<PAGE>
Preliminary Proxy Statement--Subject to Completion
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Confidential, for Use of the
[X]Preliminary Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))
[_]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CBS Corporation
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_]No fee required.
[X]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: common
stock, par value $1.00 per share, of CBS Corporation.
(2) Aggregate number of securities to which transaction applies:
826,492,158, which is the sum of (i) the number of shares of CBS
Corporation common stock, par value $1.00 per share ("CBS Common
Stock") outstanding on August 31, 1999, (ii) the number of shares of
CBS Common Stock issuable pursuant to outstanding stock options through
the date the merger is expected to be consummated, and (iii) the number
of shares of CBS Common Stock otherwise expected to be issued prior to
the date the merger is expected to be consummated.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): THE FILING
FEE OF $7,677,286.00 WAS CALCULATED PURSUANT TO EXCHANGE ACT RULE 0-
11(c) (1) BY MULTIPLYING 1/50TH OF 1% BY THE VALUE OF CBS COMMON STOCK
TO BE RECEIVED BY VIACOM INC. IN THE TRANSACTION. THE VALUE OF CBS
COMMON STOCK WAS DETERMINED TO BE $46.445 IN ACCORDANCE WITH EXCHANGE
ACT RULE 0-11(a) (4) BASED ON THE AVERAGE HIGH AND LOW PRICES OF CBS
COMMON STOCK AS REPORTED ON THE NEW YORK STOCK EXCHANGE TRANSACTIONS
TAPE ON SEPTEMBER 30, 1999.
(4) Proposed maximum aggregate value of transaction: $38,386,428,278.00
(5) Total fee paid: $7,677,286.00
[_]Fee paid previously with preliminary materials.
[X]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $10,671,428.00
(2) Form, Schedule or Registration Statement No.: Form S-4
(3) Filing Party: VIACOM INC.
(4) Date Filed: October 7, 1999
<PAGE>
PRELIMINARY PROXY STATEMENT -- SUBJECT TO COMPLETION
----------------------------------------------------
[LOGO]
CBS CORPORATION
51 WEST 52nd STREET
NEW YORK, NEW YORK 10019
October . , 1999
Dear CBS Shareholder,
You are cordially invited to attend a special meeting of shareholders of
CBS Corporation to be held on . , . , 1999 at . , New York, New York, commencing
at . a.m., eastern standard time.
At the special meeting, you will be asked to consider and vote upon a
proposal to adopt the Agreement and Plan of Merger, dated as of September 6,
1999, between CBS and Viacom Inc., which provides for the merger of CBS and
Viacom. Under the terms of the merger agreement, each issued and outstanding
share of CBS common stock will be converted into the right to receive 1.085
shares of Viacom non-voting Class B common stock. Both Viacom's Class A and
Class B common stock and CBS' common stock are listed and traded on the New York
Stock Exchange.
The merger agreement advances the vision we share with Viacom of building
the preeminent global media and entertainment firm. The combination of our
companies, our powerful brands and our highly complementary businesses will
create a company uniquely qualified to capitalize on new opportunities
domestically and around the world.
The Board of Directors of CBS has determined that the merger is in the best
interests of CBS, has unanimously approved the merger and the merger agreement
and unanimously recommends that shareholders vote to adopt the merger agreement.
Your participation in the special meeting, in person or by proxy, is
important. Even if you anticipate attending in person, we urge you to mark,
sign and return the enclosed proxy card promptly in the enclosed postage-paid
envelope to ensure that your shares of CBS common stock will be represented at
the special meeting. If you do attend in person, you will be entitled to vote
your shares in person.
<PAGE>
PRELIMINARY PROXY STATEMENT -- SUBJECT TO COMPLETION
----------------------------------------------------
The joint proxy statement/prospectus that accompanies this letter contains
information about Viacom and CBS and describes in detail the merger and certain
related matters. Attached to the joint proxy statement/prospectus is a copy of
the merger agreement, related agreements and other important information.
Thank you, and we look forward to seeing you at the special meeting.
Very truly yours,
David T. McLaughlin Mel Karmazin
Chairman of the Board Officer President and Chief Executive
Officer
For a discussion of risk factors which you should consider in evaluating
the merger, see "Risk Factors" beginning on page . .
- -------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued in the
merger or determined whether this joint proxy statement/prospectus is truthful
or complete. Any representation to the contrary is a criminal offense. The
information in this preliminary joint proxy statement/prospectus is not complete
and may be changed. This preliminary joint proxy statement/prospectus is not an
offer to sell any securities and we are not soliciting offers to buy in any
jurisdiction where the offer or sale would be illegal.
- -------------------------------------------------------------------------------
This joint proxy statement/prospectus is dated . , 1999, and is first being
mailed to shareholders on or about . , 1999.
<PAGE>
PRELIMINARY PROXY STATEMENT -- SUBJECT TO COMPLETION
----------------------------------------------------
[LOGO]
CBS CORPORATION
51 WEST 52/nd/ STREET
NEW YORK, NEW YORK 10019
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held . , 1999
To the Shareholders of CBS:
A special meeting of shareholders of CBS Corporation, a Pennsylvania
corporation, will be held on . , 1999 at . a.m., eastern standard time, at . ,
New York, New York to consider and vote upon a proposal to adopt the Agreement
and Plan of Merger, dated as of September 6, 1999, between CBS and Viacom Inc.,
a Delaware corporation, a copy of which is attached as Annex A to the joint
proxy statement/prospectus that accompanies this notice. The merger agreement
provides for the merger of CBS with and into Viacom. If the merger agreement is
adopted and the merger is consummated each issued and outstanding share of CBS
common stock, par value $1.00 per share, will be converted into the right to
receive 1.085 shares of Viacom non-voting Class B common stock, par value $.01
per share.
Holders of record of CBS common stock at the close of business on . , 1999,
will be entitled to vote at the special meeting or any adjournments or
postponements of the special meeting.
The Board of Directors of CBS has determined that the merger is in the best
interests of CBS, has unanimously approved the merger and the merger agreement
and unanimously recommends that shareholders vote to adopt the merger agreement.
Detailed information concerning the merger, the merger agreement, related
agreements and other related matters is contained in the attached joint proxy
statement/prospectus and its annexes. Please read this information carefully.
The vote of each CBS shareholder is important. We urge you to mark, sign
and return your proxy card promptly in the enclosed postage-paid envelope to
ensure that your shares of CBS common stock will be represented at the special
meeting. If you attend the special meeting in person, you will be entitled to
vote your shares in person.
If you plan to attend the special meeting, please keep the admission ticket
that is attached to your proxy card, and also check the appropriate box on your
proxy card. Shareholders who own shares through banks or brokers and who plan
to attend must send a written notification, along with proof of ownership (such
as a bank or brokerage firm account statement), to the Secretary's Office,
<PAGE>
PRELIMINARY PROXY STATEMENT -- SUBJECT TO COMPLETION
----------------------------------------------------
CBS Corporation, 51 West 52/nd/ Street, New York, New York 10019. The names of
those shareholders indicating they plan to attend will be placed on an admission
list held at the entrance to the meeting. Admission tickets will not be mailed
in advance of the meeting.
On behalf of the Board of Directors,
Angeline C. Straka
Secretary
New York, New York
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
HOLDERS OF CBS COMMON STOCK SHOULD NOT
SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
<PAGE>
PRELIMINARY PROXY STATEMENT -- SUBJECT TO COMPLETION
----------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER............................................. 1
SUMMARY............................................................................ 7
The Companies................................................................. 7
Terms of the Merger; What Shareholders Will Receive in the Merger............. 8
Corporate Governance.......................................................... 8
Ownership of Viacom Following the Merger...................................... 8
Reasons for the Merger........................................................ 9
Purposes of the Special Meetings.............................................. 7
Our Recommendations to Shareholders........................................... 9
Date, Time and Place of Each Special Meeting.................................. 9
Shareholders Entitled to Vote; Vote Required; Voting Agreement................ 9
Interests of Directors and Executive Officers of Viacom and CBS............... 10
Fairness Opinions of Financial Advisors....................................... 10
The Merger.................................................................... 10
Viacom Summary Historical Financial Data...................................... 14
CBS Summary Historical Financial Data......................................... 15
Summary Unaudited Viacom/CBS Pro Forma Combined Financial Information......... 17
Unaudited Viacom/CBS Comparative Per Share Data............................... 18
Comparative Market Prices and Dividends....................................... 20
RISK FACTORS....................................................................... 22
Risks Relating to the Merger.................................................. 22
Risks Relating to the Combined Company........................................ 25
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS......................... 30
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION....................... 31
Unaudited Viacom/CBS Pro Forma Combined Condensed Financial Information....... 31
Unaudited CBS/King World Pro Forma Combined Condensed Financial Information... 41
THE SHAREHOLDERS' MEETINGS......................................................... 49
Date, Times and Places........................................................ 49
Matters to Be Considered at the Shareholders' Meetings........................ 49
Record Date; Shareholders Entitled to Vote; Quorum............................ 49
Votes Required................................................................ 50
Submission of Proxies......................................................... 50
Revocability of Proxies....................................................... 50
Solicitation of Proxies....................................................... 51
</TABLE>
<PAGE>
PRELIMINARY PROXY STATEMENT -- SUBJECT TO COMPLETION
----------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE MERGER................................................................................. 52
Background to the Merger.............................................................. 52
Reasons for the Merger and Board Recommendations...................................... 55
Opinions of Financial Advisors........................................................ 60
Directors, Management and Corporate Governance of the Combined Company................ 77
Accounting Treatment.................................................................. 81
Federal Income Tax Consequences....................................................... 81
Merger Consideration.................................................................. 83
Conversion of Shares; Procedures for Exchange of Certificates; Fractional Shares...... 83
Litigation............................................................................ 84
Effective Time of the Merger.......................................................... 84
Federal Securities Laws Consequences.................................................. 84
Stock Exchange Quotation.............................................................. 84
Viacom's Board of Directors After the Merger.......................................... 85
Dissenters' and Appraisal Rights...................................................... 85
Delisting and Deregistration of CBS Common Stock...................................... 85
THE MERGER AGREEMENT AND RELATED AGREEMENTS................................................ 86
The Merger Agreement.................................................................. 86
The Voting Agreement.................................................................. 93
The Stockholder Agreement............................................................. 94
INTERESTS OF CERTAIN PERSONS IN THE MERGER................................................. 95
Viacom................................................................................ 95
CBS................................................................................... 98
THE COMPANIES.............................................................................. 100
Viacom's Business..................................................................... 100
CBS' Business......................................................................... 102
REGULATORY MATTERS AND THIRD-PARTY APPROVALS............................................... 104
Antitrust............................................................................. 104
Federal Regulation of Television and Radio Broadcasting............................... 104
Other Regulations, Legislation and Recent Developments Affecting Broadcast Stations... 108
Internet.............................................................................. 110
DESCRIPTION OF VIACOM CAPITAL STOCK FOLLOWING THE MERGER................................... 111
Viacom Class A Common Stock........................................................... 111
Viacom Class B Common Stock........................................................... 111
Voting and Other Rights of Viacom Common Stock........................................ 111
Viacom Preferred Stock................................................................ 112
COMPARISON OF RIGHTS OF HOLDERS OF VIACOM COMMON STOCK AND CBS COMMON STOCK................ 114
SHAREHOLDER PROPOSALS...................................................................... 115
LEGAL MATTERS.............................................................................. 115
EXPERTS.................................................................................... 115
WHERE YOU CAN FIND MORE INFORMATION AND INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.... 116
Viacom................................................................................ 117
CBS................................................................................... 117
ANNEXES
Annex A Agreement and Plan of Merger
Annex B Restated Certificate of Incorporation
Annex C By-laws
Annex D Voting Agreement
Annex E Stockholder Agreement
Annex F Sumner Redstone's Employment Agreement
Annex G Mel Karmazin's Employment Agreement
Annex H Opinion of Morgan Stanley Dean Witter & Co
Annex I Opinion of Evercore Group Inc.
Annex J Comparison of Viacom and CBS Shareholders Rights
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why are the two companies proposing to merge?
A: Viacom and CBS believe that the merger advances the vision we share of
building the preeminent global media and entertainment firm. The
combination of our companies, our powerful brands and our highly
complementary businesses will create a company uniquely qualified to
capitalize on new opportunities domestically and around the world.
To review the reasons for the merger in greater detail, see pages .
through . and . through ..
Q: What will I receive in the merger?
A: If the merger is approved, CBS will merge with and into Viacom, which will
be the surviving corporation.
Viacom Shareholders: You will retain the shares of Viacom common stock you
currently own.
CBS Shareholders: You will be entitled to receive 1.085 shares of Viacom
non-voting Class B common stock in exchange for each share of CBS common
stock you own. Viacom will not issue fractional shares. Instead, you will
receive a payment equal to the market value of the fractional share.
<PAGE>
For example:
. If you currently own 1,000 shares of CBS common stock, then after the
merger you will be entitled to receive 1,085 shares of Viacom non-
voting Class B common stock.
. If you currently own 100 shares of CBS common stock, then after the
merger you will be entitled to receive 108 shares of Viacom non-voting
Class B common stock and a check for the market value of the 0.5
fractional share of Viacom non-voting Class B common stock.
Q: As a shareholder, how will the merger affect me?
A: Viacom Shareholders: After the merger, each share of Viacom common stock
that you own will represent a smaller ownership percentage of a
significantly larger company.
CBS Shareholders: After the merger, you will own shares of a combined
company that will own the assets of both Viacom and CBS. The name of the
combined
2
<PAGE>
company will be Viacom Inc. The shares of Viacom non-voting Class B common
stock that you will receive in exchange for your CBS common stock are non-
voting shares. All of the Viacom voting rights are held by the holders of
Viacom Class A common stock. A majority of the Viacom Class A common stock
is held by National Amusements, Inc. which, in turn, is controlled by
Sumner Redstone, the Chairman and Chief Executive Officer of Viacom.
Q: Who will manage Viacom after the merger?
A: Following the merger, the Board of Directors of Viacom will be expanded
from ten to 18 directors. The eight additional directors will initially be
selected from and designated by the Board of Directors of CBS and vacancies
in this group will be filled during the initial three-year term by
independent directors designated by the remaining CBS directors.
Mr. Redstone will continue to serve as Chairman and Chief Executive Officer
of Viacom and will be responsible, in consultation with the President and
Chief Operating Officer, for corporate policy and strategy.
Mel Karmazin, the current President and Chief Executive Officer of CBS,
will serve as President and Chief Operating Officer of the combined
company, will report directly to the CEO and consult with the CEO on all
major decisions and will have responsibility for the supervision,
coordination and management of the combined company's business.
Mr. Karmazin, as President and COO, will be entitled to manage the combined
company's business, subject to the ability of the board of directors of the
combined company to take action with the approval of at least 14 directors.
However, in a number of areas the President and COO may not act without the
approval of, and the combined company's board may act by, a majority of the
directors.
The governance arrangements described above will be in effect for a period
of three years from the closing of the merger, unless 14 of the 18
directors determine to modify these arrangements or Mr. Karmazin is not the
COO or CEO of the combined company.
The governing structure of the combined company during this three year
period is an important part of
3
<PAGE>
the merger. We recommend that you read the complete explanation of this
structure on pages . through . carefully, as well as the complete text of
the proposed new Restated Certificate of Incorporation attached as Annex B
to this joint proxy statement/prospectus.
Q: What am I being asked to vote upon?
A: Viacom Class A Shareholders: You are being asked to vote for the adoption
of the merger agreement. The Board of Directors of Viacom has declared
that the merger agreement is advisable and has unanimously approved the
merger agreement and unanimously recommends that you vote in favor of the
adoption of the merger agreement.
A majority of the Viacom Class A common stock is held by National
Amusements which, in turn, is controlled by Mr. Redstone. National
Amusements has entered into a voting agreement with CBS pursuant to which
it has agreed to vote to adopt the merger agreement. Accordingly, it is
assured that the required Viacom shareholder approval on this matter will
be obtained.
CBS Shareholders: You are being asked to vote for the adoption of the
merger agreement. The Board of Directors of CBS has determined that the
merger is in the best interests of CBS, has unanimously approved the merger
and the merger agreement and unanimously recommends that CBS shareholders
vote in favor of the adoption of the merger agreement.
Q: What do I need to do now?
