREPARATION AND FILING OF POST-DISTRIBUTION PERIOD TAX RETURNS. Except
as set forth in this Article II, with respect to Post-Distribution Periods, New
Gaylord shall not have any responsibility for preparing (or causing to be
prepared) and timely filing (or causing to be timely filed) any Tax Return with
respect to any member of the Acquired Group, and Parent shall not have any
responsibility for preparing (or causing to be prepared) and timely filing (or
causing to be filed) any Tax Return with respect to New Gaylord or any of its
Subsidiaries.
2.5 CONSISTENT TREATMENT. (a) Each Tax Return described in this Article II
shall be consistent with the rulings obtained from the Internal Revenue Service
in connection with the Restructuring, the Distribution and the Merger (including
any opinions of counsel of GEC or Parent in lieu of any rulings pursuant to the
provisions of the Merger Agreement), and, to the extent not inconsistent with
such rulings and any such opinions, with the Transaction Agreements.
(b) In the absence of a controlling change in law and except as otherwise
expressly required by this Agreement, each Tax Return described in Section 2.1,
2.2 or 2.3 hereof shall be prepared on a basis that is consistent with the
elections, accounting methods, conventions, practices and principles of taxation
used for the most recent taxable periods for which Tax Returns for GEC or any of
its Subsidiaries have been filed.
2.6 AMENDED RETURNS AND CLAIMS FOR REFUND. No member of the Acquired Group
(or any entity that directly or indirectly controls GEC) shall amend a Tax
Return or file a claim for Tax refund with respect to any Pre-Distribution
Period of GEC or any of its Subsidiaries without the prior written consent of
New Gaylord, which shall not be unreasonably withheld or delayed.
ARTICLE III
PAYMENTS WITH RESPECT TO TAXES
3.1 PAYMENT OF TAXES.
(a) Except as set forth in Section 3.1(c) hereof, for all Taxes with
respect to which Parent, GEC or a member of the Acquired Group is required to
file Tax Returns pursuant to Section 2.2 hereof, New Gaylord shall pay GEC the
amount of such Taxes relating to any Pre-Distribution Period at least 5 business
days prior to the Due Date of the Tax Return reporting such Taxes.
(b) Except as set forth in Section 3.1(c) hereof, for all Taxes with
respect to which New Gaylord or any of its Subsidiaries is required to file Tax
Returns pursuant to Section 2.3 hereof, Parent or GEC shall pay New Gaylord the
amount of such Taxes relating to the Acquired Business for any Post-Distribution
Period at least 5 business days prior to the Due Date of the Tax Return
reporting such Taxes.
(c) For all Taxes with respect to which Parent or GEC is required to file
Tax Returns for O&W, NV or any of their Subsidiaries pursuant to Section 2.2
hereof, New Gaylord shall pay GEC New Gaylord's share of the amount, if any, of
such Taxes, as determined pursuant to Article IV hereof, at least 5 business
days prior to the Due Date of the Tax Return reporting such Taxes and include a
statement showing in reasonable detail New Gaylord's calculation of such Taxes.
3.2 REMITTANCE OF TAXES TO A TAX AUTHORITY. Parent and New Gaylord, as the
case may be, shall each remit or cause to be remitted in a timely manner to the
appropriate Tax Authority all Taxes due in respect of any Tax for which it is
required to file a Tax Return pursuant to Article II hereof.
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ARTICLE IV
INDEMNIFICATION
4.1 OBLIGATIONS OF GEC. Parent, GEC and GEC's Subsidiaries shall indemnify
and hold New Gaylord and New Gaylord's Subsidiaries harmless from and against
the following:
(a) except to the extent otherwise expressly provided in Sections
4.2(c), (d) and (e) hereof, any liability for Taxes attributable to the
Acquired Business, any current member of the Acquired Group or any
Subsidiary of any such member for any Post-Distribution Period, and any
liability of any current member of the Acquired Group arising under the
provisions of Treasury regulation Section 1.1502-6(a) or comparable
provisions of foreign, state or local law for any Post-Distribution Period;
(b) any liability for Taxes relating to the Distribution, to the
extent set forth in Section 4.3(a) hereof;
(c) any liability for Taxes relating to GEC or any of its Subsidiaries
or the Restructuring to the extent that New Gaylord has made a payment to
Parent or GEC with respect thereto pursuant to Section 3.1 hereof; and
(d) 33 percent of any liability for Taxes attributable to O&W, NV or
any of their Subsidiaries for any Pre-Distribution Period other than Taxes
incurred in the Restructuring, including any liability of any member of an
"affiliated group" (within the meaning of Section 1504(a) of the Code) of
which O&W or NV is the common parent arising under the provisions of
Treasury regulation Section 1.1502-6(a) or comparable provisions of
foreign, state or local law for any Pre-Distribution Period.
4.2 OBLIGATIONS OF NEW GAYLORD. New Gaylord and New Gaylord's Subsidiaries
shall indemnify and hold Parent, GEC and their respective Subsidiaries harmless
from and against the following:
(a) except to the extent otherwise expressly provided in Section
4.1(d) hereof and subject to the remaining provisions of Section 4.2
hereof, any liability for Taxes attributable to the Distributed Business,
any current or former member of the GEC Group or any Subsidiary of any such
member for any Pre-Distribution Period, including any liability of any
member of the GEC Group or any of its Subsidiaries arising under the
provisions of Treasury regulation Section 1.1502-6(a) or comparable
provisions of foreign, state or local law for any Pre-Distribution Period
or any liability under a Pre-Distribution Period Tax sharing agreement;
(b) 67 percent of any liability for Taxes attributable to O&W, NV or
any of their Subsidiaries for any Pre-Distribution Period other than Taxes
incurred in the Restructuring, including any liability of any member of an
"affiliated group" (within the meaning of Section 1504(a) of the Code) of
which O&W or NV is the common parent arising under the provisions of
Treasury regulation Section 1.1502-6(a) or comparable provisions of
foreign, state or local law for any Pre-Distribution Period or any
liability under a Pre-Distribution Period Tax sharing agreement;
(c) any liability for Taxes relating to the Distribution, to the extent
set forth in Section 4.3(a) hereof;
(d) any liability for Taxes incurred as a result of the Restructuring
for any taxable period, provided, however, that if Parent, GEC or any of
their respective Subsidiaries takes any action after the Closing Date (as
defined in the Merger Agreement) which results in the incurrence of any
such Taxes, Parent and GEC shall pay, and shall fully indemnify and hold
harmless New Gaylord and its Subsidiaries from and against, such Taxes to
the extent that they result from such action unless such action (i) is
contemplated by the Transaction Agreements or (ii) is taken by Parent, GEC
or any of GEC's Subsidiaries with the participation at that time of New
Gaylord, any of its Subsidiaries or Edward L. Gaylord (in his capacity as a
shareholder or a trustee); and
(e) any liability for Taxes incurred solely as a result of a breach of
the representations set forth in Section 4.01(m)(ix) of the Merger
Agreement (determined by taking into account exceptions to such
representations set forth in Section 4.01(m) of the Company Disclosure
Schedule to the Merger
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Agreement), or in Sections 4.01(m)(x), (xi) or (xiii) of the Merger
Agreement (in each case determined without regard to materiality, knowledge
by New Gaylord, and any exceptions to such representations set forth in
Section 4.01(m) of the Company Disclosure Schedule to the Merger
Agreement), calculated as the amount of the excess of (x) the actual
liability for Taxes of Parent and its Subsidiaries for the relevant taxable
period over (y) the liability for Taxes of the Parent and its Subsidiaries
for such period assuming such breach of representation had not occurred but
with all other facts unchanged.
4.3 TAXES RELATING TO THE DISTRIBUTION. Notwithstanding any other provision
of this Agreement to the contrary,
(a) New Gaylord and New Gaylord's Subsidiaries shall pay or cause to
be paid, and shall fully indemnify and hold harmless Parent, GEC or any of
their respective Subsidiaries from and against, all Taxes attributable to
any member of the GEC Group or any Subsidiary of any such member resulting
from the Distribution, including, without limitation, any Tax imposed
pursuant to or as a result of Section 311 of the Code; provided, however,
that if Parent, GEC or any of their respective Subsidiaries takes any
action after the Closing Date (as defined in the Merger Agreement) which
results in the incurrence of any such Taxes, Parent and GEC shall pay, and
shall fully indemnify and hold harmless New Gaylord and its Subsidiaries
from and against, such Taxes to the extent that they result from such
action unless such action (i) is contemplated by the Transaction Agreements
or (ii) is taken by Parent, GEC or any of GEC's Subsidiaries with the
participation at that time of New Gaylord, any of its Subsidiaries or
Edward L. Gaylord (in his capacity as a shareholder or a trustee).
(b) If GEC or any of its Subsidiaries is required to recognize gain
pursuant to Section 311 of the Code with respect to the Restructuring or
the Distribution, then, to the extent permitted by law or regulation,
Parent, GEC or the appropriate member of the Acquired Group or the
appropriate Subsidiary of Parent, if so requested by New Gaylord, shall
elect pursuant to Section 336(e) of the Code to treat the Distribution as a
disposition of all the assets of New Gaylord, provided, however, that
Parent, GEC or the appropriate member of the Acquired Group or the
appropriate Subsidiary of Parent, as the case may be, shall not be required
to file such election if such election would result in an actual increase
in Tax liability to Parent and its Subsidiaries and New Gaylord does not
fully indemnify Parent and its Subsidiaries from and against such Tax
liability.
4.4 STRADDLE PERIODS.
(a) To the extent permitted by law or administrative practice, the
taxable year of any member of the GEC Group or any of its Subsidiaries
which includes the Distribution Date shall be treated as closing on (and
including) the Distribution Date, provided, however, that if the Effective
Time occurs later than the day immediately following the Distribution Date,
the taxable year of any member of the Acquired Group or any of its
Subsidiaries which includes the Distribution Date shall be treated as
closing on (and including) the last day that GEC is the common parent of
the GEC Group.
