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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-977
CBS CORPORATION
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(Exact name of registrant as specified in its charter)
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PENNSYLVANIA 25-0877540
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(State of Incorporation) (I.R.S. Employer Identification No.)
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019 (212) 975-4321
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(Address of Principal Executive Offices) (Telephone No.)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, par value $1.00 per Share New York Stock Exchange Boston Stock Exchange
Pacific Stock Exchange Philadelphia Stock Exchange
Chicago Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by checkmark whether the registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
CBS Corporation had 714,593,724 shares of common stock outstanding at January
30, 1998. As of that date, the aggregate market value of common stock held by
non-affiliates was $20.7 billion.
DOCUMENT INCORPORATED BY REFERENCE INTO THE PARTS OF THIS REPORT INDICATED:
1. Portions of CBS Corporation's Notice of 1998 Annual Meeting and Proxy
Statement to be filed with the Commission pursuant to Regulation 14A of the
Securities Exchange Act of 1934 (the Proxy Statement). (Parts I and III)
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The terms "CBS" and "Corporation" as used in this Report on Form 10-K refer to
CBS Corporation and its consolidated subsidiaries unless the context indicates
otherwise.
PART I
ITEM 1. BUSINESS.
General
Westinghouse Electric Corporation changed its name to CBS Corporation on
December 1, 1997. CBS Corporation is one of the largest radio and television
broadcasters in the United States. The Corporation was founded in 1886 and
operates under a corporate charter granted by the Commonwealth of Pennsylvania
in 1872. The Corporation operates its continuing businesses primarily in the
United States through its Radio, Television Stations, Television Network, and
Cable Groups. These businesses furnish network television services to affiliated
television stations; operate the Corporation's non-broadcast television
networks; produce news, sports, and entertainment programming; and operate 14
television broadcast stations and 76 radio stations under licenses from the
Federal Communications Commission (FCC).
During recent years, the Corporation dramatically redefined its business
portfolio and future direction. The Corporation acquired CBS Inc. in November
1995, Infinity Broadcasting Corporation (Infinity) in December 1996, and Gaylord
Entertainment Company's two major cable networks, The Nashville Network (TNN)
and Country Music Television (CMT), in September 1997. Also in September 1997,
the Corporation announced it had reached a definitive agreement to acquire the
radio broadcasting operations of American Radio Systems Corporation (American
Radio). Upon completing the American Radio transaction, CBS will own (subject to
any required divestitures) approximately 175 radio stations.
As the Corporation redefined its business portfolio, a number of businesses were
identified as non-strategic and to be divested. The Corporation divested The
Knoll Group (Knoll), its office furniture unit, and the Corporation's defense
and electronic systems business in February and March 1996, respectively. In
December 1996, the Corporation divested Westinghouse Security Systems, its
residential security business. During 1996 and 1997, the Corporation continued
to divest other non-strategic businesses.
In November 1996, the Corporation's Board of Directors conditionally approved a
plan to separate the Corporation's media and industrial businesses by way of a
tax-free dividend to shareholders, forming a publicly traded company to be
called Westinghouse Electric Company (WELCO). Modifications were made to the
plan such that WELCO would consist primarily of the manufacturing and service
businesses for the nuclear and fossil-fueled power generation industry and the
government operations business. The Corporation would retain the media
businesses and Thermo King Corporation (Thermo King). In September 1997, the
Corporation reached a definitive agreement to sell Thermo King, and the sale was
completed in October 1997.
However, in light of consolidation in the power industry, the Corporation
considered offers by various parties to acquire certain of the WELCO businesses.
In November 1997, the Corporation announced a definitive agreement to sell its
Power Generation business for $1.525 billion in cash. The remaining industrial
businesses, consisting primarily of Energy Systems and Government Operations,
are expected to be divested in 1998.
Financial results for 1997 and prior years include as Discontinued Operations
the Corporation's industrial businesses previously divested or expected to be
divested in 1998. For information about principal acquisitions, pending
acquisitions, and divestitures, see notes 1, 3, and 7 to the financial
statements included in Part II, Item 8 of this report.
Financial and other information by segment is included in note 19 to the
financial statements included in Part II, Item 8 of this report.
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BUSINESS SEGMENTS
Radio
The Radio Group owns and operates 76 AM and FM radio stations in 17 markets (New
York, Los Angeles, Chicago, San Francisco, Philadelphia, Detroit, Dallas-Ft.
Worth, Washington, D.C., Houston-Galveston, Boston, Atlanta, Minneapolis-St.
Paul, St. Louis, Baltimore, Pittsburgh, Tampa-St. Petersburg, and San Jose).
Sixty-three of the Corporation's radio stations are in the nation's ten largest
radio markets. Radio believes that its presence in large markets makes it
attractive to advertisers and that the overall diversity of its stations reduces
its dependence on any single station, local economy, or advertiser. The
Corporation's stations serve diverse target demographics through a broad range
of programming formats such as rock, oldies, news/talk, adult contemporary,
sports/talk, and country, and include leading franchises in news, sports, and
personality programming. Upon completing the American Radio acquisition, the
Radio Group will own and operate approximately 175 radio stations, subject to
any required divestitures. The Corporation also has a minority equity investment
in Westwood One, which it manages. Westwood One, a leader in producing and
distributing syndicated and network radio programming, manages the CBS Radio
Network.
The Corporation also participates in the outdoor advertising business through
its wholly owned subsidiary, TDI Worldwide, Inc. (TDI). TDI is based in New York
with 20 branch offices throughout the United States, United Kingdom, Republic of
Ireland, and Northern Ireland. TDI is one of the largest outdoor advertising
companies in the United States, operating some 100 franchises, the majority of
which are in large metropolitan areas (including New York, Los Angeles, Atlanta,
Washington, D.C., Philadelphia, Chicago, San Francisco, Minneapolis, and
Phoenix). TDI sells space on various media including buses, trains, train
platforms and terminals throughout commuter rail systems, and on painted
billboards, thirty-sheet billboards, and phone kiosks. TDI also has the
franchise to manage advertising space within the London Underground and certain
London buses and has the exclusive rights to transit advertising in the Republic
of Ireland and Northern Ireland.
Television Stations
The 14 owned and operated television stations are located in seven of the
nation's ten largest markets, and 11 of the nation's top 20 markets, reaching
approximately 32% of all U.S. television households. The CBS owned stations are:
WCBS-TV New York, KCBS-TV Los Angeles, WBBM-TV Chicago, WCCO-TV Minneapolis,
WFRV-TV Green Bay, WWJ-TV Detroit, WJZ-TV Baltimore, WBZ-TV Boston, KCNC-TV
Denver, WFOR-TV Miami, KYW-TV Philadelphia, KDKA-TV Pittsburgh, KUTV-TV Salt
Lake City, and KPIX-TV San Francisco. The stations produce news and broadcast
public affairs and other programming to serve their local markets.
Television Network
Through the Television Network, the Corporation 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 Television Network's domestic
affiliates include independently owned stations and the Corporation's 14 owned
and operated television stations. These affiliates serve, in the aggregate, all
50 states and the District of Columbia. The Television Network is responsible
for sales of advertising time for the CBS Television Network broadcasts and
related merchandising and sales promotion activities. It is also responsible for
managing the full range of ongoing activities and areas of mutual concern
between the television network and the independently owned affiliated stations.
CBS Entertainment produces and otherwise acquires and schedules entertainment
series and other programming (primetime comedy and drama series, motion pictures
made for television, mini-series, theatrical films, specials, and children's
programs) broadcast on the CBS Television Network. CBS News operates a worldwide
news gathering and production organization serving the CBS Television and Radio
Networks with regularly scheduled news and public affairs broadcasts, and
special reports. This unit also produces, for the CBS Television Network,
certain news-oriented programming for broadcast in the early morning daypart and
in designated hours during primetime. A unit of CBS News produces documentaries
for sale to other media outlets. CBS News maintains news bureaus in the United
States and abroad in addition to its headquarters in New York. CBS Sports
produces and otherwise acquires sports programs for broadcast by the CBS
Television Network, including the 1998 Olympic Winter Games from Nagano, Japan;
NCAA basketball, including the men's Final Four tournament; auto racing,
including the Daytona 500; golf, including the Masters(R) and PGA Championship;
the U.S. Open Tennis Championships; and college football. In January 1998, CBS
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entered into an agreement with the National Football League to broadcast
American Football Conference games beginning with the 1998 football season.
CBS Enterprises is active in the production, distribution, and marketing of
first-run and off-network programming to broadcast, cable, home video,
in-flight, and emerging media worldwide. EYEMARK Entertainment oversees domestic
syndication, while CBS Broadcast International is responsible for selling
programming internationally. The division also manages licensing and
merchandising opportunities, as well as video opportunities, for diverse
programming produced by EYEMARK Entertainment and CBS Productions.
CBS New Media is responsible for the Television Network's involvement with
evolving technologies, including the Internet on which the Corporation operates
two web services: CBS.com and Country.com. CBS.com, a co-branded
network-affiliate web site, was launched in February 1998 with more than 150
affiliates participating. The site can be customized and offers subscribing CBS
affiliates a variety of network provided national content, including up-to-date
information from CBS News, as well as sports, weather, business, life, and local
guides, all under the "banner" and branding of each affiliate's local market
identity. CBS.com is also the Television Network's marketing and promotional web
site. Country.com features the latest country lifestyle and entertainment news
and promotes TNN and CMT programming. Also part of CBS New Media are the
Corporation's minority investment in SportsLine USA, Inc. (which publishes
several sports web sites, including CBS.Sportsline.com) and its joint venture
with Data Broadcasting Corporation (which publishes CBS.Marketwatch.com).
Cable
The Cable Group owns and operates the Corporation's non-broadcast television
networks, including TNN, CMT, Eye on People, TeleNoticias, and two regional
sports networks. These networks are distributed by cable television and other
multichannel technologies.
TNN is an advertiser-supported cable network featuring country lifestyle and
entertainment programming. The network serves approximately 70 million U.S.
homes. TNN's programming includes country music performances, interviews with
country music artists and personalities, specials, variety shows, talk shows,
news, and sports. TNN's weekend programming focuses on outdoor sports, such as
hunting, fishing, and motor sports, some of which, including a portion of the
NASCAR Winston Cup Series, is broadcast live.
CMT is an advertiser-supported, 24-hour cable network with a country music video
format. It reaches approximately 41 million U.S. homes.
Eye on People, launched in March 1997, is an entertainment and information
network focusing on people and personalities. The programming is produced by CBS
News and other CBS divisions as well as by outside producers.
TeleNoticias is a leading 24-hour Spanish-language cable network. TeleNoticias
is available in 22 countries and territories, primarily in Latin America.
In addition, the Cable Group owns and operates the Midwest Sports Channel, a
regional sports network in Minneapolis, and is a majority owner of Home Team
Sports, a regional sports network serving the mid-Atlantic states.
Also part of the Cable Group, Group W Network Services (GWNS) is a global
provider of satellite services to broadcast, cable, and corporate networks.
Based in Stamford, Connecticut, GWNS handles nearly 6,000 hours of television
programming each week, providing transmission and other technical services to
U.S. broadcast networks and many major cable networks, including A&E and the
Discovery Channel. GWNS also provides full production and post-production
services. In a joint venture with The Yellow River Network, GWNS operates Asia
Broadcast Centre in Singapore, a full-service television operations hub serving
the Asia-Pacific region.
COMPETITION
The broadcast environment is highly competitive. The Telecommunications Act of
1996 provides both new opportunities and potential new competition for CBS. By
deregulating station ownership limits, the Act has allowed the Corporation to
pursue strategic growth in its Radio and Television Station Groups.
Radio competes with other radio stations, other radio networks and suppliers of
radio programming, and other advertising media. Developments in radio technology
could affect competition in the radio marketplace. New radio technology, known
as digital audio broadcasting, can provide sound the quality of compact discs,
which is significantly
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higher than that now provided by radio stations and networks using analog
technology. The Corporation is participating in the development of digital audio
broadcasting.
The CBS Television Network, Television Stations, and the Cable Group compete for
audiences with other television networks, television stations, and cable
networks, as well as with other media, including satellite television services
and videocassettes. In recent years, broadcast television has seen total
audience viewership decline. In the sale of advertising time, the CBS Television
Network, Television Stations, and the Cable Group compete with other broadcast
networks, other television stations, other cable networks, and other advertising
media. The CBS Television Network, Television Stations, and the Cable Group also
compete with other video media for distribution rights to television
programming.
In addition, the CBS Television Network competes with other television networks
to secure affiliations with independently owned television stations in markets
across the country, which are necessary to ensure the effective distribution of
network programming to a nationwide audience. More than 95% of CBS affiliates
are under long-term agreements with the Television Network.
Current and future technological developments may affect competition within the
television marketplace. Developments in advanced digital technology may enable
competitors to provide high definition pictures and sound qualitatively superior
to what television stations now provide. Developing technology to compress
digital signals may also permit the same broadcast or cable channel or satellite
transponder to carry multiple video and data services, and could result in an
expanded field of competing services.
An extended conversion to digital television broadcasting has begun. Television
broadcasters will continue to operate their current stations while gradually
building and operating digital facilities concurrently on separate channels.
This transition is expected to continue well into the early 21st century because
new consumer appliances are required to receive and display these digital
signals.
In April 1997, the FCC adopted a schedule under which television stations must
build digital television transmission facilities and begin digital
transmissions. The schedule includes a provision for extensions of time for
certain unforeseeable or uncontrollable circumstances. Under that schedule, CBS
is required to build digital facilities by May 1, 1999 for the stations it owns
in seven of the ten largest television markets. Construction is required by
November 1, 1999 for CBS's five additional owned television stations in the 30
largest television markets. CBS's two owned television stations in markets below
the largest 30 must construct digital facilities by May 1, 2002. In addition,
CBS, as well as other major station group owners, have volunteered to the FCC to
make a good faith effort to construct digital facilities for some stations in
the ten largest markets on an accelerated basis by November 1, 1998. The CBS
markets currently planned for accelerated construction include New York, San
Francisco, Philadelphia, and Detroit.
All of the Corporation's television and radio stations operate under licenses
from the FCC, which is empowered by the Communications Act of 1934, as amended,
to, among other things, license and regulate television and radio broadcasting
stations. The FCC has authority to grant or renew broadcast licenses for a
maximum statutory term of eight years if it determines that the "public
convenience, interest, or necessity" will be served thereby. During a specified
period after an application for renewal of a broadcast station license has been
filed, persons objecting to the license renewal application may file petitions
to deny.
The FCC's approval of the Corporation's acquisition of Infinity contained a
number of temporary waivers of the FCC's television and radio cross-ownership
rules (the "One-to-a-Market" Rule). These waivers were granted subject to the
outcome of the pending ownership rulemaking in which certain deregulation of the
"One-to-a-Market" Rule has been proposed. In the event that any station
divestitures are required at the conclusion of this rulemaking, the Corporation
would be required to file applications with the FCC for consent to the necessary
divestitures within six months of the rulemaking order. The FCC orders approving
both the CBS Inc. and Infinity acquisitions are subject to judicial appeals by
certain third parties. The FCC has previously rejected the positions of these
third parties, and the Corporation believes that such appeals are without merit.
DISCONTINUED OPERATIONS
Discontinued Operations currently consists of the Power Generation, Energy
Systems, and Government Operations operating units which are described below.
Discontinued Operations also consists of the remaining operations of the
Communication & Information Systems Company (CISCO), the environmental services
business, and the leasing
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portfolio from the Financial Services business. See note 7 to the financial
statements included in Part II, Item 8 of this report. All of the businesses in
Discontinued Operations are expected to be divested in 1998, except for the
leasing portfolio which will liquidate in accordance with its contractual terms.
Power Generation 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. This unit also constructs turnkey power
plants worldwide. In addition to serving the electric utility industry, Power
Generation supplies, services, and operates power plants for independent power
producers and supplies power generation equipment and services to other
non-utility customers. On November 14, 1997, the Corporation entered into an
agreement with a subsidiary of Siemens A.G. to sell its Power Generation
business.
Energy Systems serves the domestic and international electric power industry by
supplying fuel and other products and services to owners and operators of
nuclear power plants. The unit supplies operating plant services ranging from
performance-based maintenance programs, including operations 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. Energy Systems is marketing new nuclear power plants
and components to the worldwide market. It is also working with government
agencies to develop a simplified nuclear power plant design that incorporates
passive safety systems. The Process Control Division of Energy Systems provides
distributed control, communications, data acquisition, and information systems
to domestic and international nuclear and fossil-fueled electric utilities, and
to chemical processors, water and waste water treatment facilities, and the
steel industry.
Government Operations provides management services for: (1) certain
government-owned facilities under contracts with the Department of Energy in the
areas of waste management, environmental cleanup, and the safe management of the
nation's nuclear materials inventory; (2) the nuclear reactors programs for the
U.S. Navy; and (3) a chemical agent and weapons destruction program for the
Department of Defense. It also manufactures nuclear waste storage containers.
TRADEMARKS AND PATENTS
CBS has a worldwide trademark portfolio that it considers important in the
marketing of its products and services, including, among others, the trademarks
"CBS," "WESTINGHOUSE," the CBS "Eye" logo, and the "CIRCLE W" logo. CBS believes
that its rights in these trademarks are adequately protected and of unlimited
duration.
CBS owns or is licensed under a large number of patents and patent applications
(primarily related to its industrial businesses which are classified as
Discontinued Operations) in the United States and other countries that, taken
together, are of material importance to the industrial businesses. Such patent
rights are, in the judgment of CBS, adequate for the conduct of these
businesses. No patents that CBS considers material to the industrial businesses
as a whole will expire within the next five years.
ENVIRONMENTAL MATTERS
Information with respect to Environmental Matters is incorporated herein by
reference to Management's Discussion and Analysis--Environmental Matters
included in Part II, Item 7 and in note 12 to the financial statements included
in Part II, Item 8 of this report.
RESEARCH AND DEVELOPMENT
The Corporation's Continuing Operations do not engage in any material research
and development activities.
EMPLOYEE RELATIONS
During 1997, the Corporation employed an average of 51,444 people, of whom
46,113 were located in the United States. During the same period, 6,153 domestic
employees were represented in collective bargaining by 24 labor organizations.
The 1997 average number of employees includes 37,863 employees employed by
businesses classified as Discontinued Operations.
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ITEM 2. PROPERTIES.
The Corporation's corporate headquarters is located at 51 West 52nd Street, New
York, New York, where the Corporation currently owns approximately 900,000
square feet of floor space, primarily utilized for executive and certain
operating division offices. The majority of other properties used by the media
businesses consist of both owned and leased office space, studio facilities,
transmitter equipment, and antenna sites throughout the United States and in 14
countries around the world. As of December 31, 1997, the Corporation's
Continuing Operations owned or leased 438 U.S. properties totaling 6,455,000
square feet of floor area and 37 foreign locations totaling 109,000 square feet.
Domestic locations of Continuing Operations comprised approximately 98% of the
total space. Leased facilities in the United States accounted for approximately
33% of the total space occupied by Continuing Operations, while facilities
leased in foreign countries accounted for approximately 2% of the total space
occupied by Continuing Operations. No individual lease was material. The
physical properties described above are adequate and suitable, with an
appropriate level of utilization, for the conduct of its business in the future.
At December 31, 1997, the Corporation's Discontinued Operations owned or leased
255 locations totaling 17,127,000 square feet of floor area within the United
States and 108 locations totaling 2,608,000 square feet in 27 foreign countries.
Domestic operations of Discontinued Operations accounted for approximately 87%
of the total space occupied by Discontinued Operations. Leased facilities in the
United States accounted for approximately 24% of the total space occupied by
Discontinued Operations, while facilities leased in foreign countries accounted
for approximately 3% of the total space occupied by Discontinued Operations. No
individual lease was material. A number of manufacturing plants and other
facilities formerly used in operations are either vacant, partially utilized, or
leased to others. All of these facilities are expected to be sold.
ITEM 3. LEGAL PROCEEDINGS.
(a) On February 27, 1996, suit was brought against the Corporation in the United
States District Court (USDC) for the District of New Jersey by Public Service
Electric & Gas Company, PECO Energy Company, Atlantic City Electric Company, and
Delaware Power & Light Company, the owners of the Salem Generating Station. The
suit alleges counts under the Racketeer Influenced and Corrupt Organization Act
(RICO) for fraud, negligent misrepresentation, and breach of contract in
connection with the Corporation's supply of steam generators and for service
orders in 1993 and 1995 related to these steam generators. The parties are
currently engaged in discovery.
The Corporation is also a party to five tolling agreements with utility owners
that have asserted steam generator claims. See note 12 to the financial
statements included in Part II, Item 8 of this report.
(b) In August 1988, the Pennsylvania Department of Environmental Resources
(PDER) filed a complaint against the Corporation alleging violations of the
Pennsylvania Clean Streams Law at the Corporation's Gettysburg, Pennsylvania,
elevator plant. PDER requested that the Environmental Hearing Board assess a
penalty in the amount of $9 million. The Corporation denied these allegations.
The parties completed discovery, and a portion of the hearing on the complaint
began in 1991. The hearing resumed in 1992 and concluded in February 1993. In
November 1996, the Board assessed a civil penalty of approximately $5.5 million.
The Corporation appealed the Board's decision to the Commonwealth Court. On
January 2, 1998, the Commonwealth Court upheld the Board's findings with respect
to violations of the Pennsylvania Clean Streams Law but not with respect to the
amount of the penalty assessed. The Commonwealth Court returned the matter to
the Board for a reassessment of the penalty. The Corporation has filed an
application for a rehearing before the Commonwealth Court.
(c) The Corporation has been defending, in the USDC for the Western District of
Pennsylvania (the District Court), consolidated class and derivative actions and
an individual lawsuit brought by shareholders against the Corporation,
Westinghouse Financial Services, Inc. (WFSI) and Westinghouse Credit Corporation
(WCC), previously subsidiaries of the Corporation, and/or certain present and
former directors and officers of the Corporation, as well as other unrelated
parties. Together, these actions allege various federal securities law and
common law violations arising out of alleged misstatements or omissions
contained in the Corporation's public filings concerning the financial condition
of the Corporation, WFSI, and WCC in connection with a $975 million charge to
earnings announced on February 27, 1991, a public offering of the Corporation's
common stock in May 1991, a $1,680 million charge to earnings announced on
October 7, 1991, and alleged misrepresentations regarding the adequacy of
internal controls at the Corporation, WFSI, and WCC. In July 1993, the court
dismissed in its entirety the derivative claim and dismissed most of the class
action claims with leave to replead certain claims in both actions. Both actions
were subsequently repled. On January 20,
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1995, the District Court again dismissed the derivative complaint in its
entirety. On February 8, 1995, this dismissal was appealed. Also on January 20,
1995, the court dismissed the class action claims but granted plaintiffs the
right to replead certain of the claims. Plaintiffs in the class action did not
replead the claims, and on February 28, 1995, the court dismissed these claims
in their entirety. Plaintiffs in both the derivative and class action suits
appealed the rulings and dismissals of their claims by the District Court to the
United States Court of Appeals for the Third Circuit (Court of Appeals). In July
1996, the Court of Appeals affirmed in part and reversed in part the class
action claims. Pursuant to this ruling, the class action claims have been
remanded to the District Court where the plaintiffs will proceed with their
surviving claims. The parties in the class action case are currently engaged in
discovery. In the derivative action, the Court of Appeals affirmed the dismissal
of this action by the District Court.
In 1997, two duplicative class action suits were brought against the Corporation
in the District Court. These cases allege similar facts and include the same
defendants as in the previous class action complaint filed in the District
Court. In November 1997, the District Court dismissed both of these actions.
(d) The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries, which allegedly occurred from use or
inclusion of asbestos in certain of the Corporation's products supplied by its
industrial businesses, generally in the pre-1970 time period. Typically, these
lawsuits are brought against multiple defendants. The Corporation was neither a
manufacturer nor a producer of asbestos and is oftentimes dismissed from these
lawsuits on the basis that the Corporation has no relationship to the products
in question or the claimant was not exposed to the Corporation's products. At
December 31, 1997, the Corporation had approximately 115,700 claims outstanding
against it. In court actions that have been resolved, the Corporation has
prevailed in the vast majority of the asbestos claims and has resolved others
through settlement. Furthermore, the Corporation has brought suit against
certain of its insurance carriers with respect to these asbestos claims. Under
the terms of a settlement agreement resulting from this suit, carriers that have
agreed to the settlement are now reimbursing the Corporation for a substantial
portion of its current costs and settlements associated with asbestos claims.
A number of the asbestos-related cases pending against the Corporation,
including those in Louisiana, Pennsylvania, and West Virginia, are consolidated
or purported class action cases. In consolidated cases, the claims of a group of
plaintiffs are tried together, and oftentimes limited findings with respect to
common issues of fact and punitive damages are decided with respect to a
representative grouping of plaintiffs and then applied to other individuals in
the group. However, for the Corporation to be liable for damages to any
particular claimant, that individual claimant must prove that he developed an
asbestos-related disease, that he was exposed to a product manufactured or
supplied by the Corporation, and that this exposure was a substantial factor in
the development of the disease.
(e) In January 1997, Innovative Business Systems (Overseas) Ltd. and Innovative
Business Software, Inc. (collectively, Innovative) brought suit against the
Corporation and others in the Judicial District Court, Dallas County, Texas. The
suit alleges that in connection with the sale by the Corporation of its
residential security business on December 31, 1996 the Corporation wrongfully
transferred software to the buyers of that business. Innovative has filed four
amended complaints against the Corporation; and the latest amended complaint,
filed in the fourth quarter of 1997, seeks money damages, specific performance,
and injunctive relief against the Corporation for alleged violations by the
Corporation relating to software license agreements between the parties.
Innovative seeks monetary damages in an amount of $425 million, punitive
damages, and attorney's fees. The Corporation has denied the allegations,
believes the allegations to be without merit, and has filed a counterclaim
against Innovative and others based upon fraud, breach of contract, and tortious
interference with a business relationship. Unless continued, trial of this case
is scheduled for June 1, 1998.
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in certain of the foregoing matters and although management
believes a significant adverse judgment is unlikely, any such judgment could
have a material adverse effect on the Corporation's results of operations for a
quarter or a year. However, based on its understanding and evaluation of the
relevant facts and circumstances, management believes that the Corporation has
meritorious defenses to the litigation described in items (a) through (e) above,
and that the Corporation has adequately provided for costs arising from
potential settlement of these matters when in the best interest of the
Corporation. Management believes that the litigation should not have a material
adverse effect on the financial condition of the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None during the fourth quarter of 1997.
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EXECUTIVE OFFICERS
The names, ages, offices, and positions held during the past five years by each
of the executive officers of the Corporation as of February 14, 1998 are listed
below. Officers are elected annually. There are no family relationships among
any of the executive officers of the Corporation.
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AGE AT
FEBRUARY 14,
NAME, OFFICES, AND POSITIONS 1998
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<S> <C>
Michael H. Jordan--Chairman and Chief Executive Officer 61
since June 1993; Partner with Clayton, Dubilier & Rice,
Inc. from September 1992 to June 1993.
Louis J. Briskman--Senior Vice President and General Counsel 49
since January 1994; Senior Vice President, Secretary and
General Counsel from January 1993 to January 1994.
Mel Karmazin--Chairman and Chief Executive Officer of CBS 54
Station Group since May 1997; Chairman and Chief Executive
Officer of CBS Radio from December 1996 to May 1997;
President and Chief Executive Officer, Infinity
Broadcasting Corporation from 1981 to December 1996.
Leslie Moonves--President, CBS Television since August 1997; 48
President, CBS Entertainment Division from May 1995 to
August 1997; President, Warner Bros. Television from July
1993 to May 1995; President, Lorimar Television from 1989
to 1993.
Charles W. Pryor, Jr.--President and Chief Executive Officer 53
of Westinghouse Electric Company since November 1997;
President, Energy Systems from March 5, 1997 to November
1997; management consultant from the end of 1995 to March
1997; President and Chief Executive Officer of B&W Nuclear
Technologies (which became a subsidiary of Framatome, S.A.
in 1993) from 1991 to the end of 1995.
Fredric G. Reynolds--Executive Vice President and Chief 47
Financial Officer since March 1994; Senior Vice President,
Finance, and Chief Financial Officer, PepsiCo
International Foods from December 1990 to March 1994.
Carol V. Savage--Vice President and Chief Accounting Officer 47
since July 1996; Director, Corporate Reporting and
Policies from October 1994 to July 1996; Controller,
Nuclear and Advanced Technology Division, Energy Systems
from June 1992 to October 1994.
Randy H. Zwirn--President, Power Generation since December 44
1996; Executive Vice President and Chief Operating Officer
of Power Generation from January 1996 to December 1996;
General Manager, Power Generation Systems Division from
1994 to January 1996; General Manager, Power Generation
Projects Division from 1990 to 1994.
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</TABLE>
CBS CORPORATION
9
<PAGE> 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal markets for the Corporation's common stock are identified on page
1 of this report. The remaining information required by this item appears on
page 51 of this report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item appears on pages 50 and 51 of this report
and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item appears on pages 11 through 22 of this
report and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item, together with the reports of KPMG Peat
Marwick LLP dated January 28, 1998 and Price Waterhouse LLP dated February 12,
1996, except for the restatements discussed in notes 1 and 7, for which the
dates are March 31, 1996, November 13, 1996, and September 30, 1997, appears on
pages 23 through 51 of this report and is incorporated herein by reference.
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Report of Management 23
Reports of Independent Auditors and Accountants 24
Consolidated Statement of Income for each of the three years
in the period ended December 31, 1997 26
Consolidated Balance Sheet at December 31, 1997 and 1996 27
Consolidated Statement of Cash Flows for each of the three
years in the period ended December 31, 1997 28
Consolidated Statement of Shareholders' Equity for each of
the three years in the period ended December 31, 1997 29
Notes to the Financial Statements 30
Quarterly Financial Information (unaudited) 50
Five-Year Summary of Selected Financial and Statistical Data
(unaudited) 51
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</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There were no reportable events.
CBS CORPORATION
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
During 1997, CBS Corporation completed several strategic actions providing the
foundation for its future growth as a media company and culminating in the
announcement to sell its remaining industrial businesses. In December 1997, the
Corporation changed its name from Westinghouse Electric Corporation to CBS
Corporation recognizing that it was nearing completion of its transformation to
a pure media company.
The Corporation completed the acquisition of Gaylord Entertainment Company's two
major cable networks: The Nashville Network (TNN) and Country Music Television
(CMT) on September 30, 1997. The acquisition included domestic and international
operations of TNN, the U.S. and Canadian operations of CMT, and approximately
$50 million of working capital. The total purchase price of $1.55 billion was
paid through the issuance of 59 million shares of common stock.
On September 19, 1997, the Corporation announced that it had reached a
definitive agreement to acquire the radio broadcasting operations of American
Radio Systems Corporation (American Radio) for $1.6 billion of cash plus the
assumption of approximately $1 billion of debt. The transaction, which is
expected to close in the second quarter of 1998, will add approximately 100
radio stations, subject to any required divestitures, to the Radio Group's
current portfolio of 76 stations.
In November 1996, the Corporation's Board of Directors conditionally approved a
plan for a strategic restructuring whereby the Corporation would separate its
media and industrial businesses. Considerable progress was made in 1997 toward
achieving that goal by way of a tax-free dividend to shareholders forming a new
publicly traded company to be called Westinghouse Electric Company (WELCO). A
registration statement for WELCO, which included all of the Corporation's
industrial businesses except Thermo King Corporation (Thermo King), its
transport temperature control business, was filed with the Securities and
Exchange Commission in August 1997.
In September 1997, the Corporation reached a definitive agreement to sell Thermo
King for cash proceeds of $2.56 billion. The assets and liabilities and the
results of operations for Thermo King and for WELCO as presented in the
registration statement were reclassified as Discontinued Operations except for
certain liabilities expected to be retained by the Corporation. See notes 7 and
12 to the financial statements.
However, in light of consolidation in the power industry, the Corporation
considered offers by various parties to acquire certain of the industrial
businesses. On November 14, 1997, the Corporation announced a definitive
agreement to sell Power Generation, the largest component of WELCO, for cash
proceeds of $1.525 billion. The sale of Power Generation is expected to be
completed in mid-1998. The remaining industrial businesses, consisting primarily
of Energy Systems and Government Operations, are expected to be divested in
1998. The sale of Thermo King was completed on October 31, 1997, and the
proceeds were used to repay debt of Continuing Operations. In connection with
the divestiture of Thermo King, the planned divestiture of WELCO, and the review
of prior disposal plans, the Corporation recognized a combined after-tax gain of
$871 million in the fourth quarter of 1997.
With the sale of Thermo King, the definitive agreement for the sale of Power
Generation, and the decision to sell the remaining industrial businesses, the
Corporation was rapidly approaching its goal of becoming a pure media company.
In recognition of this accomplishment, effective December 1, 1997, the
Corporation's name was changed from Westinghouse Electric Corporation to CBS
Corporation. Furthermore, the Corporation announced that it was moving its
corporate headquarters from Pittsburgh to New York. A restructuring charge of
$15 million was recognized in the fourth quarter of 1997 for severance benefits
associated with reductions in the overhead functions at the former Pittsburgh
headquarters.
The 1997 performance for the Corporation's media businesses generally was
strong. The Radio Group reported double-digit growth in revenues and earnings
before interest, taxes, depreciation, and amortization (EBITDA) for the year,
even after adjusting for the December 31, 1996 acquisition of Infinity
Broadcasting Corporation (Infinity). The Television Group reported improved
results in 1997 and began building momentum in the second half of the year. The
Network's earnings, although lower for the year, showed improvement as the year
progressed. The Corporation's two new cable networks, TNN and CMT, began making
a strong contribution to earnings immediately after joining the Corporation.
On January 13, 1998, the Corporation and the National Football League (NFL)
announced that CBS was awarded the rights to broadcast American Football
Conference games. The eight-year agreement, subject to rebid at the end of five
years at the discretion of the NFL, will cost approximately $4 billion. The
contract
CBS CORPORATION
11
<PAGE> 12
begins with the 1998 football season and includes two Super Bowls.
On February 4, 1998, the Corporation announced that its Board of Directors
authorized the purchase, through open market transactions, of up to $1 billion
of its common stock. At the same time, the Corporation announced that it would
suspend dividend payments on its common stock after payment of the March 1, 1998
dividend so that the cash could be used to better enhance shareholder value.
Information Relating to Forward-Looking Statements
This Annual Report on Form 10-K, including Item 7--"Management's Discussion and
Analysis of Financial Condition and Results of Operations," contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, that are not historical facts but rather reflect the Corporation's
current expectations concerning future results and events. The words "believes,"
"expects," "intends," "plans," "anticipates," "likely," "will," and similar
expressions identify such forward-looking statements. These forward-looking
statements are subject to risks, uncertainties, and other factors, some of which
are beyond the Corporation's control, that could cause actual results to differ
materially from those forecast or anticipated in such forward-looking
statements.
Such risks, uncertainties, and factors include, but are not limited to: the
Corporation's ability to develop and/or acquire television programming and to
attract and retain advertisers; the impact of significant competition from both
over-the-air broadcast stations and programming alternatives such as cable
television, wireless cable, in-home satellite distribution services, and
pay-per-view and home video entertainment services; the Corporation's ability to
complete its transition from a multi-faceted industrial conglomerate to a pure
media company in a timely and cost-effective manner; the impact of new
technologies; changes in Federal Communications Commission regulations; and such
other competitive and business risks as from time to time may be detailed in the
Corporation's Securities and Exchange Commission reports.
Readers are cautioned not to place undue reliance on these forward-looking
statements which reflect management's view only as of the date of this Annual
Report. The Corporation undertakes no obligation to publicly release the result
of any revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
CONSOLIDATED OPERATING RESULTS
The Corporation reported net income for 1997 of $549 million, or $.84 per share,
compared to $95 million, or $.12 per share, for 1996. In 1995, the Corporation
lost $10 million, or $.25 per share. Net income includes results from Continuing
Operations, Discontinued Operations, and, in 1996, an extraordinary loss on
early extinguishment of debt, as presented below:
COMPONENTS OF NET INCOME (LOSS)
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) from Continuing
Operations $(131) $(221) $ 47
Income (loss) from Discontinued
Operations 680 409 (57)
Extraordinary loss -- (93) --
- -------------------------------------------------------------------------
Net income (loss) $ 549 $ 95 $(10)
- -------------------------------------------------------------------------
</TABLE>
Despite generally strong performance by the media businesses, the Corporation
reported a loss from Continuing Operations in both of the last two years. Two
primary factors more than offset the profit from the businesses: interest
expense and residual costs of discontinued businesses. Interest costs
approximated $400 million in both 1997 and 1996. This expense level, which is
approximately double the 1995 amount, reflects higher debt following the
late-1995 acquisition of CBS Inc. Residual costs of discontinued businesses of
$143 million in 1997 and $114 million in 1996 represent primarily pension and
postretirement benefit costs for inactive and retired employees of businesses
that the Corporation previously divested, including the defense and electronic
systems business divested in early 1996. The residual costs in 1995 were
substantially lower.
Included in results of Continuing Operations were restructuring costs of $15
million in 1997, $57 million in 1996, and $25 million in 1995. A charge of $28
million related to litigation matters also was included in 1996 results.
The results of Discontinued Operations include the operating results of the
industrial businesses prior to the measurement date of the disposal plan, as
well as the estimated gain or loss from disposal of those businesses. In 1997,
the Corporation recorded a net gain of $871 million, primarily from the sale of
Thermo King, and, in 1996, a net gain of $1,018 million, primarily from the sale
of the defense and electronic systems business. A net loss of $76 million was
recognized in 1995 from the disposal of the land development segment.
CBS CORPORATION
12
<PAGE> 13
SEGMENT RESULTS OF OPERATIONS--CONTINUING OPERATIONS
The following table presents the segment results for the Corporation's
Continuing Operations, which consist of the media businesses, for each of the
years ended December 31, 1997, 1996, and 1995.
EBITDA is presented in the following table because it is a widely accepted
financial indicator of a company's ability to incur and service debt. It is
commonly used in the media industry as a surrogate for cash flows. EBITDA
differs from operating cash flows for the Corporation primarily because it does
not consider changes in assets and liabilities from period to period and certain
other factors.
SEGMENT RESULTS OF OPERATIONS--CONTINUING OPERATIONS
(in millions)
<TABLE>
<CAPTION>
REVENUES OPERATING PROFIT (LOSS) EBITDA
------------------------ ------------------------ ---------------------
YEAR ENDED DECEMBER 31, 1997 1996 1995 1997 1996 1995 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Radio $1,475 $ 554 $ 216 $ 390 $ 161 $ 55 $ 575 $ 197 $ 70
Television 836 809 405 325 295 149 370 352 168
Network 2,816 2,617 252 (107) (9) (18) (31) 65 6
Cable 302 191 143 10 40 40 73 50 48
Corporate and other (66) (28) 58 (226) (319) (29) (72) (162) 114
Residual costs of discontinued
businesses -- -- -- (143) (114) (37) (143) (114) (37)
- -------------------------------------------------------------------------------------------------------------------------------
Total Continuing Operations $5,363 $4,143 $1,074 $ 249 $ 54 $ 160 $ 772 $ 388 $ 369
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Revenues of the Corporation's Continuing Operations increased $1,220 million in
1997 compared to 1996 and increased $3,069 million in 1996 compared to 1995
primarily due to the acquisitions of TNN and CMT, Infinity, and CBS Inc. After
adjusting for the effects of these acquisitions, revenues increased 10% in 1997.
Operating profit and EBITDA improved dramatically in 1997 reflecting the
additional radio stations acquired with Infinity as well as the strong
performance from the Radio and Television Groups. Operating profit for 1996,
which declined from 1995, included approximately $120 million of goodwill
amortization from the November 1995 acquisition of CBS Inc., $85 million for
charges related to restructuring and litigation matters, and higher residual
costs of discontinued businesses.
As reflected in the table above, results for Continuing Operations have been
unfavorably affected by residual costs of discontinued businesses. These costs
primarily represent pension and postretirement benefit costs for inactive and
retired employees of previously divested businesses. Although the Corporation's
objective is to reduce this earnings constraint over the next few years by fully
funding the pension plan, management expects that these costs will continue to
negatively affect operating results in 1998 and future years.
The reported results for each of the segments include depreciation and
amortization of specifically identifiable assets based on their fair values when
acquired. Amortization of goodwill arising from the CBS Inc. acquisition, which
approximates $120 million per year, is included in the results of Corporate and
other. Where appropriate, the separate business discussions that follow provide
a comparison of the actual 1997 results with the pro forma results for 1996 and
1995 determined by adjusting prior-period amounts for recent acquisitions.
Radio
The Radio Group owns and operates 76 radio stations and TDI Worldwide, Inc.
(TDI), its outdoor advertising business. Revenues and operating profit, as
reported, increased dramatically in 1997. This growth was primarily driven by
the inclusion of the results of operations for Infinity, which was acquired on
December 31, 1996, and the overall strong performance across the Radio Group.
On a pro forma basis, 1997 revenues for the Radio Group continued to outpace the
industry, increasing 20% over 1996. These results reflect strong markets for
radio and outdoor advertising combined with management's continued focus on
improving revenue growth. On a pro forma basis, revenues grew 11% for 1996
compared to 1995.
Pro forma operating profit increased at a greater rate than revenues resulting
in improved profit of 27% for 1997. Higher revenues from the strong demand for
advertising, combined with management's continued cost control efforts, drove
the increased profit. On a pro forma basis, operating profit increased 51% for
1996 compared to 1995 also reflecting increased revenues and cost control.
Pro forma EBITDA for the Radio Group increased 29% for 1997. This increase
exceeds the increase in operating profit because it eliminates the amortization
of goodwill
CBS CORPORATION
13
<PAGE> 14
arising from the Infinity acquisition. On a pro forma basis, EBITDA increased
49% for 1996 compared to 1995.
Television
The Television Group owns and operates 14 television stations. Television
station revenues rebounded during the second half of 1997 resulting in a 3%
increase over the prior year. The Television Group's revenues were up 13% in the
second half of 1997 despite facing difficult comparisons from significant
political advertising spending in the second half of 1996. The strong second
half was attributable to broad-based improvements across the television
stations. The Television Group also continued to benefit from the momentum of
strong advertising markets and a renewed focus on revenue growth. These strong
results offset the declines during the first half of 1997, which were
attributable to lower ratings in certain major markets. On a pro forma basis,
revenues for the television stations fell slightly in 1996 compared to 1995 due
to lower ratings and affiliation changes at certain stations.
Improvements in operating profit for 1997 significantly outpaced the revenue
growth resulting in a profit increase of $30 million or 10%. The strength in the
Television Group's performance reflects management's revenue focus as well as
the positive impact of ongoing cost reduction initiatives. Operating profit on a
pro forma basis declined slightly in 1996 compared to 1995 reflecting the lower
revenues, although cost improvements at the stations partially offset that
impact.
Consistent with operating profit performance, EBITDA for the Television Group
increased $18 million or 5% for the year ended December 31, 1997. On a pro forma
basis, EBITDA for the television stations remained flat in 1996 compared to
1995.
Network
The Network segment consists of CBS Entertainment, News, and Sports, as well as
CBS Enterprises (including EYEMARK Entertainment), which produces and
distributes programming and develops and sells certain syndicated programming.
The Network reported an increase in revenues of $199 million, or 8%, for the
year. The 1997 results reflect increased program syndication revenues, as well
as additional revenues generated by special programs such as the Emmy Awards.
While pricing was generally higher, declines in ratings on certain dayparts
partially offset these improvements. The Network, on a pro forma
basis, experienced a 3% increase in revenues in 1996 compared to 1995. Higher
advertising rates, revenues from the addition of college football, and increased
syndication revenues were the primary factors driving the 1996 increase.
The Network operating loss increased $98 million for the year ended December 31,
1997 resulting primarily from higher programming costs and lower audience levels
in key demographic categories. Furthermore, results for 1997 were significantly
less favorably affected by purchase accounting adjustments related to program
rights acquired in the purchase of CBS Inc. as discussed below. The Network
operating profit in 1996 compared to 1995 on a pro forma basis increased 57%
reflecting the favorable effects of higher prices and increased syndication
revenues, partially offset by lower demographic ratings and higher costs
associated with the coverage of the presidential election, advertising and
promotion for the new primetime season, programming, and affiliate compensation.
In addition, operating profit included the favorable effect of purchase
accounting adjustments related to program rights totaling $42 million in 1997,
$131 million in 1996, and $24 million in 1995.
EBITDA for the network decreased $96 million for 1997, which is consistent with
the decline in operating profit. EBITDA on a pro forma basis for the network
increased 55% in 1996 compared to 1995.
Cable
The Cable Group includes TNN and CMT, two cable networks acquired September 30,
1997; TeleNoticias, a 24-hour, Spanish-language news service acquired in 1996;
Eye on People, which debuted March 31, 1997; two sports programming providers;
and a network services provider. Prior to the acquisition of TNN and CMT, Cable
received a commission to provide marketing and advertising services to those
networks. In addition, the Corporation owned a 33% interest in CMT. Effective
October 1, 1997, the results of these networks are included in full.
Revenues for Cable increased $111 million, or 58%, compared to 1996. These
increases were primarily attributable to the acquisitions of TNN, CMT, and
TeleNoticias. In the first three quarters of 1997, prior to the acquisition of
TNN and CMT, Cable received higher commissions than in the prior year, generated
by increased sales levels achieved by TNN. In addition, Cable received increased
cable license fees generated by the sports programming providers. Cable revenues
for 1996 compared to 1995 increased $48 million, or 34%, as a result of certain
cable channel and network services acquired, increased advertising revenues, and
the acquisition of TeleNoticias.
Operating profit decreased $30 million for 1997, which was attributable to
increased expenses related to TeleNoticias and costs to develop and launch Eye
on People. Operating profit for 1996 compared to 1995 was flat.
CBS CORPORATION
14
<PAGE> 15
EBITDA increased $23 million to $73 million for the year, driven by the
inclusion of TNN and CMT during the fourth quarter and a gain on the sale of a
partnership interest. Partially offsetting these improvements were increased
expenses and startup costs related to TeleNoticias and Eye on People. EBITDA for
1996 compared to 1995 remained flat.
Corporate and Other
Corporate and other consists of three primary components: (i) corporate overhead
costs; (ii) amortization of goodwill arising from the November 1995 acquisition
of CBS Inc., which approximates $120 million per year; and (iii) special charges
relating to restructuring and other matters. In 1996, the Corporation recognized
a provision of $28 million related to litigation matters. In addition, costs for
restructuring plans initiated in 1997, 1996, and 1995 totaled $15 million, $57
million, and $25 million, respectively. These restructuring actions resulted in
a 20% decline in corporate overhead costs from 1996 to 1997. The decision to
transfer the corporate overhead functions from Pittsburgh to New York could
result in the recognition of higher overhead costs in 1998 as a result of
certain transition costs.
Residual Costs of Discontinued Businesses
Following past divestitures of the Corporation's industrial businesses, certain
liabilities arising from those businesses remained with the Corporation,
including pension and postretirement benefit obligations for inactive and
retired employees, environmental liabilities, and litigation-related
liabilities. The pension and postretirement benefit costs associated with these
former employees, as well as administration costs associated with retained
liabilities, have been presented separately in the income statement. For 1997
and 1996, these costs primarily reflect pension and postretirement benefit costs
for retirees of the defense and electronic systems business, which was sold in
the first quarter of 1996. Following the sale of Power Generation, these costs
will increase approximately $8 million per quarter.
RESTRUCTURING AND OTHER ACTIONS
The Corporation is committed to strengthening its businesses and improving its
profitability through restructuring actions ranging from changes in business
strategies to downsizing for process reengineering and productivity
improvements. To the extent possible, the Corporation is committed to reducing
its workforce through normal attrition. See note 17 to the financial statements.
During the last three years, the Corporation has undertaken restructuring
programs primarily at its corporate headquarters. Restructuring actions for
Continuing Operations have resulted in the recognition of restructuring costs
totaling $15 million in 1997, $57 million in 1996, and $25 million in 1995.
The 1997 plan involves workforce reductions related to corporate overhead
functions performed in Pittsburgh. These overhead functions are being
transferred to New York and generally will require increased staffing levels at
that office. As a result, no material cost savings are expected from this plan.
Implementation began in January 1998 with completion generally expected in early
1999.
The 1996 plan included $41 million of costs for the Corporation's actions, as
the acquiror of CBS Inc., to obtain operational synergies between the two
companies. Costs included $9 million for the separation of employees, $15
million for asset writedowns, and $17 million for lease termination and other
facility closure costs. Also in 1996, the Corporation reduced staffing levels at
its corporate headquarters in Pittsburgh resulting in separation costs of $16
million. The 1995 plan also involved the separation of employees at its
corporate headquarters, with separation costs totaling $25 million. At December
31, 1997, remaining expenditures for the 1996 and 1995 plans totaled $14
million. Annualized cost savings from these plans, which approximated $20
million for the 1996 plan and $12 million for the 1995 plan, generally were
realized in 1997.
Results of operations for the Corporation's Discontinued Operations included
restructuring actions, principally for the Power Generation and Energy Systems
businesses of WELCO. These actions involved the separation of employees and the
exiting of various product lines and closure of facilities. The restructuring
liability at December 31, 1997 either will be paid prior to divestiture of these
businesses or will be assumed by buyers.
In connection with the CBS Inc. acquisition, a plan was developed to integrate
the CBS Inc. headquarters and radio and television operations with those of the
Corporation. The estimated cost for restructuring the CBS Inc. organization,
including separating employees and closing facilities, was $100 million, the
majority of which was spent as of year-end 1997. Restructuring costs associated
with the integration of the acquiror are included in the Corporation's 1996
restructuring plan discussed previously. No significant restructuring costs were
incurred for the TNN and CMT or Infinity acquisitions.
Cost reduction initiatives are undertaken when the expected benefits are
substantial in relation to the cost of the programs and are realizable in the
near term. The Corporation will continue to implement further restructuring
initiatives as competitive conditions dictate in an ongoing effort to reduce its
overall cost structure and improve its competitiveness.
CBS CORPORATION
15
<PAGE> 16
OTHER INCOME (EXPENSE), NET
The net of other income and expense items produced income of $78 million in
1997, $55 million in 1996, and $152 million in 1995. Such items generally
include interest income, operating results of non-consolidated affiliates, and
any gains or losses on disposition of other assets.
In 1997, the gain on the disposition of assets included a $24 million gain on
the sale of a partnership interest, a $4 million gain on the sale of a radio
station, and a $6 million gain on the sale of artwork from the New York office.
In 1996, other income (expense), net included a $12 million gain from the sale
of an equity investment and, in 1995, a $115 million gain from the sale of the
Corporation's 62% interest in MICROS Systems, Inc.
INTEREST EXPENSE
Interest expense for Continuing Operations totaled $386 million in 1997, $401
million in 1996, and $184 million in 1995. The $217 million increase in 1996
compared to 1995 resulted from higher debt attributable primarily to the
acquisition of CBS Inc. The entire acquisition price of $5.4 billion was
financed with debt. The Corporation repaid $3.6 billion of this debt in the
first quarter of 1996 through proceeds from the divestiture of The Knoll Group
(Knoll) and the defense and electronic systems business.
In August 1996, the Corporation prepaid the remaining $3.2 billion of debt under
its then-existing credit facility and replaced it with borrowings under a new
revolving credit facility with more favorable borrowing rates (see Revolving
Credit Facility). As a result of extinguishing the $6.8 billion of debt prior to
maturity, the Corporation recognized a $93 million extraordinary loss, net of
taxes, for the write-off of the related debt issue costs.
Although average debt increased over the three-year period, average interest
rates declined.
In connection with the presentation of various businesses as Discontinued
Operations, interest expense on Continuing Operations' debt totaling $42 million
in 1997, $60 million in 1996, and $96 million in 1995 was allocated to
Discontinued Operations. See note 7 to the financial statements.
DISCONTINUED OPERATIONS
In November 1996, the Corporation's Board of Directors conditionally approved a
plan for a strategic restructuring whereby the Corporation would separate its
media and industrial businesses. The Corporation planned to form a new company
to be called WELCO, which, after revision, included all of the Corporation's
then-remaining industrial businesses except for Thermo King.
With the pending separation of the Corporation's industrial businesses, the
assets, liabilities, and results of operations for WELCO and Thermo King were
reclassified as Discontinued Operations, except for certain liabilities expected
to be retained by the Corporation. The Corporation completed the sale of Thermo
King on October 31, 1997 for $2.56 billion of cash and repaid debt of Continuing
Operations. On November 14, 1997, the Corporation announced that it had reached
a definitive agreement to sell its Power Generation business, the largest
component of WELCO, to a subsidiary of Siemens A.G. for $1.525 billion of cash.
The remaining businesses of WELCO, consisting primarily of Energy Systems and
Government Operations, are expected to be divested in 1998. In the fourth
quarter of 1997, the Corporation recognized a combined after-tax gain on the
disposal of Thermo King and WELCO totaling $871 million, including an adjustment
of prior disposal plans.
In 1996, the Corporation completed the sales of Knoll and its defense and
electronic systems business for a combined after-tax gain of $1.2 billion. The
purchase price totaled $3.6 billion of cash plus the assumption by the buyer of
certain pension and postretirement liabilities associated with the active
employees of the defense and electronic systems business. The net proceeds from
these transactions were used to repay debt of Continuing Operations.
Also in 1996, the Corporation adopted plans to dispose of its environmental
services businesses and its Communication & Information Systems (CISCO) segment.
The combined after-tax losses from these disposals approximated $200 million in
1996. Various businesses comprising these segments were divested in 1997 and
1996, including the residential security business, the largest component of the
CISCO segment. The remaining businesses are expected to be divested in 1998.
In July 1995, the Corporation sold its land development subsidiary for $430
million of cash and retained approximately $125 million of mortgage notes
receivable, the majority of which have been repaid, and other securities. In
addition, the buyer assumed $19 million of debt. Concurrently, the Corporation
invested $48 million for a 24% equity interest in the new business. The
Corporation expects to complete the divestiture of this investment in the near
term. The net cash proceeds from the divestiture of this subsidiary were used to
repay debt of Discontinued Operations. A net loss of $76 million was recognized
on the disposal.
CBS CORPORATION
16
<PAGE> 17
Following the divestitures of the remaining industrial businesses, which are
expected in 1998, the assets of Discontinued Operations will consist primarily
of the leasing portfolio, which will liquidate through the year 2015 in
accordance with contractual terms. Debt of Discontinued Operations will include
only that amount which can be repaid through liquidation of the leasing
portfolio. Such debt totaled $536 million at December 31, 1997. Other
liabilities for lagging divestiture costs or unresolved issues related to the
sale of the industrial businesses also may remain at year-end 1998.
Except for the leasing portfolio and related debt, all future cash inflows and
outflows related to Discontinued Operations will affect Continuing Operations.
Management believes that the liability for estimated loss on disposal of
Discontinued Operations of $989 million at December 31, 1997 is adequate to
cover future operating costs, estimated losses on disposal, and the remaining
divestiture costs associated with all Discontinued Operations.
The following represents the segment results for all Discontinued Operations for
1997, 1996, and 1995:
SEGMENT RESULTS OF OPERATIONS--DISCONTINUED OPERATIONS
(in millions)
<TABLE>
<CAPTION>
OPERATING PROFIT (LOSS)
SALES OF PRODUCTS OPERATING PROFIT EXCLUDING SPECIAL
& SERVICES (LOSS) CHARGES
------------------------ ----------------------- -----------------------
YEAR ENDED DECEMBER 31, 1997 1996 1995 1997 1996 1995 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WELCO:
Power Generation $2,004 $2,172 $1,718 $(305) $ (75) $ (57) $(305) $ (2) $ (29)
- ------------------------------------------------------------------------------------------------------------------------------
Energy Systems 1,098 1,234 1,369 3 (30) 114 (8) 94 130
Other Energy Systems (208) (172) (138) (78) (362) (305) (78) (73) (69)
- ------------------------------------------------------------------------------------------------------------------------------
Energy Systems, net 890 1,062 1,231 (75) (392) (191) (86) 21 61
Government Operations 141 121 155 70 63 81 71 71 81
Corporate and other 67 112 331 (189) (485) (112) (157) (91) (98)
- ------------------------------------------------------------------------------------------------------------------------------
Total WELCO 3,102 3,467 3,435 (499) (889) (279) (477) (1) 15
Thermo King 862 996 1,039 169 187 180 169 193 180
Other segments 305 952 3,969 (61) (195) 175 (61) (154) 227
- ------------------------------------------------------------------------------------------------------------------------------
Total Discontinued Operations $4,269 $5,415 $8,443 $(391) $ (897) $ 76 $(369) $ 38 $ 422
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The segment results shown in the table above include sales and operating profit
for each segment prior to the measurement date of the plan as well as those
after the measurement date. All operating results after the measurement date are
charged to the liability for estimated loss on disposal.
WELCO experienced an 11% decline in sales in 1997 compared to 1996, attributable
both to Power Generation and to Energy Systems. The 1997 operating loss for
Power Generation includes provisions for contract, warranty, and other costs
associated with several projects. Both sales and operating profit for Energy
Systems in 1997 include a $49 million unfavorable adjustment for higher costs to
complete a complex international nuclear project. Other Energy Systems, which
reflects the impact of litigation matters, includes special provisions in 1996
and 1995 for resolution of such matters. Government Operations reported growth
in both sales and operating profit for 1997 compared to 1996. WELCO recognized
various special charges in 1996 and 1995 for certain matters, including
restructuring, litigation, and environmental remediation activities.
The sale of Thermo King on October 31, 1997 resulted in lower reported sales and
operating profit for the year although their results through the date of sale
were strong compared to the prior period. Declining sales for the other segments
reflect continued disposals of the CISCO and environmental services businesses.
Other segment results also include income related to the leasing portfolio as
well as interest expense on the debt of Discontinued Operations.
INCOME TAXES
The Corporation's 1997 provision for income taxes in total was 57% of the income
before taxes and minority interest. The 1997 total provision of $740 million
consists of a $73 million expense from Continuing Operations and a $667 million
expense from Discontinued Operations primarily related to the gain on the sale
of Thermo King.
The Corporation's 1996 provision for income taxes in total was 81% of the income
before taxes and minority interest. The 1996 total provision of $442 million
consists of a $71 million benefit from Continuing Operations, a $573 million
expense from Discontinued Operations
CBS CORPORATION
17
<PAGE> 18
primarily related to the gain on the sale of the defense and electronic systems
businesses, and a $60 million benefit from an extraordinary item.
The Corporation's 1995 provision for income taxes in total was 95% of the income
before taxes and minority interest. The 1995 total provision of $28 million
consists of a $75 million expense from Continuing Operations and a $47 million
benefit from Discontinued Operations.
The Corporation's tax provision or benefit has fluctuated dramatically from the
statutory tax rate of 35% of pre-tax income. The items that caused the
fluctuations for Continuing Operations are set forth in note 6 to the financial
statements. Amortization of intangible assets has a significant effect on the
relationship between income taxes and pre-tax income. No tax benefit is
recognized on the goodwill amortization recorded as a result of the TNN and CMT,
Infinity, and CBS Inc. acquisitions, which approximates $240 million per year.
In future years, the effect will be more dramatic because of increased goodwill
amortization that will result from the American Radio acquisition and a full
year of amortization of TNN and CMT goodwill.
The net deferred tax asset at December 31, 1997 totaled $661 million. This
amount consists of a net deferred tax asset of $170 million from Continuing
Operations and a net deferred tax asset of $491 million from Discontinued
Operations. The temporary differences that give rise to deferred income taxes
are shown in the Consolidated Deferred Income Taxes by Source table in note 6 to
the financial statements.
The significant sources of the net deferred tax asset are: (i) the tax effect of
cumulative net temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes of $1,863 million representing future net income tax deductions; and
(ii) alternative minimum tax credit carryforwards of $302 million that have no
expiration date. Of the net temporary difference of $1,863 million,
approximately $1,092 million relates to a net pension obligation, $1,262 million
relates to obligations for postretirement and postemployment benefits, and
$2,016 million relates to reserves for restructuring, litigation, and other
matters. These are partially offset by temporary differences of approximately
$2,351 million related primarily to FCC licenses and other broadcasting
intangible assets.
Management believes that the Corporation will have sufficient future taxable
income to make it more likely than not that the net deferred tax asset will be
realized. The reversal of temporary differences may cause tax losses in future
years. Each tax-loss year would receive a new twenty-year carryforward period
for tax years beginning after 1997. Under a conservative assumption that all net
cumulative temporary differences had reversed in 1997, the Corporation would
have through the year 2012 to recover the tax asset. This would require the
Corporation to generate average annual taxable income of at least $125 million.
The following table shows a reconciliation of income (loss) from Continuing
Operations before income taxes to taxable income (loss) from Continuing
Operations:
RECONCILIATION OF PRE-TAX INCOME (LOSS) FROM CONTINUING OPERATIONS TO U.S.
FEDERAL TAXABLE INCOME (LOSS)
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- -----------------------------------------------------------
<S> <C> <C> <C>
Pre-tax income (loss) from
Continuing Operations $ (59) $(292) $ 128
State income tax (benefit) (21) 26 (12)
- -----------------------------------------------------------
Permanent differences:
Goodwill 225 120 20
Other (19) 105 44
- -----------------------------------------------------------
Net permanent differences 206 225 64
- -----------------------------------------------------------
Temporary differences:
Pensions 16 94 136
Depreciation 59 7 --
Provision for restructuring and
other actions (133) (629) 487
Other 17 (122) 26
- -----------------------------------------------------------
Net temporary differences (41) (650) 649
- -----------------------------------------------------------
U.S. federal taxable income (loss) $ 85 $(691) $ 829
- -----------------------------------------------------------
</TABLE>
YEAR 2000
The Corporation is addressing the issues associated with its existing computer
systems and their ability to operate effectively as the millennium (year 2000)
approaches. Both internal and external resources are being utilized to address
these matters throughout the Corporation. For the Corporation's Continuing
Operations, the assessing and planning phases of the project are essentially
complete. The Corporation believes that, based on available information, its
year 2000 transition will not have a material adverse effect on its business,
operations, or financial results.
For the businesses that the Corporation expects to divest in 1998, the assessing
phase of the project is complete and the planning phase is well under way. These
matters are not anticipated to materially affect the disposition of the
businesses or the sale proceeds.
CBS CORPORATION
18
<PAGE> 19
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Corporation manages its liquidity as a consolidated enterprise without
regard to whether assets or debt are classified for balance sheet purposes as
part of Continuing Operations or Discontinued Operations. As a result, the
following discussion focuses on the Corporation's consolidated cash flows and
capital resources.
In November 1996, the Corporation announced that it intended to separate its
media and industrial businesses. By the end of 1997, Thermo King had been sold
for $2.56 billion. Power Generation was under agreement to be sold for $1.525
billion. The largest remaining industrial businesses, Energy Systems and
Government Operations, as well as several smaller industrial operations, are
expected to be sold in 1998. Following these sales, the Corporation's operations
will consist of only its media businesses.
The acquisitions of TNN and CMT on September 30, 1997 and Infinity on December
31, 1996 were accomplished through the issuance of additional shares of the
Corporation's common stock. As a result of these acquisitions, the Corporation's
equity increased more than $5 billion through the issuance of nearly 250 million
additional shares. At December 31, 1997, the Corporation had nearly 700 million
shares outstanding.
By divesting the industrial businesses for cash and acquiring the media
businesses with stock, the Corporation was able to reduce its total debt to $3.9
billion at December 31, 1997 from $6.1 billion at December 31, 1996.
In September 1997, the Corporation announced that it had reached a definitive
agreement to acquire American Radio's radio broadcasting operations for $1.6
billion of cash plus the assumption of approximately $1 billion of debt. The
transaction, which is expected to close in the second quarter of 1998, will add
approximately 100 radio stations to the Radio Group's current portfolio.
In January 1998, the Corporation and the NFL announced that CBS was awarded the
rights to broadcast American Football Conference games. The eight-year
agreement, subject to rebid at the end of five years at the discretion of the
NFL, will cost approximately $4 billion. The contract begins with the 1998
football season and includes two Super Bowls.
In February 1998, the Corporation announced that its Board of Directors
authorized the purchase, through open market transactions, of up to $1 billion
of its common stock. At the same time, the Corporation announced that it would
suspend dividend payments on its common stock after payment of the March 1, 1998
dividend so that the cash could be used to better enhance shareholder value.
Management expects that the Corporation will have sufficient liquidity to meet
ordinary future business needs. Sources of liquidity generally available to the
Corporation include cash from operations, proceeds from sales of non-strategic
assets, cash and cash equivalents, availability under its credit facility,
borrowings from other sources, including funds from the capital markets, and the
issuance of additional capital stock.
Operating Activities
The operating activities of Continuing Operations used $201 million of cash in
1997 compared to $95 million of cash used in 1996. The primary factor causing
the additional use of cash in 1997 was the substantial payment of accrued
liabilities early in the year. The additional cash generated by the businesses
in 1997 was essentially offset by an increase in receivables. In 1995, the
operating activities of Continuing Operations generated $175 million of cash.
The decline in operating cash flows from 1995 to 1996 was driven by a $227
million increase in interest payments in 1996.
In general, the media businesses, through their operations, generate significant
cash. The Corporation continues to invest in program rights in an ongoing effort
to maintain quality programming and improve ratings in key demographic
categories. In each of the last two years, the Corporation has paid nearly $400
million of interest on debt of Continuing Operations, much of which was incurred
to substantially expand the media operations. This debt was more than $2 billion
lower at year-end 1997 compared to the prior year end. In future years, the
Corporation's operating cash flows from Continuing Operations will be
unfavorably affected by payments associated with retained liabilities of
discontinued businesses. However, the annual impact generally is not expected to
be significant because the payments could extend for periods of up to 30 years.
Cash contributions to all of the Corporation's pension plans totaled $164
million in 1997, $250 million in 1996, and $315 million in 1995. A $73 million
cash contribution was made in January 1998 in accordance with applicable minimum
funding requirements. The 1996 decrease in contributions resulted from the
divestiture of the defense and electronic systems business and the assumption of
certain pension liabilities by the buyer. The Corporation's contribution level
for 1998, which is expected to approximate $300 million (including the $73
million contribution made in January 1998), is consistent with the Corporation's
goal to fully fund its qualified pension plans over the next several years.
CBS CORPORATION
19
<PAGE> 20
The operating activities of Discontinued Operations used $437 million of cash
during 1997 compared to $312 million in 1996. In 1995, operating activities of
Discontinued Operations generated cash of $518 million. These cash flows consist
of those provided by or used in the operations of the businesses prior to their
disposal and the payment of divestiture and other costs associated with divested
businesses. The unfavorable cash flows in 1997 and 1996 reflect cash used in the
operations of WELCO, particularly in 1997. Cash used in 1996 included
substantial payments related to the sale of the defense and electronic systems
business. The operations of the defense and electronic systems business, Thermo
King, and WELCO generated significant cash in 1995.
Future operating cash flows of Discontinued Operations will consist primarily of
operating revenues, operating costs, and disposal costs associated with WELCO
and certain other remaining industrial businesses. These cash flows, along with
proceeds generated through divestiture of these businesses, will affect the cash
flows of Continuing Operations. Interest costs on debt of Discontinued
Operations, as well as the repayment of that debt, will be paid through the
continued liquidation of the leasing portfolio and are not expected to impact
future cash flows of Continuing Operations.
Investing Activities
Investing activities provided cash of $2.5 billion during 1997 and $2.9 billion
during 1996 and used $4.3 billion of cash during 1995. The sale of Thermo King
in 1997 for $2.56 billion and the sales of Knoll and the defense and electronic
systems business in 1996 for $3.6 billion provided the significant investing
cash inflows in 1997 and 1996. The completion of the CBS Inc. acquisition in
1995 for $5.4 billion caused the major cash outflow in 1995.
The acquisitions of TNN and CMT and Infinity were accomplished using common
stock and, except as noted below, did not require the use of cash. Acquisitions
for cash of $59 million completed during 1997 included a U.K. transit
advertising company and a payment in connection with a swap of radio stations.
Acquisitions of $1.1 billion completed during 1996 included the cash investment
associated with the repayment of Infinity debt at the time of its acquisition,
as well as purchases of two Chicago radio stations, TeleNoticias, and several
smaller businesses and investments. CBS Inc. was the only major acquisition in
1995.
In 1997, the Corporation completed the sale of Thermo King, generating cash
proceeds of $2.56 billion. Additional cash of approximately $200 million was
generated in 1997 from continued divestiture of non-strategic businesses. The
Corporation completed the sales of Knoll and the defense and electronic systems
business in 1996, generating $3.6 billion of cash. Remaining 1996 divestiture
cash proceeds resulted primarily from the sales of non-strategic businesses,
including Westinghouse Security Systems, and a Providence, Rhode Island,
television station acquired with CBS Inc. During 1995, liquidations of Financial
Services assets and divestitures generated cash proceeds of $1 billion and
included the sale of the Corporation's land development subsidiary, a majority
interest in MICROS, and several smaller businesses.
The Corporation's capital expenditures for Continuing Operations totaled $121
million in 1997 compared to $93 million in 1996 and $32 million in 1995. The
increase is primarily attributable to recent acquisitions. Over the next six to
15 years, the Corporation expects to spend approximately $250 million for
equipment and other capital assets to meet commitments for digital transmission
capability. Capital expenditures for Discontinued Operations will continue to
decline as those businesses are sold.
In 1996 and 1995, the Corporation generated $44 million and $305 million of
cash, respectively, through the sales of investments held in two trusts that
were established to fund executive benefit plans. The trust investments were
replaced with the Corporation's common stock.
The Corporation expects to liquidate the remaining assets of Discontinued
Operations in 1998. The sale of Power Generation for $1.525 billion is expected
to be completed in mid-1998.
Financing Activities
Cash used by financing activities during 1997 totaled $2 billion compared to
$2.5 billion in 1996. Financing cash outflows in 1997 included $2.56 billion of
debt prepaid upon the sale of Thermo King. Financing cash outflows in 1996
included $3.6 billion of debt prepaid upon the sales of Knoll and the defense
and electronic systems business. Also in 1996, the Corporation prepaid the
remaining outstanding debt under its then-existing $7.5 billion credit facility
and replaced it with borrowings under a new $5.5 billion credit facility (see
Revolving Credit Facility). In 1995, financing activities provided cash of $3.5
billion including $5.4 billion of borrowings to finance the CBS Inc.
acquisition.
Total borrowings under the Corporation's $5.5 billion revolving credit facility
were $1.5 billion at year-end 1997 (see Revolving Credit Facility). These
borrowings were subject to a floating interest rate of 6.7% at December 31,
1997, which was based on the London Interbank Offer Rate (LIBOR), plus a margin
based on the Corporation's senior unsecured debt rating and leverage.
Dividends paid in 1997 included $23 million for Series C preferred stock, which
converted into 32 million shares
CBS CORPORATION
20
<PAGE> 21
of common stock in the second quarter of 1997, and $125 million for common stock
dividends. Dividends paid in 1996 included $47 million for Series C preferred
stock, with the remaining $80 million representing common stock dividends.
Dividends paid in 1995 included $47 million for Series C preferred stock, $38
million for Series B preferred stock, which converted into 33 million common
shares in the third quarter of 1995, and $74 million representing common stock
dividends. The increase in the common stock dividends from 1996 to 1997 reflects
nearly 250 million additional shares issued to acquire TNN and CMT and Infinity.
In February 1998, the Corporation announced that its Board of Directors
authorized the purchase, through open market transactions, of up to $1 billion
of its common stock. At the same time, the Corporation announced that it would
suspend dividend payments on its common stock after payment of the March 1, 1998
dividend so that the cash could be used to better enhance shareholder value.
As a result of the increase in equity from the TNN and CMT and Infinity
acquisitions and the financing activities described previously, the
Corporation's net debt decreased from 84% of consolidated net capitalization at
December 31, 1995 to 50% at December 31, 1996 and to 32% at December 31, 1997.
Revolving Credit Facility
In August 1996, the Corporation completed a bank credit agreement with a total
commitment of $5.5 billion. The new agreement was structured as a revolving
credit facility with a bullet maturity in five years.
The unused capacity under the revolving credit facility equaled $4 billion at
December 31, 1997. Borrowing availability under the revolver is subject to
compliance with certain covenants, representations, and warranties, including a
no material adverse change provision with respect to the Corporation taken as a
whole, restrictions on liens incurred, a maximum leverage ratio, minimum
interest coverage ratio, and minimum consolidated net worth. Certain of the
financial covenants become more restrictive over the term of the agreement. At
December 31, 1997, the Corporation was in compliance with the financial
covenants, which were modified in the fourth quarter of 1997. Certain of the
financial covenants were also modified in the first quarter of 1998.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Corporation is exposed to market risk from changes in interest rates and
foreign exchange rates. To manage this exposure, the Corporation enters into
interest rate and currency exchange agreements. The Corporation does not use
financial instruments for trading purposes and is not a party to any leveraged
derivatives.
At December 31, 1997, the Corporation's debt of Continuing Operations was $3,387
million, of which $2,181 million was in fixed rate obligations. Additionally,
the Corporation had interest rate exchange agreements that converted $130
million of variable-rate debt to fixed-rate debt. Assuming a 1% increase in
interest rates, annual interest expense would be approximately $12 million
higher based on the balance of variable-rate debt outstanding at December 31,
1997. With regard to fixed-rate obligations and interest rate exchange
agreements, a 1% decrease in interest rates would increase the value of these
instruments by approximately $150 million.
The Corporation continually monitors its economic exposure to changes in foreign
exchange rates and enters into foreign exchange forward or option contracts to
hedge its transaction exposure where appropriate. The notional amount of the
Corporation's foreign currency forward contracts, which were hedging firm
commitments at year-end 1997, was $16 million. The majority of these related to
the Japanese Yen, German Mark, and Canadian Dollar. A 10% change in foreign
exchange rates across all currencies in the Corporation's portfolio would not be
material.
The Corporation's credit exposure under these agreements is limited to the cost
of replacing an agreement in the event of non-performance by its counterparty.
To minimize this risk, the Corporation selects high credit quality
counterparties.
For further information regarding the Corporation's debt and foreign exchange
portfolio, see note 20 to the financial statements.
ENVIRONMENTAL MATTERS
Compliance with federal, state, and local laws and regulations relating to the
discharge of pollutants into the environment, the disposal of hazardous wastes,
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. It is difficult to estimate the
timing and ultimate costs to be incurred in the future due to uncertainties
about the status of laws, regulations, and technology; the adequacy of
information available for individual sites; the extended time periods over which
site remediation occurs; and the identification of new sites. See note 12 to the
financial statements.
The majority of the environmental matters being addressed by the Corporation
have arisen from past operation of its industrial businesses. Although the
remaining industrial businesses are anticipated to be divested by year-end 1998,
the Corporation expects to retain certain obligations relating to these past
activities.
CBS CORPORATION
21
<PAGE> 22
At December 31, 1997, the Corporation had an accrued liability of $402 million
to cover site investigation, remediation, post-closure, and monitoring
activities for approximately 90 sites for which environmental responsibility is
expected to remain with the Corporation. Management anticipates that the
majority of expenditures for site investigation and remediation will occur
during the next five to ten years. Expenditures for post-closure and monitoring
activities will be made over periods up to 30 years. Should alternative
remediation strategies be selected, the costs related to these sites could
differ from the amounts currently accrued. The Corporation recognizes changes in
estimates as new remediation requirements are defined or as more information
becomes available.
In addition, included in Discontinued Operations are environmental liabilities
directly related to active sites that are expected to be assumed by buyers in
divestiture transactions.
Management believes, based on its best estimate, that the Corporation has
adequately provided for its present environmental obligations and that complying
with existing government regulations will not materially impact the
Corporation's financial position, liquidity, or results of operations.
LEGAL MATTERS
The Corporation is defending a number of lawsuits on various matters. See note
12 to the financial statements. The Corporation recorded special charges for
litigation matters during 1996 and 1995 of $486 million and $236 million,
respectively, of which $28 million in 1996 was included in Continuing
Operations. These amounts represent management's best estimate of incremental
costs associated with resolution of these matters.
Since 1993, the Corporation has entered into agreements to resolve ten
litigation claims in connection with alleged tube degradation in steam
generators sold by the Corporation as components for nuclear steam supply
systems. These agreements, among other things, require the Corporation to
provide certain products and services at prices discounted at varying rates.
These discounted products and services are expected to be provided primarily
over the next nine years. Certain of these discounts will impact future
operating results of the Energy Systems business, which is included in
Discontinued Operations. The Corporation expects the obligations for these
matters to be assumed by a buyer in a divestiture transaction.
The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries. The Corporation was neither a manufacturer
nor a producer of asbestos and is oftentimes dismissed from these lawsuits on
this basis. In court actions resolved, the Corporation has prevailed in the vast
majority of these claims and has resolved others through settlement. The
Corporation is reimbursed for a substantial portion of its current costs and
settlements through its insurance carriers. The Corporation has provided for its
share of estimated costs associated with outstanding claims; however, it cannot
reasonably estimate costs for unasserted asbestos claims.
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in certain of the Corporation's pending cases and, although
management believes a significant adverse judgment is unlikely, any such
judgment could have a material adverse effect on the Corporation's results of
operations for a quarter or a year. However, based on its understanding and
evaluation of the relevant facts and circumstances, management believes that the
Corporation has meritorious defenses to the litigation referenced in note 12 and
that the Corporation has adequately provided for costs arising from potential
settlement of these matters when in the best interest of the Corporation.
Management believes that the litigation should not have a material adverse
effect on the financial condition of the Corporation.
RETAINED LIABILITIES OF DISCONTINUED BUSINESSES
Liabilities for the environmental matters and certain of the litigation matters
discussed previously, although arising from discontinued businesses, are
expected to be retained by the Corporation following the divestiture of the
remainder of the industrial businesses. As a result, liabilities totaling $958
million at December 31, 1997 and related assets of $244 million have been
separately presented on the Corporation's balance sheet. See note 12 to the
financial statements.
CBS CORPORATION
22
<PAGE> 23
REPORT OF MANAGEMENT
The Corporation has prepared the consolidated financial statements and related
financial information included in this report. Management has the primary
responsibility for the financial statements and other financial information and
for ascertaining that the data fairly reflect the financial position, results of
operations, and cash flows of the Corporation. The financial statements were
prepared in accordance with generally accepted accounting principles appropriate
in the circumstances, and necessarily include amounts that are based on best
estimates and judgments with appropriate consideration given to materiality.
Financial information included elsewhere in this report is presented on a basis
consistent with the financial statements.
The Corporation maintains a system of internal accounting controls, supported by
adequate documentation, to provide reasonable assurance that assets are
safeguarded and that the books and records reflect the authorized transactions
of the Corporation. Limitations exist in any system of internal accounting
controls based on the recognition that the cost of the system should not exceed
the benefits derived. The Corporation believes its system of internal accounting
controls, augmented by its corporate auditing function, appropriately balances
the cost/benefit relationship.
The independent auditors provide an objective assessment of the degree to which
management meets its responsibility for fair financial reporting. They regularly
evaluate elements of the internal control structure and perform such tests and
procedures as they deem necessary to express an opinion on the fairness of the
financial statements.
The Board of Directors pursues its responsibility for the Corporation's
financial statements through its Audit Review Committee composed of directors
who are not officers or employees of the Corporation. The Audit Review Committee
meets regularly with the independent auditors, management, and the corporate
auditors. The independent auditors and the corporate auditors have direct access
to the Audit Review Committee, with and without the presence of management
representatives, to discuss the scope and results of their audit work and their
comments on the adequacy of internal accounting controls and the quality of
financial reporting.
We believe that the Corporation's policies and procedures, including its system
of internal accounting controls, provide reasonable assurance that the financial
statements are prepared in accordance with the applicable securities laws and
with a corresponding standard of business conduct.
CBS CORPORATION
23
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF CBS CORPORATION
We have audited the accompanying consolidated balance sheets of CBS Corporation
and subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, cash flows, and shareholders' equity for the years then
ended. These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated 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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CBS Corporation and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
January 28, 1998
CBS CORPORATION
24
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF CBS CORPORATION
In our opinion, the accompanying consolidated financial statements appearing on
pages 26 through 49 of this Annual Report on Form 10-K present fairly, in all
material respects, the results of operations of CBS Corporation and its
subsidiaries and their cash flows for the year ended December 31, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Corporation's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above. We have not audited the consolidated financial statements of the
Corporation and its subsidiaries for any period subsequent to December 31, 1995.
/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Pittsburgh, Pennsylvania
February 12, 1996 except for the
restatements discussed in notes 1 and 7, for
which the dates are March 31, 1996, November 13, 1996,
and September 30, 1997.
CBS CORPORATION
25
<PAGE> 26
CONSOLIDATED STATEMENT OF INCOME
(in millions except per-share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 5,363 $ 4,143 $1,074
Operating expenses (3,483) (2,786) (427)
Depreciation and amortization (445) (279) (57)
Residual costs of discontinued businesses (note 19) (143) (114) (37)
Marketing, administration, and general expenses (1,043) (910) (393)
- ----------------------------------------------------------------------------------------------
Operating profit 249 54 160
Other income (expense), net (note 18) 78 55 152
Interest expense (386) (401) (184)
- ----------------------------------------------------------------------------------------------
Income (loss) from Continuing Operations before income taxes
and minority interest in income of consolidated
subsidiaries (59) (292) 128
Income tax (expense) benefit (note 6) (73) 71 (75)
Minority interest in (income) loss of consolidated
subsidiaries 1 -- (6)
- ----------------------------------------------------------------------------------------------
Income (loss) from Continuing Operations (131) (221) 47
- ----------------------------------------------------------------------------------------------
Discontinued Operations, net of income taxes
(notes 1 and 7):
Income (loss) from Discontinued Operations (191) (609) 19
Estimated gain (loss) on disposal of Discontinued
Operations 871 1,018 (76)
- ----------------------------------------------------------------------------------------------
Income (loss) from Discontinued Operations 680 409 (57)
Extraordinary item, net of income taxes:
Loss on early extinguishment of debt (note 2) -- (93) --
- ----------------------------------------------------------------------------------------------
Net income (loss) $ 549 $ 95 $ (10)
- ----------------------------------------------------------------------------------------------
Basic and diluted earnings (loss) per common share
(note 15):
Continuing Operations $ (.24) $ (.67) $ (.09)
Discontinued Operations 1.08 1.02 (.16)
Extraordinary item -- (.23) --
- ----------------------------------------------------------------------------------------------
Basic and diluted earnings (loss) per common share $ .84 $ .12 $ (.25)
- ----------------------------------------------------------------------------------------------
Cash dividends per common share $ .20 $ .20 $ .20
- ----------------------------------------------------------------------------------------------
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
Per-share amounts for 1996 and 1995 have been restated to reflect the adoption
of SFAS No. 128, "Earnings per Share."