A: Viacom Class A Shareholders: After carefully reading and considering the
information contained in this joint proxy statement/prospectus, indicate on
the enclosed proxy card how you want to vote, and sign and submit it in the
enclosed return envelope as soon as possible so that your shares may be
represented at the special meeting. If you sign and submit your proxy card
but do not indicate how you want to vote, your proxy will be counted as a
vote in favor of adoption of the merger. If you do not vote or you
abstain, it will have the effect of a vote against adoption of the merger
agreement.
CBS Shareholders: After carefully reading and considering the information
contained in this joint proxy statement/prospectus, indicate on the
enclosed proxy card how you want to vote, and sign and submit it in the
enclosed return envelope as soon as possible so that your shares may be
represented at the special meeting. If you sign and submit your proxy card
but do not indicate how you want to vote, your shares will be voted in
favor of the adoption of the merger agreement. If you do not vote or you
abstain, it will have no effect on whether the proposal is passed.
Q: When are the special meetings?
A: The special meeting for Viacom shareholders will take place on ., 1999 and
for CBS shareholders on ., 1999. You may attend your special meeting and
vote your shares in person, rather than signing and submitting your proxy
card, even if you have previously submitted your proxy card.
4
<PAGE>
Q: If my shares are held in the name of my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on how
to vote. You should instruct your broker to vote your shares according to
your directions. Without instructions, your shares will not be voted.
Q: Can I change my vote after I have submitted my signed proxy card?
A: You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of the following three ways:
. First, you can send a written notice stating that you would like to
revoke your proxy to the appropriate company at the address indicated
below.
. Second, you can complete and submit a new proxy card to the
appropriate company at the address indicated below.
. Third, you can attend the special meeting and vote in person. Simply
attending the meeting, however, will not revoke your proxy; you must
vote at the special meeting. If you have instructed a broker to vote
your shares, you must follow directions received from your broker to
change your vote.
Q: Should I send in my stock certificates now?
A: Viacom Shareholders: No. You will keep the stock certificates you
currently own.
CBS Shareholders: No. After the merger is completed, Viacom will appoint
an exchange agent to coordinate the exchange of your shares of CBS common
stock for shares of Viacom non-voting Class B common stock. The exchange
agent will send you written instructions on how to exchange your stock
certificates.
Q: When do you expect the merger to be completed?
A: We are working to complete the merger as soon as possible. In addition to
shareholder approvals, we must also obtain regulatory approvals and satisfy
other conditions set forth in the merger agreement. We hope to complete
the merger in the first half of 2000.
Q: What are the tax consequences of the merger to me?
A: Viacom Shareholders: There will be no tax consequences to you as a result
of the merger.
CBS Shareholders: The exchange of CBS common stock for Viacom non-voting
Class B common stock will be tax-free for federal income tax purposes.
However, you will have to pay taxes on the payments received for fractional
shares. We recommend that you read the complete explanation of the tax
consequences on pages . through . carefully.
Q: Who can help answer my questions?
A: If you would like additional copies of this joint proxy
statement/prospectus,
5
<PAGE>
or if you have questions about the merger, you should contact:
VIACOM SHAREHOLDERS:
Viacom Inc.
1515 Broadway
53/rd/ Floor
New York, New York 10036
Attention: Investor Relations
Phone Number: (212) 258-6700
CBS SHAREHOLDERS:
CBS Corporation
40 West 57/th/ Street
New York, New York 10019
Attention: Investor Relations
Phone Number: (212) 314-9209
6
<PAGE>
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus, and may not contain all of the information that is
important to you. To understand the merger fully and for a complete description
of the legal terms of the merger, you should read carefully this entire joint
proxy statement/prospectus and the documents to which we have referred you. See
"Where You Can Find More Information" on page .. The merger agreement is
attached as Annex A to this joint proxy statement/prospectus. We encourage you
to read the merger agreement, as it is the legal document that governs the
merger.
The Companies
Viacom Inc.
1515 Broadway
New York, NY 10036
(212) 258-6000
Viacom Inc. is a diversified entertainment company with operations in six
segments: (1) Networks, (2) Entertainment, (3) Video, (4) Parks, (5) Publishing
and (6) Online. The Networks segment operates MTV: Music Television/(R)/,
Showtime/(R)/, Nickelodeon/(R)//Nick at Nite/(R)/, VH1 Music First/(R)/ and TV
Land/(R)/, among other program services. The Entertainment segment, which
includes Paramount Pictures/(R)/, Paramount Television/(R)/, Paramount Stations
Group and Spelling Entertainment Group Inc., produces and distributes theatrical
motion pictures and television programming and operates or programs 19 broadcast
television stations. The Video segment consists of an approximately 80% interest
in Blockbuster Inc. (NYSE: BBI) which operates and franchises Blockbuster
Video/(R)/ stores worldwide. The Parks segment, through Paramount Parks/(R)/,
owns and operates five theme parks and a themed attraction in the U.S. and
Canada. The Publishing segment publishes and distributes consumer books and
related multimedia products under such imprints as Simon & Schuster/(R)/. The
Online segment provides online music and children destinations featuring
entertainment, information, community tools and e-commerce.
CBS Corporation
51 West 52nd Street
New York, NY 10019
(212) 975-4321
CBS is one of the largest radio and television broadcasters in the United
States. CBS operates its business through its Television, Cable and Infinity
segments. The Television segment consists of CBS' 15 owned and operated
television stations and the CBS television network, which includes CBS' Internet
businesses. The Cable segment includes CBS' cable networks, consisting of The
Nashville Network, Country Music Television and two regional sports networks.
The Infinity segment corresponds to Infinity Broadcasting Corporation (NYSE:
INF), which conducts CBS' radio and outdoor advertising business.
CBS' Internet businesses include its operation of the Internet sites
CBS.com and Country.com, as well as its investments in SportsLine USA, Inc.,
MarketWatch.com, Inc. and other Internet businesses.
CBS has entered into definitive agreements to acquire King World
Productions, Inc., the distributor of a number of shows, including "The Oprah
Winfrey Show", and, through Infinity, Outdoor Systems, Inc., the largest outdoor
advertising company in North America. CBS has also entered into an agreement to
acquire television broadcast
7
<PAGE>
station KTVT-TV Dallas-Fort Worth, Texas. CBS believes that these transactions
will be completed by the end of 1999.
Terms of the Merger; What Shareholders Will Receive in the Merger
CBS will be merged with and into Viacom. Viacom will be the surviving
corporation. As a result of the merger, each holder of CBS common stock will be
entitled to receive from Viacom 1.085 shares of Viacom non-voting Class B common
stock in exchange for each share of CBS common stock. Viacom Class B common
stock is non-voting stock; all Viacom voting rights will be held by the holders
of Viacom Class A common stock. A majority of the Viacom Class A common stock
is held by National Amusements, Inc. which, in turn, is controlled by Mr.
Redstone.
Corporate Governance
Following the merger, the Board of Directors of Viacom will be expanded
from ten to 18 directors. The eight additional directors will initially be
selected from and designated by the Board of Directors of CBS and vacancies in
this group will be filled during the initial three-year term by independent
directors designated by the remaining CBS directors.
Mr. Redstone will continue to serve as Chairman and Chief Executive Officer
of Viacom and will be responsible, in consultation with the President and Chief
Operating Officer, for corporate policy and strategy.
Mr. Karmazin, the current President and Chief Executive Officer of CBS,
will serve as President and Chief Operating Officer of the combined company,
will report directly to the CEO and consult with the CEO on all major decisions
and will have responsibility for the supervision, coordination and management of
the combined company's business.
Mr. Karmazin, as President and COO, will be entitled to manage the combined
company's business, subject to the ability of the board of directors of the
combined company to take action with the approval of at least 14 directors.
However, in a number of areas the President and COO may not act without the
approval of, and the combined company's board may act by, a majority of the
directors.
The governance arrangements described above will be in effect for a period
of three years from the closing of the merger, unless 14 of the 18 directors
determine to modify these arrangements or Mr. Karmazin is not the COO or CEO of
the combined company.
The governing structure of the combined company during this three-year
period is an important part of the merger. We recommend that you read the
complete explanation of this structure on pages . through . carefully, as well
as the complete text of the proposed new Restated Certificate of Incorporation
attached as Annex B to this joint proxy statement/prospectus.
Ownership of Viacom Following the Merger
We anticipate that CBS shareholders will receive approximately 812 million
shares of Viacom non-voting Class B common stock in the merger. Based on that
number, immediately following the merger, the former CBS shareholders will hold
an aggregate equity interest in Viacom of approximately 54%. The Viacom voting
Class A common stock will continue to be controlled by National Amusements
which, in turn, is controlled by Mr. Redstone.
8
<PAGE>
Reasons for the Merger
Viacom and CBS believe that the merger advances the vision we share of
building the preeminent global media and entertainment firm. The combination of
our companies, our powerful brands and our highly complementary businesses
will create a company uniquely qualified to capitalize on new opportunities
domestically and around the world.
To review the reasons for the merger in greater detail, see pages .
through . and . through ..
Purposes of the Special Meetings
At the Viacom special meeting, the Viacom shareholders will be asked to
vote to adopt the merger agreement.
At the CBS special meeting, the CBS shareholders will be asked to vote to
adopt the merger agreement.
Our Recommendations to Shareholders
To the Viacom Shareholders:
The Viacom Board has declared that the merger agreement is advisable and
has unanimously approved the merger agreement and unanimously recommends that
you vote "for" the proposal to adopt the merger agreement.
To the CBS Shareholders:
The CBS Board has determined that the merger is in the best interests of
CBS, has unanimously approved the merger and the merger agreement and
unanimously recommends that you vote "for" the adoption of the merger agreement.
Date, Time and Place of Each Special Meeting
The Viacom special meeting will be held at ., New York, New York at . a.m.,
eastern standard time, on ., 1999.
The CBS special meeting will be held at ., New York, New York at . a.m.,
eastern standard time, on ., 1999.
Shareholders Entitled to Vote; Vote Required; Voting Agreement
Viacom Class A Shareholders: Only shareholders of record at the close of
business on the record date of ., 1999 will be entitled to vote at the special
meeting. On the record date, there were . shares of Viacom Class A common stock
outstanding. You will have one vote at the special meeting for each share of
Viacom Class A common stock that you owned on the record date. A vote in favor
of the adoption of the merger agreement by a majority of the shares of Viacom
Class A common stock outstanding on the record date is required to adopt the
merger agreement. A majority of the Viacom Class A common stock is owned by
National Amusements, which, in turn, is controlled by Mr. Redstone. National
Amusements has entered into a voting agreement with CBS pursuant to which it has
agreed to vote to adopt the merger agreement. Accordingly, it is assured that
Viacom shareholder approval of the adoption of the merger agreement will be
obtained.
CBS Shareholders: Only shareholders of record at the close of business on
the record date of ., 1999 will be entitled to vote at the special meeting. On
the record date, there were . shares of CBS common stock outstanding. You will
have one vote at the special meeting for each share of CBS common stock that you
owned on the record date. A
9
<PAGE>
majority of votes cast by all shareholders entitled to vote at the CBS special
meeting is required to adopt the merger agreement. If you sign and submit your
proxy but do not indicate how you want to vote, your proxy will be counted as a
vote in favor of adoption of the merger agreement. If you do not vote or you
abstain, it will have no effect on whether the proposal is passed.
Interests of Directors and Executive Officers of Viacom and CBS
A number of directors and executive officers of CBS and Viacom have
interests in the merger as employees and/or directors that are different from,
or in addition to, your interests as a shareholder. If the merger is completed,
certain directors and members of the existing senior management of each of CBS
and Viacom will be designated as members of the initial Board of Directors and
senior management of Viacom after the merger. Mr. Redstone and Mr. Karmazin have
entered into employment agreements providing for their employment as Chairman
and CEO and President and COO, respectively, following the merger. Also,
certain indemnification arrangements for existing directors and officers of CBS
and Viacom will be continued.
Fairness Opinions of Financial Advisors
In deciding to approve the merger, each Board considered the opinion of its
financial advisor as to the fairness of the merger to its shareholders from a
financial point of view. Viacom received an opinion from its financial advisor,
Morgan Stanley Dean Witter & Co., and CBS received an opinion from its financial
advisor, Evercore Group Inc., an affiliate of Evercore Partners Inc. These
opinions are attached as Annexes H and I, respectively, to this joint proxy
statement/prospectus. The opinions are not a recommendation as to how you
should vote your shares. We encourage you to read these opinions carefully.
The Merger
Conditions to the Merger
We will complete the merger only if various conditions are satisfied or
waived, including the following:
. Viacom and CBS shareholders vote to adopt the merger agreement;
. no law or court order prohibits the merger or makes the merger illegal;
. the registration statement of which this joint proxy statement/prospectus
forms a part has been declared effective and no stop order suspending its
effectiveness is in effect;
. the shares of Viacom Class B common stock to be issued to shareholders of
CBS in the merger have been authorized for listing by the NYSE, subject to
official notice of issuance;
. Viacom and CBS obtain all regulatory approvals necessary to complete the
merger;
. each of Viacom and CBS has certified to the other that its representations
and warranties are true and correct except as would not have a material
adverse effect and that its material obligations under the merger agreement
have been complied with in all material respects; and
10
<PAGE>
. Viacom and CBS have each obtained an opinion from their respective tax
counsel that the merger will be tax-free.
No Solicitation of Competing Transactions
The merger agreement prohibits CBS from soliciting any proposal from, or
providing information to or negotiating with, another party for the sale or
transfer of more than 35% of the voting power or assets of CBS.
However, until the CBS shareholders adopt the merger agreement, CBS may
consider an unsolicited proposal for a competing transaction from another party
which CBS' Board of Directors determines in good faith reasonably can be
expected to result in a superior proposal, and CBS may furnish information to
that party. A superior proposal is a proposal to acquire more than 50% of the
voting power or all or substantially all of the assets of CBS for consideration
which the CBS Board determines in good faith is more favorable than that to be
received by CBS shareholders in the merger. CBS must notify Viacom if it begins
to negotiate a competing transaction.
Termination of the Merger Agreement
The Boards of Directors of both our companies can jointly agree to
terminate the merger agreement at any time without completing the merger. In
addition, the merger agreement may also be terminated:
. by either company, if the merger is not completed by August 31, 2000;
. by either company, if the shareholders of CBS do not approve the merger;
. by either company, if a governmental authority has issued a final and
nonappealable order permanently prohibiting the merger;
. by either company, if the other company breaches any of the
representations or warranties it made in the merger agreement in a manner
so as to have a material adverse effect on that company, or the other
company materially fails to comply with any of the material obligations it
has under the merger agreement, in either case such that the conditions to
closing relating to the representations and warranties or covenants would
not be satisfied; or
. by CBS, if prior to the adoption of the merger agreement by the CBS
shareholders CBS gives notice to Viacom of the existence of a superior
proposal.
Termination Fees
CBS is required to pay Viacom a termination fee of $1 billion if:
. (1) Viacom or CBS terminates the merger agreement because the CBS
shareholders fail to adopt the merger agreement at the CBS special meeting,
(2) a competing proposal to acquire more than 50% of the voting power or
assets of CBS has been made public at or prior to the failure to adopt the
merger agreement and (3) within 12 months after termination, a binding
agreement to enter into a competing transaction is entered into by CBS or a
competing transaction is consummated; or
. CBS terminates the merger agreement because, prior to the adoption of the
merger agreement by CBS shareholders, CBS gives notice to
11
<PAGE>
Viacom of the existence of a superior proposal.
Regulatory Approvals
Under U.S. antitrust laws, we may not complete the merger until we have
notified the Antitrust Division of the Department of Justice and the Federal
Trade Commission of the merger and filed the necessary report forms and until a
required waiting period has ended. Viacom made its notification on September
20, 1999 and CBS made its notification on September 23, 1999. However, the
Antitrust Division of the Department of Justice and the Federal Trade Commission
continue to have the authority to challenge the merger on antitrust grounds
before and after the merger is completed.
Under U.S. federal communications laws, the merger will result in a
transfer of control to Viacom of licenses held by CBS, and, therefore, the
merger requires the prior review and approval of the Federal Communications
Commission. Both Viacom and CBS will request the required approval in an
application to the FCC. The FCC will not permit such applications to be filed
until November 16, 1999, because the application will request authority to own
two television stations in certain markets. This application will be subject to
comments by the public, and any decision may be further reviewed or reconsidered
by the FCC or a court. In order to comply with applicable law and to secure the
approval of the FCC, Viacom, CBS or both may need to divest some or all of their
respective interests in a number of radio and television licenses as well as
some or all of Viacom's interest in United Paramount Network. Further, Viacom,
CBS or both may be required to divest additional broadcast stations in the event
rules recently adopted by the FCC that relax ownership restrictions fail to
become effective, or are stayed, reconsidered or modified by the FCC or a court.