(b) Where it is necessary pursuant to this Agreement to apportion
between New Gaylord, on the one hand, and GEC and Parent, on the other
hand, the Tax liability of an entity for a Straddle Period which is not
treated under Section 4.4(a) hereof as closing on the Distribution Date
(or, if applicable pursuant to the principles set forth in Section 4.4(a)
hereof, the last day that GEC is the common parent of the GEC Group), such
liability shall be apportioned between the Pre-Distribution Period and the
Post-Distribution Period on the basis of an interim closing of the books,
except that Taxes (such as real property Taxes) imposed on a periodic basis
shall be allocated on a daily basis.
4.5 TAX OBLIGATIONS ARISING UNDER A PRE-DISTRIBUTION PERIOD TAX SHARING
AGREEMENT. Except as set forth in this Agreement, any and all existing Tax
sharing agreements and practices regarding Taxes and their payment, allocation,
or sharing between any member of the Acquired Group and any member of the New
Gaylord Group or its Subsidiaries shall be terminated with respect to the New
Gaylord Group as of the Distribution Date and no remaining liabilities
thereunder shall exist thereafter.
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4.6 REFUNDS AND TAX ATTRIBUTES. (a) New Gaylord shall be entitled to any
refund of Taxes or the benefit of the utilization of any Tax Attribute of any
member of the GEC Group attributable to any Pre-Distribution Period or the
Distributed Business, and GEC shall be entitled to a refund for Taxes or the
benefit of the utilization of any Tax Attribute attributable to the Acquired
Business for any Post-Distribution Period. If the Acquired Group receives any
refund of Tax to which New Gaylord is entitled pursuant to this Section 4.6 or
utilizes any Tax Attribute of the GEC Group attributable to any Pre-Distribution
Period, GEC shall promptly notify New Gaylord and shall pay the amount of any
such refund or the benefit realized from such utilization within 5 days of the
receipt of such refund or the realization of such benefit.
(b) If Parent, any of its Subsidiaries or any member of the Acquired Group
actually realizes a reduction of Taxes for any taxable period because it
utilizes or claims a Tax Attribute as a result of an adjustment to the taxable
income of a member of the GEC Group for a Pre-Distribution Period (including a
Tax Attribute attributable to a Section 336(e) election pursuant to Section
4.3(c) hereof), Parent or GEC shall pay New Gaylord the amount of such reduction
of Taxes within 5 days of the filing of the Tax Return in which such reduction
of Taxes is actually realized. If, after Parent or GEC pays New Gaylord the
amount of any reduction of Taxes pursuant to the immediately preceding sentence,
there is (i) a Final Determination that results in the reduction or elimination
in whole or in part of the reduction of Taxes that gave rise to such payment on
the grounds that under applicable law the Tax Attribute that produced such
reduction of Taxes did not in fact occur or arise (in whole or in part) or (ii)
a subsequent event results in the reduction or elimination in whole or in part
of the reduction of Taxes that gave rise to such payment, New Gaylord shall
repay to GEC within 5 days of the payment of Tax in connection with the Final
Determination or subsequent event that so reduced or eliminated the reduction of
Taxes the amount of such Tax (excluding interest and penalties thereon) incurred
by a member of the Acquired Group as a result of such Final Determination or
subsequent event; provided, however, that the amount of any such repayment shall
not exceed the amount of the reduction of Taxes relating to the same Tax
Attribute which Parent or GEC first paid to New Gaylord pursuant to this Section
4.6(b) and provided, further that the provisions set forth above in this Section
4.6(b) shall continue to apply thereafter to the extent of any subsequent
reduction or elimination of such Taxes or such payments.
(c) If GEC or any of its Subsidiaries actually realizes a reduction of
Taxes for a Pre-Distribution Period because it utilizes or claims a Tax
Attribute as a result of an adjustment to the taxable income of a member of the
Acquired Group for a Post-Distribution Period, New Gaylord shall pay GEC the
amount of such reduction of Taxes within 5 days of the filing of the Tax Return
in which such reduction of Taxes is actually realized. If, after New Gaylord
pays GEC the amount of any reduction of Taxes pursuant to the immediately
preceding sentence, there is (i) a Final Determination that results in the
reduction or elimination in whole or in part of the reduction of Taxes that gave
rise to such payment on the grounds that under applicable law the Tax Attribute
that produced such reduction of Taxes did not in fact occur or arise (in whole
or in part) or (ii) a subsequent event that results in the reduction or
elimination in whole or in part of the reduction of Taxes that gave rise to such
payment, Parent or GEC shall repay to New Gaylord within 5 days of the payment
of Tax in connection with the Final Determination or subsequent event that so
reduced or eliminated the reduction of Taxes the amount of such Tax (excluding
interest and penalties thereon) incurred by a member of the GEC Group as a
result of such Final Determination or subsequent event; provided, however, that
the amount of any such repayment shall not exceed the amount of the reduction of
Taxes relating to the same Tax Attribute which New Gaylord first paid to GEC
pursuant to this Section 4.6(c) and provided, further that the provisions set
forth above in this Section 4.6(c) shall continue to apply thereafter to the
extent of any subsequent reduction or elimination of such Taxes or such
payments.
(d) For purposes of this Agreement, when as a result of an action or event,
a Tax benefit, a reduction of Taxes, or a Tax refund arises, the amount of such
benefit, reduction or refund shall equal the amount of the excess of (x) the
actual liability for Taxes of the person for the relevant taxable period over
(y) the liability for Taxes of such person for such period assuming the action
or event from which such benefit, reduction or refund arose had not occurred but
with all other facts unchanged.
4.7 INDEMNIFICATION PAYMENTS. To the extent that a party (the "Payor") is
required to make an indemnification payment to another party (the "Payee")
pursuant to Section 4.1, 4.2 or 4.3 hereof, the Payor shall pay the Payee no
later than 5 business days prior to the Due Date of the relevant Tax Return or
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5 business days after the Payor receives the Payee's calculations of Payor's
indemnification obligation hereunder, whichever occurs last, the amount of such
indemnification obligation.
ARTICLE V
CARRYBACKS
No member of the Acquired Group shall carry back any Tax Attribute arising
in any Post-Distribution Period to any Pre-Distribution Period without the prior
written consent of New Gaylord, which shall not be unreasonably withheld or
delayed. GEC shall be entitled to retain any Tax benefits with respect to any
permitted carryback of a Tax Attribute relating to the Acquired Business from a
Post-Distribution Period to a Pre-Distribution Period. No member of the New
Gaylord Group shall carry back any Tax Attribute arising in any
Post-Distribution Period to any Pre-Distribution Period without the prior
written consent of GEC, which shall not be unreasonably withheld or delayed. GEC
shall forward to New Gaylord with respect to any permitted carryback of a Tax
Attribute relating to the Distributed Business from a Post-Distribution Period
to a Pre-Distribution Period (a) any refunds of Taxes received from a Tax
Authority within 5 days of the receipt thereof or (b) the amount of any
reduction in Taxes of the Acquired Group attributable to any Tax Attribute
within 5 days of the utilization of such Tax Attribute.
To the extent that this Article V conflicts with Section 4.6 hereof, this
Article V shall apply.
ARTICLE VI
TAX CLAIMS
6.1 GENERAL. New Gaylord shall have sole control over all Tax Claims with
respect to any Tax Return which New Gaylord is responsible for preparing (or
causing to be prepared) pursuant to this Agreement, and GEC shall have sole
control over all Tax Claims with respect to any Tax Return which GEC is
responsible for preparing (or causing to be prepared) pursuant to this
Agreement. The party controlling a Tax Claim pursuant to this Section 6.1 shall
have the sole right to contest, litigate and Dispose of such Tax Claim and to
employ counsel of its choice at its sole expense; provided, however, that the
other party may participate in (but not control) the defense of any such Tax
Claim at its own expense. If, pursuant to this Section 6.1, a Tax Claim presents
issues for which both parties may be liable pursuant to this Agreement or an
issue which affects both the Distributed Business and the Acquired Business, the
party controlling such Tax Claim shall not litigate or Dispose of such Tax Claim
without the prior written consent of the other party, which shall not be
unreasonably withheld or delayed.
6.2 TAX CLAIM MANAGEMENT. (a) GEC or New Gaylord, as the case may be, shall
promptly notify the other party in writing of any Tax Claim that may reasonably
be likely to result in liability of the other party under this Agreement. With
respect to any such Tax Claim, the party not controlling such Tax Claim shall
(i) not make any submission to any Tax Authority without offering the other
party the opportunity to review it, (ii) not take any action or make (or purport
to make) any representations in connection with such Tax Claim with respect to
issues affecting the other party's indemnity hereunder, (iii) keep the other
party informed as to any information that it receives regarding the progress of
such Tax Claim, (iv) provide the other party with any information that it
receives regarding the nature and amounts of any proposed Disposition of the Tax
Claim, (v) permit the other party to participate in all conferences, meetings or
proceedings with any Tax Authority in which the indemnified Tax Claim is or may
be a subject, and (vi) permit the other party to participate in all court
appearances in which the indemnified Tax Claim is or may be a subject. With
respect to any Tax Claim relating to a Pre-Distribution Period for which New
Gaylord is or may be liable pursuant to this Agreement, GEC shall either file
(or cause to be filed) submissions at New Gaylord's direction which appoint (or
cause to be appointed) New Gaylord or its authorized representatives as
additional authorized representatives entitled to communicate fully with the
Internal Revenue Service with respect to such Tax Claim.