CBS CORPORATION
26
<PAGE> 27
CONSOLIDATED BALANCE SHEET
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents (note 2) $ 8 $ 129
Customer receivables (net of allowance for doubtful
accounts of $35 million and $27 million) 936 783
Program rights 502 431
Deferred income taxes (note 6) 394 377
Prepaid and other current assets 135 182
- ----------------------------------------------------------------------------------
Total current assets 1,975 1,902
Property and equipment, net (note 8) 1,066 1,017
FCC licenses, net (note 9) 2,171 2,199
Goodwill, net (note 9) 9,681 8,721
Other intangible and noncurrent assets (note 9) 1,610 1,567
Net assets of Discontinued Operations (note 7) 212 1,646
- ----------------------------------------------------------------------------------
Total assets $16,715 $17,052
- ----------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Short-term debt (note 10) $ 89 $ 484
Current maturities of long-term debt (note 10) 62 4
Accounts payable 221 206
Liabilities for talent and program rights 309 308
Other current liabilities (note 11) 868 1,380
- ----------------------------------------------------------------------------------
Total current liabilities 1,549 2,382
Long-term debt (note 10) 3,236 5,147
Pension liability (note 4) 1,149 1,061
Other noncurrent liabilities (note 11) 2,696 2,728
- ----------------------------------------------------------------------------------
Total liabilities 8,630 11,318
- ----------------------------------------------------------------------------------
Contingent liabilities and commitments (notes 12 and 13)
Minority interest in equity of consolidated subsidiaries 5 3
- ----------------------------------------------------------------------------------
Shareholders' equity (note 14):
Preferred stock, $1.00 par value (25 million shares
authorized):
Series C conversion preferred (no shares and 4 million
shares issued) -- 4
Common stock, $1.00 par value (1,100 million shares
authorized, 718 million and 609 million shares issued) 718 609
Capital in excess of par value 7,178 5,376
Common stock held in treasury, at cost (530) (546)
Minimum pension liability adjustment (note 4) (771) (796)
Retained earnings 1,485 1,084
- ----------------------------------------------------------------------------------
Total shareholders' equity 8,080 5,731
- ----------------------------------------------------------------------------------
Total liabilities and shareholders' equity $16,715 $17,052
- ----------------------------------------------------------------------------------
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
CBS CORPORATION
27
<PAGE> 28
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities of Continuing
Operations:
Income (loss) from Continuing Operations $ (131) $ (221) $ 47
Adjustments to reconcile income (loss) from Continuing
Operations to net cash provided (used) by operating
activities:
Depreciation and amortization 445 279 57
Gains on asset dispositions (39) (13) (121)
Other noncash adjustments (81) (164) --
Changes in assets and liabilities, net of effects of
acquisitions and divestitures of businesses:
Receivables, current and noncurrent (144) (22) 208
Accounts payable 14 67 (37)
Deferred and current income taxes 5 37 14
Program rights (79) (148) (47)
Other assets and liabilities (191) 90 54
- -----------------------------------------------------------------------------------------------
Cash provided (used) by operating activities of Continuing
Operations (201) (95) 175
- -----------------------------------------------------------------------------------------------
Cash provided (used) by operating activities of Discontinued
Operations (note 7) (437) (312) 518
- -----------------------------------------------------------------------------------------------
Cash flows from investing activities:
Business acquisitions (59) (1,110) (5,411)
Business divestitures and other asset liquidations 2,752 4,165 1,045
Capital expenditures--Continuing Operations (121) (93) (32)
Capital expenditures--Discontinued Operations (85) (113) (258)
Asset liquidations of trust investments -- 44 305
Other -- -- 15
- -----------------------------------------------------------------------------------------------
Cash provided (used) by investing activities 2,487 2,893 (4,336)
- -----------------------------------------------------------------------------------------------
Cash flows from financing activities:
Bank revolver borrowings 2,970 7,263 7,480
Bank revolver repayments (4,555) (4,318) (8,294)
Net reduction in other short-term debt (406) (403) (416)
Long-term borrowings -- -- 5,009
Repayments of long-term debt (153) (5,012) (9)
Stock issued 287 130 90
Debt issue costs (10) (12) (176)
Dividends paid (148) (127) (159)
- -----------------------------------------------------------------------------------------------
Cash provided (used) by financing activities (2,015) (2,479) 3,525
- -----------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (166) 7 (118)
Cash and cash equivalents at beginning of period for
Continuing and Discontinued Operations (notes 2 and 7) 233 226 344
- -----------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period for Continuing
and Discontinued Operations (notes 2 and 7) $ 67 $ 233 $ 226
- -----------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Interest paid--Continuing Operations $ 395 $ 392 $ 165
Interest paid--Discontinued Operations 95 106 188
- -----------------------------------------------------------------------------------------------
Total interest paid $ 490 $ 498 $ 353
- -----------------------------------------------------------------------------------------------
Income taxes paid (refunded) $ 68 $ (34) $ 61
- -----------------------------------------------------------------------------------------------
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements and include descriptions of noncash transactions.
CBS CORPORATION
28
<PAGE> 29
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in millions)
<TABLE>
<CAPTION>
MINIMUM
COMMON CAPITAL IN PENSION
PREFERRED STOCK AT EXCESS OF TREASURY LIABILITY RETAINED
STOCK PAR VALUE PAR VALUE STOCK ADJUSTMENT EARNINGS TOTAL
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 12 $ 393 $ 1,931 $ (870) $ (962) $ 1,285 $ 1,789
Series B preferred shares
converted (8) 33 (25) --
Shares issued under various
compensation and benefit plans (55) 139 84
Shares issued under dividend
reinvestment plan (4) 11 7
Pension liability adjustment, net
of deferred taxes (258) (258)
Net loss (10) (10)
Dividends paid (159) (159)
- ------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $ 4 $ 426 $ 1,847 $ (720) $(1,220) $ 1,116 $ 1,453
- ------------------------------------------------------------------------------------------------------------------------
Shares issued under various
compensation and benefit plans (41) 161 120
Shares issued under dividend
reinvestment plan (3) 13 10
Shares issued for Infinity
acquisition 183 3,573 3,756
Pension liability adjustment, net
of deferred taxes 424 424
Net income 95 95
Dividends paid (127) (127)
- ------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $ 4 $ 609 $ 5,376 $ (546) $ (796) $ 1,084 $ 5,731
- ------------------------------------------------------------------------------------------------------------------------
Series C preferred shares
converted (4) 32 (28) --
Shares issued under various
compensation and benefit plans 18 333 15 366
Shares issued under dividend
reinvestment plan 7 1 8
Shares issued for TNN and CMT
acquisition 59 1,490 1,549
Pension liability adjustment, net
of deferred taxes 25 25
Net income 549 549
Dividends paid (148) (148)
- ------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ -- $ 718 $ 7,178 $ (530) $ (771) $ 1,485 $ 8,080
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to the Financial Statements are an integral part of these financial
statements.
CBS CORPORATION
29
<PAGE> 30
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
Consolidation
On December 1, 1997, Westinghouse Electric Corporation (Westinghouse) changed
its name to CBS Corporation. These consolidated financial statements include the
accounts of CBS Corporation and its subsidiary companies (together, the
Corporation) after elimination of intercompany accounts and transactions.
Investments in joint ventures and other companies that the Corporation does not
control but has the ability to exercise significant management influence over
operating and financial policies are accounted for by the equity method.
The Corporation's Continuing Operations include the Radio Group, the Television
Group, Network, and Cable. Segment information is included in note 19 to the
financial statements.
On September 30, 1997, the Corporation acquired Gaylord Entertainment Company's
(Gaylord) two major cable networks: The Nashville Network (TNN) and Country
Music Television (CMT). On December 31, 1996, the Corporation acquired Infinity
Broadcasting Corporation (Infinity), and on November 24, 1995, it acquired CBS
Inc. The Corporation's Consolidated Statement of Income includes the operating
results of the acquired entities from their respective dates of acquisition. See
note 3 to the financial statements.
In September 1997, the Corporation announced that it had reached a definitive
agreement to acquire the radio broadcasting operations of American Radio Systems
Corporation (American Radio) for $1.6 billion of cash plus the assumption of
approximately $1 billion of debt. The transaction is expected to close in the
second quarter of 1998.
Certain previously reported amounts have been reclassified to conform to the
1997 presentation.
Discontinued Operations
Under various disposal plans adopted in recent years, the Corporation has either
completed or planned the divestiture of all of its industrial businesses. See
note 7 to the financial statements.
In November 1996, the Corporation announced a conditional plan to separate its
media and industrial businesses. The Corporation planned to form a new company
to be called Westinghouse Electric Company (WELCO), which, after modification of
the plan, would include all of the Corporation's then-remaining industrial
businesses except for Thermo King Corporation (Thermo King), its transport
temperature control business. In September 1997, the Corporation announced a
definitive agreement to sell Thermo King and completed the sale in October 1997.
In November 1997, the Corporation announced that it would separate the remaining
industrial businesses by way of sale and that it had reached a definitive
agreement to sell Power Generation, the largest of those businesses. All of the
remaining industrial businesses are expected to be divested in 1998. In
connection with these actions, the Corporation reclassified the assets and
liabilities of Thermo King and WELCO as Discontinued Operations except for
certain liabilities expected to be retained by the Corporation. See note 12 to
the financial statements.
In November 1996, the Corporation adopted a plan to exit its Communication &
Information Systems (CISCO) segment, and in March 1996, adopted a plan to exit
its environmental services segment. These businesses were reclassified as
Discontinued Operations in 1996.
In December 1995, the Corporation announced a plan to divest its defense and
electronic systems business and The Knoll Group (Knoll), its office furniture
segment. In July 1995, the Corporation sold WCI Communities, Inc. (WCI), its
land development subsidiary. These businesses were reclassified as Discontinued
Operations in 1995.
As a result, certain financial information previously issued has been restated
to give effect to the classification of these businesses as discontinued
operations in accordance with Accounting Principles Board (APB) Opinion No. 30,
"Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions."
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenues are primarily derived from the sale of advertising spots and are
recognized when the spots are broadcast. The Corporation also receives
syndication revenues on sales of owned programming, cable license fees from
distribution of its cable networks, and advertising revenues on the sale of
outdoor advertising space. Syndication revenues are recognized when the
programming is available to telecast and certain other conditions are met.
Revenues from cable license fees are recorded in the period that service is
provided. Revenues on outdoor advertising space are recognized proportionately
over the contract term.
CBS CORPORATION
30
<PAGE> 31
Stock-Based Compensation
The Corporation measures compensation cost for stock-based awards using the
intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." The pro forma net income and pro
forma earnings per share disclosures using the fair value based method defined
in Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," are provided in note 16 to the financial statements.
Legal Costs
When estimating the amount of probable loss to be recognized in connection with
litigation matters, the Corporation includes estimated external legal costs
through the date of resolution. All other legal costs are recognized in the
period in which they are incurred.
Environmental Costs
The Corporation records liabilities when environmental assessments or remedial
efforts are probable and the costs can be reasonably estimated. Such estimates
are adjusted if necessary as new remediation requirements are defined or as more
information becomes available.
Extraordinary Item
In 1996, the Corporation extinguished prior to maturity $6.8 billion of debt
under its then-existing $7.5 billion credit facility. These prepayments
represented all outstanding borrowings under this facility. As a result of the
early extinguishment of debt and the write-off of related debt issue costs, the
Corporation recognized an extraordinary loss of $93 million, net of a tax
benefit of $60 million, in 1996.
Cash and Cash Equivalents
The Corporation considers all investment securities with a maturity of three
months or less when acquired to be cash equivalents. All cash and temporary
investments are placed with high credit quality financial institutions, and the
amount of credit exposure to any one financial institution is limited.
Program Rights
Costs incurred in connection with the production of, or the purchase of, rights
to programs to be broadcast within one year are classified as current assets
while costs of those programs to be broadcast after one year are considered
noncurrent. Program costs are amortized as the respective programs are
broadcast. Program rights are carried at the lower of unamortized cost or
estimated net realizable value.
Property and Equipment
Property and equipment assets are recorded at cost and depreciated over their
estimated useful lives. Depreciation is generally computed on the straight-line
method based on useful lives of 27.5 to 60 years for buildings, 20 years for
land improvements, and three to 12 years for equipment. Leasehold improvements
are amortized over the shorter of the useful life or the term of the lease.
Expenditures for additions and improvements are capitalized, and costs for
repairs and maintenance are charged to operations as incurred. The Corporation
limits capitalization of newly acquired assets to those assets with cost
generally in excess of $1,500.
Intangible Assets
Identifiable intangible assets primarily include Federal Communications
Commission (FCC) licenses, which are limited as to availability and have
historically appreciated in value with the passage of time, and cable license
agreements. Identifiable intangible assets and goodwill are amortized using the
straight-line method over their estimated lives but not in excess of 40 years.
Subsequent to the acquisition of an intangible or other long-lived asset, the
Corporation evaluates whether later events and circumstances indicate the
remaining estimated useful life of that asset may warrant revision or that the
remaining carrying value of such an asset may not be recoverable. If definitive
cash flows are not available for a specific intangible or other long-lived
asset, the Corporation evaluates recoverability of the specific business to
which the asset relates. When factors indicate that an intangible or other
long-lived asset should be evaluated for possible impairment, the Corporation
uses an estimate of the related asset's undiscounted future cash flows over the
remaining life of that asset in measuring recoverability. If such an analysis
indicates that impairment has in fact occurred, the Corporation writes down the
book value of the intangible or other long-lived asset to its fair value.
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, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. On an ongoing basis,
management reviews its estimates, including those related to litigation,
environmental liabilities, program rights, contracts, pensions, and Discontinued
Operations, based on currently available information. Changes in facts and
circumstances may result in revised estimates.
New Pronouncements
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information," were
issued. SFAS 130 requires that an enterprise report by major component and as a
single total the change in its net assets from nonowner
CBS CORPORATION
31
<PAGE> 32
sources during the period. SFAS 131 establishes annual and interim reporting
standards for an enterprise's operating segments and related disclosures about
its products, services, geographic areas, and major customers. Adoption of these
statements will not impact the Corporation's consolidated financial position,
results of operations, or cash flows, and any effect will be limited to the form
and content of its disclosures. Both statements are effective for fiscal years
beginning after December 15, 1997.
At December 31, 1997, the Corporation adopted SFAS No. 128, "Earnings per
Share," which establishes standards for computing and disclosing basic and
diluted earnings per common share. Earnings per common share for 1996 and 1995
have been restated to reflect the adoption of SFAS 128. See note 15 to the
financial statements.
NOTE 3: ACQUISITIONS
On September 30, 1997, the Corporation acquired Gaylord's two major cable
networks: TNN and CMT. The acquisition included the domestic and international
operations of TNN, the U.S. and Canadian operations of CMT, and approximately
$50 million in working capital. The total purchase price of $1.55 billion was
paid through the issuance of 59 million shares of the Corporation's common
stock. The acquisition was accounted for under the purchase method. Based on
preliminary estimates, which may be revised at a later date, the excess of the
consideration paid over the estimated fair value of net assets acquired of
approximately $1.2 billion was recorded as goodwill and is being amortized on a
straight-line basis over 40 years.
Prior to the acquisition, the Corporation provided certain services to TNN and
CMT for which it received a commission. Additionally, the Corporation owned a
33% interest in CMT.
On December 31, 1996, the Corporation acquired Infinity for $3.8 billion of
equity and $.9 billion of debt. The acquisition, which was accounted for under
the purchase method, resulted in an increase in the Corporation's shareholders'
equity at year-end 1996 of $3.8 billion from the issuance of 183 million shares
of common stock and the conversion of Infinity options into options to acquire
approximately 22 million additional shares of the Corporation's common stock.
The estimated fair values of assets acquired and liabilities assumed are
summarized in the following table:
FAIR VALUES OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
(in millions)
<TABLE>
<CAPTION>
TNN AND CMT INFINITY
AT SEPTEMBER 30, AT DECEMBER 31,
1997 1996
- ------------------------------------------------------------
<S> <C> <C>
Cash $ 8 $ --
Receivables 63 180
Program rights 22 --
Investments -- 107
Assets held for sale -- 70
Property and equipment 49 39
Identifiable intangible assets:
FCC licenses -- 996
Cable license
agreements 506 --
Other -- 277
Goodwill 1,177 3,630
Other assets 4 31
Liabilities for
talent, program
rights, and similar
contracts (8) --
Debt -- (149)
Deferred income taxes (200) (328)
Other liabilities (71) (146)
- ------------------------------------------------------------
Total purchase price $1,550 $4,707
- ------------------------------------------------------------
</TABLE>
The following unaudited pro forma information combines the consolidated results
of operations of the Corporation with those of TNN and CMT and Infinity as if
these acquisitions had occurred at the beginning of 1996. The pro forma results
give effect to certain purchase accounting adjustments, including additional
depreciation expense resulting from a step-up in the basis of fixed assets,
additional amortization expense from goodwill and other identifiable intangible
assets, increased interest expense from acquisition debt, related income tax
effects, and the issuance of additional shares in connection with the
acquisitions.
PRO FORMA RESULTS
(unaudited, in millions except per-share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996
- -------------------------------------------------------------
<S> <C> <C>
Revenues $5,566 $5,137
Interest expense (386) (482)
Loss from Continuing Operations (129) (242)
Loss per common share--
Continuing Operations (.23) (.45)
- -------------------------------------------------------------
</TABLE>
This pro forma financial information is presented for comparative purposes only
and is not necessarily indicative of the operating results that actually would
have occurred had the TNN and CMT and Infinity acquisitions been consummated on
January 1, 1996. In addition, these results are not intended to be a projection
of future
CBS CORPORATION
32
<PAGE> 33
results and do not reflect any synergies that might be achieved from combined
operations.
NOTE 4: PENSIONS
The Corporation has a number of defined benefit pension plans covering
substantially all employees. Most plan benefits are based on either years of
service and compensation levels at the time of retirement or a formula based on
career earnings. Pension benefits are paid primarily from trusts funded by the
Corporation and employee contributions. The Corporation funds its qualified U.S.
pension plans at amounts equal to or greater than the minimum funding
requirements of the Employee Retirement Income Security Act of 1974, as amended.
Substantially all plan assets are invested in equity and fixed income
securities. The Corporation also participates in various multi-employer,
union-administered defined benefit plans that cover certain broadcast employees.
Pension expense related to these multi-employer plans for 1997 and 1996 was $11
million and $10 million, respectively, and was not material for 1995.
The components of net periodic pension cost follow:
NET PERIODIC PENSION COST
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 62 $ 70 $ 53
Interest cost on projected benefit
obligation 384 371 391
Amortization of unrecognized net
transition obligation 27 25 35
Amortization of unrecognized prior
service benefit (10) (7) (11)
Amortization of unrecognized net
loss 83 108 68
- -------------------------------------------------------------
546 567 536
Return on plan assets:
Actual return on plan assets (636) (437) (584)
Deferred gain 290 90 245
- -------------------------------------------------------------
Recognized return on plan assets (346) (347) (339)
- -------------------------------------------------------------
Net periodic pension cost $ 200 $ 220 $ 197
- -------------------------------------------------------------
</TABLE>
Of the net periodic pension cost shown in the preceding table, $83 million, $121
million, and $172 million are included in the results of operations of
Discontinued Operations for 1997, 1996, and 1995, respectively.
The assumptions used to develop the net periodic pension cost and the present
value of benefit obligations are shown in the following table:
SIGNIFICANT PENSION PLAN ASSUMPTIONS
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate:
Periodic pension cost 7.75% 6.75% 8.5%
Pension benefit obligation 7.25 7.75 6.75
Compensation increase rate 4.0 4.0 4.0
Long-term rate of return on plan
assets 9.5 9.5 9.75
- ---------------------------------------------------------------------
</TABLE>
Based on the requirements of SFAS No. 87, "Employers' Accounting for Pensions,"
the Corporation adjusts the discount rate to reflect current and expected-to-be-
available interest rates on high quality fixed income investments at the end of
each year.
The table on the following page sets forth the funded status of the defined
benefit plans and amounts recognized in the Corporation's balance sheet at
December 31, 1997 and 1996:
CBS CORPORATION
33
<PAGE> 34
FUNDED STATUS--PENSION PLANS
(in millions)
<TABLE>
<CAPTION>
1997 1996
----------------------------- -----------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
AT DECEMBER 31, BENEFITS ASSETS BENEFITS ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested $ (830) $(3,836) $(693) $(3,875)
Nonvested (22) (268) (47) (265)
- ------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation (852) (4,104) (740) (4,140)
Effect of projected future compensation levels (132) (188) (116) (198)
- ------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation for service rendered to date (984) (4,292) (856) (4,338)
Plan assets at fair value 1,023 2,991 879 3,051
- ------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets 39 (1,301) 23 (1,287)
Unrecognized net loss (gain) 30 1,355 (1) 1,402
Prior service cost (benefit) not yet recognized in net
periodic pension cost (63) (72) 9 (86)
Unrecognized net transition obligation (asset) (6) 94 (11) 128
- ------------------------------------------------------------------------------------------------------------------------------
Prepaid pension cost -- 76 20 157
Minimum pension liability -- (1,189) -- (1,246)
- ------------------------------------------------------------------------------------------------------------------------------
Pension asset (liability) included in consolidated balance
sheet $ -- $(1,113) $ 20 $(1,089)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Corporation sponsors various non-qualified supplemental pension plans that
provide additional benefits to certain employees. For financial reporting
purposes, these plans are treated as non-funded pension plans. The unfunded
accumulated benefit obligation under these plans included in the preceding table
at December 31, 1997 and 1996 is $307 million and $260 million, respectively.
At December 31, 1997 and 1996, included in the balance sheet of Continuing and
Discontinued Operations are the following pension assets and liabilities:
BALANCE SHEET STATUS
(in millions)
<TABLE>
<CAPTION>
1997
------------------------
NET
PENSION INTANGIBLE
AT DECEMBER 31, LIABILITY ASSET
- ------------------------------------------------------------
<S> <C> <C>
Continuing Operations $(1,149) $22
Discontinued Operations 36 --
- ------------------------------------------------------------
Total $(1,113) $22
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1996
------------------------
NET
PENSION INTANGIBLE
AT DECEMBER 31, LIABILITY ASSET
- ------------------------------------------------------------
<S> <C> <C>
Continuing Operations $(1,061) $40
Discontinued Operations (8) --
- ------------------------------------------------------------
Total $(1,069) $40
- ------------------------------------------------------------
</TABLE>
Included in plan assets at December 31, 1997 are 5,614,600 shares of the
Corporation's common stock having a market value of $165 million. Dividends paid
by the Corporation during 1997 on shares held by the pension fund totaled $1
million.
During 1997 and 1996, respectively, the Corporation contributed $164 million and
$250 million of cash to its pension plans.
Pension plans are considered unfunded when the accumulated benefit obligation
exceeds the fair value of plan assets. Accordingly, the Corporation has recorded
a minimum pension liability and a charge to shareholders' equity, net of taxes,
for its unfunded pension plans, as shown in the following table:
EFFECT OF MINIMUM PENSION LIABILITY ON EQUITY
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
- -------------------------------------------------------------
<S> <C> <C>
Unfunded pension obligation $(1,113) $(1,089)
Less: Prepaid pension cost 76 157
- -------------------------------------------------------------
Minimum pension liability (1,189) (1,246)
Add: Intangible pension asset 22 40
Add: Deferred tax effects 396 410
- -------------------------------------------------------------
Reduction of shareholders' equity $ (771) $ (796)
- -------------------------------------------------------------
</TABLE>
CBS CORPORATION
34
<PAGE> 35
NOTE 5: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS, AND POSTEMPLOYMENT BENEFITS
The Corporation has postretirement plans that provide defined medical, dental,
and life insurance benefits for eligible retirees and dependents.
The components of net periodic postretirement benefit cost follow:
NET PERIODIC POSTRETIREMENT BENEFIT COST
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 11 $ 11 $ 13
Interest cost on accumulated
postretirement benefit obligation 104 97 100
Amortization of unrecognized net
loss (gain) 1 4 (4)
Recognized return on plan assets (5) (5) (1)
- -------------------------------------------------------------
Net periodic postretirement benefit
cost $111 $107 $108
- -------------------------------------------------------------
</TABLE>
Of the net periodic postretirement benefit cost shown in the preceding table,
$42 million, $55 million, and $77 million are included in the results of
operations of Discontinued Operations for 1997, 1996, and 1995, respectively.
The assumptions used to develop the net periodic postretirement benefit cost and
the present value of benefit obligations are shown in the following table:
SIGNIFICANT POSTRETIREMENT BENEFIT PLAN
ASSUMPTIONS
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996 1995
- -----------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.25% 7.75% 6.75%
Health care cost trend rates 9.5* 10.0* 10.5*
Compensation increase rate 4.0 4.0 4.0
Long-term rate of return on plan
assets 7.0 7.0 7.0
- -----------------------------------------------------------
</TABLE>
* At December 31, 1997, the rate was assumed to decrease ratably to 5.50% in
2005, decrease to 5.25% in 2006, and remain at that level thereafter. At
December 31, 1996, the rate was assumed to decrease ratably to 6% in 2004,
decrease to 5.75% in 2005, and remain at that level thereafter. At December
31, 1995, the rate was assumed to decrease ratably to 5% in 2006, decrease to
4.75% in 2007, and remain at that level thereafter.
Net periodic postretirement benefit cost is determined using the assumptions as
of the beginning of the year. The funded status is determined using the
assumptions as of the end of the year.
The funded status and amounts recognized in the Corporation's balance sheet at
December 31, 1997 and 1996 were as follows:
FUNDED STATUS--POSTRETIREMENT BENEFITS
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
- --------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $(1,157) $(1,099)
Fully eligible, active plan participants (53) (61)
Other active plan participants (215) (245)
- --------------------------------------------------------------
Total accumulated postretirement
benefit obligation (1,425) (1,405)
Unrecognized net loss 197 152
Unrecognized prior service benefit (36) (33)
Plan assets at fair value 69 68
- --------------------------------------------------------------
Accrued postretirement benefit cost $(1,195) $(1,218)
- --------------------------------------------------------------
</TABLE>
The accrued postretirement benefit cost included in the net assets of
Discontinued Operations at December 31, 1997 and 1996 was $35 million and $59
million, respectively.
The funded assets consist primarily of interest-bearing securities. The effect
of a 1% annual increase in the assumed health care cost trend rates would
increase the accumulated postretirement benefit obligation by approximately $33
million and would increase net periodic postretirement benefit cost by
approximately $3 million.
The Corporation provides certain postemployment benefits to former or inactive
employees and their dependents during the time period following employment but
before retirement. At December 31, 1997 and 1996, the Corporation's liability
for postemployment benefits totaled $66 million and $67 million, respectively.
The portion of this liability included in the net assets of Discontinued
Operations was $38 million and $40 million at December 31, 1997 and 1996,
respectively.
NOTE 6: INCOME TAXES
Income tax expense (benefit) included in the consolidated financial statements
follows:
COMPONENTS OF CONSOLIDATED INCOME TAX EXPENSE (BENEFIT)
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------
<S> <C> <C> <C>
Continuing Operations $ 73 $(71) $ 75
Discontinued Operations 667 573 (47)
Extraordinary item -- (60) --
- -------------------------------------------------------------
Income tax expense $740 $442 $ 28
- -------------------------------------------------------------
</TABLE>
The tax provision for Discontinued Operations includes tax expense of $779
million in 1997 and $868 million in
CBS CORPORATION
35
<PAGE> 36
1996 for the estimated gain on disposal of Discontinued Operations. The 1995 tax
benefit includes $32 million associated with the estimated loss on disposal of
Discontinued Operations.
INCOME TAX EXPENSE (BENEFIT) FROM
CONTINUING OPERATIONS
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 37 $(17) $132
State 19 (19) 27
Foreign 1 -- --
- -------------------------------------------------------------
Total current income tax expense
(benefit) 57 (36) 159
- -------------------------------------------------------------
Deferred:
Federal 14 (28) (69)
State 2 (7) (15)
- -------------------------------------------------------------
Total deferred income tax expense
(benefit) 16 (35) (84)
- -------------------------------------------------------------
Income tax expense (benefit) $ 73 $(71) $ 75
- -------------------------------------------------------------
</TABLE>
CONSOLIDATED INCOME TAX EXPENSE (BENEFIT)
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 79 $ 88 $ 18
State 73 52 7
Foreign 46 27 27
- -------------------------------------------------------------
Total current income tax expense 198 167 52
- -------------------------------------------------------------
Deferred:
Federal 553 269 (34)
State (41) (2) (5)
Foreign 30 8 15
- -------------------------------------------------------------
Total deferred income tax expense
(benefit) 542 275 (24)
- -------------------------------------------------------------
Income tax expense $740 $442 $ 28
- -------------------------------------------------------------
</TABLE>
During 1997, 1996, and 1995, $14 million, $229 million, and ($138) million of
deferred tax effects, respectively, were recorded in shareholders' equity as
part of the minimum pension liability adjustment. See note 4 to the financial
statements.
The foreign portion of income or loss before income taxes and minority interest
in income of consolidated subsidiaries included in the Corporation's results of
operations for both Continuing and Discontinued Operations consisted of income
of $476 million in 1997, $32 million in 1996, and $128 million in 1995. Such
income consists of profits and losses generated from foreign operations,
primarily of Discontinued Operations, that can be subject to both U.S. and
foreign income taxes.
Deferred income taxes result from temporary differences in the financial bases
and tax bases of assets and liabilities. The types of differences that give rise
to significant portions of deferred income tax liabilities or assets are shown
in the following table:
CONSOLIDATED DEFERRED INCOME TAXES BY SOURCE
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
- -------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Provision for expenses and losses $ 1,204 $ 1,352
Long-term contracts in process 91 38
Minimum pension liabilities 382 360
Operating losses and credit
carryforwards 316 796
Postretirement and postemployment
benefits 442 450
Other 281 276
- -------------------------------------------------------------
Total deferred tax assets 2,716 3,272
Valuation allowance (137) (52)
- -------------------------------------------------------------
Net deferred tax asset 2,579 3,220
- -------------------------------------------------------------
Deferred tax liabilities:
Accelerated depreciation and
amortization (1,176) (992)
Leasing activities (572) (575)
Other (170) (242)
- -------------------------------------------------------------
Total deferred tax liabilities (1,918) (1,809)
- -------------------------------------------------------------
Deferred income taxes, net asset $ 661 $ 1,411
- -------------------------------------------------------------
</TABLE>
At December 31, 1997 and 1996, included in the balance sheet of Continuing
Operations and net assets of Discontinued Operations are the following net
deferred tax assets:
BALANCE SHEET STATUS
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
- ------------------------------------------------------------
<S> <C> <C>
Continuing Operations $170 $ 687
Discontinued Operations 491 724
- ------------------------------------------------------------
Deferred income taxes, net asset $661 $1,411
- ------------------------------------------------------------
</TABLE>
The valuation allowance for deferred taxes reflects foreign tax credits and
operating loss carryforwards of certain foreign subsidiaries not anticipated to
be utilized as a result of divestitures of foreign subsidiaries principally
related to Discontinued Operations.
At December 31, 1997, there were alternative minimum tax credit carryforwards of
$302 million that have no expiration date. At December 31, 1997, there were $30
million of net operating loss carryforwards attributable to foreign
subsidiaries. Of this total, approximately $14 million has no expiration date.
The remaining amount will expire not later than 2004. At December 31, 1997,
there were $169 million of foreign tax credit carryforwards, $23 million of
which will expire in 1999. The remaining amount will expire no later than 2003.
CBS CORPORATION
36
<PAGE> 37
INCOME TAX EXPENSE (BENEFIT) FROM
CONTINUING OPERATIONS
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- -----------------------------------------------------------
<S> <C> <C> <C>
Federal income tax expense (benefit)
at statutory rate $(21) $(102) $45
Increase (decrease) in tax resulting
from:
Amortization of goodwill 78 42 7
State income tax expense (benefit),
net of federal effect 13 (17) 8
Lower tax rate on income of foreign
sales corporations (5) (2) --
Gain on sale of stock of subsidiary
and affiliate -- -- 12
Nondeductible expenses 3 4 1
Other differences, net 5 4 2
- -----------------------------------------------------------
Income tax expense (benefit) from
Continuing Operations $ 73 $ (71) $75
- -----------------------------------------------------------
</TABLE>
The federal income tax returns of the Corporation and its wholly owned
subsidiaries are settled through the year ended December 31, 1989. The
Corporation has reached an agreement with the Internal Revenue Service regarding
certain issues for the years 1990 through 1992 and a tentative agreement for
1993. Management believes that adequate provisions for taxes have been made
through December 31, 1997.
NOTE 7: DISCONTINUED OPERATIONS
In November 1996, the Corporation's Board of Directors conditionally approved a
plan for a strategic restructuring whereby the Corporation would separate its
media and industrial businesses. The Corporation planned to form a new company
to be called WELCO, which, after modification of the plan, included all of the
Corporation's then-remaining industrial businesses except for Thermo King.
In September 1997, the Corporation reached a definitive agreement to sell Thermo
King for cash proceeds of $2.56 billion. The sale was completed on October 31,
1997.
In November 1997, the Corporation announced a definitive agreement to sell Power
Generation, the largest component of WELCO, for cash proceeds of $1.525 billion.
The sale of Power Generation is expected to be completed in mid-1998. The
remaining industrial businesses, consisting primarily of Energy Systems and
Government Operations, are expected to be divested in 1998.
The assets, liabilities, and results of operations for Thermo King and WELCO are
classified as Discontinued Operations except for certain liabilities expected to
be retained by the Corporation. See note 12 to the financial statements. In
connection with the disposal of Thermo King and WELCO, the Corporation
recognized a combined net gain of $871 million in the fourth quarter of 1997.
This net gain includes an after-tax adjustment of approximately $125 million for
additional divestiture costs associated with prior disposal plans.
The Corporation had previously adopted several other separate plans to dispose
of major segments of its business. The following table summarizes each of the
Corporation's segment disposal plans as well as the assets remaining at December
31, 1997.
<TABLE>
<CAPTION>
MEASUREMENT DATE BUSINESS SEGMENT REMAINING ASSETS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
September 1997 WELCO All assets
Thermo King None
November 1996 CISCO Three miscellaneous operations
March 1996 Environmental Services Three waste incineration plants
December 1995 Knoll None
Defense and Electronic Systems None
July 1995 WCI Mortgage notes receivable and
miscellaneous securities
November 1992 Financial Services Leasing portfolio
Distribution & Control (DCBU) None
Westinghouse Electric Supply Company Miscellaneous securities
(WESCO)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Sales of Knoll and the defense and electronic systems business were completed in
the first quarter of 1996 for combined cash proceeds of $3.6 billion plus
assumption by the buyer of certain pension and postretirement benefit
liabilities associated with the active employees of the business. A combined
after-tax gain of $1.2 billion was recognized. Exit plans for the CISCO segment
and the environmental services line of business, which were adopted later in
1996, reduced the after-tax gain by approximately $200 million. The majority of
the businesses comprising these segments were divested in 1997
CBS CORPORATION
37
<PAGE> 38
and 1996 although completion of the disposal of the remaining operations is
expected in 1998.
In connection with the July 1995 sale of WCI, the Corporation recognized a net
loss of $76 million. The majority of the mortgage notes receivables remaining
after the sale have been liquidated. Disposal of the miscellaneous securities
and liquidation of the remaining notes are expected in 1998.
Portfolio investments remaining from the Corporation's 1992 plan to exit the
Financial Services business consist primarily of receivables related to the
leasing portfolio. The leasing portfolio is expected to liquidate through 2015
in accordance with contractual terms and generally consists of direct financing
and leveraged leases. At December 31, 1997 and 1996, 83% and 84% of the leases,
respectively, related to aircraft while the remainder primarily related to
cogeneration facilities.
The assets and liabilities of Discontinued Operations have been separately
classified on the balance sheet as net assets of Discontinued Operations. A
summary of these assets and liabilities follows:
NET ASSETS OF DISCONTINUED OPERATIONS
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
- -------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and cash equivalents $ 59 $ 104
Customer receivables 537 867
Inventories 560 816
Costs and estimated earnings over
billings on uncompleted contracts 437 677
Portfolio investments 791 845
Plant and equipment, net 681 945
Deferred income taxes (note 6) 491 724
Other assets 545 732
- -------------------------------------------------------------
Total assets--Discontinued Operations $4,101 $5,710
- -------------------------------------------------------------
Liabilities:
Accounts payable 384 760
Billings over costs and estimated
earnings on uncompleted contracts 377 335
Short-term debt 7 18
Current maturities of long-term debt 96 2
Long-term debt 440 419
Liability for estimated loss on disposal 989 829
Settlements and environmental liabilities
(note 12) 625 757
Other liabilities 971 944
- -------------------------------------------------------------
Total liabilities--Discontinued Operations 3,889 4,064
- -------------------------------------------------------------
Net assets of Discontinued Operations $ 212 $1,646
- -------------------------------------------------------------
</TABLE>
Certain of WELCO's environmental and litigation-related liabilities are expected
to be assumed by buyers and are included in the net assets of Discontinued
Operations. Those that are not expected to be assumed by other parties in the
divestiture transactions have been separately presented as retained liabilities
of discontinued businesses. See note 12 to the financial statements.
PORTFOLIO INVESTMENTS
Portfolio investments at December 31, 1997 and 1996, consisted of leasing
receivables of $761 million and $800 million, respectively. Other portfolio
investments totaled $30 million and $45 million, respectively.
The following table presents the Corporation's net investment in leases:
NET INVESTMENT IN LEASES
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
- ------------------------------------------------------------
<S> <C> <C>
Rental payments receivable (net of principal
and interest on nonrecourse loans) $ 689 $ 737
Estimated residual value of leased assets 366 366
Unearned and deferred income (294) (303)
- ------------------------------------------------------------
Investment in leases (leasing receivables) 761 800
Deferred taxes and deferred investment tax
credits arising from leases (572) (575)
- ------------------------------------------------------------
Investment in leases, net $ 189 $ 225
- ------------------------------------------------------------
</TABLE>
At December 31, 1997 and 1996, deferred investment tax credits totaled $20
million and $21 million, respectively. These deferred investment tax credits are
amortized over the contractual terms of the respective leases.
Contractual maturities for the Corporation's leasing rental payments receivable
at December 31, 1997 are as follows:
CONTRACTUAL MATURITIES FOR LEASING RENTAL PAYMENTS RECEIVABLE
AT DECEMBER 31, 1997
(in millions)
<TABLE>
<CAPTION>
YEAR OF MATURITY
----------------------------------------
AFTER
TOTAL 1998 1999 2000 2001 2002 2002
- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$689 $45 $43 $55 $61 $147 $338
- -----------------------------------------------
</TABLE>
LONG-TERM DEBT
At December 31, 1997, long-term debt, including current maturities, consisted of
$382 million of allocated revolver borrowings under the Corporation's $5.5
billion credit facility (see note 10 to the financial statements) and $154
million of medium-term notes. At December 31, 1996, long-term debt consisted
principally of $263 million of revolver borrowings and $156 million of
medium-term notes. The weighted-average interest rate for 1997 was 8.9% for the
medium-term notes. Scheduled maturities of long-term debt at December 31, 1997
are $96 million in 1998, $46 million in 1999, $10 million in 2000, with the
CBS CORPORATION
38
<PAGE> 39
remaining balance of $384 million due in 2001. None of this debt is expected to
be assumed by buyers in divestiture transactions.
Long-term debt of Discontinued Operations generally will be repaid using cash
proceeds from the liquidation of the portfolio investments of Discontinued
Operations.
LIABILITY FOR ESTIMATED LOSS ON DISPOSAL
The liability for estimated loss on disposal includes estimated losses and
disposal costs associated with each divestiture transaction, including estimated
results of operations through the expected closing date and other costs expected
subsequent to the divestiture. Satisfaction of these liabilities is expected to
occur over the next several years. Management believes that the liability for
estimated loss on disposal at December 31, 1997 is adequate to cover divestiture
or liquidation of the remaining assets and liabilities of Discontinued
Operations.
Cash requirements to satisfy non-debt obligations of Discontinued Operations as
well as cash proceeds from the sale or liquidation of all other assets of
Discontinued Operations will affect cash flows of Continuing Operations.
RESULTS OF OPERATIONS
In accordance with APB 30, the consolidated financial statements reflect the
operating results of Discontinued Operations separately from Continuing
Operations. Interest expense on debt of Continuing Operations totaling $42
million, $60 million, and $96 million for 1997, 1996, and 1995, respectively,
was allocated to Discontinued Operations based on the ratio of the net assets of
Discontinued Operations to the sum of total consolidated net assets plus
consolidated debt. Summarized in the following table are the operating results
of Discontinued Operations:
OPERATING RESULTS OF DISCONTINUED OPERATIONS
(in millions)
<TABLE>
<CAPTION>
NET INCOME OPERATING
SALES OF (LOSS) BEFORE RESULTS AFTER
PRODUCTS OR MEASUREMENT MEASUREMENT
SERVICES DATE DATE
- ---------------------------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER
31, 1997
WELCO $ 3,102 $ (292) $ (55)
Thermo King 862 101 17
CISCO 204 -- (8)
Environmental
Services 89 -- (13)
Financial Services 12 -- (29)
- ---------------------------------------------------------------------
Total $ 4,269 $ (191) $ (88)
- ---------------------------------------------------------------------
YEAR ENDED DECEMBER
31, 1996
WELCO $ 3,467 $ (694) $ --
Thermo King 996 142 --
CISCO 337 (46) (24)
Environmental
Services 237 (11) (57)
Defense and
Electronic Systems 262 -- (19)
Knoll 90 -- (63)
Financial Services 26 -- (16)
- ---------------------------------------------------------------------
Total $ 5,415 $ (609) $(179)
- ---------------------------------------------------------------------
YEAR ENDED DECEMBER
31, 1995
WELCO $ 3,435 $ (229) $ --
Thermo King 1,039 138 --
CISCO 361 7 --
Environmental
Services 299 (32) --
Defense and
Electronic Systems 2,549 106 --
Knoll 621 14 --
WCI 108 15 --
Financial Services 31 -- (52)
- ---------------------------------------------------------------------
Total $ 8,443 $ 19 $ (52)
- ---------------------------------------------------------------------
</TABLE>
All operating results after the measurement date are charged to the liability
for estimated loss on disposal.
Operating cash flows from Discontinued Operations are presented separately from
Continuing Operations in the consolidated financial statements. Total operating
cash flows from Discontinued Operations consist of the following:
CBS CORPORATION
39
<PAGE> 40
CASH FLOWS FROM OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- ------------------------------------------------------------
<S> <C> <C> <C>
WELCO $(466) $ (77) $ 84
Thermo King 135 166 197
Knoll and Defense and Electronic
Systems (17) (328) 306
Environmental Services and CISCO (59) (76) (6)
Financial Services (30) 3 (81)
WCI -- -- 18
- ------------------------------------------------------------
Cash provided (used) by operating
activities $(437) $(312) $ 518
- ------------------------------------------------------------
</TABLE>
The cash flows presented in the preceding table include cash flows from the
operations of the businesses as well as payments for disposition-related costs.
NOTE 8: PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
- -------------------------------------------------------------
<S> <C> <C>
Land and buildings $ 642 $ 613
Equipment 802 730
Construction in progress 37 12
- -------------------------------------------------------------
Property and equipment, at cost 1,481 1,355
Accumulated depreciation (415) (338)
- -------------------------------------------------------------
Property and equipment, net $1,066 $1,017
- -------------------------------------------------------------
</TABLE>
For the years ended December 31, 1997, 1996, and 1995, depreciation expense
totaled $120 million, $105 million, and $32 million, respectively. Of these
amounts, $33 million, $29 million, and $9 million, respectively, were included
in operating expenses and $87 million, $76 million, and $23 million,
respectively, were included in marketing, administration, and general expenses.
NOTE 9: OTHER INTANGIBLE AND NONCURRENT ASSETS
OTHER INTANGIBLE AND NONCURRENT ASSETS
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
- -------------------------------------------------------------
<S> <C> <C>
Deferred income taxes (note 6) $ -- $ 310
Cable license agreements 491 --
Other intangible assets 384 400
Intangible pension asset (note 4) 22 40
Deferred charges 48 39
Joint ventures and other affiliates 122 142
Recoverable costs of discontinued
businesses (note 12) 208 235
Noncurrent receivables 145 91
Program rights 135 142
Other 55 168
- -------------------------------------------------------------
Other intangible and noncurrent assets $1,610 $1,567
- -------------------------------------------------------------
</TABLE>
Cable license agreements and other intangible assets are shown in the preceding
table net of accumulated amortization of $70 million at December 31, 1997 and
$33 million at December 31, 1996.
Joint ventures and other affiliates include investments in companies over which
the Corporation exercises significant influence but does not control.
FCC licenses and goodwill are shown on the balance sheet net of accumulated
amortization. At December 31, 1997 and 1996 accumulated amortization for FCC
licenses is $105 million and $51 million and for goodwill is $435 million and
$201 million, respectively.
NOTE 10: DEBT
SHORT-TERM DEBT
(in millions)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
1997
--------------------------------------------
AT DECEMBER 31 DURING THE YEAR
------------------- ----------------------
COMPOSITE AVG. OUT- WEIGHTED
BALANCE RATE STANDING AVG. RATE
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Credit facility $-- --% $362 6.0%
Short-term foreign
bank loans 89 4.7 76 5.4
Other -- -- 19 5.9
- -------------------------------------------------------------------
Total short-term debt $89
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1996
--------------------------------------------
AT DECEMBER 31 DURING THE YEAR
------------------- ----------------------
COMPOSITE AVG. OUT- WEIGHTED
BALANCE RATE STANDING AVG. RATE
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Credit facility $295 7.6% $264 6.5%
Short-term foreign
bank loans 58 3.4 35 4.5
Other 131 7.4 72 6.3
- -------------------------------------------------------------------
Total short-term debt $484
- -------------------------------------------------------------------
</TABLE>
Average outstanding borrowings were determined based on daily amounts
outstanding for the credit facilities and on monthly balances outstanding for
short-term foreign bank loans.
CBS CORPORATION
40
<PAGE> 41
LONG-TERM DEBT
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
- -------------------------------------------------------------
<S> <C> <C>
Revolver $1,083 $2,787
8 3/8% notes due 2002 348 348
7 7/8% debentures due 2023 325 325
6 7/8% notes due 2003 275 275
8 5/8% debentures due 2012 273 273
8 7/8% notes due 2001 250 250
8 7/8% notes due 2014 150 150
7 5/8% notes due 2002 150 150
10 3/8% notes due 2002 -- 149
7 3/4% notes due 1999 125 125
7 1/8% notes due 2023 97 97
8 7/8% debentures due 2022 92 92
Medium-term notes due through 2001 76 78
Other 54 52
- -------------------------------------------------------------
3,298 5,151
Current maturities (62) (4)
- -------------------------------------------------------------
Long-term debt $3,236 $5,147
- -------------------------------------------------------------
</TABLE>
In March 1997, the Corporation redeemed the $149 million of 10 3/8% notes, which
were issued by Infinity prior to the acquisition.
The Corporation obtained a $5.5 billion credit facility in August 1996 that
provides for short-term money market loans and revolver borrowings. Borrowing
rates under the facility are determined at the time of each borrowing and are
based generally on a floating rate index, the London Interbank Offer Rate
(LIBOR), plus a margin based on the Corporation's senior unsecured debt rating
and leverage. The cost of the facility includes commitment fees, which are based
on the unutilized facility and vary with the Corporation's debt ratings. For
financial reporting purposes, revolver borrowings are classified as long term.
At December 31, 1997 and 1996, $382 million and $263 million, respectively, of
revolver borrowings were included in the net assets of Discontinued Operations.
See note 7 to the financial statements. There are no compensating balance
requirements under the facility.
The 8 7/8% debentures due 2022 may be redeemed after June 1, 2002 at specified
redemption prices. The 8 7/8% notes due 2014 are redeemable at 100% of principal
plus accrued interest at the election of the holder on June 14, 1999 or June 14,
2004. The Corporation may redeem the notes only if the total outstanding
principal is $10 million or less. Except for these debentures and notes and the
revolver borrowings, the remaining long-term debt outstanding at December 31,
1997 may not be redeemed prior to maturity.
At December 31, 1997, medium-term notes had interest rates ranging from 8.7% to
9.4%, with an average interest rate of 9.0%. During 1998, $58 million will
become due under the medium-term notes.
The scheduled maturities of long-term debt outstanding at December 31, 1997 for
each of the next five years are as follows:
SCHEDULED MATURITIES OF LONG-TERM DEBT
(in millions)
<TABLE>
<CAPTION>
YEAR OF MATURITY
----------------------------------
AT DECEMBER 31, 1997 1998 1999 2000 2001 2002
- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Long-term debt $62 $313 $1 $1,353 $500
- ------------------------------------------------------------
</TABLE>
NOTE 11: OTHER CURRENT AND NONCURRENT LIABILITIES
OTHER CURRENT LIABILITIES
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
- ------------------------------------------------------------
<S> <C> <C>
Accrued employee compensation $119 $ 127
Income taxes payable 30 163
Accrued restructuring costs 28 64
Accrued interest and insurance 54 75
Accrued liabilities 309 578
Retained liabilities of discontinued
businesses (note 12) 191 120
Other 137 253
- ------------------------------------------------------------
Total other current liabilities $868 $1,380
- ------------------------------------------------------------
</TABLE>
OTHER NONCURRENT LIABILITIES
(in millions)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
- -------------------------------------------------------------
<S> <C> <C>
Postretirement benefits (note 5) $1,160 $1,159
Postemployment benefits (note 5) 28 27
Deferred income taxes (note 6) 224 --
Accrued restructuring costs 13 53
Liabilities for talent and program rights 68 52
Accrued liabilities 201 379
Retained liabilities of discontinued
businesses (note 12) 767 806
Other 235 252
- -------------------------------------------------------------
Total other noncurrent liabilities $2,696 $2,728
- -------------------------------------------------------------
</TABLE>
NOTE 12: CONTINGENT LIABILITIES
Certain of the environmental and litigation-related liabilities associated with
the industrial businesses are not expected to be assumed by other parties in the
pending divestiture transactions and, therefore, would be retained by the
Corporation. These liabilities include environmental obligations that are not
related to active properties of operating businesses, accrued product liability
claims for divested businesses, liabilities associated with asbestos claims, and
general litigation claims not involving active businesses. Accrued liabilities
associated with these matters, which have been separately presented as retained
liabilities of discontinued businesses, totaled $958 million at December 31,
1997, including amounts
CBS CORPORATION
41
<PAGE> 42
related to previously discontinued businesses of CBS Inc. Of this amount, $767
million is classified as noncurrent. A separate asset of $244 million was
recorded for estimated amounts recoverable from third parties, of which $208
million is classified as noncurrent.
LEGAL MATTERS
Steam Generators
The Corporation has been defending various lawsuits brought by utilities
claiming a substantial amount of damages in connection with alleged tube
degradation in steam generators sold by Energy Systems as components of nuclear
steam supply systems. Since 1993, settlement agreements have been entered
resolving ten litigation claims. These agreements generally require the
Corporation to provide certain products and services at prices discounted at
varying rates. Two cases were resolved in favor of the Corporation after trial
or arbitration. One steam generator lawsuit remains.
The Corporation is also a party to five tolling agreements with utilities or
utility plant owners' groups that have asserted steam generator claims. The
tolling agreements delay initiation of any litigation for various specified
periods of time and permit the parties time to engage in discussions.
Accrued liabilities for previous and potential settlement agreements that
provide for costs in excess of discounted prices are included in Discontinued
Operations.
Securities Class Actions--Financial Services
The Corporation has been defending derivative and class action lawsuits alleging
federal securities law and common law violations arising out of purported
misstatements or omissions contained in the Corporation's public filings
concerning the financial condition of the Corporation and certain of its former
subsidiaries in connection with charges to earnings of $975 million in 1990 and
$1,680 million in 1991 and a public offering of the Corporation's common stock
in 1991. The court dismissed both the derivative claim and the class action
claims in their entirety. These dismissals were appealed. In July 1996, the
United States Court of Appeals for the Third Circuit (the Circuit Court)
affirmed the court's dismissal of the derivative claim. The Circuit Court also
affirmed in part and reversed in part the dismissal of the class action claims.
Those class action claims that were not dismissed by the Circuit Court have been
remanded to the lower court for further proceedings.
Asbestos
The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries, which allegedly occurred from use or
inclusion of asbestos in certain of the Corporation's products supplied by its
industrial businesses, generally in the pre-1970 time period. Typically, these
lawsuits are brought against multiple defendants. The Corporation was neither a
manufacturer nor a producer of asbestos and is oftentimes dismissed from these
lawsuits on the basis that the Corporation has no relationship to the products
in question or the claimant was not exposed to the Corporation's product. At
December 31, 1997, the Corporation had approximately 115,700 claims outstanding
against it.
In court actions that have been resolved, the Corporation has prevailed in the
majority of the asbestos claims and has resolved others through settlement.
Furthermore, the Corporation has brought suit against certain of its insurance
carriers with respect to these asbestos claims. Under the terms of a settlement
agreement resulting from this suit, carriers that have agreed to the settlement
are reimbursing the Corporation for a substantial portion of its current costs
and settlements associated with asbestos claims. The Corporation has recorded a
liability for asbestos-related matters that are deemed probable and can be
reasonably estimated, and has separately recorded an asset equal to the amount
of such estimated liabilities that will be recovered pursuant to agreements with
insurance carriers. The Corporation cannot reasonably estimate costs for
unasserted asbestos claims.
General
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in the steam generator claims, the securities class action,
and certain groupings of asbestos claims, and, although management believes a
significant adverse judgment is unlikely, any such judgment could have a
material adverse effect on the Corporation's results of operations for a quarter
or a year. However, based on its understanding and evaluation of the relevant
facts and circumstances, management believes that the Corporation has
meritorious defenses to the litigation described previously, and that the
Corporation has adequately provided for costs arising from potential settlement
of these matters when in the best interest of the Corporation. Management
believes that the litigation should not have a material adverse effect on the
financial condition of the Corporation.
ENVIRONMENTAL MATTERS
Compliance with federal, state, and local laws and regulations relating to the
discharge of pollutants into the environment, the disposal of hazardous wastes,
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. It is difficult to estimate the
timing and ultimate costs to be incurred in the future due to uncertainties
about the status of laws, regulations, and technology; the adequacy of
information available for
CBS CORPORATION
42
<PAGE> 43
individual sites; the extended time periods over which site remediation occurs;
and the identification of new sites. The Corporation has, however, recognized an
estimated liability, measured in current dollars, for those sites where it is
probable that a loss has been incurred and the amount of the loss can be
reasonably estimated. The Corporation recognizes changes in estimates as new
remediation requirements are defined or as more information becomes available.
With regard to remedial actions under federal and state Superfund laws, the
Corporation has been named a potentially responsible party (PRP) at numerous
sites located throughout the country. At many of these sites, the Corporation is
either not a responsible party or its site involvement is very limited or de
minimis. However, the Corporation may have varying degrees of cleanup
responsibilities at approximately 90 sites. The Corporation believes that any
liability incurred for cleanup at these sites will be satisfied over a number of
years, and in many cases, the costs will be shared with other responsible
parties. These sites include certain sites for which the Corporation, as part of
an agreement for sale, has retained obligations for remediation of environmental
contamination and for other Comprehensive Environmental Response Compensation
and Liability Act (CERCLA) issues.
Based on the costs associated with the most probable alternative remediation
strategy for the previously mentioned sites, the Corporation has an accrued
liability of $402 million at December 31, 1997. Depending on the remediation
alternatives ultimately selected, the costs related to these sites could differ
from the amounts currently accrued. The accrued liability includes $284 million
for site investigation and remediation, and $118 million for post-closure and
monitoring activities. Management anticipates that the majority of expenditures
for site investigation and remediation will occur during the next five to ten
years. Expenditures for post-closure and monitoring activities will be made
during periods of up to 30 years. In addition, included in Discontinued
Operations are environmental liabilities directly related to active sites that
are expected to be assumed by buyers in divestiture transactions.
Other
The Corporation is involved with several administrative actions alleging
violations of federal, state, or local environmental regulations. For these
matters, the Corporation has estimated its remaining reasonably possible costs
and determined them to be immaterial.
Management believes, based on its best estimate, that the Corporation has
adequately provided for its present environmental obligations and that complying
with existing government regulations will not materially impact the
Corporation's financial position, liquidity, or results of operations.
NOTE 13: LEASES AND OTHER COMMITMENTS
Leases
The Corporation has commitments under operating and capital leases for certain
facilities and equipment. Rental expense for Continuing Operations in 1997,
1996, and 1995 was $64 million, $51 million, and $15 million, respectively.
These amounts include immaterial amounts for contingent rentals and sublease
income.
Additionally, the Corporation's outdoor advertising business has franchise
rights entitling it to display advertising on such media as buses, taxis,
trains, bus shelters, terminals, billboards, and phone kiosks. Under most of
these franchise agreements, the franchiser is entitled to receive the greater of
a percentage of the relevant advertising revenues, net of advertising agency
fees, or a specified guaranteed minimum annual payment. Franchise payments
totaled $192 million in 1997.
MINIMUM RENTAL PAYMENTS
(in millions)
<TABLE>
<CAPTION>
GUARANTEED
LEASES MINIMUM
------------------- FRANCHISE
AT DECEMBER 31, 1997 OPERATING CAPITAL PAYMENTS
- -------------------------------------------------------------
<S> <C> <C> <C>
1998 $ 56 $ 7 $153
1999 44 7 157
2000 40 6 126
2001 33 6 87
2002 31 6 41
Thereafter 88 17 4
- -------------------------------------------------------------
Minimum rental payments $292 49 $568
- -------------------------------------------------------------
Interest and executory
costs (6)
- -------------------------------------------------------------
Present value of minimum
rental payments $43
- -------------------------------------------------------------
</TABLE>
CBS CORPORATION
43
<PAGE> 44
Other Commitments
The Corporation routinely enters into commitments to purchase the rights to
broadcast programs, including feature films and sports events. These contracts
permit the broadcast of such properties for various periods. At December 31,
1997, the Corporation was committed to make payments under such broadcasting
contracts, along with commitments for talent contracts, of $3,502 million. At
December 31, 1997, aggregate payments related to these commitments during the
next five years and thereafter are as follows:
OTHER COMMITMENTS
(in millions)
<TABLE>
<CAPTION>
AGGREGATE
AT DECEMBER 31, 1997 PAYMENTS
- ------------------------------------------------------------
<S> <C>
1998 $1,095
1999 813
2000 631
2001 473
2002 397
Thereafter 93
- ------------------------------------------------------------
Total other commitments $3,502
- ------------------------------------------------------------
</TABLE>
In addition to the amounts in the preceding table are commitments related to an
eight-year agreement reached in January 1998, approximating $4 billion, for
rights to broadcast certain National Football League games.
NOTE 14: SHAREHOLDERS' EQUITY
In connection with the TNN and CMT acquisition on September 30, 1997, the
Corporation issued 59 million shares of common stock resulting in an increase in
shareholders' equity of $1.55 billion.
On May 30, 1997, the Corporation redeemed all outstanding shares of its Series C
Conversion Preferred Stock (Series C Preferred) and, in connection with the
redemption, issued 32 million shares of common stock. All accrued and unpaid
dividends on the redeemed shares of Series C Preferred were paid on May 30,
1997.
On December 31, 1996, the Corporation issued 183 million shares of common stock
for the acquisition of Infinity resulting in an increase in shareholders' equity
of $3.8 billion.
On September 1, 1995, the Corporation's Series B Conversion Preferred Stock
(Series B Preferred), outstanding since 1992, mandatorily converted into 33
million shares of common stock.
COMMON SHARES
(shares in thousands)
<TABLE>
<CAPTION>
IN
ISSUED TREASURY OUTSTANDING
- ------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1,
1995 393,080 36,288 356,792
Shares issued for
dividend reinvestment
plan -- (450) 450
Shares issued for
employee plans -- (5,886) 5,886
Shares issued for
conversion of Series B
Preferred 32,890 -- 32,890
- ------------------------------------------------------------
Balance at December 31,
1995 425,970 29,952 396,018
- ------------------------------------------------------------
Shares issued for
dividend reinvestment
plan -- (1,071) 1,071
Shares issued for
employee plans -- (6,254) 6,254
Shares issued for
Infinity acquisition 183,002 -- 183,002
- ------------------------------------------------------------
Balance at December 31,
1996 608,972 22,627 586,345
- ------------------------------------------------------------
Shares used for dividend
reinvestment plan 384 (29) 413
Shares issued for
employee plans 17,245 (925) 18,170
Shares issued for TNN and
CMT acquisition 59,058 -- 59,058
Shares issued for
conversion of Series C
Preferred 31,859 -- 31,859
- ------------------------------------------------------------
Balance at December 31,
1997 717,518 21,673 695,845
- ------------------------------------------------------------
</TABLE>
Of the common stock held in treasury at December 31, 1997, 1996, and 1995, 18
million, 22 million, and 21 million shares, respectively, were held by the
Corporation's rabbi trusts for the payment of benefits under executive benefit
plans.
On December 29, 1995, the Board of Directors adopted a shareholder rights plan
providing for the distribution of one right for each share of common stock
outstanding on January 9, 1996 or issued thereafter until the occurrence of
certain events. The rights become exercisable only in the event, with certain
exceptions, that an acquiring party accumulates 15% or more of the Corporation's
voting stock or a party announces an offer to acquire 30% or more of the voting
stock. The rights have an exercise price of $64 per share and expire on January
9, 2006. The Board of Directors has adopted a resolution affirming its intention
to redeem the rights in January 2001 (if still outstanding). Upon the occurrence
of certain events, holders of the rights will be entitled to purchase either CBS
Corporation preferred shares or shares in an acquiring entity at half of market
value. The Corporation is entitled to redeem the rights at a value of $.01 per
right at any time until the tenth day following the acquisition of a 15%
position in its voting stock.
CBS CORPORATION
44
<PAGE> 45
NOTE 15: EARNINGS (LOSS) PER COMMON SHARE--CONTINUING OPERATIONS
At December 31, 1997, the Corporation adopted SFAS 128, which establishes
standards for computing and disclosing basic and diluted earnings per common
share. The following is the computation of basic and diluted earnings per common
share in accordance with the new standard:
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE--CONTINUING OPERATIONS
(in millions except per-share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- --------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) from Continuing
Operations $ (131) $ (221) $ 47
Less: Preferred stock dividends (23) (47) (81)
- --------------------------------------------------------------
Loss applicable to common stock $ (154) $ (268) $ (34)
Average shares outstanding 629 401 370
Basic and diluted loss per common
share $ (.24) $ (.67) $ (.09)
- --------------------------------------------------------------
</TABLE>
Options to purchase shares of common stock as well as shares of common stock
issuable under deferred compensation arrangements and preferred stock were not
included in the computation of diluted earnings per common share because their
inclusion would result in a smaller loss per common share. During 1997, 1996,
and 1995, common shares issuable under deferred compensation arrangements
approximated 6 million. See note 16 to the financial statements for additional
information on stock options.
NOTE 16: STOCK-BASED COMPENSATION PLANS
At December 31, 1997, the Corporation had several stock-based compensation plans
that provide for the granting of stock options, restricted stock, and other
performance awards to employees or directors of the Corporation. At December 31,
1997 and 1996, shares authorized for awards under these plans totaled 49.5
million and 37.4 million, respectively. Of these amounts, 8.1 million and 7.0
million, respectively, remained available for award. Generally, stock option
awards are granted for terms of 10 years or less and become exercisable in whole
or in part after the commencement of the second year of the term.
In addition to the stock options shown in the following table, the Corporation
granted 9,449 and 49,174 shares of restricted stock to employees and directors
in 1997 and 1996, respectively. These shares had a weighted-average fair value
at date of grant of $18.52 and $18.41, respectively, with a weighted-average
vesting period of one year for the 1997 grants and two years for the 1996
grants.
In connection with the acquisitions of TNN and CMT, and Infinity, the
Corporation assumed options outstanding under the Gaylord and Infinity plans as
of the date of the acquisition. The then-outstanding options were converted to
options to acquire the Corporation's common stock and are included in the
following table as awards assumed. Exercise prices for awards assumed in the
1997 TNN and CMT acquisition, which generally have ten-year terms and become
exercisable ratably in years two through five, range from $9.45 to $25.41.
Exercise prices for awards assumed in the 1996 Infinity acquisition, which
generally have ten-year terms and become exercisable ratably over a five-year
period, range from $.0002 to $19.66.
Of the options granted by the Corporation in 1995, 2.4 million were performance
stock options. The vesting of these options was contingent on attainment of
specific performance targets. All of these options terminated in 1996 or 1997
because the performance targets were not met.
CBS CORPORATION
45
<PAGE> 46
STOCK OPTION INFORMATION
(shares in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1 57,816 $13.15 28,384 $17.41 20,504 $18.66
Options granted 12,917 19.30 10,990 19.09 8,945 14.17
Options exercised (8,106) 14.62 (1,728) 13.22 (481) 11.75
Options forfeited (1,945) 10.69 (1,750) 15.93 (584) 16.15
Options expired (397) 30.70 (306) 27.41 -- --
Awards assumed 124 17.06 22,226 5.18 -- --
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 31 60,409 $14.05 57,816 $13.15 28,384 $17.41
- --------------------------------------------------------------------------------------------------------------------------
Exercisable at December 31 45,267 $18.87 41,251 $12.07 18,456 $18.92
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ------------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
FAIR EXERCISE FAIR EXERCISE FAIR EXERCISE
VALUE PRICE VALUE PRICE VALUE PRICE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options granted:
Exercise price equaled grant date
stock price $7.92 $19.30 $7.41 $18.86 $5.95 $14.31
Exercise price exceeded grant date
stock price 6.51 23.46 5.92 20.74 4.81 18.67
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
STOCK OPTIONS OUTSTANDING AT DECEMBER 31, 1997
(shares in thousands)
<TABLE>
<CAPTION>
WEIGHTED-
OPTIONS AVERAGE WEIGHTED-
OUTSTANDING WEIGHTED- REMAINING EXERCISABLE AVERAGE
RANGE OF AT AVERAGE CONTRACTUAL AT EXERCISE
EXERCISE DECEMBER 31, EXERCISE LIFE DECEMBER 31, PRICE OF
PRICES 1997 PRICE IN YEARS 1997 EXERCISABLE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$.0002 - 4.99 11,797 $ 0.73 2.2 11,797 $ 0.73
5 - 9.99 5,572 7.04 6.5 4,219 7.06
10 - 14.99 7,606 13.35 7.2 6,299 13.27
15 - 19.99 27,645 17.83 7.8 17,115 17.38
20 - 29.99 6,980 25.39 5.1 5,028 26.60
30 - 36.53 809 36.45 2.4 809 36.45
- -------------------------------------------------------------------------------------------
TOTAL 60,409 45,267
- -------------------------------------------------------------------------------------------
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1997, 1996, and 1995, respectively: risk-free
interest rates of 6.4%, 6.1%, and 7.2%; expected dividend yields of 1.0%, 1.1%,
and 1.4%; expected volatility of 30%, 30%, and 31%; and expected lives of 7.3
years, 7.4 years, and 7.3 years.
The Corporation accounts for its stock-based compensation plans under APB 25.
For stock options granted, the option price is not less than the market value of
shares on the grant date; therefore, no compensation cost has been recognized
for stock options granted. Had compensation cost for these plans been determined
under the provisions of SFAS 123, the Corporation's net income and earnings per
share would have been reduced to the following pro forma amounts:
CBS CORPORATION
46
<PAGE> 47
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- -----------------
AS PRO AS PRO AS PRO
YEAR ENDED DECEMBER 31, REPORTED FORMA REPORTED FORMA REPORTED FORMA
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) (in millions) $549 $487 $95 $57 $(10) $(29)
Basic and diluted earnings (loss) per common share .84 .74 .12 .02 (.25) (.30)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 17: RESTRUCTURING
In recent years, the Corporation has restructured its corporate headquarters and
certain aspects of its businesses in an effort to reduce its cost structure and
remain competitive in its markets. Restructuring activities primarily involve
the separation of employees, the termination of leases, and similar actions.
Costs for restructuring activities are limited to incremental costs that
directly result from the restructuring activities and provide no future benefit
to the Corporation.
Restructuring costs, totaling $15 million in 1997, $57 million in 1996, and $25
million in 1995, are included in marketing, administration, and general
expenses. Except for costs totaling $32 million in 1996, these costs essentially
were for the separation of employees. The 1996 plan also included asset
write-downs of $15 million and lease termination and other facility closure
costs of $17 million.
Generally, separated employees receive benefits under certain plans, including
layoff income benefits, permanent job separation benefits, retraining, and/or
outplacement assistance. The amount included for these benefits in the
restructuring charge represents the incremental cost of such benefits over those
amounts previously accrued under SFAS No. 112, "Employers' Accounting for
Postemployment Benefits."
The 1997 plan involves the separation of 118 employees at the former Pittsburgh
headquarters related to the transfer of the Corporation's overhead functions to
New York. Implementation of the plan began in January 1998 and generally is
expected to be completed in early 1999.
Of the employee separations in the 1996 and 1995 plans, the majority were
completed at December 31, 1997. Employee separation costs generally are paid
over a period of up to two years following the separation.
In connection with the acquisition of CBS Inc., the Corporation developed a
restructuring plan to integrate the operations of CBS Inc. with those of the
Corporation and eliminate duplicate facilities and functions. The cost of this
plan, which approximated $100 million, was recorded in connection with the
purchase. In addition, the costs for integration activities for the acquiring
company are included in the 1996 costs described previously.
The following is a reconciliation of the restructuring liability for Continuing
Operations:
RECONCILIATION OF RESTRUCTURING LIABILITY
(in millions)
<TABLE>
<S> <C>
- -------------------------------------------------------------
Balance at January 1, 1995 $ 11
Provision for restructuring 25
CBS Inc. acquisition plan 100
Cash expenditures (19)
- -------------------------------------------------------------
Balance at December 31, 1995 117
Provision for restructuring 57
Cash expenditures (50)
Noncash charges (7)
- -------------------------------------------------------------
Balance at December 31, 1996 117
Provision for restructuring 15
Cash expenditures (83)
Noncash charges (8)
- -------------------------------------------------------------
Balance at December 31, 1997 $ 41
- -------------------------------------------------------------
</TABLE>
NOTE 18: OTHER INCOME (EXPENSE), NET
OTHER INCOME (EXPENSE), NET
(in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- ----------------------------------------------------------
<S> <C> <C> <C>
Interest income $11 $33 $ 13
Gain on disposition of assets 39 13 121
Operating results--non-
consolidated affiliates 9 10 15
Other 19 (1) 3
- ----------------------------------------------------------
Other income (expense), net $78 $55 $152
- ----------------------------------------------------------
</TABLE>
The gain on disposition of assets includes gains of $24 million in 1997 and $12
million in 1996 from sales of equity investments. The gain on disposition of
other assets for 1995 includes a gain of $115 million from the sale of the
Corporation's 62% interest in MICROS Systems, Inc.
CBS CORPORATION
47
<PAGE> 48
NOTE 19: SEGMENT INFORMATION
The Corporation's continuing businesses operate primarily in the United States
in the principal business areas of radio and television broadcasting and
broadcast and cable network programming and distribution. The Corporation's
Continuing Operations are aligned into the following four segments: Radio,
Television, Network, and Cable.
The Radio and Television Groups own and operate 76 radio stations and 14
television broadcasting stations. The pending acquisition of American Radio,
which is expected to close in the second quarter of 1998, will add approximately
100 radio stations, subject to any required divestitures. In addition, the Radio
Group participates in the outdoor advertising business through its subsidiary,
TDI Worldwide, Inc. The Corporation operates the CBS Television Network, which
provides entertainment, sports, and news programming for approximately 200
affiliates throughout the country. The Corporation also provides programming,
distribution, and network services primarily to the cable television industry.
The Cable Group owns two country music entertainment networks, TNN and CMT,
which were acquired in 1997; a 24-hour, Spanish-language news service,
TeleNoticias; a new cable channel, Eye on People; and two regional sports
networks.
The Corporation's Discontinued Operations generally consist of the industrial
businesses which have been divested or are expected to be divested in 1998.
WELCO, the largest component of Discontinued Operations, consists of Power
Generation, Energy Systems, and Government Operations. Certain segment data for
Discontinued Operations are provided in note 7 to the financial statements.
REVENUES AND OPERATING PROFIT (LOSS) BY SEGMENT
(in millions)
<TABLE>
<CAPTION>
REVENUES OPERATING PROFIT (LOSS)
------------------------ ------------------------
YEAR ENDED DECEMBER 31, 1997 1996 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Radio $1,475 $ 554 $ 216 $ 390 $ 161 $ 55
Television 836 809 405 325 295 149
Network 2,816 2,617 252 (107) (9) (18)
Cable 302 191 143 10 40 40
Corporate and other (66) (28) 58 (226) (319) (29)
Residual costs of discontinued businesses -- -- -- (143) (114) (37)
- ----------------------------------------------------------------------------------------------------------------------
Total $5,363 $4,143 $1,074 $ 249 $ 54 $ 160
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Corporate and other consists of: (i) corporate overhead costs, (ii) amortization
of goodwill arising from the November 1995 acquisition of CBS Inc., which
approximates $120 million per year, and (iii) special charges relating to
restructuring and other matters, which totaled $15 million in 1997, $85 million
in 1996, and $25 million in 1995.
Residual costs of discontinued businesses primarily represent pension and
postretirement benefit costs associated with inactive and retired employees of
previously divested businesses.
OTHER SEGMENT FINANCIAL INFORMATION
(in millions)
<TABLE>
<CAPTION>
DEPRECIATION AND
IDENTIFIABLE ASSETS AMORTIZATION CAPITAL EXPENDITURES
AT OR FOR THE YEAR ENDED --------------------------- ----------------------- -----------------------
DECEMBER 31, 1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Radio $ 6,258 $ 6,397 $ 903 $176 $ 36 $ 16 $ 15 $ 6 $ 9
Television 1,216 1,204 1,235 46 45 18 33 27 11
Network 1,694 1,434 1,383 64 63 5 51 34 1
Cable 1,958 156 118 35 8 6 17 9 9
Corporate and other 5,377 6,215 6,752 124 127 12 5 17 2
- ---------------------------------------------------------------------------------------------------------------------------
Total $16,503 $15,406 $10,391 $445 $279 $57 $121 $93 $32
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Corporate and other assets in the preceding table are not identifiable to
operating segments and principally include cash and cash equivalents, deferred
income taxes, property and equipment associated with corporate headquarters,
goodwill arising from the acquisition of CBS Inc., and certain noncurrent
receivables.
The increase in identifiable assets reflects the acquisitions of TNN and CMT in
1997 and Infinity in 1996.
CBS CORPORATION
48
<PAGE> 49
NOTE 20: FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments is determined by the
Corporation using the best available market information and appropriate
valuation methodologies. However, considerable judgment is necessary in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented are not necessarily indicative of the amounts that the
Corporation could realize in a current market exchange or the value that
ultimately will be realized by the Corporation upon maturity or disposition.
Additionally, because of the variety of valuation techniques permitted under
SFAS No. 107, "Disclosures about Fair Values of Financial Instruments,"
comparability of fair values among entities may not be meaningful. The use of
different market assumptions or estimation methodologies may have a material
effect on the estimated fair value amounts.
FAIR VALUE OF FINANCIAL INSTRUMENTS
(in millions)
<TABLE>
<CAPTION>
1997 1996
-------------------------------- --------------------------------
ESTIMATED ESTIMATED
CARRYING FAIR CONTRACT CARRYING FAIR CONTRACT
AT DECEMBER 31, AMOUNT VALUE AMOUNT AMOUNT VALUE AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 8 $ 8 $ -- $ 129 $ 129 $ --
Investments in marketable securities 36 36 -- 48 47 --
Noncurrent customer and other receivables 145 145 -- 91 91 --
LIABILITIES:
Short-term debt 89 89 -- 484 484 --
Current maturities of long-term debt 62 62 -- 4 4 --
Long-term debt 3,236 3,305 -- 5,147 5,145 --
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS:
Interest rate swap agreements:
Unrealized losses -- (5) -- -- (7) --
Foreign currency exchange contracts:
Unrealized losses -- (1) -- -- (1) --
Letters of credit -- -- 133 -- -- 131
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following methods and assumptions were used to estimate the fair value of
financial instruments for which it was practicable to estimate that value.
Cash and Cash Equivalents
The carrying amount for cash and cash equivalents approximates fair value.
Investments in Marketable Securities
The fair value of investments in marketable securities is based on quoted market
prices.
Noncurrent Customer and Other Receivables
The fair value of noncurrent customer and other receivables is estimated by
discounting the expected future cash flows at interest rates commensurate with
the creditworthiness of the customer or other third party.
Short-Term Debt
The carrying amount of the Corporation's borrowings under credit facilities and
other arrangements approximates fair value.
Long-Term Debt
The fair value of long-term debt is estimated using quoted market prices or
discounted cash flow methods based on the Corporation's current borrowing rates
for similar types of borrowing arrangements with comparable terms and
maturities.
Interest Rate and Foreign Currency Exchange Contracts
The fair value of interest rate and foreign exchange contracts is based on
quoted market prices to terminate the contracts.
CBS CORPORATION
49
<PAGE> 50
QUARTERLY FINANCIAL INFORMATION
(unaudited, in millions except per-share amounts)
<TABLE>
<CAPTION>
1997 QUARTER ENDED 1996 QUARTER ENDED
----------------------------------------------- -----------------------------------------------
DEC. 31 SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $1,471 $1,283 $1,283 $1,326 $1,016 $910 $1,100 $1,117
Gross margin 539 511 506 324 286 328 453 290
Depreciation and
amortization (128) (107) (105) (105) (69) (68) (75) (67)
Residual costs of
discontinued businesses (37) (35) (36) (35) (30) (30) (30) (24)
Marketing, administration,
and general expenses (278) (266) (261) (238) (238) (190) (211) (271)
Operating profit (loss) 96 103 104 (54) (51) 40 137 (72)
Other income (expense),
net 17 4 16 41 20 22 7 6
Income (loss) from
Continuing Operations (10) (19) (11) (91) (63) (26) 19 (151)
Income (loss) from
Discontinued
Operations(a) 871 (143) 12 (60) 29 28 (108) 460
Extraordinary item -- -- -- -- -- (30) -- (63)
Net income (loss) 861 (162) 1 (151) (34) (28) (89) 246
- ---------------------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings
(loss) per common share:
Continuing Operations (.01) (.03) (.04) (.18) (.18) (.09) .02 (.41)
Discontinued Operations 1.25 (.23) .02 (.10) .07 .07 (.27) 1.16
Extraordinary item -- -- -- -- -- (.08) -- (.16)
Basic and diluted earnings
(loss) per common share 1.24 (.26) (.02) (.28) (.11) (.10) (.25) .59
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends per common share .05 .05 .05 .05 .05 .05 .05 .05
New York Stock Exchange
market price per share:
High 32 1/16 27 15/16 23 13/16 20 3/8 21 1/8 19 20 1/8 21
Low 23 3/8 22 3/4 16 16 3/4 17 15 3/8 17 3/8 16 5/8
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes net gains of $871 million in the fourth quarter of 1997 and $1,018
million in the first quarter of 1996 from disposals of business segments.
CBS CORPORATION
50
<PAGE> 51
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL AND STATISTICAL DATA
(unaudited, dollars in millions except per-share amounts)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 5,363 $ 4,143 $ 1,074 $ 744 $ 684
Operating profit 249 54 160 151 46
Other income (expense), net 78 55 152 (131) 35
Interest expense (386) (401) (184) (26) (55)
Income (loss) from Continuing Operations before income
taxes and minority interest (59) (292) 128 (6) 26
Income tax (expense) benefit (73) 71 (75) 1 43
Income (loss) from Continuing Operations (131) (221) 47 (10) 63
Income (loss) from Discontinued Operations 680 409 (57) 58 (388)
Extraordinary item -- (93) -- -- --
Cumulative effect of change in accounting principle -- -- -- -- (4)
Net income (loss) 549 95 (10) 48 (329)
- ---------------------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings (loss) per common share:
Continuing Operations $ (.24) $ (.67) $ (.09) $ (.27) $ .04
Discontinued Operations 1.08 1.02 (.16) .16 (1.11)
Extraordinary item -- (.23) -- -- --
Cumulative effect of change in accounting principle -- -- -- -- (.01)
Basic and diluted earnings (loss) per common share .84 .12 (.25) (.11) (1.08)
Dividends per common share .20 .20 .20 .20 .40
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets:
Continuing Operations $16,503 $15,406 $10,391 $ 2,524 $ 4,051
Discontinued Operations 4,101 5,710 8,157 9,273 10,458
Total assets 20,604 21,116 18,548 11,797 14,509
Long-term debt:
Continuing Operations 3,236 5,147 7,222 1,865 1,868
Discontinued Operations 440 419 161 589 664
Total debt:
Continuing Operations 3,387 5,635 7,840 2,471 2,467
Discontinued Operations 543 439 528 1,266 3,883
Shareholders' equity 8,080 5,731 1,453 1,789 1,078
- ---------------------------------------------------------------------------------------------------------------------------------
Average common and common equivalent shares
outstanding (if dilutive) 629,205,801 400,512,154 369,612,697 354,580,674 349,425,391
Market price range per share $32 1/16--16 $21 1/8--15 3/8 $17 7/8--12 1/8 $15 1/4--10 7/8 $17 1/8--12 3/4
Market price at year end 29 7/16 19 7/8 16 3/8 12 1/4 14 1/8
Common shareholders at year end 122,548 127,802 125,962 125,376 125,806
Average number of employees:
Continuing Operations 13,581 9,353 3,819 2,588 2,872
Discontinued Operations 37,863 49,922 73,994 81,811 100,191
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Previously reported financial information has been restated to reflect the
reclassification of certain businesses as Discontinued Operations.
CBS CORPORATION
51
<PAGE> 52
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Part of the information concerning executive officers required by this item is
set forth in Part I pursuant to General Instruction G to Form 10-K and part is
incorporated herein by reference to "Security Ownership" in the Proxy Statement.
The information as to directors is incorporated herein by reference to "Election
of Directors" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated herein by reference to
"Director Compensation" and "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated herein by reference to
"Security Ownership" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated herein by reference to
"Transactions Involving Directors and Executive Officers" in the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A)(1) FINANCIAL STATEMENTS
The financial statements required by this item are listed under Part II, Item 8,
which list is incorporated herein by reference.
(A)(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule for CBS Corporation and the Reports
of Independent Auditors and Accountants thereon are included in Part IV of this
report:
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Reports of Independent Auditors and Accountants on
Financial Statement Schedule 55-56
For the three years ended December 31, 1997: Schedule
II--Valuation and Qualifying Accounts 57
</TABLE>
Other schedules are omitted because they are not applicable or because the
required information is included in the financial statements or notes thereto.
<TABLE>
<S> <C> <C> <C>
(A)(3) EXHIBITS
(3) Articles of Incorporation and Bylaws
(a) Amendment to the Articles of Incorporation.
(b) The Restated Articles of the Corporation, as amended to
December 11, 1997.
(c) The Bylaws of the Corporation, as amended to December 1,
1997.
(4) Rights of Security Holders
(a) There are no instruments with respect to long-term debt of
the Corporation that involve securities authorized
thereunder exceeding 10% of the total assets of the
Corporation and its subsidiaries on a consolidated basis.
The Corporation agrees to provide to the Securities and
Exchange Commission, upon request, a copy of instruments
defining the rights of holders of long-term debt of the
Corporation and its subsidiaries.
(b) Rights Agreement is incorporated herein by reference to
Exhibit 1 to Form 8-A filed with the Securities and Exchange
Commission on January 9, 1996.
</TABLE>
CBS CORPORATION
52
<PAGE> 53
<TABLE>
<S> <C> <C> <C>
(10) Material Contracts
(a*) The Annual Performance Plan, as amended to November 1, 1996,
is incorporated herein by reference to Exhibit 10(a) to Form
10-Q for the quarter ended September 30, 1996.
(b*) The 1993 Long-Term Incentive Plan, as amended to January 28,
1998.
(c*) The 1984 Long-Term Incentive Plan, as amended to November 1,
1996, is incorporated herein by reference to Exhibit 10(c)
to Form 10-Q for the quarter ended September 30, 1996.
(d*) The Westinghouse Executive Pension Plan, as amended to
December 1, 1997.
(e*) The Deferred Compensation and Stock Plan for Directors, as
amended to January 1, 1998.
(f*) The Director's Charitable Giving Program, as amended to
April 30, 1996, is incorporated herein by reference to
Exhibit 10(g) to Form 10-Q for the quarter ended June 30,
1996.
(g*) The 1991 Long-Term Incentive Plan, as amended to January 28,
1998.
(h*) Advisory Director's Plan Termination Fee Deferral Terms and
Conditions, dated April 30, 1996, is incorporated herein by
reference to Exhibit 10(i) to Form 10-Q for the quarter
ended June 30, 1996.
(i*) Employment Agreement between the Corporation and Michael H.
Jordan is hereby incorporated by reference to Exhibit 10 to
the Corporation's Form 8-K, dated September 1, 1993.