Both companies are required to make filings with or obtain approvals from
certain other domestic and international regulatory authorities in connection
with the merger.
We cannot predict whether we will obtain all required regulatory approvals
to complete the merger, or whether any approvals will include conditions that
would be detrimental to CBS or Viacom.
No Appraisal Rights
Neither Viacom shareholders nor CBS shareholders have a right to an
appraisal of the value of their shares in connection with the merger.
Certain Federal Income Tax Consequences
Viacom tax counsel and CBS tax counsel will each provide an opinion that
CBS shareholders will not be taxed as a result of the exchange of CBS common
stock for Viacom Class B common stock in the merger unless and only to the
extent they receive a payment for fractional shares. Receipt of these opinions
is a condition to the closing of the merger.
Viacom shareholders will not be taxed as a result of the merger.
Accounting Treatment
The merger will be accounted for under the purchase method of accounting in
accordance with generally accepted accounting principles. Accordingly, the cost
to acquire CBS will be allocated to the assets acquired and liabilities assumed
based on their fair values, with any excess being treated as goodwill and
amortized over its estimated useful life.
Risk Factors
12
<PAGE>
There are risk factors relating to the merger and the combined company that
both Viacom and CBS shareholders should consider in evaluating how to vote at
the special meeting. These risk factors include the following:
. fixed exchange ratio may result in lower value of merger consideration;
. the merger is subject to review and approval by the Federal
Communications Commission and the combined company may be required to
divest certain assets;
. antitrust regulatory agencies may oppose the merger or impose conditions
on the merger;
. Viacom and CBS may encounter difficulties in integrating operations and
may not achieve strategic and other benefits;
. there will be a controlling shareholder;
. the combined company's corporate governance structure will be unusual;
. the split-off of Blockbuster from Viacom may not occur;
. the combined company will operate in a business environment that is
rapidly changing due to technological and other factors;
. expenditures by advertisers tend to be seasonal and cyclical;
. acceptance of the combined company's programming by the public
generally;
. dependence upon affiliation agreements;
. the broadcast industry is subject to extensive federal regulation; and
. the combined company has environmental, asbestos and other contingent
liabilities.
Surrender of Stock Certificates
Following the merger, Viacom will appoint an exchange agent who will
instruct the CBS shareholders on the procedure to follow to surrender their
stock certificates of CBS common stock in exchange for stock certificates of
Viacom non-voting Class B common stock. Upon surrender of the stock
certificates, CBS shareholders will be entitled to receive a payment for the
value of any fractional shares.
* * *
13
<PAGE>
Viacom Summary Historical Financial Data
The summary consolidated financial data presented below have been derived
from, and should be read together with, Viacom's audited consolidated financial
statements and the accompanying notes included in Viacom's annual report on Form
10-K for the year ended December 31, 1998 and the unaudited interim consolidated
financial statements and the accompanying notes included in Viacom's quarterly
report on Form 10-Q for the quarterly period ended June 30, 1999, both of which
are incorporated by reference into this joint proxy statement/prospectus. The
historical financial data presented below includes the results of Paramount
Communications Inc. after its acquisition by Viacom on March 11, 1994 and the
results of Blockbuster Entertainment Corporation after its acquisition by Viacom
on September 29, 1994.
Statement of Operations Data
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
----------------- ------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------- -------- --------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(Unaudited)
Revenues.............................. $5,954 $5,465 $12,096 $10,685 $ 9,684 $ 8,700 $ 4,486
Operating income...................... $ 560 $ 48 $ 752 $ 685 $ 1,197 $ 1,247 $ 354
Earnings (loss) from continuing
operations.......................... $ 128 $ (220) $ (44) $ 374 $ 152 $ 88 $ 19
Net earnings (loss)................... $ 104 $ (279) $ (122) $ 794 $ 1,248 $ 223 $ 90
Net earnings (loss) attributable to
common stock........................ $ 92 $ (309) $ (150) $ 734 $ 1,188 $ 163 $ 15
Earnings (loss) per common share:
Basic:
Earnings (loss) from continuing
operations......................... $ .17 $ (.35) $ (.10) $ .44 $ .13 $ .04 $ (.14)
Net earnings (loss)................. $ .13 $ (.43) $ (.21) $ 1.04 $ 1.63 $ .22 $ .04
Diluted:
Earnings (loss) from continuing
operations........................ $ .16 $ (.35) $ (.10) $ .44 $ .13 $ .04 $ (.13)
Net earnings (loss)................ $ .13 $ (.43) $ (.21) $ 1.04 $ 1.62 $ .22 $ .03
</TABLE>
Balance Sheet Data
(in millions)
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------
As of
June 30, 1999 1998 1997 1996 1995 1994
------------- ------- ------ ------- ------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Total assets........................................... $23,803 $23,613 $28,289 $28,834 $28,991 $28,274
Total long-term debt, net of current portion........... $ 6,424 $ 3,813 $ 7,423 $ 9,856 $10,712 $10,402
Shareholders' equity................................... $11,215 $12,050 $13,384 $12,587 $12,094 $11,792
</TABLE>
14
<PAGE>
CBS Summary Historical Financial Data
The selected consolidated historical financial data presented below
have been derived from, and should be read together with, the CBS audited
consolidated financial statements and the accompanying notes included in CBS'
Annual Report on Form 10-K for the year ended December 31, 1998 and the
unaudited interim consolidated financial statements and the accompanying notes
included in CBS' quarterly report on Form 10-Q for the six months ended June 30,
1999, which are incorporated by reference in this joint proxy
statement/prospectus. The historical financial data presented below includes
the results of CBS Radio Inc., formerly American Radio Systems Corporation,
after its acquisition by CBS on June 4, 1998, the results of The Nashville
Network and Country Music Television, Gaylord Entertainment Company's two major
cable networks, after their acquisition by CBS on September 30, 1997, the
results of Infinity Media Corporation, formerly known as Infinity Broadcasting
Corporation, after its acquisition by CBS on December 31, 1996 and the results
of CBS Inc. after its acquisition by CBS, formerly Westinghouse Electric
Corporation, on November 24, 1995.
Statement of Operations Data
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
---------------- ------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------- ------- ------- ------- ------- ------- ------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.................................... $3,446 $3,433 $6,805 $5,367 $4,143 $1,074 $ 744
Operating profit............................ 412 263 482 253 54 160 151
Interest expense............................ (97) (160) (370) (386) (401) (184) (26)
Income (loss) from Continuing Operations
before income taxes and minority interest.. 309 120 155 (59) (292) 128 (6)
Income tax (expense) benefit................ (176) (95) (161) (73) 71 (75) 1
Income (loss) from Continuing Operations.... 103 23 (12) (131) (221) 47 (10)
Income (loss) from Discontinued
Operations................................. 384 -- -- 680 409 (57) 58
Extraordinary item, net of income taxes..... (5) -- (9) -- (93) -- --
Net income (loss)........................... 482 23 (21) 549 95 (10) 48
Basic earnings (loss) per common share:
Continuing Operations....................... $ .15 $ .03 $ (.02) $ (.24) $ (.67) $ (.09) $(.27)
Discontinued Operations..................... .55 -- -- 1.08 1.02 (.16) .16
Extraordinary item.......................... (.01) -- (.01) -- (.23) -- --
------ ------ ------ ------ ------ ------ -----
Basic earnings (loss) per common share...... $ .69 $ .03 $ (.03) $ .84 $ .12 $ (.25) $(.11)
====== ====== ====== ====== ====== ====== =====
Diluted earnings (loss) per common share:
Continuing Operations....................... $ .15 $ .03 $ (.02) $ (.24) $ (.67) $ (.09) $(.27)
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
---------------- ------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------- ------- ------- ------- ------- ------- ------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Discontinued Operations.................... .54 -- -- 1.08 1.02 (.16) .16
Extraordinary item......................... (.01) -- (.01) -- (.23) -- --
------ ------ ------ ------ ------ ------ -----
Diluted earnings (loss) per
common share............................. $ .68 $ .03 $ (.03) $ .84 $ .12 $ (.25) $(.11)
====== ====== ====== ====== ====== ====== =====
Dividends per common share................. $ -- $ .05 $ .05 $ .20 $ .20 $ .20 $ .20
====== ====== ====== ====== ====== ====== =====
</TABLE>
Balance Sheet Data
(in millions)
<TABLE>
<CAPTION>
As of As of December 31,
June 30, ------------------------------------------------
1999 1998 1997 1996 1995 1994
--------- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
(Unaudited)
Total assets--Continuing Operations...... $20,358 $20,139 $16,503 $15,406 $10,391 $ 2,524
Total assets--Discontinued Operations.... 861 1,919 4,101 5,710 8,157 9,273
------- ------- ------- ------- ------- -------
Total assets.............................. $21,219 $22,058 $20,604 $21,116 $18,548 $11,797
======= ======= ======= ======= ======= =======
Long-term debt--Continuing Operations..... $ 2,111 $ 2,506 $ 3,236 $ 5,147 $ 7,222 $ 1,865
Long-term debt--Discontinued Operations... 408 382 440 419 161 589
------- ------- ------- ------- ------- -------
Total long-term debt...................... $ 2,519 $ 2,888 $ 3,676 $ 5,566 $ 7,383 $ 2,454
======= ======= ======= ======= ======= =======
Total debt--Continuing Operations......... $ 2,190 $ 2,665 $ 3,387 $ 5,635 $ 7,840 $ 2,471
Total debt--Discontinued Operations....... 429 428 543 439 528 1,266
------- ------- ------- ------- ------- -------
Total debt................................ $ 2,619 $ 3,093 $ 3,930 $ 6,074 $ 8,368 $ 3,737
======= ======= ======= ======= ======= =======
Shareholders' equity...................... $ 9,695 $ 9,054 $ 8,080 $ 5,731 $ 1,453 $ 1,789
======= ======= ======= ======= ======= =======
</TABLE>
16
<PAGE>
Summary Unaudited Viacom/CBS Pro Forma Combined Financial Information
The following summary unaudited pro forma combined financial information is
derived from and should be read together with the information provided in the
section, "Unaudited Viacom/CBS Pro Forma Combined Condensed Financial
Information" and the notes thereto. The summary unaudited pro forma combined
financial information is based upon the historical financial statements of
Viacom, adjusted for the initial public offering of Blockbuster and other
related transactions, and the historical financial statements of CBS, adjusted
for the acquisition of American Radio and the pending acquisitions of King World
and Outdoor Systems, Inc. The unaudited pro forma combined condensed statement
of operations data for the six months ended June 30, 1999 and the year ended
December 31, 1998 is presented as if the merger of Viacom and CBS and all other
aforementioned transactions had occurred on January 1, 1998. The unaudited pro
forma combined balance sheet data at June 30, 1999 is presented as if the merger
of Viacom and CBS and all other aforementioned transactions had occurred on June
30, 1999.
The summary unaudited pro forma combined financial data is for illustrative
purposes only and does not necessarily indicate the operating results or
financial position that would have been achieved had the merger of Viacom and
CBS and all other aforementioned transactions been completed as of the dates
indicated or of the results that may be obtained in the future. In addition, the
data does not reflect synergies that might be achieved from combining these
operations.
Unaudited Pro Forma Combined Statement of Operations Data
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1999 December 31, 1998
-------------- ------------------
<S> <C> <C>
Revenues............................................................. $10,144 $20,457
Operating income..................................................... $ 720 $ 695
Earnings (loss) from continuing operations before income taxes
and minority interest..................................... $ 307 $ (365)
Loss from continuing operations...................................... $ (148) $ (774)
Net loss from continuing operations attributable to common stock..... $ (161) $ (801)
Basic and diluted loss from continuing operations per share.......... $ (.11) $ (.53)
Weighted average shares outstanding:
Basic..................................................... 1,505 1,521
Diluted................................................... 1,505 1,521
</TABLE>
Unaudited Pro Forma Combined Balance Sheet Data
(in millions)
<TABLE>
<CAPTION>
At June 30, 1999
----------------
<S> <C>
Total assets.......................................... $77,467
Total long-term debt, net of current portion.......... $ 9,740
Shareholders' equity.................................. $47,486
</TABLE>
17
<PAGE>
Unaudited Viacom/CBS Comparative Per Share Data
The following tables present the Viacom and CBS historical and pro forma
combined and CBS pro forma equivalent comparative per share data for the six
months ended or at June 30, 1999 and the twelve months ended or at December 31,
1998.
<TABLE>
<CAPTION>
Pro Forma Combined As CBS
Six Months Ended Viacom Adjusted For Other Pro Forma
or At June 30, 1999 Historical CBS Historical Viacom Events Equivalent(3)
- ------------------- ---------- -------------- --------------------- -------------
<S> <C> <C> <C> <C>
Earnings (loss) per common share
from continuing operations(1):
Basic......................... $ .17 $ .15 $ (.11) $ (.12)
Diluted....................... .16 .15 (.11) (.12)
Book value per common share(2):
Basic......................... $16.29 $13.96 $ 31.65 $34.34
Diluted....................... 15.98 13.64 31.38 34.04
Cash dividends per common share.... -- -- -- --
<CAPTION>
Pro Forma Combined As CBS
Twelve Months Ended Viacom Adjusted For Other Pro Forma
or At December 31, 1998 Historical CBS Historical Viacom Events Equivalent(3)
- ----------------------- ---------- -------------- --------------------- -------------
<S> <C> <C> <C> <C>
Earnings (loss) per common share
from continuing operations(1):
Basic......................... $ (.10) $ (.02) $ (.53) $ (.57)
Diluted....................... (.10) (.02) (.53) (.57)
Book value per common share(2):
Basic......................... $17.34 $13.12 $ 32.06 $34.79
Diluted....................... 17.07 12.85 31.83 34.54
Cash dividends per common share.... -- $ .05 -- --
</TABLE>
(1) The weighted average common shares outstanding used in calculating pro
forma combined basic and diluted earnings (loss) from continuing operations
per common share, as adjusted for all transactions, are calculated assuming
that the estimated number of shares of Viacom common stock to be issued in
the merger were outstanding from January 1, 1998. For both periods
presented, the weighted average common shares outstanding used in
calculating pro forma combined diluted earnings (loss) from continuing
operations per common share do not include the impact of Viacom stock
options, as they are antidilutive.
(2) The book value per common share amounts of Viacom and CBS were calculated
by dividing shareholders' equity by the number of common shares outstanding
at the end of the period. The common shares outstanding used in
calculating basic pro forma combined book value per share include
approximately 688 million and approximately 695 million of Viacom common
shares outstanding at June 30, 1999 and December 31, 1998, respectively,
plus approximately 812 million shares representing the estimated number of
common shares to be issued in the merger. (See Note 2 to the Unaudited
Viacom/CBS Pro Forma Combined Condensed Financial Statements.) The common
shares outstanding used in calculating diluted pro forma combined book
value per common share as of June 30, 1999 and December 31, 1998 include
the Viacom common shares, plus the estimated number of common shares to be
issued in
18
<PAGE>
the merger, as well as the dilutive impact of Viacom options to
purchase shares of common stock, and totaled approximately 1.5 billion for
both periods.
(3) CBS pro forma equivalent amounts are calculated by multiplying the
respective pro forma combined per common share amounts by the exchange
ratio of 1.085.
19
<PAGE>
Comparative Market Prices and Dividends
Viacom Class A common stock and Class B common stock are listed and traded
on the NYSE under the symbols "VIA" and "VIAB", respectively. CBS common stock
is listed and traded on the NYSE under the symbol "CBS."
On February 25, 1999, the Board of Directors of Viacom declared a 2-for-1
common stock split, to be effected in the form of a dividend. The additional
shares were issued on March 31, 1999 to shareholders of record on March 15,
1999. All common share and per share amounts have been adjusted to reflect the
stock split for all periods presented.
The following tables set forth, for the calendar periods indicated, the per
share range of high and low sales prices for Viacom Class A common stock, Viacom
non-voting Class B common stock and CBS common stock as reported on the NYSE or
by the American Stock Exchange, together with the dividend declaration history
of Viacom and CBS. Only shares of Viacom non-voting Class B common stock will
be issued to shareholders of CBS in the merger in exchange for their shares of
CBS common stock.