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(b) Unless New Gaylord and GEC agree otherwise in writing, GEC shall use
its best efforts to keep all Tax Claims arising under federal Tax Returns which
GEC is responsible for filing pursuant to Section 2.2 hereof under the
jurisdiction of the Nashville, Tennessee district of the Internal Revenue
Service. GEC shall promptly notify New Gaylord if any Tax Authority proposes to
transfer or contest such a Tax Claim in a district other than the district that
includes Nashville, Tennessee and shall cooperate with New Gaylord in taking all
reasonable actions to prevent such transfer or contest.
ARTICLE VII
COOPERATION
Parent, GEC and New Gaylord shall (and shall cause Parent's Subsidiaries,
the members of the GEC Group and the New Gaylord Group, respectively, to)
cooperate with each other in the preparation and filing of any Tax Returns and
the conduct of any audit or other proceeding and each shall execute and deliver
such powers of attorney and make available such other documents as are necessary
to carry out the intent of this Agreement. Such cooperation shall include,
without limitation, (a) making employees available on a mutually convenient
basis to provide such assistance as might reasonably be required and (b)
providing such information as might reasonably be required in connection with
any such Tax Return or proceeding, including, without limitation, records,
returns, schedules, documents, work papers or other relevant materials.
The parties hereto shall use reasonable best efforts to reduce any
transfer, sales or other similar Taxes that may be incurred with respect to the
transactions contemplated by the Distribution Agreement, the Merger Agreement
and the Ancillary Agreements.
ARTICLE VIII
RETENTION OF RECORDS; ACCESS
Parent, each Subsidiary of Parent, the Acquired Group and the New Gaylord
Group shall (a) until the expiration of the relevant statutes of limitations
(giving effect to any applicable extensions or waivers), retain records,
documents, accounting data and other information (including computer data)
necessary for the preparation and filing of all Tax Returns in respect of Taxes
of the Acquired Group or the New Gaylord Group or for a Tax Claim by a Tax
Authority relating to such Tax Returns; and (b) give to the other group
reasonable access to such records, documents, accounting data and other
information (including computer data) and to its personnel (ensuring their
cooperation) and premises, with reimbursement by the requesting group of
reasonable out-of-pocket costs incurred therewith, for the purpose of the review
or audit of such Tax Returns to the extent relevant to an obligation or
liability of any party under this Agreement. Prior to destroying any records,
documents, data or other information described in this Article VIII, the group
wishing to destroy such items shall give the other group a reasonable
opportunity to obtain such items (at such other group's expense).
ARTICLE IX
DISPUTES
If the parties disagree as to the calculation of any Tax or the amount of
(but not liability for) any payment to be made under this Agreement, the parties
shall cooperate in good faith to resolve any such dispute, and any agreed-upon
amount shall be paid to the appropriate party. If the parties are unable to
resolve any such dispute within 15 days thereafter, such dispute shall be
resolved by a "Big Six" accounting firm acceptable to both GEC and New Gaylord.
The decision of such firm shall be final and binding. The fees and expenses
incurred in connection with such decision shall be shared by GEC and New Gaylord
in accordance with the final allocation of the Tax liability in dispute.
Following the decision of such accounting firm, the parties shall each take (or
cause to be taken) any action that is necessary or appropriate to implement such
decision, including, without limitation, the filing of amended Tax Returns and
the prompt payment of
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underpayments or overpayment, with interest calculated on such underpayments or
overpayment at the Underpayment Rate from the date such payment was due.
ARTICLE X
SURVIVAL
Notwithstanding any other provision in this Agreement to the contrary, the
rights and obligations provided for in this Agreement shall not terminate any
earlier than the expiration of the applicable statute of limitation for the
relevant taxable periods in question (giving effect to any applicable waivers or
extensions). All other covenants under this Agreement shall survive
indefinitely.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 TRANSFER TAXES. New Gaylord shall prepare (or cause to be prepared)
and timely file (or cause to be timely filed) with the appropriate Tax Authority
all Tax Returns with respect to Transfer Taxes imposed with respect to the
Restructuring, the Distribution and the Merger. New Gaylord shall pay (or cause
to be paid) all Transfer Taxes attributable to the Restructuring and the
Distribution. New Gaylord, on the one hand, and GEC and Parent, on the other
hand, shall share equally the liability for all Transfer Taxes attributable to
the Merger. Notwithstanding anything in this Section 11.1 to the contrary, if
any member of the Acquired Group is required to file a Tax Return in respect of
Transfer Taxes, then New Gaylord shall deliver to GEC the prepared Tax Return
together with the amount of Taxes shown to be due on such Tax Return and for
which New Gaylord is liable at least 5 days prior to the Due Date thereof and
Parent or GEC shall timely file (or cause to be timely filed) with the
appropriate Tax Authority such Tax Return as prepared by New Gaylord and remit
to such Tax Authority the amount of Transfer Taxes shown to be due on such Tax
Return.
11.2 INTEREST ON LATE PAYMENTS. Any payment required by this Agreement
which is not made on or before the date required to be made hereunder shall bear
interest after such date at the Underpayment Rate.
11.3 DETERMINATION AND CHARACTERIZATION OF PAYMENTS. (a) All
indemnification payments under this Agreement shall be determined on a pre-Tax
basis, i.e., without regard to the Tax consequences to the indemnified party of
making a payment that is indemnified by another party under this Agreement or of
receiving a payment under this Agreement as indemnification therefor.
(b) The payments made pursuant to this Agreement shall be treated as
occurring immediately before the Distribution, and no member of the New Gaylord
Group and the Acquired Group and none of the Subsidiaries of any such member and
none of Parent and its Subsidiaries shall take any position inconsistent with
such treatment before any Tax Authority, except to the extent that a Final
Determination with respect to the recipient party causes any such payment to not
be so treated.
11.4 NOTICES AND GOVERNING LAW. All notices required or permitted to be
given pursuant to this Agreement shall be given, and the applicable law
governing the interpretation of this Agreement shall be determined, in
accordance with the applicable provisions of the Distribution Agreement.
11.5 AMENDMENTS. This Agreement may not be amended except by an agreement
in writing, signed by the parties.
11.6 BINDING EFFECT; NO ASSIGNMENT; THIRD PARTY BENEFICIARIES. This
Agreement shall be binding on, and shall inure to the benefit of, the parties
and the respective successors, assigns, and persons controlling any of the
corporations bound hereby. Parent and GEC, on the one hand, and New Gaylord, on
the other hand, hereby guarantee the performance of all actions, agreements and
obligations provided for under this Agreement of GEC's Subsidiaries and New
Gaylord's Subsidiaries, respectively. Parent and GEC, on the one hand, and New
Gaylord, on the other hand, shall, upon the written request of any other party,
cause any of their respective Subsidiaries (but in the case of Parent, only GEC
and its Subsidiaries and their respective
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successors) to execute this Agreement. No party to this Agreement shall assign
any of its rights or delegate any of its duties under this Agreement without the
prior written consent of New Gaylord, in the case of Parent or GEC, and GEC, in
the case of New Gaylord. No person (including, without limitation, any employee
of a party or any stockholder of a party) shall be, or shall be deemed to be, a
third party beneficiary of this Agreement.
11.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties concerning the subject matter hereof and supersedes all prior
agreements, whether or not written, concerning such subject matter. To the
extent that the provisions of this Agreement are inconsistent with the
provisions of the Distribution Agreement, the provisions of this Agreement shall
prevail.
11.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute together the same document.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
GAYLORD ENTERTAINMENT COMPANY
By
------------------------------------------
Name:
Title:
NEW GAYLORD ENTERTAINMENT COMPANY
By
------------------------------------------
Name:
Title:
WESTINGHOUSE ELECTRIC CORPORATION
By
------------------------------------------
Name:
Title:
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ANNEX VI
[Letterhead of Merrill Lynch]
February 9, 1997
Board of Directors
Gaylord Entertainment Company
One Gaylord Drive
Nashville, Tennessee 37214
Members of the Board:
You have informed us that Gaylord Entertainment Company (the "Company"),
Westinghouse Electric Corporation (the "Parent"), and a newly formed wholly
owned subsidiary of the Parent (the "Merger Sub") propose to enter into an
Agreement and Plan of Merger (the "Agreement") pursuant to which, after the
completion of the Restructuring and Company Distribution described below, the
Merger Sub will be merged (the "Merger") with and into the Company. In the
Merger each outstanding share of Class A Common Stock, $.01 par value, of the
Company and Class B Common Stock, $.01 par value, of the Company (collectively,
the "Company Common Stock") will be converted into the right to receive a number
(the "Exchange Ratio") of shares of Common Stock, $1.00 par value, of the Parent
("Parent Common Stock") equal to the quotient (rounded pursuant to the
Agreement) of (i) the quotient of $1,550,000,000 divided by the number of shares
of Company Common Stock issued and outstanding immediately prior to the
effective time of the Merger (the "Outstanding Number"), divided by (ii) the
Market Price (as defined in the Agreement) of the Parent Common Stock; provided
that, in the event that the product of the Exchange Ratio multiplied by the
Outstanding Number would exceed 110,000,000 (or 88,000,000 in the event the
Parent Distribution (as defined below) occurs prior to the Merger), then the
Exchange Ratio shall be the highest number (after rounding) that would not
result in the product of such number multiplied by the Outstanding Number
exceeding 110,000,000 (or 88,000,000, as the case may be) and the Company will
have the option to terminate the Agreement (the "Cap Termination Right") unless
the Parent elects to increase the Exchange Ratio to the Exchange Ratio
calculated in accordance with the above formula without giving effect to the
foregoing proviso. You have also informed us that prior to the Merger the
Company will restructure its assets and businesses (the "Restructuring")
pursuant to an Agreement and Plan of Distribution which provides for the Company
to transfer its hotel and theme park businesses and certain other operations and
all of the assets and liabilities related thereto to its wholly-owned
subsidiary, Gaylord Broadcasting Corporation ("GBC"), and for the Company to
distribute the common stock of GBC to its stockholders (the "Company
Distribution"). Additionally, you have informed us that it is currently
anticipated that the Parent will effect a distribution (the "Parent
Distribution") of the common stock of a subsidiary owning the Parent's
industrial businesses to its shareholders and it is intended that the Merger
will be consummated prior to the Parent Distribution.