(j*) Employment Agreement between the Corporation and Fredric G.
Reynolds is incorporated herein by reference to Exhibit
10(j) to Form 10-K for the year ended December 31, 1994.
(k) $5.5 billion Credit Agreement among the Corporation, the
Lenders parties thereto, Nationsbank, N.A. and The
Toronto-Dominion Bank as Syndication Agents, The Chase
Manhattan Bank as Documentation Agent, and Morgan Guaranty
Trust Company of New York as Administrative Agent, dated
August 29, 1996, is incorporated herein by reference to
Exhibit 10(l) to Form 10-Q for the quarter ended September
30, 1996.
(l*) CBS Supplemental Executive Retirement Plan, as amended to
November 15, 1995, is incorporated herein by reference to
Exhibit 10(n) to Form 10-K for the year ended December 31,
1996.
(m*) CBS Bonus Supplemental Executive Retirement Plan, as amended
to November 15, 1995, is incorporated herein by reference to
Exhibit 10(o) to Form 10-K for the year ended December 31,
1996.
(n) First Amendment, dated as of January 29, 1997 to the Credit
Agreement, dated as of August 29, 1996, among the
Corporation, the Lenders parties thereto, Nationsbank, N.A.
and The Toronto-Dominion Bank as Syndication Agents, The
Chase Manhattan Bank as Documentation Agent, and Morgan
Guaranty Trust Company of New York as Administrative Agent,
is hereby incorporated by reference to Exhibit 10(p) to Form
10-Q for the quarter ended March 31, 1997.
(o) Second Amendment, dated as of March 21, 1997, to the Credit
Agreement, dated as of August 29, 1996, as amended by the
First Amendment thereto dated as of January 29, 1997, among
the Corporation, the Subsidiary Borrowers parties thereto,
the Lenders parties thereto, Nationsbank, N.A. and The
Toronto-Dominion Bank as Syndication Agents, The Chase
Manhattan Bank as Documentation Agent, and Morgan Guaranty
Trust Company of New York as Administrative Agent, is hereby
incorporated by reference to Exhibit 10(q) to Form 10-Q for
the quarter ended March 31, 1997.
(p) Amended and Restated Agreement and Plan of Merger, dated as
of December 18, 1997, by and among American Radio Systems
Corporation, the Corporation, and R Acquisition Corp, is
incorporated herein by reference to the Corporation's Form
8-K dated January 7, 1998.
(q) First Amendment, dated December 19, 1997, to the Amended and
Restated Agreement and Plan of Merger, dated as of December
18, 1997, by and among American Radio Systems Corporation,
the Corporation, and R Acquisition Corp, is incorporated
herein by reference to the Corporation's Form 8-K dated
January 7, 1998.
(r*) Employment Agreement between the Corporation and Mel
Karmazin, made as of June 20, 1996 and effective as of
December 31, 1996, is hereby incorporated by reference to
Exhibit 10(s) to Form 10-Q for the quarter ended March 31,
1997.
(s*) Amended and restated Infinity Broadcasting Corporation Stock
Option Plan is incorporated herein by reference to Exhibit
4.4 to the Corporation'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.
</TABLE>
CBS CORPORATION
53
<PAGE> 54
<TABLE>
<S> <C> <C> <C>
(t*) The WCK Acquisition Corp. Stock Option Plan is incorporated
herein by reference to Exhibit 4.5 to the Corporation'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.
(u*) Infinity Broadcasting Corporation Warrant Certificate No. 3
to Mel Karmazin is incorporated herein by reference to
Exhibit 4.6 to the Corporation'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.
(v*) Employment Agreement between a subsidiary of the
Corporation, CBS Broadcasting, Inc. (formerly CBS Inc.) and
Leslie Moonves entered into as of May 17, 1995 and amended
as of January 20, 1998.
(w) Asset Purchase Agreement between the Corporation and Siemens
Power Generation Corporation, a subsidiary of Siemens A.G.,
dated as of November 14, 1997.
(x*) Employment Agreement between CBS Broadcasting, Inc.
(formerly CBS Inc.) and Peter Lund, dated as of November 28,
1995, is hereby incorporated by reference to Exhibit 10(l)
to Form 10-Q for the quarter ended March 31, 1996.
(12) (a) Computation of Ratio of Earnings to Fixed Charges
(12) (b) Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
(21) Subsidiaries of the Registrant
(23) (a) Consent of Independent Auditors
(23) (b) Consent of Independent Accountants
(24) Power of Attorney and Extract of Resolutions of Board of
Directors
(27) Financial Data Schedule
</TABLE>
* Identifies management contract or compensatory plan or arrangement.
(B) REPORTS ON FORM 8-K
A Current Report on Form 8-K (Items 5 and 7) filed October 2, 1997 regarding a
press release announcing the completion of the merger of a CBS subsidiary with
Gaylord Entertainment Company.
A Current Report on Form 8-K (Items 5 and 7) filed October 10, 1997 regarding a
press release announcing the receipt of a favorable tax ruling for the
separation of the Corporation's industrial businesses and discussing certain of
the Corporation's operating industrial businesses.
A Current Report on Form 8-K (Items 5 and 7) filed November 7, 1997 regarding a
press release announcing the sale of Thermo King.
A Current Report on Form 8-K (Items 5 and 7) filed November 14, 1997 regarding
third quarter 1997 earnings.
A Current Report on Form 8-K (Items 5 and 7) filed November 14, 1997 regarding a
press release announcing the sale of the Corporation's Power Generation business
unit and a modification to the Corporation's previously announced separation
plan.
A Current Report on Form 8-K (Items 5) filed December 1, 1997 regarding the name
change of the Corporation, effective December 1, 1997.
A Current Report on Form 8-K (Items 5 and 7) filed December 8, 1997 regarding a
press release announcing the election of two new directors, effective at a
future date.
A Current Report on Form 8-K (Items 5 and 7) filed December 11, 1997 regarding
restated financial results.
CBS CORPORATION
54
<PAGE> 55
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF CBS CORPORATION
Under date of January 28, 1998, we reported on the consolidated balance sheets
of CBS Corporation and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, cash flows, and shareholders' equity,
for the years then ended, which are included in the 1997 Annual Report on Form
10-K. In connection with our audits of the aforementioned consolidated financial
statements, we have also audited the related December 31, 1997 and 1996
financial statement schedule included in the 1997 Annual Report on Form 10-K.
The financial statement schedule is the responsibility of the Corporation's
management. Our responsibility is to express an opinion on the financial
statement schedule based on our audits.
In our opinion, the December 31, 1997 and 1996 financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
January 28, 1998
CBS CORPORATION
55
<PAGE> 56
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF CBS CORPORATION
Our audit of the consolidated financial statements referred to in our report
dated February 12, 1996 except for the restatements discussed in notes 1 and 7,
for which the dates are March 31, 1996, November 13, 1996, and September 30,
1997, appearing on page 25 of this Form 10-K of CBS Corporation (which report
and consolidated financial statements are included in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Pittsburgh, Pennsylvania
February 12, 1996, except for the
restatements discussed in notes 1
and 7, for which the dates are
March 31, 1996, November 13, 1996,
and September 30, 1997.
CBS CORPORATION
56
<PAGE> 57
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------
(in millions) 1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CUSTOMER RECEIVABLES FROM CONTINUING OPERATIONS--ALLOWANCE
FOR DOUBTFUL ACCOUNTS:
Balance at beginning of year $ 27 $ 20 $ 6
Charged to costs and expenses 12 8 2
Increase resulting from business acquisitions 7 7 13
Write-offs, net of recoveries (11) (8) (1)
- --------------------------------------------------------------------------------------------
Balance at end of year $ 35 $ 27 $ 20
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES--VALUATION ALLOWANCE:
Balance at beginning of year $ 52 $ 98 $101
Charged to costs and expenses 85(a) 3 --
Decrease resulting from business divestitures -- (49) (3)
- --------------------------------------------------------------------------------------------
Balance at end of year $137 $ 52 $ 98
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Relates to foreign tax credit carryforwards not expected to be realized.
CBS CORPORATION
57
<PAGE> 58
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 24th day of March,
1998.
CBS CORPORATION
By: /s/ CAROL V. SAVAGE
-----------------------------------
Carol V. Savage
Vice President and
Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
SIGNATURE AND TITLE
Frank C. Carlucci, Director
Robert E. Cawthorn, Director
George H. Conrades, Director
Martin C. Dickinson, Director
William H. Gray III, Director
Michael H. Jordan, Chairman and Chief Executive
Officer (principal executive officer) and Director
Mel Karmazin, Chairman and Chief Executive Officer,
CBS Station Group, and Director
Jan Leschly, Director
Dr. David K.P. Li, Director
David T. McLaughlin, Director
Richard R. Pivirotto, Director
Fredric G. Reynolds, Executive Vice President and
Chief Financial Officer (principal financial officer)
Carol V. Savage, Vice President and Chief
Accounting Officer (principal accounting officer)
Raymond W. Smith, Director
Dr. Paula Stern, Director
Robert D. Walter, Director
By: /s/ CAROL V. SAVAGE
----------------------------------
Carol V. Savage
Attorney-In-Fact
March 24, 1998
Original powers of attorney authorizing Carol V. Savage and certain others,
individually, to sign this report on behalf of the listed directors and officers
of the Corporation and a certified copy of resolutions of the Board of Directors
of the Corporation authorizing Carol V. Savage and certain others to sign on
behalf of the Corporation have been filed with the Securities and Exchange
Commission and are included as Exhibit 24 to this report.
CBS CORPORATION
58
<PAGE> 1
EXHIBIT 3(a)
EXHIBIT A
RESOLVED, that Article FIRST of the Restated Articles of
Incorporation of the Company is hereby amended and restated in its
entirety to read as follows: The name of the corporation (hereinafter
called the "Company") is CBS Corporation.
<PAGE> 1
EXHIBIT 3(b)
CBS CORPORATION
RESTATED ARTICLES OF INCORPORATION
(As amended through December 11, 1997)
FIRST: The name of the corporation (hereinafter called the "Company")
is CBS CORPORATION.
SECOND: The location and post office address of the current registered
office of the Company in the Commonwealth of Pennsylvania is Westinghouse
Building, Gateway Center, Pittsburgh, Allegheny County, Pennsylvania 15222.
THIRD: The Company is subject to the Act of the General Assembly of the
Commonwealth of Pennsylvania, known as the "Business Corporation Law," approved
May 5, 1933, and any act amendatory thereof, supplementary thereto or
substituted therefor, and the purposes for which the Company is organized are:
(1) To develop, build, manufacture, process and otherwise
produce, to purchase, lease, exchange and otherwise acquire, and to
hold, own, use, operate, repair, sell, lease, assign, distribute and
otherwise deal in and dispose of structures, machinery, equipment,
apparatus, appliances, devices, products, materials, articles,
processes and systems for any application or purpose, whether for use
for industrial, utility, transportation, broadcasting, communication,
home, defense, consumer or other purposes or applications, or
combinations thereof, whatsoever, including but not limited to the
following: for the generation, conversion, transmission, utilization,
storage
-1-
<PAGE> 2
and control of any form of energy whatsoever (including but not limited
to electrical, mechanical, chemical, atomic, nuclear, steam, thermal,
mineral, gas, water and solar); for the handling, conditioning,
heating, cooling, treatment, application or use of air and other gases,
liquids and solids; for aerial, nautical, terrestrial, spatial or
celestial operations, applications or navigation; for radio, television
and all other forms of transmission, reception or communication; and
for incorporation into or use in, on or about any establishment,
building or structure of any kind or nature whatsoever; and any and all
related engines, turbines, motors, parts, tools, accessories and
improvements thereof and supplies or materials pertaining or incidental
to any of the above structures, machinery, equipment, apparatus,
appliances, devices, products, materials, articles, processes and
systems, of any kind or nature whatsoever.
(2) To develop, build, manufacture, process and otherwise
produce, to purchase, lease, exchange and otherwise acquire, and to
hold, own, use, operate, repair, sell, lease, assign, distribute and
otherwise deal in and dispose of structures, machinery, equipment,
apparatus, appliances, devices, products, materials, articles,
processes, systems, goods, wares and merchandise of every kind, nature
and description, and to engage in any industrial, manufacturing,
mining, mercantile, broadcasting, trading or other lawful business of
any kind or character whatsoever.
(3) To conduct and carry on research work in, and to engage in
any activity pertaining or incidental to, any scientific, technical or
other field or fields, and to render services of a scientific,
technical or other nature to any person, association, firm,
corporation, country, state, municipality or other governmental
division or subdivision.
(4) To purchase, lease, exchange and otherwise acquire all, or
any part of, or any interest in, the properties, assets, business and
goodwill of any one or more persons, associations, firms or
corporations; to pay for the same in cash, property or its
-2-
<PAGE> 3
own or other securities; to hold, own, use, operate, reorganize and
otherwise manage such properties, assets, business and goodwill; to
sell, lease, assign, distribute, liquidate and otherwise deal in and
dispose of the whole or any part thereof; and in connection therewith,
to assume or guarantee performance of any liabilities, obligations or
contracts of such persons, associations, firms or corporations.
(5) To develop, apply for, register, take licenses in respect
of, purchase, lease, exchange and otherwise acquire, and to hold, own,
use, operate, sell, lease, assign, grant licenses in respect of,
manufacture under, exercise and otherwise deal in and dispose of any
and all inventions, devices, formulae, technical or business
information, including trade secrets, know-how, processes, improvements
and modifications thereof, letters patent and all rights connected
therewith or appertaining thereto, copyrights, trademarks, trade names,
trade symbols and other indications of origin and ownership,
franchises, licenses, concessions or other rights granted by or
recognized under the laws of any country, state, municipality or other
governmental division or subdivision.
(6) To purchase, exchange and otherwise acquire, and to hold,
own, sell, assign, transfer, reissue, cancel and otherwise deal in and
dispose of its own shares and securities, to such extent and in such
manner and upon such terms as it may determine; provided that the
Company shall not use its funds or property for the purchase of its own
shares when such purchase shall be prohibited by law; and provided that
shares of its capital stock which belong to the Company shall not be
voted directly or indirectly.
(7) To enter into, make, perform and carry out contracts and
agreements of every kind and description which may be necessary,
appropriate, convenient or advisable in carrying out the purposes of
the Company, with any person, association, firm, corporation, country,
state, municipality or other governmental division or subdivision.
-3-
<PAGE> 4
(8) To carry out any of or all the foregoing purposes as
principal or agent and alone or with associates; and to execute from
time to time such general or special powers of attorney to such person
or persons as it may determine, granting to such person or persons such
powers as it may deem proper, and to revoke such powers of attorney as
and when it may desire; and to conduct its business in any and all of
its branches at one or more offices in the Commonwealth of Pennsylvania
and elsewhere.
(9) To do everything necessary, suitable, convenient or proper
for, or in connection with, or incident to, the accomplishment of any
of the purposes herein enumerated, or which shall at any time appear
conducive to or expedient for the accomplishment of any of such
purposes, not inconsistent with the laws of the Commonwealth of
Pennsylvania.
Except as otherwise expressly provided in this Article THIRD,
none of the purposes set forth above in this Article THIRD shall be in any way
limited or restricted by reference to, or inference from, any other of the
purposes therein set forth, and each of said purposes shall be regarded as a
separate and independent purpose.
The purposes set forth above shall be construed as powers as
well as purposes; but the enumeration herein of certain powers is not intended
to be exclusive of, or a waiver of, but shall be in addition to, the powers,
rights or privileges granted or conferred by said "Business Corporation Law" and
any other laws of the Commonwealth of Pennsylvania applicable to the Company
that may now or hereafter be in force. Without limiting the generality of the
foregoing, the Company shall have and may exercise the general powers which are
now or may hereafter be enumerated in Section 302 of said "Business Corporation
Law," or any act amendatory thereof, supplemental thereto or substituted
therefor, to the same extent as if such powers were set forth in full herein.
-4-
<PAGE> 5
Except as otherwise provided by law or these Restated Articles
of Incorporation or the By-laws, the powers of the Company shall be exercised by
its Board of Directors.
Nothing herein contained shall authorize or be construed as
intended to authorize the Company to carry on any business or exercise any
powers in any commonwealth, state, territory, or country which a business
corporation organized under the laws of such commonwealth, state, territory or
country could not carry on or exercise, except to the extent permitted or
authorized by the laws of such commonwealth, state, territory or country; and
notwithstanding any provision herein, the Company shall not be deemed to have
the power to carry on or exercise within the Commonwealth of Pennsylvania any
business whatsoever the carrying on or exercising of which would prevent the
Company from being classified as a business corporation under said "Business
Corporation Law," or any act amendatory thereof, supplemental thereto or
substituted therefor.
FOURTH: The term of existence of Company shall be perpetual.
FIFTH: A. The total number of shares of all classes of stock which the
Company shall have authority to issue is 1,125,000,000 consisting of: (1)
25,000,000 shares of Preferred Stock, par value $1.00 per share ("Preferred
Stock"), and (2) 1,100,000,000 shares of Common Stock, par value $1.00 per share
("Common Stock").
B. The Board of Directors is hereby expressly authorized to
provide, out of the unissued shares of Preferred Stock, for series of Preferred
Stock. Before any share of any such series is issued, the Board shall fix, and
hereby is expressly empowered to fix, the following provisions of the shares
thereof:
-5-
<PAGE> 6
(1) the terms of such series, the number of shares to
constitute such series and the stated value thereof if different from
the par value thereof;
(2) whether the shares of such series shall have voting rights
in addition to any voting rights provided by law and, if so, the terms
of such voting rights, which may be general or limited;
(3) the dividends, if any, payable on such series, whether any
such dividends shall be cumulative and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, the
preference or relation which such dividends shall bear to the dividends
payable on any shares of stock of any other class or any other series
of Preferred Stock;
(4) whether the shares of such series shall be subject to
redemption at the election of the Company or the holders of such series
and, if so, the times, prices and other conditions of such redemption;
(5) the amount or amounts payable upon shares of such series
upon, and the rights of the holders of such series in the event of,
voluntary or involuntary liquidation, dissolution or winding up, or
upon any distribution of the assets of the Company;
(6) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to
the purchase or redemption of the shares of such series for retirement
or other corporate purposes and the terms and provisions relative to
the operation thereof;
(7) whether the shares of such series shall be convertible
into, or exchangeable for, shares of stock of any other class or any
other series of Preferred Stock or any other securities and, if so, the
price or prices or the rate or rates of conversion or exchange
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and the method, if any, of adjusting the same, and any other terms and
conditions of conversion or exchange;
(8) the limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, or upon the
purchase, redemption or other acquisition by the Company of, the Common
Stock or shares of stock of any other class or any other series of
Preferred Stock;
(9) the conditions or restrictions, if any, upon the creation
of indebtedness of the Company or upon the issue of any additional
stock, including additional shares of any other series of Preferred
Stock or of any other class of stock; and
(10) any other powers, preferences and relative,
participating, optional and other special rights, and any
qualifications, limitations and restrictions thereof.
C. The powers, preferences and relative, participating,
optional and other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series of Preferred Stock at any time outstanding.
All shares of any one series of Preferred Stock shall be identical in all
respects with all other shares of such series, except that shares of any one
series issued at different times may differ as to the dates from which dividends
thereon shall be cumulative.
D. Subject to the provisions of this Article FIFTH and actions
taken by the Board of Directors pursuant to this Article FIFTH:
(1) such dividends (whether in cash, stock or otherwise) as
may be determined by the Board of Directors may be declared and paid on
the Common Stock from time to time in accordance with the laws of the
Commonwealth of Pennsylvania; and the holders
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of the Preferred Stock shall not be entitled to participate in any such
dividends whether payable in cash, stock or otherwise;
(2) voting power shall be exclusively vested in the Common
Stock;
(3) dividends upon shares of any class of the Company shall be
payable only out of assets legally available for the payment of such
dividends, and the rights of the holders of the Preferred Stock of all
series and of the holders of the Common Stock in respect of dividends
shall at all times be subject to the power of the Board of Directors,
which is hereby expressly vested in said Board, from time to time to
set aside such reserves and to make such other provisions, if any, as
said Board shall deem to be necessary or advisable for working capital,
for additions, improvements and betterments to plant and equipment, for
expansion of the Company's business (including the acquisition of real
and personal property for that purpose), for plans for maintaining
employment at the plants of the Company and also for other plans for
the benefit of employees generally, and for any other purposes of the
Company whether or not similar to those herein mentioned;
(4) holders of Preferred Stock and holders of Common Stock
shall not have any preemptive, preferential or other right to subscribe
for or purchase or acquire any shares of any class or any other
securities of the Company, whether now or hereafter authorized, and
whether or not convertible into, or evidencing or carrying the right to
purchase, shares of any class or any other securities now or hereafter
authorized, and whether the same shall be issued for cash, services or
property, or by way of dividend or otherwise, other than such right, if
any, as the Board of Directors in its discretion from time to time may
determine. If the Board of Directors shall offer to the holders of the
Preferred Stock or the holders of the Common Stock, or any of them, any
such shares or other securities of the Company, such offer shall not in
any way constitute a waiver or
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<PAGE> 9
release of the right of the Board of Directors subsequently to dispose
of other portions of said shares or securities without so offering the
same to said holders;
(5) the shares of Preferred Stock and the shares of Common
Stock may be issued for such consideration and for such corporate
purposes as the Board of Directors may from time to time determine;
(6) subject to the provisions of the By-laws of the Company as
from time to time amended, with respect to the closing of the transfer
books or the fixing of a record date for the determination of
shareholders entitled to vote, each holder of record of shares of any
class of the Company shall be entitled to one vote, on each matter
submitted to a vote at a meeting of shareholders and in respect of
which shares of such class shall be entitled to be voted, for every
share of such class standing in his name on the books of the Company;
(7) in each election of directors no shareholder shall have
any right to cumulate his votes and cast them for one candidate or
distribute them among two or more candidates.
E. 1. Designation and Amount. The shares of this series shall
be designated as "Series A Participating Preferred Stock" (the "Series A
Preferred Stock"). The par value of each share of Series A Preferred Stock shall
be $1.00. The number of shares constituting the Series A Preferred Stock
initially shall be 5,000,000; provided, however, that, if more than a total of
5,000,000 shares of Series A Preferred Stock shall be issuable upon the exercise
of Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of
December 28, 1995, between the Company and First Chicago Trust Company of New
York, as Rights Agent (as such agreement may be amended from time to time, the
"Rights Agreement"), the Board of Directors of the Company, pursuant to Section
1914(c) and/or Section 1522(b) of
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the Pennsylvania Business Corporation Law of 1988, as amended (the "Pennsylvania
BCL"), and in accordance with the provisions of Article FIFTH of the Restated
Articles of Incorporation, shall adopt a resolution or resolutions increasing
the previously determined total number of shares of Series A Preferred Stock
authorized to be issued (to the extent that the Restated Articles of
Incorporation then permit) to the largest number of whole shares (rounded up to
the nearest whole number) issuable upon exercise of such Rights and directing
that a statement or articles of amendment with respect to such increase in
authorized shares for the Series A Preferred Stock be executed and filed with
the Department of State of the Commonwealth of Pennsylvania.
2. Dividends and Distributions.
(a) Subject to the provisions for adjustment hereinafter set
forth, the holders of outstanding shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, (i) a cash dividend in an amount per
share (rounded to the nearest cent) equal to 100 times the aggregate per share
amount of each cash dividend declared or paid on the Common Stock, $1.00 par
value per share, of the Company (the "Common Stock") and any other security
ranking junior to the Series A Preferred Stock, and (ii) a preferential cash
dividend (the "Preferential Dividends"), if any, in preference to the holders of
Common Stock and any other security ranking junior to the Series A Preferred
Stock, on the first day of March, June, September and December of each year
(each a "Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a share
of Series A Preferred Stock, payable in an amount (except in the case of the
first Quarterly Dividend Payment if the date of the first issuance of Series A
Preferred Stock is a date other than a Quarterly Dividend Payment date, in which
case such payment shall be a prorated amount of such amount) equal to $1.00 per
share of Series A Preferred Stock less the per share amount of all cash
dividends
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declared on the Series A Preferred Stock pursuant to clause (i) of this sentence
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In addition, in the
event the Company shall, at any time after the issuance of any share or fraction
of a share of Series A Preferred Stock, pay any dividend or make any
distribution on the shares of Common Stock of the Company, whether by way of a
dividend or a reclassification of stock, a recapitalization, reorganization or
partial liquidation of the Company or otherwise, which is payable in cash or any
debt security, debt instrument, real or personal property or any other property
(other than (x) cash dividends subject to the immediately preceding sentence,
(y) a distribution of shares of Common Stock or other capital stock of the
Company or (z) a distribution of rights or warrants to acquire any such shares,
including as such a right any debt security convertible into or exchangeable for
any such shares, at a price less than the Fair Market Value (as hereinafter
defined) of such shares on the date of issuance of such rights or warrants),
then, and in each such event, the Company shall simultaneously pay on each then
outstanding share of Series A Preferred Stock a distribution, in like kind, of
100 times such distribution paid on a share of Common Stock (subject to the
provisions for adjustment hereinafter set forth). The dividends and
distributions on the Series A Preferred Stock to which holders thereof are
entitled pursuant to clause (i) of the first sentence of this paragraph and
pursuant to the second sentence of this paragraph are hereinafter referred to as
"Dividends" and the multiple of such cash and non-cash dividends and
distributions on the Common Stock applicable to the determination of the
Dividends, which shall be 100 initially but shall be adjusted from time to time
as hereinafter provided, is hereinafter referred to as the "Dividend Multiple."
In the event the Company shall at any time after January 9, 1996 declare or pay
any dividend or make any distribution on Common Stock payable in shares of
Common Stock, or effect a subdivision or split or a combination, consolidation
or reverse split of the
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outstanding shares of Common Stock into a greater or lesser number of shares of
Common Stock, then in each such case the Dividend Multiple thereafter applicable
to the determination of the amount of Dividends which holders of shares of
Series A Preferred Stock shall be entitled to receive shall be the Dividend
Multiple applicable immediately prior to such event multiplied by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) The Company shall declare each Dividend at the same time
it declares any cash or non-cash dividend or distribution on the Common Stock in
respect of which a Dividend is required to be paid. No cash or non-cash dividend
or distribution on the Common Stock in respect of which a Dividend is required
to be paid shall be paid or set aside for payment on the Common Stock unless a
Dividend in respect of such dividend or distribution on the Common Stock shall
be simultaneously paid, or set aside for payment, on the Series A Preferred
Stock.
(c) Preferential Dividends shall begin to accrue on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issuance of such shares of Series A
Preferred Stock. Accrued but unpaid Preferential Dividends shall cumulate but
shall not bear interest.
(d) Any dividend payment made on shares of the Series A
Preferred Stock shall first be credited against the earliest accrued but unpaid
Preferential Dividend due with respect to shares of the Series A Preferred
Stock.
(e) All dividends paid with respect to shares of the Series A
Preferred Stock pursuant to this paragraph 2 shall be paid pro rata on a
share-by-share basis to the holders entitled thereto.
(f) The holders of shares of Series A Preferred Stock shall
not be entitled to receive any dividends or distributions except as provided
herein.
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3. Voting Rights. The holders of record of outstanding shares
of Series A Preferred Stock shall have the following voting rights:
(a) Subject to the provisions for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the holders
of the Common Stock. The number of votes which a holder of a share of
Series A Preferred Stock is entitled to cast, as the same may be
adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Vote Multiple." In the event the Company shall at
any time after January 9, 1996 declare or pay any dividend on Common
Stock, payable in shares of Common Stock, or effect a subdivision or
split or a combination, consolidation or reverse split of the
outstanding shares of Common Stock into a greater or lesser number of
shares of Common Stock, then in each such case the Vote Multiple
thereafter applicable to the determination of the number of votes per
share to which holders of shares of Series A Preferred Stock shall be
entitled after such event shall be the Vote Multiple immediately prior
to such event multiplied by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in the Restated
Articles of Incorporation, in the By-laws, or as otherwise provided by
law, the holders of shares of Series A Preferred Stock and the holders
of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of shareholders of the Company.
(c) In the event that the Preferential Dividends payable to
the holders of Series A Preferred Stock are in arrears and unpaid for
the equivalent of six quarterly periods, the Board of Directors will be
increased by two directors and the holders of Series A Preferred Stock,
together with the holders of all other outstanding series of the
Preferred
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<PAGE> 14
Stock in respect of which such a default in payment of dividends as
described hereinabove exists and is entitled to vote thereon, voting as
a single class without regard to series, will be entitled to elect two
directors of the expanded Board of Directors. Such entitlement shall
continue until such time as all dividends in arrears on all of the
Series A Preferred Stock at the time outstanding have been paid or
declared and set aside for payment, whereupon such voting rights of the
holders of the Series A Preferred Stock shall cease (and, unless
holders of shares of other series of Preferred Stock shall still have
the right to elect such directors, the respective terms of the two
additional directors shall thereupon expire and the number of directors
constituting the full board be decreased by two) subject to being again
revived from time to time upon the reoccurrence of the conditions
described in this paragraph (3)(c) as giving rise thereto.
At any time when the rights of holders of Series A Preferred
Stock to elect two additional directors shall have so vested, the
Company shall, upon the written request of the holders of record of not
less than 10% of the Series A Preferred Stock then outstanding (or 10%
of all of the shares of Preferred Stock having the right to vote for
such directors in case holders of shares of other series of Preferred
Stock shall also have the right to elect directors in such
circumstances), call a special meeting of holders of the Series A
Preferred Stock (and other series of Preferred Stock, if applicable)
for the election of directors. In the case of a written request, the
special meeting shall be held within 60 days after the delivery of the
request, upon the notice provided by law and in the By-laws of the
Company; except that the Company shall not be required to call such a
special meeting if the request is received less than 120 days before
the date fixed for the next ensuing annual meeting of shareholders of
the Company.
Whenever the number of directors of the Company shall have
been increased by two as provided in this paragraph (3)(c), the number
as so increased may thereafter be
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<PAGE> 15
further increased or decreased in such manner as may be permitted by
the By-laws and without the vote of the holders of Series A Preferred
Stock. No such action shall impair the right of the holders of Series A
Preferred Stock to elect and to be represented by two directors as
provided in this paragraph (3)(c).
The two directors elected as provided in this paragraph (3)(c)
shall serve until the next annual meeting of shareholders of the
Company and until their respective successors shall be elected and
qualified or the earlier expiration of their terms as provided in this
paragraph (3)(c). No such director may be removed without the vote of
holders of a majority of shares of Series A Preferred Stock (or holders
of a majority of shares of Preferred Stock having the right to vote in
the election of such director in case holders of shares of other series
of Preferred Stock shall also have the right to elect such director).
If, prior to the expiration of the term of any such director, a vacancy
in the office of such director shall occur, such vacancy shall, until
the expiration of such term, in each case be filled by the remaining
director elected as provided in this paragraph (3)(c) or, if none
remains in office, by vote of the holders of record of a majority of
the outstanding shares of Series A Preferred Stock (or holders of a
majority of shares of Preferred Stock who are then entitled to
participate in the election of such directors in case holders of shares
of other series of Preferred Stock shall also have the right to elect
such director).
(d) Except as otherwise required by the Articles of
Incorporation or By-laws or set forth in this paragraph 3 or in
paragraph 13 or as otherwise provided by law, holders of Series A
Preferred Stock shall have no other special voting rights and their
consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for the
taking of any corporate action.
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<PAGE> 16
4. Certain Restrictions.
(a) Whenever Preferential Dividends or Dividends are in arrears
or the Company shall be in default of payment thereof, thereafter and until all
accrued and unpaid Preferential Dividends and Dividends, whether or not
declared, on shares of Series A Preferred Stock outstanding shall have been paid
or set irrevocably aside for payment in full, and in addition to any and all
other rights which any holder of shares of Series A Preferred Stock may have in
such circumstances, the Company shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration, any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity as to dividends with the
Series A Preferred Stock, unless dividends are paid ratably on the
Series A Preferred Stock and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled if the full dividends
accrued thereon were to be paid;
(iii) except as permitted by subparagraph (iv) of this paragraph
4(a), redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for
shares of any stock of the Company ranking junior (both as to dividends
and upon liquidation, dissolution or winding up) to the Series A
Preferred Stock; or
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<PAGE> 17
(iv) purchase or otherwise acquire for consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock (either as to dividends or upon
liquidation, dissolution or winding up), except as permitted by
subparagraph (iii) of this paragraph 4(a) or in accordance with a
purchase offer made to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(b) The Company shall not permit any Subsidiary (as hereinafter
defined) of the Company to purchase or otherwise acquire for consideration any
shares of stock of the Company unless the Company could, under subparagraph (a)
of this paragraph 4, purchase or otherwise acquire such shares at such time and
in such manner. A "Subsidiary" of the Company shall mean any corporation or
other entity of which securities or other ownership interests entitled to cast
at least a majority of the votes that would be entitled to be cast in an
election of the board of directors of such corporation or other entity or other
persons performing similar functions are beneficially owned, directly or
indirectly, by the Company or by any corporation or other entity that is
otherwise controlled by the Company.
(c) The Company shall not issue any shares of Series A Preferred
Stock except upon exercise of Rights issued pursuant to the Rights Agreement, a
copy of which is on file with the Secretary of the Company at its principal
executive office and shall be made available to shareholders of record without
charge upon written request therefor addressed to said Secretary.
Notwithstanding the foregoing sentence, nothing contained in the provisions of
this Article FIFTH (E) shall prohibit or restrict the Company from issuing for
any purpose any series of Preferred Stock with rights and privileges similar to,
different from, or greater than, those of
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<PAGE> 18
the Series A Preferred Stock or, subject to the limitations set forth in
paragraph 13, from creating other securities senior to, junior to or on a parity
with the Series A Preferred Stock.
5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
upon their retirement and cancellation shall become authorized but unissued
shares of Preferred Stock, without designation as to series, and such shares may
be redesignated and reissued as part of any series of the Preferred Stock.
6. Liquidation, Dissolution or Winding Up; Fair Value for
Purposes of Pennsylvania Anti-Takeover Statute.
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, no distribution shall be made (i) to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless the holders of
shares of Series A Preferred Stock outstanding shall have received out of the
assets of the Company available for distribution to its shareholders after
payment or provision for payment of any securities ranking senior to the Series
A Preferred Stock, for each share of Series A Preferred Stock, subject to
adjustment as hereinafter provided, (A) $100.00 plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment or, (B) if greater than the amount specified in clause
(i)(A) of this sentence, an amount equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, as the same may be adjusted as
hereinafter provided, and (ii) to the holders of stock ranking on a parity upon
liquidation, dissolution or winding up with the Series A Preferred Stock, unless
simultaneously therewith distributions are made ratably on the Series A
Preferred Stock and all other shares of such parity stock in proportion to the
total amounts to which the holders of shares of Series A Preferred Stock are
entitled under clause
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(i)(A) of this sentence and to which the holders of such parity shares are
entitled, in each case upon such liquidation, dissolution or winding up. The
amount to which holders of Series A Preferred Stock may be entitled upon
liquidation, dissolution or winding up of the Company pursuant to clause (i)(B)
of the foregoing sentence is hereinafter referred to as the "Participating
Liquidation Amount" and the multiple of the amount to be distributed to holders
of shares of Common Stock upon the liquidation, dissolution or winding up of the
Company applicable pursuant to said clause to the determination of the
Participating Liquidation Amount, as said multiple may be adjusted from time to
time as hereinafter provided, is hereinafter referred to as the "Liquidation
Multiple." In the event the Company shall at any time after January 9, 1996
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or effect a subdivision or split or a combination, consolidation or reverse
split of the outstanding shares of Common Stock into a greater or lesser number
of shares of Common Stock, then, in each such case, the Liquidation Multiple
thereafter applicable to the determination of the Participating Liquidation
Amount to which holders of Series A Preferred Stock shall be entitled after such
event shall be the Liquidation Multiple applicable immediately prior to such
event multiplied by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event. Except as provided in this paragraph 6(a), holders of
Series A Preferred Stock shall not be entitled to any distribution in the event
of liquidation, dissolution or winding up of the Company.
(b) For the purposes of this paragraph 6, none of the following
shall be deemed to be a voluntary or involuntary liquidation, dissolution or
winding up of the Company:
(i) the voluntary sale, conveyance, lease, exchange or transfer
(for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Company;
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<PAGE> 20
(ii) the consolidation or merger of the Company with or into one
or more other corporations or other associations;
(iii) the consolidation or merger of one or more corporations or
other associations with or into the Company;
(iv) the participation by the Company in a share exchange;
(v) the division of the Company pursuant to sections 1951 through
1957 of the Pennsylvania BCL;
(vi) the conversion of the Company pursuant to sections 1961
through 1966 of the Pennsylvania BCL;
(c) Notwithstanding anything to the contrary in this Article
FIFTH (E), in case any Controlling Person or Group (as defined from time to time
in Section 2543 of the Pennsylvania BCL) shall be required to purchase any
shares of Series A Preferred Stock pursuant to Sections 2541 through 2548 of the
Pennsylvania BCL, as in effect from time to time, the amount that is determined
to represent the "fair value" (as that term is used in such Section 2542 of the
Pennsylvania BCL) of such shares shall be an amount per share equal to the
Liquidation Multiple then in effect times the aggregate amount per share that
such Controlling Person or Group is required to pay to purchase any share of
Common Stock pursuant to such Sections 2541 through 2548 of the Pennsylvania
BCL.
7. Certain Reclassifications and Other Events. (a) In the event
that holders of shares of Common Stock of the Company receive after January 9,
1996 in respect of their shares of Common Stock any share of capital stock of
the Company (other than any share of Common Stock of the Company), whether by
way of reclassification, recapitalization, reorganization, dividend or other
distribution or otherwise (a "Transaction"), then, and in each such event, the
dividend rights, voting rights and rights upon the liquidation, dissolution or
winding up of the Company of the shares of Series A Preferred
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Stock shall be adjusted so that after such event the holders of Series A
Preferred Stock shall be entitled, in respect of each share of Series A
Preferred Stock held, in addition to such rights in respect thereof to which
such holder was entitled immediately prior to such adjustment, to (i) such
additional dividends as equal the Dividend Multiple in effect immediately prior
to such Transaction multiplied by the additional dividends which the holder of a
share of Common Stock shall be entitled to receive by virtue of the receipt in
the Transaction of such capital stock, (ii) such additional voting rights as
equal the Vote Multiple in effect immediately prior to such Transaction
multiplied by the additional voting rights to which the holder of a share of
Common Stock shall be entitled by virtue of the receipt in the Transaction of
such capital stock and (iii) such additional distributions upon liquidation,
dissolution or winding up of the Company as equal the Liquidation Multiple in
effect immediately prior to such Transaction multiplied by the additional amount
which the holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of the Company by virtue of the receipt
in the Transaction of such capital stock, as the case may be, all as provided by
the terms of such capital stock.
(b) In the event that holders of shares of Common Stock of the
Company receive after January 9, 1996 in respect of their shares of Common Stock
any right or warrant to purchase Common Stock (including as such a right, for
all purposes of this paragraph 7(b), any security convertible into or
exchangeable for Common Stock) at a purchase price per share less than the Fair
Market Value of a share of Common Stock on the date of issuance of such right or
warrant, then and in each such event the dividend rights, voting rights and
rights upon the liquidation, dissolution or winding up of the Company of the
shares of Series A Preferred Stock shall each be adjusted so that after such
event the Dividend Multiple, the Vote Multiple and the Liquidation Multiple
shall each be the product of the Dividend Multiple, the Vote Multiple and the
Liquidation Multiple, as the case may be, in effect immediately prior to such
event multiplied by a
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fraction the numerator of which shall be the number of shares of Common Stock
outstanding immediately before such issuance of rights or warrants plus the
maximum number of shares of Common Stock which could be acquired upon exercise
in full of all such rights or warrants and the denominator of which shall be the
number of shares of Common Stock outstanding immediately before such issuance of
rights or warrants plus the number of shares of Common Stock which could be
purchased, at the Fair Market Value of the Common Stock at the time of such
issuance, by the maximum aggregate consideration payable upon exercise in full
of all such rights or warrants.
(c) In the event that holders of shares of Common Stock of the
Company receive after January 9, 1996 in respect of their shares of Common Stock
any right or warrant to purchase capital stock of the Company (other than shares
of Common Stock), including as such a right, for all purposes of this paragraph
7(c), any security convertible into or exchangeable for capital stock of the
Company (other than Common Stock), at a purchase price per share less than the
Fair Market Value of a share of such capital stock on the date of issuance of
such right or warrant, then and in each such event the dividend rights, voting
rights and rights upon liquidation, dissolution or winding up of the Company of
the shares of Series A Preferred Stock shall each be adjusted so that after such
event each holder of a share of Series A Preferred Stock shall be entitled, in
respect of each share of Series A Preferred Stock held, in addition to such
rights in respect thereof to which such holder was entitled immediately prior to
such event, to receive (i) such additional dividends as equal the Dividend
Multiple in effect immediately prior to such event multiplied, first, by the
additional dividends to which the holder of a share of Common Stock shall be
entitled upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise, and multiplied again by the Discount
Fraction (as hereinafter defined), (ii) such additional voting rights as equal
the Vote Multiple in effect immediately prior to such event multiplied, first,
by the additional voting rights to which the
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holder of a share of Common Stock shall be entitled upon exercise of such right
or warrant by virtue of the capital stock which could be acquired upon such
exercise, and multiplied again by the Discount Fraction and (iii) such
additional distributions upon liquidation, dissolution or winding up of the
Company as equal the Liquidation Multiple in effect immediately prior to such
event multiplied, first, by the additional amount which the holder of a share of
Common Stock shall be entitled to receive upon liquidation, dissolution or
winding up of the Company upon exercise of such right or warrant by virtue of
the capital stock which could be acquired upon such exercise, and multiplied
again by the Discount Fraction. For purposes of this paragraph, the "Discount
Fraction" shall be a fraction the numerator of which shall be the difference
between the Fair Market Value of a share of the capital stock subject to a right
or warrant distributed to holders of shares of Common Stock of the Company as
contemplated by this paragraph 7(c) immediately after the distribution thereof
and the purchase price per share for such share of capital stock pursuant to
such right or warrant and the denominator of which shall be the Fair Market
Value of a share of such capital stock immediately after the distribution of
such right or warrant.
(d) For purposes of this Article FIFTH (E), the "Fair Market
Value" of a share of capital stock of the Company (including a share of Common
Stock) on any date shall be deemed to be the average of the daily closing price
per share thereof over the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however, that in
the event that such Fair Market Value of any such share of capital stock is
determined during a period which includes any date that is within 30 Trading
Days after (i) the ex-dividend date for a dividend or distribution on stock
payable in shares of such stock or securities convertible into shares of such
stock, or (ii) the effective date of any subdivision, split, combination,
consolidation, reverse stock split or reclassification of such stock or division
of the Company pursuant to Sections 1951 through 1957 of the Pennsylvania BCL,
then, and in each
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such case, the Fair Market Value shall be appropriately adjusted by the Board of
Directors of the Company to take into account ex-dividend or post-effective date
trading. The closing price for any day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way (in either case, as reported in the
applicable transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange), or, if the shares are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
applicable transaction reporting system with respect to securities listed on the
principal national securities exchange on which the shares are listed or
admitted to trading or, if the shares are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by The Nasdaq Stock Market or such other system then in use, or if
on any such date the shares are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional market maker
making a market in the shares selected by the Board of Directors of the Company.
The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the shares are listed or admitted to trading is
open for the transaction of business or, if the shares are not listed or
admitted to trading on any national securities exchange, on which the New York
Stock Exchange or such other national securities exchange as may be selected by
the Board of Directors of the Company is open. If the shares are not publicly
held or not so listed or traded on any day within the period of 30 Trading Days
applicable to the determination of Fair Market Value thereof as aforesaid, "Fair
Market Value" shall mean the fair market value thereof per share as determined
in good faith by the Board of Directors of the Company. In either case referred
to in the foregoing sentence, the determination of Fair Market Value shall be
described in a statement filed with the Secretary of the Company.
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8. Consolidation, Merger, etc. In case the Company shall enter
into any consolidation, merger, division, share exchange, combination, sale of
all or substantially all of the Company's assets, or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each
outstanding share of Series A Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and/or other property (payable in like kind), as the case may
be, for which or into which each share of Common Stock is changed or exchanged
multiplied by the highest of the Vote Multiple, the Dividend Multiple or the
Liquidation Multiple in effect immediately prior to such event; provided,
however, no fractional share or scrip representing fractional shares of any
other stock or securities shall be issued. Instead of any fractional interest in
a share of such other stock or securities which would otherwise be deliverable
pursuant to this paragraph 8, the Company will pay to the holder thereof an
amount in cash (computed to the nearest cent) equal to the same fraction of the
Fair Market Value of a share of such other stock or security.
9. Effective Time of Adjustments.
(a) Adjustments to the Series A Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event requiring
such adjustments occurs.
(b) The Company shall give prompt written notice to each holder
of a share of outstanding Series A Preferred Stock of the effect of any
adjustment to the voting rights, dividend rights or rights upon liquidation,
dissolution or winding up of the Company of such shares required by the
provisions hereof. Notwithstanding the foregoing sentence, the failure of the
Company to give such notice shall not affect the validity of or the force or
effect of or the requirement for such adjustment.
10. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable at the option of the Company or any holder thereof.
Notwithstanding the foregoing
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sentence of this paragraph, the Company may acquire shares of Series A Preferred
Stock in any other manner permitted by law, the provisions hereof and the
Restated Articles of Incorporation.
11. Ranking. The Series A Preferred Stock shall rank senior to
the Common Stock and, unless otherwise provided in a Statement with Respect to
Shares or an amendment to the Restated Articles of Incorporation relating to the
determination of a subsequent series of preferred stock of the Company, the
Series A Preferred Stock shall rank junior to all other series of the Company's
preferred stock as to the payment of dividends and the distribution of assets on
liquidation, dissolution or winding up.
12. Limitations. Except as may otherwise be required by law, the
shares of Series A Preferred Stock shall not have any powers, preferences or
relative, participating, optional or other special rights other than those
specifically set forth in this Article FIFTH (E) (as such may be amended from
time to time) or otherwise in the Restated Articles of Incorporation.
13. Amendment. So long as any shares of the Series A Preferred
Stock are outstanding, the Company shall not amend this Article FIFTH (E) or the
Restated Articles of Incorporation in any manner which would alter or change the
rights, preferences or limitations of the Series A Preferred Stock so as to
affect such rights, preferences or limitations in any material respect
prejudicial to the holders of the Series A Preferred Stock without, in addition
to any other vote of shareholders required by law, the affirmative vote of the
holders of two-thirds or more of the outstanding shares of Series A Preferred
Stock, voting together as a single class; provided, however, that the creation
of another series of the Preferred Stock ranking senior to or on a parity with
the Series A Preferred Stock as to the payment of dividends or the distribution
of assets or liquidation, dissolution or winding up shall not be deemed to be
prejudicial to the holders of the Series A Preferred Stock for the purposes of
this paragraph 13.
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SIXTH:A. A higher than majority shareholder vote for certain Business
Combinations (as defined below) shall be required as follows:
(1) In addition to any affirmative vote required by law or these
Restated Articles of Incorporation or the terms of any series of
Preferred Stock or any other securities of the Company and except as
otherwise expressly provided in Section B. of this Article SIXTH:
(a) any merger or consolidation of the Company or any
Subsidiary with (i) any Interested Stockholder or with (ii) any
other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation
would be, an Affiliate or Associate of an Interested Stockholder;
(b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of
transactions whether or not related) to an Interested Stockholder
(or an Affiliate or Associate of an Interested Stockholder) of
any assets of the Company or of a Subsidiary having an aggregate
Fair Market Value of $10,000,000 or more;
(c) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of
transactions whether or not related) to or with the Company or a
Subsidiary of any assets of an Interested Stockholder (or an
Affiliate or Associate of an Interested Stockholder) having an
aggregate Fair Market Value of $10,000,000 or more;
(d) the issuance or sale by the Company or any
Subsidiary (in one transaction or a series of transactions
whether or not related) of any securities of the Company or of
any Subsidiary to any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder in exchange for cash,
securities or other consideration (or a combination thereof)
having an aggregate Fair Market Value of
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$10,000,000 or more except an issuance of securities upon
conversion of convertible securities of the Company or of a
Subsidiary which were not acquired by such Interested Stockholder
(or such Affiliate or Associate) from the Company or a
Subsidiary;
(e) the adoption of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on
behalf of any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
(f) any reclassification of securities (including any
reverse stock split), or recapitalization of the Company, or any
merger or consolidation of the Company with any of its
Subsidiaries or any other transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity securities or securities convertible into equity
securities of the Company or any Subsidiary which is directly or
indirectly owned by any Interested Stockholder or any Affiliate
or Associate of any Interested Stockholder; shall require the
affirmative vote of (i) the holders of at least eighty percent
(80%) of the combined voting power of the then outstanding shares
of capital stock of the Company entitled to vote generally in an
annual election of directors (the "Voting Stock") and (ii) the
holders of at least a majority of the combined voting power of
the then outstanding Voting Stock held by Disinterested
Stockholders, in each case voting together as a single class.
Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be
specified, by law, by any other provisions of these Restated
Articles of Incorporation or by the terms of any series of
Preferred Stock or any other securities of the Company;
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(2) The term "Business Combination" as used in this Article SIXTH
shall mean any transaction which is referred to in any one or more of
clauses (a) through (f) of paragraph (1) of Section A. of this Article
SIXTH.
B. The provisions of Section A. of this Article SIXTH shall not
be applicable to any Business Combination, and such Business Combination shall
require only such affirmative vote (if any) as is required by law, any other
provision of these Restated Articles of Incorporation or the terms of any class
or series of capital stock of the Company entitled to a preference over the
Common Stock as to dividends or upon liquidation, or the terms of any other
securities of the Company, if all of the conditions specified in either of the
following paragraphs (1) or (2) are met:
(1) The Business Combination shall have been approved by a
majority of the Disinterested Directors or
(2) All the following six conditions shall have been met -
(a) The transaction constituting the Business
Combination shall provide for a consideration to be received by
holders of Common Stock in exchange for their Common Stock, and
the aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders
of Common Stock in such Business Combination shall be at least
equal to the highest of the following:
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid in order to
acquire any shares of Common Stock beneficially owned
by the Interested Stockholder which were acquired (x)
within the two-year period
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immediately prior to the first public announcement of
the proposed Business Combination (the "Announcement
Date") or (y) in the transaction in which it became
an Interested Stockholder, whichever is higher;
(ii) the Fair Market Value per share of Common
Stock on the Announcement Date or on the date on
which the Interested Stockholder became an Interested
Stockholder (the "Determination Date"), whichever is
higher; and
(iii) (if applicable) the price per share equal
to the Fair Market Value per share of Common Stock
determined pursuant to clause (ii) immediately
preceding, multiplied by the ratio of (x) the highest
per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid in
order to acquire any shares of Common Stock
beneficially owned by the Interested Stockholder
which were acquired within the two-year period
immediately prior to the Announcement Date to (y) the
Fair Market Value per share of Common Stock on the
first day in such two-year period on which the
Interested Stockholder beneficially owned any shares
of Common Stock, whether or not such Stockholder was
an Interested Stockholder on that day.
(b) If the transaction constituting the Business
Combination shall provide for a consideration to be received by
holders of any class of outstanding Voting Stock other than
Common Stock, the aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the Business
Combination of consideration other than cash to be received per
share by holders of shares of such Voting Stock shall be at least
equal to the highest of the following (it being intended
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that the requirements of this clause (2)(b) shall be required to
be met with respect to every class of outstanding Voting Stock
other than Institutional Voting Stock, whether or not the
Interested Stockholder beneficially owns any shares of a
particular class of Voting Stock):
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid in order to
acquire any shares of such class of Voting Stock
beneficially owned by the Interested Stockholder
which were acquired (x) within the two-year period
immediately prior to the Announcement Date or (y) in
the transaction in which it became an Interested
Stockholder, whichever is higher;
(ii) (if applicable) the highest preferential
amount per share to which the holders of shares of
such class of Voting Stock are entitled in the event
of any voluntary or involuntary liquidation,
dissolution or winding up of the Company;
(iii) the Fair Market Value per share of such
class of Voting Stock on the Announcement Date or on
the Determination Date, whichever is higher; and
(iv) (if applicable) the price per share equal
to the Fair Market Value per share of such class of
Voting Stock determined pursuant to clause (iii)
immediately preceding, multiplied by the ratio of (x)
the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers'
fees) paid in order to acquire any shares of such
class of Voting Stock beneficially owned by the
Interested Stockholder which were acquired within the
two-year period immediately prior to the
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Announcement Date to (y) the Fair Market Value per
share of such class of Voting Stock on the first day
in such two-year period on which the Interested
Stockholder beneficially owned any shares of such
class of Voting Stock, whether or not such
Stockholder was an Interested Stockholder on that
day.
(c) The consideration to be received by holders of a
particular class of Voting Stock (including Common Stock) shall
be in cash or in the same form as was previously paid in order to
acquire shares of such class of Voting Stock which are
beneficially owned by the Interested Stockholder and, if the
Interested Stockholder beneficially owns shares of any class of
Voting Stock which were acquired with varying forms of
consideration, the form of consideration to be received by
holders of such class of Voting Stock shall be either cash or the
form used to acquire the largest number of shares of such class
of Voting Stock beneficially owned by it. The prices determined
in accordance with clauses (a) and (b) of paragraph (2) of this
Section B. shall be subject to an appropriate adjustment in the
event of any stock dividend, stock split, subdivision,
combination of shares or similar event.
(d) After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such
Business Combination:
(i) except as approved by a majority of the
Disinterested Directors, there shall have been no
failure to declare and pay at the regular date
therefor any full quarterly dividends (whether or not
cumulative) on any outstanding Preferred Stock or
other capital stock entitled to a preference over the
Common Stock as to dividends or upon liquidation;
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(ii) except as approved by a majority of the
Disinterested Directors, there shall have been (x) no
reduction in the annual amount of dividends paid on
the Common Stock (except as necessary to reflect any
subdivision of the Common Stock) and (y) no failure
to increase the annual amount of dividends as
necessary to prevent any such reduction in the event
of any reclassification (including any reverse stock
split), recapitalization, reorganization or similar
transaction which has the effect of reducing the
number of outstanding shares of the Common Stock;
(iii) such Interested Stockholder shall not
have become the beneficial owner of any additional
shares of Voting Stock except as part of the
transaction in which it became an Interested
Stockholder; and
(iv) there shall have always been at least
three Disinterested Directors on the Board of
Directors.
(e) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not
have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Company, whether
in anticipation of or in connection with such Business
Combination or otherwise.
(f) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to
shareholders at least 30 days prior to the consummation of such
Business Combination (whether or not
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such proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions).
C. For the purposes of this Article SIXTH:
(1) A "person" shall mean any individual, a
partnership, a corporation, an association, a trust or other
entity.
(2) "Interested Stockholder" at any particular time
shall mean any person (other than the Company or any Subsidiary)
who or which:
(a) is at such time the beneficial owner,
directly or indirectly, of five percent (5%) or more
of the voting power of the Voting Stock;
(b) is an Affiliate of the Company and at any
time within the two-year period immediately prior to
the date in question was the beneficial owner,
directly or indirectly, of five percent (5%) or more
of the voting power of the Voting Stock; or
(c) is at such time an assignee of or has
otherwise succeeded to the beneficial ownership of
any shares of Voting Stock which were at any time
within the two-year period immediately prior to the
date in question beneficially owned by any Interested
Stockholder (as defined in C.(2)(a) and (b) above),
if such assignment or succession shall have occurred
in the course of a transaction or series of
transactions not involving a public offering within
the meaning of the Securities Act of 1933.
(3) "Disinterested Stockholder" shall mean a
shareholder of the Company who is not an Interested Stockholder
or an Affiliate or an Associate of an Interested Stockholder.
(4) A person shall be a "beneficial owner" of any
shares of Voting Stock:
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(a) which such person or any of its Affiliates
or Associates beneficially owns, directly or
indirectly;
(b) which such person or any of its Affiliates
or Associates has (i) the right to acquire (whether
or not such right is exercisable immediately)
pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any
agreement, arrangement or understanding; or
(c) which are beneficially owned, directly or
indirectly, by any other person with which such
person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of
any shares of Voting Stock.
(5) For the purpose of determining whether a person
is an Interested Stockholder pursuant to paragraph (2) of this
Section C., the number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned by an Interested
Stockholder through application of paragraph (4) of this Section
C. but shall not include any other shares of Voting Stock which
may be issuable pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise.
(6) "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act
of 1934, as in effect on December 31, 1984 (the term "registrant"
in such Rule 12b-2 meaning in this case the Company).
(7) "Subsidiary" means any corporation of which a
majority of any class of equity security is owned, directly or
indirectly, by the Company; provided,
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however, that for the purposes of the definition of Interested
Stockholder set forth in paragraph (2) of this Section C. the
term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly or
indirectly, by the Company.
(8) "Disinterested Director" means any member of the
Board of Directors who is unaffiliated with, and not a
representative or nominee of, an Interested Stockholder and (a)
was a member of the Board prior to the time that the Interested
Stockholder became an Interested Stockholder, or (b) recommended
to succeed a Disinterested Director by a majority of the
Disinterested Directors then on the Board.
(9) "Fair Market Value" means: (a) in the case of
stock, the highest closing sale price during the 30-day period
immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock Exchange Listed
Stocks, or, if such stock is not quoted on the Composite Tape, on
the New York Stock Exchange, or if such stock is not listed on
such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a
share of such stock during the 30-day period preceding the date
in question on the National Association of Securities Dealers,
Inc. Automated Quotation System or any other system then in use,
or if no such quotations are available, the fair market value on
the date in question of a share of such stock as determined by a
majority of the Disinterested Directors in good faith; and (b) in
the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by a
majority of the Disinterested Directors in good faith.
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(10) In the event of any Business Combination in
which the Company survives, the phrase "consideration other than
cash to be received" as used in paragraph (2) of Section B. of
this Article SIXTH shall include the shares of Common Stock and
the shares of any other class of outstanding Voting Stock
retained by the holders of such shares.
(11) The term "class" of Voting Stock shall be deemed
to refer to a series of Voting Stock where more than one series
of Voting Stock is outstanding within a class of Voting Stock.
(12) "Institutional Voting Stock" shall mean any
class of Voting Stock which was issued to and continues to be
held solely by one or more insurance companies, pension funds,
commercial banks, savings banks or similar financial institutions
or institutional investors.
D. A majority of the Disinterested Directors of the Company shall
have the power and duty to determine for the purposes of this Article SIXTH, on
the basis of information known to them after reasonable inquiry, (1) whether a
person is an Interested Stockholder, (2) the number of shares of Voting Stock
beneficially owned by any person, (3) whether a person is an Affiliate or
Associate of another, (4) whether the requirements of Section B. of this Article
SIXTH have been met with respect to any Business Combination, (5) whether a
class of Voting Stock is Institutional Voting Stock and (6) whether the assets
which are subject to any Business Combination have, or the consideration to be
received for the issuance or transfer of securities by this Company or any
subsidiary in any Business Combination has, an aggregate Fair Market Value of
$10,000,000 or more. Any such determination made in good faith shall be binding
and conclusive on all parties.
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E. Nothing contained in this Article SIXTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
F. In addition to any requirements of law and any other
provisions of these Restated Articles of Incorporation or the terms of any class
or series of capital stock of the Company entitled to a preference over the
Common Stock as to dividends or upon liquidation, or the terms of any other
securities of the Company (and notwithstanding the fact that a lesser percentage
may be specified by law, these Restated Articles of Incorporation or any such
terms), the affirmative vote of
(1) the holders of eighty percent (80%) or more of the combined
voting power of the Voting Stock, voting together as a single class,
and
(2) a majority of the combined voting power of the Voting Stock
held by the Disinterested Stockholders, voting together as a single
class, shall be required to amend, alter or repeal, or adopt any
provision inconsistent with, this Article SIXTH.
SEVENTH: A. Except as otherwise fixed by or pursuant to the terms of
any class or series of capital stock of the Company entitled to a preference
over the Common Stock as to dividends or upon liquidation, the number,
qualification, terms of office, manner of election, time and place of meeting,
compensation, powers and duties of the directors shall be fixed from time to
time by or pursuant to the By-laws.
B. If the By-laws so provide, the members of the Board (other
than those who may be elected by the holders of any class or series of capital
stock having a preference over the Common Stock as to dividends or upon
liquidation pursuant to the terms of these Restated Articles of Incorporation or
of such class or series of stock) shall be classified, with respect to the time
for which they severally hold office, into three classes, as nearly equal in
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number as possible, having such terms and being elected in such manner as shall
be specified in the By-laws.
EIGHTH: In furtherance and not in limitation of the powers conferred
upon it by law, the Board of Directors is expressly authorized to:
(1) adopt any By-laws a majority of the entire Board of Directors
may deem necessary or desirable for the efficient conduct of the
affairs of the Company, including, but not limited to, provisions
governing the conduct of, and the matters which may properly be brought
before, meetings of the shareholders and provisions specifying the
manner and extent to which prior notice shall be given of the
submission of proposals to be considered at any such meeting or of
nominations for the election of directors to be held at any such
meeting; and
(2) repeal, alter or amend the By-laws by the vote of a majority
of the entire Board of Directors.
NINTH: In addition to any requirements of law and any other
provisions of these Restated Articles of Incorporation or the terms of any
series of Preferred Stock or any other securities of the Company (and
notwithstanding the fact that a lesser percentage may be specified by law, these
Restated Articles of Incorporation or any such terms), the affirmative vote of
the holders of eighty percent (80%) or more of the combined voting power of the
then outstanding shares of capital stock of the Company entitled to vote
generally in an annual election (the "Voting Stock"), voting together as a
single class, shall be required to:
(1) remove a director without cause (For purposes of this Article
(NINTH) "cause" shall mean the willful and continuous failure of a
director to substantially perform such director's duties to the
Company, other than any such failure resulting from incapacity
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due to physical or mental illness, or the willful engaging by a
director in gross misconduct materially and demonstrably injurious to
the Company);
(2) adopt, amend, alter or repeal any provision of the By-laws,
except that By-law XVI may be amended or altered by a majority vote of
the Voting Stock if the majority of the entire Board of Directors has
first recommended the amendment or alteration for approval by the
shareholders;
(3) amend, alter or repeal or adopt any provision inconsistent
with, Articles SEVENTH or EIGHTH or this Article NINTH; and
(4) amend, alter or repeal or adopt any provisions inconsistent
with any provision, other than Articles SIXTH, SEVENTH or EIGHTH or
this Article NINTH, contained in these Restated Articles of
Incorporation, unless otherwise first recommended and approved by a
majority of the entire Board of Directors or, if there is an Interested
Stockholder (as defined in Article SIXTH), by a majority of the
Disinterested Directors (as defined in Article SIXTH), in which cases a
majority vote of the Voting Stock is required to amend, alter or repeal
such other provisions of these Restated Articles of Incorporation.
TENTH: To the fullest extent that the law of the Commonwealth of
Pennsylvania, as it exists on January 27, 1987, or as it may thereafter be
amended, permits the elimination of the liability of directors, no director of
the corporation shall be liable for monetary damages for any action taken, or
any failure to take any action. This Article TENTH shall not apply to any breach
of performance of duty or any failure of performance of duty by any director
occurring prior to January 27, 1987. No amendment to or repeal of this Article
TENTH shall apply to or have any effect on the liability or alleged liability of
any director of the Company for or with
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respect to any act or failure to act on the part of such director occurring
prior to such amendment or repeal.
ELEVENTH: The Company may, to the fullest extent permitted by
applicable law as then in effect, indemnify any person who is or was a director,
officer, employee or agent of the Company or is or was serving at the request of
the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise (including, without
limitation, any employee benefit plan) and may take such steps as may be deemed
appropriate by the Company, including purchasing and maintaining insurance,
entering in to contracts (including, without limitation, contracts of
indemnification between the Company and its directors and officers), creating a
trust fund, granting security interests or using other means (including, without
limitation, a letter of credit) to insure the payment of such amount as may be
necessary to effect such indemnification. This Article shall apply to any action
taken, or any failure to take any action, on or after January 27, 1987.
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<PAGE> 1
EXHIBIT 3(c)
BY-LAWS
OF
CBS CORPORATION
-------
AS AMENDED TO
DECEMBER 1, 1997
-------
<PAGE> 2
BY-LAWS
OF
CBS CORPORATION
---------
ARTICLE I
MEETINGS OF SHAREHOLDERS
The annual meeting of the shareholders of the Company shall be held on
such date and at such hour as the Board of Directors may designate and on any
subsequent day or days to which such meeting may be adjourned, for the purpose
of electing directors and for the transaction of such other business as may
lawfully come before the meeting. If for any reason the annual meeting shall not
have been held on the day designated by the Board or on the day specified above,
the Board of Directors shall cause the annual meeting to be called and held as
soon thereafter as may be convenient.
Special meetings of the shareholders of the Company may be called by the
Board of Directors or by the Chairman to be held on such date as the Board or
the Chairman shall determine. At an annual meeting of the shareholders, only
such business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be (i)
specified in the notice of the meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (ii) otherwise brought before the
meeting by or at the direction of the Board of Directors or (iii) brought before
the meeting by a shareholder in accordance with the procedure set forth below.
For business to be properly brought before an annual meeting by a shareholder,
the shareholder must be entitled by Pennsylvania law to present such
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business and must have given written notice of such business, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of the
Company not later than 90 days in advance of such meeting; provided, however,
that if such annual meeting of shareholders is held on a date other than the
last Wednesday of April, such written notice must be given within ten days after
the first public disclosure, which may include any public filing by the Company
with the Securities and Exchange Commission, of the date of the annual meeting.
Any such notice shall set forth as to each matter the shareholder proposes to
bring before the annual meeting: (a) a brief description of the business desired
to be brought before the meeting and the reasons for conducting such business at
the meeting, and in the event that such business includes a proposal to amend
the By-laws of the Company, the language of the proposed amendment; (b) the name
and address of the shareholder proposing such business; (c) a representation
that the shareholder is a holder of record of stock of the Company entitled to
vote at such meeting and intends to appear in person or by proxy at the meeting
to propose such business; and (d) any material interest of any shareholder in
such business. No business shall be conducted at an annual meeting except in
accordance with this paragraph, and the chairman of any annual meeting of
shareholders may refuse to permit any business to be brought before such annual
meeting without compliance with the foregoing procedures.
Subject to the rights of the holders of any class or series of stock
having a preference over the Common Stock of the Company as to dividends or upon
liquidation, nominations for the election of directors may be made by the Board
of Directors or by any shareholder entitled to vote for the election of
directors. Any shareholder entitled to vote for the election of directors may
nominate at a meeting persons for election as directors
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<PAGE> 4
only if written notice of such shareholder's intent to make such nomination is
given, either by personal delivery or by United States mail, postage prepaid, to
the Secretary of the Company not later than: (i) with respect to an election to
be held at an annual meeting of shareholders, 90 days in advance of such meeting
(provided that if such annual meeting of shareholders is held on a date other
than the last Wednesday of April, such written notice must be given within ten
days after the first public disclosure, which may include any public filing by
the Company with the Securities and Exchange Commission, of the date of the
annual meeting); and (ii) with respect to an election to be held at a special
meeting of shareholders for the election of directors, the close of business on
the seventh day following the date on which notice of such meeting is first
given to shareholders. Each such notice shall set forth: (a) the name and
address of the shareholder who intends to make the nomination and of each person
to be nominated; (b) a representation that the shareholder is a holder of record
of stock of the Company entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice as directors; (c) a description of all arrangements or
understandings between the shareholder and each proposed nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (d) such other
information regarding each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission were such nominee to be nominated by
the Board of Directors; and (e) the consent of each proposed nominee to serve as
a director of the Company if so elected. The chairman of any meeting of
shareholders to elect directors may refuse to permit the
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<PAGE> 5
nomination of any person to be made without compliance with the foregoing
procedure.
Every meeting of the shareholders, annual or special, shall be held at
such place within or without the Commonwealth of Pennsylvania as the Board of
Directors may designate or, in the absence of such designation, at the
registered office of the Company in the Commonwealth of Pennsylvania.
Written notice of every meeting of the shareholders shall be given by,
or at the direction of, the person authorized to call the meeting, to each
shareholder of record entitled to vote at the meeting, at the shareholder's
address appearing on the books of the Company. The notice of every meeting of
the shareholders shall specify the place, day and hour of the meeting and, in
the case of a special meeting, the matter or matters to be acted upon at such
meeting. Only the matter or matters specified in the notice of a special meeting
shall be acted upon thereat. All notices of meetings of the shareholders shall
be provided in accordance with Pennsylvania law.
The notice of every meeting of the shareholders may be accompanied by a
form of proxy approved by the Board of Directors in favor of such person or
persons as the Board of Directors may select.
Except as otherwise provided by law or by the Restated Articles of the
Company, as from time to time amended (hereinafter called the Articles of the
Company), or by these By-laws, the presence in person or by proxy of
shareholders entitled to cast at least a majority of the votes that all
shareholders are entitled to cast on a particular matter shall constitute a
quorum at the meeting of shareholders, and all questions shall be decided by a
majority of the votes cast, in person or by proxy, at a duly organized meeting
by the holders of shares entitled to vote thereon. The shareholders present at
any duly
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organized meeting may continue to do business until adjournment, notwithstanding
the withdrawal of enough shareholders to leave less than a quorum.
Any meeting of the shareholders may be adjourned from time to time,
without notice other than by announcement at the meeting at which such
adjournment is taken, and at any such adjourned meeting at which a quorum shall
be present any action may be taken that could have been taken at the meeting
originally called; provided, that any meeting at which directors are to be
elected shall be adjourned only from day to day, or for such longer periods, not
exceeding fifteen days each, as the holders of a majority of the shares present
in person or by proxy shall direct, until such directors have been elected.
If a meeting cannot be organized because of lack of a quorum, those
present may, except as otherwise provided by law, adjourn the meeting to such
time and place as they may determine, but in the case of any meeting called for
the election of directors those who attend the second of such adjourned
meetings, although less than a quorum, shall nevertheless constitute a quorum
for the purpose of electing directors.
At each meeting, each shareholder entitled to vote may vote in person or
by proxy executed in writing by the shareholder or by his or her duly authorized
attorney-in-fact and filed with the Secretary of the Company. Except as
otherwise provided by law or the Articles of the Company or these By-laws, each
holder of record of shares of any class of the Company shall be entitled to one
vote, on each matter submitted to a vote at a meeting of the shareholders, and
in respect of which shares of such class shall be entitled to be voted, for
every share of such class standing in his or her name on the books of the
Company.
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<PAGE> 7
ARTICLE II
BOARD OF DIRECTORS - COMMITTEES -
THEIR POWERS AND DUTIES
The business, affairs and property of the Company shall be managed and
controlled by a Board of Directors, which, except as otherwise provided by law
or the Articles of the Company, shall exercise all the powers of the Company.
The number, qualifications, manner of election, time and place of meeting,
compensation and powers and duties of the directors of the Company shall be
fixed from time to time by or pursuant to these By-laws. Nominees for election
to the Board of Directors who qualify as Independent Directors on the date of
their nomination shall be such that the majority of all directors holding office
immediately after such nomination, assuming the election of such nominees, shall
be Independent Directors.
The number of directors which shall constitute the Board of Directors
shall be fixed from time to time by a vote of a majority of the Board of
Directors, provided, however, that the number of directors of the Company shall
be not less than three nor more than twenty-four. The shareholders shall, at
each annual meeting, elect directors, each of whom shall serve until the annual
meeting of shareholders next following his or her election and until his
successor is elected and shall qualify; provided, however, that directors with
terms expiring at the annual meetings of shareholders to be held in 1994 and
1995 shall serve until the expiration of their respective terms.
Each election of directors by the shareholders shall be conducted by one
or three judges of election appointed by the Board of Directors in advance of
the meeting to act at that meeting and at any adjournment thereof. If any or all
of such appointees shall fail to appear or fail or refuse to act, the vacancy or
vacancies shall be filled by the Board of
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<PAGE> 8
Directors or the presiding officer of the meeting. No person who is a candidate
for office to be filled at the meeting shall act as a judge.
Except as the law may otherwise provide, the shareholders shall not
remove any director from office without assigning any cause (as such term is
defined in the Articles) prior to the expiration of the term of office unless
holders of at least 80% of the shares of capital stock of the Company entitled
to vote thereon, vote to remove the director from office.
In case of any vacancy in the Board of Directors through death,
resignation, disqualification, removal, increase in the number of directors or
other cause, the remaining directors, though less than a quorum, by affirmative
vote of a majority thereof or by a sole remaining director, may fill such
vacancy to serve for the balance of the unexpired term and until his or her
successor shall have been elected and qualified; provided, however, that any
director elected to fill a vacancy for a director having a term expiring at the
annual meeting of shareholders to be held in 1994 or 1995 shall serve only until
the annual election of shareholders next following his or her election.
There shall be a Compensation Committee, an Audit Review Committee, a
Committee on Environment and Health, and a Nominating and Governance Committee.
The Compensation Committee may determine to retain an independent compensation
consultant to assist it in carrying out its duties. Each of these committees
shall consist of not less than two members of the Board of Directors, at least
two of whom, on the date of their appointment to the committee, are Independent
Directors. All members of the Compensation Committee and the Nominating and
Governance Committee must, on the date of their appointment to said committee,
be Independent Directors. With respect to
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<PAGE> 9
each such committee, the Board of Directors shall, by one or more resolutions
adopted by a majority of the whole Board, determine the duties and
responsibilities, determine the number of members, appoint the members and the
committee chair and fill each vacancy occurring in the membership.
The Board of Directors may from time to time appoint such further
standing or special committees as it may deem in the best interest of the
Company, but no such committee shall have any powers, except such as are
expressly conferred upon it by the Board. Each committee referred to in this
Article II shall act only as a committee and the individual members shall have
no power as such.
Each director shall be entitled to receive from the Company such annual
and other fees and compensation as the Board of Directors shall from time to
time determine and to be reimbursed for his reasonable expenses in connection
with attendance at meetings. Nothing herein contained shall preclude any
director from serving the Company or its subsidiaries in any other capacity and
receiving compensation therefor.
For purposes of this Article II, the term "Independent Director" shall
mean a director who: (a) is not and has not been employed by the Company or a
subsidiary in an executive capacity within the five years immediately prior to
the annual meeting at which he or she will be voted upon; (b) is not an employee
or five percent or more owner of an entity that is a regular advisor or
consultant to the Company or its subsidiaries; (c) is not an employee or five
percent or more owner of a significant customer or supplier of the Company or
its subsidiaries; (d) does not have a personal services contract with the
Company or its subsidiaries; (e) is not employed by a tax-exempt organization
that receives significant contributions from the Company or its subsidiaries;
and (f) is not a
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<PAGE> 10
spouse, parent, sibling, child, parent-in-law, brother or sister-in-law or son
or daughter-in-law of an officer of the Company.
The Board of Directors shall have the exclusive right and power to
interpret and apply the provisions of this Article II, including, without
limitation, the adoption of written definitions of terms used in and guidelines
for its application (any such definitions and guidelines shall be filed with the
Secretary, and such definitions and guidelines as may prevail shall be made
available to any shareholder upon written request). Any such definitions or
guidelines and any other interpretation or application of the provisions of this
Article II made in good faith shall be binding and conclusive.
ARTICLE III
CONTRIBUTIONS
The Board of Directors shall have the power, at any time and from time
to time, to make contributions and donations for the public welfare or for
religious, charitable, scientific or educational purposes.
ARTICLE IV
ELECTION AND TERM OF
CHAIRMAN OF THE BOARD AND OFFICERS
The Board of Directors shall elect a Chairman of the Board, who may be
designated an officer of the Company, a President or a Chief Executive Officer
or both, such Vice Presidents as may from time to time be necessary or
desirable, a Secretary and a Treasurer. There shall also be one or more
assistant secretaries and treasurers and such other officers and assistant
officers as the Board may deem appropriate. The Board of
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Directors shall elect all officers, except assistant officers.
The term of office for all officers shall be until the organization
meeting of the Board of Directors following the next annual meeting of
shareholders and until their respective successors are elected or appointed and
shall qualify, or until their earlier death, resignation or removal. The
Chairman of the Board or any officer may be removed from office, either with or
without cause, at any time by the affirmative vote of the majority of the
members of the Board then in office. A vacancy in any office arising from any
cause may be filled for the unexpired term by the Board.
ARTICLE V
MEETINGS OF DIRECTORS
Regular meetings of the Board of Directors shall be held without notice
at such place or places either within or without the Commonwealth of
Pennsylvania, at such hour and on such day as may be fixed by resolution of the
Board of Directors.
The Board of Directors shall meet for organization at its first regular
meeting after the annual meeting of shareholders or at a special meeting of the
Board of Directors called after the annual meeting of shareholders and prior to
said first regular meeting. If no special meeting of the Board of Directors for
organization shall be called, all provisions of these By-laws in respect of
notice of special meetings of the Board of Directors shall apply to the first
regular meeting of the Board of Directors held after the annual meeting of
shareholders.
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<PAGE> 12
Special meetings of the Board of Directors shall be held, whenever
called by the Chairman or by four directors or by resolution adopted by the
Board of Directors, at such place or places either within or without the
Commonwealth of Pennsylvania as may be stated in the notice of the meeting.
Notice of the time and place of all special meetings of the Board of
Directors, and notice of any change in the time or place of holding the regular
meetings of the Board of Directors, shall be given to each director in person,
by telephone, or by sending a copy thereof by first class or express mail,
postage prepaid, or by telegram (with messenger service specified), telex or TWX
(with answerback received) or courier service, charges prepaid, or by facsimile
transmission, or by any type of electronic communication to the address (or to
the telephone, telex, TWX, fax or other number or address) supplied by the
director to the Corporation for the purpose of notice at least one day before
the day of the meeting; provided, however, that notice of any meeting need not
be given to any director if waived by such director in writing, whether before
or after the time stated therein, or if such director shall be present at the
beginning of such meeting and does not object to the transaction of business
because the meeting was not lawfully called or convened. If the notice is sent
by mail, telegraph or courier service, it shall be deemed to have been given to
the director when deposited in the United States mail or with a telegraph office
or courier service for delivery to the director or, in the case of telex, TWX,
fax or other electronic communication, it shall be deemed to have been given to
the director when dispatched. In the absence of any resolution of the Board of
Directors or any committee governing rules of procedure to the contrary, notice
of meetings of any committee referred
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to or provided for in these By-laws shall follow the same procedures as those
set forth in these By-laws for meetings of the Board of Directors.
Except as otherwise provided in these By-laws, a majority of the
directors in office shall constitute a quorum of the Board competent to transact
business; but a lesser number may adjourn from day to day until a quorum is
present. Except as otherwise provided in these By-laws, all questions shall be
decided by a vote of a majority of the directors present.
All or any number less than all of the directors may participate in a
meeting of the Board of Directors or of a committee of the Board of Directors by
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
Each committee referred to or provided for in these By-laws shall have
authority, except as may otherwise be required by law or by resolution of the
Board of Directors, to fix its own rules of procedure and to meet where and as
provided by such rules. The presence at any meeting of any such committee of a
majority of the members, including alternate members thereof, shall be necessary
to constitute a quorum for the transaction of business and in every case the
affirmative vote of a majority of such members present at any meeting shall be
necessary for the adoption of any resolution of such committee. In the absence
or disqualification of any member of such committee or committees, the member or
members thereof, including alternate members, present at any meeting and not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another director to act at the meeting in the place of
any such absent or disqualified member.
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<PAGE> 14
ARTICLE VI
CHAIRMAN OF THE BOARD
The Chairman of the Board shall preside at all meetings of the Board of
Directors at which he or she is present and shall call meetings of the Board and
Board committees when he or she deems them necessary. Unless otherwise precluded
from doing so by these By-laws, the Chairman of the Board may be a member of the
committees of the Board. He or she shall act as chairman at all meetings of the
shareholders at which he or she is present unless he or she elects that the
Chief Executive Officer shall so preside. The Chairman of the Board may be
designated by the Board as an officer of the Company and may be elected by the
Board as the Chief Executive Officer. The Chairman of the Board shall perform
all duties as may be assigned to him or her by the Board of Directors.
ARTICLE VII
PRESIDENT; CHIEF EXECUTIVE OFFICER
The President shall have such powers and duties as may, from time to
time, be prescribed by the Board of Directors or the Chairman of the Board.
Unless the Board of Directors shall otherwise direct, the President shall be the
Chief Executive Officer of the Company. In the absence of the Chairman of the
Board, the President or, if none, the Chief Executive Officer shall perform the
duties and have the powers of the Chairman of the Board, as determined by the
Board of Directors.
The Chief Executive Officer shall have general charge of the affairs of
the Company, subject to the control of the Board of Directors. He or she may
appoint all officers and employees of the Company for whose election no other
provision is made in these
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<PAGE> 15
By-laws, and may discharge or remove any officer or employee, subject to action
thereon by the Board of Directors as required by these By-laws. The Chief
Executive Officer shall be the officer through whom the Board delegates
authority to corporate management, and shall be responsible to see that all
orders and resolutions of the Board are carried into effect by the proper
officers or other persons. The Chief Executive Officer shall also perform all
duties as may be assigned to him or her by the Board of Directors.
ARTICLE VIII
SECRETARY
The Secretary shall attend meetings of the shareholders and the Board of
Directors, shall keep minutes thereof in suitable books, and shall send out all
notices of meetings as required by law or by these By-laws. He or she shall, in
general, perform all duties incident to the office of the Secretary and perform
such other duties as may be assigned to him or her by the Board, the Chairman of
the Board or the President.
ARTICLE IX
TREASURER
The Treasurer shall have custody of, and shall manage and invest, all
moneys and securities of the Company, and shall have such powers and duties as
generally pertain to the office of Treasurer.
To the extent not invested, the Treasurer shall deposit all moneys in
such banks or other places of deposit as the Board of Directors may from time to
time designate or as may be designated by any officer or officers of the Company
so authorized by resolution of the Board of Directors. Unless otherwise provided
by the Board of Directors, all checks,
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drafts, notes and other orders for the payment of money from a disbursing
account shall be signed by the Treasurer or such person or persons as may be
designated by name by the Treasurer in writing. The Treasurer's signature and,
if authorized by the Treasurer in writing, the signature of such person or
persons as may be designated by the Treasurer as provided above, to a check,
draft, note or other order for the payment of money from a disbursing account
may be by facsimile or other means. Procedures for withdrawal of moneys from
accounts other than disbursing accounts shall be established from time to time
by the Treasurer.
The Treasurer shall have such other powers and perform such other duties
as may be assigned by the Board of Directors. The Chief Financial Officer of the
Company shall have all of the powers granted to the Treasurer under these
By-laws, including the power to sign any check, draft, note or other order for
the payment of money from a disbursing account, including by facsimile signature
or other means.
ARTICLE X
ASSISTANT SECRETARY, ASSISTANT TREASURER AND OTHER OFFICERS
In the event of the absence or inability to serve of the Secretary, an
assistant secretary shall perform all the duties of the Secretary; and in the
event of the absence or inability to serve of the Treasurer, an assistant
treasurer shall perform all the duties of the Treasurer.
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<PAGE> 17
The powers and duties of other officers of the Company shall be such as
may, from time to time, be prescribed by the Board of Directors, the Chairman of
the Board, the President or the Chief Executive Officer.
In case of the absence of any officer of the Company, or for any other
reason that the Board of Directors may deem sufficient, the Board, or in the
absence of action by the Board, the Chief Executive Officer, or in his or her
absence, the President, or in his or her absence, the Chairman of the Board, may
delegate for the time being the powers and duties of any officer to any other
officer or to any director.
ARTICLE XI
CORPORATE SEAL
The Company shall have a corporate seal, which shall contain within a
circle the name of the Company, together with the following: "Incorporated
1872".