<TABLE>
<CAPTION>
Viacom Class A Viacom Class B
Common Stock/(1)/ Common Stock/(1)/
-------------------- --------------------------
High Low High Low
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
1997
1st Quarter.............................. $ 18 9/16 $ 16 $ 18 15/16 $ 16
2nd Quarter.............................. 17 23/32 12 5/8 18 12 5/8
3rd Quarter.............................. 17 3/8 13 3/4 17 9/16 13 5/8
4th Quarter.............................. 20 7/8 13 21 1/8 13 1/4
1998
1st Quarter.............................. $ 27 1/8 $ 19 15/16 $ 27 17/32 $ 20 1/4
2nd Quarter.............................. 30 1/2 26 1/8 30 5/8 26 13/32
3rd Quarter.............................. 34 11/16 24 5/8 35 24 3/4
4th Quarter.............................. 36 29/32 25 7/16 37 1/8 25 163/512
1999
1st Quarter.............................. $ 45 1/2 $ 35 5/16 $ 45 15/16 $ 35 3/8
2nd Quarter/(2)/......................... 48 3/4 36 11/16 49 3/16 36 5/8
3rd Quarter.............................. 49 5/8 38 7/16 48 3/4 38 9/16
4th Quarter (through October 4, 1999).... 45 42 5/16 44 7/16 41 7/16
</TABLE>
- ---------------------------
(1) Viacom has not declared cash dividends on its Class A or Class B common
stock and has no present intention of doing so.
(2) As of April 8, 1999, Viacom Class A and Class B common stock ceased trading
on the American Stock Exchange and commenced trading on the NYSE.
20
<PAGE>
<TABLE>
<CAPTION>
CBS Common Stock
--------------------------------------
Dividends
High Low per Share/(1)/
--------- ------- --------------
<S> <C> <C> <C>
1997
1st Quarter............................. $ 20 3/8 $ 16 3/4 $ .05
2nd Quarter............................. 23 13/16 16 .05
3rd Quarter............................. 27 15/16 22 3/4 .05
4th Quarter............................. 32 1/16 23 3/8 .05
1998
1st Quarter............................. $ 34 3/16 $ 26 3/4 $ .05
2nd Quarter............................. 36 5/8 29 11/16 --
3rd Quarter............................. 35 1/2 21 7/8 --
4th Quarter............................. 33 1/8 18 --
1999
1st Quarter............................. $ 41 5/8 $ 31 11/16 --
2nd Quarter............................. 47 5/16 39 3/16 --
3rd Quarter............................. 51 15/16 43 5/8 --
4th Quarter (through October 4, 1999)... 48 1/2 45 3/4 --
</TABLE>
- -------------------
(1) CBS suspended payments of dividends after it commenced its stock buy-back
program in March 1998.
On September 3, 1999, the last trading day prior to the announcement of the
execution of the merger agreement, the last reported closing sale prices per
share of Viacom Class A common stock and Class B common stock were $45 5/16 and
$45 1/16, respectively, and the last reported sale price per share of CBS common
stock was $48 15/16. On ., 1999, the last trading day prior to the printing of
this joint proxy statement/prospectus, the last reported sale prices per share
of Viacom Class A common stock and Class B common stock were $. and $.,
respectively, and the last reported sale price per share of CBS common stock was
$ . .
The market prices of shares of Viacom Class A common stock, Viacom Class B
common stock and CBS common stock are subject to fluctuations. As a result,
Viacom and CBS shareholders are urged to obtain current market quotations.
On the record date, there were approximately . holders of record of Viacom
Class A common stock, approximately . holders of record of Viacom Class B common
stock, and approximately . holders of record of CBS common stock.
21
<PAGE>
RISK FACTORS
You should consider the following risks in deciding whether to adopt the
merger agreement. These matters should be considered along with the other
information included or incorporated by reference in this joint proxy
statement/prospectus. We have separated the risks into two groups:
. risks relating to the merger; and
. risks relating to the combined company.
Risks Relating to the Merger
Fixed Exchange Ratio May Result in Lower Value of Merger Consideration
Upon completion of the merger, each share of CBS common stock will be
exchanged for 1.085 shares of Viacom non-voting Class B common stock. This
exchange ratio is fixed and will not be adjusted as a result of any increase or
decrease in the price of either Viacom non-voting Class B common stock or CBS
common stock. Any change in the price of Viacom non-voting Class B common stock
will affect the value the CBS shareholders receive in the merger. In addition,
because the merger will be completed only after all the conditions to the merger
are satisfied or waived, including the receipt of regulatory approvals, there is
no way to be sure that the price of Viacom non-voting Class B common stock or
CBS common stock at the time the merger is completed will be the same as their
prices on the date of the special meeting. Changes in the business, operations
or prospects of Viacom or CBS, regulatory considerations, general market and
economic conditions and other factors may affect the prices of Viacom non-voting
Class B common stock, CBS common stock or both. Many of those factors are
beyond our control. You are encouraged to obtain current market quotations for
both Viacom non-voting Class B common stock and CBS common stock.
The Merger Is Subject to Review and Approval by the Federal Communications
Commission and the Combined Company May Be Required to Divest Certain Assets
Approval by the FCC is required for the transfer of control to Viacom of
the television and radio station licenses currently held by CBS. An application
will be filed requesting such approval, which will be subject to public comment.
FCC approval will be predicated, in part, on the effectiveness of new FCC rules
permitting a single company to hold two television stations in a single market
and upon the effectiveness of modifications to the "one-to-a-market" rule, which
governs the degree of common ownership of television and radio stations in one
market. The FCC will not accept any such applications until the effective date
of these rules, November 16, 1999, which may delay the approval process.
The combined company will be required under current law to divest some of
its broadcasting assets in order to receive FCC approval. In particular, the
television stations currently held by both entities together reach more than the
maximum percentage of U.S. television households permitted by the FCC.
Accordingly, in the absence of changes to this so-called "national cap" rule,
the combined company will have to divest a sufficient number of television
stations to reduce the overall audience reach, calculated for FCC purposes, from
approximately 41% to less than 35%.
22
<PAGE>
The combined company may be required to divest up to an aggregate of 12
radio stations in Los Angeles, Chicago, Dallas, Washington/Baltimore and
Sacramento in order to comply with recently adopted limits on the common
ownership of same-market radio and television stations.
The combined company would hold licenses for two television stations in
each of six markets -- Philadelphia, Boston, Dallas, Detroit, Miami and
Pittsburgh. In the event the common ownership of two television stations in
each of these markets does not comply with recently adopted FCC rules permitting
such in-market "duopolies" in certain circumstances, the combined company could
be required to divest a television station in one or more of these markets. The
combined company may also be required to divest additional broadcast stations
in the event rules recently adopted by the FCC that relax ownership restrictions
fail to become effective, or are stayed, reconsidered or modified by the agency
or a court. The combined company may also have to reduce or divest its interest
in the United Paramount Network to comply with rules limiting the common
ownership of certain television networks. There can be no assurance that the
consummation of any required divestitures could be effected at a fair market
price.
In order to consummate the merger on an orderly and timely basis and to
avoid a sale that would yield less than a fair market price, Viacom and CBS may
request temporary waivers of FCC rules, apply to place certain assets in trust
or seek other regulatory relief. There can be no assurance that such waivers or
trust applications would be granted or other relief obtained or that
consummation of the merger will not be delayed pending receipt of FCC approval
of the merger. Further, there can be no assurance that FCC approval of the
merger will not require further divestitures or impose material conditions
adverse to Viacom or CBS, or that no action will be brought challenging such
approvals or actions, or, if such challenge is made, as to the result thereof.
See "-- Federal Regulation of Television and Radio Broadcasting."
Antitrust Regulatory Agencies May Oppose or Impose Conditions on the Merger
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Viacom and
CBS must file Premerger Notification and Report Forms with the Antitrust
Division of the Department of Justice and the Federal Trade Commission, and a
waiting period must expire or terminate before the merger may be completed. One
of the agencies will be assigned to review the merger, and prior to the
expiration of the waiting period, the reviewing agency may issue to the parties
a Request for Additional Information and Documentary Material. The DOJ or the
FTC could take action under the antitrust laws to:
. enjoin the merger or
. require divestiture of assets or businesses of Viacom or CBS.
The initial filings under the HSR Act were made by Viacom and CBS on
September 20, 1999 and September 23, 1999, respectively. We do not know whether
the federal antitrust authorities will permit the HSR Act waiting period to
expire without challenging the merger. We also do not know whether a third
party will challenge the merger on antitrust grounds or what the result of a
third party challenge might be.
23
<PAGE>
In addition, it is possible that one or more individual states could
investigate and challenge the merger under either federal law or their own state
law, although states have no notification and waiting period requirements.
Depending on the nature of any of these challenges, and any conditions imposed
as a result, these challenges and conditions could delay completion of the
merger or lessen the anticipated benefits of the merger.
The merger agreement requires the parties to use their respective best
efforts, and to take all actions necessary, to satisfy the conditions to the
merger, and to do so in a manner designed to obtain all regulatory clearances
and the satisfaction of the conditions as expeditiously as possible. This
includes agreeing to the sale or other disposition of assets or businesses and
taking all steps necessary to vacate or lift any order, judgment or injunction
that would prohibit or materially delay consummation of the merger.
Viacom and CBS May Encounter Difficulties in Integrating Operations and May Not
Achieve Strategic and Other Benefits
The merger will require the integration of our two companies and will also
require the integration of companies recently acquired or being acquired by CBS.
The combined companies expect to realize cost savings and other financial and
strategic and operating benefits as a result of the merger. However, when these
benefits will occur, as well as the extent to which they actually will be
achieved, cannot be predicted with certainty. The integration of Viacom and CBS
will also require substantial attention from management. The diversion of
management attention and any difficulties associated with integrating Viacom and
CBS could have a material adverse effect on the revenues, the levels of expenses
and the operating results of the combined company. See "The Merger--Reasons for
the Merger and Board Recommendations."
There Will Be a Controlling Shareholder
Immediately after completion of the merger, National Amusements will own
approximately 68% of the voting stock of the combined company. Mr. Redstone,
who controls National Amusements, will be able to determine the outcome of all
corporate actions requiring shareholder approval except actions that under
Delaware law require a class vote of the Viacom Class B common stock. However,
in connection with the merger, National Amusements has entered into a
stockholder agreement pursuant to which it has agreed for a three-year period to
ensure, among other things, that eight of the 18 members of the Board of
Directors of the combined company shall be directors of CBS or replacements they
may designate. In addition, the proposed new Restated Certificate of
Incorporation of Viacom, which will become effective at the time of the merger,
will provide that Board action will require the approval of 14 of the 18
directors of the combined company, except for a number of areas where the
directors of the combined company may act by a majority vote of the Board. Such
arrangements will be in place for a three-year period unless 14 of 18 directors
determine to modify these arrangements or Mr. Karmazin is not the COO or the CEO
of the combined company. For a more detailed discussion of the corporate
governance of the combined company, see "The Merger--Directors, Management and
Corporate Governance of the Combined Company."
24
<PAGE>
The Combined Company's Corporate Governance Structure Will Be Unusual
In the merger agreement, CBS and Viacom have agreed to a variety of
corporate governance arrangements that will differ significantly from the manner
in which the two companies are currently managed. There can be no assurance
that these arrangements will prove to be a successful model for managing the
combined company. For a detailed description of the corporate governance
arrangements, see "The Merger--Directors, Management and Corporate Governance of
the Combined Company."
The Split-off of Blockbuster from Viacom May Not Occur
Viacom has announced that, subject to Viacom Board approval and the receipt
of a supplemental tax ruling from the Internal Revenue Service reflecting the
proposed merger between Viacom and CBS, it may split-off Blockbuster by offering
to exchange all of its shares of Blockbuster for shares of Viacom's common
stock. The split-off is intended to establish Blockbuster as a stand-alone
entity with objectives separate from those of Viacom's other businesses. Viacom
believes that the split-off will resolve management, systemic, competitive and
other problems that have arisen from the operation of various different
businesses under a common parent corporation. For example, the split-off will
resolve perceived conflicts of interest between Blockbuster and Paramount.
These conflicts are perceived both by the movie studio competitors of Paramount
and the video retail competitors of Blockbuster. In addition, Viacom believes
the split-off will allow Blockbuster to facilitate the expansion of
Blockbuster's business by issuing its stock to make acquisitions. The split-off
will also allow Blockbuster to modify its compensation structure to provide
incentives to its employees that are more closely linked to its performance.
Viacom has no obligation to effect the split-off either before or after the
merger. Viacom and CBS cannot give any assurance as to whether or not or when
the split-off will occur or as to the terms of the split-off if it does occur,
or whether or not the split-off, if it does occur, will be tax-free.
Risks Relating to the Combined Company
The Combined Company Will Operate in a Business Environment that Is Rapidly
Changing Due to Technological and Other Factors.
General. The combined company will operate in a rapidly changing business
-------
environment. There can be no assurance that competitive developments and
technologies will not adversely affect the combined company's future market
share of the audiences and customers for entertainment and leisure-time
activities or of advertising revenue. In particular, while the amount of
advertising on the Internet is currently small, the Internet is a rapidly
growing competitor for advertising spending and viewership, the full impact of
which cannot be predicted.
Film and Television Production. The television and motion picture industry
------------------------------
has experienced cycles in which increased costs of talent and other factors have
resulted in higher production costs and increased competition. In addition,
television and movie producers are indirectly affected by changes in viewership
of broadcast and cable networks, the amount of broadcast time available on local
stations for syndicated television programs and, for movies, the relative
success of different forms of distribution, such as home video, pay television
and network television, each of which have different profitability to producers.
There can be no assurance that developments in these areas will not adversely
affect the profitability of the combined company.
25
<PAGE>
Television and Cable Television Networks. The combined company will
----------------------------------------
directly compete for viewers in general (and viewers in specific demographic
categories) and for programming with other cable and broadcast television
networks. The recently expanded availability of digital cable television and
the introduction of direct-to-home satellite distribution has greatly increased
the amount of channel capacity available for new networks, resulting in the
launch of a number of new cable television networks by both our companies and
their competitors. In addition, digital broadcast television, which has recently
become available in major markets, may allow a single television station to
broadcast several channels simultaneously. Increasing audience fragmentation
could have an adverse effect on advertising revenue and subscription revenues.
Broadcast television has experienced a decline in total audience viewership in
recent years. Among the major networks, CBS delivers an audience that has an
older demographic. An older demographic may result in lower revenue for an
advertising spot. There can be no assurance that this audience decline will not
continue or that CBS network programming will appeal to an audience having a
younger demographic.
Television and Radio Broadcast Stations. New technologies, such as digital
---------------------------------------
radio services, direct-to-home satellite, wireless and wired cable television
and Internet radio and video programming, compete for programming, audiences and
advertising revenues. Although each of these technologies are different from
traditional broadcasting (for example, satellite-delivered digital radio
services cannot broadcast local advertising or programming), there can be no
assurance that these or other new technologies will not have an adverse effect
on the combined company's business in the future.
Video. Videocassette rental competes with other forms of distribution of
-----
movies, including theatrical distribution, cable, satellite and broadcast
television. Movie studios make available videocassettes for rental during a
distribution "window" of time which is in advance of, and exclusive against,
distribution through most other forms of non-theatrical movie distribution.
Although the studios have a significant interest in maintaining a viable home
video rental industry, changes in the videocassette exclusive window in relation
to other windows could have an adverse effect upon the video rental business.
In addition, some digital cable providers have begun testing technology designed
to transmit movies on demand with interactive capabilities such as start, stop
and rewind. This "video-on-demand" technology could have a material adverse
effect on the videocassette rental market if it could be provided profitably at
a reasonable price and if video-on-demand rights were to be provided with a
favorable window by the movie studios.
Expenditures by Advertisers Tend to Be Seasonal and Cyclical
The combined company will derive a substantial portion of its revenues from
the sale of advertising on its television stations, cable networks, radio
stations and outdoor displays. Expenditures by advertisers tend to be seasonal
and cyclical, reflecting overall economic conditions as well as budgeting and
buying patterns. A decline in the economic prospects of advertisers or the
economy in general could alter current or prospective advertisers' spending
priorities or increase the time it takes to close a sale with our advertisers.