You have asked us whether, in our opinion, the Exchange Ratio in the Merger
is fair to the holders of the Company Common Stock from a financial point of
view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
that we deemed relevant relating to the Company and the Parent and the
respective industries in which they operate;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and prospects
of the Company (after giving effect to the Restructuring and the
Company Distribution) and the Parent (before and after giving effect to
the Parent Distribution) furnished to us by the Company and the Parent;
(3) Conducted discussions with members of senior management and
representatives of the Company and the Parent concerning the businesses
and prospects of the Company (after giving effect to the
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Restructuring and the Company Distribution) and the Parent (before and
after giving effect to the Parent Distribution), including after giving
effect to the Merger;
(4) Reviewed the historical market prices and trading activity for the
Company Common Stock and the Parent Common Stock and compared them with
those of certain publicly traded companies that we deemed to be
comparable to the Company (after giving effect to the Restructuring and
the Company Distribution) and the Parent (before and after giving
effect to the Parent Distribution), including after giving effect to
the Merger;
(5) Compared the historical and projected results of operations of the
Company (after giving effect to the Restructuring and the Company
Distribution) and the Parent (before and after giving effect to the
Parent Distribution), including, with respect to projected results of
operations, after giving effect to the Merger, with those of certain
companies that we deemed to be comparable to the Company (after giving
effect to the Restructuring and the Company Distribution) and the
Parent (before or after giving effect to the Parent Distribution),
including after giving effect to the Merger;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other mergers and acquisitions that we deemed to be
relevant;
(7) Reviewed a draft of the Agreement in the form provided to us and we
have assumed that the final form of such agreement will not vary in any
manner that is material to our analysis; and
(8) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available and have further
relied on the assurances of management of the Company and the Parent that they
are not aware of any facts that would make such information inaccurate or
misleading. We have not assumed any responsibility for independently verifying
such information and we have not undertaken an independent evaluation or
appraisal of any of the assets or liabilities of the Company or the Parent or
been furnished with any such evaluation or appraisal, nor have we conducted a
physical inspection of the properties or facilities of the Company or the
Parent. With respect to the financial forecast information furnished to or
discussed with us by the Company, the Parent or their representatives, we have
assumed that they have been reasonably prepared and reflect the best currently
available estimates and judgment of the Company's and the Parent's managements
as to the expected future financial performance of the Company (after taking
into account the Restructuring and the Company Distribution) or the Parent
(before and after giving effect to the Parent Distribution), including after
giving effect to the Merger. We express no opinion as to such financial forecast
information or the assumptions on which they were based. We have further assumed
that the Merger will qualify as a tax-free reorganization for United States
Federal income tax purposes.
For purposes of rendering this opinion we have assumed, in all respects
material to our analysis, that the representations and warranties of each party
to the Agreement and all related documents and instruments (collectively, the
"Documents") contained therein are true and correct, that each party to the
Documents will perform all of the covenants and agreements required to be
performed by such party under such Documents and that all conditions to the
consummation of the Merger will be satisfied without waiver thereof. We have
also assumed that all material governmental, regulatory or other consents and
approvals will be obtained in connection with the Merger and that in the course
of obtaining any necessary governmental, regulatory or other consents and
approvals, or any amendments, modifications or waivers to any documents to which
either of the Company or the Parent are party, no restrictions will be imposed
or amendments, modifications or waivers made that would have any material
adverse effect on the contemplated benefits to the Company or its stockholders
of the Merger.
Our opinion is necessarily based upon market, economic and other conditions
as they exist on, and can be evaluated as of, the date hereof. For purposes of
rendering this opinion we have assumed that the Merger will not occur under
circumstances where the Company's Cap Termination Right will be exercisable. Our
opinion
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does not address the merits of the underlying decision by the Company to engage
in the Merger and does not constitute a recommendation to any stockholder as to
how such stockholder should vote on the proposed Merger or any matter related
thereto.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or any
part of the Company. In addition, we have not been asked to consider, and this
opinion does not in any manner address, the price at which the Parent Common
Stock will trade following the announcement or consummation of the Merger.
Furthermore, we have not been asked to consider, and this opinion does not in
any manner address, the Restructuring and the Company Distribution or any aspect
thereof, including, without limitation, its fairness, the merits of the
underlying decision by the Company to engage therein or the price at which the
shares of GBC will trade following the Restructuring and the Company
Distribution.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger. In addition, the Company has
agreed to indemnify us for certain liabilities arising out of our engagement. We
have, in the past, provided financial advisory and/or financing services to the
Company and/or the Parent and may continue to do so and have received, and may
receive, fees for the rendering of such services. In the ordinary course of our
business, we may actively trade in the securities of the Company and the Parent
(and anticipate trading after the Merger in the securities of the Parent and/or
GBC) for our own account and for the accounts of our customers and, accordingly,
may at any time hold a long or short position in such securities.
On the basis of and subject to the foregoing, we are of the opinion, as of
the date hereof, that the Exchange Ratio is fair from a financial point of view
to the holders of the Company Common Stock.
This opinion is for the use and benefit of the Board of Directors of the
Company in its evaluation of the Merger and shall not be used for any other
purpose without our prior written consent.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ SAMUEL R. DODSON III
---------------------------------------
Samuel R. Dodson III
Managing Director
Investment Banking Group
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ANNEX VII
NEW GAYLORD ENTERTAINMENT COMPANY
1997 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION.
The purpose of the 1997 Stock Option and Incentive Plan of New Gaylord
Entertainment Company (the "Plan") is to afford an incentive to officers,
directors, and key employees of New Gaylord Entertainment Company (the
"Company"), or any Subsidiary (as defined herein) which now exists or hereafter
is organized or acquired by the Company, to acquire a proprietary interest in
the Company, to continue as employees and directors, to increase their efforts
on behalf of the Company and to promote the success of the Company's business.
It is further intended that options granted by the Compensation or other
Committee (the "Committee") of the Board of Directors of the Company (the
"Board") pursuant to Section 8 of the Plan shall constitute "incentive stock
options" ("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and options granted by
the Committee pursuant to Section 7 of the Plan shall constitute "nonqualified
stock options" ("Nonqualified Stock Options"). The Committee may also grant
stock appreciation rights ("Stock Appreciation Rights" or "SARs") pursuant to
Section 9 of the Plan and shares of restricted stock ("Restricted Stock")
pursuant to Section 10 of the Plan.
The provisions of the Plan are intended to satisfy the requirements of
Section 16(b) of the Securities Exchange Act of 1934, and shall be interpreted
in a manner consistent with the requirements thereof, as now or hereafter
construed, interpreted, and applied by regulations, rulings, and cases. The Plan
is also designated so that awards granted hereunder intended to comply with the
requirements for "performance-based" compensation under Section 162(m) of the
Code may comply with such requirements. The creation and implementation of the
Plan shall not diminish or prejudice other compensation plans or programs
approved from time to time by the Board.
2. DEFINITIONS.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Common Stock" shall mean shares of Common Stock, par value $.01
per share, of the Company.
(b) "Disability" shall mean a Grantee's (as defined in Section 3
hereof) inability to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment that can be
expected to result in death or that has lasted or can be expected to last
for a continuous period of not less than twelve (12) months.
(c) "Fair Market Value" per share of Common Stock as of a particular
date shall mean (i) the closing sales price per share of Common Stock on
the national securities exchange on which the Common Stock is principally
traded, for the last preceding date on which there was a sale of such
Common Stock on such exchange, or (ii) if the shares of Common Stock are
then traded in an over-the-counter market, the average of the closing bid
and asked prices for the shares of Common Stock in such over-the-counter
market for the last preceding date on which there was a sale of such Common
Stock in such market, or (iii) if the shares of Common Stock are not then
listed on a national securities exchange or traded in an over-the-counter
market, such value as the Committee, in its sole discretion, shall
determine.
(d) "Immediate Family" shall mean any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-
in-law, and shall include adoptive relationships.
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(e) "Option" or "Options" shall mean a grant to a Grantee of an
option or options to purchase shares of Common Stock. Options granted by
the Committee pursuant to the Plan shall constitute either Incentive Stock
Options or Nonqualified Stock Options.
(f) "Parent" shall mean any company (other than the Company) in an
unbroken chain of companies ending with the Company if, at the time of
granting an Option, each of the companies other than the Company owns stock
or equity interests (including partnership interests) possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock or equity interests in one of the other companies in such chain.
(g) "Performance Goals" means performance goals based on one or more
of the following criteria: (i) pre-tax income or after-tax income; (ii)
operating cash flow; (iii) operating profit; (iv) return on equity, assets,
capital, or investment; (v) earnings or book value per share; (vi) sales or
revenues; (vii) operating expenses; (viii) Common Stock price appreciation;
and (ix) implementation or completion of critical projects or processes.
Where applicable, the Performance Goals may be expressed in terms of
attaining a specified level of the particular criteria or the attainment of
a percentage increase or decrease in the particular criteria, and may be
applied to one or more of the Company or any Subsidiary, or a division or
strategic business unit of the Company, or may be applied to the
performance of the Company relative to a market index, a group of other
companies, or a combination thereof, all as determined by the Committee.