ARTICLE XII
CERTIFICATES OF STOCK
The shares of stock of the Company shall be represented by certificates
of stock, signed by the President or one of the Vice Presidents or other officer
designated by the Board of Directors, countersigned by the Treasurer or an
assistant treasurer and sealed with the corporate seal of the Company; and if
such certificates of stock are signed or countersigned by a corporate transfer
agent or a corporate registrar of this Company, such signature of the President,
Vice President or other officer, such counter-signature of the
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<PAGE> 18
Treasurer or assistant treasurer, and such seal, or any of them, may be executed
in facsimile, engraved or printed.
ARTICLE XIII
TRANSFERS OF STOCK
Transfers of shares of stock of the Company shall be made on the books
of the Company by the holder of record thereof or his or her legal
representative, acting by his or her attorney-in-fact duly authorized by written
power of attorney filed with the Secretary of the Company, or with one of its
transfer agents, and on surrender for cancellation of the certificate or
certificates for such shares. Except as otherwise provided in these By-laws, the
person in whose name shares of stock stand on the books of the Company shall be
deemed the owner thereof for all purposes as regards the Company. The Company
may have one or more transfer offices or agencies and/or registrars for the
transfer and/or registration of shares of stock of the Company.
The Board of Directors may fix in advance a time, which shall not be
more than ninety days prior to the date of any meeting of shareholders, or the
date for the payment of any dividend or distribution, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
shares will be made or go into effect, as a record date, for the determination
of the shareholders entitled to notice of, or to vote at, any such meeting, or
entitled to receive payment of any such dividend or distribution, or to receive
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of shares; and in such case only shareholders of
record at the time so fixed as a record date shall be entitled to notice of, or
to vote at, such meeting or to vote at any adjournment thereof, or to receive
payment of such dividend or distribution,
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or to receive such allotment of rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of stock on the books of the Company after
any such record date fixed as aforesaid.
ARTICLE XIV
RIGHTS
Those rights having the terms provided under the Rights Agreement
between CBS Corporation and First Chicago Trust Company of New York (the "Rights
Agent") dated as of December 28, 1995, as it may be amended from time to time
(the "Rights" and the "Rights Agreement") and issued to or Beneficially Owned by
Acquiring Persons or their Affiliates or Associates (as such terms are defined
in the Rights Agreement) shall, under certain circumstances as provided in the
Rights Agreement, be null and void and may not be transferred to any person.
ARTICLE XV
FISCAL YEAR
The fiscal year of the Company shall be the calendar year.
ARTICLE XVI
CERTAIN ISSUES OF STOCK
The Company may from time to time issue shares of its stock and may
create and issue (whether or not in connection with the issuance of any of its
shares or other securities) option rights or securities having conversion or
option rights entitling the holders thereof to purchase or acquire shares,
option rights, securities having conversion or option
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rights, or obligations, of any class or series, or assets of the Company, or to
purchase or acquire from the Company shares, option rights, securities having
conversion or option rights, or obligations, of any class or series owned by the
Company and issued by any other person. Such shares, rights or securities may be
issued to directors, officers (including assistant officers) or employees of the
Company or any of its subsidiaries or to such other persons as the Company may
determine appropriate.
ARTICLE XVII
INDEMNIFICATION
A. Indemnification Provisions Applicable to Proceedings Not Covered by
Section B of this Article.
Every person who is or was a director, officer or employee of the
Company, or of any other corporation which he or she serves or served as such at
the request of the Company, shall, in accordance with this Article XVII but not
if prohibited by law, be indemnified by the Company as hereinafter provided
against reasonable expense and any liability paid or incurred by him or her in
connection with or resulting from any threatened or actual claim, action, suit
or proceeding (whether brought by or in the right of the Company or such other
corporation or otherwise), civil, criminal administrative or investigative, in
which he or she may be involved, as a party or otherwise, by reason of his or
her being or having been a director, officer or employee of the Company or such
other corporation, whether or not he or she continues to be such at the time
such expense or liability shall have been paid or incurred.
As used in this Article XVII, the term "expense" shall mean counsel fees
and disbursements and all other expenses (except any liability) relating to any
such claim,
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<PAGE> 21
action, suit or proceeding, and the term "liability" shall mean amounts of
judgments, fines or penalties against, and amounts paid in settlement by, a
director, officer or employee with respect to any such claim, action, suit or
proceeding.
Any person referred to in the first paragraph of this Article XVII who
has been wholly successful, on the merits or otherwise, with respect to any
claim, action, suit or proceeding of the character described in such first
paragraph shall be reimbursed by the Company for his or her reasonable expense.
Any other person claiming indemnification under the first paragraph of
this Article XVII shall be reimbursed by the Company for his or her reasonable
expense and for any liability (other than any amount paid to the Company) if a
Referee shall deliver to the Company his or her written finding that such person
acted, in good faith, in what he or she reasonably believed to be the best
interests of the Company, and in addition with respect to any criminal action or
proceeding, reasonably believed that his or her conduct was lawful. The
termination of any claim, action, suit or proceeding by judgment, settlement
(whether with or without court approval), adverse decision or conviction after
trial or upon a plea of guilty or of nolo contendere, or its equivalent, shall
not create a presumption that a director, officer or employee did not meet the
foregoing standards of conduct. The person claiming indemnification shall at the
request of the Referee appear before him or her and answer questions which the
Referee deems relevant and shall be given ample opportunity to present to the
Referee evidence upon which he or she relies for indemnification; and the
Company shall, at the request of the Referee, make available to the Referee
facts, opinions or other evidence in any way relevant for his or her finding
which are within the possession or control of the Company. As used in this
Article XVII,
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the term "Referee" shall mean independent legal counsel (who may be regular
counsel of the Company), or other disinterested person or persons, selected to
act as such hereunder by the Board of Directors of the Company, whether or not a
disinterested quorum exists.
Any expense incurred with respect to any claim, action, suit or
proceeding of the character described in the first paragraph of this Article
XVII may be advanced by the Company prior to the final disposition thereof upon
receipt of an undertaking made by or on behalf of the recipient to repay such
amount if it is ultimately determined that he or she is not indemnified under
this Article XVII.
The rights of indemnification provided in this Article XVII shall be in
addition to any rights to which any such director, officer or employee may
otherwise be entitled by contract or as a matter of law and, in the event of
such person's death, such rights shall extend to his or her heirs and legal
representatives.
B. Indemnification Provisions Applicable to Proceedings Based on Acts
or Omissions on or after January 27, 1987.
SECTION 1. Right to Indemnification and Effect of Amendments.
(a) Right to Indemnification. The Company, unless prohibited by
applicable law, shall indemnify any person who is or was a director or officer
of the Company and who is or was involved in any manner (including, without
limitation, as a party or a witness) or is threatened to be made so involved in
any threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
Proceeding) (whether or not the indemnified liability arises or arose from any
threatened, pending or completed Proceeding by or in the right of the Company)
by reason of the fact
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that such person is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise (including, without limitation, any employee benefit plan) (a Covered
Entity) against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such Proceeding; provided, however, that except as provided in
Section 4(c) of this Article, the foregoing shall not apply to a director or
officer of the Company with respect to a Proceeding that was commenced by such
director or officer. Any director or officer of the Company entitled to
indemnification as provided in this Section 1, is hereinafter called an
"Indemnitee." Any right of an Indemnitee to indemnification shall be a contract
right and shall include the right to receive, prior to the conclusion of any
Proceeding, payment of any expenses incurred by the Indemnitee in connection
with such Proceeding, consistent with the provisions of applicable law as then
in effect and the other provisions of this Article.
(b) Effect of Amendments. Neither the alteration, amendment or repeal
of, nor the adoption of a provision inconsistent with, any provision of this
Article (including, without limitation, this Section 1(b)) shall adversely
affect the rights of any director or officer under this Article with respect to
any Proceeding commenced or threatened, or any alleged act or omission, prior to
such alteration, amendment, repeal or adoption of an inconsistent provision,
without the written consent of such director or officer.
SECTION 2. Insurance; Contracts and Funding. The Company may purchase
and maintain insurance to protect itself and any indemnified person against any
expenses, judgments, fines and amounts paid in settlement as specified in
Section 1 or Section 5 of
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this Article or incurred by any indemnified person in connection with any
Proceeding referred to in such Sections, to the fullest extent permitted by
applicable law as then in effect. The Company may enter into contracts with any
director, officer, employee or agent of the Company or of any Covered Entity in
furtherance of the provisions of this Article and may create a trust fund, grant
a security interest or use other means (including, without limitation, a letter
of credit) to insure the payment of such amounts as may be necessary to effect
indemnification as provided in this Article.
SECTION 3. Indemnification and Not Exclusive Right. The right of
indemnification provided in this Article shall not be exclusive of any other
rights to which any indemnified person may otherwise be entitled, and the
provisions of this Article shall inure to the benefit of the heirs and legal
representatives of any indemnified person under this Article and shall be
applicable to Proceedings arising from acts or omissions occurring on or after
January 27, 1987.
SECTION 4. Advancement of Expenses; Request for Indemnification;
Remedies; Presumptions and Defenses. In furtherance, but not in limitation of
the foregoing provisions, the following procedures, presumptions and remedies
shall apply with respect to advancement of expenses and the right to
indemnification under this Article:
(a) Advancement of Expenses. All reasonable expenses incurred by or on
behalf of the Indemnitee in connection with any Proceeding (including any
Proceeding commenced by the Indemnitee under Section 4(c) but excluding any
other Proceeding commenced by the Indemnitee) shall be advanced to the
Indemnitee by the Company within 20 days after the receipt by the Company of a
statement or statements from the Indemnitee requesting such advance or advances
from time to time, whether prior to or
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after final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the expenses incurred by the Indemnitee and, if required by
law at the time of such advance, shall include or be accompanied by an
undertaking by or on behalf of the Indemnitee to repay the amounts advanced if
it should ultimately be determined that the Indemnitee is not entitled to be
indemnified against such expenses pursuant to this Article.
(b) Request for Indemnification. To obtain indemnification under this
Article, an Indemnitee shall submit to the Secretary of the Company a written
request, including such documentation and information as is reasonably available
to the Indemnitee and reasonably necessary to determine whether and to what
extent the Indemnitee is entitled to indemnification (the Supporting
Documentation).
(c) Remedies; Presumptions and Defenses. If (i) expenses are not
advanced in full within 20 days after receipt by the Company of the statement or
statements and the undertaking (if an undertaking is required by law, By-law,
agreement or otherwise at the time of such advance) required by Section 4(a) of
this Article, or (ii) indemnification is not paid in full within 60 days after
receipt by the Company of the written request for indemnification and Supporting
Documentation required by Section 4(b) of this Article, then the person claiming
advancement of expenses or indemnification shall be entitled to seek judicial
enforcement of the Company's obligation to pay such advancement of expenses or
indemnification. It shall be a defense to any Proceeding seeking judicial
enforcement of the Company's obligation to pay indemnification that the conduct
of the person claiming indemnification was such that under Pennsylvania law the
Company is prohibited from indemnifying such person for the amount claimed. The
Company shall have the burden of proving such defense. Neither the failure of
the Company (including its
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Board of Directors, independent legal counsel and its shareholders) to have made
a determination prior to the commencement of such Proceeding that
indemnification is proper in the circumstances, nor an actual determination by
the Company (including its Board of Directors, independent legal counsel or its
shareholders) that such indemnification is prohibited by law, shall be a defense
to a Proceeding seeking enforcement of the provisions of this Article or create
a presumption that such indemnification is prohibited by law. The only defense
to any such Proceeding to receive payment of expenses in advance shall be
failure to make an undertaking to reimburse, if such an undertaking is required
by law, By-law, agreement or otherwise. Notwithstanding the foregoing, the
Company may bring an action, in an appropriate court in the Commonwealth of
Pennsylvania or any other court of competent jurisdiction, contesting the right
of a person claiming advancement of expenses or indemnification to receive such
advancement or indemnification hereunder because such advancement or
indemnification is prohibited by law; provided, however, that in any such action
the Company shall have the burden of proving that such advancement or
indemnification is prohibited by law.
The Company shall be precluded from asserting in any action or
Proceeding commenced pursuant to this Section 4(c) that the procedure and
presumptions of this Article are not valid, binding and enforceable and shall
stipulate in any such court that the Company is bound by all the provisions of
this Article.
If the person claiming advancement of expenses or indemnification,
pursuant to this Section 4(c), seeks to enforce his or her rights under, or to
recover damages for breach of this Article, that person shall be entitled to
recover from the Company, and shall be indemnified by the Company against, any
expenses actually and reasonably incurred by such person if such person prevails
in such Proceeding. If it shall be determined in such Proceeding that such
person is entitled to receive part but not all of the indemnification or
advancement of expenses sought, the expenses incurred by
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such person in connection with such Proceeding shall be prorated accordingly.
SECTION 5. Indemnification of Employees and Agents. Notwithstanding any
other provision or provisions of this Article, the Company, unless prohibited by
applicable law, may indemnify any person other than a director or officer of the
Company who is or was an employee or agent of the Company and who is or was
involved in any manner (including, without limitation, as a party or a witness)
or is threatened to be made so involved in any threatened, pending or completed
Proceeding by reason of the fact that such person is or was a director, officer,
employee or agent of a Covered Entity against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such Proceeding. The Company may also
advance expenses incurred by such employee or agent in connection with any such
Proceeding, consistent with the provisions of applicable law as then in effect.
SECTION 6. Severability. If any provision or provisions of this Article
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Article (including, without limitation, all portions of any Section of this
Article containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Article (including, without limitation, all
portions of any Section of this
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Article containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
be construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable.
ARTICLE XVIII
DIRECTOR LIABILITY
To the fullest extent that the law of the Commonwealth of Pennsylvania,
as it exists on January 27, 1987, or as it may thereafter be amended, permits
the elimination of the liability of directors, no director of the Company shall
be liable for monetary damages for any action taken, or any failure to take any
action. This Article shall not apply to any breach of performance of duty or any
failure of performance of duty by any director occurring prior to January 27,
1987. No amendment to or repeal of this Article shall apply to or have any
effect on the liability or alleged liability of any director of the Company for
or with respect to any act or failure to act on the part of such director
occurring prior to such amendment or repeal.
ARTICLE XIX
PENNSYLVANIA OPT OUT
A. "Subsections (e) through (g) of Section 1721, "Board of Directors,"
of Title 15 of the Pennsylvania Consolidated Statutes, or any successor
subsections thereto, shall not be applicable to the Company.
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B. Subchapter G, "Control-Share Acquisitions," of Chapter 25, Title 15
of the Pennsylvania Consolidated Statutes, or any successor subchapter thereto,
shall not be applicable to the Company.
C. Subchapter H, "Disgorgement By Certain Controlling Shareholders
Following Attempts to Acquire Control," of Chapter 25, Title 15 of the
Pennsylvania Consolidated Statutes, or any successor subchapter thereto, shall
not be applicable to the Company."
ARTICLE XX
AMENDMENTS
The By-laws of the Company, regardless of whether adopted by the
shareholders or by the Board of Directors, may be altered, amended or repealed
by the Board of Directors, to the extent permitted by applicable law, or,
subject to Article I hereof, by the shareholders. Such action at a meeting of
the Board of Directors shall be taken by the affirmative vote of a majority of
the members of the Board of Directors in office at the time; and such action by
the shareholders shall be taken by the affirmative vote of the holders of 80% of
the shares of capital stock of the Company entitled to vote thereon.
These By-laws are subject to any requirements of law, any provisions of
the Articles of the Company, as from time to time amended, and any terms of any
series of preferred stock or any other securities of the Company.
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ARTICLE XXI
CONFIDENTIALITY IN VOTING
Shareholders shall be provided permanent confidentiality in all voting,
except as necessary to meet applicable legal requirements. The Company shall
engage the services of an independent third party to receive, inspect, count and
tabulate proxies. A representative of the independent third party shall also act
as a judge of election at the annual meeting of shareholders.
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TABLE OF CONTENTS
-----------------
Page
Article I Meetings of Shareholders............................1
Article II Board of Directors - Committees -
Their Powers and Duties.............................6
Article III Contributions.......................................9
Article IV Election and Term of Chairman of
the Board and Officers..............................9
Article V Meetings of Directors..............................10
Article VI Chairman of the Board..............................13
Article VII President; Chief Executive Officer.................13
Article VIII Secretary..........................................14
Article IX Treasurer..........................................14
Article X Assistant Secretary, Assistant Treasurer
and Other Officers.................................15
Article XI Corporate Seal.....................................16
Article XII Certificates of Stock..............................16
Article XIII Transfers of Stock.................................17
Article XIV Rights.............................................18
Article XV Fiscal Year........................................18
Article XVI Certain Issues of Stock............................18
Article XVII Indemnification....................................19
Article XVIII Director Liability.................................27
Article XIX Pennsylvania Opt Out...............................27
Article XX Amendments.........................................28
Article XXI Confidentiality in Voting..........................29
<PAGE> 1
Exhibit 10(b)
1993 LONG-TERM INCENTIVE PLAN
(as amended as of January 28, 1998)
ARTICLE I
GENERAL
1.1 Purpose
The purposes of the 1993 Long-Term Incentive Plan ("Plan") for key
personnel of CBS Corporation (formerly known as Westinghouse Electric
Corporation) ("Corporation") and its Subsidiaries (the Corporation and its
Subsidiaries severally and collectively referred to in the Plan as the
"Company") are to foster and promote the long-term financial success of the
Company and materially increase stockholder value by (i) attracting and
retaining key personnel of outstanding ability, (ii) strengthening the Company's
capability to develop, maintain and direct a competent management team, (iii)
motivating key personnel, by means of performance-related incentives, to achieve
long-range performance goals, (iv) providing incentive compensation
opportunities competitive with those of other major companies and (v) enabling
key personnel to participate in the long-term growth and financial success of
the Company.
1.2 Administration
(a) The Plan will be administered by a committee of the Board of
Directors of the Corporation ("Committee") which will consist of two or more
members. Each member will be a "non-employee director," as that term is defined
by Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as such rule may be amended, or any successor rule, and an
"outside director," as that term is defined by Section 162(m) of the Internal
Revenue Code of 1986, as amended. The members will be appointed by the Board of
Directors, and any vacancy on the Committee will be filled by the Board of
Directors or in a manner authorized by the Board.
The Committee will keep minutes of its meetings and of any action taken by
it without a meeting. A majority of the Committee will constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum
is present will be the acts of the Committee. Any action that may be taken at a
meeting of the Committee may be taken without a meeting if a consent or consents
in writing setting forth the action so taken is signed by all of the members of
the Committee. The Committee will make appropriate reports to the Board of
Directors concerning the operations of the Plan.
(b) Subject to the limitations of the Plan, the Committee will have the
sole and complete authority: (i) to select in accordance with Section 1.3
persons who will participate in the Plan ("Participant" or "Participants")
(including the right to delegate authority to select as Participants persons who
are not required to file reports with respect to securities of the Company
pursuant to Section 16(a) of the Exchange Act ("Nonreporting Persons")); (ii) to
make Awards and payments in such forms and amounts as it may determine
(including the right to delegate authority to make
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<PAGE> 2
Awards to Nonreporting Persons within limits approved from time to time by the
Committee); (iii) to impose such limitations, restrictions and conditions upon
such Awards as the Committee, or, with respect to Awards to Nonreporting
Persons, the Committee's authorized delegates, deems appropriate; (iv) to
interpret the Plan and the terms of any document relating to the Plan and to
adopt, amend and rescind administrative guidelines and other rules and
regulations relating to the Plan; (v) to amend or cancel an existing Award in
whole or in part (including the right to delegate authority to amend or cancel
an existing Award to a Nonreporting Person in whole or in part within limits
approved from time to time by the Committee), except that the Committee and its
authorized delegates may not, unless otherwise provided in the Plan, or unless
the Participant affected thereby consents, take any action under this clause
that would adversely affect the rights of such Participant with respect to the
Award, and except that the Committee and its authorized delegates may not take
any action to amend any outstanding Option under the Plan in order to decrease
the Option Price under such Option or to cancel and replace any such Option with
an Option with a lower Option Price unless such action is approved by the common
stockholders of the Corporation; and (vi) to make all other determinations and
to take all other actions necessary or advisable for the interpretation,
implementation and administration of the Plan. The Committee's determinations on
matters within its authority will be conclusive and binding upon the Company and
all other persons.
(c) The Committee will act with respect to the Plan on behalf of the
Corporation and on behalf of any Subsidiary issuing stock under the Plan,
subject to appropriate action by the board of directors of any such Subsidiary.
All expenses associated with the Plan will be borne by the Corporation subject
to such allocation to its Subsidiaries and operating units as it deems
appropriate.
1.3 Selection for Participation
Participants selected by the Committee (or its authorized delegates)
must be Eligible Persons, as defined below, who are key employees and have the
capacity to contribute to the success of the Company. "Eligible Persons" are
persons who are salaried employees of the Company ("Employee" or "Employees").
In making this selection and in determining the form and amount of Awards, the
Committee may give consideration to the functions and responsibilities of the
Eligible Person, his or her past, present and potential contributions to the
Company and other factors deemed relevant by the Committee.
1.4 Types of Awards under Plan
Awards ("Awards") under the Plan may be in the form of any one or more
of the following: (i) Incentive Stock Options ("ISOs") and Non-statutory Stock
options ("NSOs") (Incentive Stock Options and Non-statutory Stock Options
severally and collectively referred to in the Plan as "Options"), as described
in Article II; (ii) Stock Appreciation Rights ("SARs") and Limited Stock
Appreciation Rights ("Limited Rights"), as described in Article III; (iii)
Performance Awards ("Performance Awards") as described in Article IV; and (iv)
Restricted Stock ("Restricted Stock") as described in Article V.
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<PAGE> 3
1.5 Shares Subject to the Plan
Shares of stock issued under the Plan may be in whole or in part
authorized and unissued or treasury shares of the Corporation's common stock,
par value $1.00 ("Common Stock"), or "Formula Value Stock" as defined in Section
8.12(d) (Common Stock and Formula Value Stock severally and collectively
referred to in the Plan as "Stock").
The maximum number of shares of Stock which may be issued for all
purposes under the Plan will be 4,000,000 increased on January 1 of each
calendar year from and including 1994 to and including 2003 by a number of
shares equal to one percent (1%) of the number of shares of Stock outstanding on
December 31 of the preceding year. The maximum number of such shares which may
be issued pursuant to the exercise of ISOs will be 1,000,000 increased on
January 1 of each calendar year from and including 1994 to and including 2003 by
1,000,000 shares. The maximum number of such shares subject to options to
purchase Stock, SARs and Limited Rights under the Plan awarded to any one
Participant in any one calendar year may not exceed 3,500,000 shares plus unused
share amounts that could have been awarded to that Participant in previous
calendar years.
Except as otherwise provided below, any shares of Stock subject to an
Option or other Award which is canceled or terminates without having been
exercised will again be available for Awards under the Plan. Shares subject to
an option canceled upon the exercise of an SAR will not again be available for
Awards under the Plan except to the extent the SAR is settled in cash. To the
extent that an Award is settled in cash, shares of Stock subject to that Award
will again be available for Awards. Shares of Stock tendered by a Participant or
withheld by the Company to pay the exercise price of an Option or to satisfy the
tax withholding obligations of the exercise or vesting of an Award will be
available again for Awards under the Plan, but only to Nonreporting Persons.
Shares of Restricted Stock forfeited to the Company in accordance with the Plan
and the terms of the particular Award will be available again for Awards under
the Plan unless the Participant has received the benefits of ownership (within
the applicable interpretation under Rule 16b-3 under the Exchange Act), in which
case such shares may only be available for Awards to Nonreporting Persons.
No fractional shares will be issued, and the Committee will determine
the manner in which fractional share value will be treated.
ARTICLE II
STOCK OPTIONS
2.1 Award of Stock Options
The Committee may, from time to time, subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe, award
to any Participant ISOs
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<PAGE> 4
and NSOs to purchase Stock.
The Committee may provide with respect to any option to purchase Stock
that, if the Participant, while an Eligible Person, exercises the option in
whole or in part using already-owned Stock, the Participant will, subject to
this Section 2.1 and such other terms and conditions as may be imposed by the
Committee, receive an additional option ("Reload Option"). The Reload Option
will be to purchase, at Fair Market Value as of the date the original option was
exercised, a number of shares of Stock equal to the number of whole shares used
by the Participant to exercise the original option. The Reload Option will be
exercisable only between the date of its grant and the date of expiration of the
original option.
A Reload Option will be subject to such additional terms and conditions
as the Committee may approve, which terms may provide that the Committee may
cancel the Participant's right to receive the Reload Option and that the Reload
Option will be granted only if the Committee has not canceled such right prior
to the exercise of the original option. Such terms may also provide that, upon
the exercise by a Participant of a Reload Option while an Eligible Person, an
additional Reload Option will be granted with respect to the number of whole
shares used to exercise the first Reload Option.
2.2 Stock Option Agreements
The award of an option will be evidenced by a signed written agreement
("Stock Option Agreement") containing such terms and conditions as the Committee
may from time to time determine.
2.3 Option Price
The purchase price of Stock under each Option ("Option Price") will not
be less than the Fair Market Value of such Stock on the date the Option is
awarded.
2.4 Exercise and Term of Options
(a) Except as otherwise provided in the Plan, Options will become
exercisable at such time or times as the Committee may specify. The Committee
may at any time and from time to time accelerate the time at which all or any
part of the Option may be exercised.
(b) The Committee will establish procedures governing the exercise of
options and will require that notice of exercise be given. Stock purchased on
exercise of an option must be paid for as follows: (1) in cash or by check
(acceptable to the Company in accordance with guidelines established for this
purpose), bank draft or money order payable to the order of the Company or (2)
if so provided by the Committee (not later than the time of grant, in the case
of an ISO) (i) through the delivery of shares of Stock which are then
outstanding and which have a Fair Market Value on the date of exercise equal to
the exercise price, (ii) by delivery of an unconditional and irrevocable
undertaking by a broker to deliver promptly to the Company
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<PAGE> 5
sufficient funds to pay the exercise price, or (iii) by any combination of the
permissible forms of payment.
2.5 Termination of Eligibility
In the event the Participant is no longer an Eligible Person and ceased
to be such as a result of termination of service to the Company with the consent
of the Committee or as a result of his or her death, retirement or disability,
each of his or her outstanding Options (whether held by the Participant or, if
the Option is an NSO that has been transferred to a Permissible Transferee (as
defined in Section 8.12) in accordance with Section 8.1, by that Permissible
Transferee) will be exercisable by the Participant (or his or her legal
representative or designated beneficiary) or Permissible Transferee, as the case
may be, to the extent that such Option was then exercisable, at any time prior
to an expiration date established by the Committee at the time of award, but in
no event after such expiration date. If the Participant ceases to be an Eligible
Person for any other reason, all of the Participant's then outstanding Options
(whether held by the Participant or, if the Option is an NSO that has been
transferred to a Permissible Transferee in accordance with Section 8.1, by that
Permissible Transferee) will terminate immediately.
ARTICLE III
STOCK APPRECIATION RIGHTS AND LIMITED RIGHTS
3.1 Award of Stock Appreciation Right
(a) An SAR is an Award entitling the recipient on exercise to receive
an amount, in cash or Stock or a combination thereof (such form to be determined
by the Committee), determined in whole or in part by reference to appreciation
in Stock value.
(b) In general, an SAR entitles the Participant to receive, with
respect to each share of Stock as to which the SAR is exercised, the excess of
the share's Fair Market Value on the date of exercise over its Fair Market Value
on the date the SAR was granted.
(c) SARs may be granted in tandem with options granted under the Plan
("Tandem SARS") or independently of Options ("Independent SARs"). An SAR granted
in tandem with an NSO may be granted either at or after the time the option is
granted. An SAR granted in tandem with an ISO may be granted only at the time
the option is granted.
(d) SARs awarded under the Plan will be evidenced by either a Stock
Option Agreement (when SARs are granted in tandem with an Option) or a separate
agreement between the Company and the Participant.
(e) Except as otherwise provided herein, a Tandem SAR will be
exercisable only at the same time and to the same extent and subject to the same
conditions as the option related thereto is exercisable, and the Committee may
prescribe additional conditions and limitations on
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the exercise of the SAR. The exercise of a Tandem SAR will cancel the related
Option. Tandem SARs may be exercised only when the Fair Market Value of Stock to
which it relates exceeds the Option Price.
(f) Except as otherwise provided herein, an Independent SAR will become
exercisable at such time or times, and on such conditions, as the Committee may
specify, and the Committee may at any time accelerate the time at which all or
any part of the SAR may be exercised.
The Committee may provide, under such terms and conditions as it may
deem appropriate, for the automatic grant of additional SARs upon the full or
partial exercise of an Independent SAR.
Any exercise of an Independent SAR must be in writing, signed by the
proper person and delivered or mailed to the Company, accompanied by any other
documents required by the Committee.
(g) Except as otherwise provided herein, all SARs will automatically be
exercised on the last trading day prior to the expiration date established by
the Committee at the time of the award for the SAR, or, in the case of a Tandem
SAR, for the related Option, so long as exercise on such date will result in a
payment to the Participant.
(h) Unless otherwise provided by the Committee, no SAR will become
exercisable or will be automatically exercised for six months following the date
on which it was granted or the effective date of the Plan, whichever is later.
(i) At the time of award of an SAR, the Committee may limit the amount
of the payment that may be made to a Participant upon the exercise of the SAR.
The Committee may further determine that, if the amount to be received by a
Participant in any year is limited pursuant to this provision, payment of all or
a portion of the amount that is unpaid as a result of the limitation may be made
to the Participant at a subsequent time. No such limitation will require a
Participant to return to the Company any amount theretofore received by him or
her upon the exercise of an SAR.
(j) Payment of the amount to which a Participant is entitled upon the
exercise of an SAR will be made in cash, Stock, or partly in cash and partly in
Stock, as the Committee may determine. To the extent that payment is made in
Stock, the shares will be valued at their Fair Market Value on the date of
exercise of the SAR.
(k) Each SAR will expire on a date determined by the Committee or
earlier upon the occurrence of the first of the following: (i) in the case of a
Tandem SAR, termination of the related option, (ii) expiration of a period of
six months after the Participant's ceasing to be an Eligible Person as a result
of termination of service to the Company with the consent of the Committee or as
a result of his or her death, retirement or disability, or (iii) the Participant
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ceasing to be an Eligible Person for any other reason.
3.2 Limited Rights
(a) The Committee may award Limited Rights pursuant to the provisions
of this Section 3.2 to the holder of an Option to purchase Common Stock granted
under the Plan (a "Related Option") with respect to all or a portion of the
shares subject to the Related Option. A Limited Right may be exercised only
during the period beginning on the first day following a Change in Control, as
defined in Section 7.2 of the Plan, and ending on the thirtieth day following
such date. Each Limited Right will be exercisable only to the same extent that
the Related Option is exercisable, and in no event after the termination of the
Related Option. In no event may a Limited Right be exercised during the first
six months after the date of grant of the Limited Right or the effective date of
the Plan, whichever is later. Limited Rights will be exercisable only when the
Fair Market Value (determined as of the date of exercise of the Limited Rights)
of each share of Common Stock with respect to which the Limited Rights are to be
exercised exceeds the Option Price per share of Common Stock subject to the
Related option.
(b) Upon the exercise of Limited Rights, the Related Option will be
considered to have been exercised to the extent of the number of shares of
Common Stock with respect to which such Limited Rights are exercised. Upon the
exercise or termination of the Related Option, the Limited Rights with respect
to such Related Option will be considered to have been exercised or terminated
to the extent of the number of shares of Common Stock with respect to which the
Related Option was so exercised or terminated.
(c) The effective date of the grant of a Limited Right will be the date
on which the Committee approves the grant of such Limited Right. Each grantee of
a Limited Right will be notified promptly of the grant of the Limited Right in
such manner as the Committee prescribes.
(d) Upon the exercise of Limited Rights, the holder thereof will
receive in cash an amount equal to the product computed by multiplying (i) the
excess of (a) the higher of (x) the Minimum Price Per Share (as hereinafter
defined), or (y) the highest reported closing sales price of a share of Common
Stock on the New York Stock Exchange at any time during the period beginning on
the sixtieth day prior to the date on which such Limited Rights are exercised
and ending on the date on which such Limited Rights are exercised, over (b) the
Option Price per share of Common Stock subject to the Related Option, by (ii)
the number of shares of Common Stock with respect to which such Limited Rights
are being exercised.
(e) For purposes of this Section 3.2, the term "Minimum Price Per
Share" will mean the highest gross price (before brokerage commissions and
soliciting dealers' fees) paid or to be paid for a share of Common Stock
(whether by way of exchange, conversion, distribution upon liquidation or
otherwise) in any Change in Control which is in effect at any time during the
period beginning on the sixtieth day prior to the date on which such Limited
Rights are exercised and ending on the date on which such Limited Rights are
exercised. For purposes of this definition, if the consideration paid or to be
paid in any such Change in Control will consist, in
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whole or in part, of consideration other than cash, the Board will take such
action, as in its judgement it deems appropriate, to establish the cash value of
such consideration.
ARTICLE IV
PERFORMANCE AWARDS
4.1 Nature of Performance Awards
A Performance Award provides for the recipient to receive an amount in
cash or Stock or a combination thereof (such form to be determined by the
Committee) following the attainment of Performance Goals. Performance Goals may
be related to personal performance, corporate performance (including corporate
stock performance), departmental performance or any other category of
performance deemed by the Committee to be important to the success of the
Company. The Committee will determine the Performance Goals, the period or
periods during which performance is to be measured and all other terms and
conditions applicable to the Award. Regardless of the degree to which
Performance Goals are attained, a Performance Award will be paid only when, if
and to the extent that the Committee determines to make such payment.
4.2 Other Awards Subject to Performance Condition
The Committee may, at the time any Award described in this Plan is
granted, impose the condition (in addition to any conditions specified or
authorized in the Plan) that Performance Goals be met prior to the Participant's
realization of any payment or benefit under the Award.
ARTICLE V
RESTRICTED STOCK
5.1 Award of Restricted Stock
The Committee may award to any Participant shares of Stock subject to
this Article V and such other terms and conditions as the Committee may
prescribe, such Stock referred to herein as "Restricted Stock."
Each certificate for Restricted Stock will be registered in the name of
the Participant and deposited by him or her, together with a stock power
endorsed in blank, with the Corporation.
5.2 Restricted Stock Agreement
Shares of Restricted Stock awarded under the Plan will be evidenced by
a signed written agreement containing such terms and conditions as the Committee
may determine.
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5.3 Restriction Period
At the time of award, there will be established for each Participant a
"Restriction Period" of such length as the Committee determines. The Restriction
Period may be waived by the Committee. Shares of Restricted Stock may not be
sold, assigned, transferred, pledged or otherwise encumbered, except as
hereinafter provided, during the Restriction Period. Subject to such restriction
on transfer, the Participant as owner of such shares of Restricted Stock will
have the rights of the holder of such Restricted Stock, except that the
Committee may provide at the time of the Award that any dividends or other
distributions paid on such Stock during the Restriction Period will be
accumulated and held by the Company and will be subject to forfeiture under
Section 5.4.
Upon the expiration or waiver by the Committee of the Restriction
Period, the Corporation will redeliver to the Participant (or his or her legal
representative or designated beneficiary) the shares deposited pursuant to
Section 5.1.
5.4 Termination of Eligibility
In the event the Participant is no longer an Eligible Person and ceased
to be such as a result of termination of service to the Company with the consent
of the Committee, or as a result of his or her death, retirement or disability,
the restrictions imposed under this Article V will lapse with respect to such
number of shares theretofore awarded to him or her as may be determined by the
Committee. All other shares of Restricted Stock theretofore awarded to him or
her which are still subject to restrictions, along with any dividends or other
distributions thereon that have been accumulated and held by the Company, will
be forfeited, and the Corporation will have the right to complete the blank
stock power.
In the event the Participant ceases to be an Eligible Person for any
other reason, all shares of Restricted Stock theretofore awarded to him or her
which are still subject to restrictions, along with any dividend or other
distributions thereon that have been accumulated and held by the Company, will
be forfeited, and the Corporation will have the right to complete the blank
stock power.
ARTICLE VI
DEFERRAL OF PAYMENTS
6.1 Deferral of Amounts
If the Committee makes a determination to designate Awards or, from
time to time, groups or types of Awards, eligible for deferral hereunder, a
Participant may, subject to such terms and conditions and within such limits as
the Committee may from time to time establish, elect to defer the receipt of
amounts due to him or her under the Plan. Amounts so deferred are referred to
herein as "Deferred Amounts." The Committee may also permit amounts now or
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hereafter deferred or available for deferral under any present or future
incentive compensation program or deferral arrangement of the Company to be
deemed Deferred Amounts and to become subject to the provisions of this Article.
Awards which are so deferred will be deemed to have been awarded in cash and the
cash deferred as Deferred Amounts.
The period between the date on which the Participant's Deferred Amount
would have been payable absent deferral and the final payment of such Deferred
Amount will be referred to herein as the "Deferral Period."
6.2 Investment During Deferral Period
Unless otherwise determined by the Committee, and subject to such
changes as the Committee may determine, the Deferred Amount will be treated
during the Deferral Period as if it were invested in putative convertible
debentures with a fixed interest rate, compounded annually, for the entire
Deferral Period. For purposes of determining the value of the Deferred Amount at
the time of payment, each putative debenture will be deemed to be convertible
into Common Stock at a conversion rate computed by reference to the Fair Market
Value of the Common Stock on the last trading day prior to the regular January
meeting of the Board of Directors on or preceding the date of deferral. Payment
of Deferred Amounts may be made in cash, Stock, or partly in cash and partly in
Stock, in the Committee's sole discretion.
6.3 Participant Reports
Annually, each Participant who has a Deferred Amount will receive a
report setting forth all of his or her then Deferred Amounts and the yield
thereon to date.
6.4 Payment of Deferred Amounts
Payment of Deferred Amounts will be made at such time or times, and may
be in cash, Stock, or partly in cash and partly in Stock, as the Committee from
time to time determines. The limitations respecting the issuance of Stock or
other limitations on aggregate awards payable contained in the Annual
Performance Plan of the Corporation, Article XVI of the by-laws of the
Corporation, the 1974 Stock Option Plan, the 1979 Stock Option and Long-Term
Incentive Plan, the 1984 Long-Term Incentive Plan, the Plan and in any plan
hereafter adopted by the stockholders will be limitations applicable to the
payment of any Deferred Amounts under this Article VI.
6.5 Alternative Valuation Election
Unless otherwise determined by the Committee, a Participant may, at a
time established by the Committee, but prior to such Participant's ceasing to be
an Eligible Person, elect to establish the ultimate payable value of each
Deferred Amount by reference to the Fair Market Value of the Common Stock as of
the day on which an alternate valuation election is received by the corporation
in accordance with procedures established by the Committee.
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Notwithstanding the establishment of the ultimate payable value
resulting from the alternate valuation election by the Participant, the yield
will continue as though no such election had been made and will continue to be
subject to the limitations set forth in Section 6.2, and Deferred Amounts and
the yield thereon will be paid as otherwise provided in this Article.
ARTICLE VII
CHANGES IN CONTROL
7.1 Effect of Change in Control
Notwithstanding any other provision of the Plan, upon the occurrence of
a Change in Control, as defined in Section 7.2: (i) all Options and, subject to
the exercise provisions of Section 3.2(a) of the Plan, Limited Rights, but not
SARS, outstanding and unexercised on the date of the Change in Control will
become immediately exercisable; (ii) all Performance Awards will be deemed to
have been earned on such basis as the Committee may prescribe and then paid on
such basis, at such time and in such form as the Committee may prescribe, or
deferred in accordance with the elections of Participants; (iii) all Restricted
Stock will be deemed to be earned and the Restriction Period will be deemed
expired on such terms and conditions as the Committee may determine; and (iv)
all amounts deferred under this Plan will be paid to a trustee or otherwise on
such terms as the Committee may prescribe or permit.
7.2 Definition of Change in Control
The term "Change in Control" means the occurrence of one or more of the
following events: (a) there shall be consummated (i) any consolidation or merger
of the Corporation in which the Corporation is not the continuing or surviving
corporation or pursuant to which shares of the Common Stock would be converted
into cash, securities or other property, other than a merger of the Corporation
in which the holders of Common Stock immediately prior to the merger have the
same proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Corporation, or (b) the stockholders of
the Corporation shall approve any plan or proposal for the liquidation or
dissolution of the Corporation, or (c) (i) any person (as such term is defined
in Section 13(d) of the Exchange Act), corporation or other entity shall
purchase any Common Stock of the Corporation (or securities convertible into
Common Stock) for cash, securities or any other consideration pursuant to a
tender offer or exchange offer, unless, prior to the making of such purchase of
Common Stock (or securities convertible into Common Stock), the Board shall
determine that the making of such purchase shall not constitute a Change in
Control, or (ii) any person (as such term is defined in Section 13(d) of the
Exchange Act), corporation or other entity (other than the Corporation or any
benefit plan sponsored by the Corporation or any of its subsidiaries) shall be
the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing
twenty percent
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or more of the combined voting power of the Corporation's then outstanding
securities ordinarily (and apart from any rights accruing under special
circumstances) having the right to vote in the election of directors (calculated
as provided in Rule 13d-3(d) in the case of rights to acquire any such
securities), unless, prior to such person so becoming such beneficial owner, the
Board shall determine that such person so becoming such beneficial owner shall
not constitute a Change in Control, or (d) at any time during any period of two
consecutive years, individuals who at the beginning of such period constituted
the entire Board shall cease for any reason to constitute at least a majority
thereof, unless the election or nomination for election of each new director
during such two-year period 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
two-year period.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Transferability
No Option, Limited Right, SAR, Performance Award or share of Restricted
Stock or Deferred Amount under the Plan will be transferable other than by will,
by the applicable laws of descent and distribution, or by transfer to a properly
designated beneficiary in the event of death; provided, however, that the
Committee may, in its sole discretion, permit the transfer of an NSO Option
(including any Tandem SARs or Limited Rights) by a Participant to a Permissible
Transferee (as defined in Section 8.12) subject to such terms and conditions as
the Committee may, from time to time, determine. All Awards and Deferred Amounts
will be exercisable or received during the Participant's lifetime only by such
Participant or his or her legal representative or, in the case of an NSO Option
(including any Tandem SARs or Limited Rights) that has been transferred to a
Permissible Transferee in accordance with this Section 8.1, by that Permissible
Transferee. Any transfer contrary to this Section 8.1 will nullify the option,
Limited Right, SAR, Performance Award or share of Restricted Stock, and any
attempted transfer of a Deferred Amount contrary to this Section 8.1 will be
void and of no effect.
8.2 Beneficiaries
The Committee may establish or authorize the establishment of
procedures not inconsistent with Section 8.1 under which a Participant may
designate a beneficiary or beneficiaries to hold, exercise and/or receive
amounts due under an Award or with respect to Deferred Amounts in the event of
the Participant's death.
8.3 Adjustments Upon Changes in Stock
If there is any change in the Stock of the Company, through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
split up, dividend in kind or other change in the corporate structure or
distribution to the stockholders, appropriate adjustments may be made by the
Board of Directors of the Company (or if the Company is not the surviving
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corporation in any such transaction, the board of directors of the surviving
corporation) in the aggregate number and kind of shares subject to the Plan, and
the number and kind of shares and the price per share subject to outstanding
Options or which may be issued under outstanding Performance Awards or Awards of
Restricted Stock. Appropriate adjustments may also be made by the Board of
Directors or the Committee in the terms of any Awards under the Plan to reflect
such changes and to modify any other terms of outstanding Awards on an equitable
basis, including modifications of performance targets and changes in the length
of Performance Periods.
8.4 Conditions of Awards
(a) The rights of a Participant with respect to any Award received
under this Plan will be subject to the conditions that, until the Participant
has fully received all payments, transfers and other benefits under the Award,
he or she will (i) not engage, either directly or indirectly, in any manner or
capacity as advisor, principal, agent, partner, officer, director, employee,
member of any association or otherwise, in any business or activity which is at
the time competitive with any business or activity conducted by the Company and
(ii) be available, unless he or she has died, at reasonable times for
consultations at the request of the Company's management with respect to phases
of the business with which he or she is or was actively connected during his or
her employment, but such consultations will not (except in the case of a
Participant whose active service was outside the United States) be required to
be performed at any place or places outside of the United States of America or
during usual vacation periods or periods of illness or other incapacity. In the
event that either of the above conditions is not fulfilled, the Participant will
forfeit all rights to any unexercised option or SAR, or any Performance Award or
Stock held which has not yet been determined by the Committee to be payable or
unrestricted (and any unpaid amounts equivalent to dividends or other
distributions or amounts equivalent to interest relating thereto) as of the date
of the breach of condition. Any determination by the Board of Directors of the
Corporation, which will act upon the recommendation of the Chief Executive
Officer, that the Participant is, or has, engaged in a competitive business or
activity as aforesaid or has not been available for consultations as aforesaid
will be conclusive.
(b) This Section 8.4 will not apply to Limited Rights.
8.5 Use of Proceeds
All cash proceeds from the exercise of options will constitute general
funds of the Company.
8.6 Tax Withholding
The Company will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding requirements").
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In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may permit
the Participant or such other person to elect at such time and in such manner as
the Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement. In the alternative, the Committee may, at
the time of grant of any such Award, require that the Company withhold from any
shares to be delivered Stock with a value calculated to satisfy applicable tax
withholding requirements.
If at the time an ISO is exercised the Committee determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Committee may require as a
condition of exercise that the person exercising the ISO agree (i) to inform the
Company promptly of any disposition of Stock received upon exercise, and (ii) to
give such security as the Committee deems adequate to meet the potential
liability of the Company for the withholding requirements and to augment such
security from time to time in any amount reasonably deemed necessary by the
Committee to preserve the adequacy of such security.
8.7 Non-Uniform Determinations
The Committee's determinations under the Plan, including without
limitation, (i) the determination of the Participants to receive Awards, (ii)
the form, amount, timing and payment of such Awards, (iii) the terms and
provisions of such Awards and (iv) the agreements evidencing the same, need not
be uniform and may be made by it selectively among Participants who receive, or
who are eligible to receive, Awards under the Plan, whether or not such
Participants are similarly situated.
8.8 Leaves of Absence; Transfers
The Committee will be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect to any leave of
absence from the Company granted to a Participant. Without limiting the
generality of the foregoing, the Committee will be entitled to determine (i)
whether or not any such leave of absence will be treated as if the Participant
ceased to be an Employee and (ii) the impact, if any, of any such leave of
absence on Awards under the Plan. In the event a Participant transfers within
the Company, such Participant will not be deemed to have ceased to be an
Employee for purposes of the Plan.
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8.9 General Restriction
(a) Each Award under the Plan will be subject to the condition that, if
at any time the Committee determines that (i) the listing, registration or
qualification of shares of Stock upon any securities exchange or under any state
or federal law, (ii) the consent or approval of any government or regulatory
body or (iii) an agreement by the Participant with respect thereto, is necessary
or desirable, then such Award will not be consummated in whole or in part unless
such listing, registration, qualification, consent, approval or agreement has
been effected or obtained free from any conditions not acceptable to the
Committee.
(b) Shares of Common Stock for use under the provisions of this Plan
will not be issued until they have been duly listed, upon official notice of
issuance, upon the New York Stock Exchange and such other exchanges, if any, as
the Board of Directors of the Corporation determines, and a registration
statement under the Securities Act of 1933 with respect to such shares has
become, and is, effective.
8.10 Effective Date
The Plan will be effective on the date on which it is approved by the
common stockholders of the Corporation. Grants of Awards under the Plan may be
made prior to that date (but not before the date on which the Plan is adopted by
the Board of Directors), subject to such approval.
No Award may be granted under the Plan after May 25, 2003, but Awards
previously made may extend beyond that date and Reload Options and additional
Reload Options provided for with respect to original options outstanding prior
to that date may continue unless the Committee otherwise provides and subject to
such additional terms and conditions as the Committee may provide except that
all Reload Options issued after that date will be NSOs, and the provisions of
Article VI of the Plan will survive and remain effective as to all present and
future Deferred Amounts until such later date as the Committee or the Board of
Directors may determine.
The adoption of the Plan will not preclude the adoption by appropriate
means of any other stock option or other incentive plan for employees.
8.11 Amendment, Suspension and Termination of Plan
The Board of Directors may at any time or times amend the Plan for any
purpose which may at the time be permitted by law, or may at any time suspend or
terminate the Plan as to any further grants of Awards.
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8.12 Certain Definitions
(a) Unless otherwise determined by the Committee, the terms
"retirement" and "disability" as used under the Plan will be construed by
reference to the provisions of the Westinghouse Pension Plan or other similar
plan or program of the Company applicable to a Participant.
(b) The term "Fair Market Value" as it relates to Common Stock means
the mean of the high and low prices of the Common Stock as reported by the
Composite Tape of the New York Stock Exchange (or such successor reporting
system as the Committee may select) on the relevant date or, if no sale of the
Common Stock has been reported for that day, the average of such prices on the
next preceding day and the next following day for which there were reported
sales. The term "Fair Market Value" as it relates to Formula Value Stock will
mean the value determined by the Committee.
(c) The term "Subsidiary" will mean, unless the context otherwise
requires, any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the corporation if each of the corporations other
than the last corporation in such chain owns stock possessing at least 50% of
the voting power in one of the other corporations in such chain.
(d) "Formula Value Stock" means shares of a class or classes of stock
the value of which is derived from a formula established by the Committee which
reflects such financial measures as the Committee may determine. Such shares
will have such other characteristics as may be determined at time of their
authorization.
(e) "Permissible Transferee" means any of the following: (1) a member
of the Participant's Immediate Family; (2) a trust solely for the benefit of the
Participant and/or the Participant's Immediate Family; and (3) a partnership or
limited liability company whose only partners or members, as the case may be,
are the Participant and/or Permissible Transferees of the Participant as
otherwise identified in this definition. "Immediate Family" has the meaning set
forth in Rule 16a-1(e) under the Exchange Act, as such rule may be amended from
time to time, or any successor rule.
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Exhibit 10(d)
WESTINGHOUSE EXECUTIVE PENSION PLAN
As Amended and Restated
Effective December 4, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Definitions 1
Section 2. Qualification for Benefits;
Mandatory Retirement 4
Section 3. Calculation of Executive Pension 5
Supplement
Section 4. Death in Active Service 5
Section 5. Payment of Benefits 6
Section 6. Plan Costs 7
Section 7. Conditions to Receipt of Executive 7
Pension Supplement
Section 8. Administration 7
Section 9. Modification or Termination 8
Section 10. Miscellaneous 9
Section 11. Creditors' Claims 9
Section 12. Change in Control 9
Section 13. Governing Law 11
Section 14. Severability 11
Section 15. Authority to Expand Benefits 12
Appendix A Executive Buy Back 13
Appendix B Rehired Executives 14
</TABLE>
<PAGE> 3
WESTINGHOUSE EXECUTIVE PENSION PLAN
WHEREAS, Westinghouse Electric Corporation ("Westinghouse") established the
Westinghouse Executive Pension Plan (the "Plan") in order to provide
supplemental pension benefits for its eligible employees and their
beneficiaries; and
WHEREAS, the Plan has been established by Westinghouse primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees; and
WHEREAS, the Board of Directors of Westinghouse has determined to amend the
Plan in certain respects;
NOW, THEREFORE, the Plan is hereby amended and restated in its entirety,
effective as of December 4, 1997, as follows:
Section 1. Definitions
(a) Administrative Managers. Administrative Managers means the persons or
entities identified from time to time by the chief executive officer of
Westinghouse to serve as administrative managers for the Plan, the Westinghouse
Pension Plan and certain other plans, and to have authority with respect to
administration and all other fiduciary matters with respect to such plans that
are not within the authority of the Financial Managers.
(b) Average Annual Compensation. Average Annual Compensation means the
amount determined by multiplying 12 times the average of the five highest of the
Executive's December l monthly base salaries during the ten year period
immediately preceding the earliest of the Executive's date of death, the
Executive's actual retirement date or the Executive's Normal Retirement Date,
and adding to that product the average of the Executive's five highest annual
incentive compensation awards paid under the Westinghouse Annual Incentive
Programs or equivalent annual program or programs during the ten-year period
ending with the earliest of the year of the Executive's death, the year of the
Executive's actual retirement date or the year of the Executive's Normal
Retirement Date. In the case of an Eligible Affected Employee, the Executive's
Effective Termination Date will be substituted for "actual retirement date" in
determining Average Annual Compensation.
(c) Board. Board means the Board of Directors of Westinghouse.
(d) Credited Service. Credited Service shall have the same meaning as
defined in the Westinghouse Pension Plan, provided for purposes of the Plan it
shall also include such service with a Designated Entity or Designated Group;
but it shall not include any "deemed" service which may be awarded under a
special retirement window or similar arrangements.
(e) Defined contribution plan. When used in the Plan, the term "defined
contribution plan" shall not include (1) the Westinghouse Savings Program or any
similar program of, or made
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<PAGE> 4
available to employees of, an Employer, a Designated Entity or a Designated
Group or (2) any amount received pursuant to a cash or deferred arrangement (as
that term is defined in the Internal Revenue Code of 1986, as amended)
maintained by, or made available to employees of, Westinghouse, an Employer, a
Designated Entity or a Designated Group.
(f) Designated Entity. Designated Entity means an Affiliated Entity or
other entity that has been and is still designated by the Managers as
participating in the Plan.
(g) Designated Group. Designated Group means a group of employees that has
been and is still both defined and designated by the Managers as participating
in the Plan.
(h) Employer. Employer means a participating Employer under the
Westinghouse Pension Plan.
(i) Executive. Executive means any Employee who is employed in a corporate
grade 40 or above position or a comparable position with Westinghouse, an
Employer, a Designated Entity or a Designated Group, or in a position with
Westinghouse, an Employer, a Designated Entity or a Designated Group that is
otherwise determined by the chief executive officer of Westinghouse or the
Managers to be eligible as an Executive position under the Plan based upon the
duties and responsibilities of the position, and the Employee has been so
notified in writing.
By participating in the Westinghouse Executive Pension Plan, an Executive
is also deemed to be a "bona fide executive" and/or "high policymaking
employee," as defined under the federal Age Discrimination in Employment Act, as
amended.
(j) Executive Benefit Service. Executive Benefit Service means the
Executive's total years of Eligibility Service if: (1) the Executive was making
the Maximum Contribution during each of those years; or (2) the Executive (i)
was making the Maximum Contribution during each of those years after the date he
or she first became an Executive and (ii) has complied with the provisions of
the Executive Buy Back process (as set forth in Appendix A of the Plan) as to
those years prior to his or her first becoming an Executive. The Executive
Benefit Service of an Executive who did not make the Maximum Contribution during
those years prior to the date he or she first became an Executive and has not
complied with the Executive Buy Back process will be based solely on the
period(s) of Eligibility Service during which he or she made the Maximum
Contribution.
(k) Executive Pension Base. Executive Pension Base means the amount
determined by multiplying 1.47 percent times Average Annual Compensation times
the number of years of Executive Benefit Service accrued to the earliest of the
Executive's actual retirement date, the Executive's Normal Retirement Date or
the date of the Executive's death; or, in the case of an Eligible Affected
Employee, the Executive's Effective Termination Date. Also, in the case of an
Eligible Affected Employee, in the event that benefits commence under this Plan
prior to age 65, then the Executive Pension Base will be actuarially reduced by
the same percentage that the Executive's benefit under the Westinghouse Pension
Plan would be actuarially reduced for life annuity benefits commencing at the
time.
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(l) Executive Pension Supplement. Executive Pension Supplement means the
pension calculated pursuant to Sections 3 and 4 of this Plan. There will be no
Executive Pension Supplement payable if the Executive's Qualified Plan Benefit
equals or exceeds his or her Executive Pension Base.
(m) Financial Managers. Financial Managers means the persons or entities
identified from time to time by the chief executive officer of Westinghouse to
serve as financial managers for the Plan, the Westinghouse Pension Plan and
certain other plans, and to have authority with respect to establishing
investment policy, appointing, directing, providing guidelines to and monitoring
the performance of investment managers and trustees, establishing funding and
actuarial policies and practices, and managing the funding, cost and financial
aspects of such plans.
(n) Managers. Managers means the Financial Managers and the Administrative
Managers.
(o) Maximum Contribution. Maximum Contribution means: (1) during such time
as the Employee was eligible to participate in the Westinghouse Pension Plan,
the Employee contributed the maximum amount the Employee was permitted to
contribute to the Westinghouse Pension Plan, and (2) during such time as the
Employee was employed by a Designated Entity or as part of a Designated Group,
the Employee (i) contributed the maximum amount the Employee was permitted to
contribute, if any, to that Designated Entity's or Designated Group's defined
benefit pension or defined contribution plan, if any, or to such defined benefit
pension or defined contribution plan as was made available to employees of said
Designated Entity or Designated Group, if any, and (ii) paid Westinghouse an
amount of each of his or her annual incentive compensation awards based on the
maximum Westinghouse Pension Plan contribution formula applied to 50% of said
awards.
(p) Plan. Plan means the Westinghouse Executive Pension Plan.
(q) Qualified Plan Benefit. Qualified Plan Benefit means (1) the annual
amount of pension the Executive has accrued under the Westinghouse Pension Plan
and any applicable defined benefit pension plan of, or made available to
employees of, a Designated Entity or Designated Group based on Credited Service
accumulated up to the earlier of the Executive's actual retirement date or
death, (2) the amount the Executive is entitled to receive on a life annuity
basis for retirement under any applicable defined contribution plan of, or made
available to employees of, a Designated Entity or Designated Group, and (3) in
any case where service included in the Executive's Eligibility Service also
entitles that Executive to benefits under one or more retirement plans (whether
a defined benefit or defined contribution plan or both) of another company, the
amount the Executive is entitled to receive on a life annuity basis for
retirement from those plans; provided, the method of benefit measurement, in the
case of (2) and (3) above, shall be on the basis of procedures determined by the
Administrative Managers on a plan-by-plan basis. The Qualified Plan Benefit does
not include any early pension retirement supplement or any amount received
pursuant to a cash or deferred arrangement (as that term is defined in the
Internal Revenue Code of 1986, as amended) maintained by Westinghouse, an
Employer, a Designated Entity or a Designated Group or any amount received
pursuant to the Westinghouse Savings Program or any similar program of, or made
available to employees of, an Employer, a Designated Entity or a Designated
Group. In the case of an Eligible Affected Employee, the Executive's Effective
Termination Date will be substituted for "actual retirement date" in determining
his or her Qualified Plan Benefit.
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(r) Retirement Eligible. Retirement Eligible means that the Executive is
accruing Eligibility Service and (i) has attained age 65 and completed five or
more years of Eligibility Service, (ii) has attained age 60 and completed 10 or
more years of Eligibility Service, (iii) has attained age 58 and completed 30 or
more years of Eligibility Service, (iv) has satisfied the requirements for an
immediate pension under the Special Retirement Pension provisions of the
Westinghouse Pension Plan, or (v) is an Eligible Affected Employee.
(s) Westinghouse. Westinghouse means Westinghouse Electric Corporation.
(t) Westinghouse Annual Incentive Programs. Westinghouse Annual Incentive
Programs means the Westinghouse Annual Performance Plan, the Westinghouse Annual
Incentive Plan, and the former Westinghouse By-law XVI Incentive Compensation
Program.
(u) Westinghouse Pension Plan Definitions. Terms used in this Plan which
are defined in the Westinghouse Pension Plan, as amended, shall have the same
meanings unless otherwise expressly stated in this Plan.
Section 2. Qualification for Benefits; Mandatory Retirement
(a) Qualification for Benefits. Subject to Section 8 and other applicable
provisions hereof, if any, each Executive shall be entitled to the benefits of
this Plan on separation of service from Westinghouse, an Employer, a Designated
Entity or a Designated Group, provided that such Executive: (i) has been
employed in a position that meets the definition of Executive for five or more
continuous years immediately preceding the earlier of the Executive's actual
retirement date or the Executive's Normal Retirement Date; (ii) has made the
Maximum Contribution during each year of Eligibility Service from the date he or
she first became an Executive until the earliest of his or her date of death,
actual retirement date or Normal Retirement Date; (iii) is a participant in the
Westinghouse Pension Plan or in the defined benefit or defined contribution plan
of, or made available to employees of, a Designated Entity or Designated Group,
if any; and (iv) is Retirement Eligible on the date of voluntary or involuntary
separation of service from Westinghouse, an Employer, a Designated Entity or a
Designated Group or, in the case of a Surviving Spouse benefit, satisfies the
requirements for benefits under Section 4 of the Plan. In the case of an
Eligible Affected Employee, the Executive's Effective Termination Date will be
substituted for "actual retirement date" in clauses (i) and (ii) above, and
clause (iv) will not apply.
(b) Mandatory Retirement. Pursuant to this Plan, Westinghouse shall be
entitled, at its option, to retire any Executive who has attained sixty-five
years of age and who, for the two-year period immediately before his or her
retirement, has participated in this Plan, if such Executive is entitled to an
immediate nonforfeitable annual retirement benefit from a pension,
profit-sharing, savings or deferred compensation plan, or any combination of
such plans, of Westinghouse, an Employer or any Affiliated Entity, which equals,
in the aggregate, at least $44,000. The calculation of such $44,000 (or greater)
amount shall be performed in a manner consistent with 29 U.S.C.A.
Section 631(c)(2).
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Section 3. Calculation of Executive Pension Supplement
The Executive Pension Supplement for an Executive who meets the
qualifications of Section 2 of the Plan retiring on an Early, Normal or Special
Retirement Date shall be calculated as follows:
(a) If the Executive (i) has attained age 60 and completed 10 or more years
of Eligibility Service, (ii) has attained age 65, or (iii) has satisfied the
eligibility requirements for an immediate pension under the Special Retirement
Pension provisions of the Westinghouse Pension Plan, the Executive Pension
Supplement is determined by subtracting the Executive's Qualified Plan Benefit
that would be payable if he or she elected a Life Annuity Option (after any
reduction for early retirement, if applicable) from his or her Executive Pension
Base.
(b) If the Executive has not met the requirements of Section 3(a) above but
has attained age 58 and completed 30 or more years of Eligibility Service, the
Executive Pension Supplement is determined by subtracting the Executive's
Qualified Plan Benefit that would be payable if he or she elected a Life Annuity
Option (before any reduction for retirement prior to age 60) from his or her
Executive Pension Base.
If the Executive is an Eligible Affected Employee, the Executive Pension
Supplement is determined by subtracting the Executive's Qualified Plan Benefit
that would be payable if he or she elected a Life Annuity Option at his or her
Effective Termination Date (after reduction for early retirement) from his or
her Executive Pension Base (also after reduction by the same percentage for
early retirement).
Section 4. Death in Active Service
(a) Eligibility For an Immediate Benefit. If an Executive dies in active
service and, on his or her date of death, satisfies the requirements of the
Surviving Spouse Benefit for Death Before Retirement provisions of the
Westinghouse Pension Plan and satisfied the requirements of Section 2(a)(ii) and
(iii) at the time of death, a Surviving Spouse benefit shall also be payable
under this Plan if his or her Executive Pension Base exceeds his or her
Qualified Plan Benefit. The duration portion of the requirement of Section 2(i)
of the Plan that the Executive be employed in a position that meets the
definition of Executive for five or more continuous years is waived in this
case.
The Surviving Spouse Benefit under this Section 4(a) shall be the Executive
Pension Supplement reduced in the same manner as though the benefit were payable
under the Westinghouse Pension Plan. For purposes of this paragraph, the
Executive Pension Supplement shall be calculated as follows:
(i) If the Executive had attained age 60 or if the Executive had completed
30 years of Eligibility Service, the Executive Pension Supplement would be
calculated as described in Section 3(a);
(ii) If the Executive did not meet either of the requirements set forth in
subparagraph (i) above, the Executive Pension Supplement would be 80% of the
difference between the Executive Pension Base and the unreduced Qualified Plan
Benefit.
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(b) Eligibility for a Deferred Benefit. If an Executive dies in active
service who does not satisfy the requirements of Section 4(a) above but who
satisfies the requirements of the Surviving Spouse Benefit for Certain Vested
Employees provisions of the Westinghouse Pension Plan and satisfied the
requirements of Section 2(a)(ii) and (iii) at the time of death, a Surviving
Spouse benefit shall also be payable under this Plan if his or her Executive
Pension Base exceeds his or her Qualified Plan Benefit. The duration portion of
the requirement of Section 2(a)(i) of the Plan that the Executive be employed in
a position that meets the definition of Executive for five or more continuous
years is waived in this case.
The Surviving Spouse benefit under this Section 4(b) shall be the Executive
Pension Supplement reduced in the same manner as though the benefit were payable
under the Westinghouse Pension Plan. For purposes of this paragraph, the
Executive Pension Supplement shall be calculated by subtracting the Executive's
Qualified Plan Benefit (before any reductions) from his or her Executive Pension
Base.
Section 5. Payment of Benefits
No benefits shall be payable under this Plan to any Executive whose
employment terminates for any reason other than death prior to satisfying the
definition of Retirement Eligible hereunder.
The Executive Pension Supplement shall be paid in monthly installments,
each equal to 1/12th of the annual amount determined in Section 3 or 4,
whichever is applicable. If the Executive or Surviving Spouse is eligible for
Plan benefits, such payments shall commence at the same time as payments under
the Westinghouse Pension Plan, if any. If the Executive or Surviving Spouse is
eligible for Plan benefits and is receiving payments from a defined benefit or
defined contribution plan of, or made available to employees of, a Designated
Entity or Designated Group and not from the Westinghouse Pension Plan, payments
shall commence at the same time as payments under such Designated Entity or
Designated Group plan provided the requirements of Section 2(a)(iv) have been
met. The payments shall be payable for the life of the Executive or the
Executive's Surviving Spouse, as the case may be.
Unless the Financial Managers determine otherwise, the Executive may
elect that the Executive Pension Supplement determined in Section 3 be paid in
accordance with any of the optional forms of payment, other than as a lump sum,
then available under the Westinghouse Pension Plan, subject to the same
reductions or other provisions that apply to the elected form of payment under
the Westinghouse Pension Plan. Any election hereunder as to optional forms of
payment may be revoked prior to the effective date of such election, but may not
be revoked on or after the Executive's actual retirement date for any reason.
All elections hereunder become effective on the Executive's actual retirement
date.
Regardless of the form of payment elected by the Executive, after the
Executive retires and begins receiving an Executive Pension Supplement a minimum
of 60 times the monthly payment he or she would have received on a life annuity
basis is guaranteed hereunder.
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Surviving Spouse benefits under this Plan will be paid in accordance with
the form of payment made for Surviving Spouse Benefits under the Westinghouse
Pension Plan. Once a Surviving Spouse Benefit determined under Section 4(a) has
commenced, a minimum of 60 times the monthly benefit payable to the Surviving
Spouse is guaranteed hereunder.
In the event that an Executive retires or otherwise ceases to be an
Employee of Westinghouse, an Employer, a Designated Entity or a Designated Group
and is later rehired by one of those entities, the additional provisions set
forth in Appendix B to the Plan will apply.
Section 6. Plan Costs
Benefits payable under the Plan and any expenses in connection therewith
will be paid by Westinghouse to the extent they are not available to be paid
from any trust fund established by Westinghouse to help defray the costs of
providing Plan benefits.
Section 7. Conditions to Receipt of Executive Pension Supplement
Payments of benefits under this Plan to Executives are subject to the
condition that the recipient shall not engage directly or indirectly in any
business which is at the time competitive with any business or part thereof, or
activity then conducted by, Westinghouse, any of its subsidiaries or any other
corporation, partnership, joint venture or other entity of which Westinghouse
directly or indirectly holds a 10% or greater interest (together, the "Company")
in the area in which such business, or part thereof, or activity is then being
conducted by the Company, unless such condition is specifically waived with
respect to such recipient by the Westinghouse Board of Directors. Breach of the
condition contained in the preceding sentence shall be deemed to occur
immediately upon an Executive's engaging in competitive activity. Payments
suspended for breach of the condition shall not thereafter be resumed whether or
not the Executive terminates the competitive activity. A recipient shall be
deemed to be engaged in such a business indirectly if he or she is an employee,
officer, director, trustee, agent or partner of, or a consultant or advisor to
or for, a person, firm, corporation, association, trust or other entity which is
engaged in such a business or if he or she owns, directly or indirectly, in
excess of five percent of any such firm, corporation, association, trust or
other entity. The ongoing condition of this Section 7 shall not apply to an
Executive age 65 or older.
Section 8. Administration
This Plan shall be administered by the Administrative Managers. The
Administrative Managers shall have the right to make reasonable rules from time
to time regarding the Plan; such rules shall be consistent with the policy
provided herein. The Administrative Managers shall have full and absolute
discretion and authority to control and manage the operation and administration
of the Plan, and to interpret and apply the terms of the Plan. This full and
absolute discretion and authority shall include the power to interpret, construe
and apply the provisions of the Plan, and any construction adopted by the
Administrative Managers in good faith shall be final and binding.
In accordance with the provisions of Section 503 of the Employee Retirement
Income Security Act of 1974, the Administrative Managers shall provide a
procedure for handling claims of
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participants or their beneficiaries under this Plan. Such procedure shall be
in accordance with regulations issued by the Secretary of Labor and shall
provide adequate written notice within a reasonable period of time with respect
to the denial of any such claim as well as a reasonable opportunity for a full
and fair review of any such denial.
The Board may authorize the establishment of one or more trusts and the
appointment of a trustee or trustees ("Trustee") to hold any and all assets of
the Plan in trust.
Section 9. Modification or Termination
(a) Westinghouse reserves the right, at any time and from time to time,
without notice, to suspend or terminate the Plan or to amend, in whole or in
part, any and all provisions of the Plan, acting as follows:
(i) The Board may suspend the Plan, terminate the Plan, or adopt Plan
amendments that amend any and all provisions of the Plan in whole or in part;
(ii) The Compensation Committee of the Board may adopt Plan amendments that
amend any and all provisions of the Plan in whole or in part;
(iii) The Managers may adopt Plan amendments that amend any and all
provisions of the Plan in whole or in part, provided that no amendments may be
adopted by the Managers that would materially change any Plan benefits or
materially increase the costs of the Plan; and
(iv) The Administrative Managers may adopt Plan amendments that relate
solely to the administration of the Plan and do not materially change any Plan
benefits or materially increase the costs of the Plan.
Any such change, termination or suspension shall be effective at such time
as is specified by the Board, the Compensation Committee, the Managers, or the
Administrative Managers, as applicable, or, if no such time is so specified,
upon the adoption thereof.
(b) Notwithstanding the above, no such change or termination may adversely
affect (i) the benefits of any Executive who retires prior to such change or
termination or (ii) the right of any then current Executive to receive upon
retirement (or to have a Surviving Spouse or beneficiary receive upon the
Executive's death), an Executive Pension Supplement, calculated as of the
effective date of such change or termination, under the Plan provided that the
Executive meets the following two conditions: (1) at the time of such change or
termination the Executive has vested pension benefits under the Westinghouse
Pension Plan and/or any applicable pension plan of a Designated Entity or
Designated Group, and (2) at the date of such change or termination and at the
date of actual retirement or death the Executive has occupied, for the then
required period next preceding such dates, a position that meets the definition
of Executive in Section 1(i) of this Plan as in effect at the date of such
change or termination.
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Section 10. Miscellaneous
(a) No Executive, former Executive or Surviving Spouse shall have the right
to anticipate, alienate, sell, transfer, assign, pledge, encumber, or otherwise
subject to lien any of the benefits provided under this Plan. Such rights may
not be subject to the debts, contracts, liabilities, engagements or torts of the
Executive, former Executive or Surviving Spouse of an Executive.
(b) If, in the opinion of Westinghouse, a person to whom a benefit is
payable is unable to care for his or her affairs because of illness, accident or
any other reason, any payment due the person, unless prior claim therefore shall
have been made by a duly qualified guardian or other duly appointed and
qualified representative of such person, may be paid to some member of the
person's family, or to some other party who, in the opinion of Westinghouse, has
incurred expense for such person. Any such payment shall be a payment for the
account of such person and shall be a complete discharge of Westinghouse's
liability under this Plan.
(c) Westinghouse, in adopting this Plan, shall not be held to create or
vest in any Executive or any other person any interest, pension or benefits
other than the benefits specifically provided herein, or to confer upon any
Executive the right to remain in the service of Westinghouse.
Section 11. Creditors' Claims
Any assets purchased by Westinghouse to provide benefits under this Plan
shall at all times remain subject to the claims of general creditors of
Westinghouse and any Executive, former Executive or Surviving Spouse of an
Executive participating in the Plan has only an unsecured promise to pay
benefits from Westinghouse.
Section 12. Change in Control
A. The term "Change in Control" means the occurrence of one or more of the
following events:
(a) there shall be consummated (i) any consolidation or merger of
Westinghouse in which Westinghouse is not the continuing or surviving
corporation or pursuant to which shares of Westinghouse's Common Stock would be
converted into cash, securities or other property, other than a merger of
Westinghouse in which the holders of Westinghouse's Common Stock immediately
prior to the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of Westinghouse, or
(b) the stockholders of Westinghouse shall approve any plan or proposal for the
liquidation or dissolution of Westinghouse, or (c) (i) any person (as such term
is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), corporation or other entity shall purchase any Common
Stock of Westinghouse (or securities convertible into Westinghouse Common Stock)
for cash, securities or any other consideration pursuant to a tender offer or
exchange offer, unless, prior to the making of such purchase of Westinghouse
Common Stock (or securities convertible into Westinghouse Common Stock), the
Board shall determine that the making of such purchase shall not constitute a
Change in Control, or (ii) any person (as such
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term is defined in Section 13(d) of the Exchange Act), corporation or other
entity (other than Westinghouse or any benefit plan sponsored by Westinghouse or
any of its subsidiaries) shall become the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Westinghouse representing twenty percent or more of the combined
voting power of Westinghouse's then outstanding securities ordinarily (and apart
from any rights accruing under special circumstances) having the right to vote
in the election of directors (calculated as provided in Rule 13d-3(d) in the
case of rights to acquire any such securities), unless, prior to such person so
becoming such beneficial owner, the Board of Directors of Westinghouse shall
determine that such person so becoming such beneficial owner shall not
constitute a Change in Control, or (d) at any time during any period of two
consecutive years, individuals who at the beginning of such period constituted
the entire Board of Directors of Westinghouse shall cease for any reason to
constitute at least a majority thereof, unless the election or the nomination
for election of each new director during such two-year period 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 two-year period.
B. Notwithstanding any other provision of this Plan, upon a Change in
Control, as defined above, the following shall apply: (i) all Executives shall
be deemed vested; (ii) an amount sufficient to fund all unpaid benefits and any
Surviving Spouse Benefits payable under this Plan, shall be paid immediately by
Westinghouse to the Trustee pursuant to a trust agreement for the Westinghouse
Executive Pension Plan Trust for payment of such benefits at the earliest date
available in accordance with the provisions hereof and on such other terms as a
committee composed of the Chief Executive Officer, the Chief Financial Officer
and the Chief Legal Officer of Westinghouse, shall deem appropriate (including a
direction to the Trustee to pay immediately all benefits on a present value
basis and/or such other terms as they may deem appropriate). Notwithstanding
this funding, Westinghouse shall be obligated to pay benefits to Executives and
to Surviving Spouses of Executives to the extent such funding proves to be
insufficient. To the extent such funding proves to be more than sufficient, the
excess shall revert to Westinghouse.
Upon a Change in Control, for any Executive in the Plan who is
involuntarily separated and who is not then eligible for a Normal or Special
Retirement Pension under the Westinghouse Pension Plan, such separation shall be
deemed to be a separation due to a Permanent Job Separation, and the Special
Retirement Pension provisions under the Westinghouse Pension Plan shall be used
for purposes of determining eligibility and payment of benefits to such
Executive under the Plan.
The present value of benefits payable by the Trustee shall be calculated
for specific groups of Executives at the time of the Change in Control as
follows:
a. The present value of the benefits payable from this Plan to Executives
who have retired at the time of the Change in Control (as well as
benefits payable from this Plan to any Surviving Spouse of an
Executive) shall be calculated by using the PBGC immediate discount
rate established and in effect for the beginning of the calendar year
in which the Change in Control occurs.
b. The present value of the benefits payable from this Plan to Executives
who are eligible to retire under the terms of this Plan at the time of
the Change in Control shall be calculated by using the PBGC immediate
discount rates established and in effect at the
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beginning of the calendar year in which the Change in Control
occurs, assuming a pension which is immediately payable at the
time of the Change in Control.
c. The present value of the benefits payable from this Plan to
Executives who have completed at least thirty (30) years of
service with Westinghouse, an Employer, a Designated Entity or a
Designated Group but have not yet attained age 58 at the time of
the Change in Control shall be calculated by using the PBGC
deferred discount rates established and in effect for the
beginning of the calendar year in which the Change in Control
occurs, assuming a pension which is payable at age 58.
d. The present value of benefits payable from this Plan to
Executives who have completed at least ten (10) years of service
with Westinghouse, an Employer, a Designated Entity or a
Designated Group but less than thirty (30) years of service at
the time of the Change in Control, but have not yet attained age
60 at the time of the Change in Control, shall be calculated by
using the PBGC deferred discount rates established and in effect
for the beginning of the calendar year in which the Change in
Control occurs, assuming a pension which is payable at age 60.
e. The present value of benefits payable from this Plan to
Executives who have completed less than ten (10) years of service
with Westinghouse, an Employer, a Designated Entity or a
Designated Group at the time of the Change in Control shall be
calculated by using the PBGC deferred discount rates established
and in effect for the beginning of the calendar year in which the
Change in Control occurs, assuming a pension which is payable at
age 65.
In calculating the benefit payable to each Executive, any offset for the
Westinghouse Pension Plan or other qualified plan in which the Executive
participates, shall be based upon the last official pension file data available,
adjusted to the date of any Change in Control by assuming that the most recent
salary reflected in the pension file remains constant.
Notwithstanding any provision of this Plan, at any time following a Change
in Control, this Plan may not be (a) amended such that future benefits would be
reduced, (b) suspended or (c) terminated (i) as to the further accrual of
benefits, and (ii) as to the payment of benefits, at any time prior to the last
payment, determined in accordance with the provisions of this Plan, to each
Executive, former Executive receiving benefits under the Plan, or eligible
spouse.
Section 13. Governing Law
To the extent not preempted by federal law, the law of the Commonwealth of
Pennsylvania shall govern the construction and administration of the Plan.
Section 14. Severability
If any provision of this Plan or the application thereof to any
circumstance or person is held to be invalid by a court of competent
jurisdiction, the remainder of the Plan and the application of such provision to
other circumstances or persons shall not be affected thereby.
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Section 15. Authority to Expand Benefits
The Board or the Compensation Committee of the Board may, from time to time
and without notice, by resolution of the Board or of the Compensation Committee
of the Board, authorize the payment of benefits or expand the benefits otherwise
payable or to be payable hereunder to any one or more individuals. The Board and
the Compensation Committee shall each have the right to delegate authority to
take any action that they may take under this Section 15 of the Plan within such
limits as they each may approve from time to time.
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APPENDIX A
EXECUTIVE BUY BACK
The Executive Buy Back process permits newly eligible Executives to "buy
back" past years of Executive Benefit Service under the Plan for periods of time
during which they did not make the Maximum Contribution.
If an Employee did not make the Maximum Contribution during each of the
years of his or her Eligibility Service prior to the time he or she first became
an Executive, the Employee will be permitted to pay an amount equal to the
Maximum Contributions that would have been payable during the ten years prior to
the date he or she first became an Executive (or such lesser period from the
later of January 1, 1985 or the date the Employee was employed by Westinghouse,
an Employer, a Designated Entity or a Designated Group) plus compounded interest
on that amount in order to "buy back" his or her non-contributory years of
service.
Upon qualifying as an Executive, an Executive will be offered an Executive
Buy Back opportunity at the time he or she first becomes an Executive. The
actual terms of the Executive Buy Back will be determined from time to time by
the Administrative Managers. This election will be offered one time to the
Executive and his or her decision whether or not to "buy back" will be
irrevocable.
Executive Buy Back payments will be made to Westinghouse and will not be
deposited into the Westinghouse Pension Plan Trust. Any Executive Buy Back
payments made by the Executive will not increase the Executive's Qualified Plan
Benefit.
If, at some point, an Employee is no longer an Executive or otherwise
becomes ineligible to receive an Executive Pension Supplement, any Executive Buy
Back payments the Employee has made (including any interest the Employee paid)
plus any other amount as defined in Section 1(o)(2)(ii) in the definition of
Maximum Contribution paid by the Employee to Westinghouse will be refunded, with
interest, at such time as the Employee meets one of the following criteria:
termination or retirement from Westinghouse, an Employer, a Designated Entity or
a Designated Group; or death; provided, however, no refund shall be made if the
Employee is an eligible Executive, whether or not the amount of his or her
Executive Pension Supplement exceeds zero. All interest rates will be determined
at the discretion of Westinghouse.
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APPENDIX B
REHIRED EXECUTIVES
Section 1. Retired Executives Rehired as Executives
If an Executive who retired from Westinghouse, an Employer, a Designated
Entity or a Designated Group and who received or is receiving an Executive
Pension Supplement as a lump sum or on a monthly basis is rehired in an
Executive position by Westinghouse, an Employer, a Designated Entity or a
Designated Group, the following provisions apply:
(a) For an Executive who elected a monthly Executive Pension Supplement,
the Plan will:
(i) suspend all Executive Pension Supplement payments; and
(ii) if, but only if, the Executive is Retirement Eligible at the time
of subsequent actual retirement:
(1) restore previous years of Eligibility Service and Executive
Benefit Service accrued prior to the Executive's retirement;
and
(2) recalculate the Executive's Executive Pension Supplement in
accordance with the Plan at his or her subsequent actual
retirement date as long as the Executive then meets all Plan
benefit qualification requirements.
The Executive, having previously met the five years of continuous service
as an Executive requirement prior to his or her first retirement, need not again
meet that requirement. The Executive's Average Annual Compensation will be
computed without regard to the break in service, using zero for any periods
during which the Executive was a retiree.
In addition, if the Executive elected to take a lump sum Qualified Plan
Benefit with respect to his or her initial retirement, then in any subsequent
calculation of the Executive's Executive Pension Supplement, the Executive's
Executive Pension Base will be reduced by both the Executive's Qualified Plan
Benefit received at the time of the initial retirement and the Executive's
Qualified Plan Benefit accrued from the date of rehire through the date of his
or her subsequent retirement.
(b) For an Executive who elected a lump sum Executive Pension Supplement
and who is Retirement Eligible at the time of subsequent actual retirement, the
Plan will:
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(i) restore previous years of Eligibility Service but not previous
years of Executive Benefit Service; and
(ii) calculate the Executive's additional Executive Pension Supplement
at his or her subsequent actual retirement date on the basis of
years of service after the rehire in accordance with the Plan as
long as the Executive then meets all Plan benefit qualification
requirements.
As under Section 1(a) of this Appendix B, the Executive, having previously
met the five years of continuous service as an Executive requirement prior to
his or her first retirement, need not again meet that requirement. The
Executive's Average Annual Compensation will be computed without regard to the
break in service, using zero for any periods during which the Executive was a
retiree.
In addition, if the Executive elected a monthly Qualified Plan Benefit with
respect to his or her initial retirement, then the Executive's Qualified Plan
Benefit accrued from the date of rehire through the subsequent date of actual
retirement will be subtracted from the Executive's Executive Pension Base in
calculating the Executive's additional Executive Pension Supplement at his or
her subsequent retirement.
Section 2. Former Executives with Vested Pensions Rehired as Executives
If the employment of an Executive of Westinghouse, an Employer, a
Designated Entity or a Designated Group who was eligible only for a vested
pension under the relevant qualified defined benefit or defined contribution
plan, if any, was terminated and the Executive is rehired by Westinghouse, an
Employer, a Designated Entity or a Designated Group, the following provisions
apply:
(i) restore previous years of Eligibility Service and Executive
Benefit Service accrued prior to the Executive's termination of
employment;
(ii) the Executive must meet the five years of continuous service as
an Executive requirement prior to a subsequent actual retirement
counting only years of service after the rehire; and
(iii) only base salary and incentive awards earned after the rehire
will be used in computing Average Annual Compensation.