This could cause revenues of the combined company from advertisements to decline
significantly in any given period. In addition, because a substantial portion
of the combined company's revenues will be derived from local advertisers, the
combined company's ability to generate advertising revenues in specific markets
could be adversely affected by local or regional economic downturns.
26
<PAGE>
Acceptance of the Combined Company's Programming by the Public Generally
Revenues derived from the production and distribution of a feature film,
television series or radio show depend primarily upon its acceptance by the
public, which is difficult to predict. The commercial success of a feature
film, television series or radio show also depends upon the quality and
acceptance of other competing films, television series or radio shows released
into the marketplace at or near the same time, the availability of alternative
forms of entertainment and leisure time activities, general economic conditions
and other tangible and intangible factors, all of which can change and cannot be
predicted with certainty. Further, the theatrical success of a feature film and
the audience ratings for a television series are generally key factors in
generating revenues from other distribution channels, such as home video, free
television and premium pay television.
Dependence upon Affiliation Agreements
Much of the combined company's broadcast network programming will be
provided to its broadcast affiliates pursuant to affiliation agreements of
varying durations and staggered expirations. The combined company will be
dependent upon the maintenance of affiliation agreements with third-party owned
television stations, and there can be no assurance that such affiliation
agreements will be renewed in the future on terms acceptable to the combined
company. The loss of a significant number of such affiliation arrangements
could reduce the distribution of the combined company's programming, thereby
adversely affecting the combined company's ability to sell national advertising
time.
Similarly, the basic cable networks in which the combined company will hold
interests, including MTV, VH1, Nickelodeon, The Nashville Network, Country Music
Television and other cable networks maintain affiliation arrangements that
enable them to reach a large percentage of cable and direct broadcast satellite
(DBS) households across the United States. Such cable networks also depend on
achieving and maintaining carriage within the most widely distributed cable
programming tiers to maximize their subscriber base and revenues. The loss of a
significant number of affiliation arrangements on basic programming tiers could
reduce the distribution of such cable networks, thereby adversely affecting such
networks' revenues from subscriber fees and the ability to sell advertising
time. The combined company's non-advertiser supported pay television networks,
such as Showtime, are similarly dependent for their distribution on the
maintenance of affiliation agreements with cable and DBS distributors on
acceptable terms. The loss of carriage on cable systems or DBS platforms, or
continued carriage on less favorable terms, could adversely affect such
networks' subscriber fee revenues.
The Broadcast Industry Is Subject to Extensive Federal Regulation
The television and radio broadcasting industries are subject to regulation
by the FCC under the Communications Act of 1934, as amended. Approval of the
FCC is required for the issuance or renewal, as well as transfer and assignment
of broadcast station operating licenses. The combined company will be dependent
upon its ability to maintain broadcasting licenses from the FCC. License
renewals filed after 1996 customarily are granted for terms of eight years,
absent serious or repeated violations of law. While broadcast licenses are
typically renewed by the FCC, there can be no
27
<PAGE>
assurance that the licenses for the combined company's stations will be renewed
at their expiration dates or, if renewed, that the renewal terms will be for the
full eight-year periods. The non-renewal or revocation of the FCC licenses held
by the combined company could have a material adverse effect on the operations
of the combined company.
All of the television stations the combined company will own have been
allocated a digital television, or DTV, channel. FCC rules require that the
combined company deliver a digitally transmitted signal on these channels by
specified dates, terminate analog signals and return the license to operate an
analog service by 2006, unless specified conditions exist that, in effect,
reflect the public's general inability to receive DTV transmissions in a
particular market. We are unable to predict the costs or benefits associated
with the operation of DTV stations and networks. Additionally, the extent to
which cable channels will be required to carry broadcast stations' new digital
channels is an issue that remains pending at the FCC.
The FCC also generally regulates, among other things, the ownership of
media (including ownership by non-U.S. citizens), broadcast programming and
technical operations. Further, the U.S. Congress and the FCC currently have
under consideration, and may in the future adopt, new laws, regulations and
policies regarding a wide variety of matters, including technological changes,
which could, directly or indirectly, affect the operations and ownership of the
combined company's broadcast properties.
The Combined Company Has Environmental, Asbestos and Other Contingent
Liabilities
Primarily as a result of Viacom's mergers with Paramount Communications
(formerly Gulf & Western) and Blockbuster (which owned a controlling interest in
Spelling Entertainment Group Inc., formerly the Charter Company) in 1994 and the
merger of CBS Inc. with Westinghouse Electric Corporation in 1995, the combined
company will have significant environmental liabilities. Both Paramount and
Westinghouse were diversified, global companies with portfolios including a wide
variety of industrial businesses. The Charter Company was in various businesses
related to petroleum products. Viacom and CBS have each retained certain
liabilities, including environmental, and indemnified others under certain
circumstances against liabilities, including environmental, related to
discontinued operations.
Under federal and state Superfund and other environmental laws, Viacom and
CBS each have been named as a potentially responsible party at numerous sites
located throughout the country. At many of these sites, Viacom and CBS are
either not responsible parties or their site involvement is very limited or de
minimis. However, Viacom or CBS, as the case may be, may have varying degrees
of cleanup responsibilities at a number of sites. Viacom and CBS believe 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
potentially responsible parties. These sites include certain sites for which
Viacom or CBS, as the case may be, as part of an agreement for sale, may have
retained obligations for remediation of possible environmental contamination or
may have continuing obligations under applicable environmental laws.
28
<PAGE>
In addition, CBS and Viacom are parties to various lawsuits and have
received claims relating to their continuing and discontinued operations.
Certain lawsuits and claims, including those related to asbestos liabilities,
seek substantial monetary damages.
The combined company will have access to insurance in substantial
amounts and management believes it has sufficient reserves. Accordingly, while
there can be no assurance in this regard, the pending or potential litigation,
environmental and other liabilities should not have a material adverse effect on
the financial condition of the combined company.
29
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This document and the documents incorporated by reference into this joint
proxy statement/prospectus contain both historical and forward-looking
statements. All statements other than statements of historical fact are, or may
be deemed to be, forward-looking statements within the meaning of section 27A of
the Securities Act of 1933 and section 21E of the Securities Exchange Act of
1934. These forward-looking statements are not based on historical facts, but
rather reflect Viacom's and CBS' current expectations concerning future results
and events. These forward-looking statements generally can be identified by use
of statements that include phrases such as "believe," "expect," "anticipate,"
"intend," "plan," "foresee," "likely," "will" or other similar words or phrases.
Similarly, statements that describe our objectives, plans or goals are or may be
forward-looking statements. These forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Viacom or CBS to be different from any
future results, performance and achievements expressed or implied by these
statements. You should review carefully all information, including the
financial statements and the notes to the financial statements, included or
incorporated by reference into this joint proxy statement/prospectus.
In addition to the risk factors described in the previous section, the
following important factors could affect future results, causing these results
to differ materially from those expressed in our forward-looking statements:
. the timing, impact and other uncertainties related to pending
acquisitions by CBS or Viacom and future acquisitions and dispositions
by the combined company;
. the ability of the combined company to renew existing programming,
licensing and distribution agreements and to enter into new
agreements;
. the success of CBS and Viacom and their suppliers and customers in
achieving year 2000 compliance;
. changes in tax requirements, including tax rate changes, new tax laws
and revised tax law interpretations; and
. interest rate fluctuations and other capital market conditions.
These factors and the risk factors described in the previous section are
not necessarily all of the important factors that could cause actual results to
differ materially from those expressed in any of our forward-looking statements.
Other unknown or unpredictable factors also could have material adverse effects
on our future results. The forward-looking statements included in this joint
proxy statement/prospectus are made only as of the date of this joint proxy
statement/prospectus and under section 27A of the Securities Act and section 21E
of the Exchange Act we do not have any obligation to publicly update any
forward-looking statements to reflect subsequent events or circumstances. We
cannot assure you that projected results or events will be achieved.
30
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
Unaudited Viacom/CBS Pro Forma Combined Condensed Financial Information
General
The merger will be accounted for by the purchase method of accounting.
Consideration provided by Viacom in this merger includes: approximately $36.7
billion through the issuance of approximately 812 million shares of Viacom non-
voting Class B common stock plus, approximately $833 million of cash
consideration, net of approximately $556 million of deferred taxes, for the
assumed settlement of certain historical CBS stock options and the assumption of
approximately $200 million of CBS stock options by Viacom, both of which were
granted prior to the date of the merger agreement, and approximately $3.5
billion for the assumption of debt. This consideration will be allocated to the
tangible and identifiable intangible assets acquired and liabilities assumed
according to their respective fair values, with the excess purchase
consideration being allocated to goodwill. The merger is contingent upon, among
other things, regulatory and Viacom and CBS shareholder approval.
The following unaudited pro forma combined condensed consolidated balance
sheet as of June 30, 1999, is presented as if the merger and the other Viacom
and other CBS transactions described in the notes to the unaudited Viacom/CBS
pro forma combined condensed financial statements had occurred on June 30, 1999.
The unaudited pro forma combined condensed statements of operations for the six
months ended June 30, 1999, and for the year ended December 31, 1998, are
presented as if the merger and the other Viacom and other CBS transactions had
occurred on January 1, 1998. In the opinion of Viacom and CBS management, all
adjustments and/or disclosures necessary for a fair presentation of the pro
forma data have been made. These unaudited pro forma combined condensed
financial statements are presented for illustrative purposes only and are not
necessarily indicative of the operating results or the financial position that
would have been achieved had the merger, or the other Viacom and other CBS
transactions had been consummated as of the dates indicated or of the results
that may be obtained in the future.
These unaudited pro forma combined condensed financial statements and notes
thereto should be read in conjunction with the unaudited CBS/King World pro
forma combined condensed financial information included herein, and (i) CBS'
consolidated financial statements and the notes thereto as of and for the year
ended December 31, 1998, and Management's Discussion and Analysis included in
CBS' Annual Report on Form 10-K for the year ended December 31, 1998, which is
incorporated by reference in this joint proxy statement/prospectus; (ii) King
World's consolidated financial statements and the notes thereto as of and for
the year ended August 31, 1998, which are included in CBS' Current Report on
Form 8-K filed on or about October 8, 1999 which is incorporated by reference in
this joint proxy statement/prospectus; (iii) CBS' Quarterly Reports on Form 10-Q
for the quarterly periods ended March 31, 1999 and June 30, 1999 which are
incorporated by reference in this joint proxy statement/prospectus; (iv) King
World's condensed consolidated financial statements and notes thereto as of and
for the quarterly period ended May 31, 1999 which are included in CBS' Current
Report on Form 8-K filed on or about October 8, 1999 which is incorporated by
reference in this joint proxy statement/prospectus; (v) Viacom's consolidated
financial statements and the notes thereto as of and for the year ended December
31, 1998, and Management's Discussion and Analysis included in Viacom's Annual
Report on Form 10-K for the year ended December 31, 1998 which is incorporated
by
31
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reference in this joint proxy statement/prospectus; and (vi) Viacom's
consolidated financial statements and the notes thereto as of and for the six-
month period ended June 30, 1999, on Form 10-Q which is incorporated by
reference in this joint proxy statement/prospectus.
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UNAUDITED VIACOM/CBS PRO FORMA
COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1999
(in millions)
<TABLE>
<CAPTION>
Pro Forma
CBS Adjustments for Pro Forma Adjustments
Viacom Pro Forma Viacom/CBS Combined For Other
Historical Combined Merger Viacom/CBS Viacom Events
----------- ---------- ------ ----------- --------------
ASSETS:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents................ $ 616 $ 582 $ (532)/(3)/ $ 666 $ ---
Customer receivables, net................ 1,577 1,388 --- 2,965 ---
Other current assets..................... 2,622 1,212 484 /(3)/ 4,318 ---
------- ------- -------------- ------- -----------
Total current assets..................... 4,815 3,182 (48) 7,949 ---
Property and equipment, net.............. 3,249 3,047 --- 6,296 ---
Goodwill and other intangibles, net...... 11,490 23,689 22,594 /(3)/ 57,773 ---
Other noncurrent assets.................. 4,249 1,592 (387)/(3)/ 5,454 (5)/(4)/
------- ------- -------------- ------- -----------
Total assets............................. $23,803 $31,510 $ 22,159 $77,472 $ (5)
======= ======= ============== ======= ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current portion of long-term debt........ $ 328 $ 265 $ --- $ 593 $ ---
Accounts payable, accrued expenses and
other.................................. 3,960 1,880 (72)/(3)/ 5,768 ---
------- ------- -------------- ------- -----------
Total current liabilities................ 4,288 2,145 (72) 6,361 ---
Long-term debt........................... 6,424 3,283 470 /(3)/ 10,177 (437)/(4)/
Net liabilities of discontinued
operations............................ --- 985 --- 985 ---
Other noncurrent liabilities............. 1,876 4,336 --- 6,212 ---
------- ------- -------------- ------- -----------
Total liabilities........................ 12,588 10,749 398 23,735 (437)
------- ------- -------------- ------- -----------
Minority interest in equity of
consolidated subsidiaries.............. --- 5,589 --- 5,589 1,094/(4)/
Shareholders' equity:
Common stock............................. 7 800 8 /(2)/ 15 ---
(800)/(3)/
Additional paid-in capital............... 10,593 14,596 36,725 /(2)/ 47,518 (662)/(4)/
200 /(2)/
(14,596)/(3)/
Common stock held in treasury, at cost... (1,361) (1,467) 1,467 /(3)/ (1,361) ---
Retained earnings........................ 2,018 1,910 (1,910)/(3)/ 2,018 ---
Accumulated other comprehensive loss..... (42) (667) 667 /(3)/ (42) ---
------- ------- -------------- ------- -----------
Total shareholders' equity............... 11,215 15,172 21,761 48,148 (662)
------- ------- -------------- ------- -----------
Total liabilities and
shareholders' equity.................. $23,803 $31,510 $ 22,159 $77,472 $ (5)
======= ======= ============== ======= ===========
<CAPTION>
Pro Forma
Combined
As Adjusted
For Other
Viacom Events
--------------
ASSETS:
<S> <C>
Cash and cash equivalents................ $ 666
Customer receivables, net................ 2,965
Other current assets..................... 4,318
-------
Total current assets..................... 7,949
Property and equipment, net.............. 6,296
Goodwill and other intangibles, net...... 57,773
Other noncurrent assets.................. 5,449
-------
Total assets............................. $77,467
=======
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current portion of long-term debt........ $ 593
Accounts payable, accrued expenses and
other.................................. 5,768
-------
Total current liabilities................ 6,361
Long-term debt........................... 9,740
Net liabilities of discontinued
operations............................ 985
Other noncurrent liabilities............. 6,212
-------
Total liabilities........................ 23,298
-------
Minority interest in equity of
consolidated subsidiaries.............. 6,683
Shareholders' equity:
Common stock............................. 15
Additional paid-in capital............... 46,856
Common stock held in treasury, at cost... (1,361)
Retained earnings........................ 2,018
Accumulated other comprehensive loss..... (42)
-------
Total shareholders' equity............... 47,486
-------
Total liabilities and
shareholders' equity.................. $77,467
=======
</TABLE>
See accompanying notes to unaudited Viacom/CBS
pro forma combined condensed financial statements.
33
<PAGE>
UNAUDITED VIACOM/CBS PRO FORMA
COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Adjustments Combined
CBS for Pro Forma For Other as Adjusted
Viacom Pro Forma Viacom/CBS Combined Viacom For Other
Historical Combined Merger Viacom/CBS Events Viacom Events
---------- --------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues..................................... $ 5,954 $ 4,190 $ --- $10,144 $ --- $10,144
Operating expenses........................... (3,887) (2,442) --- (6,329) --- (6,329)
Selling, general and administrative.......... (1,110) (660) --- (1,770) --- (1,770)
Depreciation and amortization................ (397) (561) (282)/(3)/ (1,240) --- (1,240)
Residual costs of discontinued businesses.... --- (85) --- (85) --- (85)
------- ------- ----------- ------- ------- -------
Operating income (loss)...................... 560 442 (282) 720 --- 720
Other income and expense, net................ (29) (4) --- (33) --- (33)
Interest expense, net........................ (200) (143) (38)/(3)/ (381) 1/(4)/ (380)
------- ------- ----------- ------- ------- ------
Earnings from continuing operations before
income taxes................................ 331 295 (320) 306 1 307
Income tax (expense) benefit................. (202) (239) 15/(5)/ (426) --- (426)
Minority interest............................ (1) (32) --- (33) 4/(4)/ (29)
------- ------- ----------- ------- ------- ------
Earnings (loss) from continuing operations... 128 24 (305) (153) 5 (148)
Cumulative convertible preferred stock
dividend requirement and premium on
repurchase of preferred stock............... (13) --- --- (13) --- (13)
------- ------- ----------- ------- ------- ------
Net earnings (loss) from continuing
operations attributable to common stock..... $ 115 $ 24 $ (305) $ (166) $ 5 $ (161)
======= ======= =========== ======= ======== =======
Earnings (loss) from continuing operations
per common share:
Basic....................................... $.17 $(.11) $(.11)
Diluted..................................... $.16 $(.11) $(.11)
Weighted average shares outstanding:
Basic....................................... 693 812 1,505 1,505
Diluted..................................... 708 812 1,505 1,505
</TABLE>
See accompanying notes to unaudited Viacom/CBS
pro forma combined condensed financial statements.