The Performance Goals may include a threshold level of performance below
which no payment will be made (or no vesting will occur), levels of
performance at which specified payments will be made (or specified vesting
will occur), and a maximum level of performance above which no additional
payment will be made (or at which full vesting will occur). Each of the
foregoing Performance Goals shall be determined, to the extent applicable,
in accordance with generally accepted accounting principles and shall be
subject to certification by the Committee; provided, that the Committee
shall have the authority to make equitable adjustments to the Performance
Goals in recognition of unusual or non-recurring events affecting the
Company or any Subsidiary or the financial statements of the Company or any
Subsidiary, in response to changes in applicable laws or regulations, or to
account for items of gain, loss, or expense determined to be extraordinary
or unusual in nature or infrequent in occurrence or related to the disposal
of a segment of business or related to a change in accounting principles.
(h) "Subsidiary" shall mean any company (other than the Company) in
an unbroken chain of companies beginning with the Company if, at the time
of granting an Option, each of the companies other than the last company in
the unbroken chain owns stock or equity interests (including partnership
interests) possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock or equity interests in one of the
other companies in such chain.
(i) "Ten Percent Stockholder" shall mean a Grantee who, at the time
an Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or any Parent or Subsidiary.
(j) "Retirement" means retirement by an employee from active
employment with the Company or any Subsidiary (i) on or after attaining age
65, or (ii) with the express written consent of the Company on or after
attaining age 55.
(k) "Voting Trust" shall mean the trust created by that certain
Voting Trust Agreement, dated as of October 3, 1990, as amended October 7,
1991, and as may be amended hereafter from time to time, and "Voting
Trustees" shall mean the trustees of the Voting Trust.
3. ADMINISTRATION.
The Plan shall be administered by the Committee, which will be comprised
solely of "Non-Employee Directors" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or by the
Board if for any reason the Committee is not so comprised, in which case all
references herein to the Committee shall refer to the Board.
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The Committee shall have the authority in its discretion, subject to and
not inconsistent with the express provisions of the Plan, to administer the Plan
and to exercise all the powers and authorities either specifically granted to it
under the Plan or necessary or advisable in the administration of the Plan,
including, without limitation, the authority to grant Options, SARs, and
Restricted Stock; to determine which Options shall constitute Incentive Stock
Options and which Options shall constitute Nonqualified Stock Options and
whether such Options will be accompanied by Stock Appreciation Rights; to
determine the purchase price of the shares of Common Stock covered by each
Option (the "Option Price") and SARs and the kind of consideration payable (if
any) with respect to awards; to determine the period during which Options may be
exercised and during which Restricted Stock shall be subject to restrictions,
and whether in whole or in installments; to determine the persons to whom, and
the time or times at which awards shall be granted (such persons are referred to
herein as "Grantees"); to determine the number of shares to be covered by each
award; to determine the terms, conditions, and restrictions of any Performance
Goals and the number of Options, SARs, or shares of Restricted Stock subject
thereto; to interpret the Plan; to prescribe, amend, and rescind rules and
regulations relating to the Plan; to determine the terms and provisions of the
agreements (which need not be identical) entered into in connection with awards
granted under the Plan (the "Agreements"); to cancel or suspend awards, as
necessary; and to make all other determinations deemed necessary or advisable
for the administration of the Plan.
The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Committee or
any person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations, and
interpretations of the Committee shall be final and binding on all Grantees of
any awards under this Plan.
The Board shall fill all vacancies, however caused, in the Committee. The
Board may from time to time appoint additional members to the Committee, and may
at any time remove one or more Committee members and substitute others. One
member of the Committee shall be selected by the Board as chairman. The
Committee shall hold its meetings at such times and places as it shall deem
advisable. All determinations of the Committee shall be made by a majority of
its members either present in person or participating by conference telephone at
a meeting or by written consent. The Committee may appoint a secretary and make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings.
No members of the Board or Committee shall be liable for any action taken
or determination made in good faith with respect to the Plan or any award
granted hereunder.
4. ELIGIBILITY.
Directors, officers, and other key employees of the Company shall be
eligible to receive awards hereunder. In determining the persons to whom awards
shall be granted and the number of shares to be covered by each award, the
Committee, in its sole discretion, shall take into account the contribution by
the eligible participants to the management, growth, and profitability of the
business of the Company and such other factors as the Committee shall deem
relevant.
5. STOCK.
The maximum number of shares of Common Stock reserved for the grant of
awards under the Plan shall be 3,000,000 (including shares of Common Stock
reserved for the grant of awards issued in connection with the Distribution
Agreement (as defined below)) subject to adjustment as provided in Section 11
hereof. Such shares may, in whole or in part, be authorized but unissued shares
or shares that shall have been or may be reacquired by the Company.
If any outstanding award under the Plan should, for any reason, expire or
be canceled, forfeited, or terminated, without having been exercised in full,
the shares of Common Stock allocable to the unexercised, canceled, forfeited, or
terminated portion of such award shall (unless the Plan shall have been
terminated) become available for subsequent grants of awards under the Plan.
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The maximum number of shares of Common Stock with respect to which awards
(including Options, SARs, and Restricted Stock) may be granted under the Plan to
any eligible employee during any consecutive three-year period shall be 500,000,
subject to adjustment as provided in Section 11 hereof. Notwithstanding the
foregoing, shares of Common Stock issued or issuable to any person in connection
with the Agreement and Plan of Distribution, dated as of , 1997,
between the Company and Gaylord Entertainment Company, a Delaware corporation
(the "Distribution Agreement") shall not be counted for purposes of the maximum
number of shares limitation in the preceding sentence.
6. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted pursuant to the Plan shall be evidenced by a written
agreement between the Company and the Grantee (the "Option Agreement"), in such
form as the Committee shall from time to time approve, which Option Agreement
shall comply with and be subject to the following terms and conditions:
(a) Number of Shares. Each Option Agreement shall state the number of
shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall specifically state
that the Option constitutes an Incentive Stock Option or a Nonqualified
Stock Option.
(c) Option Price. Each Option Agreement shall state the Option Price,
which, in the case of an Incentive Stock Option, shall not be less than one
hundred percent (100%) of the Fair Market Value of the shares of Common
Stock covered by the Option on the date of grant. The Option Price shall be
subject to adjustment as provided in Section 11 hereof. Unless otherwise
stated in the resolution, the date on which the Committee adopts a
resolution expressly granting an Option shall be considered the day on
which such Option is granted.
(d) Medium and Time of Payment. The Option Price shall be paid in
full, at the time of exercise, as the Option Agreement may provide, in cash
or in shares of Common Stock having a Fair Market Value equal to such
Option Price, or in a combination of cash and Common Stock, or in such
other manner as the Committee shall determine.
(e) Term and Exercisability of Options. Each Option shall be
exercisable at such times and under such conditions as the Committee, in
its discretion, shall determine; provided, however, that in the case of an
Incentive Stock Option, such exercise period shall not exceed ten (10)
years from the date of grant of such Option. The exercise period shall be
subject to earlier termination as provided in Section 6(f) hereof. An
Option may be exercised, as to any or all full shares of Common Stock as to
which the Option has become exercisable, by giving written notice of such
exercise to the Committee or its designated agent.
(f) Termination of Employment
(i) Generally. Except as otherwise provided herein, an Option may
not be exercised unless the Grantee is then in the service or employ of
the Company or a Parent or Subsidiary (or a company or a parent or
subsidiary company of such company issuing or assuming the Option in a
transaction to which Section 424(a) of the Code applies), and unless the
Grantee has remained continuously so employed since the date of grant of
the Option. Unless otherwise determined by the Committee at or after the
date of grant, in the event that the employment of a Grantee terminates
(other than by reason of death, Disability, Retirement, or for Cause)
all Options that are exercisable at the time of such termination may be
exercised for a period of 90 days from the date of such termination or
until the expiration of the stated term of the Option, whichever period
is shorter. For purposes of interpreting this Section 6(f) only, the
service of a director as a non-employee member of the Board shall be
deemed to be employment by the Company.
(ii) Death or Disability. If a Grantee dies while employed by the
Company or a Parent or Subsidiary (or within the period of extended
exercisability otherwise provided herein), or if the
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Grantee's employment terminates by reason of Disability, all Options
theretofore granted to such Grantee will become fully vested and
exercisable (notwithstanding any terms of the Options providing for
delayed exercisability) and may be exercised by the Grantee, by the
legal representative of the Grantee's estate, or by the legatee under
the Grantee's will at any time until the expiration of the stated term
of the Option. In the event that an Option granted hereunder is
exercised by the legal representative of a deceased or disabled Grantee,
written notice of such exercise must be accompanied by a certified copy
of letters testamentary or equivalent proof of the right of such legal
representative or legatee to exercise such Option.
(iii) Retirement. If a Grantee's employment terminates by reason of
Retirement, any Option held by the Grantee may thereafter be exercised,
to the extent it was exercisable at the time of such Retirement or on
such accelerated basis as the Committee may determine at or after the
date of grant (but before the date of such Retirement), at any time
until the expiration of the stated term of the Option.
(iv) Cause. If a Grantee's employment terminates for "Cause" (as
determined by the Committee in its sole discretion) the Option, to the
extent not theretofore exercised, shall terminate on the date of
termination of employment.
(v) Committee Discretion. Notwithstanding the provisions of
subsections (i) through (iv) above, the Committee may, in its sole
discretion, at or after the date of grant (but before the date of
termination), establish different terms and conditions pertaining to the
effect on any Option of termination of a Grantee's employment, to the
extent permitted by applicable federal and state law.
(g) Other Provisions. The Option Agreements evidencing Options under
the Plan shall contain such other terms and conditions, not inconsistent
with the Plan, as the Committee may determine.
7. NONQUALIFIED STOCK OPTIONS.
Options granted pursuant to this Section 7 are intended to constitute
Nonqualified Stock Options and shall be subject only to the general terms and
conditions specified in Section 6 hereof.
8. INCENTIVE STOCK OPTIONS.
Options granted pursuant to this Section 8 are intended to constitute
Incentive Stock Options and shall be subject to the following special terms and
conditions, in addition to the general terms and conditions specified in Section
6 hereof.