In addition, if the Executive elected to take his or her Vested Pension as
a lump sum, in any calculation of an Executive Pension Supplement at actual
retirement the Executive's Executive Pension Base will be reduced by both the
Executive's Qualified Plan Benefit at the time of the initial termination of
employment and the Executive's Qualified Plan Benefit accrued from the date of
rehire through the date of actual retirement.
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Section 3. Retired Executives Rehired in Non-Executive Positions
If an Executive who retired from Westinghouse, an Employer, a Designated
Entity or a Designated Group and who received or is receiving an Executive
Pension Supplement as a lump sum or on a monthly basis is rehired by
Westinghouse, an Employer, a Designated Entity or a Designated Group in a
non-Executive position, the following provisions apply:
(a) For a former Executive who elected a monthly Executive Pension
Supplement, the Plan will:
(i) suspend all Executive Pension Supplement payments; and
(ii) if, but only if, the former Executive is still Retirement
Eligible at time of subsequent actual retirement, recommence
Executive Pension Supplement payments at the time of the
Executive's subsequent actual retirement without recalculation of
amount.
At subsequent actual retirement, the former Executive may re-select any
form of payment of his or her Executive Pension Supplement then permitted under
the Plan.
(b) For a former Executive who elected to take his or her Executive Pension
Supplement as a lump sum, no further benefits will be paid by the Plan.
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Exhibit 10(e)
DEFERRED COMPENSATION AND STOCK PLAN
FOR DIRECTORS
(AS AMENDED AS OF JANUARY 1, 1998)
SECTION 1. INTRODUCTION
1.1 Establishment. CBS Corporation, a Pennsylvania corporation formerly
known as Westinghouse Electric Corporation (the "Company"), has established the
Deferred Compensation and Stock Plan for Directors, as amended from time to time
(the "Plan"), for those directors of the Company who are neither officers nor
employees of the Company. The Plan provides, among other things, for the payment
of specified portions of the Annual Director's Fee in the form of Stock Options
and Restricted Stock and for the payment of the Annual Committee Chair's Fee in
the form of Restricted Stock, and the opportunity for the Directors to defer
receipt of all or a part of their cash compensation. Unless otherwise provided
for herein, the term Company includes CBS Corporation and its subsidiaries.
1.2 Purposes. The purposes of the Plan are to encourage the Directors
to own shares of the Company's stock and thereby to align their interests more
closely with the interests of the other shareholders of the Company, to
encourage the highest level of Director performance, and to provide a financial
incentive that will help attract and retain the most qualified Directors.
SECTION 2. DEFINITIONS
2.1 Definitions. The following terms will have the meanings set forth
below:
(a) "Annual Committee Chair's Fee" means the annual amount
established from time to time by the Board as the annual fee to be paid to
Directors for their services as chairs of standing committees of the Board.
(b) "Annual Director's Fee" means the annual amount (which may
be prorated for a Director serving less than a full calendar year, as in the
case of a Director who will be retiring or not standing for reelection at the
annual meeting of shareholders or a Director joining the Board (or otherwise
first becoming a Director) after the beginning of the year) established from
time to time by the Board as the annual fee to be paid to Directors for their
services as directors.
(c) "Attendance Percentage" for a Director with respect to a
particular Grant Year means the percentage of the aggregate of all meetings of
the Board and committees of which the Director was a member held during the
Grant Year (or, for Directors who join the Board or otherwise first become
Directors after the beginning of the Grant Year, Directors who retire at the
annual meeting of shareholders (as described in the Company's By-laws) held
during the Grant Year, Directors who do not stand for reelection at the annual
meeting of shareholders
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held during the Grant Year, or Directors who die during the Grant Year, the
aggregate of all such meetings held for the portion of the Grant Year during
which the Director served as a director), excluding any meeting(s) not attended
because of illness, which were attended by the Director. Except as otherwise
provided below, in the event that a Director ceases to be a director at any time
during the Grant Year for any reason other than retirement at the annual meeting
of shareholders, not standing for reelection at the annual meeting of
shareholders, or death, all meetings held during the Grant Year of the Board and
committees of which he was a member at the time of termination of service will
continue to be included as meetings when calculating the Attendance Percentage.
(d) "Board" means the Board of Directors of the Company.
(e) "Cash Account" means the account established by the
Company in respect of each Director pursuant to Section 6.3(a) hereof and to
which deferred cash compensation has been or will be credited pursuant to the
Plan.
(f) "Cause" means any act of (a) fraud or intentional
misrepresentation or (b) embezzlement, misappropriation or conversion of assets
or opportunities of the Company or any of its direct or indirect majority-owned
subsidiaries.
(g) "Change in Control" will have the meaning assigned to it
in Section 9.2 hereof.
(h) "Committee" means the Compensation Committee of the Board
(or any subcommittee thereof) or any successor committee established by the
Board, or any subcommittee thereof, in each case consisting of two or more
members each of whom is a "non-employee director" as that term is defined by
Rule 16b-3 under the Exchange Act, as such rule may be amended, or any successor
rule.
(i) "Common Stock Equivalent" means a hypothetical share of
Stock which will have a value on any date equal to the mean of the high and low
prices of the Stock as reported by the composite tape of the New York Stock
Exchange on that date, except as otherwise provided under Section 9.1.
(j) "Common Stock Equivalent Award" means an award of Common
Stock Equivalents granted to a Director pursuant to Section 5 of the Plan prior
to its amendment as of April 26, 1995.
(k) "Debenture" means a hypothetical debenture of the Company
that has a face value of $100, bears interest at a rate equal to the ten-year
U.S. Treasury Bond rate (prior to January 1, 1995, the seven-year U.S. Treasury
Bond rate) in effect the week prior to the regular January meeting of the Board
(or, if no such meeting is held, the week prior to the first trading day of the
New York Stock Exchange in February) in the year in respect of which deferred
amounts are earned, and is convertible into Stock at a conversion rate
determined by dividing $100 by the mean of the high and low prices of the Stock
as reported by the composite tape
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of the New York Stock Exchange on the date the Debenture is credited to the
Deferred Debenture Account pursuant to Section 6.3 hereof.
(l) "Deferred Debenture Account" means the account established
by the Company pursuant to Section 6.3(c) hereof in respect of each Director
electing to defer cash compensation under the Plan for 1997 and/or for an
earlier year or years and to which has been or will be credited Debentures and
other amounts pursuant to the Plan.
(m) "Deferred Stock Account" means the account established by
the Company in respect of each Director pursuant to Section 5.2 hereof and to
which has been or will be credited Common Stock Equivalents pursuant to the
Plan.
(n) "Director" means a member of the Board who is neither an
officer nor an employee of the Company. For purposes of the Plan, an employee is
an individual whose wages are subject to the withholding of federal income tax
under Section 3401 of the Internal Revenue Code, and an officer is an individual
elected or appointed by the Board or chosen in such other manner as may be
prescribed in the By-laws of the Company to serve as such.
(o) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(p) "Fair Market Value" means the mean of the high and low
prices of the Stock as reported by the composite tape of the New York Stock
Exchange (or such successor reporting system as the Committee may select) on the
relevant date or, if no sale of the Stock has been reported for that day, the
average of such prices on the next preceding day and the next following day for
which there were reported sales.
(q) "Grant Date" means, as to a Stock Option Award, the date
of grant pursuant to Section 7.1 and as to a Restricted Stock Award, the date of
grant pursuant to Section 8.1.
(r) "Grant Year" means, as to a particular award, the calendar
year in which the award was granted.
(s) "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time.
(t) "Restricted Stock" means shares of Stock awarded to a
Director pursuant to Section 8 and subject to certain restrictions in accordance
with the Plan.
(u) "Restricted Stock Award" means an award of shares of
Restricted Stock granted to a Director pursuant to Section 8 of the Plan.
(v) "Stock" means the common stock, $1.00 par value, of the
Company.
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(w) "Stock Option" means a non-statutory stock option to
purchase shares of Stock for a purchase price per share equal to the Exercise
Price (as defined in Section 7.2(a)) in accordance with the provisions of the
Plan.
(x) "Stock Option Award" means an award of Stock Options
granted to a Director pursuant to Section 7 of the Plan.
(y) "Stock Option Value" means the value of a Stock Option
for one share of Stock on the relevant date as determined by an outside firm
selected by the Company.
2.2 Gender and Number. Except when otherwise indicated by the context,
the masculine gender will also include the feminine gender, and the definition
of any term herein in the singular will also include the plural.
SECTION 3. PLAN ADMINISTRATION
(a) The Plan will be administered by the Committee. The
members of the Committee will be members of the Board appointed by the Board,
and any vacancy on the Committee will be filled by the Board or in a manner
authorized by the Board.
The Committee will keep minutes of its meetings and of any action taken
by it without a meeting. A majority of the Committee will constitute a quorum,
and the acts of a majority of the members present at any meeting at which a
quorum is present will be the acts of the Committee. Any action that may be
taken at a meeting of the Committee may be taken without a meeting if a consent
or consents in writing setting forth the action so taken is signed by all of the
members of the Committee. The Committee will make appropriate reports to the
Board concerning the operations of the Plan.
(b) Subject to the limitations of the Plan, the Committee
will have the sole and complete authority: (i) to impose such limitations,
restrictions and conditions upon such awards as it deems appropriate; (ii) to
interpret the Plan and to adopt, amend and rescind administrative guidelines and
other rules and regulations relating to the Plan; and (iii) to make all other
determinations and to take all other actions necessary or advisable for the
implementation and administration of the Plan. Notwithstanding the foregoing,
the Committee will have no authority, discretion or power to select the
Directors who will receive awards pursuant to the Plan, determine the awards to
be granted pursuant to the Plan, the number of shares of Stock to be issued
thereunder or the price thereof or the time at which such awards are to be
granted, establish the duration and nature of awards or alter any other terms or
conditions specified in the Plan, except in the sense of administering the Plan
subject to the provisions of the Plan. The Committee's determinations on matters
within its authority will be conclusive and binding upon the Company and all
other persons.
(c) The Company will be the sponsor of the Plan. All expenses
associated with the Plan will be borne by the Company.
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SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. 600,000 shares of Stock are authorized for
issuance under the Plan in accordance with the provisions of the Plan, subject
to adjustment and substitution as set forth in this Section 4. This
authorization may be increased from time to time by approval of the Board and,
if such approval is required, by the shareholders of the Company. The Company
will at all times during the term of the Plan retain as authorized and unissued
Stock at least the number of shares from time to time required under the
provisions of the Plan, or otherwise assure itself of its ability to perform its
obligations hereunder.
4.2 Other Shares of Stock. Any shares of Stock that are subject to a
Common Stock Equivalent Award, a Stock Option Award, a Restricted Stock Award or
a Debenture and which are forfeited, any shares of Stock that for any other
reason are not issued to a Director, and any shares of Stock tendered by a
Director to pay the Exercise Price of a Stock Option will automatically become
available again for use under the Plan if Rule 16b-3 under the Exchange Act, as
such rule may be amended, or any successor rule, and interpretations thereof by
the Securities and Exchange Commission or its staff permit such share
replenishment.
4.3 Adjustments Upon Changes in Stock. If there is any change in the
Stock of the Company, through merger, consolidation, division, share exchange,
combination, reorganization, recapitalization, stock dividend, stock split,
spin-off, split up, dividend in kind or other change in the corporate structure
or distribution to the shareholders, appropriate adjustments may be made by the
Committee (or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) in the
aggregate number and kind of shares subject to the Plan, and the number and kind
of shares which may be issued under the Plan. Appropriate adjustments may also
be made by the Committee in the terms of any awards or Debentures under the Plan
to reflect such changes and to modify any other terms of outstanding awards on
an equitable basis as the Committee in its discretion determines.
SECTION 5. COMMON STOCK EQUIVALENT AWARDS
5.1 Grants of Common Stock Equivalent Awards. Common Stock Equivalents
equal to a fixed number of shares of Stock were granted automatically to
Directors on a formula basis under Section 5.1 of the Plan prior to its
amendment as of April 26, 1995. All Common Stock Equivalents granted pursuant to
Section 5.1 prior to its amendment as of April 26, 1995 are subject to
adjustment as provided in Section 4.3.
5.2 Deferred Stock Account. A Deferred Stock Account has been
established for each Director elected prior to the annual meeting of
shareholders held in 1995. The Deferred Stock Account consists of compensation
in the form of Common Stock Equivalents which have been awarded to the Director
hereunder by the Company plus Common Stock Equivalents credited to the Deferred
Stock Account in respect of dividends and other distributions on the Stock
pursuant to Sections 5.3 and 5.4.
5.3 Hypothetical Investment. Compensation awarded hereunder in the form
of Common Stock Equivalents is assumed to be a hypothetical investment in shares
of Stock, and is
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subject to adjustment to reflect stock dividends, splits and reclassifications
and as otherwise set forth in Section 4.3.
5.4 Hypothetical Dividends. Dividends and other distributions on Common
Stock Equivalents will be deemed to have been paid as if such Common Stock
Equivalents were actual shares of Stock issued and outstanding on the respective
record or distribution dates. Common Stock Equivalents will be credited to the
Deferred Stock Account in respect of cash dividends and any other securities or
property issued on the Stock in connection with reclassifications, spin-offs and
the like on the basis of the value of the dividend or other asset distributed
and the value of the Common Stock Equivalents on the date of the announcement of
the dividend or asset distribution, all at the same time and in the same amount
as dividends or other distributions are paid or issued on the Stock. Such Common
Stock Equivalents are subject to adjustment as provided in Section 4.3.
Fractional shares will be credited to a Director's Deferred Stock Account
cumulatively but the balance of shares of Common Stock Equivalents in a
Director's Deferred Stock Account will be rounded to the next highest whole
share for any payment to such Director pursuant to Section 5.6.
5.5 Statement of Account. A statement will be sent to each Director as
to the balance of his Deferred Stock Account at least once each calendar year.
5.6 Payment of Deferred Stock. Upon termination of services as a
Director, the balance of the Director's Deferred Stock Account will be paid to
such Director in Stock in January of the year following the year of termination
of services as a director on the basis of one share of Stock for each Common
Stock Equivalent in such Director's Deferred Stock Account.
5.7 Payments to a Deceased Director's Estate. In the event of a
Director's death before the balance of his or her Deferred Stock Account is
fully paid to the Director, payment of the balance of the Director's Deferred
Stock Account will then be made to the beneficiary properly designated by the
Director pursuant to Section 5.8, if any, or to his or her estate in the absence
of such a beneficiary designation, in the time and manner selected by the
Committee. The Committee may take into account the application of any duly
appointed administrator or executor of a Director's estate and direct that the
balance of the Director's Deferred Stock Account be paid to his or her estate in
the manner requested by such application.
5.8 Designation of Beneficiary. A Director may designate a beneficiary
in the event of the Director's death in a form approved by the Company.
SECTION 6. DEFERRAL OF COMPENSATION
6.1 Amount of Deferral. A Director may elect to defer receipt of all or
a specified portion of the cash compensation otherwise payable to the Director
for services rendered to the Company as a director.
6.2 Manner of Electing Deferral. A Director will make elections
permitted hereunder by giving written notice to the Company in a form approved
by the Committee and in compliance with Section 6.4. The notice will include:
(i) the percentage of cash compensation
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to be deferred, which amount must be stated in whole increments of five percent;
and (ii) the time as of which deferral is to commence.
6.3 Accounts.
(a) Cash Account. A Cash Account has been or will be
established for each Director electing to defer hereunder. Each Cash Account
will be credited with the amounts deferred on the date such compensation is
otherwise payable and will be debited with the amount of any such compensation
forfeited in accordance with applicable Board policy.
(b) Interest. Deferred amounts in the Cash Account will
accrue interest from time to time as follows:
(1) For deferred amounts credited to the Cash
Account prior to January 1, 1998 (including but not limited
to Annual Director's Fees for the calendar year 1997), such
deferred amounts will accrue interest from time to time at a
rate equal to the ten-year U.S. Treasury Bond rate (prior to
January 1, 1995, the seven-year U.S. Treasury Bond rate) in
effect the week prior to the regular January meeting of the
Board (or, if no such meeting is held, the week prior to the
first trading day of the New York Stock Exchange in February)
in the year in respect of which such deferred amounts are
earned until the last trading day of the New York Stock
Exchange prior to the regular January meeting of the Board
(or, if no such meeting is held, until the first trading day
of February) in the year following the year in respect of
which deferred amounts are earned, at which time such
deferred amounts, including interest, will be invested in
Debentures and credited to the Deferred Debenture Account.
Deferred amounts will be credited to the Deferred Debenture
Account only in $100 amounts. Fractional amounts of $100 will
remain in the Cash Account and continue to accrue interest.
(2) For deferred amounts credited to the Cash
Account on or after January 1, 1998 (and any fractional
amounts remaining in the Cash Account from prior deferrals),
such deferred amounts will accrue interest from time to time
at the Interest Credit Rate then in effect, compounded
annually. The "Interest Credit Rate" will be reset by the
Company on an annual basis in January of the year, and will
equal the then current one-year U.S. Treasury Bill rate or
such other fixed rate as the Committee may from time to time
determine.
(c) Deferred Debenture Account. A Deferred Debenture Account
has been established for each Director electing to defer cash compensation
hereunder for the calendar year 1997 and/or for an earlier year or years.
Deferred amounts credited to the Cash Account prior to January 1, 1998 will be
invested in Debentures and credited to the Deferred Debenture Account at the
time and in the manner set forth in Section 6.3(b)(1). Deferred amounts credited
to the Cash Account on or after January 1, 1998 will not be invested in
Debentures but will remain in the Cash Account and accrue interest until payment
hereunder.
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6.4 Time for Electing Deferral. Any election to (i) defer cash
compensation, (ii) alter the portion of such amounts deferred, or (iii) revoke
an election to defer such amounts, must be made prior to the time such
compensation is earned by the Director and otherwise in compliance with any
deadline which the Company may from time to time impose and in the manner set
forth in Section 6.2.
6.5 Payment of Deferred Amounts. Payments from a Deferred Debenture
Account and/or from a Cash Account will be made in five consecutive annual
installments beginning in the January following the Director's termination of
service.
Payments from a Deferred Debenture Account will consist of accumulated
interest on the Debentures (which amount will only be payable in cash) plus the
greater value of (i) the face value of the Debentures or (ii) the shares of
Stock into which the Debentures are convertible. In the event the value of the
payment is determined by the amount referred to in clause (i), payment will be
made in cash. In the event such value is determined by clause (ii), such payment
will be made in Stock, other than the value of fractional shares which will be
paid in cash.
Payments from a Cash Account will consist of the deferred cash
compensation and accumulated interest in said account and will be made in cash.
6.6 Payments to a Deceased Director's Estate. In the event of a
Director's death before the balance of his or her Cash Account or Deferred
Debenture Account is fully paid to the Director, payment of the balance of the
Cash Account or Deferred Debenture Account will then be made to the beneficiary
properly designated by the Director pursuant to Section 6.7, if any, or to his
or her estate in the absence of such a beneficiary designation, in the time and
manner selected by the Committee. The Committee may take into account the
application of any duly appointed administrator or executor of a Director's
estate and direct that the balance of the Director's Cash Account or Deferred
Debenture Account be paid to his or her estate in the manner requested by such
application.
6.7 Designation of Beneficiary. A Director may designate a beneficiary
in the event of the Director's death in a form approved by the Company.
SECTION 7. STOCK OPTION AWARDS
7.1 Grants of Stock Option Awards.
(a) For calendar year 1995, Stock Options for a fixed number
of shares of Stock were granted automatically to Directors on a formula basis
under Section 7.1(a) of the Plan.
(b) For calendar year 1995, Stock Options for a fixed number
of shares of Stock were granted automatically on a formula basis under Section
7.1(b) of the Plan to Directors serving as chairs of standing committees of the
Board.
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(c) For calendar years 1996 and 1997, Stock Options were
granted automatically under Section 7.1(c) of the Plan to Directors for
one-fourth of the value of their Annual Director's Fees.
(d) Beginning with calendar year 1998, each Director will
receive 5/16ths (31.25%) of the value of his or her Annual Director's Fee in the
form of a Stock Option Award. Such Stock Options will be granted automatically
each year on the last Wednesday in January of such year to each Director in
office on such Grant Date. If a person joins the Board or otherwise first
becomes a Director at any time after the last Wednesday in January of a given
calendar year (beginning with 1998) but before the end of that calendar year,
whether by action of the shareholders of the Company or the Board or otherwise,
such person upon becoming a Director will be granted automatically 5/16ths
(31.25%) of the value of his or her Annual Director's Fee for that calendar year
in the form of a Stock Option Award on the last Wednesday of the calendar month
in which such person first becomes a Director (or in the next following calendar
month if such person first becomes a Director after the last Wednesday of the
month). The total number of shares of Stock subject to any such Stock Option
Award will be the number of shares determined by dividing the amount of the
Annual Director's Fee to be paid in the form of a Stock Option Award by the
Stock Option Value on the Grant Date, rounded up to the nearest whole share.
(e) All Stock Options granted pursuant to Section 7.1 are
subject to adjustment as provided in Section 4.3.
7.2 Terms and Conditions of Stock Options. Stock Options granted under
the Plan will be subject to the following terms and conditions:
(a) Exercise Price. Beginning with calendar year 1998, the
purchase price per share at which a Stock Option may be exercised ("Exercise
Price") will be equal to 100% of the Fair Market Value of a share of Stock on
the Grant Date.
For Stock Options granted in 1995, 1996 and 1997, the Exercise Price
was determined as follows: on any Grant Date, (1) Stock Options for two-thirds
of the option shares granted on the Grant Date had an Exercise Price per share
equal to 100% of the Fair Market Value of a share of Stock on the Grant Date;
and (2) Stock Options for the remaining one-third of the option shares granted
on the Grant Date had an Exercise Price per share equal to 125% of the Fair
Market Value of a share of Stock on the Grant Date.
(b) Exercisability. Subject to the terms and conditions of
the Plan and of the agreement referred to in Section 7.2(j), a Stock Option may
be exercised in whole or in part upon notice of exercise to the Company, (1) as
to any Stock Option granted in calendar year 1995, commencing on the first day
after the Grant Date and until it terminates, and (2) as to any Stock Option
granted after January 1, 1996 that vests as provided in Section 7.2(c)(2) or
7.2(c)(3), commencing on January 1 of the calendar year next following the Grant
Year or upon the occurrence of a Change in Control, if earlier, and until it
terminates. During a Director's lifetime, a Stock Option may be exercised only
by the Director or the Director's guardian or legal representative.
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(c) Vesting of Stock Option Awards.
(1) Stock Options granted in calendar year 1995 vested
immediately on grant.
(2) Stock Options granted after January 1, 1996 will vest on
January 1 of the calendar year next following the Grant Year (the "Option
Vesting Date") if the Director has an Attendance Percentage of at least
seventy-five percent (75%) for the Grant Year. In the event that a Director has
an Attendance Percentage of less than seventy-five percent (75%) for a Grant
Year, Stock Options granted in that Grant Year for a number of shares equal to
the Director's Attendance Percentage for that year multiplied by the total
number of option shares granted for that year (rounded up to the nearest whole
share) will vest on the Option Vesting Date, and Stock Options granted in that
Grant Year as to the remaining option shares will be forfeited and will
terminate as of the Option Vesting Date.
(3) Notwithstanding anything to the contrary herein, (i) in
the event that a director is removed from office for Cause, all outstanding
Stock Options will be forfeited immediately as of the time the grantee is so
removed from office, and (ii) upon the occurrence of a Change in Control, all
outstanding Stock Options will vest and become immediately exercisable.
(d) Mandatory Holding of Stock. Except as otherwise provided
in Section 7.5 or Section 10, any Stock acquired on exercise of a Stock Option
must be held by the grantee for a minimum of: (1) three years from the date of
exercise; (2) two years from the date the grantee ceases to be a director of the
Company; or (3) until the occurrence of a Change in Control, whichever first
occurs (the "Option Shares Holding Period").
(e) Option Term. The term of a Stock Option (the "Option
Term") will be the shorter of: (1) the period of ten years from its Grant Date;
(2) the period from the Grant Date until the Option Vesting Date for a Stock
Option that does not vest and is terminated on said date as provided in Section
7.2(c)(2) (or with respect to any portion of a Stock Option that does not vest
on the Option Vesting Date and is terminated as provided in Section 7.2(c)(2));
(3) the period from the Grant Date until the time the Stock Option is forfeited
as provided in Section 7.2(c)(3)(i) in the event a director is removed from
office for Cause; or (4) the period from the Grant Date until the date the Stock
Option ceases to be exercisable as provided in Section 7.2(h).
(f) Payment of Exercise Price. Stock purchased on exercise of
a Stock Option must be paid for as follows: (1) in cash or by check (acceptable
to the Company), bank draft or money order payable to the order of the Company,
(2) through the delivery of shares of Stock which are then outstanding and which
have a Fair Market Value on the date of exercise equal to the Exercise Price per
share multiplied by the number of shares as to which the Stock Option is being
exercised (the "Aggregate Exercise Price"); (3) by delivery of an unconditional
and irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the Aggregate Exercise Price, or (4) by a combination of
the permissible forms of payment; provided, however, that any portion of the
Exercise Price representing a fraction of a share must
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be paid in cash and no share of Stock held for less than six months may be
delivered in payment of the Aggregate Exercise Price.
(g) Rights as a Shareholder. The holder of a Stock Option
will not have any of the rights of a shareholder with respect to any shares of
Stock subject to the Stock Option until such shares are issued by the Company
following the exercise of the Stock Option.
(h) Termination of Eligibility. If a grantee ceases to be a
Director for any reason, any outstanding Stock Options will be exercisable
according to the following provisions:
(1) If a grantee ceases to be a director for any reason other
than removal for Cause or death, any outstanding Stock Options held by such
grantee which are vested or which thereafter vest will be exercisable by the
grantee in accordance with their terms at any time prior to the expiration of
the Option Term;
(2) If a grantee is removed from office as a director of the
Company for Cause, any outstanding vested Stock Options held by such grantee
will be exercisable by the grantee in accordance with their terms at any time
prior to the earlier of (a) the time the grantee is so removed from office and
(b) the expiration of the Option Term; and
(3) Following the death of a grantee while a director or
after the grantee ceased to be a director for any reason other than removal for
Cause, any Stock Options that are outstanding and exercisable by such grantee at
the time of death or which thereafter vest will be exercisable in accordance
with their terms by the person or persons entitled to do so under the grantee's
will, by a beneficiary properly designated by the Director in the event of death
pursuant to Section 7.4, if any, or by the person or persons entitled to do so
under the applicable laws of descent and distribution at any time prior to the
earlier of (a) the expiration of the Option Term and (b) two years after the
date of death.
(i) Termination of Stock Option. A Stock Option will
terminate on the earlier of (1) exercise of the Stock Option in accordance with
the terms of the Plan, and (2) expiration of the Option Term as specified in
Sections 7.2(e) and 7.2(h).
(j) Stock Option Agreement. All Stock Options will be
confirmed by an agreement, or an amendment thereto, which will be executed on
behalf of the Company by the Chief Executive Officer, the President or any Vice
President and by the grantee.
(k) General Restrictions.
(1) The obligation of the Company to issue Stock pursuant to
Stock Options under the Plan will be subject to the condition that, if at any
time the Company determines that (a) the listing, registration or qualification
of shares of Stock upon any securities exchange or under any state or federal
law, or (b) the consent or approval of any government or regulatory body is
necessary or desirable, then such Stock will not be issued unless such listing,
registration, qualification, consent or approval has been effected or obtained
free from any conditions not acceptable to the Company.
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(2) Shares of Stock for use under the provisions of this
Section 7 will not be issued until they have been duly listed, upon official
notice of issuance, upon the New York Stock Exchange and such other exchanges,
if any, as the Board may determine, and a registration statement under the
Securities Act of 1933 with respect to such shares has become, and is,
effective.
Subject to the foregoing provisions of this Section 7.2 and the other
provisions of the Plan, any Stock Option granted under the Plan will be subject
to such restrictions and other terms and conditions, if any, as the Committee
may determine, in its discretion, and as are set forth in the agreement referred
to in Section 7.2(j), or an amendment thereto; provided, however, that in no
event will the Committee or the Board have any power or authority which would
cause transactions pursuant to the Plan to cease to be exempt from the
provisions of Section 16(b) of the Exchange Act pursuant to Rule 16b-3, as such
rule may be amended, or any successor rule.
7.3 Annual Statement. A statement will be sent to each Director as to
the status of his or her Stock Options at least once each calendar year.
7.4 Designation of a Beneficiary. A Director may designate a
beneficiary to hold and exercise outstanding Stock Options in accordance with
the Plan in the event of the Director's death in a form approved by the Company.
7.5 Holding Period Applicable to a Deceased Grantee's Estate. As long
as at least six months have elapsed since the Grant Date, a beneficiary properly
designated by the Director pursuant to Section 7.4, if any, or a person holding
a Stock Option under a deceased grantee's will or under the applicable laws of
descent or distribution, exercising a Stock Option in accordance with Section
7.2(h) will not be subject to the Holding Period with respect to shares of Stock
received on exercise of a Stock Option.
SECTION 8. RESTRICTED STOCK AWARDS.
8.1 Grants of Restricted Stock Awards.
(a) For calendar years 1996 and 1997, each Director received
one-fourth of the value of his or her Annual Director's Fee in the form of a
Restricted Stock Award.
Beginning with calendar year 1998, each Director will receive 5/16ths
(31.25%) of the value of his or her Annual Director's Fee in the form of a
Restricted Stock Award. Such Restricted Stock will be granted automatically each
year on the last Wednesday in January of such year to each Director in office on
such Grant Date. If a person joins the Board or otherwise first becomes a
Director at any time after the last Wednesday in January of a given calendar
year (beginning with 1998) but before the end of that calendar year, whether by
action of the shareholders of the Company or the Board or otherwise, such person
upon becoming a Director will be granted automatically 5/16ths (31.25%) of the
value of his or her Annual Director's Fee for that calendar year in the form of
a Restricted Stock Award on the last Wednesday in the
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calendar month in which such person first becomes a Director (or in the next
following calendar month if said person first becomes a Director after the last
Wednesday of the month).
(b) Beginning with calendar year 1996, each Director who is
the chair of a standing committee of the Board will receive the full value of
his or her Annual Committee Chair's Fee in the form of a Restricted Stock Award.
Such Restricted Stock will be granted automatically each year immediately
following the annual meeting of shareholders and the organization meeting of the
Board related to such annual meeting of shareholders, beginning with the annual
meeting of shareholders and related organization meeting held in 1996, to each
Director who is elected at such organization meeting to serve as the chair of a
standing committee of the Board.
(c) The total number of shares of Stock representing any such
Restricted Stock Award will be the number of shares determined by dividing the
amount of the Annual Director's Fee or the Annual Committee Chair's Fee, as the
case may be, to be paid in the form of a Restricted Stock Award by the Fair
Market Value of a share of Stock on the Grant Date, rounded up to the nearest
whole share.
(d) Restricted Stock granted pursuant to Section 8.1 is
subject to adjustment as provided in Section 4.3.
8.2 Terms and Conditions of Restricted Stock. Restricted Stock granted
under the Plan will be subject to the following terms and conditions:
(a) Restriction Period. Restricted Stock will be subject to a
Restriction Period ("Restriction Period") beginning on the Grant Date and
continuing through December 31 of the Grant Year.
(b) Vesting.
(1) Except as set forth in Section 8.2(b)(3), a Director's
right to ownership in shares of Restricted Stock granted to a Director pursuant
to Section 8.1(a) will vest on the January 1 immediately following the
expiration of the Restriction Period for such shares (the "Restricted Stock
Vesting Date") if the Director has an Attendance Percentage of at least
seventy-five percent (75%) for the Grant Year. In the event that a Director has
an Attendance Percentage of less than seventy-five percent (75%) for a Grant
Year, a number of shares of Restricted Stock equal to the Director's Attendance
Percentage for the Grant Year multiplied by the total number of shares of
Restricted Stock granted pursuant to Section 8.1(a) during the Grant Year
(rounded up to the nearest whole share) will vest on the Restricted Stock
Vesting Date and the remaining shares of Restricted Stock granted pursuant to
Section 8.1(a) during the Grant Year will be forfeited as of the Restricted
Stock Vesting Date.
(2) Except as set forth in Section 8.2(b)(3) below, a
Director's right to ownership in shares of Restricted Stock granted to a
committee chair pursuant to Section 8.1(b) will vest on the Restricted Stock
Vesting Date.
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(3) Notwithstanding anything to the contrary herein, (i) in
the event that a director is removed from office for Cause prior to the
Restricted Stock Vesting Date, all of said Director's shares of Restricted Stock
that have not yet vested will be forfeited immediately as of the time the
grantee is so removed from office and the Company will have the right to
complete the blank stock power described below with respect to such shares, and
(ii) upon the occurrence of a Change in Control, all shares of Restricted Stock
that have not yet vested will immediately vest.
(c) Issuance of Shares. On or about the Grant Date, a
certificate representing the shares of Restricted Stock will be registered in
the Director's name and deposited by the Director, together with a stock power
endorsed in blank, with the Company. Subject to the transfer restrictions set
forth in Section 8.2(d) and to the last sentence of this Section 8.2(c), the
Director as owner of shares of Restricted Stock will have the rights of the
holder of such Restricted Stock during the Restriction Period. On the Restricted
Stock Vesting Date following expiration of the Restriction Period, vested shares
of Restricted Stock will be redelivered by the Company to the Director, and
non-vested shares of Restricted Stock will be forfeited and the Company will
have the right to complete the blank stock power with respect to such non-vested
shares; provided, however, with respect to shares of Restricted Stock granted in
1996 prior to shareholder approval of an amendment to the Plan on April 24,
1996, no certificates were issued, such shares were not issued and outstanding,
and the Directors did not have any of the rights of an owner of the shares until
the date such shareholder approval occurred.
(d) Transfer Restrictions; Mandatory Holding of Stock. Except
as otherwise provided in Section 8.5 or Section 10, shares of Restricted Stock
are not transferable during the Restriction Period. Once the Restriction Period
lapses and shares vest, except as otherwise provided in Section 8.5 or Section
10, shares acquired as a Restricted Stock Award must be held by the grantee for
a minimum of: (1) three years from the Grant Date; (2) two years from the date
the grantee ceases to be a director of the Company; or (3) until the occurrence
of a Change of Control, whichever first occurs (the "Restricted Shares Holding
Period").
(e) Restricted Stock Agreement. All Restricted Stock Awards
will be confirmed by an agreement, or an amendment thereto, which will be
executed on behalf of the Company by the Chief Executive Officer, the President
or any Vice President and by the grantee.
(f) General Restriction.
(1) The obligation of the Company to issue shares of
Restricted Stock under the Plan will be subject to the condition that if, at any
time, the Committee determines that (a) the listing, registration or
qualification of shares of Restricted Stock upon any securities exchange or
under any state or federal law or (b) the consent or approval of any government
or regulatory body is necessary or desirable, then such Restricted Stock will
not be issued unless such listing, registration, qualification, consent or
approval has been effected or obtained free from any conditions not acceptable
to the Company.
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(2) Shares of Stock for use under the provisions of this
Section 8 will not be issued until they have been duly listed, upon official
notice of issuance, upon the New York Stock Exchange and such other exchanges,
if any, as the Board may determine, and a registration statement under the
Securities Act of 1933 with respect to such shares has become, and is,
effective.
Subject to the foregoing provisions of this Section 8.2 and the other
provisions of the Plan, any shares of Restricted Stock granted under the Plan
will be subject to such restrictions and other terms and conditions, if any, as
may be determined by the Committee, in its discretion, and as are set forth in
the agreement referred to in Section 8.2(e), or an amendment thereto; provided,
however, that in no event will the Committee or the Board have any power or
authority which would cause transactions pursuant to the Plan to cease to be
exempt from the provisions of Section 16(b) of the Exchange Act under Rule
16b-3, as such rule may be amended, or any successor rule.
8.3 Annual Statement. A statement will be sent to each Director as to
the status of his Restricted Stock at least once each calendar year.
8.4 Designation of a Beneficiary. A Director may designate a
beneficiary to hold shares of Restricted Stock in accordance with the Plan in
the event of the Director's death in a form approved by the Company.
8.5 Holding Period Applicable to a Deceased Grantee's Estate. As long
as at least six months have elapsed since the Grant Date, a beneficiary properly
designated by the Director pursuant to Section 8.4 in the event of death, if
any, or a person holding shares of Restricted Stock under a deceased grantee's
will or under the applicable laws of descent or distribution, will not be
subject to the Restricted Shares Holding Period with respect to such shares of
Restricted Stock.
SECTION 9. CHANGE IN CONTROL
9.1 Settlement of Compensation. In the event of a Change in Control of
the Company as defined herein, (a) to the extent not already vested, all Stock
Option Awards, Restricted Stock Awards and other benefits hereunder will be
vested immediately; and (b) the value of all unpaid benefits and deferred
amounts will be paid in cash to PNC Bank, National Association, the trustee
pursuant to a trust agreement dated as of June 22, 1995, as amended from time to
time, or any successor trustee, or otherwise on such terms as the Committee may
prescribe or permit. For purposes of this Section 9.1, the value of deferred
amounts will be equal to the sum of (i) the value of all Common Stock Equivalent
Awards then held in such Director's Deferred Stock Account (the value of which
will be based upon the highest price of the Stock as reported by the composite
tape of the New York Stock Exchange during the 30 days immediately preceding the
Change in Control), (ii) the value of the Director's Cash Account, and (iii) the
greater value of (x) the cash amount equal to the face value of the Debentures
in the Director's Deferred Debenture Account plus cash equal to accrued interest
on the Debentures or (y) the number of shares of Stock into which the Debentures
in the Director's Deferred Debenture Account are convertible (the value of which
will be based upon the highest price of the Stock as
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reported by the composite tape of the New York Stock Exchange during the 30 days
immediately preceding the Change in Control), plus cash equal to accrued
interest on the Debentures.
9.2 Definition of Change in Control. A Change in Control will mean the
occurrence of one or more of the following events:
(a) there shall be consummated (i) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Stock immediately prior to the
merger have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (ii) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; or
(b) the shareholders of the Company shall approve of any plan
or proposal for the liquidation or dissolution of the Company; or
(c) (i) any person (as such term is defined in Section 13(d)
of the Exchange Act), corporation or other entity shall purchase any Stock of
the Company (or securities convertible into the Company's Stock) for cash,
securities or any other consideration pursuant to a tender offer or exchange
offer, unless, prior to the making of such purchase of Stock (or securities
convertible into Stock), the Board shall determine that the making of such
purchase shall not constitute a Change in Control, or (ii) any person (as such
term is defined in Section 13(d) of the Exchange Act), corporation or other
entity (other than the Company or any benefit plan sponsored by the Company or
any of its subsidiaries) shall become the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty percent or more of the combined
voting power of the Company's then outstanding securities ordinarily (and apart
from any rights accruing under special circumstances) having the right to vote
in the election of directors (calculated as provided in Rule 13d-3(d) in the
case of rights to acquire any such securities), unless, prior to such person so
becoming such beneficial owner, the Board shall determine that such person so
becoming such beneficial owner shall not constitute a Change in Control; or
(d) at any time during any period of two consecutive years,
individuals who at the beginning of such period constituted the entire Board
shall cease for any reason to constitute at least a majority thereof, unless the
election or nomination for election of each new director during such two-year
period is approved by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of such two-year period.
SECTION 10. ASSIGNABILITY
10.1 The right to receive payments or distributions hereunder
(including any "derivative security" issued pursuant to the Plan, as such term
is defined by the rules promulgated under Section 16 of the Exchange Act), any
shares of Restricted Stock granted hereunder during the Restriction Period, and
any Stock Options granted hereunder will not be
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transferable or assignable by a Director other than by will, by the laws of
descent and distribution, to a beneficiary properly designated by the Director
pursuant to the appropriate section of the Plan in the event of death, if any,
or pursuant to a domestic relations order as defined by Section 414(p)(1)(B) of
the Internal Revenue Code or the rules thereunder that satisfies Section
414(p)(1)(A) of the Internal Revenue Code or the rules thereunder.
10.2 In addition, Stock acquired on exercise of a Stock Option will not
be transferable prior to the end of the applicable Option Shares Holding Period,
if any, set forth in Sections 7.2(d) and 7.5, and Stock acquired as Restricted
Stock will not be transferable prior to the end of the applicable Restricted
Shares Holding Period, if any, set forth in Sections 8.2(d) and 8.5, in either
case other than by will, by transfer to a beneficiary properly designated by the
Director pursuant to the appropriate section of the Plan in the event of death,
if any, by the applicable laws of descent and distribution, or pursuant to a
domestic relations order as defined by Section 414(p)(1)(B) of the Internal
Revenue Code or the rules thereunder that satisfies Section 414(p)(1)(A) of the
Internal Revenue Code or the rules thereunder.
SECTION 11. RETENTION; WITHHOLDING OF TAX
11.1 Retention. Nothing contained in the Plan or in any Stock Option
Award or Restricted Stock Award granted under the Plan will interfere with or
limit in any way the right of the Company to remove any Director from the Board
pursuant to the Restated Articles of Incorporation and the By-laws of the
Company, nor confer upon any Director any right to continue in the service of
the Company.
11.2 Withholding of Tax. To the extent required by applicable law and
regulation, each Director must arrange with the Company for the payment of any
federal, state or local income or other tax applicable to any payment or any
delivery of Stock hereunder before the Company will be required to make such
payment or issue (or, in the case of Restricted Stock, deliver) such shares
under the Plan.
SECTION 12. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time to time may amend or
modify the Plan, provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the shareholders
if shareholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements.
SECTION 13. REQUIREMENTS OF LAW
13.1 Federal Securities Law Requirements. Implementation and
interpretations of, transactions pursuant to, the Plan will be subject to all
conditions required under Rule 16b-3, as such rule may be amended, or any
successor rule, to qualify such transactions for any exemption from the
provisions of Section 16(b) of the Exchange Act available under that rule, or
any successor rule.
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13.2 Governing Law. The Plan and all agreements hereunder will be
construed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
SECTION 14. OTHER COMPENSATION
This Plan will not preclude the adoption by appropriate means of any
other compensation or deferral plan for directors.
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Exhibit 10(g)
1991 LONG-TERM INCENTIVE PLAN
(as amended as of January 28, 1998)
ARTICLE I
GENERAL
1.1 Purpose
The purposes of the 1991 Long-Term Incentive Plan ("Plan") for eligible
employees of CBS Corporation (formerly known as Westinghouse Electric
Corporation) ("Corporation") and its Subsidiaries (the Corporation and its
Subsidiaries severally and collectively referred to in the Plan as the
"Company") are to foster and promote the long-term financial success of the
Company and materially increase stockholder value by (i) attracting and
retaining employees of outstanding ability, (ii) strengthening the Company's
capability to develop, maintain and direct a high performance team, (iii)
motivating employees, by means of performance-related incentives, to achieve
long-range performance goals, (iv) providing incentive compensation
opportunities competitive with those of other major companies and (v) enabling
employees to participate in the long-term growth and financial success of the
Company.
1.2 Administration
(a) The Plan will be administered by a committee of the Board of
Directors of the Corporation ("Committee") which will consist of two or more
members. The members will be appointed by the Board of Directors, and any
vacancy on the Committee will be filled by the Board of Directors or in a manner
authorized by the Board.
The Committee will keep minutes of its meetings and of any action taken
by it without a meeting. A majority of the Committee will constitute a quorum,
and the acts of a majority of the members present at any meeting at which a
quorum is present will be the acts of the Committee. Any action that may be
taken at a meeting of the Committee may be taken without a meeting if a consent
or consents in writing setting forth the action so taken is signed by all of the
members of the Committee. The Committee will make appropriate reports to the
Board of Directors concerning the operations of the Plan.
(b) Subject to the limitations of the Plan, the Committee will have the
sole and complete authority: (i) to select in accordance with Section 1.3
persons who will participate in the Plan ("Participant" or "Participants")
(including the right to delegate authority to select Participants); (ii) to make
Awards and payments in such forms and amounts as it may determine, including the
right to delegate authority to make Awards within limits approved by the
Committee; (iii) to impose such limitations, restrictions, terms and conditions
upon such Awards as the Committee or its authorized delegates deems appropriate;
(iv) to interpret the Plan and the
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<PAGE> 2
terms of any document relating to the Plan and to adopt, amend and rescind
administrative guidelines and other rules and regulations relating to the Plan;
(v) to amend or cancel an existing Award in whole or in part (including the
right to delegate authority to amend or cancel an existing Award in whole or in
part within limits approved from time to time by the Committee), except that the
Committee and its authorized delegates may not, unless otherwise provided in the
Plan, or unless the Participant affected thereby consents, take any action under
this clause that would adversely affect the rights of such Participant with
respect to the Award, and except that the Committee and its authorized delegates
may not take any action to amend any outstanding Option under the Plan in order
to decrease the Option Price under such Option or to cancel and replace any such
Option with an Option with a lower Option Price; and (vi) to make all other
determinations and to take all other actions necessary or advisable for the
interpretation, implementation and administration of the Plan. The Committee's
determinations on matters within its authority will be conclusive and binding
upon the Company and all other persons.
(c) The Committee will act with respect to the Plan on behalf of the
Corporation and on behalf of any Subsidiary issuing stock under the Plan,
subject to appropriate action by the board of directors of any such Subsidiary.
All expenses associated with the Plan will be borne by the Corporation subject
to such allocation to its Subsidiaries and operating units as it deems
appropriate.
1.3 Selection for Participation
Participants selected by the Committee or its authorized delegates must
be Eligible Persons as defined below. "Eligible Persons" are persons who are
employees of the Company ("Employee" or "Employees") or, in the event of death
while an Employee, his or her estate. Eligible Persons will also include
independent contractors of the Company as to an Award if the person is an
independent contractor at the time the Award is granted. In making this
selection and in determining the form and amount of Awards, the Committee may
give consideration to the functions and responsibilities of the Eligible Person,
his or her past, present and potential contributions to the Company and other
factors deemed relevant by the Committee.
1.4 Types of Awards under Plan
Awards ("Awards") under the Plan may be in the form of any one or more
of the following: (i) Non-statutory Stock Options ("NSOs" or "Options"), as
described in Article II, (ii) Stock Appreciation Rights ("SARs") and Limited
Stock Appreciation Rights ("Limited Rights"), as described in Article III, (iii)
Performance Awards ("Performance Awards") as described in Article IV, and (iv)
Restricted Stock ("Restricted Stock") as described in Article V.
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1.5 Shares Subject to the Plan
Shares of stock issued under the Plan may be in whole or in part
authorized and unissued or treasury shares of the Corporation's common stock,
par value $1.00 ("Common Stock"), or "Formula Value Stock" as defined in Section
8.12(d) (Common Stock and Formula Value Stock severally and collectively
referred to in the Plan as "Stock").
The maximum number of shares of Stock which may be issued for all
purposes under the Plan will be 30,500,000, plus such additional shares as the
Board of Directors or the Committee may, from time to time, authorize by a
resolution or resolutions duly adopted by said Board of Directors or Committee.
Except as otherwise provided below, any shares of Stock subject to an
Option or other Award which is canceled or terminates without having been
exercised will again be available for Awards under the Plan. Shares subject to
an option canceled upon the exercise of an SAR will not again be available for
Awards under the Plan except to the extent the SAR is settled in cash. To the
extent that an Award is settled in cash, shares of Stock subject to that Award
will again be available for Awards. Shares of Stock tendered by a Participant or
withheld by the Company to pay the exercise price of an Option or to satisfy the
tax withholding obligations of the exercise or vesting of an Award will be
available again for Awards under the Plan. Shares of Restricted Stock forfeited
to the Company in accordance with the Plan and the terms of the particular Award
will be available again for Awards under the Plan.
No fractional shares will be issued, and the Committee will determine
the manner in which fractional share value will be treated.
ARTICLE II
STOCK OPTIONS
2.1 Award of Stock Options
The Committee may, from time to time, subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe, award
to any Participant Options to purchase Stock.
The Committee may provide with respect to any option to purchase Stock
that, if the Participant, while an Eligible Person, exercises the option in
whole or in part using already-owned Stock, the Participant will, subject to
this Section 2.1 and such other terms and conditions as may be imposed by the
Committee, receive an additional option ("Reload Option"). The Reload Option
will be to purchase, at Fair Market Value as of the date the original option was
exercised, a number of shares of Stock equal to the number of whole shares used
by the Participant to exercise the original option. The Reload Option will be
exercisable only between the date of its grant and the date of expiration of the
original option.
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A Reload Option will be subject to such additional terms and conditions
as the Committee may approve, which terms may provide that the Committee may
cancel the Participant's right to receive the Reload Option and that the Reload
Option will be granted only if the Committee has not canceled such right prior
to the exercise of the original option. Such terms may also provide that, upon
the exercise by a Participant of a Reload Option while an Eligible Person, an
additional Reload Option will be granted with respect to the number of whole
shares used to exercise the first Reload Option.
2.2 Stock Option Agreements
The award of an option will be evidenced by a written agreement ("Stock
Option Agreement") in such form and containing such terms and conditions as the
Committee may from time to time determine.
2.3 Option Price
The purchase price of Stock under each Option ("Option Price") will not
be less than the Fair Market Value of such Stock on the date the Option is
awarded.
2.4 Exercise and Term of Options
(a) Except as otherwise provided in the Plan, Options will become
exercisable at such time or times as the Committee may specify. The Committee
may at any time and from time to time accelerate the time at which all or any
part of the Option may be exercised.
(b) The Committee will establish procedures governing the exercise of
options and will require that notice of exercise be given. Stock purchased on
exercise of an option must be paid for as follows: (1) in cash or by check
(acceptable to the Company in accordance with guidelines established for this
purpose), bank draft or money order payable to the order of the Company or (2)
if so provided by the Committee (i) through the delivery of shares of Stock
which are then outstanding and which have a Fair Market Value on the date of
exercise equal to the exercise price, (ii) by delivery of an unconditional and
irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price, or (iii) by any combination of the
permissible forms of payment.
2.5 Termination of Eligibility
In the event the Participant is no longer an Eligible Person and ceased
to be such as a result of termination of service to the Company with the consent
of the Committee or as a result
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of his or her death, retirement or disability, each of his or her
outstanding Options will be exercisable by the Participant (or his or her legal
representative or designated beneficiary), to the extent that such Option was
then exercisable, at any time prior to an expiration date established by the
Committee at the time of award, but in no event after such expiration date. In
the event an Award is made to the estate of a person who died while an Employee,
each outstanding Option held by such estate will be exercisable by the estate
(or the distributee of said estate) at any time prior to an expiration date
established by the Committee at the time of award. If the Participant ceases to
be an Eligible Person for any other reason, all of the Participant's then
outstanding Options will terminate immediately.
ARTICLE III
STOCK APPRECIATION RIGHTS AND LIMITED RIGHTS
3.1 Award of Stock Appreciation Right
(a) An SAR is an Award entitling the recipient on exercise to receive
an amount, in cash or Stock or a combination thereof (such form to be determined
by the Committee), determined in whole or in part by reference to appreciation
in Stock value.
(b) In general, an SAR entitles the Participant to receive, with
respect to each share of Stock as to which the SAR is exercised, the excess of
the share's Fair Market Value on the date of exercise over its Fair Market Value
on the date the SAR was granted.
(c) SARs may be granted in tandem with options granted under the Plan
("Tandem SARS") or independently of Options ("Independent SARs"). An SAR granted
in tandem with an NSO may be granted either at or after the time the option is
granted.
(d) SARs awarded under the Plan will be evidenced by either a Stock
Option Agreement (when SARs are granted in tandem with an Option) or a separate
agreement between the Company and the Participant.
(e) Except as otherwise provided herein, a Tandem SAR will be
exercisable only at the same time and to the same extent and subject to the same
conditions as the option related thereto is exercisable, and the Committee may
prescribe additional conditions and limitations on the exercise of the SAR. The
exercise of a Tandem SAR will cancel the related Option. Tandem SARs may be
exercised only when the Fair Market Value of Stock to which it relates exceeds
the Option Price.
(f) Except as otherwise provided herein, an Independent SAR will become
exercisable at such time or times, and on such conditions, as the Committee may
specify, and the Committee may at any time accelerate the time at which all or
any part of the SAR may be exercised.
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The Committee may provide, under such terms and conditions as it may
deem appropriate, for the automatic grant of additional SARs upon the full or
partial exercise of an Independent SAR.
Any exercise of an Independent SAR must be in writing, signed by the
proper person and delivered or mailed to the Company, accompanied by any other
documents required by the Committee.
(g) Except as otherwise provided herein, all SARs will automatically be
exercised on the last trading day prior to the expiration date established by
the Committee at the time of the award for the SAR, or, in the case of a Tandem
SAR, for the related Option, so long as exercise on such date will result in a
payment to the Participant.
(h) Unless otherwise provided by the Committee, no SAR will become
exercisable or will be automatically exercised for six months following the date
on which it was granted.
(i) At the time of award of an SAR, the Committee may limit the amount
of the payment that may be made to a Participant upon the exercise of the SAR.
The Committee may further determine that, if the amount to be received by a
Participant in any year is limited pursuant to this provision, payment of all or
a portion of the amount that is unpaid as a result of the limitation may be made
to the Participant at a subsequent time. No such limitation will require a
Participant to return to the Company any amount theretofore received by him or
her upon the exercise of an SAR.
(j) Payment of the amount to which a Participant is entitled upon the
exercise of an SAR will be made in cash, Stock, or partly in cash and partly in
Stock, as the Committee may determine. To the extent that payment is made in
Stock, the shares will be valued at their Fair Market Value on the date of
exercise of the SAR.
(k) Each SAR will expire on a date determined by the Committee or
earlier upon the occurrence of the first of the following: (i) in the case of a
Tandem SAR, termination of the related option, (ii) expiration of a period of
six months after the Participant's ceasing to be an Eligible Person as a result
of termination of service to the Company with the consent of the Committee or as
a result of his or her death, retirement or disability, or (iii) the Participant
ceasing to be an Eligible Person for any other reason.
3.2 Limited Rights
(a) The Committee may award Limited Rights pursuant to the provisions
of this Section 3.2 to the holder of an Option to purchase Common Stock granted
under the Plan (a "Related Option") with respect to all or a portion of the
shares subject to the Related Option. A Limited Right may be exercised only
during the period beginning on the first day following a Change in Control, as
defined in Section 7.2 of the Plan, and ending on the thirtieth day
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following such date. Each Limited Right will be exercisable only to the same
extent that the Related Option is exercisable, and in no event after the
termination of the Related Option. In no event may a Limited Right be exercised
during the first six months after the date of grant of the Limited Right.
Limited Rights will be exercisable only when the Fair Market Value (determined
as of the date of exercise of the Limited Rights) of each share of Common Stock
with respect to which the Limited Rights are to be exercised exceeds the Option
Price per share of Common Stock subject to the Related option.
(b) Upon the exercise of Limited Rights, the Related Option will be
considered to have been exercised to the extent of the number of shares of
Common Stock with respect to which such Limited Rights are exercised. Upon the
exercise or termination of the Related Option, the Limited Rights with respect
to such Related Option will be considered to have been exercised or terminated
to the extent of the number of shares of Common Stock with respect to which the
Related Option was so exercised or terminated.
(c) The effective date of the grant of a Limited Right will be the date
on which the Committee approves the grant of such Limited Right. Each grantee of
a Limited Right will be notified promptly of the grant of the Limited Right in
such manner as the Committee prescribes.
(d) Upon the exercise of Limited Rights, the holder thereof will
receive in cash an amount equal to the product computed by multiplying (i) the
excess of (a) the higher of (x) the Minimum Price Per Share (as hereinafter
defined), or (y) the highest reported closing sales price of a share of Common
Stock on the New York Stock Exchange at any time during the period beginning on
the sixtieth day prior to the date on which such Limited Rights are exercised
and ending on the date on which such Limited Rights are exercised, over (b) the
Option Price per share of Common Stock subject to the Related Option, by (ii)
the number of shares of Common Stock with respect to which such Limited Rights
are being exercised.
(e) For purposes of this Section 3.2, the term "Minimum Price Per
Share" will mean the highest gross price (before brokerage commissions and
soliciting dealers' fees) paid or to be paid for a share of Common Stock
(whether by way of exchange, conversion, distribution upon liquidation or
otherwise) in any Change in Control which is in effect at any time during the
period beginning on the sixtieth day prior to the date on which such Limited
Rights are exercised and ending on the date on which such Limited Rights are
exercised. For purposes of this definition, if the consideration paid or to be
paid in any such Change in Control will consist, in whole or in part, of
consideration other than cash, the Board will take such action, as in its
judgment it deems appropriate, to establish the cash value of such
consideration.
ARTICLE IV
PERFORMANCE AWARDS
4.1 Nature of Performance Awards
A Performance Award provides for the recipient to receive an amount in
cash or Stock or
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a combination thereof (such form to be determined by the Committee) following
the attainment of Performance Goals. Performance Goals may be related to
personal performance, corporate performance (including corporate stock
performance), departmental performance or any other category of performance
deemed by the Committee to be important to the success of the Company. The
Committee will determine the Performance Goals, the period or periods during
which performance is to be measured and all other terms and conditions
applicable to the Award. Regardless of the degree to which Performance Goals are
attained, a Performance Award will be paid only when, if and to the extent that
the Committee determines to make such payment.
4.2 Other Awards Subject to Performance Condition
The Committee may, at the time any Award described in this Plan is
granted, impose the condition (in addition to any conditions specified or
authorized in the Plan) that Performance Goals be met prior to the Participant's
realization of any payment or benefit under the Award.
ARTICLE V
RESTRICTED STOCK
5.1 Award of Restricted Stock
The Committee may award to any Participant shares of Stock subject to
this Article V and such other terms and conditions as the Committee may
prescribe, such Stock referred to herein as "Restricted Stock."
Each certificate for Restricted Stock will be registered in the name of
the Participant and deposited by him or her, together with a stock power
endorsed in blank, with the Corporation.
5.2 Restricted Stock Agreement
Shares of Restricted Stock awarded under the Plan will be evidenced by
a written agreement in such form and containing such terms and conditions as the
Committee may determine.
5.3 Restriction Period
At the time of award, there will be established for each Participant a
"Restriction Period" of such length as the Committee determines. The Restriction
Period may be waived by the Committee. Shares of Restricted Stock may not be
sold, assigned, transferred, pledged or otherwise encumbered, except as
hereinafter provided, during the Restriction Period. Subject to such restriction
on transfer, the Participant as owner of such shares of Restricted Stock will
have
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the rights of the holder of such Restricted Stock, except that the Committee may
provide at the time of the Award that any dividends or other distributions paid
on such Stock during the Restriction Period will be accumulated and held by the
Company and will be subject to forfeiture under Section 5.4.
Upon the expiration or waiver by the Committee of the Restriction
Period, the Corporation will redeliver to the Participant (or his or her legal
representative or designated beneficiary) the shares deposited pursuant to
Section 5.1.
5.4 Termination of Eligibility
In the event the Participant is no longer an Eligible Person and ceased
to be such as a result of termination of service to the Company with the consent
of the Committee, or as a result of his or her death, retirement or disability,
the restrictions imposed under this Article V will lapse with respect to such
number of shares theretofore awarded to him or her as may be determined by the
Committee. All other shares of Restricted Stock theretofore awarded to him or
her which are still subject to restrictions, along with any dividends or other
distributions thereon that have been accumulated and held by the Company, will
be forfeited, and the Corporation will have the right to complete the blank
stock power.
In the event the Participant ceases to be an Eligible Person for any
other reason, all shares of Restricted Stock theretofore awarded to him or her
which are still subject to restrictions, along with any dividend or other
distributions thereon that have been accumulated and held by the Company, will
be forfeited, and the Corporation will have the right to complete the blank
stock power.
ARTICLE VI
DEFERRAL OF PAYMENTS
6.1 Deferral of Amounts
If the Committee makes a determination to designate Awards or, from
time to time, groups or types of Awards, eligible for deferral hereunder, a
Participant may, subject to such terms and conditions and within such limits as
the Committee may from time to time establish, elect to defer the receipt of
amounts due to him or her under the Plan. Amounts so deferred are referred to
herein as "Deferred Amounts." The Committee may also permit amounts now or
hereafter deferred or available for deferral under any present or future
incentive compensation program or deferral arrangement of the Company to be
deemed Deferred Amounts and to become subject to the provisions of this Article.
Awards which are so deferred will be deemed to have been awarded in cash and the
cash deferred as Deferred Amounts.
The period between the date on which the Participant's Deferred Amount
would have
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been payable absent deferral and the final payment of such Deferred Amount will
be referred to herein as the "Deferral Period."
6.2 Investment During Deferral Period
Unless otherwise determined by the Committee, and subject to such
changes as the Committee may determine, the Deferred Amount will be treated
during the Deferral Period as if it were invested in putative convertible
debentures with a fixed interest rate, compounded annually, for the entire
Deferral Period. For purposes of determining the value of the Deferred Amount at
the time of payment, each putative debenture will be deemed to be convertible
into Common Stock at a conversion rate computed by reference to the Fair Market
Value of the Common Stock on the last trading day prior to the regular January
meeting of the Board of Directors on or preceding the date of deferral. Payment
of Deferred Amounts may be made in cash, Stock, or partly in cash and partly in
Stock, in the Committee's sole discretion.
6.3 Participant Reports
Annually, each Participant who has a Deferred Amount will receive a
report setting forth all of his or her then Deferred Amounts and the yield
thereon to date.
6.4 Payment of Deferred Amounts
Payment of Deferred Amounts will be made at such time or times, and may
be in cash, Stock, or partly in cash and partly in Stock, as the Committee from
time to time determines. The limitations respecting the issuance of Stock or
other limitations on aggregate awards payable contained in the Annual
Performance Plan of the Corporation, Article XVI of the by-laws of the
Corporation, the 1974 Stock Option Plan, the 1979 Stock Option and Long-Term
Incentive Plan, the 1984 Long-Term Incentive Plan, the Plan and in any plan
hereafter adopted by the stockholders will be limitations applicable to the
payment of any Deferred Amounts under this Article VI.
6.5 Alternative Valuation Election
Unless otherwise determined by the Committee, a Participant may, at a
time established by the Committee, but prior to such Participant's ceasing to be
an Eligible Person, elect to establish the ultimate payable value of each
Deferred Amount by reference to the Fair Market Value of the Common Stock as of
the day on which an alternate valuation election is received by the corporation
in accordance with procedures established by the Committee.
Notwithstanding the establishment of the ultimate payable value
resulting from the
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alternate valuation election by the Participant, the yield will continue as
though no such election had been made and will continue to be subject to the
limitations set forth in Section 6.2, and Deferred Amounts and the yield thereon
will be paid as otherwise provided in this Article.
ARTICLE VII
CHANGES IN CONTROL
7.1 Effect of Change in Control
Notwithstanding any other provision of the Plan, upon the occurrence of
a Change in Control, as defined in Section 7.2: (i) all Options and, subject to
the exercise provisions of Section 3.2(a) of the Plan, Limited Rights, but not
SARS, outstanding and unexercised on the date of the Change in Control will
become immediately exercisable; (ii) all Performance Awards will be deemed to
have been earned on such basis as the Committee may prescribe and then paid on
such basis, at such time and in such form as the Committee may prescribe, or
deferred in accordance with the elections of Participants; (iii) all Restricted
Stock will be deemed to be earned and the Restriction Period will be deemed
expired on such terms and conditions as the Committee may determine; and (iv)
all amounts deferred under this Plan will be paid to a trustee or otherwise on
such terms as the Committee may prescribe or permit.
7.2 Definition of Change in Control
The term "Change in Control" means the occurrence of one or more of the
following events: (a) there shall be consummated (i) any consolidation or merger
of the Corporation in which the Corporation is not the continuing or surviving
corporation or pursuant to which shares of the Common Stock would be converted
into cash, securities or other property, other than a merger of the Corporation
in which the holders of Common Stock immediately prior to the merger have the
same proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Corporation, or (b) the stockholders of
the Corporation shall approve any plan or proposal for the liquidation or
dissolution of the Corporation, or (c) (i) any person (as such term is defined
in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), corporation or other entity shall purchase any Common Stock of
the Corporation (or securities convertible into Common Stock) for cash,
securities or any other consideration pursuant to a tender offer or exchange
offer, unless, prior to the making of such purchase of Common Stock (or
securities convertible into Common Stock), the Board shall determine that the
making of such purchase shall not constitute a Change in Control, or (ii) any
person (as such term is defined in Section 13(d) of the Exchange Act),
corporation or other entity (other than the Corporation or any benefit plan
sponsored by the Corporation or any of its subsidiaries) shall be the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing
twenty percent or more of the combined voting power of the
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Corporation's then outstanding securities ordinarily (and apart from any rights
accruing under special circumstances) having the right to vote in the election
of directors (calculated as provided in Rule 13d-3(d) in the case of rights to
acquire any such securities), unless, prior to such person so becoming such
beneficial owner, the Board shall determine that such person so becoming such
beneficial owner shall not constitute a Change in Control, or (d) at any time
during any period of two consecutive years, individuals who at the beginning of
such period constituted the entire Board shall cease for any reason to
constitute at least a majority thereof, unless the election or nomination for
election of each new director during such two-year period 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 two-year period.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Transferability
No Option, Limited Right, SAR, Performance Award or share of Restricted
Stock or Deferred Amount under the Plan will be transferable other than by will,
by the applicable laws of descent and distribution, or by transfer to a properly
designated beneficiary in the event of death. All Awards and Deferred Amounts
will be exercisable or received during the Participant's lifetime only by such
Participant or his or her legal representative. Any transfer contrary to this
Section 8.1 will nullify the option, Limited Right, SAR, Performance Award or
share of Restricted Stock, and any attempted transfer of a Deferred Amount
contrary to this Section 8.1 will be void and of no effect.
8.2 Beneficiaries
The Committee may establish or authorize the establishment of
procedures not inconsistent with Section 8.1 under which a Participant may
designate a beneficiary or beneficiaries to hold, exercise and/or receive
amounts due under an Award or with respect to Deferred Amounts in the event of
the Participant's death.
8.3 Adjustments Upon Changes in Stock
If there is any change in the Stock of the Company, through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
split up, dividend in kind or other change in the corporate structure or
distribution to the stockholders, appropriate adjustments may be made by the
Board of Directors of the Company (or if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation) in the aggregate number and kind of shares subject to the Plan, and
the number and kind of shares and the price per share subject to outstanding
Options or which may be issued under outstanding
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Performance Awards or Awards of Restricted Stock. Appropriate adjustments may
also be made by the Board of Directors or the Committee in the terms of any
Awards under the Plan to reflect such changes and to modify any other terms of
outstanding Awards on an equitable basis, including modifications of performance
targets and changes in the length of Performance Periods.
8.4 Conditions of Awards
(a) The rights of a Participant with respect to any Award received
under this Plan will be subject to the conditions that, until the Participant
has fully received all payments, transfers and other benefits under the Award,
he or she will (i) not engage, either directly or indirectly, in any manner or
capacity as advisor, principal, agent, partner, officer, director, employee,
member of any association or otherwise, in any business or activity which is at
the time competitive with any business or activity conducted by the Company and
(ii) be available, unless he or she has died, at reasonable times for
consultations at the request of the Company's management with respect to phases
of the business with which he or she is or was actively connected during his or
her employment, but such consultations will not (except in the case of a
Participant whose active service was outside the United States) be required to
be performed at any place or places outside of the United States of America or
during usual vacation periods or periods of illness or other incapacity. In the
event that either of the above conditions is not fulfilled, the Participant will
forfeit all rights to any unexercised option or SAR, or any Performance Award or
Stock held which has not yet been determined by the Committee to be payable or
unrestricted (and any unpaid amounts equivalent to dividends or other
distributions or amounts equivalent to interest relating thereto) as of the date
of the breach of condition. Any determination by the Board of Directors of the
Corporation, which will act upon the recommendation of the Chief Executive
Officer, that the Participant is, or has, engaged in a competitive business or
activity as aforesaid or has not been available for consultations as aforesaid
will be conclusive.
(b) This Section 8.4 will not apply to Limited Rights.
8.5 Use of Proceeds
All cash proceeds from the exercise of options will constitute general
funds of the Company.
8.6 Tax Withholding
The Company will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding requirements").
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In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may permit
the Participant or such other person to elect at such time and in such manner as
the Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement. In the alternative, the Committee may, at
the time of grant of any such Award, require that the Company withhold from any
shares to be delivered Stock with a value calculated to satisfy applicable tax
withholding requirements.
8.7 Non-Uniform Determinations
The Committee's determinations under the Plan, including without
limitation, (i) the determination of the Participants to receive Awards, (ii)
the form, amount, timing and payment of such Awards, (iii) the terms and
provisions of such Awards and (iv) the agreements evidencing the same, need not
be uniform and may be made by it selectively among Participants who receive, or
who are eligible to receive, Awards under the Plan, whether or not such
Participants are similarly situated.
8.8 Leaves of Absence; Transfers
The Committee will be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect to any leave of
absence from the Company granted to a Participant. Without limiting the
generality of the foregoing, the Committee will be entitled to determine (i)
whether or not any such leave of absence will be treated as if the Participant
ceased to be an Employee and (ii) the impact, if any, of any such leave of
absence on Awards under the Plan. In the event a Participant transfers within
the Company, such Participant will not be deemed to have ceased to be an
Employee for purposes of the Plan.
8.9 General Restriction
(a) Each Award under the Plan will be subject to the condition that, if
at any time the Committee determines that (i) the listing, registration or
qualification of shares of Stock upon any securities exchange or under any state
or federal law, (ii) the consent or approval of any government or regulatory
body or (iii) an agreement by the Participant with respect thereto, is necessary
or desirable, then such Award will not be consummated in whole or in part unless
such listing, registration, qualification, consent, approval or agreement has
been effected or obtained free from any conditions not acceptable to the
Committee.
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(b) Shares of Common Stock for use under the provisions of this Plan
will not be issued until they have been duly listed, upon official notice of
issuance, upon the New York Stock Exchange and such other exchanges, if any, as
the Board of Directors of the Corporation determines, and a registration
statement under the Securities Act of 1933 with respect to such shares has
become, and is, effective.
8.10 Effective Date
The Plan will be deemed effective as of December 4, 1991.
No Award may be granted under the Plan after the Plan is terminated
pursuant to Section 8.11, but Awards previously made may extend beyond that date
and Reload Options and additional Reload Options provided for with respect to
original options outstanding prior to that date may continue unless the
Committee otherwise provides and subject to such additional terms and conditions
as the Committee may provide, and the provisions of Article VI of the Plan will
survive and remain effective as to all present and future Deferred Amounts until
such later date as the Committee or the Board of Directors may determine.
The adoption of the Plan will not preclude the adoption by appropriate
means of any other stock option or other incentive plan for employees and/or
independent contractors.
8.11 Amendment, Suspension and Termination of Plan
The Board of Directors may at any time or times amend the Plan for any
purpose which may at the time be permitted by law, or may at any time suspend or
terminate the Plan as to any further grants of Awards.
8.12 Certain Definitions
(a) Unless otherwise determined by the Committee, the terms
"retirement" and "disability" as used under the Plan will be construed by
reference to the provisions of the Westinghouse Pension Plan or other similar
plan or program of the Company applicable to a Participant.
(b) The term "Fair Market Value" as it relates to Common Stock means
the mean of the high and low prices of the Common Stock as reported by the
Composite Tape of the New York Stock Exchange (or such successor reporting
system as the Committee may select) on the relevant date or, if no sale of the
Common Stock has been reported for that day, the average of such prices on the
next preceding day and the next following day for which there were reported
sales. The term "Fair Market Value" as it relates to Formula Value Stock will
mean the value determined by the Committee.
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(c) The term "Subsidiary" will mean, unless the context otherwise
requires, any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the corporation if each of the corporations other
than the last corporation in such chain owns stock possessing at least 50% of
the voting power in one of the other corporations in such chain.
(d) "Formula Value Stock" means shares of a class or classes of stock
the value of which is derived from a formula established by the Committee which
reflects such financial measures as the Committee may determine. Such shares
will have such other characteristics as may be determined at time of their
authorization.
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Exhibit 10(v)
AGREEMENT made as of the 17th day of May, 1995 by and between CBS Inc.
("CBS"), a New York corporation, having its principal office at 51 West 52nd
Street, New York, New York 10019, and Leslie Moonves ("Executive"), residing at
1045 North Bundy Drive, Los Angeles, California 90049.
W I T N E S S E T H
WHEREAS, CBS desires to secure the services of Executive as an
executive, and Executive is willing to perform such services, upon the terms,
provisions and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, it is agreed between CBS and Executive as follows:
1. (a) CBS hereby employees Executive, and Executive hereby accepts
employment, as President, CBS Entertainment Division of CBS ("CED"), and as
Executive Vice President, CBS Broadcast Group ("CBG"), for a five-year term
commencing December 5, 1995 and ending December 4, 2000 (the "Employment Term").
Each successive year of the Employment Term is herein referred to as a "Contract
Year," with the first Contract Year to commence December 5, 1995 and to continue
through December 4, 1996, and each successive Contract Year thereafter to
commence on December 5 and continue through December 4 of the applicable
Contract Year.
(b) Executive shall report directly and only to the person who is
President of the CBG.
(c) So long as this agreement is not terminated pursuant to
paragraph 7 below and Executive is rendering services hereunder, there shall be
no higher executive of CED, and Executive shall have full authority and
responsibility to run CED, including the hiring and replacement of personnel for
CED and the setting of projects for development and production, such projects to
include series and other production commitments, in accordance with CBS policies
and practices. Financial commitments undertaken by Executive must adhere to
established practices and policies of CBS. Executive shall have the opportunity
to participate in discussions concerning the development and review of such
practices and policies.
(d) So long as this agreement is not terminated pursuant to
paragraph 7 below and Executive is rendering services hereunder, Executive shall
provide executive services to CBS in a manner determined by the President, CBG.
2. (a) CBS agrees to pay Executive, and Executive agrees to accept from
CBS for his services hereunder, a base salary of $2,500,000 per annum for the
first Contract Year, $2,500,000 for the second Contract Year, $2,500,000 for the
third Contract Year, $2,500,000 for the fourth Contract Year, and $2,500,000 for
the fifth Contract Year. Base salary shall be payable bi-weekly or in such other
manner as CBS may designate for employees generally.
(b) In addition to the base salary provided for in paragraph 2(a)
above, Executive shall receive a bonus payment of $1,500,000 per annum in each
Contract Year of the Employment Term. Bonus payments, which shall not be
considered as base salary, shall be prorated over the applicable
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Contract Year, and each pro rata portion shall be paid with base salary in the
manner described above in paragraph 2(a). The bonus payments provided for herein
are intended to substitute for any sums that otherwise would or might be payable
to Executive under the CBS Executive Incentive Plan (EIP), for which Executive
shall not be eligible.
3. Executive shall be included in all plans now existing or hereafter
adopted for the general benefit of CBS employees such as pension plans,
investment funds and group medical, disability or other insurance plans and
benefits, if and to the extent he is and remains eligible to participate
thereunder, and subject to the provisions of such plans as the same may be in
effect from time to time. Executive shall also be eligible and recommended to
the CBS Board of Directors for participation in the CBS's Supplemental Executive
Retirement Plan (SERP) and the CBS Stock Rights Plan (SRP) or any successor
plans thereto, and other plans in which participation is limited to CBS
executives in positions comparable to Executive's; provided, however, that
Executive shall not be eligible to participate in or receive payments under the
EIP or any successor plans thereto. To the extent Executive participates in any
benefit plan, such participation shall be based solely upon Executive's base
salary, except that Executive's participation in SERP shall be based upon fifty
percent (50%) of the annual bonus payment provided for in paragraph 2(b). With
respect to Executive's eligibility for participation in the SRP, it is
understood and agreed that Executive shall be proposed for a grant of stock
options pursuant to the CBS Stock Rights Plan at each meeting of the CBS Board
of Directors during the Employment Term at which grants are proposed for CBS
senior executives and that if and when such stock options are granted, the
number of options granted to Executive shall be no less than that awarded to any
person reporting to the President, CBG at the time of such grant. Executive
acknowledges, however, that since SERP and the Stock Rights Plan are
administered under procedures that are not subject to contractual arrangements,
eligibility for consideration is not a guarantee of actual participation because
the CBS Board of Directors' discretion, or that of the appropriate committee of
such Board, in granting participation, is absolute.
4. Executive shall be entitled to four (4) weeks vacation with pay in
each Contract Year, and vacation shall be governed in accordance with CBS
policy.
5. Executive agrees to devote all of his business time and attention to
the affairs of CBS, except during vacation periods and reasonable periods of
illness or other incapacity consistent with the practices of CBS for executives
in comparable positions, and agrees that his business/professional services
shall be completely exclusive to CBS during the term hereof.
6. Executive acknowledges that he has been furnished a copy of the
Policy Notes from the President concerning Conflicts of Interest ("Conflicts
Policy") dated December 13, 1989, and a copy of the "CBS Policy Summary."
Executive further acknowledges that he has read and fully understands all of the
requirements thereof, and acknowledges that at all times during the term hereof,
he shall perform his services hereunder in full compliance with the Conflicts
Policy and the CBS Policy Summary and with any revisions thereof or additions
thereto including without limitation any notice provisions therein
(notwithstanding any notice provisions to the contrary which may be contained in
paragraph 13 of this
2
<PAGE> 3
agreement); provided, however, that is understood and agreed that the exercise
by Executive during the Employment Term of stock options awarded to him by his
prior employer that would be forfeited if not exercised by him during the
Employment Term shall not be deemed to be a violation of the Conflicts Policy.
7. If, during the term of this agreement, the employment of Executive
by CBS should be terminated by CBS for cause (which for these purposes is
defined as (i) fraud, misappropriation or embezzlement on the part of Executive;
(ii) Executive's willful failure to perform services hereunder, unless such
failure is cured within fifteen (15) days after written notice specifying the
alleged failure; or (iii) Executive's intentional breach of the provisions of
paragraph 5 or of paragraph 6 hereof, unless such breach is cured within fifteen
(15) days after written notice specifying the alleged breach) or for Executive's
incapacity, then CBS shall immediately have the right to terminate this
agreement without further obligation; provided, however, that in the event of
Executive's incapacity CBS may terminate this agreement effective only during
the period of incapacity and only after the expiration of a period the length of
which shall be determined by the CBS Personnel Department pursuant to the then
applicable CBS sick leave policy for CBS exempt staff employees as though such
policy were applicable to this agreement but in any event not less than four (4)
consecutive weeks. If Executive is found to be insurable for the purposes of the
CBS Senior Executive Life Insurance Plan (SELIP), CBS will obtain insurance, at
CBS's expense and for CBS's benefit, or CBS will self-insure, against
Executive's incapacity, for an amount equal to the total compensation payable to
Executive pursuant to paragraph 2 of this agreement during the Employment Term.
The insured amount shall be reduced at the beginning of the second Contract Year
of the Employment Term, and of each Contract Year thereafter, to correspond to
the remaining compensation payable to Executive under the terms of paragraph 2
of this agreement. The insured amount shall be further reduced by the maximum
amount of Executive's salary which may be insured under the CBS Long Term
Disability ("LTD") Plan at the time of disability, regardless of whether
Executive elects to obtain full benefits to which he is entitled under CBS's LTD
Plan. If Executive is found to be insurable as set forth above and CBS
terminates this agreement by reason of Executive's incapacity, Executive shall
continue to be paid the annual compensation that would otherwise be payable
under the terms of paragraph 2 of this agreement for the duration of the
Employment Term, less the maximum amount of Executive's salary which may be
insured under the CBS Long Term Disability ("LTD") Plan at the time of
disability, regardless of whether Executive elects to obtain full benefits to
which he is entitled under CBS's LTD Plan.
Nothing herein shall obligate CBS to utilize Executive's services, and
CBS shall have fulfilled all of its obligations hereunder by payment to
Executive of the applicable compensation provided for in paragraphs 2 and 11
hereof, plus any benefits to which Executive is entitled pursuant to paragraph 3
above during the Employment Term, and the fulfillment of the indemnification
obligation set forth in paragraph 12 below.
3
<PAGE> 4
If, during the Employment Term, CBS elects to terminate Executive's
employment hereunder for any reason other than cause (as hereinabove defined),
or if this agreement is terminated by Executive for Good Reason (as hereinbelow
defined), Executive shall have no duty to mitigate, and shall be entitled to
receive his base salary and bonus as provided for in paragraph 2 and any
additional payment provided for in paragraph 11 (none of which shall constitute
severance pay), for the remainder of the Employment Term, with no offset based
on any employment Executive may obtain following such termination. Following any
such termination, CBS shall have no obligation whatsoever to make any further
payments to Executive except as provided in the preceding sentence.
Notwithstanding anything contained in this agreement, Executive shall not be
entitled to receive any severance pay upon the termination of this agreement or
of Executive's employment hereunder at any time during the Employment Term.
"Good Reason" shall mean any of the following (without Executive's
prior express written consent) which, on written notice from Executive, CBS
shall not have cured within fifteen (15) days: (A) the repeated failure of CBS
to pay Executive any compensation due and owing hereunder (it being agreed that
written notice with respect to a repeated failure need be given only one time);
(B) removing Executive from his title or position as President, CED; (C)
inserting any other person in the chain of authority between the Executive and
the person who is President of CBG; (D) diminishing in any substantial way
Executive's authority for the management and operation of CED; or (E)
diminishing in any substantial way the functions of CED.
8. In accordance with the then applicable CBS policy, CBS shall
reimburse Executive for the cost of his reasonable, actual and necessary
business and travel expenses incurred in connection with his services hereunder.
9. Executive shall be entitled to receive a payment of $1,500 for each
month of his employment hereunder to offset certain benefits which Executive is
foregoing with his present employer by accepting employment with CBS.
10. CBS shall own all right, title and interest in perpetuity to the
results of Executive's services and all artistic materials and intellectual
properties which are, in whole or in part, created, developed or produced by
Executive during the Employment Term and which are suggested by or related to
Executive's employment hereunder or any activities to which Executive is
assigned, and Executive shall not have or claim to have any right, title or
interest therein of any kind or nature. Nothing in the preceding sentence is
intended to constitute a waiver of CBS's Conflict of Interest policies.
11. In the vent of a Change of Control (as defined below) during the
Employment Term and while Executive is rendering services hereunder, Executive
shall continue to be employed by CBS pursuant to the terms of this agreement. If
there is a Change of Control (as defined below) during the Employment Term and
while Executive is rendering services hereunder in which the Per Share
Consideration (as defined below) is less than the Threshold Amount (as defined
below), Executive shall receive, in addition to the compensation provided for in
paragraph 2 hereof, an additional payment of $1,000,000 for each remaining
Contract Year (or prorated portion thereof) of the Employment Term
4
<PAGE> 5
following consummation of such Change of Control, payable over the course of
each such year in the manner provided for in paragraph 2. If the Per Share
Consideration in such Change of Control during the Employment Term and while
Executive is rendering services hereunder is equal to or more than the Threshold
Amount, CBS shall pay to Executive (in lieu of the additional payment provided
for in the preceding sentence), promptly following consummation thereof,
$5,000,000 plus an amount equal to the product of $500,000 and the amount by
which the Per Share Consideration exceeds the sum of the Threshold Amount and
$10. "Change of Control" means a transaction or business combination in which
the shareholders of CBS immediately before consummation thereof do not
immediately following consummation thereof beneficially own at least fifty
percent (50%) of the voting securities of the resulting entity; provided,
however, that the acquisition or disposition of shares of CBS by Loews
Corporation shall not in any event result in a Change of Control within the
meaning of this agreement, except for the disposition of such shares in
connection with a transaction in which a third party acquires at least fifty
percent (50%) of the voting securities of CBS. "Per Share Consideration" means
the fair market value as of the date of payment of the consideration per share
of CBS Common Stock received in a Change of Control transaction (such fair
market value to be determined in good faith by the CBS Board of Directors,
provided that if such consideration includes publicly traded securities, fair
market value for such securities shall be the average of the closing or last
sale prices for such securities for the ten trading days following consummation
of such Change of Control). "Threshold Amount" means $80 plus the amount, if
any, by which retained earnings (as set forth in CBS's annual audited balance
sheet) per outstanding CBS share increases from December 31, 1995 to December 31
of the fiscal year immediately preceding the Change of Control; provided,
however, that at no time shall the Threshold Amount be less than $80. In the
vent of a stock split or stock dividend, or a reclassification or similar change
in CBS's outstanding Common Stock, or in the event of an extraordinary dividend
or a spin-off (but not a share repurchase), CBS's Board of Directors shall in
good faith make appropriate adjustments to the amounts set forth in this
paragraph.