34
<PAGE>
UNAUDITED VIACOM/CBS PRO FORMA
COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Combined
CBS for Pro Forma Adjustments As Adjusted
Viacom Pro Forma Viacom/CBS Combined For Other For Other
Historical Combined Merger Viacom/CBS Viacom Events Viacom Events
---------- --------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues............................... $12,096 $ 8,361 $ --- $ 20,457 $ --- $ 20,457
Operating expenses..................... (8,506) (5,242) --- (13,748) --- (13,748)
Selling, general and administrative.... (2,061) (1,335) --- (3,396) --- (3,396)
Depreciation and amortization.......... (777) (1,113) (565)/(3)/ (2,455) --- (2,455)
Residual costs of discontinued
businesses.......................... --- (163) --- (163) --- (163)
------- ------- --------- -------- --------- --------
Operating income (loss)................ 752 508 (565) 695 --- 695
Other income and expense, net.......... (57) 38 --- (19) --- (19)
Interest expense, net.................. (599) (363) (85)/(3)/ (1,047) 6/(4)/ (1,041)
------- ------- --------- -------- --------- --------
Earnings (loss) from continuing
operations before income taxes........ 96 183 (650) (371) 6 (365)
Income tax (expense) benefit........... (139) (320) 34 /(5)/ (425) (2)/(5)/ (427)
Minority interest...................... (1) (35) --- (36) 54/(4)/ 18
------- ------- --------- -------- --------- --------
Earnings (loss) from continuing
operations............................ (44) (172) (616) (832) 58 (774)
Cumulative convertible preferred stock
dividend requirement and discount on
repurchase of preferred stock......... (27) --- --- (27) --- (27)
------- ------- --------- -------- --------- --------
Net earnings (loss) from continuing
operations attributable to common stock $ (71) $ (172) $ (616) $ (859) $ 58 $ (801)
======= ======= ========= ======== ========= ========
Loss from continuing operations per
common share:
Basic............................... $(.10) $(.56) $(.53)
Diluted............................. $(.10) $(.56) $(.53)
Weighted average shares outstanding:
Basic............................... 709 812 1,521 1,521
Diluted............................. 709 812 1,521 1,521
</TABLE>
See accompanying notes to unaudited Viacom/CBS
pro forma combined condensed financial statements.
35
<PAGE>
NOTES TO UNAUDITED VIACOM/CBS PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
(tables in millions, except per share amounts)
(1) Basis of Presentation
The purchase method of accounting has been used in the preparation of the
accompanying unaudited pro forma combined condensed financial statements. Under
this method of accounting, the purchase consideration is allocated to tangible
and identifiable intangible assets acquired and liabilities assumed based on
their respective fair values, with the excess purchase consideration being
allocated to goodwill. For purposes of the unaudited pro forma combined
condensed financial statements, the preliminary fair values of CBS' assets and
liabilities were estimated by CBS and Viacom management. The final allocation of
the purchase price will be determined after the completion of the merger and
will be based on appraisals and a comprehensive final evaluation of tangible and
identifiable intangible assets acquired (including their estimated useful lives)
and liabilities assumed.
(2) Consideration
Pursuant to the merger agreement, CBS shareholders will receive 1.085
shares of Viacom non-voting Class B common stock for each CBS share issued and
outstanding at the completion of the merger. The total number of CBS shares
issued and outstanding during the period subsequent to the merger announcement
but prior to its completion is not anticipated to fluctuate from the ordinary
course. For purposes of the unaudited pro forma combined condensed financial
statements, the $45.225 per share value of Viacom non-voting Class B common
stock to be issued was calculated based on its average market price per share
from September 2, 1999 through September 9, 1999.
<TABLE>
<S> <C>
Total estimated CBS common shares outstanding (including approximately 57.3
shares to be issued to King World shareholders)............................. 748.6
Exchange Ratio................................................................ 1.085
-------
Estimated Viacom Class B common shares to be issued........................... 812.2
=======
Purchase Consideration:
Estimated value of Viacom Class B common stock to be issued
(812.2 shares at $45.225 per share):
Common stock, $.01 par value............................................... $ 8
Additional paid-in capital................................................. 36,725
Estimated fair value of CBS stock options to be assumed by Viacom (note 3).... 200
-------
Estimated net increase in Viacom equity....................................... $36,933
=======
</TABLE>
36
<PAGE>
NOTES TO UNAUDITED VIACOM/CBS PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share amounts)
(3) Merger
To record the excess purchase price over the net tangible and identifiable
intangible assets acquired in connection with the merger as described in notes 1
and 2, after the elimination of certain CBS Pro Forma Combined balances at June
30, 1999:
<TABLE>
<S> <C>
Estimated net increase in Viacom equity................................ $ 36,933
Less: Shareholders' equity of CBS Pro Forma Combined at June 30, 1999
Common stock......................................................... (800)
Additional paid-in capital........................................... (14,596)
Common stock held in treasury........................................ 1,467
Retained earnings/Accumulated other comprehensive loss............... (1,243)
Adjustments:
Add: Liability for conversion of CBS stock options, net of deferred
taxes................................................................ 833
--------
Excess purchase price over net tangible and identifiable intangible
assets acquired....................................................... 22,594
Identifiable intangible assets acquired................................ 23,689
--------
Excess purchase price over net tangible assets acquired................ $ 46,283
========
Incremental amortization expense of excess purchase price over net
tangible and identifiable intangible assets acquired:
Twelve month amortization............................................. $ 565
========
Six month amortization................................................ $ 282
========
</TABLE>
The above pro forma adjustments are based on preliminary estimates. The
final allocation of the purchase price will be determined after the completion
of the merger and will be based on appraisals and a comprehensive final
evaluation of the fair value of CBS' tangible and identifiable intangible assets
acquired and liabilities assumed at the time of the merger. For the purpose of
these unaudited pro forma combined condensed financial statements, amortization
of the excess purchase price over tangible net assets acquired of approximately
$46.3 billion is computed on a straight-line basis using useful lives as
follows: $37.2 billion (40 years), $6.6 billion (30 years) and $2.5 billion (10
years).
Generally accepted accounting principles currently require that acquired
intangible assets be amortized over periods not to exceed 40 years. Viacom
believes that the intangible assets acquired from CBS included in the 40-year
category are comprised principally of the franchises, FCC licenses, and
trademarks of CBS assets with indefinite lives, which have historically
appreciated in value over time. In addition, Viacom intends to continue to
expand the combined company's existing lines of business, develop new businesses
by leveraging the well known franchises, trademarks and products of Viacom and
CBS, and take advantage of synergies that exist between Viacom and CBS to
further strengthen existing lines of business. Viacom believes that it will
benefit from the merger for an
37
<PAGE>
NOTES TO UNAUDITED VIACOM/CBS PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share amounts)
indeterminable period of time of at least 40 years and, therefore, a 40-year
amortization period for the $37.2 billion portion of the excess purchase
consideration is appropriate. After the completion of the merger, Viacom will
complete valuations and other studies of the significant assets, liabilities and
business operations of CBS as of the time of the merger. Using this
information, Viacom will make a final allocation of the purchase consideration,
including allocation to tangible assets and liabilities, identifiable intangible
assets and goodwill. Accordingly, depreciation and amortization, as presented
in the pro forma combined condensed statements of operations for the year and
six months ended December 31, 1998 and June 30, 1999, may fluctuate
significantly from the preliminary estimate when the final appraisals of
tangible and intangible assets are completed.
Certain limited rights to receive cash in lieu of Viacom options exist for
the majority of the historical CBS stock options outstanding prior to the
announcement of the merger. To reflect the liability associated with these
stock options, these unaudited pro forma combined condensed financial statements
assume that the options will be settled in cash for approximately $1.4 billion.
Accordingly, the issuance of long-term debt of $470 million and adjustments to
reflect the use of cash and investments, classified as other noncurrent assets,
of $532 million and $387 million, respectively, have been recorded in the pro
forma balance sheet to reflect the financing and funding of such obligations at
the effective time of the merger. In addition, related interest expense of $38
million and $85 million for the six months of 1999 and the twelve months of
1998, respectively, have been recorded in the unaudited pro forma combined
condensed statements of operations. Deferred taxes have been provided for on
the respective book and tax basis differences at a 40 percent marginal tax
rate. Additional options with a fair value of $200 million either do not
contain these limited rights or are options related to underlying shares which
cannot be disposed of for some designated period of time, and, as such, have
been reflected as an adjustment to additional paid-in capital within
shareholders' equity.
(4) Other Viacom Events
On August 10, 1999, Blockbuster Inc., a subsidiary of Viacom, completed the
initial public offering of 31 million shares of its Class A common stock at $15
per share. Viacom owns 100% of the outstanding shares of Blockbuster Class B
common stock, which represents approximately 82.3% of Blockbuster's equity value
after the initial public offering. As a result of the issuance of subsidiary
stock, Viacom recorded a pro forma reduction to additional paid-in capital of
approximately $662 million. Of this amount, $5 million represents transaction
costs which were prepaid prior to June 30, 1999. Net proceeds from this
offering of approximately $437 million were used to repay Blockbuster debt.
The net decrease in interest expense of $1 million and $6 million for the
six months ended June 30, 1999 and the twelve months ended December 31, 1998,
respectively, is attributable to the repayment of debt with the Blockbuster
initial public offering net proceeds of $437 million, partially offset by the
increase in interest expense due to the higher interest rate attributable to the
Blockbuster debt and the amortization of deferred debt issue costs incurred in
connection with the Blockbuster debt.
38
<PAGE>
NOTES TO UNAUDITED VIACOM/CBS PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share amounts)
The adjustment to minority interest reflects Blockbuster's initial public
offering of its shares as discussed above.
(5) Income Tax Expense
Income tax expense on the pro forma results of operations and the pro forma
adjustments, excluding non-deductible goodwill amortization, is calculated at a
40 percent marginal tax rate.
(6) Items not included in the Unaudited Pro Forma Combined Condensed Financial
Statements
The preceding unaudited pro forma combined condensed financial statements
do not include any pro forma adjustments for the following:
. Viacom has entered into agreements with the two Deputy Chairmen of
Viacom, regarding the terms of their resignations upon the effective
time of the merger, and expects to recognize a charge of approximately
$300 million which consists principally of a non-cash, pre-tax charge
for stock options granted to them over the life of their employment
with Viacom.
. Viacom anticipates recording a pre-tax restructuring charge in
connection with the acquisition of the remaining minority interest of
Spelling Entertainment Group Inc. of approximately $70-$90 million in
the third quarter of 1999.
. Any operating efficiencies and cost savings that may be achieved with
respect to the combined companies.
. Upon closing of the merger, the combined companies may incur certain
integration related expenses as a result of the elimination of
duplicate facilities and functions, operational realignment and
related workforce reductions. Such CBS costs would generally be
recognized as a liability assumed as of the merger date resulting in
additional goodwill while Viacom related costs would be recognized as
an expense through the statements of operations.
. Transactions between Viacom and CBS, including transactions between
Viacom and companies proposed to be acquired by CBS, have not been
eliminated in the unaudited pro forma combined condensed financial
statements, as the amounts are not material for the periods presented.
. Transaction costs related to the merger are not expected to have a
material impact on these unaudited pro forma combined condensed
financial statements.
. In connection with the merger, certain radio and television stations
may have to be divested in order to comply with current FCC
regulations. Also, Viacom may be
39
<PAGE>
NOTES TO UNAUDITED VIACOM/CBS PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share amounts)
required to reduce or divest its interest in the United Paramount
Network to comply with FCC rules limiting the common ownership of
certain television networks. Generally, any gains or losses associated
with disposition of historical Viacom assets would be recognized through
the statements of operations while the gain or loss on the disposition
of historical CBS assets would likely be recognized as an adjustment to
goodwill.
. Viacom has announced that, subject to Viacom Board approval and the
receipt of a supplemental tax ruling from the Internal Revenue Service
reflecting the merger, it may split-off Blockbuster by offering to
exchange all of its shares of Blockbuster for shares of Viacom's common
stock. The aggregate market value of the shares of Blockbuster common
stock based on the October 4, 1999 closing price of $12.00 per share of
Blockbuster common stock was approximately $2.1 billion. The pro forma
net book value of Blockbuster at June 30, 1999, after giving effect to
the initial public offering, was approximately $5.1 billion. If Viacom
determines to engage in the split-off, any difference between the fair
market value and net book value at the time of the split-off will be
recognized as a gain or loss for accounting purposes. The actual amount
of the gain or loss will depend upon the fair market value and net book
value of Blockbuster at the time of the split-off as well as the
exchange ratio used in the split-off. In addition, in a tax-free split-
off, Viacom/CBS pro forma shareholders' equity will be reduced by an
amount no greater than the net book value of Blockbuster at the time of
the split-off. Viacom has no obligation to effect the split-off either
before or after the merger. Viacom and CBS cannot give any assurance as
to whether or not or when the split-off will occur or as to the terms of
the split-off if it does occur, or whether or not the split-off, if it
does occur, will be tax-free.
(7) Reclassifications
Certain reclassifications have been made from the historical Viacom
financial statements to conform to the unaudited pro forma combined condensed
financial statements presentation.
40
<PAGE>
Unaudited CBS/King World Pro Forma Combined Condensed Financial Information
General
The following unaudited pro forma combined condensed financial statements
are presented using the purchase method of accounting for the merger of CBS and
King World, the June 4, 1998 acquisition of CBS Radio, Inc., formerly American
Radio Systems Corporation, by CBS and the probable acquisition of Outdoor
Systems, Inc. by Infinity Broadcasting Corporation which was announced on May
27, 1999. These financial statements also reflect the combination of
consolidated historical financial data of CBS, King World, American Radio, and
Outdoor Systems.
The unaudited pro forma combined condensed balance sheet as of June 30,
1999 is presented as if the merger of CBS and King World, and the Outdoor
Systems acquisition had occurred on June 30, 1999. The unaudited pro forma
combined condensed statement of operations for the six months ended June 30,
1999 and the year ended December 31, 1998 is presented as if the merger of CBS
and King World, the acquisition of American Radio by CBS, the probable
acquisition of Outdoor Systems by Infinity, and the Infinity initial public
offering had occurred on January 1, 1998. In the opinion of CBS management, all
adjustments and/or disclosures considered necessary for a fair presentation of
the pro forma data have been made.
These unaudited pro forma combined condensed financial statements should be
read in conjunction with: (i) CBS' consolidated financial statements and the
notes thereto as of and for the year ended December 31, 1998 and Management's
Discussion and Analysis included in CBS' Annual Report on Form 10-K for the year
ended December 31, 1998, which is incorporated by reference in this joint proxy
statement/prospectus; (ii) King World's consolidated financial statements and
the notes thereto as of and for the year ended August 31, 1998, which are
included in CBS' Current Report on Form 8-K filed on or about October 8, 1999,
which is incorporated by reference in this joint proxy statement/prospectus;
(iii) CBS' Quarterly Reports on Form 10-Q for the quarterly periods ended June
30, 1999 and March 31, 1999, which are incorporated by reference in this joint
proxy statement/prospectus; and (iv) King World's condensed consolidated
financial statements and notes thereto as of and for the quarterly period ended
May 31, 1999, which are included in CBS' Current Report on Form 8-K filed on or
about October 8, 1999, which is incorporated by reference in this joint proxy
statement/prospectus. These unaudited pro forma combined condensed financial
statements are presented for illustrative purposes only and are not necessarily
indicative of the operating results or financial position that would have been
achieved had the CBS and King World merger, the acquisition of American Radio by
CBS, the probable acquisition of Outdoor Systems by Infinity, or the Infinity
initial public offering been consummated as of the dates indicated, or of the
results that may be obtained in the future.