(a) Value of Shares. The aggregate Fair Market Value (determined as of the
date the Incentive Stock Option is granted) of the shares of equity securities
of the Company with respect to which Incentive Stock Options granted under this
Plan and all other option plans of any Parent or Subsidiary become exercisable
for the first time by each Grantee during any calendar year shall not exceed
$100,000. To the extent such $100,000 limit has been exceeded with respect to
any Options first becoming exercisable, including acceleration upon a Change in
Control, and notwithstanding any statement in the Option Agreement that it
constitutes an Incentive Stock Option, the portion of such Option(s) that
exceeds such $100,000 limit shall be treated as a Nonqualified Stock Option.
(b) Ten Percent Stockholder. In the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, (i) the Option Price shall not be less
than one hundred ten percent (110%) of the Fair Market Value of the shares of
Common Stock on the date of grant of such Incentive Stock Option, and (ii) the
exercise period shall not exceed five (5) years from the date of grant of such
Incentive Stock Option.
9. STOCK APPRECIATION RIGHTS.
The Committee is authorized to grant SARs to Grantees on the following
terms and conditions:
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(a) In General. Unless the Committee determines otherwise, an SAR (i)
granted in tandem with a Nonqualified Stock Option may be granted at the
time of grant of the related Nonqualified Stock Option or at any time
thereafter, and (ii) granted in tandem with an Incentive Stock Option may
only be granted at the time of grant of the related Incentive Stock Option.
An SAR granted in tandem with an Option shall be exercisable only to the
extent the underlying Option is exercisable and shall terminate when the
underlying Option terminates.
(b) SARs. An SAR shall confer on the Grantee a right to receive an
amount with respect to each share subject thereto, upon exercise thereof,
equal to the excess of (i) the Fair Market Value of one share of Common
Stock on the date of exercise over (ii) the grant price of the SAR (which
in the case of an SAR granted in tandem with an Option shall be equal to
the exercise price of the underlying Option, and which in the case of any
other SAR shall be such price as the Committee may determine).
(c) Performance Goals. The Committee may condition the exercise of
any SAR upon the attainment of specified Performance Goals, in its sole
discretion.
10. RESTRICTED STOCK.
The Committee may award shares of Restricted Stock to any eligible employee
or director. Each award of Restricted Stock under the Plan shall be evidenced by
an instrument, in such form as the Committee shall from time to time approve
(the "Restricted Stock Agreement"), and shall comply with the following terms
and conditions (and with such other terms and conditions not inconsistent with
the terms of this Plan as the Committee, in its discretion, shall establish
including, without limitation, the requirement that a Grantee provide
consideration for Restricted Stock upon the lapse of restrictions):
(a) The Committee shall determine the number of shares of Common Stock
to be issued to the Grantee pursuant to the award.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of, except by will or the laws
of descent and distribution, for such period as the Committee shall
determine from the date on which the award is granted (the "Restricted
Period"). The Committee may impose such other restrictions and conditions
on the shares as it deems appropriate including the satisfaction of
Performance Goals. Certificates for shares of stock issued pursuant to
Restricted Stock awards shall bear an appropriate legend referring to such
restrictions, and any attempt to dispose of any such shares of stock in
contravention of such restrictions shall be null and void and without
effect. During the Restricted Period, such certificates shall be held in
escrow by an escrow agent appointed by the Committee. In determining the
Restricted Period of an award, the Committee may provide that the foregoing
restrictions lapse at such times, under such circumstances, and in such
installments, as the Committee may determine.
(c) Subject to such exceptions as may be determined by the Committee,
if the Grantee's continuous employment with the Company or any Parent or
Subsidiary shall terminate for any reason prior to the expiration of the
Restricted Period of an award, any shares remaining subject to restrictions
(after taking into account the provisions of Subsection (f) of this Section
10) shall thereupon be forfeited by the Grantee and transferred to, and
reacquired by, the Company or a Parent or Subsidiary at no cost to the
Company or such Parent or Subsidiary.
(d) During the Restricted Period the Grantee shall possess all
incidents of ownership of such shares, subject to Subsection (b) of this
Section 10, including the right to receive cash dividends with respect to
such shares and to vote such shares; provided, that shares of Common Stock
distributed in connection with a stock split or stock dividend shall be
subject to restriction and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such shares are distributed.
(e) Upon the occurrence of any of the events described in Section
11(c), all restrictions then outstanding with respect to shares of
Restricted Stock awarded hereunder shall automatically expire and be of no
further force or effect.
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(f) The Committee shall have the authority (and the Restricted Stock
Agreement may so provide) to cancel all or any portion of any outstanding
restrictions prior to the expiration of the Restricted Period with respect
to any or all of the shares of Restricted Stock awarded on such terms and
conditions as the Committee shall deem appropriate.
11. EFFECT OF CERTAIN CHANGES.
(a) If there is any change in the shares of Common Stock through the
declaration of extraordinary cash dividends, stock dividends, recapitalization,
stock splits, or combinations or exchanges of such shares, or other similar
transactions, the number of shares of Common Stock available for awards (both
the maximum number of shares issuable under the Plan as a whole and the maximum
number of shares issuable on a per-employee basis, each as set forth in Section
5 hereof), the number of such shares covered by outstanding awards, the
Performance Goals, and the price per share of Options or SARs shall be
proportionately adjusted by the Committee to reflect such change in the issued
shares of Common Stock; provided, that any fractional shares resulting from such
adjustment shall be eliminated; and provided, further, that, with respect to
Incentive Stock Options, such adjustment shall be made in accordance with
Section 424(h) of the Code.
(b) In the event of the dissolution or liquidation of the Company; in the
event of any corporate separation or division, including but not limited to,
split-up, split-off or spin-off; or in the event of other similar transactions,
the Committee may, in its sole discretion, provide that either:
(i) the Grantee of any award hereunder shall have the right to
exercise an Option (at its then Option Price) and receive such property,
cash, securities, or any combination thereof upon such exercise as would
have been received with respect to the number of shares of Common Stock for
which such Option might have been exercised immediately prior to such
dissolution, liquidation, or corporate separation or division; or
(ii) each Option shall terminate as of a date to be fixed by the
Committee and that not less than thirty (30) days' written notice of the
date so fixed shall be given to each Grantee, who shall have the right,
during the period of thirty (30) days preceding such termination, to
exercise all or part of such Option.
In the event of a proposed sale of all or substantially all of the assets
of the Company or the merger of the Company with or into another corporation,
any award then outstanding shall be assumed or an equivalent award shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless such successor corporation does not agree to
assume the award or to substitute an equivalent award, in which case the
Committee shall, in lieu of such assumption or substitution, provide for the
realization of such outstanding awards in the manner set forth in Section
11(b)(i) or 11(b)(ii) above.
(c) If, while any awards remain outstanding under the Plan, any of the
following events shall occur (which events shall constitute a "Change in
Control" of the Company):
(i) the "beneficial ownership," as defined in Rule 13d-3 under the
Exchange Act, of securities representing more than a majority of the
combined voting power of the Company are acquired by any "person" as
defined in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the
Company, (B) any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (C) the Voting Trust and the Voting
Trustees, (D) Edward L. Gaylord or any member of his Immediate Family, or
(E) any corporation owned, directly or indirectly, by the shareholders of
the Company in substantially the same proportions as their ownership of
stock of the Company); or
(ii) the shareholders of the Company approve a definitive agreement to
merge or consolidate the Company with or into another company (other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) a majority of the combined voting power
of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation), or to sell or
otherwise dispose of all or substantially all of its assets, or adopt a
plan of liquidation; or
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(iii) during any period of two consecutive years, individuals who at
the beginning of such period were members of the Board cease for any reason
to constitute at least a majority thereof (unless the election, or the
nomination for election by the Company's shareholders, of each new director
was approved by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of such period);
then from and after the date on which any such Change in Control shall have
occurred (the "Acceleration Date"), any Option, SAR, and share of Restricted
Stock awarded pursuant to this Plan shall be exercisable or otherwise
nonforfeitable in full, as applicable, whether or not otherwise exercisable or
forfeitable.
Following the Acceleration Date, the Committee shall, in the case of a
merger, consolidation, or sale or disposition of assets, promptly make an
appropriate adjustment to the number and class of shares of Common Stock
available for awards, and to the amount and kind of shares or other securities
or property receivable upon exercise or other realization of any outstanding
awards after the effective date of such transaction, and, if applicable, the
price thereof.
(d) In the event of a change in the Common Stock of the Company as
presently constituted that is limited to a change of all of its authorized
shares of Common Stock into the same number of shares with a different par value
or without par value, the shares resulting from any such change shall be deemed
to be the Common Stock within the meaning of the Plan.
(e) Except as herein before expressly provided in this Section 11, the
Grantee of an award hereunder shall have no rights by reason of any subdivision
or consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class or by reason of any dissolution, liquidation, merger, or consolidation
or spin-off of assets or stock of another company; and any issue by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock subject to
an award. The grant of an award pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structures or to merge or
to consolidate or to dissolve, liquidate, or sell, or transfer all or part of
its business or assets or engage in any similar transactions.
12. SURRENDER AND EXCHANGES OF AWARDS.
The Committee may permit the voluntary surrender of all or a portion of any
Option granted under the Plan or any option granted under any other plan,
program, or arrangement of the Company or any Subsidiary ("Surrendered Option"),
to be conditioned upon the granting to the Grantee of a new Option for the same
number of shares of Common Stock as the Surrendered Option, or may require such
voluntary surrender as a condition precedent to a grant of a new Option to such
Grantee. Subject to the provisions of the Plan, such new Option (1) may be an
Incentive Stock Option or a Nonqualified Stock Option and (2) shall be
exercisable at the price, during such period, and on such other terms and
conditions as are specified by the Committee at the time the new Option is
granted. The Committee may also grant Restricted Stock in exchange for
Surrendered Options to any holder of such Surrendered Option.