12. CBS shall, to the fullest extent permitted by applicable law,
indemnify Executive and hold him harmless from and against any claim, loss,
liability, judgment or expense (including reasonable attorneys fees) arising
from or relating to Executive's employment by CBS.
13. Any controversy or claim arising out of or relating to this
agreement, or to the construction, validity or enforceability thereof (except
any claim or controversy arising out of or relating to paragraph 11 of this
agreement, or the construction, validity or enforceability thereof), shall be
settled by arbitration held in New York City in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. An arbitration held
pursuant to this paragraph shall be conducted by a single arbitrator mutually
agreeable to and designated by the parties, who shall be either a retired or
former Judge of a Untied States District Court of United States Court of
Appeals, or a law professor with acknowledged expertise from a nationally
recognized law school. Such arbitration shall be commenced by delivery by hand
or certified mail of a written demand setting forth the claim or controversy
which the demanding party wishes to have resolved. The arbitrator shall
determined rules for the conduct of the
5
<PAGE> 6
arbitration proceeding. All documents, information or testimony provided by
either party to the other, or the arbitrator, shall be maintained in confidence.
Any award, ruling or judgment of the arbitrator shall be rendered in writing and
shall be final and binding on the parties. The arbitrator shall be empowered to
grant any appropriate remedy that may be available in law or equity, except that
the arbitrator shall have no authority to award punitive damages. Judgment on an
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. All fees and other costs of the arbitration, including the fees and
expenses of the arbitrator and of each party's attorneys and expert witnesses,
shall be allocated by the arbitrator at his or her discretion.
14. This agreement contains the entire understanding of the parties
with respect to the subject matter thereof, supersedes any and all prior
agreements of the parties with respect to the subject matter thereof, and cannot
be changed or extended except by a writing signed by both parties hereto. This
agreement shall be binding upon and insure to the benefit of the parties and
their respective legal representatives, executors, heirs, administrators,
successors and assign, it being understood that no assignment of this agreement,
in whole or in part, will relieve either party of its obligations hereunder.
This agreement and all matters and issues collateral thereto shall be governed
by the laws of the State of New York applicable to contracts performed entirely
therein. If any provision of this agreement, as applied to either party or to
any circumstance, shall be adjusted by a court to be void or unenforceable, the
same shall in no way affect any other provision of this agreement or the
validity or enforceability thereof.
15. All notice or other communications hereunder shall be given in
writing and shall be deemed given if served personally or mailed by registered
or certified mail, return receipt requested, to the parties at their address
above indicated, or at such other addresses as they may hereafter designated in
writing. All such notices or other communications directed to CBS shall be
directed to the attention of Peter Keegan, Executive Vice President and Chief
Financial Officer, and to Ellen Oran Kaden, Executive Vice President, General
Counsel and Secretary, or such other persons whom CBS may hereafter designated
in writing. Any notice to Executive also shall be sent in the same manner to:
Ernest Del, Esq.
Del, Rubel, Shaw, Mason & Derin
2029 Century Park East - Suite 3910
Los Angeles, California 90067-3025
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first above written.
CBS Inc.
----------------------------------
/s/ Leslie Moonves
- --------------------------
Executive
<PAGE> 8
[LOGO]
51 West 52nd Street
CBS BROADCASTING INC. Michael H. Jordan New York, New York 10019
Chairman and (212) 975-3535
Chief Executive Officer
CONFIDENTIAL & PROPRIETARY
January 20, 1998
Mr. Leslie Moonves
51 West 52nd Street
New York, New York 10019
Dear Mr. Moonves:
This letter (the "Amendment") will amend, as set forth below, the
provisions of the Agreement between you ("Executive") and CBS Broadcasting Inc.
(formerly known as CBS Inc.) ("CBS") dated as of May 17, 1995 (the "Agreement")
pursuant to which you perform services for CBS.
Upon execution of the Amendment by you and CBS, all changes set forth
in the Amendment will be effective as of June 17, 1997 except as otherwise set
forth herein.
1. The following two sentences are hereby added after the first
sentence of current paragraph 1(a) of the Agreement:
"Beginning August 7, 1997, Executive will be employed as President, CBS
Television, and Executive Vice President, CBS, rather than as
President, CBS Entertainment Division of CBS ("CED"), and Executive
Vice President, CBS Broadcast Group. In addition, Executive will serve
on the CBS Committee currently consisting of Michael H. Jordan, Mel
Karmazin and Fredric G. Reynolds."
<PAGE> 9
Mr. Leslie Moonves CONFIDENTIAL & PROPRIETARY
January 20, 1998
Page 2
2. Current paragraph 1(b) of the Agreement is hereby replaced with the
following:
"(b) Executive shall report directly and only to the person
who is Chairman and Chief Executive Officer of CBS (currently, Michael
H. Jordan)."
3. The following is hereby added to the end of the first sentence of
current paragraph 1(c) of the Agreement:
"and, in addition to such authority and responsibility to run CED,
Executive shall, beginning August 7, 1997, have full authority and
responsibility to run Eyemark Entertainment, CBS Enterprises, and
sales, advertising and promotion, and research for CBS Network
Television, all in accordance with CBS policies and practices."
4. Current paragraph 1(d) of the Agreement is hereby replaced with the
following:
"(d) So long as this agreement is not terminated pursuant to
paragraph 7 below and Executive is rendering services hereunder,
Executive shall provide executive services to CBS in a manner
determined by the person who is Chairman and Chief Executive Officer of
CBS (currently, Michael H. Jordan)."
5. The second sentence through the last sentence of current paragraph 3
of the Agreement (relating to CBS executive and stock plans) are hereby replaced
with the following two paragraphs:
"As provided in this agreement prior to the Amendment,
Executive shall be eligible for participation in the CBS Supplemental
Executive Retirement Plan (SERP), or any successor plan thereto, with
Executive's participation in SERP to be based upon fifty percent (50%)
of the annual bonus payment provided for in paragraph 2(b) of this
agreement, such participation in or benefits under such plan to be
subject to the terms of such plan as such plan may be in effect from
time to time.
<PAGE> 10
Mr. Leslie Moonves CONFIDENTIAL & PROPRIETARY
January 20, 1998
Page 3
From and after the date of the Amendment, Executive shall be
entitled during the remaining term of this agreement so long as he is
an employee of CBS to participate in or receive benefits under any and
all other CBS employee benefit plans made available to CBS senior-level
executives, such participation in or benefits under any such plan or
plans to be subject to the terms of such plans as such plans may be in
effect from time to time; provided, however, that Executive shall not
be entitled to any annual incentives other than the bonus payments
provided in paragraph 2(b) of this agreement or any stock options other
than the stock options provided in paragraph 16 of this agreement, and
provided, however, that Executive shall not be entitled to participate
in or receive benefits under any plan provided exclusively to the Chief
Executive Officer or provided solely to executives of, or relating
primarily to the performance or sale of, a particular business or
groups of businesses not involving Executive."
6. The following is hereby added as new paragraph 16 of the Agreement:
"Prior to the effective date of the Amendment and
after November 24, 1995, Executive received three stock option grants
from CBS Corporation for 50,000, 80,000 and 80,000 shares,
respectively, of common stock of CBS Corporation. Each such stock
option grant is reflected in and governed by a stock option agreement
executed by CBS Corporation and Executive.
Subject to execution by both parties of the Amendment and the
relevant stock option agreements, Executive has been granted
non-qualified stock options to purchase an aggregate of 790,000 shares
of common stock of CBS Corporation under the CBS Corporation 1993
Long-Term Incentive Plan or its successor as in effect from time to
time (the "Plan"). The options for 500,000 shares of this aggregate
amount all have an option exercise price per share of $21.75, the fair
market value (as defined in the Plan) of the CBS Corporation common
stock on the grant date for these options (June 17, 1997), will all
become exercisable ("vest") beginning on June 18, 1998, and will all
expire on June 16, 2007. The options for the remaining 290,000 shares
of this aggregate amount all have an option exercise price per share of
$24.3125, the fair market value (as defined in the Plan) of the CBS
Corporation common stock on the grant date for these options (July 28,
1997), will vest beginning on July 29, 1998 as to 96,666 shares, on
July 29, 1999 as to 96,667 shares and on July 16, 2000 as to 96,667
shares, and will all expire on July 27, 2007. In each case, these
options will vest only if Executive is an employee of CBS Corporation
or one of its subsidiaries on the vesting date except as otherwise set
forth in the relevant stock option agreement. The relevant stock option
agreements for these option grants will define and govern all of the
terms and conditions of the stock options, including but not limited to
termination provisions. Such stock option agreements will be issued
upon execution of the Amendment by both parties.
<PAGE> 11
Mr. Leslie Moonves CONFIDENTIAL & PROPRIETARY
January 20, 1998
Page 4
Executive will be considered for a grant of additional stock
options during the Employment Term so long as this agreement is not
terminated pursuant to paragraph 7 hereof and Executive is rendering
services hereunder, it being understood that any such grant would be
within the sole discretion of the Compensation Committee of the Board
of Directors of CBS Corporation and that there would be no guarantee
of any such further grant or as to the terms thereof even if other
senior-level CBS executives or members of the CBS Committee are
granted additional stock options."
7. The following is hereby added as new paragraph 17 of the Agreement:
"Beginning August 7, 1997 and for the remaining term of this
agreement so long as Executive is rendering services hereunder,
Executive shall have a right of non-exclusive but priority business use
of (and may also use for non-business travel on a prudent basis when an
airplane is available, it being understood that business purpose trips
take priority over non-business travel) any jet airplane(s) which CBS
Corporation owns or leases during that time, it being understood that
CBS Corporation is under no obligation to maintain or increase its
current number of airplanes or to lease or charter any additional
airplanes for this purpose. Such right of priority use would be subject
to (i.e. subordinate to) the right of use by the Chief Executive
Officer and equal to the right of use by any other CBS executive whose
position is commensurate with Executive's position. With respect to any
conflict of use between Executive and any other such equal executive,
Executive and such other executive will work in good faith to
coordinate their schedules and accommodate the other's travel needs, it
being understood that from time to time it may become necessary for
Executive and/or any such other executive to use a commercial flight in
lieu of a company airplane. Executive's family members may accompany
him on corporate aircraft flights. Flight Operations will outline to
Executive the tax implications of any use of corporate aircraft by
Executive and any members of his family. Executive will not be required
to reimburse CBS for any non-business use of corporate aircraft."
Except as specifically amended in the Amendment, all the terms and
conditions of the Agreement are in all other respects hereby ratified and
confirmed.
<PAGE> 12
Mr. Leslie Moonves CONFIDENTIAL & PROPRIETARY
January 20, 1998
Page 5
Kindly sign in the space provided below to indicate your acceptance of
the foregoing and return one copy of the Amendment to Ms. Karen Beldegreen at
CBS.
Very truly yours,
CBS Broadcasting Inc.
By: /s/ MICHAEL H. JORDAN
---------------------
Name: Michael H. Jordan
Its: Chairman and Chief
Executive Officer
Consented to, Accepted and Agreed:
/s/ LESLIE MOONVES
- ------------------
Leslie Moonves
Date: 1-22-98
- ------------------
<PAGE> 1
Exhibit 10(w)
ASSET PURCHASE AGREEMENT
between
WESTINGHOUSE ELECTRIC CORPORATION
and
SIEMENS POWER GENERATION CORPORATION
Dated November 14, 1997
RELATING TO THE POWER GENERATION BUSINESS
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS........................... 2
Section 1.1 Specified Definitions................................ 2
Section 1.2 Other Terms.......................................... 15
Section 1.3 Other Definitional Provisions........................ 15
ARTICLE 2
SALE AND PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES..................... 16
SECTION 2.1 Purchase and Sale.................................... 16
SECTION 2.2 Acquired Assets and Excluded Assets.................. 16
(a) Acquired Assets........................................... 16
(b) Excluded Assets........................................... 18
(c) Nonassignable Rights...................................... 20
(d) Termination of Rights of Sold
Subsidiaries.............................................. 20
SECTION 2.3 Assumption of Liabilities............................ 20
(a) Assumed Liabilities....................................... 20
(b) Excluded Liabilities...................................... 22
SECTION 2.4 Purchase Price....................................... 23
SECTION 2.5 Purchase Price Adjustment............................ 23
ARTICLE 3
THE CLOSING............................... 27
SECTION 3.1 Closing Date......................................... 27
SECTION 3.2 Transactions To Be Effected at the
Closing.............................................. 27
(a) Deliveries by Sellers..................................... 27
(b) Deliveries by Purchaser................................... 27
(c) Nominee Shares............................................ 28
ARTICLE 4
REPRESENTATIONS AND WARRANTIES.................... 28
SECTION 4.1 Representations and Warranties of
WEC.................................................. 28
(a) Organization, Standing and Power.......................... 28
(b) Authority................................................. 28
(c) Financial Statements; Undisclosed
Liabilities............................................. 30
(d) Compliance with Applicable Laws........................... 31
(e) Litigation; Decrees....................................... 31
(f) Title to Acquired Assets.................................. 31
(g) Real Property............................................. 32
(h) Intellectual Property and Technology...................... 34
(i) Insurance................................................. 35
(j) Contracts................................................. 35
(k) Sufficiency of Acquired Assets............................ 38
i
<PAGE> 3
(l) Absence of Certain Changes or Events...................... 38
(m) Employee Benefits......................................... 38
(n) Environmental Matters..................................... 41
(o) Taxes..................................................... 42
(p) Sold Subsidiaries......................................... 44
(q) Labor Matters............................................. 44
(r) Tangible Property......................................... 45
SECTION 4.2 Representations and Warranties of
Purchaser............................................ 45
(a) Organization. Standing and Power.......................... 45
(b) Authority................................................. 45
(c) Financing................................................. 46
ARTICLE 5
COVENANTS............................ 47
SECTION 5.1 Covenants of WEC Relating to Conduct
of Business.......................................... 47
(a) Ordinary Course........................................... 47
(b) Advice of Changes......................................... 49
SECTION 5.2 Access to Information................................ 49
SECTION 5.3 Governmental Approvals, Etc.......................... 50
SECTION 5.4 Third Party Consents................................. 52
(a) Employee Matters.......................................... 53
(b) Accrued Vacation.......................................... 54
(c) Union Representation...................................... 55
(d) Pension Plan.............................................. 55
(g) Severance Obligations..................................... 62
(h) Executive Compensation.................................... 62
(i) Cooperation............................................... 63
(j) WARN Act.................................................. 63
(k) COBRA..................................................... 64
(l) Workers Compensation...................................... 64
(m) Multiemployer Plans....................................... 64
(n) Internal Revenue Service Forms............................ 64
SECTION 5.6 Collection of Receivables............................ 68
SECTION 5.7 Expenses............................................. 68
SECTION 5.8 Brokers or Finders................................... 68
SECTION 5.9 License Agreement.................................... 69
SECTION 5.10 Certain Information.................................. 69
SECTION 5.11 Bulk Transfer Laws................................... 70
SECTION 5.12 Additional Agreements................................ 70
SECTION 5.13 Certain Understandings............................... 70
SECTION 5.14 Allocation; Tax Matters.............................. 71
SECTION 5.15 Supplies............................................. 76
SECTION 5.16 Transfer of Assets of Sold
Subsidiaries......................................... 76
SECTION 5.17 Credit Support....................................... 76
SECTION 5.18 Non-Competition...................................... 77
(a) Covenants Against Competition............................. 77
(b) Rights and Remedies Upon Breach........................... 79
(c) Severability of Covenants................................. 79
(d) Blue-Pencilling........................................... 79
ii
<PAGE> 4
SECTION 5.19 Post-Closing Agreements.............................. 79
(a) Transitional Services..................................... 80
(b) Facilities................................................ 80
(c) Field Sales Offices....................................... 80
SECTION 5.20 Removal of Excluded Assets and
Liabilities from Sold Subsidiaries................... 80
SECTION 5.21 Guarantee Agreement.................................. 80
SECTION 5.22 Steam Generator Agreement............................ 80
SECTION 5.23 Post Closing Hiring of Employees..................... 80
[Section 5.24 Instrumentation and Control
Matters.............................................. 81
ARTICLE 6
CONDITIONS PRECEDENT....................... 82
SECTION 6.1 Conditions to Each Party's
Obligation........................................... 82
(a) Certain Waiting Periods................................... 82
(b) No Injunctions or Restraints.............................. 82
(c) Governmental Action....................................... 83
SECTION 6.2 Conditions to Obligation of
Purchaser............................................ 83
(a) Representations and Warranties............................ 83
(b) Performance of Obligations of WEC......................... 83
(c) Material Permits.......................................... 83
(d) Opinion of WEC's Counsel.................................. 84
(e) Conveyancing Documents.................................... 84
SECTION 6.3 Conditions to Obligation of
WEC.................................................. 84
(a) Representations and Warranties............................ 84
(b) Performance of Obligations of
Purchaser................................................. 84
(c) Opinion of Purchaser's Counsel............................ 84
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER................ 85
SECTION 7.1 Termination.......................................... 85
SECTION 7.2 Amendments and Waivers............................... 86
ARTICLE 8
INDEMNIFICATION......................... 86
SECTION 8.1 Indemnification by WEC............................... 86
SECTION 8.2 Indemnification by Purchaser......................... 89
SECTION 8.3 Characterization of Indemnification
Payments............................................. 89
SECTION 8.4 Losses Net of Insurance; Tax Loss
and Benefits; No Consequential Damages............... 89
SECTION 8.5 Termination of Indemnification....................... 90
SECTION 8.6 Procedures Relating to Third Party
Claims (Other than Tax Controversies)................ 90
SECTION 8.7 Procedures Relating to Non-Third
Party Claims. ....................................... 92
iii
<PAGE> 5
SECTION 8.8 Joint Defense Agreement.............................. 92
SECTION 8.9 Arbitration of Environmental
Liabilities.......................................... 92
ARTICLE 9
GENERAL PROVISIONS........................ 93
SECTION 9.1 Notices.............................................. 93
SECTION 9.2 Interpretation....................................... 95
SECTION 9.3 Survival of Representations.......................... 95
SECTION 9.4 Severability......................................... 96
SECTION 9.5 Counterparts......................................... 96
SECTION 9.6 Entire Agreement; No Third Party
Beneficiaries........................................ 96
SECTION 9.7 Governing Law........................................ 96
SECTION 9.8 Mediation; Consent to Jurisdiction................... 96
SECTION 9.9 Publicity............................................ 97
SECTION 9.10 Assignment........................................... 98
SECTION 9.11 Release of Siemens
Aktiengesellschaft................................... 98
SECTION 9.12 Waiver of July Trial; Trial Costs.................... 98
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LIST OF EXHIBITS
Exhibit A Transitional Services Agreement
Exhibit B Opinion of Weil, Gotshal & Manges LLP, special
counsel to WEC
Exhibit C Opinion of Louis J. Briskman, Esq., General
Counsel of WEC
Exhibit D Opinion of Purchaser's Counsel
Exhibit E Shared Technology Agreement
Exhibit F Joint Defense Agreement
Exhibit G Guarantee Agreement
Exhibit H Steam Generator Agreement
Exhibit I Trademark and Trade Name License Agreement
LIST OF SCHEDULES
Schedule 1.1(a) [INTENTIONALLY OMITTED]
Schedule 1.1(b) Investments
Schedule 1.1(c) Leased Real Property
Schedule 1.1(d) Matters Not Constituting a Material
Adverse Effect
Schedule 1.1(e) Owned Real Property
Schedule 1.1(f) Permitted Liens
Schedule 1.1(g) Settlement Agreements
Schedule 1.1(h) Sold Subsidiaries
Schedule 2.2(a) Acquired Assets
Schedule 2.2(b) Excluded Assets
Schedule 2.2(b)(ix)(A) Surplus Property
Schedule 2.2(b)(ix)(B) Additional Acquired Assets
Schedule 2.3(a) Assumed Liabilities
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<PAGE> 7
Schedule 2.5(c) Target Amount
Schedule 4.1(b) Intellectual Property,
Technology and Contracts
Schedule 4.1(c)(ii) Undisclosed Liabilities
4.1(c)(iii) Material Obligors
Schedule 4.1(d) Actions of Governmental Authorities
Schedule 4.1(e) Certain Lawsuits, Actions and Proceedings
Schedule 4.1(h) Material Intellectual Property and Technology
Schedule 4.1(i) Insurance
Schedule 4.1(j) Contracts
Schedule 4.1(j)(i) Employment Contracts
Schedule 4.1(j)(ii) Collective Bargaining Agreements
Schedule 4.1(j)(iii) Transactions with Affiliates
Schedule 4.1(j)(iv) Indebtedness
Schedule 4.1(j)(v) Covenants Not to Compete
Schedule 4.1(j)(vi) Real Property Leases
Schedule 4.1(j)(vii) Personal Property Leases
Schedule 4.1(j)(viii) Purchase Contracts
Schedule 4.1(j)(ix) Joint Ventures; Partnerships
Schedule 4.1(j)(x) Asset Sales; Preferential Rights
Schedule 4.1(j)(xi) Take-or-Pay/Requirements Contracts
Schedule 4.1(j)(xii) Acquisition Contracts
Schedule 4.1(j)(xiii) Material License or Development
Agreements
Schedule 4.1(j)(xiv) Sales Contracts
Schedule 4.1(j)(xv) Business Unit Settlements
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<PAGE> 8
Schedule 4.1(l) Certain Changes or Events
Schedule 4.1(m)(i) Plans and Benefit Arrangements
4.1(m)(ii)(A) Actions of Governmental Authorities
Regarding Plans
4.1(m)(ii)(B) Business Pension Plans
4.1(m)(ii)(C) Plan Noncompliance
4.1(m)(ii)(D) Events Resulting in Material
Liability to Plans
4.1(m)(ii)(E) Group Health Plan Noncompliance
4.1(m)(ii)(F) Material Plan Amendments
Schedule 4.1(n) Environmental Matters
Schedule 4.1(o) Tax Matters
Schedule 4.1(q) Labor Matters
Schedule 5.1 Ordinary Course
Schedule 5.5(f)(iv) Payment Schedule Under WEC's FAS 106
Plans
Schedule 5.5(l) Multiemployer Plans
Schedule 5.5(o)(i) Foreign Employment Contracts
Schedule 5.5(o)(iii) Delayed Foreign Employees
Schedule 5.9(a)(ii) Licensed Intellectual Property
Schedule 5.14(a) Allocation of Purchase Price
Schedule 5.14(c) Sold Subsidiaries Subject to Section
338(h)(10) Election
Schedule 5.15(b) Licensed Entities
Schedule 5.17 Credit Support Arrangements
Schedule 5.25 STC Programs
Schedule 6.2(c) Third Party Consents
Schedule 9.2 Persons with Knowledge
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<PAGE> 9
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made November 14,
1997, among WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation
("WEC"), and SIEMENS POWER GENERATION CORPORATION, a Delaware corporation
("PURCHASER").
W I T N E S S E T H:
WHEREAS, WEC is engaged, through its Power Generation Business Unit, in
a business, which, among other things, (i) designs, manufactures, sells,
installs and services steam and combustion turbine generators and components for
the generation, transmission, distribution and control of electric power, (ii)
constructs turn-key fossil fuel power plants worldwide, (iii) supplies, services
and operates power plants for independent power producers and utilities and
supplies power generation equipment and services to other non-utility customers,
(iv) provides field service and factory service on electrical apparatus and
maintains repair facilities which perform machine work on electrical apparatus
(through its Electrical Systems Services Division), and (v) sells replacement
parts and components related to the generators and components described in
clause (i) above (including the Acquired Assets and the Assumed Liabilities, but
excluding the Excluded Assets and the Excluded Liabilities (each as hereinafter
defined), the "BUSINESS"), certain assets of which are owned by Subsidiaries of
WEC; and
WHEREAS, WEC desires to (and to cause its appropriate Subsidiaries to)
sell, transfer and assign to Purchaser, and Purchaser desires to purchase and
assume from WEC and its appropriate Subsidiaries, substantially all of the
assets and liabilities of the Business, together with the shares of capital
stock of certain Subsidiaries of WEC, all as more specifically provided herein;
and
WHEREAS, WEC also is engaged in an energy systems business, (the
"ENERGY SYSTEMS BUSINESS") which serves the domestic and international electric
power industry, among other things, by supplying nuclear power plants, advanced
nuclear plant design technology, nuclear fuel and associated materials and
components and fuel technology and technical services, including, field and
factory equipment refurbishment, total plant outage and maintenance services, as
well as operating plant services including parts and equipment, instrumentation
and control systems (through its Process Control Division), reactor coolant
pumps, motors and controlled mechanisms and distributed control, communicators,
data acquisition systems and information systems and project management,
decontamination and decommissioning; and
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WHEREAS, Subsidiaries of WEC, the capital stock of which will be
transferred to Purchaser hereunder, hold assets utilized in both the Business
and the Energy Systems Business, and certain assets relating to the Energy
Systems Business will be transferred by such Subsidiaries prior to the Closing
to WEC or other subsidiaries of WEC pursuant to the terms hereof; and
WHEREAS, certain facilities, assets and services of WEC and its
subsidiaries are utilized both in the Business and the Energy Systems Business
or the other businesses of WEC and certain of such facilities, assets and
services will be shared by the owners of the Business and WEC pursuant to the
terms of certain agreements contemplated hereby.
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties herein contained, and subject to and on the terms
and conditions herein set forth, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 SPECIFIED DEFINITIONS. As used in this Agreement, the
following capitalized terms have the meanings specified below:
"ACCOUNTING FIRM" means such nationally recognized independent public
accounting firm as shall be agreed upon by the parties hereto in writing.
"ACCOUNTS RECEIVABLE" shall have the meaning specified in
Section 2.2(a).
"ACQUIRED ASSETS" shall have the meaning specified in
Section 2.2(a).
"ACTION OR PROCEEDING" shall mean any action, proceeding or suit,
including any by a Governmental Authority.
"ADJUSTED PURCHASE PRICE" shall have the meaning specified
in Section 2.5(b).
"AFFILIATE" of a Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person.
"ALLOCATION STATEMENT" shall have the meaning specified in
Section 5.14(a).
"ASSUMED LIABILITIES" shall have the meaning specified in
Section 2.3(a).
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<PAGE> 11
"BALANCE SHEET" shall have the meaning specified in Section
4.1(c)(i).
"BANKRUPTCY EXCEPTION" shall have the meaning specified in
Section 4.1(j).
"BENEFIT ARRANGEMENT" means a benefit program or practice for bonuses,
incentive compensation, vacation pay, severance pay, insurance, restricted
stock, stock options, performance awards, employee discounts, company cars,
tuition reimbursement, holidays, leaves of absence or any other perquisite or
benefit (including, without limitation, any fringe benefit under Section 132 of
the Code) to employees, officers or independent contractors that is not a Plan.
"BENEFITS" shall have the meaning specified in Section
5.18(b)(ii).
"BENEFITS MAINTENANCE PERIOD" shall have the meaning
specified in Section 5.5(a).
"BOOKS AND RECORDS" of any Person means all files, documents,
instruments, papers, books and records relating to the business, operations,
conditions of (financial or other), results of operations and assets and
properties of such Person, including, without limitation, financial statements,
Tax Returns and related work papers and letters from accountants, budgets,
pricing guidelines, ledgers, journals, title policies, minute books, stock
certificates and books, stock transfer ledgers, customer lists, computer files
and programs, retrieval programs, operating data and plans and environmental
studies and plans.
"BUSINESS" shall have the meaning specified in the first
recital to this Agreement.
"BUSINESS DAY" means any day other than Saturday, a Sunday or a day
when commercial banks in New York City are authorized or required by law to be
closed.
"BUSINESS EMPLOYEE" shall have the meaning specified in
Section 5.5(a).
"BUSINESS PENSION PLANS" shall have the meaning specified in
Section 4.1(m)(ii)(B).
"CLOSING" means the closing of the purchase, assignment and sale of the
Acquired Assets and the assumption of the Assumed Liabilities contemplated
hereunder.
"CLOSING BALANCE SHEET" has the meaning specified in Section
2.5(a).
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<PAGE> 12
"CLOSING DATE" means the time and date on which the Closing takes
place, as established by Section 3.1.
"CLOSING NET ASSETS" shall have the meaning specified in
Section 2.5(a).
"CODE" means the Internal Revenue Code of 1986, as amended, and all
Laws promulgated pursuant thereto or in connection therewith.
"CONFIDENTIAL INFORMATION" shall have the meaning specified
in Section 5.18(a)(ii).
"CONFIDENTIALITY AGREEMENT" shall have the meaning specified
in Section 5.2.
"CONTRACTS" means all contracts; leases; indentures; joint venture,
governmental funding or incentive program, environmental indemnity, license
(including any sublicense), development and other agreements; commitments; and
all other legally binding arrangements, including all interworks orders and
interdivisional orders between the Business and other businesses of WEC,
including the Energy Systems Business, in each case whether oral or written,
relating primarily to the Business, to which any of Sellers or a Sold Subsidiary
is a party or bound, except for Plans and Benefit Arrangements.
"CREDIT SUPPORT ARRANGEMENTS" shall have the meaning
specified in Section 5.17.
"DELAYED FOREIGN EMPLOYEES" shall have the meaning specified
in Section 5.5(o).
"DELAYED TRANSFER DATE" shall have the meaning specified in
Section 5.5(o).
"ENCUMBRANCES" means any mortgages, pledges, liens, security interests,
restrictions, defects in title, easements or encumbrances.
"ENERGY SYSTEMS BUSINESS" shall have the meaning specified in the
recitals to this Agreement.
"ENVIRONMENTAL LAW" means any foreign or United States local, county,
state or federal law (including common law), regulation, order, decree or other
legally binding requirement that governs the existence of or provides a remedy
for release resources or the environment (including the protection of endangered
species or wetlands) or the manufacture, processing, distribution, use,
generation, treatment, storage, disposal, transportation, Release or management
of, or other activities of Hazardous Substances, the protection of persons,
natural resources or the environment (including the protection of endangered
species or wetlands) or the manufacture, processing, distribution, use,
generation, treatment, storage, disposal, transportation, Release or management
of, or other activities
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<PAGE> 13
with respect to, Hazardous Substances including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et SEQ., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 ET SEQ., the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq., the Clean Water Act,
33 U.S.C. Section 1251 et seq., the Clean Air Act, 33 U.S.C. Section 2601 et
SEQ., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136 et
seq., the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et SEQ. and the
Occupational Safety and Health Act, 29 U.S.C. Section 651 ET SEQ., as such laws
have been amended or supplemented, and any other similar federal, state, local
or county laws or regulations, in each case as in effect on or prior to the
Closing Date or, with respect to representations and warranties made on the date
hereof, on or prior to the date hereof.
"ENVIRONMENTAL LIABILITY" means any Liability arising under
Environmental Laws or under any Permit issued pursuant to any Environmental Law,
and including all direct costs and expenses associated with Remedial Action, in
connection with the Acquired Assets, the Sold Subsidiaries or the Business, to
the extent arising from any condition existing or any act or omission of
Sellers, any Sold Subsidiary or any other Person (including without limitation
any prior owner, occupant or user of any Premises and any Person engaged in the
removal, transportation or disposition of Hazardous Substances that were
originated or at any time stored or otherwise held at any site associated with
the Sold Subsidiaries or the Business, whether or not included in whole or in
part in the Acquired Assets) at or prior to the Closing Date, including claims,
demands, penalties, fines, liens, fees and costs of environmental consultants,
personal injuries and property damages, administrative proceedings, assessments,
judgments, orders, causes of action (including toxic tort suits), notices of
actual or alleged violations or liability (including such notices regarding the
disposal, transportation or Release (or threatened Release) of Hazardous
Substances on the Premises or elsewhere), proceedings and any associated Losses.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"EVENT" shall have the meaning specified in Section
5.5(f)(iv).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCLUDED ASBESTOS LIABILITIES" means all Liabilities in respect of
death or personal injury actually or allegedly caused directly or indirectly by
asbestos or asbestos compounds or products.
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<PAGE> 14
"EXCLUDED ASSETS" shall have the meaning specified in
Section 2.2(b).
"EXCLUDED LIABILITIES" shall have the meaning specified in
Section 2.3(b).
"EXISTING SCHEDULE" shall have the meaning specified in
Section 5.5(f)(iv).
"EXON-FLORIO AMENDMENT" means Section 721 of the Omnibus
Trade and Competitiveness Act of 1988 (amending Title VII of the
Defense Production Act, 50 U.S.C. App. Section 2170 (1997)).
"FAS 106 LIABILITY" shall have the meaning specified in
Section 5.5(f)(iv).
"FINANCIAL STATEMENTS" shall have the meaning specified in
Section 4.1(c)(i).
"FIRST-TIER ENVIRONMENTAL LOSSES" shall have the meaning
specified in Section 8.1(a).
"FIXTURES AND EQUIPMENT" means all furniture, fixtures, furnishings,
machinery, vehicles, equipment and other tangible personal property owned or
leased by Sellers or any Sold Subsidiary and used or held for use primarily in
connection with the Business.
"FOREIGN BUSINESS EMPLOYEES" shall have the meaning
specified in Section 5.5(o).
"FOREIGN PLAN PARTICIPANT" shall have the meaning specified
in Section 5.5(o).
"FOREIGN PLANS" shall have the meaning specified in Section
4.1(m).
"FOREIGN RETIREMENT PLAN" shall have the meaning specified
in Section 5.5(o).
"FREE-STANDING PLAN" shall have the meaning specified in
Section 4.1(m).
"GAAP" means United States generally accepted accounting
principles.
"GOVERNMENT CONTRACT" means any Contract entered into with
any Governmental Authority.
"GOVERNMENT OPERATIONS BUSINESS" means the operations conducted by the
Government Operations business unit of WEC, including the provision of
management services for certain
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<PAGE> 15
government-owned facilities under Contracts with the United States Department of
Energy and the United States Department of Defense, management of nuclear
reactor programs for the United States Navy and management of a chemical agent
destruction program for the Department of Defense.
"GOVERNMENTAL AUTHORITY" means any agency, board, bureau, court,
commission, department, instrumentality or administration of any foreign
government, the United States government, any state government or any local or
other governmental body in a state, territory or possession of the United States
or the District of Columbia or any political subdivision of any of the
foregoing.
"GUARANTEE AGREEMENTS" shall have the meaning specified in
Section 5.21.
"GUARANTORS" means each of (i) Siemens Corporation, a Delaware
corporation and the parent of Purchaser, (ii) Siemens Aktiengesellschaft, a
company organized under the laws of the Federal Republic of Germany and an the
parent of Siemens Corporation ("Siemens Parent") and (iii) Siemens
Finanzierungsgesellschaft Fur Informationstechnik mbH, a company organized under
the laws of the Federal Republic of Germany and a wholly-owned Subsidiary of
Siemens Parent.
"HAZARDOUS SUBSTANCE" means (i) any petroleum or petroleum products (to
the extent regulated under Environmental Law), flammable explosives, radioactive
materials, asbestos or asbestos-containing products or materials, urea
formaldehyde foam insulation and transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls (PCBs); and (ii) any
substance, material or waste that is regulated under any Environmental Law or is
defined as, or included in the definition of, or deemed by any Environmental Law
or Governmental Authority to be "hazardous," "toxic," a "contaminant," "waste,"
a "pollutant," "hazardous substance," "hazardous waste," "restricted hazardous
waste," "hazardous material," "extremely hazardous waste," a "toxic substance,"
a "toxic pollutant" or words with similar meaning.
"INACTIVE EMPLOYEE" shall have the meaning specified in
Section 5.5(a).
"INCOME TAX" means any Tax on or determined by reference to
net income.
"INDEBTEDNESS" of any Person means, without duplication, (i) the
principal of and premium (if any) in respect of (A) indebtedness of such Person
for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is responsible or
liable; (ii) all obligations of such Person issued
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<PAGE> 16
or assumed as the deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable and other accrued
current liabilities arising in the Ordinary Course of Business); (iii) all
obligations of such Person under leases required to be capitalized in accordance
with GAAP; (iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction; (v) all obligations of the type referred to in clauses (i) through
(iv) of any Persons for the payment of which such Person is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise, including
guarantees of such obligations; and (vi) all obligations of the type referred to
in clauses (i) through (v) of other Persons secured by any Lien on any property
or asset of such Person (whether or not such obligation is assumed by such
Person).
"INDEMNIFIED PARTY" shall have the meaning specified in
Section 8.6(a).
"INTELLECTUAL PROPERTY" means all domestic and foreign patents, utility
models, patent applications, trademarks, trademark registrations, servicemarks,
tradenames, tradename registrations, registered copyrights, applications for any
of the foregoing, and licenses with respect to the foregoing owned by Sellers or
any Sold Subsidiary that relate primarily to the Business (except as otherwise
provided by Section 5.16).
"INVENTORY" means all raw materials, work-in-process, finished goods,
merchandise, office and other supplies, parts, packaging materials and other
accessories related thereto which are held at, or are in transit from or to, the
Premises or located at other locations at which the Business is conducted, or
located at suppliers' premises, in each case, which are used or held for use by
any Seller or Sold Subsidiary in the conduct of the Business, including any of
the foregoing purchased subject to any conditional sales or title retention
agreement in favor of any other Person, together with all rights of any Seller
or Sold Subsidiary against suppliers of such inventories.
"INVESTMENTS" means all capital stock, partnership interests and other
equity interests owned by any Seller in any Person which is held primarily in
connection with the Business, including the capital stock, partnership interests
and other equity interests owned by any Seller in the Sold Subsidiaries, and all
capital stock, partnership interests and other equity interests owned by any
Sold Subsidiary in any Person (except as otherwise provided by Section 5.16).
Schedule 1.1(b) sets forth a list of all Investments.
"LABOR CONTRACT" shall have the meaning specified in Section
4.1(j)(ii).
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<PAGE> 17
"LAW" means, as to any Person, any foreign or United States federal,
state or local law, statute, code, ordinance, regulation, order, writ,
injunction, judgment or decree applicable to such Person and to the businesses
and assets thereof.
"LEASED REAL PROPERTY" means all real property leased by any Seller as
lessee and by any Sold Subsidiary as lessee and listed in Schedule 1.1(c).
"LESSEE LEASES" means all oral and written agreements (including all
amendments and supplements thereto) with or binding upon any Seller with respect
to the Business or any Sold Subsidiary with respect to the Leased Real Property.
"LESSOR LEASE SUBLEASE" shall have the meaning specified in
Section 4.1(c).
"LIABILITIES" means, as to any Person, all debts, adverse claims,
liabilities and obligations, direct indirect, absolute or contingent, known or
unknown, of such Person, whether accrued, vested or otherwise, whether in
contract, tort, strict liability or otherwise and whether or not actually
reflected, or required by GAAP to be reflected, in such Person's balance sheets
or other books and records.
"LIENS" means mortgages, liens, security interests, pledges, or
encumbrances, of any nature whatsoever.
"LOSSES" means any and all demands, claims, complaints, actions or
causes of action, suits, proceedings, investigations, arbitrations, assessments,
losses (including, except as provided in Section 8.4, loss of value), damages,
liabilities, obligations (including those arising out of any action, such as any
settlement or compromise thereof or judgment or award therein) and all costs and
expenses, including, without limitation, reasonable attorneys' and other
advisors' fees and disbursements reduced by recoveries under insurance policies
and Government Contracts and net Tax benefits as provided in Section 8.4.
"MATERIAL ADVERSE EFFECT" means an effect or change that is materially
adverse to the business, assets, financial condition or results of operations of
the Business taken as a whole.
"MATERIAL CONTRACT" shall have the meaning specified in
Section 4.1(j).
"MATERIAL LESSEE LEASE" shall have the meaning specified in
Section 4.1(g)(ii).
"MATERIAL SUBLEASE" shall have the meaning specified in
Section 4.1(c).
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<PAGE> 18
"MULTIEMPLOYER PLAN" shall have the meaning specified in
Section 5.5(m).
"NET ASSETS" shall have the meaning specified in Section
2.5(c).
"NEW FOREIGN RETIREMENT PLAN" shall have the meaning specified in
Section 5.5(o).
"NOMINEE SHARES" shall have the meaning specified in Section
3.2(c).
"NOTICE OF DISAGREEMENT" shall have the meaning specified in
Section 2.5(a).
"ORDINARY COURSE OF BUSINESS" means, with respect to any Seller or Sold
Subsidiary, actions taken in the ordinary course of business consistent with
past practices of such Seller or Sold Subsidiary in relation to the Business
since January 1, 1997.
"OWNED REAL PROPERTY" means all real property owned in fee by any
Seller or Sold Subsidiary and listed on Schedule 1.1(e).
"PENSION PLAN" means an "employee pension benefit plan" as such term is
defined in Section 3(2) of ERISA.
"PERMITS" means all permits, licenses, franchises, approvals, consents
and authorizations by or of any Governmental Authority that (i) are owned or
held by or otherwise have been granted to or for the benefit of any Seller and
that relate to the Business or any part thereof or to any of the Acquired Assets
or (ii) are owned or held by or otherwise have been granted to or for the
benefit of any Sold Subsidiary (except as otherwise provided by Section 5.16).
"PERMITTED LIENS" means (i) Liens expressly disclosed in Schedule
1.1(f) or in the Financial Statements or that secure Indebtedness that is
included in Assumed Liabilities and reflected as a liability on the Balance
Sheet, (ii) any progress payment Liens arising in the ordinary course of
business from progress payments made by the United States Government or any
agency thereof or any other Governmental Authority on Government Contracts that
are included in Assumed Liabilities and (iii) (A) mechanics', carriers',
workmen's, repairmen's and other like Liens arising or incurred in the Ordinary
Course of Business that are included in the Assumed Liabilities and are for
amounts not yet overdue or that are being contested in good faith by appropriate
proceedings, (B) Liens for Taxes, assessments and other governmental charges not
yet due and payable or Liens for Taxes, assessments and governmental charges
other than Income Taxes that may thereafter be paid without penalty or that are
being contested in good faith by appropriate proceedings and (C)
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<PAGE> 19
imperfections of title and other Liens that, individually or in the
aggregate, do not materially affect the value of the encumbered asset or the
continued use and operation of the encumbered asset in the Business.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization, other form
of business or legal entity or Governmental Authority.
"PLAN" means any plan, program, agreement or arrangement, whether or
not written, that is or was an "employee benefit plan" as such term is defined
in Section 3(3) of ERISA, whether or not subject to ERISA and whether or not
maintained in the U.S., and (a) which is maintained by Sellers or the Sold
Subsidiaries, (b) to which Sellers or the Sold Subsidiaries contribute or fund
or provide benefits; or (c) which provides or promises benefits to any person
who performs or who has performed services for Sellers or the Sold Subsidiaries
and because of those services is or has been (i) a participant therein or (ii)
entitled to benefits thereunder.
"POST-CLOSING TAX RETURNS" shall have the meaning specified
in Section 5.14(j).
"PRE-CLOSING TAX PERIOD" means any period ending on or before the
Closing Date in respect of which any Tax is payable and the portion ending on
the Closing Date of any such period that includes but does not end on the
Closing Date.
"PRE-CLOSING INCOME TAX RETURNS" shall have the meaning specified in
Section 5.14(i).
"PREMISES" means, collectively, the Owned Real Property and
the Leased Real Property.
"PROCESS CONTROL DIVISION" means the business unit of WEC that is
engaged in the business of supplying advanced industrial control and information
systems for nuclear and fossil-fueled power generation, water and wastewater
treatment, metals, mining, chemical and other process industry applications
worldwide.
"PROPERTY PLANS" shall have the meaning specified in Section
2.2(a)(xvi).
"PURCHASE PRICE ADJUSTMENT" shall have the meaning specified
in Section 2.5(b).
"PURCHASE PRICE" shall have the meaning specified in Section
2.4.
"PURCHASER ANCILLARY DOCUMENTS" shall have the meaning
specified in Section 4.2(b).
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"PURCHASER EXECUTIVE PLAN" shall have the meaning specified
in Section 5.5(h).
"PURCHASER FAS 106 PLANS" shall have the meaning specified in Section
5.5(f)(iii).
"PURCHASER PENSION PLAN" shall have the meaning specified in
Section 5.5(d)(i).
"PURCHASER TAX CONTROVERSIES" shall have the meaning
specified in Section 5.14(l).
"PURCHASER'S 401(K) PLAN" shall have the meaning specified
in Section 5.5(e).
"PURCHASER'S WORKERS COMPENSATION PROGRAM" shall have the meaning
specified in Section 5.5(l).
"RATE" shall have the meaning specified in Section 2.5(b).
"RELEASE" means any releasing, spilling, leaking, discharging,
disposing of, pumping, pouring, emitting, emptying, injecting, leaching, dumping
or allowing to escape and includes any "release" as defined in CERCLA or in
violation of any other Environmental Law.
"REMEDIAL ACTION" means any action to clean up, monitor, abate,
transport, remove, treat or in any other way address any Hazardous Substances
that is (i) required by any Environmental Law or (ii) reasonably required to
avoid or reduce actual or potential liability under any Environmental Law.
"RESTRICTED PERIOD" shall have the meaning specified in
Section 5.18(a)(i).
"RESTRICTIVE COVENANTS" shall have the meaning specified in
Section 5.18(b).
"REVISED SCHEDULE" shall have the meaning specified in
Section 5.5(f)(iv).
"SCHEDULES" means the disclosure schedules delivered by WEC
to Purchaser in connection herewith.
"SECOND-TIER ENVIRONMENTAL LOSSES" shall have the meaning
specified in Section 8.1(a).
"SECTION 338 ELECTIONS" shall have the meaning specified in
Section 5.14(c).
"SELLER ANCILLARY DOCUMENTS" shall have the meaning
specified in Section 4.1(b).
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"SELLER'S STRADDLE PERIOD TAXES" shall have the meaning specified in
Section 5.14(j)(ii).
"SELLERS" means, collectively, WEC and the Selling
Subsidiaries.
"SELLING SUBSIDIARY" means any Subsidiary of WEC having any right,
title or interest in, to, or under the Acquired Assets or any Liabilities
included in the Assumed Liabilities, but shall not include any Sold Subsidiary.
"SETTLEMENT AGREEMENTS" means those agreements described in
Schedule 1.1(g).
"SIEMENS PARENT" shall have the meaning provided in the
definition of Guarantors.
"SIGNIFICANT OWNED REAL PROPERTY" means any Owned Real Property (i)
having improvements thereon in excess of 75,000 square feet and/or (ii) being
the site of any manufacturing, design, management, warehouse, assembly,
distribution, research, marketing or other operation that, in any case, is
material to the operation of the Business as presently conducted.
"SOFC" shall have the meaning specified in Section 5.25.
"SOLD SUBSIDIARY" means any Subsidiary of WEC listed in Schedule 1.1(h)
under the caption "Sold Subsidiary".
"SPECIAL ENVIRONMENTAL LIABILITY" shall have the meaning
specified in Section 2.3(a)(v).
"STATEMENT" shall have the meaning specified in Section
2.5(a).
"STC" shall have the meaning specified in Section 5.25.
"STC PROGRAMS" shall have the meaning specified in Section
5.25.
"STEAM GENERATOR AGREEMENT" shall have the meaning specified
in Section 5.22.
"STRADDLE PERIOD TAX RETURNS" shall have the meaning specified in
Section 5.14(j).
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"SUBSIDIARY ASSETS" means all assets, properties, goodwill and rights
of the Sold Subsidiaries of whatever kind or nature, real or personal, tangible
or intangible, other than as contemplated by Section 5.16.
"SUBSIDIARY" means, as to any Person, another Person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such Person.
"SUPPLIES" shall have the meaning specified in Section
5.15(a).
"SURPLUS PROPERTY" shall have the meaning specified in
Section 2.2(b).
"TANGIBLE PROPERTY" shall have the meaning specified in
Section 4.1(r).
"TARGET AMOUNT" shall have the meaning specified in Section
2.5(b).
"TAXES" means all federal, state, local, foreign or other governmental
taxes, assessments, duties, fees, levies or similar charges of any kind,
including all income, profit, franchise, excise, property, use, intangibles,
sales, payroll, employment, withholding and other taxes, and including all
interest and penalties imposed with respect to such amounts.
"TAX CONTROVERSIES" shall have the meaning specified in
Section 5.14(l).
"TAX RETURN" means any return, report, form or other information filed
with any taxing authority with respect to Taxes.
"TECHNOLOGY" means all trade secrets, inventions, know-how, formulae,
processes, procedures, research records, records of inventions, test
information, market surveys and marketing know-how and unregistered copyrights
owned by any Seller or any Sold Subsidiary that relate primarily to the Business
except as otherwise provided by Section 5.16.
"THIRD PARTY CLAIM" shall have the meaning specified in
Section 8.6(a).
"THIRD-TIER ENVIRONMENTAL LOSSES" shall have the meaning
specified in Section 8.1(a).
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"TRANSFER TAXES" shall have the meaning specified in Section
5.14(d).
"TRANSITIONAL SERVICES AGREEMENT" shall have the meaning
specified in Section 5.19(a).
"WARN ACT" shall have the meaning specified in Section
5.5(d)(v).
"WEC EXECUTIVE PLAN" shall have the meaning specified in
Section 5.5(h).
"WEC FAS 106 PLANS" shall have the meaning specified in Section
5.5(f)(iii).
"WEC PENSION PLAN" shall have the meaning specified in
Section 5.5(d)(i).
"WEC TAX CONTROVERSIES" shall have the meaning specified in
Section 5.14(l).
"WEC SAVINGS PROGRAM" shall have the meaning specified in
Section 5.5(e).
"WELCO" means Westinghouse Electric Company as such term is used in the
Form 10 filed with the Securities and Exchange Commission on August 13, 1997.
SECTION 1.2 OTHER TERMS. Other terms may be defined elsewhere in the
text of this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
SECTION 1.3 OTHER DEFINITIONAL PROVISIONS.
(a) 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.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States
dollars.
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ARTICLE 2
SALE AND PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES
SECTION 2.1 PURCHASE AND SALE. Upon the terms and subject to the
conditions of this Agreement, at the Closing, WEC agrees to sell, assign,
transfer, convey and deliver to Purchaser all of WEC's right, title and interest
in, to and under the Acquired Assets and to cause each Selling Subsidiary to
sell, assign, transfer, convey and deliver to Purchaser all of such Selling
Subsidiary's right, title and interest in, to and under the Acquired Assets, in
each case free and clear of any Liens other than Permitted Liens, and Purchaser
agrees to purchase, acquire and accept from Sellers, all such right, title and
interest in, to and under the Acquired Assets.
SECTION 2.2 ACQUIRED ASSETS AND EXCLUDED ASSETS.
(A) ACQUIRED ASSETS. The term "ACQUIRED ASSETS" means the
business, properties, assets, goodwill and rights of Sellers of whatever kind
and nature, real or personal, tangible or intangible, other than the Excluded
Assets, primarily used or held for use in the Business, wherever located and
whether or not reflected on the Books and Records of the Sellers, as they exist
on the date hereof, with such changes, deletions or additions thereto as may
occur from the date hereof to the Closing Date consistent with the terms and
conditions of this Agreement, including, subject to Section 2.2(b):
(i) all Owned Real Property (and all easements and
rights-of-way appurtenant thereto) and all Leased Real Property;
(ii) all Inventory;
(iii) all Fixtures and Equipment, including the Fixtures and
Equipment referred to in Section 5.25;
(iv) all trade accounts receivable and all notes, bonds and
other evidences of indebtedness of and rights to receive payments
arising out of sales occurring in the conduct of the Business and the
security agreements related thereto, including any rights of any of the
Sellers with respect to any third party collection proceedings or any
other Actions or Proceedings which have been commenced in connection
therewith (the "ACCOUNTS RECEIVABLE");
(v) subject to the license to be granted pursuant to Section
5.9(a), all Intellectual Property;
(vi) subject to the license to be granted pursuant to Section
5.9(a), all Technology;
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(vii) subject to Section 2.2(c), all Permits;
(viii) subject to Sections 2.2(c) and 5.19(c), all Contracts;
(ix) subject to Section 2.2(c), all bids, quotations and
proposals for Contracts, whether oral or written, to which any of
Sellers is a party or by which any of Sellers is bound that relate
primarily to the Business;
(x) all Investments;
(xi) all Books and Records with respect to the Business,
except (A) to the extent relating to the Excluded Assets or the
Excluded Liabilities and (B) the materials described in Section
2.2(b)(vii);
(xii) subject to Section 2.2(c), all rights, claims and causes
of action to the extent relating to the Business or any of the Assumed
Liabilities or the Acquired Assets;
(xiii) all prepaid expenses, to the extent relating to the
Business;
(xiv) all motor vehicles owned or leased by the Sellers and
used or held for use primarily in the conduct of the Business;
(xv) all security deposits (A) deposited by or on behalf of
any Seller as lessee or sublessee under any of the Contracts or (B)
deposited with or paid to any Seller pursuant to any Contract;
(xvi) all site plans, surveys, soil and substratus studies,
architectural drawings, plans and specifications, engineering,
electrical and mechanical plans and studies, floor plans, landscape
plans, appraisals, feasibility studies, environmental studies and other
plans and studies of any kind if existing and in the possession or
subject to the control of any Seller relating to the Owned Real
Property or the Leased Real Property (collectively, "PROPERTY PLANS");
(xvii) all rights of any Seller under or pursuant to all
warranties, representations and guarantees made by suppliers,
manufacturers and contractors in connection with products sold to or
services provided to any Seller for the Business, or affecting the
property, machinery or equipment owned by Sellers or any Sold
Subsidiary and used in the conduct of the Business, or relating to the
Premises;
(xviii) (A) all insurance proceeds, and all rights to
insurance proceeds receivable in respect of any Assumed
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Liability insured on a "claims made" basis and (B) all insurance
proceeds, and all rights to insurance proceeds received or receivable
in respect of any loss or casualty with respect to any asset that will
be or would, if held by a Seller or a Sold Subsidiary on the Closing
Date, be an Acquired Asset;
(xix) all proceeds, net of any cost of disposition, from the
sale or other disposition after the date of this Agreement and prior to
the Closing Date of any asset that (A) is of a type permitted or
required by GAAP to be treated as a fixed asset on the books of the
Business and (B) but for such sale or other disposition prior to the
Closing would be an Acquired Asset;
(xx) all transferable telephone exchange numbers used in the
Business;
(xxi) the assets of the STC described in Section 5.25; and
(xxii) all assets described on Schedule 2.2(a), whether or not
related to the Business.
(B) EXCLUDED ASSETS. The term "EXCLUDED ASSETS" means:
(i) all cash on hand or in banks and all cash equivalents,
except any cash or cash equivalents (A) reflected on the Statement or
(B) described in Section 2.2(a)(xv)(B), (xviii) and (xix) or (C)
constituting security deposits deposited with or paid to any Sold
Subsidiary pursuant to any Contract;
(ii) all rights of Sellers under this Agreement and the
agreements, instruments and certificates delivered in connection with
this Agreement;
(iii) all records prepared in connection with the sale of the
Business, including bids received from third persons and analyses
relating to the Business (but not the Sellers' rights under any
confidentiality agreements with such bidders, which shall be included
in Acquired Assets);
(iv) except as provided in Section 2.3(a)(xviii), all rights
of Sellers under insurance policies;
(v) all rights, claims and causes of action relating to any of
the Excluded Liabilities or the Excluded Assets, including rights,
claims and causes of action under insurance policies relating thereto;
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(vi) all rights to claims, available to or being pursued by
Sellers or any Sold Subsidiary, for refunds of or credits against
Income Taxes (including all investment tax credits, research credits
and credits for prepayments of Income Taxes) attributable to the
Business for Pre-Closing Tax Periods;
(vii) any consolidated, combined, unitary or separate company
Tax Return relating to Income Taxes that includes any of Sellers or any
Sold Subsidiary, and records and work papers used in preparation
thereof;
(viii) all assets used primarily in the Government Operations
Business, the Energy Systems Business or the
Process Control Division;
(ix) all real property ("SURPLUS PROPERTY") owned, leased or
occupied by any Seller or Sold Subsidiary that is not listed on
Schedule 1.1(c) or 1.1(e) and all real property that is entirely or
substantially vacant, "mothballed" or held principally for remediation
or other risk management purposes including, without limitation, the
properties listed on Schedule 2.2(b)(ix);
(x) the stock of Westinghouse Electric S.A.;
(xi) subject to the license to be granted pursuant to Section
5.9(b), the names and marks "Westinghouse Electric Corporation",
"Westinghouse" and "Circle W" (in logotype design or any other style or
design), and any name or mark derived from or including any of the
foregoing);
(xii) all assets of the Sold Subsidiaries not used or held for
use primarily in the Business or which pursuant to Section 5.16 will be
transferred by the Sold Subsidiaries to other Subsidiaries of WEC in
the manner provided by Section 5.16;
(xiii) subject to the provisions of the Steam Generator
Agreement, all Settlement Agreements and rights of Sellers thereunder;
(xiv) subject to the Transitional Services Agreement and the
arrangements contemplated by Section 5.19(b), all assets used in
connection with or relating to WEC's corporate headquarters or
corporate activities that are provided to or managed for the benefit of
any of the Sellers or any of the Sold Subsidiaries; and
(xv) all assets identified in Schedule 2.2(b).
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(C) NONASSIGNABLE RIGHTS. Notwithstanding anything to the
contrary contained herein, but without limiting the rights and obligations of
the parties under the other provisions of this Agreement (including, without
limitation, Section 5.4), this Agreement shall not operate to assign any
Intellectual Property, Technology, Permit or Contract or any claim, right or
benefit arising thereunder or resulting therefrom if an attempted assignment
thereof, without the consent of any Person, would constitute a breach, default
or other contravention thereof or a violation of Law (it being understood that,
except as otherwise provided in Section 6.2(c), the failure to obtain such
consents shall not relieve either party from its obligation to consummate at the
Closing the transactions contemplated by this Agreement).
(D) TERMINATION OF RIGHTS OF SOLD SUBSIDIARIES.
Notwithstanding anything to the contrary in any agreement or otherwise, any
rights, express or implied, of any Sold Subsidiary to use any and all domestic
and foreign patents, patent applications, trademarks, trademark registrations,
servicemarks, trade names, registered copyrights and licenses with respect to
the foregoing and all trade secrets, inventions, know-how, formulae, processes,
procedures, research records, records of inventions, test information, market
surveys and marketing know-how and unregistered copyrights owned by Sellers
shall terminate at the Closing, except to the extent included in the
Intellectual Property or Technology and except as otherwise contemplated by
Section 5.9.
SECTION 2.3 ASSUMPTION OF LIABILITIES.
(A) ASSUMED LIABILITIES. Upon the terms and subject to the
conditions of this Agreement (including the indemnity provisions hereof),
Purchaser hereby agrees to assume, effective as of the Closing, and agrees to
pay, perform and discharge when due all of the following Liabilities of Sellers
(except Excluded Liabilities) arising out of, relating to or otherwise in
respect of the Acquired Assets, the Business or the operations of the Business
before, on or after the Closing Date (collectively, the "ASSUMED LIABILITIES"):
(i) all Liabilities of Sellers under the Contracts;
(ii) all accounts payable owed by Sellers arising out of
operations of the Business or otherwise in respect of the Business;
(iii) all Liabilities in respect of any and all products sold
by the Business (wherever the same may have been manufactured or
serviced by Sellers), including Liabilities for refunds, adjustments,
allowances, repairs, exchanges, returns and warranty, merchantability
and other claims;
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(iv) all Liabilities (other than Environmental Liabilities or
Liabilities otherwise arising by reason of any Release of Hazardous
Substances) arising as a result of being the owner or occupant of, or
the operator of the activities conducted at, (A) the Premises and (B)
any other real property owned, leased or operated at any time by the
Sellers and used in the Business, including all Liabilities relating to
personal injury and property damage;
(v) all Environmental Liabilities but only to the extent that
(A) they arise as a result of being the owner or occupant of, or the
operator of the activities conducted at, the Premises; (B) they relate
to the treatment, storage, transportation or disposal of Hazardous
Substances on, to or at a waste site, treatment site, disposal site or
other location after they were produced, generated, used or stored at
the Premises or (C) they relate to a Release of a Hazardous Substance
that occurred on property other than property of WEC or an Affiliate of
WEC, in connection with the conduct of the Business but not in
connection with the treatment, storage, transportation for treatment,
storage or disposal or disposal of the Hazardous Substance (an
Environmental Liability described in clause (C) of this paragraph (v)
is sometimes hereinafter referred to as a "Special Environmental
Liability");
(vi) all Liabilities relating to the employment or termination
of employment of any employee or former employee of the Business;
(vii) all Liabilities arising under or in connection with any
Plan or Benefit Arrangement;
(viii) all Liabilities for Taxes (other than Income Taxes for
Pre-Closing Tax Periods) attributable to the Business for all taxable
periods;
(ix) all Liabilities in respect of lawsuits, actions and
proceedings, pending or threatened, and claims, whether or not
presently asserted, arising out of, relating to or otherwise in any way
in respect of the Business, including, without limitation, those set
forth on Schedule 4.1(e);
(x) all Liabilities in respect of the STC, but only to the
extent provided in or contemplated by the arrangements described in
Section 5.25;
(xi) all Liabilities of Sellers arising out of, relating to or
otherwise in respect of the Acquired Assets, the Business or the
operations of the Business as of the Closing Date of the type reflected
on the Balance Sheet, including the notes thereto; and
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(xii) all Liabilities described on Schedule 2.3(a), whether or
not related to the Business.
(B) EXCLUDED LIABILITIES. Any provision of this Agreement to
the contrary notwithstanding (and without implication that Purchaser is assuming
any liability not expressly excluded and, where applicable, without implication
that any of the following have been included in the Assumed Liabilities), the
following liabilities (the "EXCLUDED LIABILITIES") of the Sellers and the Sold
Subsidiaries are excluded and shall not be assumed or discharged by Purchaser:
(i) any Liability of any Seller or any Sold Subsidiary (I) for
Income Taxes or for Pre-Closing Tax Periods that are attributable to
the Business or the Sold Subsidiaries or (II) for Taxes, other than
Income Taxes, payable by the Sold Subsidiaries (to the extent the Taxes
described in this clause (II) are not related to the Business) for
Pre-Closing Tax Periods, including (A) any Liability for Income Taxes
of any of the Sellers or any Sold Subsidiary pursuant to Treasury
Regulation Section 1.1502-6(a) or any comparable provision of state,
local or foreign law and (B) Taxes resulting from the sale and transfer
from WEC to Purchaser of the Acquired Assets (including Income Taxes
resulting from the Section 338 Elections), but Excluded Liabilities
shall not include (X) any Transfer Taxes for which Purchaser is liable
pursuant to Section 5.14(d) or (Y) any Taxes resulting from actions
with respect to the Sold Subsidiaries or the Acquired Assets taken by
Purchaser or its Affiliates after the Closing;
(ii) any Environmental Liabilities relating to real property
owned, leased or occupied at any time by any Seller or Sold Subsidiary
and not included in the Premises;
(iii) any Liabilities in respect of any claim, lawsuit, action
or proceeding before or after the Closing to the extent the same
directly pertain to any Excluded Asset or Excluded Liability;
(iv) any Excluded Asbestos Liabilities;
(v) any Liabilities relating to the capital stock of any
Seller or any shareholders' agreements to which any Seller is party;
(vi) any Liabilities relating to amounts required to be paid
by WEC pursuant to Section 2.4 or Section 2.5;
(vii) except for any Liabilities reflected on the Statement
and Liabilities contemplated by the agreements and arrangements
referred to in Sections 5.25 and 5.26, any Liabilities owed to any
Seller or any Affiliate of any Seller;
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(viii) any Liabilities in respect of any claim, lawsuit,
action or proceeding that is asserted or brought by any Governmental
Authority (in any criminal proceeding), before or after the Closing,
based on any actual or alleged criminal violation of Law occurring
prior to the Closing;
(ix) except as provided in Section 2.3(a)(v) (as limited by
Section 2.3(b)(iii)), any Liabilities arising out of or in respect of
(A) any Subsidiary sold or otherwise divested prior to the Closing, or
the business conducted by any such Subsidiary or (B) any divested
business or business unit;
(x) any Liabilities with respect to Plans and Benefit
Arrangements retained by WEC under Section 5.5; and
(xi) any other Liabilities not assumed by Purchaser pursuant
to the provisions of Section 2.3(a).
SECTION 2.4 PURCHASE PRICE. Subject to adjustment pursuant to Section
2.5, the purchase price for the Acquired Assets shall be $1,525,000,000 (the
"Purchase Price"), payable as set forth in Section 3.2(b), together with the
assumption of the Assumed Liabilities.
SECTION 2.5 PURCHASE PRICE ADJUSTMENT. (a) As promptly as practicable
and in any event within 90 days after the Closing Date, WEC shall at its expense
prepare and deliver to Purchaser (i) an audited balance sheet of the Business
(excluding the assets and liabilities of STC contemplated by Section 5.25) (the
"Closing Balance Sheet") as of the close of business on the Closing Date in
accordance with GAAP applied on a consistent basis with the Financial Statements
and (ii) an audited statement of Net Assets acquired (the "Statement of Net
Assets Acquired") setting forth the Closing Balance Sheet with adjustments to
eliminate assets not acquired and liabilities not assumed by Purchaser pursuant
to the Agreement to arrive at Net Assets Acquired. In addition, a statement (the
"Statement") will be prepared and audited setting forth the Net Assets Acquired
with adjustments to eliminate all noncurrent assets and all environmental
liabilities to arrive at Net Assets (as defined below) as of the close of
business on the Closing Date ("Closing Net Assets"), together with special
purpose reports of WEC's independent auditors to the effect that the Statement
of Net Assets Acquired and the Statement have been prepared and audited in
compliance with the requirements of this Section 2.5.
Purchaser shall cause the employees of the Business to assist
WEC in the preparation of the Closing Balance Sheet, the Statement of Net Assets
Acquired and the Statement and shall
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provide WEC and its independent auditors on-site access at all reasonable times
to the personnel, properties, books and records of the Business for such
purposes. Purchaser acknowledges that WEC shall have the primary responsibility
and authority for preparing the Closing Balance Sheet, the Statement of Net
Assets Acquired and the Statement.
During the 60-day period following Purchaser's receipt of the
Statement, Purchaser and its independent auditors shall be permitted to review
the working papers of WEC and its independent auditors relating to the
Statement. The Statement shall become final and binding upon the parties on the
60th day following delivery thereof, unless Purchaser gives written notice of
its disagreement with the Statement ("Notice of Disagreement") to WEC prior to
such date. Any Notice of Disagreement shall specify in reasonable detail the
nature of any disagreement so asserted, and only include disagreements based on
mathematical errors or based on Closing Net Assets not being calculated in
accordance with this Section 2.5. If a Notice of Disagreement complying with the
preceding sentence is received by WEC in the period specified, then the Closing
Net Assets set forth in the Statement shall be deemed adjusted as provided in
the Notice of Disagreement and that adjusted calculation shall become final and
binding upon the parties at 5:00 p.m., New York City time on the tenth (10th)
day following the date of receipt of the Notice of Disagreement, unless prior to
that time WEC shall have notified Purchaser in writing of its objection to the
Notice of Disagreement. In the event that WEC notifies Purchaser prior to 5:00
p.m., New York City time on the tenth (10th) day following the date of receipt
of the Notice of Disagreement of its objection to the Notice of Disagreement,
then the Statement as revised in accordance with the resolutions that result
from clause (I) or (II) below and the following paragraph shall become final and
binding upon the earlier of (I) the date WEC and Purchaser resolve in writing
any differences they have with respect to the matters specified in the Notice of
Disagreement or (II) the date any disputed matters are finally resolved in
writing by the Accounting Firm in accordance with the following paragraph.
During the 60-day period following the delivery of a Notice of
Disagreement that complies with the preceding paragraph, WEC and Purchaser 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 WEC and its independent auditors shall have reasonable on-site access
during normal business hours to the personnel, properties, books, records,
schedules, analyses and working papers of the Business and shall be permitted to
review and make copies reasonably required of the working papers of Purchaser or
its representatives and its independent auditors (if any) relating to the
preparation of the Notice of Disagreement. If, at the end of such 60-day period,
WEC and Purchaser have not so resolved such differences, WEC and Purchaser shall
submit to the
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Accounting Firm for review and resolution any and all matters which remain in
dispute and which were properly included in the Notice of Disagreement. WEC and
Purchaser shall use reasonable efforts to cause the Accounting Firm to render a
decision resolving the matters in dispute within 30 days following the
submission of such matters to the Accounting Firm. WEC and Purchaser 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. Except as specified in the following sentence, the cost of any
arbitration (including the fees and expenses of the Accounting Firm) pursuant to
this Section 2.5 shall be borne by WEC and Purchaser 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 expenses of WEC's independent auditors incurred in
connection with the issuance of their special purpose report relating to the
Statement and review of any Notice of Disagreement shall be borne by WEC, and
the fees and expenses of Purchaser's independent auditors incurred in connection
with their review of the Statement shall be borne by Purchaser.
(b) The Purchase Price shall be increased by the amount by
which Closing Net Assets, as adjusted in accordance with Section 2.5(a), exceeds
the sum of the Target Amount (as defined below) plus $25,000,000, and the
Purchase Price shall be decreased by the amount by which Closing Net Assets (as
so adjusted) is less than the sum of the Target Amount plus $25,000,000 (the
Purchase Price as so increased or decreased shall hereinafter be referred to as
the "Adjusted Purchase Price"). The Target Amount shall be $490,000,000. If the
Purchase Price is less than the Adjusted Purchase Price, Purchaser shall, and if
the Purchase Price is greater than the Adjusted Purchase Price, WEC shall,
within 10 business days after the Statement becomes final and binding upon the
parties, make payment to the other party by wire transfer in immediately
available funds of the amount of such difference, together with interest thereon
at the three-month treasury bill rate (as reported by The Wall Street Journal
or, if not reported thereby, by another authoritative source) in effect on the
Closing Date plus .25% (the "RATE"), calculated on the basis of the actual
number of days elapsed over 365, from the Closing Date to the date of actual
payment, compounded annually. Notwithstanding the foregoing provisions of this
Section 2.5, if the Statement delivered by WEC pursuant to Section 2.5(a) and
any Notice of Disagreement delivered by Purchaser pursuant to Section 2.5(a)
both reflect a calculation of Closing Net Assets that if correct would require a
payment by the same party, then within 10 days after delivery of the Notice of
Disagreement that party shall make a payment to the other, in the manner and
with interest as provided elsewhere in this Section 2.5(b), in an amount equal
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to the lesser of (i) the amount payable by that party pursuant to the
calculation reflected in the Statement and (ii) the amount payable by that party
pursuant to the calculation reflected in the Notice of Disagreement. Any amount
paid pursuant to the preceding sentence shall be applied against, and
correspondingly reduce, the amount otherwise payable under this Section 2.5(b).
(c) The term "Net Assets" shall mean all current assets
(except that amounts received by Purchaser at the Closing pursuant to Section
2.2(a)(xviii) and (xix) will be excluded) minus all liabilities of the Business
other than environmental liabilities. All assets and liabilities included in the
Closing Balance Sheet, the Statement of Net Assets Acquired and the Statement
shall be in accordance with GAAP and determined in the same way, using the same
accounts, accounting methods, accounting practices, assumptions (including
discount rates and actuarial assumptions), policies, valuations and estimation
methodologies and judgments as used in determining the Target Amount as set
forth in Schedule 2.5(c). In calculating the Closing Net Assets, no changes will
be made in any account except to reflect specific identifiable events, facts and
circumstances (other than any such events relating to or arising as a result of
the announcement of the transactions contemplated by this Agreement or events
already taken into account in establishing the Target Amount) occurring between
June 30, 1997 and the Closing Date.
In calculating Closing Net Assets, no changes will be made in
any contract estimate at completion except to reflect specific identifiable
events, facts and circumstances (other than any such events relating to or
arising as a result of the announcement of the transactions contemplated by this
Agreement or events already taken into account in establishing the Target
Amount) occurring between June 30, 1997 and the Closing Date. The parties agree
that the adjustment contemplated by this Section 2.5 is intended to show the
change in Net Assets from the Target Amount, and that such change may only be
measured if the calculation is done in accordance with the preceding sentence.
The scope of the disputes to be resolved by the Accounting Firm is limited to
whether such calculations were done in accordance with the foregoing provisions
of this Section 2.5 and whether there were mathematical errors in the Statement.
(d) Purchaser agrees that following the Closing it shall not
take any actions which would affect preparation and audit of the Closing Balance
Sheet, the Statement of Net Assets Acquired and the Statement with respect to
the accounting books and records of the Business on which the Closing Balance
Sheet, the Statement of Net Assets Acquired and the Statement are to be based
that are not consistent with past practices. Purchaser shall cause the employees
of the Business to cooperate in the preparation of the Statement, including
providing customary certifications, including management representation letters,
to WEC's independent auditors.
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(e) During the period of time from and after the Closing Date
through the resolution of any adjustment to the Purchase Price contemplated by
this Section 2.5, Purchaser shall cause the employees of the Business to afford
to WEC and any accountants, counsel or financial advisers retained by WEC in
connection with any adjustment to the Purchase Price contemplated by this
Section 2.5 on-site access at all reasonable times to all Business personnel,
properties, books, contracts, records, schedules, analyses and working papers.
ARTICLE 3
THE CLOSING
SECTION 3.1 CLOSING DATE. The Closing shall take place at the offices
of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, at
10:00 a.m. on a date specified by WEC that is not earlier than five (5) and not
later than ten (10) days following the satisfaction or waiver of the condition
to the Closing set forth in Section 6.1(a), or, if the other conditions to the
Closing set forth in Article 6 shall not have been satisfied or waived by such
date, as soon as practicable after such conditions shall have been satisfied or
waived.
SECTION 3.2 TRANSACTIONS TO BE EFFECTED AT THE CLOSING. At the Closing:
(A) DELIVERIES BY SELLERS. WEC shall deliver (and cause any
Selling Subsidiaries to deliver) to Purchaser such appropriately executed deeds,
bills of sale, assignments, declarations, memoranda of assignment, certificates,
affidavits and other instruments of transfer providing for the sale, assignment,
transfer, conveyance and delivery of the Acquired Assets and the consummation of
the transactions contemplated by this Agreement, in form and substance
reasonably satisfactory to Purchaser and its counsel (it being understood that
any such instrument shall not provide for any representations or warranties or
any Liabilities that are not otherwise expressly provided for in this
Agreement), together with resignations as director of each director of each Sold
Subsidiary if requested by Purchaser.
(B) DELIVERIES BY PURCHASER. Purchaser shall deliver to WEC
(or, at WEC's direction, one or more Selling Subsidiaries) (i) by wire transfer
at the Closing to an account designated in writing (at least three Business Days
prior to the Closing by WEC) of immediately available funds in an amount equal
to the Purchase Price and (ii) such appropriately executed assumption agreements
and other instruments of assumption providing for the assumption of, and
indemnification against, the Assumed
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Liabilities in form and substance reasonably satisfactory to WEC and its counsel
(it being understood that any such instrument shall not provide for any
representations or warranties or any Liabilities that are not otherwise
expressly provided for in this Agreement).
(C) NOMINEE SHARES. At the Closing, or as promptly thereafter
as possible, with respect to any Sold Subsidiaries as to which directors or
other nominees of WEC or any of its Subsidiaries (other than one of the Sold
Subsidiaries) own shares of capital stock for the purpose of satisfying
requirements of Law (such shares, "Nominee Shares") , WEC shall cause the
applicable Selling Subsidiary to take all necessary or appropriate steps to
effect the transfer of the Nominee Shares to new directors or other nominees
designated by Purchaser as, when and to the extent permitted by Law.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF WEC. WEC hereby
represents and warrants to Purchaser as follows:
(A) ORGANIZATION, STANDING AND POWER. WEC is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the requisite corporate power and authority
to own the Acquired Assets owned by it and to carry on the Business as now being
conducted. Each Sold Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has the requisite corporate power and authority to own its assets and to
carry on its business as now being conducted.
(B) AUTHORITY. WEC has the requisite corporate power and
authority to execute, deliver and perform this Agreement. Sellers have the
requisite corporate power and authority to execute, deliver and perform the
agreements to be entered into by them at the Closing pursuant hereto (the
"SELLER ANCILLARY DOCUMENTS") and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of WEC, and, in the case of the
Seller Ancillary Documents, will be authorized by all necessary corporate action
on the part of the Selling Subsidiaries prior to the Closing, and do not and
will not require the approval of the stockholders of WEC. This Agreement has
been duly executed and delivered by WEC and constitutes, and each Seller
Ancillary Document to be entered into by any of Sellers will be duly executed
and delivered at the
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Closing and when so executed and delivered will constitute, its legal, valid and
binding obligation enforceable against it in accordance with its terms. The
execution and delivery of this Agreement by WEC do not, and the execution and
delivery by Sellers of the Seller Ancillary Documents, the consummation by
Sellers of the transactions contemplated hereby and thereby and the compliance
by Sellers with the terms hereof and thereof will not, conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation (except, to the extent provided in any such
program or plan, any acceleration of vesting under the Westinghouse Savings
Program or under any Pension Plan or long-term incentive plan) or to loss of a
material benefit under, or result in the creation of any Lien upon any of the
Acquired Assets under, any provision of (i) the Business Corporation Law of the
Commonwealth of Pennsylvania, (ii) the certificate of incorporation or by-laws
(or comparable organizational documents) of any of Sellers or the Sold
Subsidiaries, (iii) except as disclosed on Schedule 4.1(b), any Intellectual
Property, Technology or Contract or (iv) subject to the filings and other
matters referred to in the following sentence, any Law applicable to Sellers,
the Sold Subsidiaries, the Acquired Assets or the Subsidiary Assets, other than,
in the case of clauses (iii) and (iv) above, any such conflicts, violations,
defaults, rights or Liens that, individually or in the aggregate, would not (A)
reasonably be expected to materially reduce the benefits to Purchaser of the
transactions contemplated by this Agreement or (B) materially impair the ability
of WEC to perform its obligations under this Agreement. No consent, approval,
license, permit, order or authorization of, or registration, declaration or
filing with, any Governmental Authority is required to be obtained or made by or
with respect to Sellers, the Sold Subsidiaries, the Acquired Assets or the
Subsidiary Assets in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except as
disclosed on Schedule 4.1(b) and for (i) compliance with and filings under the
HSR Act, (ii) voluntary notification under the Exon-Florio Amendment, (iii)
filings and approvals under foreign laws, including, without limitation, Canada
and Germany, (iv) compliance with and filings under the Exchange Act, (v)
consents or novations which may be required for the assignment of any
Intellectual Property, Technology or Contract as contemplated in Section 5.4,
(vi) compliance with, and notices and filings under, environmental permits,
statutes and regulations, (vii) those that may be required solely by reason of
Purchaser's (as opposed to any other Person's) participation in the transactions
contemplated hereby and (viii) those the failure of which to obtain or make,
individually or in the aggregate, would not (A) reasonably be expected to
materially reduce the benefits to Purchaser of the transactions contemplated by
this Agreement or (B) materially impair the ability of WEC to perform its
obligations under this Agreement.
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(C) FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. (i) WEC has
previously delivered to Purchaser (A) the audited combined balance sheet and
related statements of income and cash flows of "Welco" as of and for the fiscal
year ended December 31, 1996, together with the notes to such financial
statements; (B) the condensed unaudited balance sheet (the "Balance Sheet") and
related statement of loss of the Business as of and for the six months ended
June 30, 1997, together with notes to such financial statements and (C) the
audited balance sheet and related statement of income as of and for the fiscal
year ended December 31, 1996 of the Business and included in the combining
balance sheet and combining statement of income which comprise "Welco" at such
date (the financial statements described in clauses (A), (B) and (C) are
collectively, the "FINANCIAL STATEMENTS"). Copies of the Financial Statements
are attached hereto as Schedule 4.1(c)(i). The Financial Statements have been
prepared from the books and records of WEC and its Subsidiaries relating to
"Welco" and the Business and, except as described in the notes thereto or
independent auditors' report thereon, or otherwise indicated in the Financial
Statements, have been prepared in accordance with GAAP consistently applied and
present fairly, in all material respects, the financial position, results of
operations and cash flows of "Welco" and the Business as at the applicable dates
and for the periods indicated, subject, in the case of the interim financial
statements, to normal year-end adjustments (the principal elements of such
annual year-end adjustments include revised pension and OPEB market valuations
of assets and obligations and actuarial studies and deferred income tax
true-ups).
(ii) Except (A) as disclosed, recorded or reserved
against in the Balance Sheet and the notes thereto, (B) for items set forth in
Schedule 4.1(c)(ii), (C) for Liabilities incurred in the Ordinary Course of
Business since the date of the Balance Sheet, (D) for Liabilities required to be
incurred pursuant to this Agreement and the transactions contemplated hereby and
(E) for Income Taxes, there is no material liability related to the Business and
none of the Sold Subsidiaries has any material liabilities, in each case of a
nature required to be reflected on a balance sheet prepared in accordance with
GAAP.
(iii) All Accounts Receivable reflected on the
Balance Sheet and all Accounts Receivable that have arisen since the date of the
Balance Sheet, (A) have arisen from bona fide sales transactions in the Ordinary
Course of Business, and (B) represent valid and binding obligations due to the
Sellers or Sold Subsidiaries, and are enforceable in accordance with their terms
(subject to the Bankruptcy Exception). Schedule 4.1(c)(iii) lists any obligor
which together with all of its Affiliates owed, as of June 30, 1997, amounts
billed and uncollected by Sellers and the Sold Subsidiaries in an aggregate
amount of $5,000,000 or more. All the Inventory consists of a quality and
quantity
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usable and salable in the Ordinary Course of Business consistent with
past practice, subject to normal and customary allowances in the industry for
damage and outdated items.
(iv) The order backlog information of the Business at
the date of the Balance Sheet set forth on Schedule 4.1(c)(iv) is true and
correct in all material respects. The orders comprising the backlog of the
Business reflect bona fide transactions entered into in the Ordinary Course of
Business.
(D) COMPLIANCE WITH APPLICABLE LAWS. Except as set forth on
Schedule 4.1(d), Sellers and the Sold Subsidiaries are in compliance and have
complied, in each case in all material respects, with all Laws which relate to
the Business and the Acquired Assets. Except as set forth in Schedule 4.1(d),
since January 1, 1996, neither Sellers nor the Sold Subsidiaries have (i)
received any written notice alleging any non-compliance in any material respect
with any such Laws or (ii) received any written notice of any criminal or
material administrative or civil investigation or audit by any Governmental
Authority relating to the Business. This Section 4.1(d) does not relate to labor
and employment matters (to which Section 4.1(q) is applicable), employee
benefits matters (to which Section 4.1(m) is applicable), Environmental Laws (to
which Section 4.1(n) is applicable) or Tax matters (to which Section 4.1(o) is
applicable).
(E) LITIGATION; DECREES. Schedule 4.1(e) sets forth a list as
of the date of this Agreement of all pending lawsuits, actions and proceedings
that, if pending on the Closing Date, would be included in Assumed Liabilities.
Except as set forth in Schedule 4.1(e), and without regard to actions or claims
brought as a result of implementing the Announcement (defined in Section
5.5(d)(v), there is no lawsuit, action or proceeding pending, or, to WEC's
knowledge, threatened, against any of Sellers or the Sold Subsidiaries relating
to the Business which if adversely determined would reasonably be expected to
materially reduce the benefits to Purchaser of the transactions contemplated by
this Agreement. None of Sellers or any Sold Subsidiary is in default in any
material respect under any judgment, order, injunction or decree of any
Governmental Authority or arbitrator entered against any of Sellers or the Sold
Subsidiaries and relating to the Business.