41
<PAGE>
UNAUDITED CBS/KING WORLD PRO FORMA
COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1999
(in millions)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments for Combined Adjustments
CBS King World CBS/King CBS/King For Other CBS
Historical May 31, 1999 World Merger World Events (8)
---------- ------------ -------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents..................... $ 742 $ 375 $ --- $ 1,117 $ (535)
Short-term investments........................ --- 32 --- 32 ---
Customer receivables, net..................... 1,127 102 (5)/(4)/ 1,224 164
Program rights................................ 516 --- --- 516 ---
Deferred income taxes......................... 303 --- --- 303 13
Prepaid and other current assets.............. 163 96 --- 259 89
------- ------ ------------- ------- ------
Total current assets.......................... 2,851 605 (5) 3,451 (269)
Long-term investments......................... --- 387 --- 387 ---
Property and equipment, net................... 1,132 20 --- 1,152 1,895
FCC licenses, net............................. 4,310 --- --- 4,310 ---
Goodwill, net................................. 10,260 --- 1,731/(3)/ 11,991 6,627
Other intangible and noncurrent assets........ 1,805 94 --- 1,899 67
------- ------ ------------- ------- ------
Total assets.................................. $20,358 $1,106 $ 1,726 $23,190 $8,320
======= ====== ============= ======= ======
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current maturities of long-term debt.......... $ 79 $ --- $ --- $ 79 $ 186
Liabilities for talent and program rights..... 374 --- --- 374 ---
Accounts payable, accrued and other
liabilities............................. 1,255 143 25/(3)/ 1,418 88
(5)/(4)/
------- ------ ------------- ------- ------
Total current liabilities..................... 1,708 143 20 1,871 274
Long-term debt................................ 2,111 --- --- 2,111 1,172
Net liabilities of discontinued operations.... 985 --- --- 985 ---
Pension liability............................. 846 --- --- 846 ---
Postretirement benefit liability.............. 1,020 --- --- 1,020 ---
Other noncurrent liabilities.................. 2,368 --- --- 2,368 102
------- ------ ------------- ------- ------
Total liabilities............................. 9,038 143 20 9,201 1,548
------- ------ ------------- ------- ------
Minority interest in equity of
consolidated subsidiaries............... 1,625 --- --- 1,625 3,964
Shareholders' equity:
Preferred stock............................... --- --- --- --- ---
Common stock.................................. 743 1 57/(3)/ 800 ---
(1)/(3)/
Capital in excess of par value................ 9,176 151 2,282/(3)/ 11,788 2,808
330/(3)/
(151)/(3)/
Common stock held in treasury,
at cost.................................. (1,467) (446) 446/(3)/ (1,467) ---
Retained earnings............................. 1,910 1,257 (1,257)/(3)/ 1,910 ---
Accumulated other comprehensive
loss..................................... (667) --- --- (667) ---
------- ------ ------------- ------- ------
Total shareholders' equity.................... 9,695 963 1,706 12,364 2,808
------- ------ ------------- ------- ------
Total liabilities and shareholders' equity.... $20,358 $1,106 $ 1,726 $23,190 $8,320
======= ====== ============= ======= ======
<CAPTION>
CBS
Pro Forma
Combined
----------
<S> <C>
ASSETS:
Cash and cash equivalents..................... $ 582
Short-term investments........................ 32
Customer receivables, net..................... 1,388
Program rights................................ 516
Deferred income taxes......................... 316
Prepaid and other current assets.............. 348
-------
Total current assets.......................... 3,182
Long-term investments......................... 387
Property and equipment, net................... 3,047
FCC licenses, net............................. 4,310
Goodwill, net................................. 18,618
Other intangible and noncurrent assets........ 1,966
-------
Total assets.................................. $31,510
=======
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current maturities of long-term debt.......... $ 265
Liabilities for talent and program rights..... 374
Accounts payable, accrued and other
liabilities............................. 1,506
-------
Total current liabilities..................... 2,145
Long-term debt................................ 3,283
Net liabilities of discontinued operations.... 985
Pension liability............................. 846
Postretirement benefit liability.............. 1,020
Other noncurrent liabilities.................. 2,470
-------
Total liabilities............................. 10,749
-------
Minority interest in equity of
consolidated subsidiaries............... 5,589
Shareholders' equity:
Preferred stock............................... ---
Common stock.................................. 800
Capital in excess of par value................ 14,596
Common stock held in treasury,
at cost.................................. (1,467)
Retained earnings............................. 1,910
Accumulated other comprehensive
loss..................................... (667)
-------
Total shareholders' equity.................... 15,172
-------
Total liabilities and shareholders' equity.... $31,510
=======
</TABLE>
See accompanying notes to unaudited CBS/King World pro forma
combined condensed financial statements.
42
<PAGE>
UNAUDITED CBS/KING WORLD PRO FORMA
COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
King World Adjustments for Combined Adjustments For
Six months ended CBS/King CBS/King Other CBS
CBS Historical May 31, 1999(7) World Merger World Events (8)
--------------- ------------------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues.............................. $ 3,446 $ 390 $ (20)/(4)/ $ 3,816 $ 374
Operating expenses.................... (2,051) (238) 20/(4)/ (2,269) (173)
Marketing, general and
administrative....................... (597) (44) --- (641) (19)
Depreciation and
amortization......................... (301) (2) (87)/(5)/ (390) (171)
Residual costs of discontinued
businesses........................... (85) --- --- (85) ---
------- ----- ----------- ------- -----
Operating profit (loss)............... 412 106 (87) 431 11
Other income and expense, net......... (6) --- --- (6) 2
Interest expense, net................. (97) 14 --- (83) (60)
------- ----- ----------- ------- -----
Income (loss) from continuing
operations before income taxes and
minority interest in income of
consolidated subsidiaries............ 309 120 (87) 342 (47)
Income tax expense.................... (176) (42) --- (218) (21)
Minority interest in income
of consolidated subsidiaries......... (30) --- --- (30) (2)
------- ----- ----------- ------- -----
Income (loss) from continuing
operations........................... $ 103 $ 78 $ (87) $ 94 $ (70)
======= ===== =========== ======= =====
Income from continuing
operations per share:
Basic.............................. $.15 $.13
Diluted............................ $.15 $.12
Weighted average shares outstanding
Basic.............................. 694 57/(2)(6)/ 751
Diluted............................ 710 60 770
<CAPTION>
CBS
Pro Forma
Combined
----------
<S> <C>
Revenues.............................. $ 4,190
Operating expenses.................... (2,442)
Marketing, general and
administrative....................... (660)
Depreciation and
amortization....................... (561)
Residual costs of discontinued
businesses........................... (85)
-------
Operating profit (loss)............... 442
Other income and expense, net......... (4)
Interest expense, net................. (143)
-------
Income (loss) from continuing
operations before income taxes and
minority interest in income of
consolidated subsidiaries........... 295
Income tax expense.................... (239)
Minority interest in income
of consolidated subsidiaries....... (32)
-------
Income (loss) from continuing
operations........................... $ 24
=======
Income from continuing
operations per share:
Basic.............................. $.03
Diluted............................ $.03
Weighted average shares
outstanding
Basic.............................. 751
Diluted............................ 770
</TABLE>
See accompanying notes to unaudited CBS/King World pro forma
combined condensed financial statements.
43
<PAGE>
UNAUDITED CBS/KING WORLD PRO FORMA
COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(in millions, except per share amounts)
<TABLE>
<CAPTION>
King World Pro Forma Pro Forma
Twelve months Adjustments for Combined Adjustments For CBS
ended November CBS/King CBS/King Other CBS Pro Forma
CBS Historical 30, 1998(7) World Merger World Events (8) Combined
--------------- ---------------- ---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................ $ 6,805 $ 705 $ (23)/(4)/ $ 7,487 $ 874 $ 8,361
Operating expenses...................... (4,373) (442) 23/(4)/ (4,792) (450) (5,242)
Marketing, general and
administrative........................ (1,216) (78) --- (1,294) (41) (1,335)
Depreciation and
amortization.......................... (571) (2) (177)/(5)/ (750) (363) (1,113)
Residual costs of discontinued
businesses............................ (163) --- --- (163) --- (163)
------- ----- ------ ------- ----- -------
Operating profit (loss)................. 482 183 (177) 488 20 508
Other income and expense, net........... 43 --- --- 43 (5) 38
Interest expense, net................... (370) 34 --- (336) (27) (363)
------- ----- ------ ------- ----- -------
Income (loss) from continuing
operations before income taxes and
minority interest in income of
consolidated subsidiaries............. 155 217 (177) 195 (12) 183
Income tax expense...................... (161) (74) --- (235) (85) (320)
Minority interest in income
of consolidated subsidiaries.......... (6) --- --- (6) (29) (35)
------- ----- ------ ------- ----- -------
Income (loss) from continuing
operations............................. $ (12) $ 143 $ (177) $ (46) $(126) $ (172)
======= ===== ====== ======= ===== =======
Basic and diluted loss from continuing
operations per share................... $ (.02) $ (.06) $ (.23)
Weighted average Basic and Diluted
shares outstanding..................... 696 57/(2)(6)/ 753 753
</TABLE>
See accompanying notes to unaudited CBS/King World pro forma
combined condensed financial statements.
44
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
(tables in millions, except per share data)
(1) Basis of Presentation
The purchase method of accounting has been used in the preparation of the
accompanying unaudited pro forma combined condensed financial statements. Under
this method of accounting, the purchase price is allocated to assets acquired
and liabilities assumed based on their respective fair values as of the
effective time of the CBS/King World merger. The excess of consideration paid
over the estimated fair value of net assets acquired will be recorded as
goodwill and amortized as a charge to earnings. For purposes of the unaudited
pro forma combined condensed financial statements, the preliminary fair values
of King World's assets and liabilities were estimated by CBS management based
primarily on information furnished by the management of King World. The final
allocation of the purchase price will be determined after the consummation of
the CBS/King World merger and will be based on appraisals and a comprehensive
final evaluation of the fair value of assets acquired and liabilities assumed of
King World.
(2) Purchase Price Information
Pursuant to the merger agreement, shareholders of King World will receive
.81 of a share of CBS common stock for each share of King World common stock
issued and outstanding at the consummation of the CBS/King World merger. The
total number of King World shares issued and outstanding during the period
subsequent to the CBS/King World merger announcement but prior to its
consummation is not anticipated to fluctuate from the ordinary course. For the
purpose of the pro forma combined condensed financial statements, the $40.8125
per share value of CBS common stock to be issued was calculated based upon the
market price per share at the close of business on March 31, 1999.
<TABLE>
<CAPTION>
<S> <C>
Total estimated King World common shares outstanding......................... 70.8
Exchange Ratio............................................................... .81
------
Estimated CBS common shares to be issued..................................... 57.3
======
Purchase Price:
Estimated value of CBS common stock to be issued in connection with CBS/King
World merger (57.3 shares at $40.8125 per share):
Common Stock, $1.00 par value.............................................. $ 57
Capital in excess of par value............................................. 2,282
Estimated fair value of stock options assumed................................ 330
------
Estimated net increase in CBS equity......................................... $2,669
======
</TABLE>
45
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS--(continued)
(tables in millions, except per share data)
(3) Purchase Price and Elimination of Historical Balances
To record the purchase price paid in connection with the CBS/King World
merger as described in Note 1 and Note 2 above and to eliminate certain
historical King World balances.
<TABLE>
<S> <C>
Estimated net increase in CBS equity (see Note 2)............. $ 2,669
Less: Shareholders' equity of King World at June 30, 1999
Common stock........................................... (1)
Capital in excess of par value......................... (151)
Common stock held in treasury.......................... 446
Retained earnings...................................... (1,257)
Adjustments:
Add: Estimated accrued transaction costs..................... 25
-------
Excess purchase price over fair value of net assets acquired.. $ 1,731
=======
</TABLE>
The above pro forma adjustments are based on preliminary estimates. The
final allocation of the purchase price will be determined after the consummation
of the CBS/King World merger and will be based on appraisals and a comprehensive
final evaluation of the fair value of assets acquired and liabilities assumed of
King World. As further analysis is performed, these estimates may be revised at
a later date.
(4) Existing Relationship Between CBS and King World
Through an existing agreement with King World, CBS' owned-and-operated
television stations pay for certain programming from King World. The following
adjustments have been made to eliminate the balances associated with the
transactions between CBS and King World:
<TABLE>
Balance Sheet
<S> <C>
Customer receivables/Accounts payable at June 30, 1999.............. $ 5
Statements of Operations
Revenue/operating expenses for the six months ended June 30, 1999... $20
Revenue/operating expenses for the year ended December 31, 1998..... $23
</TABLE>
(5) Amortization of Goodwill
The pro forma adjustments are based on preliminary estimates. The final
allocation of the purchase price will be determined after the consummation of
the CBS/King World merger and will be based on appraisals and a comprehensive
final evaluation of the fair value of assets acquired and
46
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
liabilities assumed of King World. As further analysis is performed, including
obtaining appraisals for identifiable intangible assets and programming
commitments acquired, these estimates may be significantly revised, including
the estimated amortization periods. Estimated goodwill amortization is computed
on a straight-line basis over a 10-year period. If goodwill amortization had
been computed assuming a 20-year period, pro forma operating results for the six
months ended June 30, 1999 and for the year ended December 31, 1998 on a pre-
and post-tax basis would have improved by $43 million and $89 million,
respectively, or approximately $.06 and $.12 per share, respectively, on both a
basic and diluted basis.
(6) Average Shares Outstanding
The average CBS common shares outstanding used in calculating pro forma
income (loss) per common share from continuing operations, as adjusted for Other
CBS Events, are calculated assuming that the estimated number of shares of CBS
common stock to be issued in connection with the CBS/King World merger were
outstanding from January 1, 1998. For the six months ended June 30, 1999, the
average common shares outstanding used in calculating pro forma combined diluted
income per share include the impact of options to purchase shares of common
stock. Shares of common stock issuable under deferred compensation arrangements
were not included in computing pro forma diluted income per common share for the
six months ended June 30, 1999, because their inclusion would result in
increased income per common share. Shares of common stock issuable under
deferred compensation arrangements approximated 3 million for the six months
ended June 30, 1999. For the year ended December 31, 1998, options to purchase
shares of common stock as well as shares issuable under deferred compensation
arrangements were not included in computing pro forma diluted income per common
share because their inclusion would result in a smaller loss per common share.
For the year ended December 31, 1998, options to purchase shares of common stock
as well as common stock issuable under deferred compensation arrangements
approximated 21 million shares.
(7) King World Condensed Statements of Operations
The King World condensed statement of operations for the six months ended
May 31, 1999 is calculated by adding the King World second quarter and third
quarter statements of operations as filed in its Quarterly Reports on Form 10-Q
for the three-month periods ended February 28, 1999 and May 31, 1999,
respectively.
The King World condensed statement of operations for the twelve month
period ended November 30, 1998 is calculated by adding the King World first
quarter statement of operations as filed in its Quarterly Report on Form 10-Q
for the three-month period ended November 30, 1998, and subtracting the prior
year first quarter statement of operations as filed in their Quarterly Report on
Form 10-Q for the period ended November 30, 1997, from its total year 1998
statement of operations as filed in its Annual Report on Form 10-K for the
fiscal year ended August 31, 1998.
(8) Other CBS Events
47
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
The unaudited pro forma combined condensed financial statements are
presented after giving effect to the following Other CBS Events:
Acquisition of American Radio by CBS
On June 4, 1998, CBS acquired the radio operations of American Radio for
$1.4 billion in cash plus the assumption of debt with a fair value of
approximately $1.3 billion. This acquisition has been accounted for under the
purchase method of accounting.
Probable Acquisition of Outdoor Systems by Infinity
On May 27, 1999, Infinity signed a definitive agreement to acquire Outdoor
Systems for approximately $8.7 billion which includes the assumption of debt
with a fair value of approximately $1.9 billion. This acquisition will be
accounted for under the purchase method of accounting. In connection with this
acquisition Infinity will issue approximately 231 million shares of its Class A
common stock which will dilute CBS' equity ownership in Infinity to
approximately 65 percent. The consummation of the acquisition is subject to
certain conditions, including the expiration or termination of the waiting
period under the HSR Act and the approval of Outdoor Systems and Infinity
shareholders. In connection with the HSR Act filing, Infinity and Outdoor
Systems have received a second request for information from the Department of
Justice, to which they are responding.