13. PERIOD DURING WHICH AWARDS MAY BE GRANTED.
Awards may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date of the Distribution (as defined in the
Distribution Agreement), provided that awards granted prior to such tenth
anniversary date may be extended beyond such date.
14. LIMITS ON TRANSFERABILITY OF AWARDS.
Awards of Incentive Stock Options (and any SAR related thereto) shall not
be transferable otherwise than by will or by the laws of descent and
distribution, and all Incentive Stock Options are exercisable during the
Grantee's lifetime only by the Grantee. Awards of Nonqualified Stock Options
(and any SAR related
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thereto) shall not be transferable, without the prior written consent of the
Committee, other than (i) by will or by the laws of descent and distribution,
(ii) by a Grantee to a member of his or her Immediate Family, or (iii) to a
trust for the benefit of the Grantee or a member of his or her Immediate Family.
Awards of Restricted Stock shall be transferable only to the extent set forth in
the Restricted Stock Agreement.
15. EFFECTIVE DATE.
The Plan shall take effect upon consummation of the Distribution, provided
that the Plan has been approved by the Board, the holders of a majority of the
voting power of the Company, and the holders of a majority of the voting power
of Gaylord Entertainment Company, the Company's Parent.
16. AGREEMENT BY GRANTEE REGARDING WITHHOLDING TAXES.
If the Committee shall so require, as a condition of exercise of an Option
or SAR or other realization of an award, each Grantee shall agree that no later
than the date of exercise or other realization of an award granted hereunder,
the Grantee will pay to the Company or make arrangements satisfactory to the
Committee regarding payment of any federal, state, or local taxes of any kind
required by law to be withheld upon the exercise of an Option or other
realization of an award. Alternatively, the Committee may provide that a Grantee
may elect, to the extent permitted or required by law, to have the Company
deduct federal, state, and local taxes of any kind required by law to be
withheld upon the exercise of an Option or realization of any award from any
payment of any kind due to the Grantee. The Committee may, in its sole
discretion, permit withholding obligations to be satisfied in shares of Common
Stock subject to the award.
17. AMENDMENT AND TERMINATION OF THE PLAN.
The Board at any time and from time to time may suspend, terminate, modify,
or amend the Plan without stockholder approval to the fullest extent permitted
by the Exchange Act and the rules and regulations thereunder; provided, however,
that no suspension, termination, modification, or amendment of the Plan may
adversely affect any award previously granted hereunder, unless the written
consent of the Grantee is obtained.
18. RIGHTS AS A SHAREHOLDER.
Except as provided in Section 10(d) hereof, a Grantee or a transferee of an
award shall have no rights as a shareholder with respect to any shares covered
by the award until the date of the issuance of a stock certificate to him or her
for such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities, or other property) or distribution
of other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 11 hereof.
19. NO RIGHTS TO EMPLOYMENT.
Nothing in the Plan or in any award granted or Agreement entered into
pursuant hereto shall confer upon any Grantee the right to continue in the
employ of the Company or any subsidiary or to be entitled to any remuneration or
benefits not set forth in the Plan or such Agreement or to interfere with or
limit in any way the right of the Company or any such subsidiary to terminate
such Grantee's employment. Awards granted under the Plan shall not be affected
by any change in duties or position of a Grantee as long as such Grantee
continues in the employ of the Company or any Subsidiary.
20. BENEFICIARY.
A Grantee may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Grantee, the executor or administrator of the Grantee's estate
shall be deemed to be the Grantee's beneficiary.
VII-9
<PAGE> 225
21. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a Grantee by
the Company, nothing contained herein shall give any such Grantee any rights
that are greater than those of a general creditor of the Company. In its sole
discretion, the Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver Common
Stock or payments in lieu of or with respect to awards hereunder; provided,
however, that, unless the Committee otherwise determines with the consent of the
affected participant, the existence of such trusts or other arrangements is
consistent with the "unfunded" status of the Plan.
22. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.
VII-10
<PAGE> 226
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 1741 of the PBCL empowers a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or proceeding (a "Proceeding"), whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a representative of the corporation or is or was serving at the request of
the corporation as a representative of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such Proceeding, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. Section 1742 of the PBCL
empowers a corporation to indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action by
or in the right of the corporation to procure a judgment in its favor by reason
of the fact that such person is or was a representative of the corporation or is
or was serving at the request of the corporation as a representative of another
corporation or enterprise, against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection with the defense or
settlement of the action if he or she acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best interests of the
corporation, provided that indemnification will not be made in respect of any
claim, issue or matter as to which such person has been adjudged to be liable to
the corporation unless there is a judicial determination that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for the expenses that the court deems proper.
Section 1743 of the PBCL provides that to the extent a representative of a
corporation has been successful on the merits or otherwise in defense of any
Proceeding, or in defense of any claim, issue or matter therein, he or she will
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Section 1745 of the PBCL provides that expenses (including attorneys' fees)
incurred in defending a Proceeding may be paid by the corporation in advance of
the final disposition of such Proceeding upon receipt of an undertaking by or on
behalf of the representative to repay such amount if it is ultimately determined
that he or she is not entitled to be indemnified by the corporation.
Section 1746 of the PBCL provides that the indemnification and advancement
of expenses provided by, or granted pursuant to, the other sections of the PBCL
will not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any by-law,
agreement, vote of shareholders or disinterested directors or otherwise.
However, Section 1746 also provides that such indemnification will not be made
in any case where the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted willful misconduct
or recklessness.
Westinghouse provides for indemnification of its directors and officers
pursuant to Article ELEVENTH of the Westinghouse Charter and Article XVII of the
Westinghouse By-laws. Article ELEVENTH of the Westinghouse Charter and Article
XVII of the Westinghouse By-laws provide in effect that, with respect to
Proceedings based on acts or omissions on or after January 27, 1987, and unless
prohibited by applicable law, Westinghouse will indemnify directors and officers
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement incurred in connection with any such Proceedings (subject to
certain limitations in the case of actions by such persons against
Westinghouse). Under Article XVII, Westinghouse will also advance amounts to any
director or officer during the pendency of any such Proceedings against expenses
incurred, provided that, if required by law, Westinghouse receives an
undertaking to repay such amount if it is ultimately determined that such person
is not to be indemnified under such Article. The indemnification provided for in
such Articles is in addition to any rights to which any director or officer may
otherwise be entitled. Article XVII of the Westinghouse By-laws provides that
the right of a director or officer
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<PAGE> 227
to such indemnification and advancement of expenses will be a contract right and
further provides procedures for the enforcement of such right.
Westinghouse has purchased directors' and officers' liability insurance
policies indemnifying its directors and officers and the directors and officers
of its subsidiaries against claims and liabilities (with stated exceptions) to
which they may become subject by reason of their positions with Westinghouse or
its subsidiaries as directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES.
(a) The following is a list of Exhibits included as part of this
Registration Statement.
<TABLE>
<C> <S> <C>
2.1 -- Agreement and Plan of Merger dated as of February 9, 1997, among Westinghouse,
Sub and the Company (included as Annex I to the Joint Proxy
Statement/Prospectus).
2.2 -- Form of Agreement and Plan of Distribution between the Company and New Gaylord
(included as Annex II to the Joint Proxy Statement/Prospectus).
2.3 -- Stockholder Agreement dated as of February 9, 1997, among Westinghouse, the
Principal Stockholders and the Voting Trustees (included as Annex III to the
Joint Proxy Statement/ Prospectus).
2.4 -- Form of Tax Disaffiliation Agreement by and among the Company, New Gaylord and
Westinghouse (included as Annex IV to the Joint Proxy Statement/Prospectus).
2.5 -- Form of Post-Closing Covenants Agreement among Westinghouse, the Company, New
Gaylord and certain subsidiaries of New Gaylord (included as Annex V to the
Joint Proxy Statement/Prospectus).
4.1 -- The Restated Articles of Westinghouse, as amended to December 13, 1996, are
incorporated herein by reference to Exhibit 4.1 to Westinghouse's Registration
Statement No. 333-13219 on Post-Effective Amendment No. 1 on Form S-8 to Form
S-4 filed with the Securities and Exchange Commission on January 2, 1997.
4.2 -- The By-Laws of Westinghouse, as amended to September 25, 1996, are incorporated
herein by reference to Exhibit 4.2 to Westinghouse's Registration Statement No.
333-13219 on Form S-4 filed with the Securities and Exchange Commission on
October 22, 1996.
4.3 -- There are no instruments with respect to long-term debt of Westinghouse that
involve securities authorized thereunder exceeding 10% of the total assets of
Westinghouse and its subsidiaries on a consolidated basis. Westinghouse 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 Westinghouse and
its subsidiaries.
4.4 -- Rights Agreement between Westinghouse and First Chicago Trust Company of New
York is incorporated herein by reference to Exhibit 1 to Form 8-A filed with the
Securities and Exchange Commission on January 9, 1996.
5.1* -- Opinion of Louis J. Briskman, as to the legality of the securities being
registered.
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Price Waterhouse LLP.
23.3 -- Consent of Arthur Andersen LLP.
23.4 -- Consent of Arthur Andersen LLP.
</TABLE>
II-2
<PAGE> 228
<TABLE>
<C> <S> <C>
23.5 -- Consent of Louis J. Briskman (included in Exhibit 5.1 to this Registration
Statement).
23.6 -- Consent of Merrill Lynch & Co.
24.1* -- Powers of Attorney.
99.1 -- Form of proxy card to be mailed to holders of Company Common Stock.
</TABLE>
(b) Not applicable.