(F) TITLE TO ACQUIRED ASSETS. Sellers have, and will transfer
to Purchaser at the Closing, good and valid title to the Acquired Assets, and
the Sold Subsidiaries have, and will continue at the Closing to have, good and
valid title to the Subsidiary Assets, in each case free and clear of all Liens,
except Permitted Liens. This Section 4.1(f) does not relate to Intellectual
Property or Technology (to which Section 4.1(h) is applicable) or the Owned Real
Property (to which Section 4.1(g) is applicable).
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(G) REAL PROPERTY.
(i) OWNED REAL PROPERTY. Schedule 1.1(e) is in all
material respects a true, complete and correct list, as of the date hereof, of
the street addresses and square footage of improvements on each Owned Real
Property. The Owned Real Property constitutes all real property or interests in
real property owned in fee by Sellers or the Sold Subsidiaries (other than any
Excluded Assets) and primarily used in the operation of the Business as
presently conducted. None of the Owned Real Property is Surplus Property. Each
Seller and Sold Subsidiary has, and will continue at the Closing to have, good
and insurable fee title to all Owned Real Property owned by it free and clear of
all Liens and other encumbrances or limitations on title other than (A)
Permitted Liens, (B) easements, covenants, rights-of-way and other restrictions
of record, (C) any conditions that a current, accurate survey or physical
inspection of any Owned Real Property may show, (D) zoning, building and other
similar restrictions, (E) unrecorded easements or rights-of-way and (F) Liens
that have been placed by any developer, landlord or other Person (other than
Sellers or the Sold Subsidiaries) on Property (other than Owned Real Property)
over which any of Sellers or the Sold Subsidiaries has easement rights, none of
which items set forth in clauses (B), (C), (D), (E) or (F) above, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect and, with respect to any Significant Owned Real Property (which for
purposes of this representation and warranty shall also include any Leased Real
Property that (x) is the subject of a sale/leaseback or similar arrangement in
which any Seller or Sold Subsidiary is the primary occupant of the property
demised thereunder and (y) would constitute, were it an Owned Real Property, a
Significant Owned Real Property), none of which items set forth in clauses (B),
(C), (D), (E) or (F) would materially impair the continued use and operation
thereof for the same uses and operations as those conducted at the present time
or grant to any party any option or right to acquire or lease a material portion
thereof. Except as set forth in Section 5.8, no brokerage or finders commissions
shall be payable by Purchaser in connection with the conveyance of the Owned
Real Property to Purchaser. No material portion of any of the Owned Real
Property is leased by Sellers or the Sold Subsidiaries to any Person.
(ii) LEASED REAL PROPERTY. Schedule 1.1(c) is in all
material respects a true, complete and correct list of all Leased Real Property.
WEC shall provide Purchaser a list of all Lessee Leases not later than 20
Business Days following the date of this Agreement. The Leased Real Property
constitutes all real property leased by any Seller or Sold Subsidiary as Lessee
(other than the Excluded Asset) and primarily used in the operation of the
Business as presently conducted. None of the Leased Real Property is Surplus
Property. With respect to each
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Lessee Lease for premises larger than 25,000 square feet of rentable space (each
a "MATERIAL LESSEE LEASE"): (A) each such lease is valid and subsisting and in
full force and effect as against the Seller or the Sold Subsidiary therein
designated and, to the best of Sellers' knowledge, as against the landlord, and
has not been amended, modified or supplemented except as set forth in Schedule
1.1(c) or in a manner which would not reasonably be expected to materially
reduce the benefits to Purchaser of the transactions contemplated by this
Agreement; (B) no notice of a material default has been sent or received by any
Seller or Sold Subsidiary under any Material Lessee Lease which remains uncured
and, to the best of Sellers' knowledge, no event has occurred and is continuing
which, with notice or lapse of time or both, would constitute a material default
by any Seller or Sold Subsidiary under any Material Lessee Lease; and (C) the
tenant is in occupancy of the space demised thereunder.
(iii) SIGNIFICANT OWNED REAL PROPERTY. With respect
to each Significant Owned Real Property (which for purposes of this
representation and warranty shall also include any Leased Real Property that is
the subject of a sale/leaseback or similar arrangement in which any Seller or
Sold Subsidiary is the primary occupant of the property demised thereunder):
(A) WEC has no knowledge that any condemnation or
eminent domain proceedings are pending with respect to any Significant Owned
Real Property; (B) each Significant Owned Real Property is an independent unit
that does not rely in any material respect on any facilities located on any
property not included in such Significant Owned Real Property to fulfill any
municipal or governmental requirement or for the furnishing to such Significant
Owned Real Property or any essential building systems or utilities, other than
facilities provided to the Significant Owned Real Property pursuant to one or
more valid easements; and (C) each Significant Owned Real Property has access to
a dedicated, public street, either by reason of such Significant Owned Real
Property abutting a dedicated,public street or by way of good and insurable
appurtenant easement(s), and such access is adequate for the present use and
operation thereof. No real estate tax certiorari proceedings are currently
pending with respect to any Significant Owned Real Property.
(iv) SUBLEASES AFFECTING LEASED REAL PROPERTY.
Schedule 4.1(g)(iv) sets forth in all material respects a true, complete and
correct list of all oral or written subleases (including all amendments and
supplements thereto) demising space leased under a Lessee Lease (each a "Lessee
Lease Sublease"). with respect to each Lessee Lease Sublease for premises larger
than 15,000 square feet of rentable space (each a "Material Sublease"): (A) each
such sublease is valid and subsisting and in full force and effect as against
the Seller or the Sold Subsidiary therein designated and, to the best of
Sellers' knowledge, as against the subtenant, and has not been
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amended, modified or supplemented expect as set forth in Schedule 4.1(g)(iv);
and (B) no notice of a material default has been sent or received by any Seller
or Sold Subsidiary under any Material Sublease which remains uncured and, to the
best of Seller's knowledge, no event has occurred and is continuing which, with
notice or lapse of time or both, would constitute a material default by any
Seller or Sold Subsidiary under any Material Sublease.
(H) INTELLECTUAL PROPERTY AND TECHNOLOGY. Schedule 4.1(h)(i)
sets forth a list, as of the date of this Agreement, of all material patents,
patent applications, registered trademarks, trademark applications, registered
servicemarks, servicemark applications, registered copyrights and copyright
applications owned by the Sellers that relate primarily to the Business or owned
by a Sold Subsidiary (except as otherwise provided by Section 5.16) and included
in the Acquired Assets and the Subsidiary Assets and, to the extent indicated on
such Schedule, such Intellectual Property has been duly registered in, filed in
or issued by the United States Copyright Office or the United States Patent and
Trademark Office, the appropriate offices in the various states of the United
States and all appropriate offices of all other jurisdictions. Except as set
forth on Schedule 4.1(h)(ii), a Seller or a Sold Subsidiary is the sole and
exclusive owner of all material Intellectual Property (other than licenses) and
material Technology, free and clear of all Encumbrances or Liens (other than
Permitted Liens). Except as set forth on Schedule 4.1(h)(iii), since January 1,
1994, no Seller or Sold Subsidiary has received any written notice from any
other Person challenging the right of Sellers or the Sold Subsidiaries to use
any of the material Intellectual Property or material Technology or any rights
thereunder. Sellers have taken measures, consistent with Sellers' corporate
practice, to protect the secrecy, confidentiality and value of the Technology
and to avoid infringement and misappropriation of the Intellectual Property. To
Seller's knowledge and except as set forth on Schedules 4.1(h) (iii); (iv); (v)
and (vi), the Intellectual Property and the Technology included in the Acquired
Assets together with Purchaser's rights under the Shared Technology Agreement
are all the intellectual property rights and rights in technology required for
Purchaser to run the Business after Closing in the manner in which it presently
is operated. Except as set forth on Schedule 4.1(h)(iv), since January 1, 1994,
no Seller or Sold Subsidiary has made any claim in writing of a violation,
infringement, misuse or misappropriation by others of their rights to or in
connection with any material Intellectual Property or material Technology, which
claim is still pending. Except as set forth on Schedule 4.1(h)(v), to WEC's
knowledge, as of the date of this Agreement, there is no pending or threatened
claim by any third Person of a material violation, infringement, misuse or
misappropriation by any Seller or Sold Subsidiary of any material Intellectual
Property or Technology owned by any third Person, or of the invalidity of any
patent which is part of
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Intellectual Property, reasonably likely to be adversely determined, and which
if adversely determined would reasonably be expected to result (individually or
in the aggregate) in a material reduction in the benefits to Purchaser of the
transactions contemplated by this Agreement. Except as set forth on Schedule
4.1(h)(vi), there are no interferences or other contested proceedings, either
pending or, to the knowledge of WEC, threatened, in the United States Copyright
Office, the United States Patent and Trademark Office or any Governmental
Authority relating to any pending application with respect to any Intellectual
Property.
(I) INSURANCE. Schedule 4.1(i) sets forth a list and brief
description (specifying the insurer, the policy number or covering note number
with respect to binders and the amount of any deductible, and the aggregate
limit, if any, of the insurer's liability thereunder) of all policies or binders
of fire, liability, errors and omissions, workers' compensation, vehicular,
unemployment and other insurance held by or on behalf of Sellers with respect to
the Acquired Assets and the Business. Such policies and binders are valid and
enforceable in accordance with their terms in all material respects (subject to
the Bankruptcy Exception), and, as of the date hereof, are in full force and
effect. None of the Sellers is in default with respect to any material provision
contained in any such policy or binder or has failed to give any material notice
or present any material claim under any such policy or binder. As of the date
hereof, none of Sellers has received any notice of cancellation or non-renewal
of any such policy or binder.
(J) CONTRACTS. Except for the Contracts listed on Schedule
4.1(j), none of Sellers or the Sold Subsidiaries is a party to or bound by any
Contract (each, a "Material Contract") relating to the Business that is:
(i) a Contract for the employment of any Person with
an annual base salary in excess of $100,000;
(ii) any collective bargaining agreement relating to
Business Employees and any other Contract with any labor union (each, a
"Labor Contract");
(iii) other than Contracts in the Ordinary Course of
Business for the purchase or sale of products or services from or to
the Business, a Contract with (A) WEC or any of its Subsidiaries, other
than a Sold Subsidiary or (B) with any current or former director or
officer of WEC or any of its Subsidiaries, or any Affiliate of any such
Person, that will not be terminated at or prior to the Closing;
(iv) other than letters of credit, bonds and similar
instruments obtained in the Ordinary Course of Business, and
intercompany Indebtedness that will not
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constitute Assumed Liabilities, an indenture, note, loan or credit
agreement or other Contract relating to (A) the borrowing of money in
an amount in excess of $1,000,000 by any of Sellers or the Sold
Subsidiaries or (B) the direct or indirect guarantee or assumption by
any of Sellers or the Sold Subsidiaries of the obligations of any other
Person (other than one of Sellers or the Sold Subsidiaries) for
borrowed money in an amount in excess of $1,000,000;
(v) a covenant not to compete (other than those
contained in project-related teaming, consortium or similar agreements
with respect to the project that is the subject of such agreement,
customary covenants contained in distributor agreements and those
covenants of which the Business is the beneficiary in employee-related
agreements)
(vi) a lease or similar agreement under which (A) any
of Sellers or a Sold Subsidiary is a lessee of, or holds or operates,
any real property owned by any third Person for an annual rent in
excess of $100,000 or (B) any of Sellers or a Sold Subsidiary is a
lessor of, or makes available for use by any third Person, any real
property owned or held as lessee by Sellers or a Sold Subsidiary for an
annual rent in excess of $250,000;
(vii) a lease or similar agreement under which (A)
any of Sellers or a Sold Subsidiary is lessee of, or holds or uses, any
machinery, equipment, vehicle or other tangible personal property owned
by any third Person for an annual rent in excess of $50,000 or (B) any
of Sellers or a Sold Subsidiary is a lessor of, or makes available for
use by any third Person, any tangible personal property owned
(including ownership for Tax purposes) by Sellers or a Sold Subsidiary
having a fair market value in excess of $50,000;
(viii) a Contract (including purchase orders),
involving the obligation of Sellers or a Sold Subsidiary to purchase
products or services for payment by Sellers or a Sold Subsidiary of
more than $1,000,000 (unless terminable by one of Sellers or a Sold
Subsidiary without payment or penalty of not more than $250,000 upon no
more than 60 days' notice);
(ix) a Contract providing for the formation of a
joint venture, long-term alliance or partnership;
(x) a Contract for the sale of any of their assets or
properties (other than sales orders) or for the grant to any Person of
any preferential rights to purchase any of its assets or properties, in
each case in an amount exceeding $250,000;
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(xi) any take-or-pay or requirements Contract or any
other Contract requiring any Seller or Sold Subsidiary to pay
regardless of whether products or services are received;
(xii) a Contract relating to the acquisition by any
Seller or Sold Subsidiary of any operating business or the capital
stock of any other Person;
(xiii) a Contract made outside the Ordinary Course of
Business relating to any Seller or Sold Subsidiary and involving an
amount in excess of $1,000,000;
(xiv) a material license or development agreement;
(xv) a Contract (not included in the backlog
described in Section 4.1(c)(iv)) with a customer for the granting of
material discounts or other material concessions (other than volume
discounts).
The term "Material Contracts" also includes the twenty (20)
largest (measured by unfilled order balance as of June 30, 1997) Contracts
(including sales orders) involving the obligation of Sellers or a Sold
Subsidiary to deliver products or services. Such Contracts are listed on
Schedule 4.1(j)(xvi). All of the Material Contracts are (or in the case of the
Material Contracts referred to in Schedule 4.1(j)(xvi), were as of June 30,
1997) valid, subsisting, in full force and effect and binding upon the Sellers
or Sold Subsidiaries that are named as parties thereto and, to the best
knowledge of WEC, the other parties thereto in accordance with their terms,
subject to the qualifications that enforcement of the rights and remedies
created thereby is subject to: (A) bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and (B) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law)
(clauses (A) and (B) being referred to herein collectively as the "BANKRUPTCY
EXCEPTION") and each of the respective Sellers or Sold Subsidiaries has
satisfied in full or provided for all of its liabilities and obligations
thereunder requiring performance prior to the date hereof in all material
respects, is not in default in any material respect under any of them, nor does
any condition exist that with notice or lapse of time or both would constitute
such a material default. To the best knowledge of WEC, no other party to
any such Material Contract is in default in any material respect thereunder, nor
does any condition exist that with notice or lapse of time or both would
constitute such a material default. This paragraph does not relate to real
estate matters (to which Section 4.1(g) is applicable).
(K) SUFFICIENCY OF ACQUIRED ASSETS. The Acquired Assets
comprise all the assets owned by Sellers that, together
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with the Subsidiary Assets, and the rights of Purchaser under the Purchaser
Ancillary Documents are (i) necessary for or (ii) presently used to a material
extent in the conduct of the Business in all material respects as presently
conducted.
(L) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in the Schedules hereto or as contemplated by this Agreement, from the date of
the Balance Sheet Sellers have conducted the Business in all material respects
only in the Ordinary Course of Business. Except as set forth in Schedule 4.1(1),
and except for changes (A) relating to or resulting from seasonal changes or
that generally affect to the same extent all participants in the industries in
which the Business operates, (B) relating to or resulting from the public
announcement of the transactions contemplated by this Agreement, or (C) relating
to the identity of the Purchaser or relating to or resulting from actions taken
by Purchaser following the date of this Agreement, since the date of the Balance
Sheet there has been no event or change that has had, or would reasonably be
expected to have, Material Adverse Effect.
(M) EMPLOYEE BENEFITS. (i) Schedule 4.1(m)(i) contains a list
of each Plan and each material Benefit Arrangement in each case currently
maintained or contributed to by Sellers or their Affiliates on behalf of
Business Employees who are or were employed in the United States and, to the
knowledge of WEC, each material Plan and Benefit Arrangement maintained or
contributed to by Sellers or their Affiliates outside the United States on
behalf of Business Employees who are employed outside the United States
("FOREIGN PLANS"). Each Plan, Benefit Arrangement and Foreign Plan which is
currently maintained or contributed to by Sellers or their Affiliates solely on
behalf of the Business (each, a "FREE-STANDING PLAN") is so indicated on
Schedule 4.1(m)(i).
(ii) With respect to the Westinghouse Savings
Program, the Free-Standing Plans and any other Plan or Benefit Arrangement for
which Purchaser is assuming liability (the "Business Plans") (but only to the
extent such liability is being assumed):
(A) To the "Knowledge" (as defined below) of Sellers,
except as disclosed in Schedule 4.1(m)(ii)(A), there is no investigation by any
Governmental Authority, termination proceeding or other claim, action or
arbitration (except claims for benefits payable in the normal operation of the
Plans), or suit or proceeding against or involving any Business Plan (for the
purpose of this paragraph Business Plan does not include any actions under plans
or otherwise to implement the Announcement as defined in Section 5.5(d)(v)) or
asserting any right or claim to benefits under any Business Plan or Labor
Contract which is reasonably likely to be adversely determined and which, if
adversely determined, would reasonably be expected to have a Material Adverse
Effect.
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(B) Except as disclosed in Schedule 4.1(m)(ii)(B), (x) all
contributions to Business Plans maintained in the United States that are
intended to be qualified under Section 401(a) of the Code and are Pension Plans
(hereinafter "BUSINESS PENSION PLANS"), which were required to be made in
accordance with Section 302 of ERISA or Section 412 of the Code, have been
timely made, (y) no Business Pension Plan has applied for or received a waiver
of the minimum funding standards imposed by Section 412 of the Code, and (z) no
Business Pension Plan subject to Section 412 has an "accumulated funding
deficiency" within the meaning of Section 412(a) of the Code as of its most
recent plan year.
(C) Each Business Pension Plan is the subject of a favorable
unrevoked determination letter issued by the IRS as to its qualified status
under the Code, and, to the Knowledge of WEC, except as disclosed in Schedule
4.1(m)(ii)(C), and to Knowledge of Sellers no circumstances have occurred that
would adversely affect the tax qualified status of any such Business Pension
Plan and none of the Sellers and any "party in interest" (as defined in Section
3(14) of ERISA) and any "disqualified person" (as defined in Section 4975 of the
Code) with respect to any Business Plan has engaged in a non-exempt "prohibited
transaction" within the meaning of Section 4975 of the Code and Section 406 of
ERISA.
(D) Except as disclosed in Schedule 4.1(m)(ii)(D), to
Knowledge of Sellers all contributions required by law or pursuant to the terms
of any Business Plan have been timely made, except as would not result in a
Material Adverse Effect.
(E) Except as disclosed in Schedule 4.1(m)(ii)(E), to
Knowledge of Sellers all Business Plans, as adopted or as they may have been
amended, comply and have been operated in all material respects in accordance
with applicable plan provisions and with currently applicable provisions of the
Code and ERISA and other applicable Laws, except as would not result in a
Material Adverse Effect.
(F) Except as disclosed in Schedule 4.1(m)(ii)(F), with
respect to any Business Pension Plan subject to Title IV of ERISA, to the
Knowledge of Sellers, no event has occurred, or is reasonably expected to occur
as a result of the transactions contemplated by this Agreement, which will
result in any material liability to any such plan or to the Pension Benefit
Guaranty Corporation, other than for the payment of contributions or premiums,
all of which have been paid when due.
(G) Except as disclosed in Schedule 4.1(m)(ii)(G), to the
Knowledge of Sellers, Sellers comply in all material respects
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with the applicable requirements of Section 4980B(f) of the Code with respect
to each Business Plan that is a "group health plan" (as such term is defined in
Section 5000(b)(1) of the Code).
(H) Except as disclosed in Schedule 4.1(m)(ii)(H), neither the
Westinghouse Pension Plan nor any Benefit Plan disclosed in Schedule 4.1(m)(i)
which is a welfare plan (as such term is defined in Section 3(1) of ERISA) that
provides for post-retirement medical or dental benefits has been amended in any
material respect since September 30, 1995, that has increased the benefits
provided to individual participants or beneficiaries thereunder.
(I) Except as disclosed in Schedule 4.1(m)(ii)(I) or as
otherwise in Section 5.5, (x) no Business Plan exists which could result in the
payment of money or any other property or rights, or accelerate or provide any
other rights or benefits, to any Business Employees that would not have been
required but for the transactions provided herein, and (y) no Business Employee
is covered by any plan, program, arrangement or understanding that would result,
separately or in the aggregate, in the payment (whether in connection with the
termination of employment or otherwise) of any "excess parachute payment" within
the meaning of Section 280G of the Code as a result of the transactions provided
herein.
(J) With respect to each Business Plan, true, correct and
complete copies of the applicable following documents have been delivered or
made available to Purchaser: (x) all current Business Plan documents and related
trust documents, and any amendment thereto; (y) Forms 5500, financial statements
and actuarial reports for the most recent year (except for the last three years
in the case of the Westinghouse Savings Program); (z) the most recently issued
IRS determination letter; and (xx) summary plan descriptions.
(K) Schedule 4.1(m)(ii)(K) sets forth the funding status of
the plans described therein as of the dates set forth on such Schedule.
(iii) "Knowledge" for purposes of Section 4.1(m) shall mean
the knowledge of the senior management at the "major facilities" (described
below) and the human resource employees at the Orlando headquarters. "Major
facilities" are (i) Orlando, Florida, (ii) Charlotte, North Carolina, (iii)
Hamilton, Ontario, (iv) Melbourne, Australia, and (v) Winston-Salem, North
Carolina.
(iv) To the Knowledge of Sellers, except as disclosed in
Schedule 4.1(m)(iv), the Westinghouse Pension Plan and the Westinghouse
Executive Pension Plan have been maintained and operated in accordance with
their terms in all material respects.
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(v) As of OCTOBER 31, 1997, Sellers and the Sold Subsidiaries
employed in the Business approximately 5,460, 1,425 and 930 active business
employees in the United States, Canada and all other countries, respectively.
(N) ENVIRONMENTAL MATTERS. Except as disclosed on Schedule
4.1(n):
(i) Sellers, in respect of the operations of the
Business and the Acquired Assets, and the Sold Subsidiaries, are in
compliance with all Environmental Laws, except for violations of
Environmental Laws that would not, individually or in the aggregate,
reasonably be expected to materially reduce the benefits to Purchaser
of the transactions contemplated by this Agreement;
(ii) Sellers and the Sold Subsidiaries severally
hold, and are in compliance with, all Permits required under
Environmental Laws for Sellers and the Sold Subsidiaries to conduct the
Business, except for the absence of, or noncompliance with, such
Permits that would not, individually or in the aggregate, reasonably be
expected to materially reduce the benefits to Purchaser of the
transactions contemplated by this Agreement;
(iii) No Seller or Sold Subsidiary has entered into
or agreed to any court order or decree or other administrative order or
decree or is subject to any judgment, order or decree relating to
compliance with any Environmental Law or to investigation or cleanup of
Hazardous Substances under any Environmental Law that, individually or
in the aggregate, would reasonably be expected to materially reduce the
benefits to Purchaser of the transactions contemplated by this
Agreement;
(iv) Neither Sellers, in respect of the operations of
the Business and the Acquired Assets, nor any of the Sold Subsidiaries
have (A) Released, transported or disposed of any Hazardous Substance
or any petroleum or petroleum product on, to, under or at any of the
Premises, other than in a manner that would not, in all such cases
taken individually or in the aggregate, reasonably be expected to
materially reduce the benefits to Purchaser of the transactions
contemplated by this Agreement; or (B) received any written notice
prior to the date of this Agreement, (x) of the institution or pendency
or any lawsuit, action, proceeding or investigation by any Person
arising under any Environmental Law at any of the Premises which is
reasonably likely to be adversely determined and which if adversely
determined would reasonably be expected to materially reduce the
benefits to Purchaser of the transactions contemplated by this
Agreement; or (y) requiring the removal of Hazardous Substance from any
of the Premises, that would reasonably be
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expected to materially reduce the benefits to Purchaser of the
transactions contemplated by this Agreement;
(v) Purchaser has been provided with an opportunity
to review true, correct and complete copies of all material
environmental investigations, studies, audits, tests, reports, reviews
or other analyses conducted by or on behalf of, or that are in the
possession of, any Seller or Sold Subsidiary in relation to any site or
facility now or, in the case of any Sold Subsidiary, previously owned,
operated or leased by any of them; and
(vi) None of Sellers or any Sold Subsidiary, in
respect of the operations of the Business or the Acquired Assets, has
agreed with any Governmental Authority pursuant to any Environmental
Law to the imposition of any lien or limitation on the future use of
any property that is an Acquired Asset.
(O) TAXES. Except as set forth on Schedule 4.1(o):
(i) Each of the Sellers and the Sold Subsidiaries has
timely filed or has had filed on its behalf, after giving effect to any
applicable extensions, all material Tax Returns required to be filed by
applicable Law and all such Tax Returns are true, correct and complete
in all material respects. Each of the Sellers and the Sold Subsidiaries
has timely paid or has had paid on its behalf, after giving effect to
any applicable extensions, all Taxes shown due on the Tax Returns
referred to in the preceding sentence.
(ii) No taxing authority has asserted in writing any
material Tax deficiency that has not been paid or reserved for in
accordance with GAAP with respect to the Acquired Assets, the
Subsidiary Assets or the income or operations of the Business.
(iii) None of the Sellers and none of the Sold
Subsidiaries has requested any extension of time within which to file
any non-Income Tax Return with respect to the Acquired Assets or the
income or operation of the Business, which Tax Return has not since
been filed.
(iv) No Seller or Sold Subsidiary has executed any
outstanding waivers or comparable consents regarding the application of
the statute of limitations with respect to any non-Income Taxes or
non-Income Tax Returns with respect to the Acquired Assets or the
income or operation of the Business.
(v) No material audits or other administrative
proceedings or court proceedings are presently pending with regard to
any Taxes or Tax Returns of any Seller (with
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respect to the Acquired Assets and the income or operation of the
Business) or Sold Subsidiary. There is no pending claim in writing by
any authority of a jurisdiction where any of the Sellers with respect
to the Acquired Assets and the income or operation of the Business or
the Sold Subsidiaries has filed Tax Returns that such Seller or Sold
Subsidiary is or may have been subject to taxation by that
jurisdiction.
(vi) No power of attorney currently in force has been
granted by any Seller (with respect to the Acquired Assets or the
income or operation of the Business) or Sold Subsidiary that would be
binding on Purchaser with respect to taxable periods commencing on or
after the Closing Date.
(vii) No Seller (with respect to the Acquired Assets
and the income or Operation of the Business) or Sold Subsidiary has
received a tax ruling or entered into a closing agreement with any
taxing authority that would have a continuing material adverse effect
upon a Sold Subsidiary, the Acquired Assets or the Business, after the
Closing Date.
(viii) Each of the Sellers (with respect to the
Acquired Assets and the income and operation of the Business) and Sold
Subsidiaries has complied in all material respects with the provisions
of the Code relating to the payment and withholding of Taxes,
including, without limitation, the withholding and reporting
requirements under Code Sections 1441 through 1464, 3401 through 3606,
and 6041 and 6049, as well as similar provisions under any other Laws,
and have, within the time and in the manner prescribed by Law, withheld
and paid over to the proper governmental authorities all material
amounts required in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(ix) None of the Acquired Assets or the Subsidiary
Assets is property that any party to this transaction is or will be
required to treat as being owned by another person pursuant to the
provisions of Code Section 168 (f)(8) (as in effect prior to its
amendment by the Tax Reform Act of 1986) or is "tax-exempt use
property" within the meaning of Code Section 168(h).
(x) No Sold Subsidiary is required to include in
income any adjustment pursuant to Code Section 481 (a) by reason of a
voluntary change in accounting method initiated by such Sold
Subsidiary, and to the best of the knowledge of Sellers and the Sold
Subsidiaries, the IRS has not proposed any such adjustment or change in
accounting method.
(P) SOLD SUBSIDIARIES. The authorized and outstanding capital
stock of each Sold Subsidiary is as set forth on Schedule 1.1(h),
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and, except as set forth on such Schedule (and except for Nominee Shares), all
of such issued and outstanding shares of capital stock are owned, directly or
indirectly, beneficially and of record by one of the Sellers as set forth on
Schedule 1.1(h), free and clear of all Liens, except as set forth on Schedule
1.1(h). For purposes of this Section 4.1(p), "beneficial ownership" of any
shares of capital stock shall mean having or sharing the power to direct or
control the voting or disposition of such shares of capital stock. Except (i)
for any Nominee Shares and (ii) as set forth in Schedule 1.1(h), there are no
shares of capital stock of or other equity interests in any Sold Subsidiary
outstanding. Except as set forth in Schedule 1.1(h), none of the shares of
capital stock of or other equity interests in any Sold Subsidiary has been
issued in violation of, or are subject to, any purchase option, call, right of
first refusal or preemptive, subscription or similar rights under any provision
of applicable law, the certificate of incorporation or by-laws (or comparable
organizational documents) of any Sold Subsidiary or any Contracts. There are no
outstanding warrants, options, rights, "phantom" stock rights, convertible or
exchangeable securities or other agreements to or instruments (other than this
Agreement) pursuant to which any Seller or any Sold Subsidiary is or may become
obligated to issue, sell, purchase, return or redeem any shares of capital stock
of or other equity interests in any Sold Subsidiary.
(Q) LABOR MATTERS. Except as set forth in Schedule 4.1(q), (i)
there is not, and since January 1, 1995, there has not been, any labor strike,
work stoppage or lockout pending against any Seller in relation to the Business
or against any Sold Subsidiary, (ii) there is no material unfair labor practice
charge or complaint against any Seller relating to the Business or any Sold
Subsidiary pending or, to the knowledge of WEC, threatened before the National
Labor Relations Board or any similar body in any material foreign jurisdiction
and (iii) there are no material pending or, to the knowledge of WEC, threatened
union grievances against any Seller in relation to the Business or against any
Sold Subsidiary. Except as disclosed on Schedule 4.1(q), each of the Sellers and
the Sold Subsidiaries has complied in all material respects with its obligations
related to, and is not in breach in any material respect of or in default in any
material respect under, any Labor Contracts. Except as set forth in Schedule
4.1(q), to the knowledge of WEC, there are no attempts presently being made to
organize any employees employed by any of the Sellers or any Sold Subsidiary.
(R) TANGIBLE PROPERTY. All tangible personal property (other
than Inventory), including, without limitation, equipment, furniture, leasehold
improvements, fixtures, vehicles, structures, any related capitalized items and
other similar tangible property, in each case owned or leased by any of the
Sellers and material to its business (collectively, the "Tangible Property") is
in good operating condition, subject to continued
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repair and replacement in accordance with past practice. During the three years
prior to the date hereof there has not been any material interruption of the
operations of any of the Sellers due to inadequate maintenance of the Tangible
Property.
SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
hereby represents and warrants to Seller as follows:
(A) ORGANIZATION. STANDING AND POWER. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated and has the requisite corporate
power and authority to carry on its business as now being conducted.
(B) AUTHORITY. Purchaser has the requisite corporate power and
authority to execute this Agreement and the agreements to be entered into by it
at the Closing pursuant hereto (the "PURCHASER ANCILLARY DOCUMENTS") and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Purchaser Ancillary Documents and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Purchaser, the Closing, and
will not require the approval of the stockholders of Purchaser. This Agreement
has been duly executed and delivered by Purchaser and constitutes, and each
Purchaser Ancillary Document will be duly executed and delivered by Purchaser at
or prior to the Closing and when so executed and delivered will constitute, a
legal, valid and binding obligation of Purchaser enforceable against it in
accordance with its terms. The execution and delivery of this Agreement by
Purchaser do not, and the execution and delivery by Purchaser of the Purchaser
Ancillary Documents, the consummation by Purchaser of the transactions
contemplated hereby and thereby and the compliance by Purchaser with the terms
hereof and thereof will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of Purchaser's assets under, any provision of (i) the State of Delaware, (ii)
the certificate of incorporation or by-laws (or comparable organizational
documents) of Purchaser or (iii) subject to the filings and other matters
referred to in the following sentence, any law, judgment, order, decree,
statute, ordinance, rule or regulation applicable to Purchaser, other than, in
the case of clause (iii) above, any such conflicts, violations, defaults, rights
or Liens that, individually or in the aggregate, would not materially impair the
ability of Purchaser to perform its obligations under this Agreement. No
consent, approval, license, permit, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required to be
obtained or made by or with respect to Purchaser in connection with the
execution and delivery of this Agreement or the consummation of the
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transactions contemplated hereby, except for (i) compliance with and filings
under the HSR Act, (ii) voluntary notification under the Exon-Florio Amendment,
(iii) compliance with and filings under the Exchange Act, (iii) filings and
approvals under foreign laws, including, without limitation, Canada and Germany,
(iv) consents or novations which may be required for the assignment of any
Intellectual Property, Technology or Contract as contemplated in Section 5.4,
(v) compliance with, and notices and filings under, environmental permits,
statutes and regulations, and (vi) those the failure of which to obtain or make,
individually or in the aggregate, would not materially impair the ability of
Purchaser to perform its obligations under this Agreement.
(C) FINANCING. Purchaser has available cash or has existing
borrowing facilities or firm commitments which, together with its available
cash, are sufficient to enable it to consummate the transactions contemplated
hereby. True and complete copies of any such facilities and commitments have
been provided to WEC prior to the date of this Agreement. The Guarantors'
financial statements provided to WEC fairly present, in all material respects,
the financial position, results of operations and cash flows of each Guarantor
as at the applicable dates and for the periods covered thereby.
ARTICLE 5
COVENANTS
SECTION 5.1 COVENANTS OF WEC RELATING TO CONDUCT OF BUSINESS.
(A) ORDINARY COURSE. During the period from the date of this
Agreement and continuing until the Closing, except as expressly provided in this
Agreement, including the Schedules hereto, or to the extent that Purchaser shall
otherwise consent, WEC shall, and shall cause the other Sellers and the Sold
Subsidiaries to carry on the Business in the Ordinary Course of Business and use
all reasonable efforts consistent with past practices to keep available the
services of the Business's present officers and employees and preserve the
Business's relationships with customers, suppliers and others having business
dealings with the Business. In addition, except as contemplated by Schedule 5.1
or as otherwise provided by this Agreement, WEC shall not, and shall not permit
any other Seller or Sold Subsidiary to, do any of the following with respect to
the Business without the consent of Purchaser (which consent shall not be, in
the case of clause (xi) below, unreasonably withheld or delayed):
(i) amend the certificates of incorporation or
by-laws (or comparable organizational documents) of any Sold
Subsidiary;
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(ii) adopt or amend any Benefit Plan or Labor
Contract so as to materially increase the costs thereunder, except as
required by Law or pursuant to the terms of any existing Labor Contract
or other existing Contract;
(iii) grant to any executive officer of any Sold
Subsidiary any increase in compensation, benefits or loans or severance
benefits, except in the Ordinary Course of Business or as may be
required under existing contracts or agreements and except for any
increases or loans the liability for which a Seller shall be solely
obligated;
(iv) incur or assume any liabilities, obligations, or
indebtedness for borrowed money which would constitute an Assumed
Liability or guarantee any such liabilities, obligations or
indebtedness, in each case other than in the Ordinary Course of
Business;
(v) acquire by merging or consolidating with, or by
purchasing a material portion of the assets of, or by any other manner,
any business or any corporation, partnership, joint stock company,
limited liability company, association or other business organization
or division thereof;
(vi) acquire any assets which are material,
individually or in the aggregate, to the Business, taken as a whole,
except in the Ordinary Course of Business;
(vii) sell, lease or mortgage, pledge or otherwise
dispose of, or grant preferential rights to, any of its assets which
are material, individually or in the aggregate, to the Business taken
as a whole, except for the sale of Inventory in the Ordinary Course of
Business and except for the sale or factoring of Accounts Receivable;
(viii) enter into any lease of real property for an
annual rent in excess of $150,000 except, following good faith
consultation with Purchaser, any renewals of existing leases in the
Ordinary Course of Business;
(ix) enter into any joint venture, partnership or
other similar arrangement;
(x) enter into, amend or terminate any employment
agreement;
(xi) knowingly waive any right of material value to
the Business or settle or compromise any claim in excess of $5,000,000;
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(xii) make any wage or salary increase or other
compensation payable or to become payable or bonus, or increase in any
other direct or indirect compensation, for or to any of its officers,
employees, consultants, agents or other representatives employed in the
Business, or any accrual for or commitment or agreement to make or pay
the same, in each case other than in the Ordinary Course of Business or
as may be required under existing contracts;
(xiii) except as described in Schedule 4.1(j)(iii) or
as otherwise contemplated by this Agreement, enter into any
transactions with any of its Affiliates, officers, directors,
employees, consultants, agents or other representatives (other than
employment arrangements made in the Ordinary Course of Business), or
any Affiliate, of any officer, director, consultant, employee, agent or
other representative, to the extent the obligations arising from any
such transaction would be an Assumed Liability;
(xiv) make any payment or commitment which would
constitute an Assumed Liability to pay any severance or termination
payment to any Person or any of its officers, directors, employees,
consultants, agents or other representatives employed in the Business,
other than payments pursuant to contractual obligations in effect on
the date of this Agreement;
(xv) except in the Ordinary Course of Business, amend
in any material respect or enter into any Contract or other agreement
of a type required to be disclosed pursuant to Section 4.1(j)(v),
(vii), (viii), (xi), (xiii), (xiv) and (xv); or
(xvi) agree, whether in writing or otherwise, to do
any of the foregoing.
(B) ADVICE OF CHANGES. WEC shall promptly advise Purchaser in
writing of (i) any event, condition or circumstance occurring from the date
hereof through the Closing Date that would constitute a material violation or
material breach of this Agreement, (ii) any event, occurrence, material
transaction or other item which would have been required to have been disclosed
on any Schedule delivered hereunder had such event, occurrence, transaction or
item existed on the date hereof, other than items arising in the Ordinary Course
of Business which would not render the representation and warranties of WEC
materially misleading and (iii) any event or change that reasonably would be
expected to have a Material Adverse Effect; PROVIDED, HOWEVER, that WEC shall
have no Liability for breach of this Section 5.1(b) except to the extent
Purchaser has actually been prejudiced by such breach.
(c) Purchaser acknowledges and agrees that WEC shall not be
deemed to be in breach of its representation and warranty
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contained in the first sentence of Section 4.1(l) or its obligations under the
first sentence of Section 5.1(a) as a result of its determination not to take
the actions described in Schedule 5.1(c). If Purchaser requests that WEC take
such (or similar) actions prior to the Closing and WEC agrees to take such
actions, Purchaser shall bear all costs incurred by WEC and its Affiliates as a
result of such actions (other than as set forth in Section 5.5(d)(vi)) by
reimbursing WEC not later than 30 days following receipt of reasonably detailed
evidence of the incurrence of such costs. Any such costs incurred by WEC prior
to the Closing (but not reimbursed prior to the Closing) shall be reimbursed by
Purchaser at the Closing. WEC agrees not to take any such action without the
prior written consent of Purchaser.
SECTION 5.2 ACCESS TO INFORMATION. WEC shall afford to Purchaser and
its accountants, counsel and other representatives reasonable access during
normal business hours during the period prior to the Closing to all the
properties, books, Contracts, commitments, Tax Returns and records of the
Business (other than those related solely to the Excluded Assets or Excluded
Liabilities), and during such period shall furnish promptly to Purchaser any
information concerning the Business (other than the Excluded Assets or Excluded
Liabilities) as Purchaser may reasonably request; and shall cause its and the
other Sellers' officers, employees, consultants, agents, accountants and
attorneys to cooperate fully with Purchaser's representatives in connection with
such review and examination and to make full disclosure to Purchaser of all
material facts affecting the financial condition and business operations of the
Business; PROVIDED, HOWEVER, that WEC is under no obligation to disclose to
Purchaser, (i) any information the disclosure of which is restricted by Contract
or applicable Law except in strict compliance with the applicable Contract or
Law (it being understood that WEC shall use reasonable commercial efforts to
obtain any necessary consent for disclosure under such Contract), (ii) any
information as to which the attorney-client privilege, the attorney work-product
doctrine or the self-evaluative privilege may be available, until a mutually
satisfactory joint defense agreement has been executed by Purchaser and WEC,
(iii) the medical records pertaining to any employee or former employee of the
Business until after the Closing or (iv) the terms of any bid or proposal by any
of the Sellers in connection with any proposed sales order. All requests for
information to visit facilities or to meet with Sellers' representatives shall
be directed to and coordinated with the person(s) designated to Purchaser from
time to time by WEC as the PGBU Coordinator(s). Purchaser acknowledges that any
information being provided to it or its representatives by Sellers pursuant to
or in connection with this Agreement is subject to the terms of a
confidentiality agreement between Siemens Corporation and WEC dated June 17,
1996, as amended (the "CONFIDENTIALITY AGREEMENT") (by which Siemens Parent has
agreed to be bound), which terms are incorporated herein by reference.
Notwithstanding anything to
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the contrary contained paragraph 8 thereof, the Confidentiality Agreement, and
the obligations not to use or disclose and to return on request or destroy,
Confidential Information (as defined in the Confidentiality Agreement) already
provided at the time of termination, shall terminate, subject to the limitations
in Section 3 thereof, on the later of June 17, 1998 and the date that this
Agreement terminates in accordance with its terms; PROVIDED, that, if the
Closing occurs, the Confidentiality Agreement and such obligations shall
terminate at the end of the Restricted Period. Nothing contained herein is
intended to limit or restrict Purchaser's use or disclosure of Confidential
Information concerning the Business following the Closing. No investigation by
Purchaser shall diminish or obviate any other representations, warranties,
covenants or agreements of WEC under this Agreement.
SECTION 5.3 GOVERNMENTAL APPROVALS, ETC.
(a) Each of Purchaser and WEC shall as promptly as practicable
(i) but in no event later than ten (10) days following the execution and
delivery of this Agreement, file with the United States Federal Trade Commission
and the United States Department of Justice, the notification and report form
under the HSR Act required for the transactions contemplated hereby and,
thereafter, any supplemental information requested in connection therewith
pursuant to the HSR Act and (ii) but in no event later than thirty (30) days
following the execution and delivery of this Agreement, file with the Committee
on Foreign Investment in the United States the voluntary notification under the
Exon- Florio Amendment for the transactions contemplated hereby. Each of
Purchaser and WEC shall as promptly as practicable comply with any other Laws of
any country and the European Union which are applicable to any of the
transactions contemplated hereby and pursuant to which any consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Authority or any other Person in connection with such transactions
is necessary. Each of Purchaser and WEC shall furnish to the other such
necessary information and reasonable assistance as the other may request in
connection with its preparation of any filing, registration or declaration which
is necessary under the HSR Act, the Exon-Florio Amendment or any other such
Laws. Purchaser and WEC shall keep each other apprised of the status of any
communications with, and any inquiries or requests for additional information
from, any Governmental Authority, and shall comply promptly with any such
inquiry or request. Purchaser shall use its best efforts and take all necessary
action to obtain any clearance under the HSR Act or any other consent, approval,
order or authorization of any Governmental Authority under United States or
foreign antitrust or competition laws, necessary in connection with the
transactions contemplated hereby or to resolve any objections
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which may be asserted by any Governmental Authority with respect to the
transactions contemplated hereby.
(B) Subject to the terms and conditions of this Agreement,
each party shall use its best efforts to cause the Closing to occur as promptly
as practicable, including (i) as contemplated by Section 5.3(a) or 5.4, (ii)
defending against any lawsuits, actions or proceedings, judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any preliminary
injunction, temporary restraining order, stay or other legal restraint or
prohibition entered or imposed by any court or other Governmental Authority that
is not yet final and nonappealable vacated or reversed; provided, however, that
none of Sellers or their Affiliates shall be required to make any material
monetary expenditure, commence or be a plaintiff in any litigation or offer or
grant any material accommodation (financial or otherwise) to any third Person.
(C) Purchaser and WEC each shall use its commercially
reasonable efforts to obtain as promptly as practicable all permits, licenses,
franchises, approvals, consents and authorizations by or of Governmental
Authorities required by Law for Purchaser to conduct the Business following the
Closing and to own the Acquired Assets (each, a "Purchaser Permit").
Notwithstanding the foregoing, neither Purchaser nor WEC shall be required to
expend any material sum or agree to a material concession to any Governmental
Authority to obtain any such Purchaser Permit.
SECTION 5.4 THIRD PARTY CONSENTS.
(A) WEC and Purchaser will cooperate and use their respective
commercially reasonable efforts to obtain as promptly as practicable all
consents, approvals and waivers required by third Persons to transfer the
Contracts, Intellectual Property, Technology, Permits and the capital stock of
the Sold Subsidiaries to Purchaser in a manner that will avoid any default,
conflict, or termination of rights under the Contracts, Intellectual Property,
Technology and Permits. Notwithstanding anything to the contrary in this
Agreement, nothing in this Section 5.4 shall (i) require Sellers or Purchaser to
expend any material sum, make a material financial commitment or grant or agree
to any material concession to any third Person to obtain any such covenant,
approval or waiver or (ii) alter, diminish or otherwise affect Purchaser's
rights under Section 6.2(c).
(B) In the event that any and all consents, approvals or
waivers necessary for the assignment, transfer or novation of any Contract,
Intellectual Property, Technology or Permit, or any claim, right or benefit
arising thereunder or resulting
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therefrom, or consents relating to a change in control of any Sold Subsidiary,
shall not have been obtained prior to the Closing Date, then as of the Closing,
this Agreement, to the extent permitted by Law, shall constitute full and
equitable assignment by Sellers to Purchaser of all of Sellers' right, title and
interest in and to, and all of Sellers' obligations and liabilities under, such
Contract, Intellectual Property, Technology and Permits, and, in the case of
Contracts, Purchaser shall be deemed Sellers' agent for purpose of completing,
fulfilling and discharging all of Sellers' liabilities under any such Contract.
The parties shall take all necessary steps and actions to provide Purchaser with
the benefits of such Contracts, Intellectual Property, Technology and Permits,
and, in the case of Contracts, to relieve Sellers of the performance and other
obligations thereunder, including entry into subcontracts for the performance
thereof. Purchaser agrees to pay, perform and discharge, and indemnify Sellers
against and hold Sellers harmless from, all obligations and liabilities of
Sellers relating to such performance or failure to perform under such Contracts.
(C) In the event Sellers shall be unable to make the equitable
assignment described in Section 5.4(b), or if such attempted assignment would
give rise to any right of termination, or would otherwise adversely affect the
rights of Sellers or Purchaser under such Contract, Intellectual Property or
Technology, or would not assign all Sellers' rights thereunder at the Closing,
Sellers and Purchaser shall continue to cooperate and use all reasonable efforts
to provide Purchaser with all such rights. To the extent that any such consents
and waivers are not obtained, or until the impediments to such assignment are
resolved, Sellers shall use all reasonable efforts (without the expenditure, in
the aggregate, of any material sum) to (i) provide to Purchaser, at the request
of Purchaser, the benefits of any such Contract, to the extent related to the
Business, or of any such Intellectual Property or Technology, (ii) cooperate in
any lawful arrangement designed to provide such benefits to Purchaser and (iii)
enforce, at the request of and for the account of Purchaser, any rights of
Sellers arising from any such Contract, Intellectual Property or Technology
against any third Person including the right to elect to terminate in accordance
with the terms thereof upon the advice of Purchaser. To the extent that
Purchaser is provided the benefits of any Contract, Intellectual Property or
Technology referred to herein (whether from Sellers or otherwise), Purchaser
shall perform at the direction of Seller and for the benefit of any third Person
the obligations of Sellers thereunder or in connection therewith, and Purchaser
agrees to pay, perform and discharge, and indemnify Sellers against and hold
Sellers harmless from, all obligations and liabilities of Sellers relating to
such performance or failure to perform (but only to the extent such obligations
or liabilities arise solely from acts of Purchaser after the Closing Date) and
in the event of a failure of such indemnity, Sellers
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shall cease to be obligated under this Agreement in respect of the Contract,
Intellectual Property or Technology which is the subject of such failure.
SECTION 5.5
(A) EMPLOYEE MATTERS.
(i) CONTINUATION OF EMPLOYMENT. Purchaser shall offer
employment to each employee of the Business (including any individual whose
principal place of employment is on the Premises, who primarily renders services
on behalf of the Business and whose compensation cost is borne primarily by the
Business) and each employee of STC as described in Section 5.25 who is actively
at work, on vacation or on short-term disability leave on the Closing Date (a
"BUSINESS EMPLOYEE"). Each employee or former employee who primarily rendered
services on behalf of the Business (or to STC as described in Section 5.25), is
not a Business Employee and who is not actively at work on the Closing Date due
to leave of absence, long-term disability leave, military leave or layoff, and
who in the case of an employee on long-term disability was last actively
employed within two years of the Closing Date, and in the case of an employee on
a leave of absence or layoff was last employed within five years of the Closing
Date and in each case has recall rights ("RECALL RIGHTS") under the work rules
of the Business, a collective bargaining agreement or applicable law
(collectively, "INACTIVE EMPLOYEES"), shall be offered active employment by
Purchaser pursuant to the Recall Rights and shall be deemed an employee of
Purchaser as of the Closing Date. Upon such offer and acceptance and
commencement of active employment, each such Inactive Employee shall be
considered a Business Employee effective as of the first date of return to work.
WEC shall deliver a schedule to Purchaser of anticipated Business Employees and
Inactive Employees with their designated status as of the Closing Date, 30 days
before the Closing Date. Such schedule shall be updated by WEC as soon as
practical after the Closing Date. Any employee of Sellers or their Affiliates
who is not otherwise a Business Employee but who is offered and accepts
employment by Purchaser, pursuant to mutual agreement with the Sellers, during
the six months following the Closing Date shall be deemed to be a Business
Employee as of the date of actual employment with the Purchaser.
(ii) CONTINUATION OF COMPENSATION AND BENEFITS.
Notwithstanding the more specific provisions set forth in this Section 5.5,
Purchaser shall provide compensation and benefit plans and arrangements which in
the aggregate are comparable (but in no event taking into account any
equity-based compensation and opportunity to invest in securities of WEC under
the Westinghouse Stock Plan or the Westinghouse Savings Program, provided that
with respect to Business Employees, the match formula under the
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Westinghouse Savings Program shall be considered when determining comparability)
to the compensation, Plans and Benefit Arrangements in effect for Business
Employees on the date of this Agreement for a period of not less than two years
following the Closing Date (the "BENEFITS MAINTENANCE PERIOD") (or, in the case
of Business Employees who are subject to a collective bargaining agreement, the
period required therein). Notwithstanding the above, with respect to Business
Employees who are executives, long-term incentives shall be comparable to such
plans offered to similarly situated executives of Purchaser in the United
States. Purchaser shall deliver to WEC no later than 15 days prior to the
Closing Date a letter from an independent consulting firm reasonably acceptable
to WEC stating that the compensation, benefits and benefit arrangements offered
by Purchaser to the Business Employees pursuant to this Section are comparable
in the aggregate to the compensation, Plans and Benefit Arrangements currently
provided by the Sellers to the Business Employees.
(B) ACCRUED VACATION. Purchaser shall credit each Business
Employee with the unused vacation days and any personal and sickness days
accrued in accordance with the vacation and personnel policies and Labor
Contracts of Sellers or their Affiliates in effect as of the Closing Date.
(C) UNION REPRESENTATION. Purchaser agrees to (i) with respect
to any collective bargaining agreement that does not relate solely to Business
Employees, recognize each union which at the Closing Date represents any of the
Business Employees as the collective bargaining representatives of such
employees as of the Closing Date, and provide such employees with comparable
wages and benefits as those in effect on the date of this Agreement, and (ii)
with respect to any collective bargaining agreement that relates solely to
Business Employees and former employees of the Business, assume the collective
bargaining agreements.
(D) PENSION PLAN. (i) Effective as of the Closing Date,
Purchaser shall establish a defined benefit pension plan intended to qualify
under Section 401(a) of the Code for the benefit of Business Employees (the
"PURCHASER PENSION PLAN") that contains terms and conditions that are
substantially identical with respect to all substantive provisions to those of
the Westinghouse Pension Plan as in effect as of the Closing Date (the "WEC
PENSION PLAN") and that credits compensation (with respect to the calendar year
which includes the Closing Date) and service for purposes of eligibility
(including early retirement eligibility and any early retirement supplemental
benefit), and vesting which was credited under the WEC Pension Plan, provided,
however, that the Purchaser Pension Plan will include provisions which are
consistent with (ii) through (iv) below and will be administered during the
Benefits Maintenance Period so that the aggregate of the benefits under the WEC
Pension Plan and the
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Purchaser Pension Plan are the same with respect to Business Employees as if
the Business Employees continued employment with Sellers.
(ii) Purchaser shall continue the Purchaser Pension
Plan without adverse effect to the Business Employees for a period not less than
the Benefits Maintenance Period.
(iii) The WEC Pension Plan shall retain liability
with respect to Business Employees for their accrued benefit calculated as of
the Closing Date, subject to adjustment as follows. WEC shall take appropriate
action to cause the WEC Pension Plan to provide (x) credit for employment of
Business Employees with the Purchaser or its Affiliates solely for purposes of
calculating vesting credit and eligibility for early retirement benefits
("Eligibility Service," as defined in the WEC Pension Plan), and (y) except as
provided in (d)(iv) below, the early retirement supplement under Section 5 for
Business Employees under the terms of the WEC Pension Plan shall be equal to the
lesser of -
(A) the early retirement supplement calculated under the terms of the
WEC Pension Plan, or as it may be reduced by WEC after the Benefits
Maintenance Period, but only to the extent such a change applies to all
WEC employees with the same benefit, as multiplied by a fraction, the
numerator of which is the participant's years of Credited Service (as
defined in the WEC Pension Plan) under the WEC Pension Plan as of the
Closing Date, and the denominator of which is the sum of the numerator
and the participant's years of employment with the Purchaser and its
Affiliates from the Closing Date until the participant's retirement or
termination of employment with the Purchaser and its Affiliates, or
(B) the comparable early retirement supplement calculated under the
terms of the Purchaser Pension Plan as in effect on the participant's
retirement or termination of employment from the Purchaser and its
Affiliates (prior to reduction for the portion of the supplement to be
paid from the WEC Pension Plan) (if the Purchaser Pension Plan has no
such supplement after the Benefits Maintenance Period the amount
calculated under this subparagraph (B) shall be zero (0)) multiplied by
a fraction, the numerator of which is the employee's years of Credited
Service under the WEC Pension Plan as of the Closing Date, and the
denominator of which is the sum of the numerator and the participant's
years of employment with the Purchaser and its Affiliates from the
Closing Date until the participant's termination of employment with the
Purchaser and its Affiliates.
Notwithstanding the foregoing, the WEC Pension Plan shall not recognize
employment with the Business after the Purchaser and
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its Affiliates have sold or divested the Business, or a portion thereof (whether
by asset or stock sale, merger or spin-off (each a "Disposition")), with respect
to the Business Employees who are transferred or terminated in connection with
such a sale or divestiture.
(iv) The Purchaser Pension Plan shall be solely
responsible for (and the WEC Pension Plan shall not provide for) (A) any early
retirement supplement that becomes payable with respect to a Business Employee
retiring after the Closing Date that is the result of a "Pension Event" as
defined in subsection (v) below, (B) any benefits pursuant to Section 19 of the
WEC Pension Plan and the corresponding provision of the Purchaser Pension Plan,
in excess of the benefits that would otherwise be payable if those sections did
not apply, with respect to a Business Employee who retires or terminates
employment with the Purchaser and its Affiliates after the Closing Date, and (C)
any other early retirement subsidy or supplement with respect to Business
Employees that is not described in (iii) above.
(v) Purchaser shall indemnify WEC for any actuarial
losses (as defined below) with respect to the WEC Pension Plan resulting from
any Business Employee commencing the receipt of benefits prior to their Normal
Retirement Date (as defined in the WEC Pension Plan) and that is attributable to
(A) a Disposition, (B) a closing of a plant or plants by Purchaser or a
reduction in the number of Business Employees employed by the Purchaser and its
Affiliates as a result of action requiring the filing of a notice under the
Worker Adjustment and Retraining Notification Act, as in effect on the Closing
Date (the "WARN ACT") (or which would require the filing of a WARN Act notice if
any actions taken within a 6-month period occurred on the same date (a "WARN
Event")), or (C) any action of the Purchaser or its Affiliates that provides an
incentive to Business Employees to terminate or retire prior to their Normal
Retirement Date including, but not limited to, an early retirement window
program or a change in plan design which reduces prospective benefits for
Business Employees who are eligible to retire under the WEC Pension Plan.
Purchaser shall notify WEC of the occurrence of any of the events described in
(A) through (C) above (each of which is a "PENSION EVENT") within 30 days after
such event, and shall cooperate with WEC in providing data to WEC to enable the
determination of actuarial losses. Actuarial losses shall be determined by the
enrolled actuary for the WEC Pension Plan (the "WEC Actuary") with respect to
each Pension Event and is measured by the difference (positive or negative)
between the accumulated benefit obligation for all of the Business Employees
affected by the Pension Event using (1) immediate commencement of benefits under
actual forms of benefit payment elected and (2) projected commencement of
benefits, both based on the assumptions described in Schedule 5.5(d), other than
lump sums elected under (1) above, which shall be valued at the actual value
distributed. Notwithstanding any other provision in this Agreement to the
contrary, this indemnity shall survive the Closing Date without limitation.
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(vi) WEC shall indemnify Purchaser, with such payment
treated as a purchase price adjustment, for the actuarial cost to Purchaser
(valued using the assumptions in Schedule 5.5(d)) under the Purchaser Pension
Plan and Purchaser Executive Plan (as defined below) attributable to the
termination of Business Employees prior to the later of December 31, 1998 or one
year following the Closing Date (the "Termination Date") pursuant to the
formulation provided in the October 10, 1997 announcement (the "Announcement")
by WEC ("ANNOUNCEMENT TERMINATIONS") under the provision of the Purchaser
Pension Plan comparable to Section 19 of the WEC Pension Plan and under a
special provision to be included in the Purchaser Pension Plan containing the
same benefit provisions of the draft amendment described in Schedule 5.5(d)(vi)
and which provision shall be included in the Purchaser Pension Plan through the
Termination Date; provided, however, in no event shall such indemnified amount
exceed $12,784,000, as reduced by any actuarial losses relating to the WEC
Pension Plan arising from Announcement Terminations prior to the Closing Date.
(E) SAVINGS PLAN. (i) Effective as of the Closing Date,
Purchaser shall adopt or have in effect a defined contribution plan that
includes a qualified cash or deferred arrangement within the meaning of Section
401(k) of the Code ("PURCHASER'S 401(K) PLAN") which provides benefits to
Business Employees participating in the Westinghouse Savings Program (the "WEC
SAVINGS PROGRAM") as of the Closing Date and contains provisions similar to the
provisions of the WEC Savings Program to the extent required by Section
411(d)(6) of the Code for account balances to be transferred from the WEC
Savings Program. Each Business Employee who was participating in the WEC Savings
Program as of the Closing Date shall become a participant in Purchaser's 401(k)
Plan as of the Closing Date. Business Employees shall receive credit for all
service with Sellers and their Affiliates for purposes of eligibility and
vesting under Purchaser's 401(k) Plan to the extent credited under the WEC
Savings Program. Effective as of the Closing Date, WEC shall fully vest the
account balances of Business Employees under the WEC Savings Program and make
all applicable contributions under the WEC Savings Program otherwise provided
for in the plan year in which the Closing occurs with respect to compensation
earned by Business Employees prior to the Closing Date, without regard to any
provision of the WEC Savings Program requiring a minimum number of hours of
service, or employment on any particular date, if the applicable Business
Employees would have qualified for a contribution if they had remained employed
with Sellers.
(ii) On the Closing Date, Purchaser shall provide
WEC with (A) either a copy of a favorable IRS determination letter to the effect
that Purchaser's 401(k) Plan is qualified under Section 401(a) of the Code or an
opinion of Purchaser's
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counsel, reasonably satisfactory to WEC, to such effect and (B) an opinion of
Purchaser's counsel, reasonably satisfactory to WEC, that the Purchaser's 401(k)
Plan will satisfy Section 411(d)(6) of the Code with respect to account balances
to be transferred to the Purchaser's 401(k) Plan from the WEC Savings Program
pursuant to (iii) below.
(iii) As soon as reasonably practicable after the
Closing Date and receipt of the documentation described in (ii) above, WEC shall
cause to be transferred from the WEC Savings Program to Purchaser's 401(k) Plan
assets having a fair market value equal to the aggregate value of the account
balances in the WEC Savings Program as of the date of transfer (such transfer to
be in (x) shares of common stock of Seller to the extent of shares in the WEC
Common Stock Fund applicable to Business Employees, (y) in notes evidencing
loans to Business Employees from their account balances, (3) in cash, and (xx)
to the extent of the account balances of the Business Employees in the WEC
Savings Program allocable to the Fixed Income Fund, in investment instruments
which approximate from a quality and interest rate perspective assets held by
the fund, but subject to the applicable fiduciary requirements of the
Purchaser's 401(k) Plan relating to quality and interest rate considerations)
and all qualified domestic relations orders (within the meaning of Section
414(p) of the Code) with respect to Business Employees, and Purchaser shall
cause the Purchaser's 401(k) Plan to accept the receipt of such transfers and
the liabilities relating thereto.
(iv) Sellers represent, warrant and covenant that
after the Closing and at the time of the transfer of assets to the Purchaser's
401(k) Plan, the WEC Savings Program will be qualified under Section 401(a) and
(k) of the Code and, to the extent pertinent to the qualified status of the
Purchaser's 401(k) Plan as relevant to asset transfers as provided herein, for
all prior periods, and will not be disqualified retroactively to any such time
or for any such period. Sellers and Purchaser shall cooperate in making, and
shall make, all appropriate filings required under the Code and ERISA, and the
regulations thereunder, and shall further cooperate to ensure that the transfers
described in this Section 5.5(e) satisfy the applicable requirements of Sections
401(k), 414(l) 411(d)(6) and 401(a)(12) of the Code and the regulations
thereunder.
(v) Purchaser's 401(k) Plan shall maintain a WEC
common stock fund, in accordance with applicable law, for Business Employees who
so elect, for a period of not less than two years following the Closing. No new
investments in WEC common stock shall be required to be permitted after the
Closing Date.
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(F) WELFARE BENEFITS.
(i) Effective as of the Closing Date, Purchaser shall
establish employee welfare benefit plans, including but not limited to medical
and dental, disability, group life, travel and accident, and accidental death
and dismemberment insurance plans, which (x) provide continuous coverage to
Business Employees and their eligible spouses and dependents, (y) credit service
with Sellers or their Affiliates for purposes of eligibility and benefit levels,
and (z) for medical and dental benefits, waive any pre-existing condition
limitations and credit the amount of any copayments and deductibles incurred
during the calendar year of the Closing.
(ii) Purchaser shall be responsible for all
employee welfare benefit plan claims (whether for insurance, benefits or
otherwise) with respect to Business Employees and Inactive Employees and their
eligible spouses and dependents, whether incurred prior to or after the Closing
Date. Sellers shall pay or cause to be paid medical, dental and other welfare
benefit claims incurred but not paid in the ordinary course, prior to the
Closing Date with respect to Business Employees and Inactive Employees and
Purchaser shall reimburse and indemnify the Sellers for the amount of such
Payments.
(iii) As of the Closing Date Purchaser shall
adopt a plan or plans providing retiree medical and other retiree welfare
benefits for Business Employees and their eligible spouses and dependents (such
plans and their successors the "PURCHASER FAS 106 PLANS") that is substantially
similar to such plan or plans maintained by WEC in the U.S. immediately prior to
the Closing Date for its domestic Business Employees, their eligible spouses and
dependents (the "WEC FAS 106 PLANS") so that during the Benefits Maintenance
Period the combination of the Purchaser FAS 106 Plans and the WEC FAS 106 Plans
provide the same benefit and the same cost sharing as if such Business Employees
continued under the WEC FAS 106 Plans as in effect on the Closing Date. The
Purchaser FAS 106 Plans will provide that the benefits payable under such plans
will be offset by the benefits provided under the WEC FAS 106 Plans, as to be
amended as described in subsection (iv) below. During the Benefits Maintenance
Period, Purchaser shall continue without adverse change the Purchaser FAS 106
Plans.
(iv) WEC shall establish a new plan to provide FAS
106 coverage or amend the WEC FAS 106 Plans effective as of the Closing Date to
provide that WEC obligations under such plans with respect to Business Employees
shall be limited in each calendar year, commencing with the Closing Date, to the
amounts set forth on Schedule 5.5(f)(iv) of the Disclosure Schedule (the "OPEB
Schedule"), as described below. WEC may amend the WEC FAS 106 Plans after the
Benefits Maintenance Period to conform to the provisions of the Purchaser FAS
106 Plans after the Benefits Maintenance Period. Such payment obligations shall
be cumulative so that if a scheduled payment is not made in full in any year
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because the aggregate benefit payment required is less than the scheduled
payment, the balance not paid out shall be carried forward to the next year.
Such payments represent the accrued obligations of WEC as calculated under FAS
106, for post-retirement benefit obligations other than pensions as of the
Closing Date with respect to Business Employees, their eligible spouses and
dependents under the WEC FAS 106 Plans (the "FAS 106 OBLIGATION"). Such payments
under the WEC FAS 106 Plans, as adjusted as described below, shall be the only
obligation of WEC to Business Employees their eligible spouses and dependents
(or to the Purchaser) with respect to post-retirement benefits other than
pensions. Purchaser shall indemnify WEC for any liability to Business Employees,
their eligible spouses and dependents for all post-retirement benefits other
than pension (including retiree medical and retiree life) other than obligations
of WEC under the WEC FAS 106 Plans as described in this subsection (iv) and
subsection (v). The payment obligations of WEC under the OPEB Schedule shall be
actuarially adjusted downwards in the event of an "actuarial gain" (as defined
below) arising from any of the following events (a "FAS 106 EVENT") (whether
applicable to some or all of the Business Employees): (A) a change in the
benefit design (including but not limited to any reduction of benefit levels or
reduction or freezing of the employer portion of benefit costs) or plan
termination by the Purchaser of the Purchaser FAS 106 Plans applicable to
Business Employees, their eligible spouses and dependents (e.g. in the event of
a termination of the Purchaser FAS 106 Plans, the OPEB Schedule shall be reduced
to zero (0)), (B) an increase in the contribution rate paid (other than an
increase proportionate to an increase in overall plan costs or an increase
provided by plan provisions) by Business Employees, their eligible spouses and
dependents instituted by the Purchaser under the Purchaser FAS 106 Plans, (C)
the enactment of legislation which reduces or eliminates the requirement of the
Purchaser to provide retiree benefits under the Purchaser FAS 106 Plans, (D) a
Disposition, (E) a closing of a plant or plants by Purchaser, or (F) a WARN
Event. Such adjustment shall be made as of the January 1 following the calendar
year in which the FAS 106 Event occurs. Actuarial gain, for purposes of this
Section 5.5(f)(iv), shall be determined by the WEC Actuary as of the Closing
Date, for the purpose of calculating the FAS 106 Obligation. Such gain shall be
determined with respect to the WEC FAS 106 Plans as if the FAS 106 Event applied
to the WEC FAS 106 Plans to the same extent and as of the same date they apply
to the Purchaser FAS 106 Plans and shall be measured by the difference between
the OPEB Schedule (or as subsequently modified pursuant to this Section
5.5(f)(iv)) (the "EXISTING SCHEDULE") and the OPEB Schedule that would have been
determined as of the Closing Date to reflect the FAS 106 Liability, if the FAS
106 Event were known as of the Closing Date (the "REVISED SCHEDULE"). To
determine whether the change from the Existing Schedule to the Revised Schedule
would result in an actuarial gain, the scheduled payments under each schedule
(whether resulting in a gain or a loss) shall be discounted back
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to the first day of the calendar year in which the FAS 106 Event occurred,
utilizing the discount rate utilized by WEC as of December 31, 1997 to determine
its APBO for FAS 106 purposes (the "Discount Rate") In no event shall any
actuarial losses in connection with the Purchaser FAS 106 Plans (other than
arising as a result of a FAS 106 Event which results in a net actuarial gain)
offset any actuarial gains as calculated under this Section 5.5(f)(iv). If the
result of discounting the scheduled payments would result in the Revised
Schedule having a lower present value obligation than the Existing Schedule, the
Revised Schedule shall be substituted for the Existing Schedule as the OPEB
Schedule. In no event shall the OPEB Schedule ever be increased. Any payment
made by WEC hereunder that exceeds a payment obligation for any year based on a
Revised Schedule, shall be utilized to reduce a future payment obligation under
the Revised Schedule.
(v) The Purchaser and WEC shall cooperate with each
other so that, to the maximum extent practicable, benefits shall be paid and
administered under the WEC FAS 106 Plans and the Purchaser FAS 106 Plans as
applicable to Business Employees, through the third-party service provider to be
selected by Purchaser, subject to consent of WEC, not to be unreasonably
withheld. Any expenses allocable to WEC under such arrangement (other than
actuarial fees) shall reduce WEC's payment obligation under the WEC FAS 106
Plans as reflected by the OPEB Schedule on a dollar-for-dollar basis. Purchaser
shall notify WEC within thirty days after any Event and shall cooperate with WEC
in providing data to determine any adjustments in the OPEB Schedule.
(vi) Subject to the requirements of applicable law
and any contractual restrictions, WEC shall cause the transfer to a trust
established by Purchaser satisfying the requirements of Section 501(C)(9) of the
Code of the funds allocable to Business Employees in a trust qualified under
Section 501(C)(9) of the Code maintained by WEC (the Retiree Health Care
Security Fund) for the purpose of funding retiree medical obligations for
Business Employees. The trust to be established by the Purchaser shall have
terms substantially similar to the terms of the WEC Trust.
(G) SEVERANCE OBLIGATIONS. Purchaser shall provide severance
and separation benefits to Business Employees and Inactive Employees during the
Benefits Maintenance Period (or, in the case of Business Employees who are
subject to a collective bargaining agreement, the period required therein) that
are comparable to benefits provided under the Involuntary Separation Program of
WEC as set forth in Schedule 5.5(g), which arrangement shall credit service with
the Sellers or their Affiliates for purposes of determining the amount of
severance or other separation benefits. Purchaser shall indemnify and hold
Sellers and their Affiliates harmless from any claims made by any Business
Employee or Inactive Employee for severance or other separation benefits arising
on or after the Closing Date, including any such claim arising on account of the
transactions contemplated hereby.
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(H) EXECUTIVE COMPENSATION. (i) Effective as of the Closing
Date, Purchaser shall adopt and establish a plan for the benefit of Business
Employees that contains terms and conditions (including but not limited to
eligibility requirements) that are substantially similar to those of the
Westinghouse Executive Pension Plan in effect as of the Closing Date (the "WEC
EXECUTIVE PLAN") and which provides credit for prior service and compensation
under the WEC Executive Plan for purposes of eligibility and benefit accrual
(the "PURCHASER EXECUTIVE PLAN"), provided, however, that the Purchaser
Executive Plan will include provisions which are consistent with (ii) through
(iv) below and will have its benefits offset by the benefits provided under the
WEC Executive Plan, the WEC Pension Plan and the Purchaser Pension Plan. The
Purchaser Executive Plan shall be administered so that the aggregate of the
benefits under the WEC Executive Plan and the Purchaser Executive Plan are the
same with respect to Business Employees as if the Business Employees were
covered under the WEC Executive Plan and continued employment with Sellers.
(ii) Purchaser shall continue the Purchaser
Executive Plan without adverse effect, including provisions therein relating to
early retirement and compensation increases, for a period not less than the
Benefits Maintenance Period.
(iii) The WEC Executive Plan shall retain liability,
if any, for benefits earned to the Closing Date with respect to Business
Employees, to be calculated pursuant to appropriate action to be taken by WEC
with respect to the WEC Executive Plan to cause the WEC Executive Plan to take
into consideration (i) credit for employment of Business Employees with the
Purchaser and its Affiliates solely for purposes of calculating eligibility for
the payment of benefits, (ii) that the Average Annual Compensation and Executive
Benefit Service (both as defined in the WEC Executive Plan) will be determined
and frozen as of the Closing Date, and (iii) that the Purchaser and its
Affiliates will be considered a Designated Entity (as defined in the WEC
Executive Plan) solely for purposes of determining eligibility for the payment
(including suspension of payment) of benefits. Notwithstanding the foregoing,
the WEC Executive Plan shall not recognize employment with the Business after
the Purchaser and its Affiliates have sold or divested the Business, or a
portion thereof as a result of a Disposition with respect to the Business
Employees who are transferred or terminated in connection with such a sale or
divesture.
(iv) The Purchaser Executive Plan shall be solely
responsible for (and the WEC Executive Plan shall not provide for) (x) any
benefit that becomes payable with respect to Business Employees retiring after
the Closing Date that is the
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result of any reduction in force, mass layoff or plant closing by the Purchaser
or its Affiliates (i.e. the benefit would not be payable absent such an event)
or (y) any other early retirement subsidy or supplement that is not described in
(iii) above.
(v) Purchaser shall indemnify WEC for any
actuarial losses (based on the same actuarial assumptions and methods used for
purposes of determining actuarial losses under Section 5.5(d)(v)) with respect
to the WEC Executive Plan resulting from any Business Employee commencing the
receipt of benefits prior to their Normal Retirement Date (as defined in the WEC
Pension Plan) and that is attributable to a Pension Event. Purchaser shall
cooperate with WEC in providing data to WEC to enable the determination of
actuarial losses. Notwithstanding any other provision in this Agreement to the
contrary, this indemnity shall survive the Closing Date without limitation.
(I) COOPERATION. The parties agree to furnish each other with
such information concerning employees and employee benefit plans, and to take
all such other action, as is necessary and appropriate to effect the
transactions contemplated by this Agreement and to cooperate with each other in
addressing inquiries and mitigating any MEPPA withdrawal liability to the extent
of any available information.
(J) WARN ACT. Purchaser agrees to provide any required notice
under the WARN Act and any similar statute, and otherwise to comply with any
such statute with respect to any "plant closing" or "mass layoff" (as defined in
the WARN Act) or similar event affecting Business Employees and occurring on or
after the Closing.
(K) COBRA. Purchaser shall assume all responsibility for COBRA
notices and coverage for employees and former employees (and their eligible
dependents) of the Business.
(L) WORKERS COMPENSATION. Effective as of the Closing Date,
Purchaser shall take all necessary and appropriate action to adopt a workers
compensation program providing such workers compensation benefits as are
provided under Sellers' Workers Compensation Program for the Business Employees
and Inactive Employees covered by such program ("PURCHASER'S WORKERS
COMPENSATION PROGRAM"). Purchaser's Workers Compensation Program shall be
responsible for all claims for benefits which are payable from and after the
Closing Date with respect to employees and former employees of the Business and
that are payable under the terms and conditions of Purchaser's Workers
Compensation Program or the Seller's Workers Compensation Program.
(M) MULTIEMPLOYER PLANS. (i) Sellers shall indemnify Purchaser
for any liability or expense attributable to a withdrawal by Sellers or their
Affiliates from a multiemployer plan under Section 4001(a)(3) of ERISA (a
"Multiemployer Plan") that occurred prior to the Closing date.
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(ii) Purchaser shall indemnify Sellers for any liability or
expense attributable to any withdrawal by Purchaser or its affiliates from a
Multiemployer Plan occurring during the five year period following the Closing
Date.
(N) INTERNAL REVENUE SERVICE FORMS. WEC and Purchaser agree
that pursuant to the "Alternative Procedure" provided in Section 5 of Revenue
Procedure 96-60, 1996-53, I.R.B. 24, with respect to preparing, filing and
furnishing the Internal Revenue Service Forms W-2, W-3, 941 and W-5, (i) WEC and
Purchaser shall report, on a "predecessor-successor" basis as set forth therein,
(ii) WEC shall be relieved from furnishing Forms W-2 to the Business Employees
and (iii) Purchaser shall assume the obligations of WEC to furnish such forms to
the Business Employees for the full calendar year in which the Closing occurs.
(O) FOREIGN EMPLOYMENT MATTERS.
(i) EMPLOYMENT. Without limiting the generality of
Section 5.5(a), Purchaser shall, or shall cause a Sold Subsidiary to, assume or
retain and be responsible for the employment (including any employment
contracts) of the Business Employees who are employed outside the United States
(the "FOREIGN BUSINESS EMPLOYEES"), and Purchaser shall take any and all actions
necessary or appropriate to continue the employment of the Foreign Business
Employees and to have Purchaser or any Sold Subsidiary assume or retain all
Liabilities relating to their employment (including, but not limited to, any
employment Contracts listed in Schedule 4.1(j)(i)) under local laws and
practices without Sellers or any of their Affiliates having any liability to any
such employees for severance, redundancy, termination, payment in lieu of
notice, indemnity or other payments to any of such employees by reason of, or as
a result of, the actions contemplated by this Section 5.5.
(ii) CANADIAN PLANS. Prior to the Closing Date, the
Canadian Consolidated Salaried Pension Plan and Hourly Pension Plan (the
"Canadian Plans"), shall be transferred to a Sellers Affiliate other than a Sold
Subsidiary. Unless the Purchaser and Sellers mutually agree to do otherwise
prior to the Closing Date, the accrued pension benefits of the Canadian Plans
attributable to (x) the Sellers' active employees who are Business Employees,
and (y) the deferred vested and retired employees of the Business (which (x) and
(y) together are "Canadian Business Participants") and a pro-rata portion of the
assets of the Canadian Plans attributable to Canadian Business Participants,
shall be transferred, in accordance with applicable law, to a pension plan (or
plans) maintained by the Purchaser that has been established and qualified or
registered with applicable federal and provincial authorities. The amount of
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liabilities and assets transferred shall be calculated by the Sellers using the
actuarial assumptions utilized in the last actuarial valuations for the Canadian
Plans, and the actuarial calculation of such amounts (but not the assumptions
therein) shall be subject to the review for accuracy by the Purchaser's actuary.
It is understood that there will be no purchase price adjustment (up or down),
pursuant to Section 2.5, relating to assets and liabilities of the Canadian
Plans for which the Seller will retain.
(iii) FREE-STANDING PLANS. Notwithstanding the
foregoing provisions of this Section 5.5 effective as of the Closing Date,
Purchaser shall assume and be responsible for all liabilities and obligations
under the Free-Standing Plans. Sellers shall take all action necessary and
appropriate to establish Purchaser as successor to Sellers as to all rights,
assets, duties, liabilities and obligations under or with respect to such
Free-Standing Plans.
(iv) FOREIGN PLANS. Except for the Free-Standing
Plans and the Canadian Plans:
(A) Effective as of the Closing Date, and as soon as necessary
or practicable thereafter, Purchaser or a Sold Subsidiary shall
establish and qualify or register with applicable regulatory
authorities employee benefit plans for, or shall extend existing
Purchaser or Sold Subsidiary employee benefit plans, programs, policies
and arrangements to, the Foreign Business Employees which are in
accordance with local Law and which provide benefits, for not less than
the Benefits Maintenance Period, to the Foreign Business Employees on
terms and conditions which are substantially similar in the aggregate
to those provided to Foreign Business Employees by Sellers or their
Affiliates immediately prior to the Closing Date.
(B) As of the Closing Date, Purchaser or a Sold Subsidiary
shall (i) establish and adopt one or more foreign pension plans or
shall extend one or more existing Purchaser or Sold Subsidiary pension
plans (each, a "NEW FOREIGN RETIREMENT PLAN") which shall provide
retirement benefits for each of the Foreign Business Employees and, to
the extent applicable, former employees who were employed by a Sold
Subsidiary in a foreign jurisdiction and who, as of the Closing Date,
are not employed by the Sellers or any of their Affiliates (the Foreign
Business Employees and such former foreign employees, collectively, the
"FOREIGN PLAN PARTICIPANTS") on substantially similar terms and
conditions to those provided to Foreign Plan Participants by the
Sellers or their Affiliates (other than a Sold Subsidiary) under each
applicable Foreign Plan that is a retirement plan (a "FOREIGN
RETIREMENT PLAN") as in effect immediately prior to the Closing Date,
and (ii) establish and adopt any
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necessary trust funds or other funding vehicles to hold assets or
reserves of New Foreign Retirement Plans which are attributable to the
Foreign Plan Participants. Purchaser or a Sold Subsidiary shall take
all action necessary to qualify or register each New Foreign Retirement
Plan and any related trusts with all applicable regulatory authorities.
Subject to Section 5.5(o)(v), effective as of the Closing Date,
Purchaser or a Sold Subsidiary shall extend coverage under the
applicable New Foreign Retirement Plan to each such Foreign Plan
Participant to the extent that each such Foreign Plan Participant shall
then, or at some later date, satisfy the eligibility and participation
requirements of such New Foreign Retirement Plan.
(C) Effective as of the Closing Date, Purchaser shall assume
the obligation of Sellers under the Belgium retiree medical program
with respect to former employees of the Business and active employees
of the Business.
(D) Except as otherwise specifically provided in this Section
5.5(o), effective as of the Closing Date, each Foreign Plan Participant
who is an active participant in any Foreign Retirement Plan shall cease
to be an active participant thereunder, and all Foreign Plan
Participants shall become eligible to participate in an applicable New
Foreign Retirement Plan in accordance with the applicable provisions of
this Section 5.5(o) and the terms and conditions of such plan.
(v) DELAYED FOREIGN EMPLOYEES. Notwithstanding the
foregoing provisions of this Section 5.5(o), Foreign Employees whose names are
listed in Schedule 5.5(o)(v) and whose employment by Purchaser or any Sold
Subsidiary will be delayed beyond the Closing Date due to applicable foreign law
(including, without limitation, due to the requirement that Purchaser establish
separate legal entities as employer) ("DELAYED FOREIGN EMPLOYEES") will continue
on a payroll of the Sellers or their Affiliates and will continue to participate
in each of Sellers or their Affiliates' employee benefit plans in which they are
participating immediately prior to the Closing Date until the applicable date on
which they first become eligible to become employed by Purchaser or any Sold
Subsidiary (the "DELAYED TRANSFER DATE"). Purchaser will offer, or cause a Sold
Subsidiary to offer, employment on the applicable Delayed Transfer Date to each
such Delayed Foreign Employee then in employment, and on and as of the
applicable Delayed Transfer Date, each such Delayed Foreign Employee then in
employment will become a Business Employee for all purposes of the Agreement.
Purchaser will promptly reimburse WEC for 100% of the payroll, benefits
(including statutory benefits, severance and other termination benefits) and
other costs and expenses directly or indirectly relating to Delayed Foreign
Employees consistent with past practice within 15 days following receipt of each
written
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notification (including reasonable substantiation of costs and expenses)
from WEC or any of its Affiliates of such payroll, benefits and other costs and
expenses.
(P) RETAINED LIABILITIES. WEC shall retain liability and
responsibility for all benefits payable under (x) the WEC Pension Plan (but,
with respect to Business Employees, as limited under Section 5.5(d)), (y) the
WEC Executive Pension Plan (but, with respect to Business Employees, as limited
under Section 5.5(h)), (3) the WEC FAS 106 Plans with respect to employees and
former employees of the Business other than Business Employees and, with respect
to Business Employees, only to the extent provided in Section 5.5(f), (xx) the
WEC Savings Program (other than with respect to assets and liabilities to be
transferred to the Purchaser's 401(k) Plan under Section 5.5(e)) and (yy) the
WEC Long-Term Incentive Plan.
(Q) ACTUARIAL DETERMINATIONS AND PAYMENTS. (i) The
calculations of actuarial losses under subsections (d)(v) and (h)(v), actuarial
gains under subsection (f)(iv) and the indemnification amount under subsection
(d)(vi) shall be performed by the WEC Actuary as soon as practicable after WEC
receives notice from Purchaser or WEC otherwise becomes aware of a Pension
Event, a FAS 106 Event or Announcement Terminations. Purchaser shall provide WEC
with sufficient data to enable the determination of any actuarial losses and/or
actuarial gains or Announcement Terminations within the 30 days following a
Pension Event, a FAS 106 Event or Announcement Terminations.