(c) The opinion of Merrill Lynch & Co. is included as Annex VI to the Proxy
Statement/Prospectus.
- ---------------
* Previously filed.
ITEM 22. UNDERTAKING.
The undersigned Registrant hereby undertakes: (a) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the registration
statement;
(b) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(c) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(d) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(e) that prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this
Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the Registrant undertakes
that such reoffering prospectus will contain the information called for by
the applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for by
the other items of the applicable registration form;
II-3
<PAGE> 229
(f) that every prospectus (i) that is filed pursuant to paragraph (e)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
(g) insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue;
(h) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request; and
(i) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective.
II-4
<PAGE> 230
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement No. 333-30455 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Pittsburgh, Commonwealth of Pennsylvania on the 16th day of July, 1997.
WESTINGHOUSE ELECTRIC CORPORATION
By /s/ LOUIS J. BRISKMAN
--------------------------------------
Name: Louis J. Briskman
Title: Senior Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement No. 333-30455 has been signed by the following
persons on the 16th day of July, 1997 in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ -----------------------------------------------
<C> <S>
* Chairman and Chief Executive Officer (principal
- ------------------------------------------ executive officer) and director
(Michael H. Jordan)
* director
- ------------------------------------------
(Frank C. Carlucci)
* director
- ------------------------------------------
(Robert E. Cawthorn)
* director
- ------------------------------------------
(George H. Conrades)
* director
- ------------------------------------------
(William H. Gray III)
* director
- ------------------------------------------
(Mel Karmazin)
* director
- ------------------------------------------
(David K.P. Li)
* director
- ------------------------------------------
(David T. McLaughlin)
* director
- ------------------------------------------
(Richard R. Pivirotto)
* director
- ------------------------------------------
(Raymond W. Smith)
</TABLE>
II-5
<PAGE> 231
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ -----------------------------------------------
<C> <S>
* director
- ------------------------------------------
(Paula Stern)
* director
- ------------------------------------------
(Robert D. Walter)
* Executive Vice President and Chief Financial
- ------------------------------------------ Officer (principal financial officer)
(Fredric G. Reynolds)
* Vice President and Chief Accounting Officer
- ------------------------------------------ (principal accounting officer)
(Carol V. Savage)
*By /s/ LOUIS J. BRISKMAN
- ------------------------------------------
(Louis J. Briskman
Attorney-in-Fact)
</TABLE>
II-6
<PAGE> 232
EXHIBIT INDEX
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger dated as of February 9, 1997, among Westinghouse, Sub
and the Company (included as Annex I to the Joint Proxy Statement/Prospectus).
2.2 Form of Agreement and Plan of Distribution between the Company and New Gaylord
(included as Annex II to the Joint Proxy Statement/Prospectus).
2.3 Stockholder Agreement dated as of February 9, 1997, among Westinghouse, the Principal
Stockholders and the Voting Trustees (included as Annex III to the Joint Proxy
Statement/Prospectus).
2.4 Form of Tax Disaffiliation Agreement by and among the Company, New Gaylord and
Westinghouse (included as Annex IV to the Joint Proxy Statement/Prospectus).
2.5 Form of Post-Closing Covenants Agreement among Westinghouse, the Company, New Gaylord
and certain subsidiaries of New Gaylord (included as Annex V to the Joint Proxy
Statement/Prospectus).
4.1 The Restated Articles of Westinghouse, as amended to December 13, 1996, are
incorporated herein by reference to Exhibit 4.1 to Westinghouse's Registration
Statement No. 333-13219 on Post-Effective Amendment No. 1 on Form S-8 to Form S-4
filed with the Securities and Exchange Commission on January 2, 1997.
4.2 The By-Laws of Westinghouse, as amended to September 25, 1996, are incorporated
herein by reference to Exhibit 4.2 to Westinghouse's Registration Statement No.
333-13219 on Form S-4 filed with the Securities and Exchange Commission on October
22, 1996.
4.3 There are no instruments with respect to long-term debt of Westinghouse that involve
securities authorized thereunder exceeding 10% of the total assets of Westinghouse
and its subsidiaries on a consolidated basis. Westinghouse 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 Westinghouse and its subsidiaries.
4.4 Rights Agreement between Westinghouse and First Chicago Trust Company of New York is
incorporated herein by reference to Exhibit 1 to Form 8-A filed with the Securities
and Exchange Commission on January 9, 1996.
5.1* Opinion of Louis J. Briskman, as to the legality of the securities being registered.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Price Waterhouse LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of Arthur Andersen LLP.
23.5 Consent of Louis J. Briskman (included in Exhibit 5.1 to this Registration
Statement).
23.6 Consent of Merrill Lynch & Co.
24.1* Powers of Attorney.
99.1 Form of proxy card to be mailed to holders of Company Common Stock.
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated January 29, 1997, except as to
note 24 which is as of July 11, 1997, included in Westinghouse Electric
Corporation's Form 10K/A Amendment No. 1 for the year ended December 31, 1996
and to the use of our report dated January 29, 1997 on the financial statement
schedule included in Westinghouse Electric Corporation's Form 10-K for the year
ended December 31, 1996, both of which are incorporated by reference in this
Amendment No. 1 to Registration Statement No. 333-30455 on Form S-4, and to the
reference to our firm under the heading "Experts" in the Registration Statement.
Our report included in the Form 10K/A Amendment No. 1 refers to a
restatement of the 1996 consolidated financial statements.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
July 16, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Amendment No. 1
to the Registration Statement No. 333-30455 on Form S-4 of our report dated
February 12, 1996 except for the restatements discussed in notes 1, 3 and 24,
for which the dates are March 31, 1996, November 13, 1996 and July 11, 1997
appearing on page 28 of Westinghouse Electric Corporation's Form 10-K/A
Amendment No. 1 for the year ended December 31, 1996 and to the incorporation by
reference of our report on the financial statement schedule appearing on page 69
of Westinghouse Electric Corporation's Form 10-K for the year ended December 31,
1996. We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
Price Waterhouse LLP
Price Waterhouse LLP
Pittsburgh, Pennsylvania
July 16, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in Amendment No. 1 to Registration Statement No. 333-30455 of our
report dated February 7, 1997 (except for certain matters as to which the dates
are February 9, 1997 and March 24, 1997), included in Gaylord Entertainment
Company's Form 10-K, as amended, for the year ended December 31, 1996 and to all
references to our Firm included in Amendment No. 1 to Registration Statement No.
333-30455.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
July 14, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated April 4, 1997, relating to the combined financial statements of the
Cable Networks Business (a division of Gaylord Entertainment Company) as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and to all references to our Firm included in Amendment No. 1
to Registration Statement No. 333-30455.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
July 14, 1997
<PAGE> 1
EXHIBIT 23.6
We hereby consent to the use of our opinion letter dated February 9, 1997
to the Board of Directors of Gaylord Entertainment Company included as Annex VI
to the Proxy Statement/Prospectus which forms a part of Amendment No. 1 to
Registration Statement No. 333-30455 on Form S-4 relating to the proposed merger
of G Acquisition Corp., a wholly owned subsidiary of Westinghouse Electric
Corporation with and into Gaylord Entertainment Company and to references to
such opinion in such Proxy Statement/Prospectus. In giving such consent, we do
not admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1993, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder, nor do we
thereby admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "experts" as used in the Securities Act
of 1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
July 16, 1997
<PAGE> 1
EXHIBIT 99.1
PROXY
PROXY
GAYLORD ENTERTAINMENT COMPANY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF GAYLORD ENTERTAINMENT
COMPANY (THE "COMPANY").
The undersigned hereby appoints EDWARD L. GAYLORD and TERRY E. LONDON, and
each of them, as proxies, with full power of substitution, to vote all shares of
the undersigned as shown on the reverse side of this proxy at the Special
Meeting of Stockholders of the Company to be held at the Ryman Auditorium, 116
5th Avenue North, Nashville, Tennessee, on Friday, August 15, 1997, at 10:00
a.m., local time, and at any adjournments or postponements thereof.
YOUR SHARES WILL BE VOTED IN ACCORDANCE WITH YOUR SPECIFICATIONS ON THE
OPPOSITE SIDE. IF NO CHOICE IS SPECIFIED, SHARES WILL BE VOTED: (I) FOR THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT (AS HEREINAFTER DEFINED); AND (II)
FOR THE APPROVAL AND ADOPTION OF THE NEW GAYLORD STOCK PLAN (AS HEREINAFTER
DEFINED).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2
1. To approve and adopt the Agreement and Plan of Merger, dated as of February
9, 1997 (the "Merger Agreement"), among Westinghouse Electric Corporation, a
Pennsylvania corporation ("Westinghouse"), G Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Westinghouse ("Sub"), and the
Company pursuant to which Sub will be merged with and into the Company and
each share of Class A Common Stock, $.01 par value, of the Company and each
share of Class B Common Stock, $.01 par value, of the Company outstanding
immediately prior to the consummation of the Merger will be converted into
the right to receive that number of shares of Common Stock, par value $1.00
per share, of Westinghouse, determined pursuant to a formula set forth in the
Merger Agreement (all as more fully described in the enclosed Proxy
Statement/Prospectus).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued from the reverse side)
2. To approve and adopt the New Gaylord Entertainment Company 1997 Stock Option
and Incentive Plan (the "New Gaylord Stock Plan") (as more fully described in
the enclosed Proxy Statement/Prospectus).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned acknowledges receipt of the Notice of Special Meeting of
Stockholders to be held on Friday, August 15, 1997 and the related Proxy
Statement/Prospectus.
Dated........................., 1997
Signature(s) .......................
...
Please sign as your name appears on
your stock certificate. If
registered in the names of two or
more persons, each should sign.
Executors, administrators, trustees,
guardians, attorneys and corporate
officers should show their full
title. Votes must be indicated in
Black or Blue ink.