(ii) No later than 60 days after the receipt by WEC of both
the notice from Purchaser that a Pension Event, a FAS 106 Event or Announcement
Terminations has occurred and sufficient data to make a determination has been
delivered, WEC will deliver to Purchaser the results of the determination of the
actuarial loss or actuarial gain or actuarial liability in the case of a
calculation under Section 5.5(d)(vi) (each a "Determination"), respectively, and
all reasonably necessary supporting information in order to permit Purchaser's
actuary to verify the Determination. Each Determination will be conclusive and
binding on the parties unless Purchaser, within the 30-day period after the
delivery of such results and supporting information, notifies WEC in writing
that it disputes the calculation, specifying the nature of the dispute and the
basis therefor (the "Notice").
(iii) Actuaries retained by WEC and Purchaser shall attempt in
good faith to reach agreement to resolve all of the disputes set forth in the
Notice within 30 days after the Notice is given by Purchaser to WEC. If
actuaries retained by WEC and Purchaser cannot resolve all disputes with respect
to a Determination within such 30-day period, WEC and Purchaser shall jointly
select a third, impartial actuary from a nationally recognized actuarial firm to
resolve the dispute (the same such actuary shall resolve all concurrent
Determinations). If the
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parties cannot jointly select a third, impartial actuary within 15 days after
the end of such 30-day period, the President of the Conference of Consulting
Actuaries shall select an impartial actuary. The cost of the impartial actuary
shall be shared equally by WEC and Purchaser.
(iv) Promptly, but no later than 60 days after his or her
selection, an impartial actuary selected under (iii) above shall review the
results of the Determination calculation, the supporting information with
respect to the Determination and the Notice, and shall reach his or her own
decision as to the issues in dispute and the determination of the actuarial gain
or actuarial loss or actuarial cost, as the case may be (which determination
shall be equal to or between the respective amounts asserted by WEC and
Purchaser). Such determination shall be final and conclusive for all purposes.
(v) Within 30 days after a final determination of any
actuarial loss under Sections 5.5(d)(v) or 5.5(h)(v), Purchaser shall make any
applicable indemnification payments under such Sections.
(vi) Within 30 days after a final determination of any
actuarial cost under Section 5.5(d)(vi) WEC shall make any applicable
indemnification payments under such Sections.
(vii) All indemnification payments under (v) and (vi) above
shall be treated as purchase price adjustments for tax purposes.
(viii) Within 30 days after a final determination of any
actuarial gain under Section 5.5(f)(v) WEC shall substitute a Revised Schedule
in place of the Existing Schedule.
(ix) The Purchaser and Sellers shall pay the costs of their
own actuaries.
SECTION 5.6 COLLECTION OF RECEIVABLES. From and after the Closing,
Purchaser shall have the right and authority to collect for its own account, and
WEC shall not, and shall cause each of its Subsidiaries not to, directly or
indirectly, interfere with or affect any of Purchaser's efforts to collect, all
accounts receivable and other items that are included in the Acquired Assets and
to endorse with the name of any of Sellers, any checks or drafts received with
respect to any such accounts receivable or other items and WEC agrees promptly
to deliver or cause to be delivered to Purchaser any cash or other property
received directly or indirectly by any of Sellers with respect to such
receivables and other items, including any amounts payable as interest.
SECTION 5.7 EXPENSES. Whether or not the Closing takes place, and
except as otherwise specifically provided in this
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Agreement, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs or expenses.
SECTION 5.8 BROKERS OR FINDERS. Each of Purchaser and WEC represents,
as to itself and its Affiliates, that no agent, broker, investment banker or
other Person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except, as to WEC and its Affiliates, Evercore
Partners Inc. and J.P. Morgan Securities Inc. whose fees and expenses will be
paid by WEC and, as to Purchaser and its Affiliates, Goldman, Sachs & Co. whose
fees and expenses will be paid by Purchaser, and each of Purchaser and WEC
respectively agrees to indemnify and hold the other harmless from and against
any and all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any Person on the basis of any act or
statement alleged to have been made by such party or its affiliate.
SECTION 5.9 LICENSE AGREEMENT. (a) On the Closing Date, WEC and
Purchaser shall enter into a Shared Technology Agreement in the form of Exhibit
E hereto, wherein (i) WEC shall retain a nonexclusive, world-wide, royalty-free,
perpetual license in order to use to satisfy WEC's obligations to divested
businesses, and in the continuing businesses of WEC and the successors or
assigns of such business, the Intellectual Property and Technology included in
the Acquired Assets or the Subsidiary Assets, with the right to grant
sublicenses of the same or lesser scope to licensees of Westinghouse's own
corresponding and/or complementary intellectual property and technology and (ii)
WEC shall grant to Purchaser nonexclusive, worldwide, paid-up, royalty-free,
perpetual license to use any intellectual property and technology of Sellers
pertinent to the Business as conducted by WEC as of the Closing Date and any
natural extensions or evolution thereof with the right to grant sublicenses of
the same or lesser scope to licensees of Purchaser's own corresponding and/or
complementary intellectual property and technology.
(b) On the Closing Date, WEC shall grant to Purchaser and its
Affiliates, pursuant to a Trademark and Trade Name License Agreement
substantially in the form of Exhibit I hereto, certain licenses to the names and
marks "Westinghouse" and "Circle W".
SECTION 5.10 CERTAIN INFORMATION. After the Closing, upon reasonable
written notice, Purchaser and WEC shall furnish or cause to be furnished to each
other and their respective accountants, counsel and other representatives
access, during normal business hours, to such information (including records
pertinent to the Business), personnel and assistance relating to the Business as
is reasonably necessary for financial reporting
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and accounting matters, the preparation and filing of any returns, reports or
forms, the defense of, prosecution of, or response required under, or pursuant
to, any lawsuit, action or proceeding (including any proceeding involving WEC
and any environmental matters related to the Acquired Assets) or in order to
enable the parties to comply with their respective obligations under this
Agreement. Purchaser and WEC shall also furnish or cause to be furnished to each
other and their respective accountants, counsel and other representative's
access, during normal business hours, to such information for any other
reasonable business purpose. Purchaser and WEC shall, and shall cause their
Affiliates to, retain until ten (10) years after the Closing Date all such
records pertinent to the Business which are owned by such Person immediately
after the Closing (excluding any Excluded Assets); after the end of such period,
before disposing of any such records, the applicable party shall give notice to
such effect to the other, and shall give the other, at the other's cost and
expense, a reasonable opportunity to remove and retain all or any part of such
records as the other may select. Cooperation with respect to Tax matters shall
be governed by Section 5.14(k).
SECTION 5.11 BULK TRANSFER LAWS. Purchaser hereby waives compliance by
Sellers with the provisions of any so-called "bulk transfer law" of any
jurisdiction in connection with the sale of the Acquired Assets to Purchaser.
SECTION 5.12 ADDITIONAL AGREEMENTS. Subject to the provisions of
Section 5.4, each of Purchaser and WEC will use all reasonable efforts to
facilitate and effect the implementation of the transfer of the Acquired Assets
to Purchaser and the assumption of the Assumed Liabilities by Purchaser and, for
such purpose but without limitation, each of Purchaser and WEC promptly will at
and after the Closing execute and deliver or cause to be executed and delivered
to the other party such assignments, deeds, bills of sale, assumption
agreements, consents and other instruments of transfer or assumption as
Purchaser or its counsel or WEC or its counsel may reasonably request as
necessary or desirable for such purpose (it being understood that any such
assignment, deed, bill of sale, assumption agreement, consent or other
instrument of transfer or assumption shall not provide for any representations
or warranties or any obligations or liabilities that are not otherwise expressly
provided for in this Agreement). At any time and from time to time after the
Closing Date at the request of Purchaser, and without further consideration, WEC
will, and will cause the other Sellers to, execute and deliver such other
instruments of sale, transfer, conveyance, assignment and confirmation and take
such other action as Purchaser may reasonably deem necessary or desirable in
order to transfer, convey and assign more effectively to Purchaser, the Acquired
Assets, to put Purchaser in actual possession and operating control of the
Business and to assist Purchaser in exercising all rights with respect thereto.
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SECTION 5.13 CERTAIN UNDERSTANDINGS. Purchaser acknowledges that none
of Sellers or any other Person has made any representation or warranty, express
or implied, as to the accuracy or completeness of any information regarding the
Business, the Acquired Assets or other matters not included in this Agreement or
the Schedules hereto and none of Sellers or any other Person will be subject to
any liability to Purchaser or any other person resulting from the distribution
to Purchaser, or Purchaser's use of, any such information, including any
information, documents or material made available to Purchaser in certain "data
rooms" or in any other form in expectation of the transactions contemplated
hereby. Purchaser acknowledges that, should the Closing occur, Purchaser will
acquire the Acquired Assets without any representation or warranty as to
merchantability or fitness for any particular purpose, in an "as is" condition
and on a "where is" basis, except as otherwise expressly represented or
warranted herein.
SECTION 5.14 ALLOCATION; TAX MATTERS.
(A) Schedule 5.14(a) sets forth the allocation of the
consideration hereunder for Tax purposes. Prior to the Closing, Purchaser and
WEC shall agree upon the allocation of the consideration hereunder for Tax
purposes among the Acquired Assets and the assets held by any Sold Subsidiary
with respect to which a Section 338 Election is made, in accordance with
Schedule 5.14(a), and shall set forth such allocation on a statement (the
"ALLOCATION STATEMENT"). After the Closing, from time to time, Purchaser and WEC
shall agree upon revisions to the Allocation Statement to reflect any
adjustments to the consideration. Purchaser and WEC shall report the Tax
consequences of the transactions contemplated by this Agreement in a manner
consistent with the Allocation Statement, as it may be revised from time to time
and shall not take any position inconsistent therewith in any examination of any
Tax Return, in any refund claim or in any litigation or investigation, except as
required by Law.
(B) Purchaser and WEC shall file and cause to be filed all Tax
Returns and execute such other documents as may be required by any taxing
authority, in a manner consistent with the Allocation Statement, as it may be
revised from time to time. WEC shall prepare an initial draft of Internal
Revenue Service Form 8594 pursuant to Section 1060 of the Code relating to the
transactions contemplated by this Agreement based on the Allocation Statement,
as it may be revised from time to time, and deliver such form to Purchaser.
Purchaser and WEC shall attempt in good faith to agree on a final version of
such form and shall file, or cause the filing of, such form with each relevant
taxing authority.
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(C) With respect to the purchase of the capital stock of Sold
Subsidiaries that are U.S. corporations and members of Sellers' "affiliated
group" (within the meaning of the Code Section 1504), (i) Purchaser and WEC
agree to jointly make the election pursuant to Section 338(h)(10) of the Code
and any comparable election under state and local law ("SECTION 338 ELECTIONS")
with respect to each of the Sold Subsidiaries listed on Schedule 5.14(c), (ii)
at Purchaser's request, Purchaser and WEC shall jointly make Section 338
Elections as to any other Sold Subsidiary designated by Purchaser in writing and
delivered to WEC prior to the Closing, (iii) Purchaser and WEC shall cooperate
with each other to take all actions necessary to effect and preserve timely
Section 338 Elections made pursuant to this Section 5.14(c) in accordance with
Treasury Regulation Section 1.338(h)(10) (and any comparable provisions of state
and local law and any successor provisions thereto) and shall not take any
position inconsistent with treating the purchases of the capital stock of such
corporations as Section 338 Elections and (iv) no Section 338 Election shall be
made as to any other such Sold Subsidiary. Unless prohibited by applicable Law,
WEC and Purchaser shall cause the Sold Subsidiaries to end their taxable years
as of the Closing Date in states that do not recognize an election comparable to
the election under Section 338(h)(10) of the Code.
(D) WEC and Purchaser shall allocate between themselves all transfer,
documentary, sales, use, registration, stamp, value-added and other similar
taxes (including all applicable real estate transfer taxes and real property
gains taxes), including any penalties, interest and additions to tax, incurred
in connection with the transactions contemplated hereby ("TRANSFER TAXES") as
follows: (i) with respect to all Transfer Taxes incurred in Florida and North
Carolina, WEC and Purchaser shall equally share all Transfer Taxes, up to an
amount not to exceed $ 7,000,000 (the "Estimated Transfer Tax Amount"), after
which WEC shall be responsible and shall indemnify Purchaser and its Affiliates
for all Transfer Taxes in excess of the Estimated Transfer Tax Amount and (ii)
WEC and Purchaser shall equally share all Transfer Taxes incurred in all other
jurisdictions. Notwithstanding the foregoing, Purchaser shall be responsible and
shall indemnify Seller and its Affiliates for the excess of (i) any Transfer
Taxes imposed by reason of the acquisition by Purchaser of the stock of the
subsidiaries of Westinghouse Electric S.A. over (ii) the Transfer Taxes that
would have been imposed had Purchaser acquired the stock of Westinghouse
Electric S.A.. WEC and Purchaser shall reimburse one another, as the case may
be, for their respective share of the Transfer Taxes paid by the other party
within five (5) days of written request for such payment. WEC and Purchaser
shall cooperate in timely making and filing all Tax Returns as may be required
to comply with the provisions of any Transfer Tax Laws. To the extent legally
able to do so, Purchaser shall deliver to
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WEC exemption certificates satisfactory in form and substance to WEC with
respect to Transfer Taxes if such delivery would reduce the amount of
Transfer Taxes that would otherwise be imposed.
(E) WEC shall terminate and shall cause the termination by the
Closing of any agreements, arrangements or practices relating to Taxes between
WEC or any of its Affiliates (other than any Investment), on the one hand, and
any Investment, on the other hand.
(F) At the Closing, WEC shall deliver to Purchaser duly
executed certificates certifying that the transactions contemplated hereby are
exempt from withholding under Section 1445 of the Code.
(G) With respect to Income Taxes, and to the extent permitted
by Law, Purchaser shall not, and shall cause each Sold Subsidiary not to, carry
back any item of income, loss, credit or deduction from any period beginning
after the Closing Date to any period including or ending prior to the Closing
Date.
(H) WEC shall file any amended consolidated, combined or
unitary Income Tax Returns that include any Sold Subsidiary for taxable years
ending on or prior to the Closing Date which are required as a result of
examination adjustments made by any taxing authority as finally determined. For
those jurisdictions in which separate Income Tax Returns are filed by any Sold
Subsidiary, any required amended Income Tax Returns resulting from such
examination adjustments, as finally determined, shall be prepared by WEC and
furnished to such Sold Subsidiary, for signature and filing at least ten days
prior to the due date for filing such returns.
(I) (i) WEC shall file or cause to be filed the United States
consolidated federal Income Tax Return of WEC and, where applicable, all other
consolidated, combined or unitary state or local Income Tax Returns for the
taxable periods of each Selling Subsidiary and each Sold Subsidiary that is a
U.S. corporation ending on or prior to the Closing Date ("PRE-CLOSING INCOME TAX
RETURNS") and (ii) WEC shall also file and shall cause each Selling Subsidiary
and each Sold Subsidiary to file all other Tax Returns with respect to the
Acquired Assets or the income or operations of the Business required to be filed
(including any extensions) on or prior to the Closing Date. WEC shall prepare or
shall cause to be prepared all state and local Pre-Closing Income Tax Returns
required to be filed by any Sold Subsidiary on a separate return basis and with
respect to those Tax Returns that have not been filed by the Closing Date (A)
WEC shall provide Purchaser with a copy of such Tax Returns at least 30 days
prior to the due date for filing such Tax Returns (including any extensions) and
(B) after reviewing and approving such Tax Returns (which approval shall not be
unreasonably withheld),
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Purchaser shall file or shall cause such Tax Returns to be filed. WEC shall
pay or cause to be paid all Income Taxes relating to the Pre-Closing Income
Tax Returns.
(J) (i) Purchaser shall timely prepare and file (or cause to
be prepared and filed) all Tax Returns required by Law for all Taxes covering
the Acquired Assets or the Sold Subsidiaries for periods ending after the
Closing Date and which include a period prior to the Closing Date ("STRADDLE
PERIOD TAX RETURNS"). Purchaser shall not prepare any Straddle Period Tax
Returns on a basis inconsistent with the methodology used in prior taxable years
(except as otherwise required by Law) if the result would be to increase the
amount of Taxes for which WEC is responsible under this Agreement. To the extent
any Straddle Period Tax Return relates to Income Taxes, (A) Purchaser shall
provide WEC with a copy of such Tax Returns at least 30 days prior to the due
date for filing such Tax Returns (including extensions), (B) after WEC's review
and approval of such Tax Returns (which approval shall not be unreasonably
withheld), Purchaser shall file or cause such Tax Returns to be filed and (C)
not later than 5 days before the due date for the payment of Income Taxes with
respect to such Tax Returns, WEC shall pay to Purchaser an amount equal to WEC's
allocable portion of the Seller's Straddle Period Taxes (as defined below)
determined in accordance with the method described in clause (ii) below.
Purchaser shall timely prepare and file (or cause to be prepared and filed) all
Tax Returns required by Law for all Taxes covering the Acquired Assets or the
Sold Subsidiaries for periods beginning after the Closing Date (the
"POST-CLOSING TAX RETURNS") and Purchaser shall timely pay or cause to be paid
all Taxes relating to Post- Closing Tax Returns
(ii) For purposes of this Agreement, Seller's
allocable portion of Taxes with respect to the Straddle Period Tax Returns
("SELLER'S STRADDLE PERIOD TAXES") shall be:
(A) In the case of any real or personal property Tax relating
to the Acquired Assets or the Subsidiary Assets, an amount equal to the Tax for
the entire taxable period multiplied by a fraction the numerator of which is the
number of days in the period for which such taxes are paid ending on the Closing
Date and the denominator of which is the number of days in the entire taxable
period; and
(B) In the case of any other Tax, the amount that would be
payable if the taxable year ended on the Closing Date.
(K) WEC and Purchaser shall each provide the other with such assistance
as may be reasonably requested (including making employees reasonably available
to provide information or testimony) in connection with the preparation of any
Tax Return, any Tax Controversy (as defined in Section 5.14(l)(ii)), or the
determination of liability for Taxes with respect to the Acquired
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Assets or the income or operations of the Business. Purchaser shall complete
WEC's standard tax packages relating to Tax Returns that WEC is responsible for
filing pursuant to Section 5.14(i) and deliver them to WEC within 90 days of
Purchaser's receipt from WEC and shall, and shall cause its Affiliates to,
cooperate with WEC in preparing and pursuing any claims for refunds or credits
of Income Taxes (including refunds or credits relating to investment tax
credits, research credits and credits for prepayments of Income Taxes). At
Purchaser's request and expense, WEC shall file claims prepared by Purchaser for
refunds of Taxes assumed by Purchaser pursuant to Section 2.3(a)(viii) and
promptly pay over the amount recovered to Purchaser (without any interest, other
than interest paid by the applicable taxing authority with respect to such
refund); PROVIDED, HOWEVER, that Purchaser shall promptly reimburse WEC to the
extent that such refund is reclaimed by a taxing authority (without any
interest, other than interest due to the applicable taxing authority with
respect to such reclamation). WEC and Purchaser each shall, and shall cause
their Affiliates to, retain until seven years after the Closing Date all Tax
Returns, schedules, work papers and other records that are owned by such Person
immediately after the Closing and that relate to the Business or the Acquired
Assets; after the end of such period, before disposing of any such Tax Returns,
schedules, work papers or other records, each shall give notice to such effect
to the other, and shall give the other, at the other's cost and expense, a
reasonable opportunity to remove and retain all or any part of such Tax Returns,
schedules, work papers or other records as the other may select.
(L) (i) Purchaser shall, in the event that Purchaser receives
notice (whether orally or in writing) of any examination, claim, proposed
settlement, proposed adjustment or related matter with respect to any Taxes for
which Purchaser may be indemnified hereunder (the "WEC TAX CONTROVERSIES")
promptly notify WEC thereof, PROVIDED, HOWEVER, that failure to give such
notification shall not affect the indemnification provided hereunder except to
the extent WEC shall have been actually prejudiced as a result of such failure
(except that WEC shall not be liable for any expenses incurred during the period
in which the Purchaser failed to give such notice). WEC shall be entitled at its
sole discretion and expense to handle, control and compromise or settle the WEC
Tax Controversies, and shall reasonably inform Purchaser of the progress of the
WEC Tax Controversies, provided, however in the event Purchaser waives its right
to indemnification with respect to any WEC Tax controversy relating to Taxes
other than Income Taxes, Purchaser may assume at its expense the sole discretion
to handle, control compromise or settle such controversy.
(ii) WEC shall, in the event WEC receives notice
(whether orally or in writing) of any examination, claim, proposed
settlement, proposed adjustment or related
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matter with respect to Taxes attributable to the Business (other than
WEC Tax Controversies) (the "PURCHASER TAX CONTROVERSIES," and together
with the WEC Tax Controversies, the "TAX CONTROVERSIES"), promptly
notify Purchaser thereof, PROVIDED, HOWEVER, that failure to give such
notification shall not affect the indemnification provided hereunder
except to the extent Purchaser shall have been actually prejudiced as a
result of such failure (except that the Purchaser shall not be liable
for any expenses incurred during the period in which Seller failed to
give such notice). Purchaser shall be entitled at its sole discretion
and expense to handle, control and compromise or settle the Purchaser
Tax Controversies, and shall reasonably inform WEC of the progress of
the Purchaser Tax Controversies.
SECTION 5.15 SUPPLIES. Purchaser shall not use any signs or stationery,
purchase order forms, packaging or other similar paper goods or supplies, or
advertising and promotional materials, product, training and service literature
and materials, or computer programs or like materials (collectively, the
"SUPPLIES"), that state or otherwise indicate thereon that the Business is a
division or unit of WEC or, except in compliance with any license agreement
contemplated by Section 5.9(b), contain any trademarks, servicemarks, trade
names or corporate or business names, derived from or including the words
"Westinghouse Electric Corporation", "Westinghouse" or "Circle W" (in logotype
design or any other style or design) in whole or in part; PROVIDED, that to the
extent any Supplies included in the Acquired Assets so indicate, Purchaser may,
for a period of 180 days after the Closing Date, use such Supplies after first
crossing out or marking over such statement or indication or trademark,
servicemark, trade name or corporate or business name and otherwise clearly
indicating on such Supplies that the Business is no longer a division or unit of
WEC. Purchaser shall not reorder or produce any Supplies which state or
otherwise indicate thereon that the Business is a division or unit of Seller or
contain any such trademarks, servicemarks, trade names or corporate or business
names.
SECTION 5.16 TRANSFER OF ASSETS OF SOLD SUBSIDIARIES. On or prior to
the Closing Date, WEC shall cause the Sold Subsidiaries to transfer, without
consideration, any Subsidiary Assets not relating primarily to the Business to
WEC or Subsidiaries of WEC other than the Sold Subsidiaries or to any third
party designated by WEC. After the Closing, Purchaser will cooperate with WEC to
transfer without consideration any Subsidiary Assets not relating primarily to
the Business to WEC or Subsidiaries of WEC or to any third party designated by
WEC and WEC shall reimburse Purchaser for its reasonable expenses incurred in
connection therewith.
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SECTION 5.17 CREDIT SUPPORT. Purchaser acknowledges that in the course
of the conduct by the Sold Subsidiaries of their business, WEC and its
Subsidiaries (other than the Sold Subsidiaries) have entered into and expect to
continue to enter into various arrangements (i) in which guaranties (including
guaranties of performance under contracts or agreements), letters of credit or
other credit arrangements, including surety and performance bonds, were issued
by or for the account of WEC and its Subsidiaries (other than the Sold
Subsidiaries) or (ii) in which WEC and its Subsidiaries (other than the Sold
Subsidiaries) are the primary or secondary obligors on debt instruments or
financing or other contracts or agreements, in any such case to support or
facilitate business transactions of the Sold Subsidiaries. Such arrangements by
such parties are hereinafter referred to as the "CREDIT SUPPORT ARRANGEMENTS."
Schedule 5.17 sets forth a list of all Credit Support Arrangements existing as
of the date hereof. Purchaser will use commercially reasonable best efforts to
(i) obtain replacement Credit Support Arrangements which will be in effect at
the Closing or (ii) repay, or cause the repayment of, all debt and other
obligations to which such Credit Support Arrangements relate (and cause the
cancellation of such Credit Support Arrangements) or arrange for itself or one
of its Subsidiaries (including the Sold Subsidiaries) to be substituted as the
obligor thereon as of the Closing Date. In the event that notwithstanding the
foregoing sentence Credit Support Arrangements remain outstanding following the
Closing, Purchaser will continue to use commercially reasonable best efforts to
take the actions described in clauses (i) and (ii) of the preceding sentence and
will indemnify WEC and its Subsidiaries (other than the Sold Subsidiaries) for
all losses, liabilities, claims, damages and expenses suffered or incurred by
WEC and its Subsidiaries (other than the Sold Subsidiaries) arising from the
existence of Credit Support Arrangements following the Closing.
SECTION 5.18 NON-COMPETITION.
(A) COVENANTS AGAINST COMPETITION. WEC acknowledges that (i)
WEC is one of a limited number of Persons who have been active in the industry
of the Business; (ii) WEC's Business is international in scope; (iii) WEC's
ownership of the Business has brought it in close contact with certain
confidential information regarding the Business not generally available; and
(iv) Purchaser would not purchase the Acquired Assets but for the agreements and
covenants of WEC contained in this Section 5.18.
Accordingly, WEC covenants and agrees that:
(i) WEC shall not in the United States of America or
elsewhere in the world, directly or indirectly, for a period commencing
on the Closing Date and terminating on the fifth anniversary of the
Closing Date (the "RESTRICTED PERIOD"), nor during the Restricted
Period shall it cause or permit any of its Subsidiaries to (A) engage
in the Business or in any business that competes with any of the
Business
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for WEC's or such Subsidiaries' direct or indirect account; (B)
render any material assistance to any Person (other than Purchaser)
engaged in such business; or (C) become interested in any such Person
(other than Purchaser) as a partner, shareholder, principal, agent,
trustee, consultant or in any other similar relationship or capacity;
PROVIDED, HOWEVER, that notwithstanding the foregoing WEC may own,
directly or indirectly, solely as an investment, securities of any
Person which are traded on any national securities exchange or NASDAQ
if WEC (i) is not a controlling Person or, or a member of a group which
controls such Person and (ii) does not, directly or indirectly, own 2%
or more of any class of securities of such Person.
(ii) During and after the Restricted Period, WEC
shall (and shall cause each of its Subsidiaries to) keep secret and
retain in strictest confidence, and not use for the benefit of itself
or others except in connection with the business and affairs of
Purchaser and its Affiliates, all confidential information with respect
to the Business and the Acquired Assets, or learned by WEC directly or
indirectly from Purchaser, including, without limitation, information
with respect to (A) prospective business activities, (B) sales figures,
(C) profit or loss, gross margin or similar information, and (D)
customers, clients, suppliers, sources of supply and customer lists
(the "CONFIDENTIAL INFORMATION"), and shall not disclose such
Confidential Information to anyone outside of Purchaser and its
Affiliates except with Purchaser's express written consent or as
required by Law or upon written advice of counsel and except for
Confidential Information which (i) is at the time of receipt or
thereafter becomes publicly known through no wrongful act of or (ii) is
received from a third party not under an obligation to keep such
information confidential and without breach of this Agreement.
(iii) During the Restricted Period, neither WEC nor
Purchaser shall, directly or indirectly, knowingly solicit or encourage
to leave the employment of Purchaser or WEC, any employee of Purchaser
or WEC, as the case may be.
Notwithstanding the foregoing, nothing contained in the
Agreement shall impair, impede, prevent, inhibit, limit or restrict WEC or any
of its Affiliates (or any successor or assign of any of them) in any manner or
respect whatsoever from (i) the continuing operation of (x) the Government
Operations Business, (y) the Energy Systems Business or (z) the Process Control
Division, including, without limitation, the business of bidding, selling,
installing and/or servicing of electrical power plants, whether alone or in
partnership, joint venture, combination or other arrangement, with suppliers or
manufacturers of goods or services competitive with the Business, provided WEC's
scope is primarily related to the goods and services which it has
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typically provided under (x), (y) and (z) or (ii) selling or otherwise
transferring the Government Operations Business, the Energy Systems Business or
the Process Control Division or any portion thereof to any Person, whether or
not such Person or any of its Affiliates is engaged in a business competitive
with the Business.
(B) RIGHTS AND REMEDIES UPON BREACH. If WEC breaches, or
threatens to commit a breach of, any of the provisions of Section 5.18(a) (the
"RESTRICTIVE COVENANTS") , Purchaser shall have the following rights and
remedies (upon compliance with any necessary prerequisites imposed by law upon
the availability of such remedies) , each of which rights and remedies shall be
independent of the other and severally enforceable and shall not be affected by
the provisions of Article VIII, and all of which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to
Purchaser under Law or in equity:
(i) The right to have the Restrictive Covenants
specifically enforced (without posting any bond) by any court having
equity jurisdiction, including, without limitation, the right to an
entry against WEC of restraining orders and injunctions (preliminary,
mandatory, temporary and permanent) against violations, threatened or
actual, and whether or not then continuing, of such covenants, it being
acknowledged and agreed that any such breach or threatened breach may
cause irreparable injury to Purchaser and that money damages may not
provide adequate remedy to Purchaser.
(ii) The right and remedy to require WEC to account
for and pay over to Purchaser all compensation, profits, monies,
accruals, increments or other benefits (collectively, "BENEFITS")
derived or received by such person as a result of any transactions
constituting a breach of any of the Restrictive Covenants, and such
person shall account for and pay over such Benefits to Purchaser.
(C) SEVERABILITY OF COVENANTS. If any court determines that
any of the Restrictive Covenants, or any part thereof, is invalid or
unenforceable, the remainder of the Restrictive Covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
(D) BLUE-PENCILLING. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration of such provision or the area covered thereby, such court shall have
the power to reduce the duration or area of such provisions and, in its reduced
form, such provision shall then be enforceable and shall be enforced.
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SECTION 5.19 POST-CLOSING AGREEMENTS. During the period prior to the
Closing, WEC and Purchaser agree to negotiate in good faith and enter into the
following agreements:
(A) TRANSITIONAL SERVICES. At the Closing, WEC and Purchaser
shall enter into a mutually acceptable agreement (the "Transitional Services
Agreement"), whereby WEC will provide to Purchaser certain transitional services
which are currently provided to the Business by WEC.
(B) FACILITIES. Sellers and Purchaser shall enter into
mutually acceptable arrangements relating to the use of (i) facilities and
equipment by Business Employees currently located in Sellers' facilities other
than the Premises and (ii) facilities and equipment by employees of WEC
currently located in the Premises and who are not Business Employees.
(C) FIELD SALES OFFICES. Sellers and Purchaser shall enter
into mutually acceptable arrangements, including sublease arrangements and
arrangements with respect to the provision and use of personnel and Tangible
Property, with respect to the conduct of the Energy Systems Business at the
field sales offices included in the Premises.
SECTION 5.20 REMOVAL OF EXCLUDED ASSETS AND LIABILITIES FROM SOLD
SUBSIDIARIES. The parties acknowledge that certain Excluded Assets and Excluded
Liabilities may be held by, or be obligations of, certain of the Sold
Subsidiaries. Sellers will at the request of Purchaser use their best efforts
either (i) to transfer the Acquired Assets held by any such Subsidiary directly
to Purchaser (in which event Seller will retain the Sold Subsidiary) or (ii) to
transfer out of any such Subsidiary, or otherwise appropriately protect
Purchaser from, any Excluded Assets and Excluded Liabilities held by any such
Subsidiary.
SECTION 5.21 GUARANTEE AGREEMENT. Concurrent with the execution of this
Agreement, the Guarantors are executing the Guarantee Agreements in the form of
Exhibits G-1, G-2 and G-3 hereto (the "GUARANTEE AGREEMENT").
SECTION 5.22 STEAM GENERATOR AGREEMENT. On the Closing Date, WEC and
Purchaser shall enter into an agreement substantially on the terms described in
Exhibit H hereto (the "STEAM GENERATOR AGREEMENT") relating to the Settlement
Agreements and related matters.
SECTION 5.23 POST CLOSING HIRING OF EMPLOYEES. If within the period
ending one (1) year after the Closing Date, Purchaser or any of its Affiliates
hires any employee of WEC or its Subsidiaries (other than Business Employees),
Purchaser shall reimburse WEC for any severance and other related termination
costs paid by WEC or its Subsidiaries to or on account of such employment with
WEC or any of its Subsidiaries during such one (1) year period.
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SECTION 5.24 INSTRUMENTATION AND CONTROL MATTERS. At the Closing, WEC
and Purchaser shall enter into supply agreements, substantially on the terms
described in Exhibit B hereto, pursuant to which WEC (or its successors) will
provide to Purchaser goods and services related to the Business.
SECTION 5.25 SCIENCE AND TECHNOLOGY CENTER.
WEC operates a Science and Technology Center in Churchill,
Pennsylvania ("STC"), which provides research and development support to the
Business. The Acquired Assets shall include all Fixtures and Equipment and,
subject to the provisions of Section 2.2(c), Contracts owned by Sellers on the
Closing Date and used or held for use primarily in the portion of the STC which
primarily provides research and development support to the Business or to the
performance of those programs ("STC PROGRAMS") (a) set forth on Schedule 5.25 or
(b) entered into or undertaken in the Ordinary Course of Business between the
date of this Agreement and the Closing Date which relate primarily to the
Business.
The provisions of Section 5.5 shall be applicable to all STC
employees (other than any employee in the Information Technology Group) who
primarily render services on behalf of the Business or on behalf of any of the
STC Programs.
On the Closing Date, WEC shall sublease to Purchaser that portion of
the premises at the STC primarily related to the Business and the STC Programs
pursuant to a mutually acceptable sublease. Purchaser and WEC agree that the
terms of the sublease shall not be materially more restrictive to Purchaser than
the terms of the master lease with respect to the STC are to WEC. WEC agrees to
provide Purchaser with a copy of the master lease with respect to the STC. On
the Closing Date, subject to Section 2.2(c), Purchaser shall assume all
Liabilities associated with the STC Programs.
Seller shall transfer and Buyer shall accept and assume all of Seller's
rights, interests and liabilities in the Solid Oxide Fuel Cell ("SOFC") program,
subject to Department of Energy approval and consent, and unless otherwise
qualified by the Shared Technology Agreement. The following contracts are part
of the rights and liabilities of Sellers with respect to the SOFC programs:
1. DOE Cooperative Agreement;
2. Southern California Edison Agreement of July, 1997;
3. Gas Research Institute Agreement;
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4. Praxair Agreement of December 31, 1996; and
5. Solid Oxide Fuel Cell Commercialization Association
Agreement.
SECTION 5.26. BUSINESS RELATIONSHIPS WITH SELLER. WEC and Purchaser
acknowledge that the Business has had relationships with other businesses within
Sellers which have not been documented by a formal written agreement. In
particular, the Business has been involved with the Energy Systems Business
Unit, Process Control Division, Westcom and the Science and Technology Center.
The parties agree that, except for specific provisions in the Agreement and the
Seller Ancillary Documents which expressly provide for any different treatment,
(a) any such pre-existing relationships will be documented by Sellers prior to
the Closing, and shall be maintained on such documented basis by Purchaser after
the Closing; and (b) all Contracts between Sellers or a Sold Subsidiary and
their customers involving products or services of the Business shall be
completed by Purchaser or its designated Subsidiary after the Closing in
accordance with the Contract terms.
ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION. The obligation of
Purchaser to purchase the Acquired Assets and the obligation of WEC to (and to
cause the Selling Subsidiaries to) sell, assign, transfer, convey and deliver
the Acquired Assets to Purchaser shall be subject to the satisfaction prior to
the Closing of the following conditions:
(A) CERTAIN WAITING PERIODS. Any waiting period under the HSR
Act and the Exon-Florio Amendment applicable to any of the transactions
contemplated hereby shall have expired or been earlier terminated.
(B) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining
order, preliminary or permanent injunction or other legal restraint or
prohibition preventing the consummation of the transactions contemplated by this
Agreement shall be in effect; PROVIDED, HOWEVER, that each of Purchaser, and,
subject to the proviso in Section 5.3(b), WEC shall have used its best efforts
to prevent the entry of any such order, injunction or other restraint or
prohibition and to appeal as promptly as possible any such order, injunction or
other restraint or prohibition that may be entered.
(C) GOVERNMENTAL ACTION. There shall not be any pending suit,
action or proceeding by any Governmental Authority
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challenging or seeking to restrain or prohibit the consummation of the
transactions contemplated by this Agreement in any material respect or seeking
to obtain any damages from Sellers, Purchaser or the Sold Subsidiaries which
would reasonably be expected to have a Material Adverse Effect or otherwise be
materially adverse to Sellers or Purchaser.
SECTION 6.2 CONDITIONS TO OBLIGATION OF PURCHASER. The obligation of
Purchaser to purchase the Acquired Assets is subject to the satisfaction at and
as of the Closing of each of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of WEC set forth in this Agreement shall be true and correct in all
respects as of the date of this Agreement and, except for those made as of a
particular date, as of the Closing as though made at and as of the Closing,
except for (i) changes permitted or contemplated by this Agreement and (ii) such
failures of representations and warranties to be true and correct that would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Purchaser shall have received a certificate signed by an
authorized officer of WEC to such effect.
(B) PERFORMANCE OF OBLIGATIONS OF WEC. WEC shall have
performed or complied in all material respects with all obligations, conditions
and covenants required to be performed or complied with by it under this
Agreement at or prior to the Closing (other than the covenant set forth in
Section 5.1(b)), and Purchaser shall have received a certificate signed by an
authorized officer of WEC to such effect. Notwithstanding the foregoing, WEC
shall be deemed to have performed or complied in all material respects with its
covenants contained in Section 5.1 so long as the failure so to perform or
comply has not had, and would not reasonably be expected to have, a Material
Adverse Effect.
(C) MATERIAL PERMITS. Except as set forth on Schedule 6.2(c),
Purchaser and the Sold Subsidiaries shall have, on the Closing Date, all
permits, licenses, franchises, approvals, consents and authorizations by or of
Governmental Authorities required by Law for Purchaser to conduct the Business
and to acquire and own the Acquired Assets, and such Permits shall be in full
force and effect, except (i) where (assuming compliance by WEC with the
provisions of Sections 5.3(c) and 5.4) the failure to have any such Permits or
of any such Permits to be in full force and effect would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect;
PROVIDED, HOWEVER, that this condition shall be inapplicable to the extent
Purchaser shall have failed to comply with its obligations under Section 5.4 to
use commercially reasonable efforts to obtain the consent of Governmental
Authorities to the
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assignment of any Seller's or Sold Subsidiary's Permits or under Section 5.3(c)
to secure its own permits, licenses, franchises, approvals, consents and
authorizations by or of Governmental Authorities in lieu of any Permits held by
any Seller or Sold Subsidiary.
(D) OPINION OF WEC'S COUNSEL. Purchaser shall have received an
opinion or opinions dated the Closing Date of counsel to WEC, in form and
substance reasonably satisfactory to Purchaser.
(E) CONVEYANCING DOCUMENTS. Sellers shall have executed and
delivered such deeds, bills of sale, assignments and other instruments, each
satisfactory in form and substance to Purchaser, as shall be necessary or
appropriate to convey the Acquired Assets in accordance with this Agreement.
SECTION 6.3 CONDITIONS TO OBLIGATION OF WEC. The obligation of WEC to
(and to cause the Selling Subsidiaries to) sell, assign, transfer, convey, and
deliver the Acquired Assets is subject to the satisfaction at and as of the
Closing of each of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing as
though made at and as of the Closing, and WEC shall have received a certificate
signed by an authorized officer of Purchaser to such effect.
(B) PERFORMANCE OF OBLIGATIONS OF PURCHASER. Purchaser shall
have performed or complied in all material respects with all obligations,
conditions and covenants required to be performed or complied with by it under
this Agreement at or prior to the Closing, and WEC shall have received a
certificate signed by an authorized officer of Purchaser to such effect.
(C) OPINION OF PURCHASER'S COUNSEL. WEC shall have received an
opinion or opinions dated the Closing Date of counsel to Purchaser and the
Guarantors in form and substance reasonably satisfactory to WEC.
(D) GUARANTEE AGREEMENTS. The Guarantee Agreements shall be in
full force and effect, and the Guarantors shall have complied with all of their
obligations thereunder.
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ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 TERMINATION.
(A) Notwithstanding anything to the contrary in this
Agreement, this Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the Closing:
(i) by mutual written consent of WEC and Purchaser;
(ii) by WEC if any of the conditions set forth in
Section 6.1 or 6.3 shall have become incapable of fulfillment, and
shall not have been waived by WEC;
(iii) by Purchaser if any of the conditions set forth
in Section 6.1 or 6.2 shall have become incapable of fulfillment, and
shall not have been waived by Purchaser; or
(iv) by WEC or Purchaser if the Closing does not
occur on or prior to December 31, 1998;
PROVIDED, HOWEVER, that the party seeking termination pursuant to clause (ii),
(iii) or (iv) is not in breach in any material respect of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
(B) In the event of termination by WEC, on the one hand, or
Purchaser, on the other hand, pursuant to this Section 7.1, written notice
thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated, without further action by
any party. If the transactions contemplated by this Agreement are terminated as
provided herein:
(i) Purchaser shall return all documents and other
material received from Sellers relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof, to WEC; and
(ii) all confidential information received by
Purchaser with respect to Business and the other operations of Sellers
shall be treated in accordance with the Confidentiality Agreement,
which shall remain in full force and effect notwithstanding the
termination of this Agreement.
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(C) If this Agreement is terminated and the transactions
contemplated hereby are abandoned pursuant to this Section 7.1 for any reason
other than a termination by Purchaser pursuant to this Section 7.1 as a result
of a failure to satisfy any condition set forth in Section 6.2(a) or (b) (which
failure shall not have been cured within twenty (20) business days following
WEC's receipt of written notice of such failure from Purchaser) , Purchaser
shall pay to WEC on demand a termination fee of $30,000,000, by wire transfer to
an account designated in writing by WEC of immediately available funds.
(D) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 7.1, this
Agreement shall become null and void and of no further force and effect, except
for the provisions of (i) Section 5.2 relating to the obligation of Purchaser to
keep confidential certain information and data obtained by it from Seller, (ii)
this Agreement relating to expenses (including Sections 5.7 and 5.14(d)), (iii)
Section 5.8 relating to finder's fees and broker's fees, (iv) this Section 7.1
and (v) Article 9. Nothing in this Section 7.1 shall be deemed to release either
party from any liability for any breach by such party of the terms and
provisions of this Agreement or to impair the right of either party to compel
specific performance by the other party of its obligations under this Agreement.
SECTION 7.2 AMENDMENTS AND WAIVERS. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto. By an instrument in writing Purchaser, on the one hand, or WEC, on the
other hand, may waive compliance by the other party with any term or provision
of this Agreement, that such other party was or is obligated to comply with or
perform.
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ARTICLE 8
INDEMNIFICATION
SECTION 8.1 INDEMNIFICATION BY WEC.
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(A) WEC hereby agrees to indemnify Purchaser and its
Affiliates and their respective officers, directors, employees, stockholders,
agents and representatives against, and agrees to hold them harmless from, any
Losses, as incurred, to the extent arising from, relating to or otherwise in
respect of (i) any breach of any representation or warranty of WEC contained in
this Agreement (other than those contained in clauses (i), (ii) and (iv)(A)
Section 4.1(n)), determined (except in respect of (A) of Sections 4.1(c)(i),
4.1(j)(xiv), 4.1(j)(xv) and 4.1(l) and (B) representations and warranties
relating to the "material" impairment of the ability of a party to perform its
obligations under this Agreement) without regard to any materiality
qualification or exception in any representation or warranty giving rise to the
claim for indemnity hereunder), (ii) any breach of any covenant of any of
Sellers contained in this Agreement or in any Seller Ancillary Document, (iii)
any Liability of any Seller which is not an Assumed Liability and any Liability
of any Sold Subsidiary which is an Excluded Liability, (iv) any Indebtedness
that is not included on the Statement or (v) any Environmental Liability which
is not an Excluded Liability; PROVIDED, HOWEVER, that (A) WEC shall not have any
Liability under clause (i) above unless the aggregate of all Losses relating
thereto for which WEC would, but for this proviso, be liable under clause (i)
above exceeds an amount equal to $50,000,000, and then only to the extent of any
such excess, (B) WEC shall not have any Liability under clause (i) above in
excess in the aggregate of the Purchase Price, (C) for purposes of calculating
Losses under clauses (i) and (ii) above, WEC shall not have any Liability for
any Loss in respect of such breaches if the aggregate amount of such Loss
relating to a single claim (or group of claims relating to the same event or
transaction) does not exceed $5,000, (D) WEC shall not have any Liability under
this Section 8.1 to the extent the Liability arises as a result of the operation
of the Business or the Acquired Assets after the Closing or any action taken or
omitted to be taken by Purchaser or any of its Affiliates, and (E) in respect of
any Losses under clause (v) above, (w) for aggregate Losses of less than $100
million ("FIRST-TIER ENVIRONMENTAL LOSSES"), WEC shall pay 25% of such Losses,
(x) for aggregate Losses of $100 million or more but less than $200 million
("SECOND-TIER ENVIRONMENTAL LOSSES"), WEC shall pay 75% of such Losses, (y) for
aggregate Losses of $200 million or more but less than $300 million ("THIRD-TIER
ENVIRONMENTAL LOSSES"), WEC shall pay 50% of such Losses and (z) for aggregate
Losses of $300 million or more ("FOURTH-TIER ENVIRONMENTAL LOSSES"), (1) if such
Losses result from a Remedial Action that is not imposed by an order of a
Governmental Authority pursuant to an Environmental Law, WEC shall pay 50% of
such Losses, and (2) WEC shall pay 100% of all other Losses. Notwithstanding the
foregoing provisions, if and to the extent Purchaser incurs Losses in respect of
Special Environmental Liabilities arising out of or in respect of the conduct of
the Business by any Seller or Sold Subsidiary prior to the Closing, WEC shall
pay the first $5,000,000 of such Losses.
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The balance of all such Losses shall be treated in the same way as all other
Losses in respect of Environmental Liabilities are treated in clause (v) above.
With respect to the Environmental Liabilities for which WEC
has Liability pursuant to this Section 8.1(a) and to the extent that such
Liability involves the implementation of a Remedial Action, (i) in no event
shall WEC's Liability extend to Remedial Action that seeks to meet or address
cleanup criteria applicable to real property other than criteria applicable to
real property used for purposes substantially consistent with the purposes for
which the Premises were used by the Business prior to the Closing and (ii) WEC
shall have the right to review and provide Purchaser with written comments in
advance of (A) the Purchaser's selection of consultants and contractors
designated to perform the Remedial Action and (B) the development of the scope
of work for, and type of, the Remedial Action to be implemented. Purchaser shall
review and reasonably and in good faith consider WEC's comments. Purchaser shall
provide all plans, reports and submissions to any Governmental Authority
regarding any such Remedial Action in draft form to WEC a reasonable time prior
to transmission of such items to such Governmental Authority and Purchaser shall
review and reasonably and in good faith consider any of WEC's comments on such
plans, reports and submissions. WEC and its representatives shall have the
opportunity to be present and participate at any meetings with Governmental
Authorities.
Notwithstanding the foregoing, from and after the time, if
any, as clause (E)(z) of the second preceding paragraph becomes applicable or
could reasonably be expected to become applicable prior to completion of any
specific Remedial Action, all determinations with respect to Remedial Actions
(including those contemplated by the first sentence of the immediately preceding
paragraph) shall be made jointly by WEC and Purchaser acting reasonably and in
good faith. All such determinations shall be made (1) with a view towards
achieving solutions that involve reasonable and customary Remedial Actions that
can be implemented efficiently and cost-effectively, (2) with due regard to
avoiding undue interference with the ongoing business operations of Purchaser
(or its successor in interest) at the Premises and (3) in accordance with
Environmental Laws. If, in such circumstances, (X) WEC and Purchaser do not
agree as to whether Remedial Action or any significant portion of a Remedial
Action is imposed by an order of a Governmental Authority pursuant to an
Environmental Law, the parties shall submit such dispute to arbitration pursuant
to Section 8.9(a) or (Y) WEC and Purchaser do not agree with respect to the
scope of work for, and the type of, the Remedial Action to be implemented, each
of WEC and Purchaser shall submit to the other a written proposal with respect
thereto; if the parties are unable to agree how to proceed, either party may
submit such dispute to arbitration pursuant to Section 8.9(b).
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(B) Purchaser acknowledges and agrees that, following the
Closing, its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement (except as provided in Section
5.14) shall be pursuant to the indemnification provisions set forth in this
Section 8.1. In furtherance of the foregoing, Purchaser hereby waives, to the
fullest extent permitted under Law, any and all rights, claims and causes of
action it may have against Sellers, their Affiliates and their respective
officers, directors, employees, stockholders, agents and representatives arising
under or based upon any Law or otherwise (except pursuant to the indemnification
provisions set forth in this Article 8).
SECTION 8.2 INDEMNIFICATION BY PURCHASER. Purchaser hereby agrees to
indemnify Sellers, their Affiliates and their respective officers, directors,
employees, stockholders, agents and representatives against, and agrees to hold
them harmless from, any Losses, as incurred, to the extent arising from,
relating to or otherwise in connection with (i) any breach of any representation
or warranty of Purchaser contained in this Agreement, (ii) any breach of any
covenant of Purchaser contained in this Agreement or in any Purchaser Ancillary
Document (iii) subject to Section 8.1(a), any Assumed Liabilities, (iv) subject
to Section 8.1(a), all Liabilities of the Sold Subsidiaries, (v) any Liability
under the WARN Act or similar statute arising from the actions of Purchaser on
or after the Closing, (vi) any Liability under any Credit Support Arrangement
following the Closing or (vii) subject to Section 8.1(a), the operation of the
Business or the Acquired Assets, or any actions or omissions of Purchaser, its
Affiliates, agents, contractors or subcontractors in connection therewith, after
the Closing.
SECTION 8.3 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS. All amounts
paid by WEC or Purchaser, as the case may be, under this Article VIII shall be
treated as adjustments to the Purchase Price for all Tax purposes.
SECTION 8.4 LOSSES NET OF INSURANCE; TAX LOSS AND BENEFITS; NO
CONSEQUENTIAL DAMAGES. The amount of any Loss shall be (a) net of any amounts
recovered or recoverable by the indemnified party under insurance policies or
Government Contracts (it being understood that if any amount is recovered or
recoverable by Purchaser under any insurance policy or Government Contract, it
shall not be subject to indemnification by WEC under this Article 8) with
respect to such Loss, (b), (i) increased to take account of any net Tax cost
incurred by the indemnified party by reason of the receipt of any indemnity
payment being treated for Tax purposes as other than an adjustment to the
Purchase Price (grossed-up for such increase) and (ii) reduced to take account
of any net Tax benefit realized by the indemnified party in respect of the
taxable year in which such Loss is
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incurred or paid and, with respect to a Tax benefit arising in a year subsequent
to the year in which the Loss is paid or incurred, the indemnified party shall
pay to the indemnifying party the amount of such Tax benefit at the time such
Tax benefit is actually realized, arising from the incurrence or payment of any
such Loss and (c) to avoid double-counting, determined after giving effect to
any reserves on the books of the Business as of the Closing Date in respect of
any matter if and to the extent such reserve reduced Closing Net Assets. In
computing the amount of any such Tax cost or Tax benefit, the indemnified party
shall be deemed to recognize all other items of income, gain, loss, deduction or
credit before recognizing any item arising from the receipt of any indemnity
payment hereunder or the incurrence or payment of any indemnified loss,
liability, claim, damage or expense. Notwithstanding anything to the contrary
contained herein, no indemnification shall be provided for under this Article 8
in respect of any indirect, special, consequential or "business interruption"
damages.
SECTION 8.5 TERMINATION OF INDEMNIFICATION. The obligations to
indemnify and hold harmless any party, (a) pursuant to clause (a)(i) of Section
8.1 and clause (a)(i) of Section 8.2, shall terminate when the applicable
representation or warranty terminates pursuant to Section 9.3 and pursuant to
clause (a)(v) of Section 8.1 shall terminate on the eighth anniversary of the
Closing Date; PROVIDED, HOWEVER, that such obligations to indemnify and hold
harmless shall not terminate with respect to any item as to which the Person to
be indemnified shall have, before the expiration of the applicable period,
previously made a claim by delivering a notice pursuant to Section 8.6 or 8.7
(stating in reasonable detail the basis of such claim) to the party to be
providing the indemnification and (b) pursuant to the other clauses of Sections
8.1 and 8.2 shall not terminate.
Notwithstanding anything to the contrary in this Agreement,
for purposes of Purchaser's entitlement to any indemnification provided for
under Section 8.1(a)(v) of this Agreement, any notice required to be given by
Purchaser to WEC hereunder need only specify in reasonable detail that a state
of facts or condition exists that gives rise to an Environmental Liability.
SECTION 8.6 PROCEDURES RELATING TO THIRD PARTY CLAIMS (OTHER THAN TAX
CONTROVERSIES).
(A) In order for a Person (the "INDEMNIFIED PARTY"), 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 against the indemnified
party (other than a Tax Controversy, procedures for which are specified in
Section 5.14(k)) (a "THIRD PARTY CLAIM"), such indemnified party must notify the
indemnifying party in writing, and in reasonable
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detail, of the Third Party Claim within 20 Business Days after receipt by such
indemnified party 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. Thereafter, the indemnified
party shall deliver to the indemnifying party, promptly after the indemnified
party's receipt thereof, copies of all notices and documents (including court
papers) received by the indemnified party relating to the Third Party Claim.
(B) If a Third Party Claim is made against an indemnified
party, the indemnifying party will be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the indemnifying party. If the indemnifying party so elects to
assume the defense of a Third Party Claim, the indemnifying party will not be
liable to the indemnified party for any legal expenses subsequently incurred by
the indemnified party in connection with the defense thereof. If the
indemnifying party assumes such defense, the indemnified party 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 indemnified party for any period during which the indemnifying party has
not assumed the defense thereof (other than during any period in which the
indemnified party shall have failed to give notice of the Third Party Claim as
provided above). 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. Such cooperation shall include the retention 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
indemnified party will agree to any settlement, compromise or discharge of such
Third Party Claim which the indemnifying party may recommend, which involves no
order for non-monetary relief, will not result in the indemnified party being
bound by principles of RES JUDICATA or collateral estoppel in defending other
similar claims and which by its terms obligates the indemnifying party to pay
the full amount of the liability in connection with such Third Party Claim or,
if such settlement, compromise or discharge does not require full payment of
such liability, the indemnified party shall have the right to consent to such
settlement, compromise or discharge, which consent may not be unreasonably
withheld. Whether or not the indemnifying party shall have assumed the defense
of a Third
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Party Claim, the indemnified party 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)
SECTION 8.7 PROCEDURES RELATING TO NON-THIRD PARTY CLAIMS. In order for
an indemnified party to be entitled to any indemnification provided for under
this Agreement in respect of a claim that does not involve a Third Party Claim
or Tax Controversy being asserted against or sought to be collected from such
indemnified party, the indemnified party shall deliver notice of such claim with
reasonable promptness to the indemnifying party. The failure by any indemnified
party so to notify the indemnifying party shall not relieve the indemnifying
party from any liability which it may have to such indemnified party under this
Agreement, except to the extent that the indemnifying party shall have been
actually prejudiced by such failure.
SECTION 8.8 JOINT DEFENSE AGREEMENT. On the Closing Date, WEC and
Purchaser shall enter into a Joint Defense Agreement substantially in the form
set forth in Exhibit F and on such additional terms as shall be mutually
agreeable.
SECTION 8.9 ARBITRATION OF ENVIRONMENTAL LIABILITIES. (a) Any dispute
arising out of whether a Remedial Action covered by Section 8.1(a)(E)(z) of this
Agreement is imposed by an order of a Governmental Authority pursuant to
Environmental Law shall be settled by arbitration in accordance with the
Commercial Rules of the American Arbitration Association. Any party may commence
arbitration hereunder by delivering notice to the other party or parties to the
dispute, claim or controversy. The arbitration panel shall consist of three
arbitrators. Within ten (10) days after delivery of the notice of commencement
of arbitration referred to above, the Purchaser and WEC shall each appoint one
arbitrator, and the two arbitrators so appointed shall within 10 days of their
appointment designate a third arbitrator within ten days of their appointment.
If the arbitrators designated by the parties to the arbitration are unable or
fail to agree upon the third arbitrator, the third arbitrator shall be
designated by the American Arbitration Association under its rules. The
arbitrators will be bound by the substantive law of the State of New York, but
will not be bound by the laws of evidence and procedure customary in courts of
law. The arbitrators shall be required to submit a written statement of their
findings and conclusions. The award of the arbitrators shall be final, binding
and conclusive on the parties; provided that, where a remedy for breach is
prescribed hereunder or limitations on remedies are prescribed, the arbitrators
shall be bound by such restrictions. Judgment upon the award may be entered in
any court having jurisdiction thereof. The arbitration proceedings shall be
conducted in New York, New York. Unless otherwise
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determined by the arbitrator (which determination shall be final and
binding on the Purchaser and WEC), each party shall pay its own expenses of
arbitration and the expenses of the arbitrators shall be shared equally by the
Purchaser, on the one hand, and WEC involved in such arbitration, on the other
hand.
(b) Any dispute as to the scope of work for or the type of
Remedial Action to be implemented in Section 8.1(a)(E)(z) shall be submitted to
"baseball arbitration" for final resolution without right of appeal as follows:
(i) the arbitrator will be a mutually agreed nationally
recognized environmental consulting firm;
(ii) WEC and the Purchasers shall each submit to the
arbitrator their respective versions of the scope of work for the
Remedial Action and documentation supporting that determination;
(iii) the arbitrator will choose one version in its entirety.
The arbitrator shall not be allowed to compromise between the two
versions or combine parts of the two versions to reach an intermediate
version.
(iv) the party whose version is not selected by the arbitrator
shall pay all expenses of the arbitrator; and
(v) the version selected by the arbitrator shall be the scope
of work for purposes of the Remedial Action to be performed.
ARTICLE 9
GENERAL PROVISIONS
SECTION 9.1 NOTICES. All notices and other communications hereunder
shall be in writing (including telecopy or similar writing) and shall be sent,
delivered or mailed, addressed or telecopied:
(a) if to Purchaser, to
c/o Siemens Corporation
1301 Avenue of the Americas
New York, New York 10019
Attention: General Counsel
Telecopy No.: (212) 258-4490
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with copies to:
Siemens Aktiengesellschaft
KWU Power Generation Group
Freyeslebenstrasse 1
D-91058 Erlangen
Germany
Attention: Adolf Huttl, President
Telecopy No. : 011-49-9131-18-7173
and to:
Siemens Aktiengesellschaft
Legal Department ZFR3
Werner-von-Siemens-Strasse 50
D-91052 Erlangen
Germany
Attention: Counsel for Power Generation Group
Telecopy No. : 011-49-9131-7-29011
(b) if to Seller, to
Office of General Counsel
Westinghouse Electric Corporation
Westinghouse Building
11 Stanwix Street
Pittsburgh, PA 15222
Telecopy No. : (412) 642-5224
with copies to:
Office of General Counsel
CBS Inc.
51 West 52nd Street
New York, New York 10019
Telecopy No. : (212) 975-3744
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Howard Chatzinoff, Esq.
Telecopy No. : (212) 310-8007
Each such notice or other communication shall be given (i) by hand delivery,
(ii) by nationally recognized courier service or (iii) by telecopy, receipt
confirmed. Each such notice or communication shall be effective (i) if delivered
by hand or by nationally recognized courier service, when delivered at the
address specified in this Section 9.1 (or in accordance with the latest
unrevoked direction from such party) and (ii) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section 9.1 (or
in accordance with the latest unrevoked direction from such party), and
confirmation is received.
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SECTION 9.2 INTERPRETATION. The Exhibits and Schedules are a part of
this Agreement as if fully set forth herein. When a reference is made in this
Agreement to a Section, Schedule or Exhibit, such reference shall be to a
Section of, or a Schedule or Exhibit 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. For purposes of any indemnification provision
in this Agreement, the word "EXPENSES" shall mean out-of-pocket expenses, and
shall not include any allocations of internal salaries and other expenses.
Whenever the words "INCLUDED," "INCLUDES" or "INCLUDING" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." Whenever the word "MATERIAL" is used in this Agreement (except when
used with respect to the Purchaser), it shall mean material to the Business or
financial condition of the Business, taken as a whole. Whenever the phrase
"REASONABLY LIKELY TO BE ADVERSELY DETERMINED" is used in this Agreement, it
shall not require a determination that it is more likely than not. Except as
otherwise provided in Section 4.1(m)(iii), whenever reference is made to
"KNOWLEDGE OF SELLER," it shall mean the actual knowledge of the Persons named
on Schedule 9.2.
SECTION 9.3 SURVIVAL OF REPRESENTATIONS. The representations and
warranties contained in this Agreement shall survive the Closing solely for
purposes of Article 8 and shall terminate at the close of business 18 months
following the Closing Date, PROVIDED, that (i) the representations and
warranties contained in Sections 4.1(a), 4.1(b), 4.1(f) and 4.1(g) (but only to
the extent Section 4.1(g) relates to matters of title) shall survive
indefinitely; (ii) the representations and warranties contained in Section
4.1(o) (to the extent Section 4.1(o) relates to Taxes other than Income Taxes)
shall survive, as to any such Tax, until the 60th day following the expiration
of the statute of limitations applicable to such Tax; and (iii) the
representations and warranties contained in (x) clauses (i), (iii) and (iv)(A)
of Section 4.1(n) and (y) Section 4.1(o), to the extent that such
representations and warranties relate to Income Taxes, shall terminate on the
Closing Date.
SECTION 9.4 SEVERABILITY. If any provision of this Agreement (or any
portion thereof) or the application of any such provision (or any portion
thereof) to any Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof (or the remaining portion thereof) or the application of such provision
to any other persons or circumstances.
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SECTION 9.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered (including by telecopy) to the other party.
SECTION 9.6 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement, the Guarantee Agreements 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 except as provided in Article 8, are not intended to
confer upon any Person other than the parties hereto (and the Selling
Subsidiaries) and their successors and permitted assigns any rights or remedies
hereunder.
SECTION 9.7 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts made and to be performed entirely in the State of New York, regardless
of the laws that might otherwise govern under applicable principles of conflict
of laws.
SECTION 9.8 MEDIATION; CONSENT TO JURISDICTION.
(A) Any dispute among the parties arising out of or in
connection with this Agreement or any other agreement, instrument or other
document delivered pursuant to this Agreement, or any alleged breach hereof or
thereof (other than (i) a dispute arising under or with respect to Section 5.18
or the confidentiality obligations set forth in the third sentence of Section
5.2) or (ii) a dispute in respect of which there is a reasonable likelihood of
irreparable harm (as to which a party may seek a temporary restraining order or
injunctive relief) shall be submitted for discussion and possible resolution by
senior officers or designated spokesperson of each such party.
(B) If within a period of 15 days after submission of a matter
in accordance with clause (a) hereof the respective senior officers and
designated spokespersons are unable to agree upon a resolution, any party may
within 15 days after the aforesaid 15-day period elect to utilize a non-binding
resolution procedure whereby each party presents its case at a hearing held in
New York, New York before a neutral advisor, who shall be selected from the
Center for Public Resources' Judicial Panel. The parties shall bear their
respective costs incurred in connection with this procedure including the fees
and expenses of the neutral advisor. Prior to the hearing, the parties and the
neutral advisor shall use their best efforts to agree on a set of ground rules
for the hearing. At the closing of the hearing, the senior executive officers of
the respective parties shall meet and attempt to resolve the matter. Only after
the foregoing procedure has been exhausted shall either party resort to
litigation as the final adjudication of the dispute.
97
<PAGE> 106
(C) Each of Purchaser and WEC irrevocably submits to the
non-exclusive jurisdiction of (i) the Supreme Court of the State of New York,
New York County, and (ii) the United States District Court for the Southern
District of New York located in the Borough of Manhattan in the City of New
York, for the purposes of any suit, action or other proceeding arising out of
this Agreement or any transaction contemplated hereby. Each of the Purchaser and
WEC further agrees that service of any process, summons, notice or document by
U.S. registered mail to such party's respective address set forth in Section 9.1
or, in the case of Purchaser, to its agent for service of process shall be
effective service of process for any action, suit or proceeding in New York with
respect to any matters to which it has submitted to jurisdiction as set forth
above. Each of Purchaser and WEC irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (x) the Supreme
Court of the State of New York, New York County, or (y) the United States
District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
SECTION 9.9 PUBLICITY. From the date of this Agreement through the
Closing, neither WEC, on the one hand, nor Purchaser, on the other hand, shall
issue or cause the publication of any press release or other public announcement
with respect to the transactions contemplated by this Agreement without the
consent of the other party, which consent shall not be unreasonably withheld,
except as such release or announcement may be required by Law or the rules or
regulations of a national securities exchange in the United States, in which
case the party required to make the release or announcement shall, to the extent
practicable, allow the other party reasonable time to comment on such release or
announcement in advance of its issuance.
SECTION 9.10 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior written consent of the other party, except that, so long as any such
assignment would not delay or impede the consummation of the transactions
contemplated hereby. Purchaser may so assign to any one or more Affiliates of
Purchaser the right to acquire part or all of the assets or Liabilities of the
Business hereunder; PROVIDED, HOWEVER, that any such assignment shall not
release Purchaser from any obligation or liability hereunder (including any
right or obligation under Article 8). 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.
98
<PAGE> 107
SECTION 9.11 RELEASE OF CERTAIN GUARANTORS. WEC hereby irrevocably and
unconditionally waives and releases all rights and claims that it or any Seller
may hereafter have that any Guarantor, other than Siemens Corporation, is or has
been at any time subject to the jurisdiction of the Federal, state or local
courts of the United States arising out of any claims or disputes related to
this Agreement or the transactions contemplated hereby.
SECTION 9.12 WAIVER OF JURY TRIAL; TRIAL COSTS. Each of Purchaser and
the Sellers, for themselves and their respective Affiliates, hereby irrevocably
waives all right to trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of or relating to the
actions of Purchaser and the Sellers or their respective Affiliates pursuant to
this Agreement in the negotiation, administration, performance or enforcement
thereof. The party in whose favor a final judgment is rendered shall be entitled
to reasonable costs and reasonable attorneys' fees.
99
<PAGE> 108
IN WITNESS WHEREOF, WEC and Purchaser 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
----------------------------------
Name: Fredric G. Reynolds
Title: Chief Financial Officer
SIEMENS POWER GENERATION CORPORATION
By: /s/ Adolf Huttl
----------------------------------
Name: Adolf Huttl
Title: Chairman
By: /s/ Albert Hoser
----------------------------------
Name: Albert Hoser
Title: President and CEO
100
<PAGE> 1
EXHIBIT 12(a)
CBS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
($ in millions)
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes and minority interest $ (59) $(292) $ 128 $ (6) $ 26
Less: Equity in income (loss) of 50 percent or less owned
affiliates 9 10 15 (3) (2)
Add: Fixed charges 410 421 188 30 59
- ---------------------------------------------------------------------------------------------------------------
Earnings as adjusted $ 342 $ 119 $ 301 $ 27 $ 87
- ---------------------------------------------------------------------------------------------------------------
Fixed charges:
Interest expense $ 386 $ 401 $ 184 $ 26 $ 55
Rental expense 24 20 4 4 4
- ---------------------------------------------------------------------------------------------------------------
Total fixed charges $ 410 $ 421 $ 188 $ 30 $ 59
- ---------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges (a) (a) 1.6x (a) 1.5x
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Additional income before income taxes and minority interest necessary to
attain a ratio of 1.00x for 1997, 1996, and 1994 would be $68 million, $302
million, and $3 million, respectively.
CBS CORPORATION
59
<PAGE> 1
EXHIBIT 12(b)
CBS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
($ in millions)
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes and minority interest $(59) $(292) $ 128 $ (6) $ 26
Less: Equity in income (loss) of 50 percent or less owned
affiliates 9 10 15 (3) (2)
Add: Combined fixed charges and preferred dividends 446 493 312 162 136
- ---------------------------------------------------------------------------------------------------------------
Earnings as adjusted $378 $ 191 $ 425 $ 159 $ 164
- ---------------------------------------------------------------------------------------------------------------
Combined fixed charges and preferred dividends
Interest expense $386 $ 401 $ 184 $ 26 $ 55
Rental expense 24 20 4 4 4
Pre-tax earnings required to cover preferred dividend
requirements (b) 36 72 124 132 77
- ---------------------------------------------------------------------------------------------------------------
Total combined fixed charges and preferred dividends $446 $ 493 $ 312 $ 162 $ 136
- ---------------------------------------------------------------------------------------------------------------
Ratio of earnings to combined fixed charges and preferred
dividends (a) (a) 1.4x (a) 1.2x
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Additional income before income taxes and minority interest necessary to
attain a ratio of 1.00x for 1997, 1996, and 1994 would be $68 million, $302
million, and $3 million, respectively.
(b) Dividend requirement divided by 100% minus the statutory income tax rate.
CBS CORPORATION
60
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Subsidiary companies of the Registrant are listed below. With respect to the
companies named, all voting securities are owned directly or indirectly by the
Registrant, except where otherwise indicated.
<TABLE>
<CAPTION>
INCORPORATED OWNED BY
UNDER IMMEDIATE
NAME LAWS OF PARENT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Bay County Energy Systems, Inc. Delaware 100.00
CBS Cable Networks, Inc. Delaware 100.00
Network Enterprises, Inc. Tennessee 100.00
country.com, Inc. Delaware 100.00
O & W Corporation Tennessee 100.00
Country Music Television, Inc. Tennessee 100.00
Outdoor Entertainment, Inc. Tennessee 100.00
Thunder, Inc. Delaware 100.00
TNN Productions, Inc. Delaware 100.00
World Sports Enterprises Tennessee 51.00
CBS Communications Services, Inc. Delaware 100.00
CBS Mass Media Corporation Delaware 100.00
Central Fidelity Insurance Company Vermont 100.00
Communities IP Holdings, Inc. Delaware 100.00
Communities LP Holdings, Inc. Delaware 100.00
Delaware Resource Beneficiary, Inc. Delaware 100.00
Delaware Resource Lessee Trust (Business Trust) Delaware 99.00
Dutchess Resource Management, Inc. Delaware 100.00
Fauske And Associates, Inc. Illinois 100.00
Corporate Fleet Leasing Company, Inc. Delaware 100.00
Group W Broadcasting, Inc. Delaware 100.00
Group W Broadcasting, L.P. Delaware 100.00
Group W Television Stations, Inc. Delaware 100.00
Group W Television Stations L.P. Delaware 100.00
Group W/CBS Television Stations Partners Delaware 100.00
KUTV, L.P. Delaware 88.00
KUTV Holdings, Inc. Delaware 100.00
KUTV Real Estate Company, L.L.C. Delaware 100.00
KUTV Associates Delaware 100.00
Home Team Sports Limited Partnership Delaware 65.70
Infinity Broadcasting Corporation (1) Delaware 100.00
TDI Worldwide, Inc. Delaware 100.00
Transportation Displays Incorporated Delaware 100.00
TDI International, Inc. Delaware 100.00
LDI Limited England 100.00
TDI Advertising Ltd. England 100.00
TDI Transit Advertising Ltd. England 100.00
TDI Buses Limited England 100.00
Outdoor Images Limited England 100.00
TDI (BP) Limited England 100.00
Metrobus Advertising Limited England 100.00
</TABLE>
CBS CORPORATION
61
<PAGE> 2
<TABLE>
<CAPTION>
INCORPORATED OWNED BY
UNDER IMMEDIATE
NAME LAWS OF PARENT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
TDI (FB) Limited England 100.00
TDI Metro, Ltd. Ireland 51.00
Metro Poster Advertising Ltd. Ireland 100.00
The Audio House, Inc. California 100.00
UCGI, Inc. Delaware 100.00
TMRG, Inc. Delaware 100.00
PCI Energy Services, Inc. Illinois 100.00
Peak FSC, Ltd. Bermuda 100.00
PN Services Inc. Washington 100.00
Powerserve International, Inc. Delaware 100.00
Rocky Mount Town Associates Limited Partnership Delaware 100.00
Safe Sites of Colorado L.L.C. Delaware 65.00
Station Holdings B, Inc. Delaware 51.00
Tube Mill, Inc. Alabama 100.00
Waste Resource Energy, Inc. Delaware 100.00
WCC FSC I, INC. Delaware 100.00
WCC FSC III, INC. US Virgin Islands 100.00
WCC FSC IV, Inc. US Virgin Islands 100.00
WCC FSC V, Inc. Bermuda 100.00
WCC FSC VIII, Inc. US Virgin Islands 100.00
WCC FSC IX, Inc. US Virgin Islands 100.00
WCC Project Corp. Delaware 100.00
WEPREC Power Pointe Corporation Georgia 100.00
Wesdyne International, Inc. Delaware 100.00
Wesgen, Inc. Delaware 100.00
West Valley Nuclear Service Company, Inc. Delaware 100.00
Westinghouse Beverage Group, Inc. Delaware 100.00
Westinghouse Canada, Inc. Canada 100.00
Westinghouse CBS Holding Company, Inc. Delaware 100.00
CBS Broadcasting Inc. New York 100.00
Amadea Film Productions, Inc. Texas 100.00
Aspenfair Music, Inc. California 100.00
Beverlyfax Music, Inc. California 100.00
Black Rock Enterprises, Inc. New York 100.00
Caroline Film Productions, Inc. California 100.00
CBS Broadcast International of Canada, Ltd. Canada 100.00
CBS Broadcast Services, Ltd. England 100.00
CBS News Communications Inc. New York 100.00
CBS Overseas Inc. New York 100.00
CBS Worldwide, Inc. Delaware 100.00
Clareanne Film Productions, Inc. California 100.00
Columbia Television, Inc. New York 100.00
Erica Film Productions, Inc. California 100.00
Merlot Film Productions, Inc. California 100.00
Nicki Film Productions, Inc. California 100.00
Radford Productions, Ltd. England 100.00
Radford Studio Center, Inc. California 100.00
Station Holdings B Inc. Delaware 100.00
</TABLE>
CBS CORPORATION
62
<PAGE> 3
<TABLE>
<CAPTION>
INCORPORATED OWNED BY
UNDER IMMEDIATE
NAME LAWS OF PARENT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Westinghouse Electric Company, S.A. Delaware 100.00
Westinghouse Electric Corporation Pennsylvania 100.00
Westinghouse Energy Systems--Japan, Inc. Delaware 100.00
Westinghouse Energy Systems, Inc. Delaware 100.00
Westinghouse Sistemas Energeticos Espana, Inc. Delaware 100.00
Westinghouse Energy Systems Europe S.A. Belgium 10.00
Westinghouse Hanford Company Delaware 100.00
Westinghouse Holdings Corporation Delaware 100.00
Westinghouse Electric S.A. Switzerland 100.00
ISCOSA Industries And Maintenance Ltd. Saudi Arabia 75.00
Modelpol, SP Poland 79.32
Energoserwis S.A. Poland 55.00
Servicios Westinghouse De Chile, Ltda. Chile 99.00
Servicios Westinghouse de Mexico S.A. de C.V. Mexico 99.00
Westinghouse China Investment Company Ltd. China 100.00
Westinghouse Czech Republic s.r.o. Czech Republic 100.00
Westinghouse Electric (Asia) S. A., Zug Switzerland 100.00
Westinghouse Electric (Asia-Pacific) Holdings, Ltd. Singapore 100.00
Group W Yarra Broadcast Pte. Ltd. Singapore 51.00
Westinghouse Electric Singapore Ltd. Singapore 100.00
Westinghouse Electric (China) S.A., Zug Switzerland 100.00
Westinghouse Electric Australasia Limited Australia 100.00
Westinghouse Electric Europe Coordination Center, S.A. Belgium 99.92
Westinghouse Electric GES MBH Austria 100.00
Westinghouse Electric GmbH, Birsfelden Switzerland 100.00
Westinghouse Electric Korea Ltd. South Korea 100.00
Westinghouse Electric Limited England 100.00
Westinghouse Electric Chonburi Project Company
Limited England 100.00
Westinghouse Electric Poland Limited Poland 100.00
Westinghouse Electric S.P.A. Italy 100.00
Westinghouse Electric Spain, S.L. Spain 100.00
Westinghouse Electrique France, S.A. France 100.00
Westinghouse Energy Systems Europe, SA. Belgium 90.00
Westinghouse Irish Holdings, Limited Ireland 100.00
Westinghouse Reinvestment Company LLC Delaware 100.00
Westinghouse Saudi Arabia Ltd. Saudi Arabia 90.00
WESTRON Ukraine 60.00
Westinghouse International Atomic Power S.A. Switzerland 100.00
Westinghouse International Technology Corporation Delaware 100.00
Westinghouse Investment Corporation Delaware 100.00
Westinghouse World Investment Corporation Delaware 100.00
Westinghouse Foreign Sales Corporation Barbados 100.00
Westinghouse Industry Products International Company, Inc. Delaware 100.00
Westinghouse Electric Pvt. Limited Mauritius 100.00
Westinghouse Electric Private Limited India 100.00
</TABLE>
CBS CORPORATION
63
<PAGE> 4
<TABLE>
<CAPTION>
INCORPORATED OWNED BY
UNDER IMMEDIATE
NAME LAWS OF PARENT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Westinghouse Industry Services International Company, Inc. Delaware 100.00
Westinghouse do Brasil Comercio e Servicos Ltda. Brazil 100.00
Westinghouse Industry Services Asia Private, Ltd. Singapore 100.00
Westinghouse Industry Services Thailand Ltd. Thailand 100.00
Westinghouse Saudi Arabia, Ltd. Saudi Arabia 10.00
Westinghouse International Service Company, Limited Delaware 100.00
Westinghouse Project Company Colombia 100.00
Westinghouse Operating Services Company Delaware 100.00
Westinghouse PRI, Inc. Delaware 100.00
Westinghouse Savannah River Company, Inc. Delaware 100.00
Westinghouse Safety Management Solutions, Inc. Delaware 100.00
Westinghouse Security Electronics, Inc. California 100.00
Westinghouse Staffing Services, Inc. Delaware 100.00
Westinghouse Technology Services S.A. Spain 100.00
Westinghouse Wireless Communications Products, SRL De CV Mexico 100.00
WPIC Corporation Delaware 100.00
York Resource Energy Systems, Inc. Delaware 100.00
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Infinity Broadcasting Corporation is the parent company of 48 wholly-owned
subsidiaries which consist primarily of radio station operations, all of
which are incorporated in the United States.
Companies not shown by name, if considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary.
CBS CORPORATION
64
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in each prospectus constituting
part of the Registration Statements on Form S-3 (Nos. 33-30729, 33-41417, and
33-41475), and on Form S-8 (Nos. 2-92085, 33-44044, 33-45365, 33-46779,
33-51445, 33-51579, 33-53815, 33-53819, 33-62043, 33-62045, 333-12583,
333-12589, 333-12591, 333-13219, 333-30127, 333-23661, 333-23663, and 333-37497)
of CBS Corporation of our report dated January 28, 1998 appearing on page 24 of
this Form 10-K. We also consent to the incorporation by reference of our report
on the financial statement schedule, which appears on page 55 of this Form 10-K.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
March 24, 1998
CBS CORPORATION
65
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in each prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 33-30729,
33-41417, and 33-41475), and on Form S-8 (Nos. 2-92085, 33-44044, 33-45365,
33-46779, 33-51445, 33-51579, 33-53815, 33-53819, 33-62043, 33-62045, 333-12583,
333-12589, 333-12591, 333-13219, 333-30127, 333-23661, 333-23663, and 333-37497)
of CBS Corporation of our report dated February 12, 1996 except for the
restatements discussed in notes 1 and 7, for which the dates are March 31, 1996,
November 13, 1996, and September 30, 1997, appearing on page 25 of this Form
10-K. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page 56 of this Form 10-K.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Pittsburgh, Pennsylvania
March 24, 1998
CBS CORPORATION
66
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ FRANK C. CARLUCCI
----------------------------
<PAGE> 2
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ ROBERT E. CAWTHORN
------------------------------
<PAGE> 3
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ MARTIN C. DICKINSON
------------------------------
<PAGE> 4
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ GEORGE H. CONRADES
------------------------------
<PAGE> 5
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ WILLIAM H. GRAY III
------------------------------
<PAGE> 6
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 17th day of March, 1998.
----
/S/ MICHAEL H. JORDAN
------------------------------
<PAGE> 7
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ MEL KARMAZIN
------------------------------
<PAGE> 8
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ JAN LESCHLY
------------------------------
<PAGE> 9
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ DAVID K. P. LI
------------------------------
<PAGE> 10
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ DAVID T. McLAUGHLIN
------------------------------
<PAGE> 11
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ RICHARD R. PIVIROTTO
------------------------------
<PAGE> 12
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ FREDRIC G. REYNOLDS
------------------------------
<PAGE> 13
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ RAYMOND W. SMITH
------------------------------
<PAGE> 14
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ PAULA STERN
------------------------------
<PAGE> 15
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/ ROBERT D. WALTER
------------------------------
<PAGE> 16
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or
officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Exchange Act of 1934, as amended,
its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the fiscal year ended December 31, 1997,
hereby constitutes and appoints Michael H. Jordan, Mel Karmazin, Fredric G.
Reynolds, Louis J. Briskman and Carol V. Savage, his/her true and lawful
attorneys-in-fact and agents, and each of them, with full power to act without
the others, for him/her and in his/her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest said seal, and to file said Form 10-K and any
and all other documents in connection therewith, with the Securities Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has duly signed this Power of
Attorney this 20th day of March, 1998.
----
/S/CAROL V. SAVAGE
------------------------------
<PAGE> 17
Exhibit 24
EXTRACT FROM MINUTES OF MEETING OF THE
BOARD OF DIRECTORS OF
CBS CORPORATION
HELD ON JANUARY 28, 1998
-----------------------
RESOLVED, that the Chief Executive Officer of the Company, its
President, its Executive Vice President and Chief Financial Officer, its Senior
Vice President and General Counsel, its Principal Accounting Officer, its Vice
President and Treasurer, and its Vice President, Secretary and Associate General
Counsel are, and each of them with full power to act without the others hereby
is, authorized to prepare, or cause to be prepared, and to execute the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 and the
Company's Quarterly Reports on Form 10-Q for 1998, as well as any and all other
reports or documents to be filed by the Company and/or its subsidiaries with the
Securities and Exchange Commission, and any and all amendments thereto, on
behalf of and as attorneys for the Company and/or its subsidiaries, and to file
said Forms 10-K and 10-Q and other reports or documents, and any and all
amendments thereto, with all exhibits thereto and any and all other documents in
connection therewith, with the Securities and Exchange Commission on behalf of,
and as attorneys for, the Company and/or its subsidiaries.
-----------------------
I, CAROL L. McADAMS, Assistant Secretary of CBS Corporation, DO HEREBY
CERTIFY that the foregoing is a true and correct copy of a resolution adopted at
a meeting of the Board of Directors of said Company held on January 28, 1998, at
which meeting a quorum was present and which resolution is still in full force
and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
said Company.
Dated: March 20, 1998
/s/ Carol L. McAdams
-------------------------
Assistant Secretary
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<DEPRECIATION> 415 338 191
<TOTAL-ASSETS> 16,715 17,052 14,258
<CURRENT-LIABILITIES> 1,549 2,382 1,899
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0 4 4
0 0 0
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<TOTAL-REVENUES> 5,363 4,143 1,074
<CGS> 3,483 2,786 427
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<INTEREST-EXPENSE> 386 401 184
<INCOME-PRETAX> (59) (292) 128
<INCOME-TAX> 73 (71) 75
<INCOME-CONTINUING> (131) (221) 47
<DISCONTINUED> 680 409 (57)
<EXTRAORDINARY> 0 (93) 0
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