Infinity Initial Public Offering
In 1998, CBS formed a new company, named Infinity, comprising the radio and
outdoor advertising operations of CBS. In December 1998, Infinity sold 18.2
percent of its common stock in an initial public offering, generating proceeds
of approximately $3 billion. These proceeds were used to pay down an
intercompany note payable to CBS. CBS used the proceeds of the payment on the
note to pay down existing debt under the CBS revolving credit facility and other
debt of CBS and made investments in short-term marketable securities.
The following table sets forth the estimated adjustments affecting CBS'
consolidated financial statements for the inclusion of the probable acquisition
of Outdoor Systems by Infinity. In that regard, the historical statement of
position at June 30, 1999, has been incorporated into the pro forma financial
information and is adjusted to reflect the acquisition purchase price as well as
certain other items such as: the repayment of long-term debt; the step up in
value of certain long-term debt instruments; the elimination of existing debt
financing costs; the accrual for the estimated transaction costs; and the
recognition of the estimated excess purchase price over the fair value of assets
acquired as goodwill. As further analysis is performed, including appraisals on
identifiable tangible and intangible assets acquired and liabilities assumed,
these estimates may be significantly revised including the estimated
amortization periods. Minority interest in equity of consolidated subsidiaries
has also been adjusted to reflect Infinity's distribution of its stock in
connection with the acquisition of Outdoor Systems and thus the reduction of
CBS' equity interest in Infinity from approximately 82 percent to approximately
65 percent.
48
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
<TABLE>
<CAPTION>
Outdoor Adjustments
Systems Pro Forma For Other CBS
June 30, 1999 Adjustments Events
-------------- ------------ --------------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents.......................... $ 13 $ (548) $ (535)
Customer receivables, net.......................... 164 --- 164
Deferred income taxes.............................. 13 --- 13
Prepaid and other current assets................... 89 --- 89
------ ------ ------
Total current assets............................... 279 (548) (269)
Property and equipment, net........................ 1,895 --- 1,895
Goodwill, net...................................... 604 6,023 6,627
Other intangible and noncurrent assets............. 49 18 67
------ ------ ------
Total assets....................................... $2,827 $5,493 $8,320
====== ====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current maturities of long-term debt............... $ 186 $ --- $ 186
Accounts payable, accrued and other
liabilities...................................... 73 15 88
------ ------ ------
Total current liabilities.......................... 259 15 274
Long-term debt..................................... 1,645 (473) 1,172
Other noncurrent liabilities....................... 112 (10) 102
------ ------ ------
Total liabilities.................................. 2,016 (468) 1,548
------ ------ ------
Minority interest in equity of consolidated
subsidiaries..................................... --- 3,964 3,964
Shareholders' equity:
Common stock....................................... 2 (2) ---
Capital in excess of par value..................... 764 2,044 2,808
Common stock held in treasury, at cost............. (4) 4 ---
Retained earnings.................................. 55 (55) ---
Accumulated other comprehensive loss............... (6) 6 ---
------ ------ ------
Total shareholders' equity......................... 811 1,997 2,808
------ ------ ------
Total liabilities and shareholders' equity......... $2,827 $5,493 $8,320
====== ====== ======
</TABLE>
48_1
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
The following table combines the above mentioned Other CBS Events as if
these transactions had occurred as of January 1, 1999 and were reflected in CBS'
results of operations for the six-month period ended June 30, 1999:
<TABLE>
<CAPTION>
Outdoor Adjustments
Systems Pro Forma For Other CBS
June 30, 1999 Adjustments Events
-------------- ------------ --------------
<S> <C> <C> <C>
Revenues.......................................................... $ 374 $ --- $ 374
Operating expenses................................................ (173) --- (173)
Marketing, general and administrative............................. (19) --- (19)
Depreciation and amortization..................................... (71) (100)/(d)/ (171)
----- ----- -----
Operating profit (loss)........................................... 111 (100) 11
Other income and expense, net..................................... 2 --- 2
Interest expense, net............................................. (74) 14/(e)/ (60)
----- ----- -----
Income (loss) from continuing operations before income taxes and
minority interest in income of consolidated subsidiaries......... 39 (86) (47)
Income tax expense................................................ (15) (6)/(c)/ (21)
Minority interest in income of consolidated subsidiaries.......... --- (2)/(f)/ (2)
----- ----- -----
Income (loss) from continuing operations.......................... $ 24 $ (94) $ (70)
===== ===== =====
</TABLE>
48_2
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
The following table combines the above mentioned Other CBS Events as
if these transactions had occurred as of January 1, 1998 and were reflected in
CBS' results of operations for the year ended December 31, 1998:
<TABLE>
<CAPTION>
American Radio Acquisition Outdoor Systems Acquisition
------------------------------------- ------------------------------------
American
Radio American Outdoor Outdoor Adjustments
through Radio Systems Systems For
June 4, Pro Forma Pro Forma Infinity December Pro Forma Pro Forma Other CBS
1998 Adjustments Combined IPO 31, 1998 Adjustments Combined Events
----------- ------------ ---------- --------- --------- ------------ ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues....................... $ 168 $ --- $ 168 $ --- $ 706 $ --- $ 706 $ 874
Operating expenses............. (119) --- (119) --- (331) --- (331) (450)
Marketing, general and
administrative................ (4) --- (4) --- (37) --- (37) (41)
Depreciation and
amortization.................. (28) (10)/(a)/ (38) --- (123) (202)/(d)/ (325) (363)
----- ----- ----- ------ ----- ----- ----- -----
Operating profit (loss)........ 17 (10) 7 --- 215 (202) 13 20
Other income and expense,
net........................... --- --- --- --- (5) --- (5) (5)
Interest expense, net.......... (30) (45)/(b)/ (75) 169/(g)/ (138) 17/(e)/ (121) (27)
----- ----- ----- ------ ----- ----- ----- -----
Income (loss) from continuing
operations before income
taxes and minority interest
in income of consolidated
subsidiaries.................. (13) (55) (68) 169 72 (185) (113) (12)
Income tax expense............. 9 10/(c)/ 19 (67)/(c)/ (31) (6)/(c)/ (37) (85)
Minority interest in
income of consolidated
subsidiaries.................. --- --- --- (13)/(f)/ --- (16)/(f)/ (16) (29)
----- ----- ----- ------ ----- ----- ----- -----
Income (loss) from
continuing operations......... $ (4) $ (45) $ (49) $ 89 $ 41 $(207) $(166) $(126)
===== ===== ===== ====== ===== ===== ===== =====
</TABLE>
Pro forma adjustments giving effect to the Other CBS Events in the
unaudited pro forma combined condensed financial statements reflect the
following:
(a) American Radio acquisition--amortization of goodwill and identifiable
intangible assets, including FCC licenses on a straight-line basis over 40
years.
(b) Increase in interest expense resulting from borrowings under CBS' credit
facility to finance the acquisition of American Radio including the
repayment of certain American Radio revolver borrowings in conjunction with
the consummation of the acquisition.
(c) Income tax expense on the pro forma results of operations and the pro forma
adjustments, excluding non-deductible goodwill amortization, is calculated
at a 40 percent marginal tax rate.
48_3
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
(d) Outdoor Systems acquisition--amortization of goodwill and identifiable
intangible assets on a straight-line basis over 30 years.
(e) Reduction in interest expense resulting from the repayment of Outdoor
Systems' credit facility with credit facility borrowings of Infinity where
average borrowing rates are more favorable than previously experienced by
Outdoor Systems. In addition, the reduction of interest expense reflects
the recording of all debt instruments assumed at fair value within the pro
forma financial statements. These reductions were partially offset by
incremental interest expense recognized as a result of the assumed
deconsolidation of Infinity from the CBS consolidated income tax return.
(f) The adjustment to minority interest in income of consolidated subsidiaries
reflects CBS' ownership interest dilution resulting from Infinity's assumed
issuance of common stock to acquire Outdoor Systems. In addition, for the
year ended December 31, 1998 the adjustment reflects the impact of
Infinity's initial public offering. As a result of the December 1998
initial public offering CBS' equity ownership in Infinity was reduced to
approximately 81.8 percent and will be further reduced to approximately 65
percent after Infinity's probable acquisition of Outdoor Systems.
(g) Reduction in the interest expense represents savings resulting from the
assumed repayment of debt with the proceeds received from the Infinity
public offering.
48_4
<PAGE>
THE SHAREHOLDERS' MEETINGS
Date, Times and Places
Viacom. The Viacom special meeting will be held at ., New York, New York,
at . a.m., eastern standard time, on ., 1999.
CBS. The CBS special meeting will be held at ., New York, New York, at .
a.m., eastern standard time, on ., 1999.
Matters to be Considered at the Shareholders' Meetings
Viacom. At the Viacom special meeting, holders of Viacom Class A common
stock are being asked to adopt the merger agreement. The merger agreement
provides for the merger of CBS and Viacom, the issuance of shares of Viacom non-
voting Class B common stock in the merger and the adoption of a proposed new
Restated Certificate of Incorporation for Viacom. See "The Merger" and "The
Merger Agreement." The Board of Directors of Viacom has declared that the merger
agreement is advisable, has unanimously approved the merger agreement and
unanimously recommends that Viacom shareholders vote "for" the adoption of the
merger agreement.
CBS. At the CBS special meeting, holders of CBS common stock are being
asked to adopt the merger agreement. The CBS Board has determined that the
merger is in the best interests of CBS, has unanimously approved the merger and
the merger agreement and unanimously recommends that CBS shareholders vote "for"
the adoption of the merger agreement.
Record Date; Shareholders Entitled to Vote; Quorum
Viacom. Only holders of record of Viacom Class A common stock at the close
of business on the Viacom record date are entitled to notice of, and holders of
record of Viacom Class A common stock at the close of business on the record
date are entitled to vote at, the Viacom special meeting. On the record date,
., 1999, . shares of Viacom Class A common stock were issued and outstanding and
held by approximately . holders of record. A majority of the shares of Viacom
Class A common stock issued and outstanding and entitled to vote on the record
date must be represented in person or by proxy at the Viacom special meeting in
order for a quorum to be present for purposes of transacting business at the
Viacom special meeting, including voting on the adoption of the merger
agreement. Holders of record of Viacom Class A common stock on the record date
are each entitled to one vote per share on all matters to be considered at the
Viacom special meeting.
CBS. Only holders of record of CBS common stock at the close of business
on the CBS record date, ., 1999, are entitled to receive notice of and to vote
at the CBS special meeting. On ., 1999, . shares of CBS common stock were
issued and outstanding and held by approximately . holders of record. A
majority of the shares of CBS common stock issued and outstanding and entitled
to vote on the record date must be represented in person or by proxy at the CBS
special meeting in order for a quorum to be present for purposes of voting on
the adoption of the merger agreement. In the event that a quorum is not present
at the CBS special meeting, it is expected that the meeting will be adjourned or
postponed to solicit additional proxies. Holders of record of CBS common stock
on the record date are each entitled to one vote per share on the matter to be
voted on at the CBS special meeting.
49
<PAGE>
Votes Required
Viacom. The adoption of the merger agreement requires the affirmative vote
of a majority of the shares of Viacom Class A common stock issued and
outstanding on the record date.
CBS. The adoption of the merger agreement requires the affirmative vote of
a majority of the votes cast by all shareholders entitled to vote at the CBS
special meeting.
Submission of Proxies
Shares represented by properly executed proxy cards received in time for
both Viacom's and CBS' special shareholder meetings will be voted at each
respective special meeting in the manner specified by the holders. Properly
executed proxy cards that do not contain voting instructions will be voted in
favor of adoption of the merger agreement.
Abstentions may be specified on all proposals except that shares of Viacom
Class A common stock or CBS common stock represented at the applicable special
meeting but not voting, including shares of Viacom Class A common stock or CBS
common stock, as the case may be, for which proxy cards have been received, but
with respect to which holders of shares have abstained on any matter, will be
treated as present at the applicable special meeting for purposes of determining
the presence or absence of a quorum for the transaction of all business.
For voting purposes at the special meetings, only shares affirmatively
voted in favor of a proposal, including properly executed proxy cards not
containing voting instructions, will be counted as votes in favor of such
proposal. With respect to Viacom's shareholders, the failure to submit a proxy
or to vote in person or the abstention from voting will have the same effect as
a vote against adoption of the merger agreement. With respect to CBS
shareholders, the failure to submit a proxy or to vote in person or the
abstention from voting will have no effect on the outcome of the vote. In
addition, under the applicable rules of the NYSE, brokers who hold shares in
street name for customers who are the beneficial owners of such shares are
prohibited from submitting a proxy to vote such customers' shares with respect
to the proposal to adopt the merger agreement absent instructions from the
beneficial owners of these shares. These are referred to as broker non-votes.
With respect to Viacom's shareholders, broker non-votes will have the same
effect as votes against adopting the merger agreement but will have no effect on
any other matter. With respect to CBS shareholders, broker non-votes will have
no effect on the outcome of the vote.
The persons named as proxies by a Viacom or CBS shareholder may propose and
vote for one or more adjournments of the applicable special meeting, including,
without limitation, adjournments to permit further solicitations of proxies in
favor of any proposal; provided, however, that a proxy that is voted against the
proposal to adopt the merger agreement may not be voted in favor of any such
adjournment or postponement.
Revocability of Proxies
The grant of a proxy on the enclosed Viacom or CBS form of proxy does not
preclude a shareholder from voting in person. A shareholder may revoke a proxy
at any time prior to its exercise in one of three ways: (1) by filing with the
Senior Vice President, General Counsel and Secretary of
50
<PAGE>
Viacom (in the case of a Viacom shareholder) or the Vice President, Deputy
General Counsel and Secretary of CBS (in the case of a CBS shareholder) a duly
executed revocation of proxy; (2) by submitting another duly executed proxy
bearing a later date; or (3) by appearing at the applicable special meeting and
voting in person. Attendance at the relevant special meeting will not, in and of
itself, constitute revocation of a proxy.
Solicitation of Proxies
Each of Viacom and CBS will bear the cost of the solicitation of proxies
from its own shareholders, except that Viacom and CBS will share equally the
cost of printing this joint proxy statement/prospectus and the fees associated
with the filing of this joint proxy statement/prospectus with the SEC. In
addition to solicitation by mail, the directors, officers and employees of each
of Viacom and CBS may solicit proxies from shareholders of their respective
company by telephone or telegram or in person. Arrangements will also be made
with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by these persons, and Viacom and CBS will reimburse these custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses.
. will assist in the solicitation of proxies by CBS. . will receive a fee
of $., plus costs and expenses, for its services.
Neither the Viacom Board nor the CBS Board is aware of any matter other
than those set forth in this joint proxy statement/prospectus that will be
brought before the Viacom special meeting or the CBS special meeting. If,
however, other matters are properly presented at either special meeting, proxies
will be voted in accordance with the discretion of the holders of such proxies.
SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES
WITH THEIR PROXY CARDS.
51
<PAGE>
THE MERGER
The discussion in this joint proxy statement/prospectus of the merger and
the principal terms of the merger agreement is subject to, and qualified in its
entirety by reference to, the merger agreement, a copy of which is attached to
this joint proxy statement/prospectus as Annex A and is incorporated herein by
reference.
Background to the Merger
On August 5, 1999, the FCC announced that it had adopted new regulations
that, for the first time, would permit a single person to own two television
stations in a single market, subject to certain limitations. Since that date,
it has been widely reported that numerous owners of television stations have
been seeking opportunities to acquire or sell stations in reliance on the new
rules.
On August 11, at the request of Mr. Karmazin, Mr. Karmazin and Mr. Redstone
met at the offices of Viacom. Mr. Karmazin reviewed with Mr. Redstone the
businesses of CBS and discussed with Mr. Redstone various possible transactions
between the two companies, including an exchange of assets in the television and
cable television businesses and ways in which various businesses of the two
companies could be combined.
On August 12, Mr. Redstone called Mr. Karmazin and suggested that they meet
again, together with Philippe Dauman and Thomas Dooley, Viacom's Deputy Chairmen
and Executive Vice Presidents, to discuss further the possible transactions
discussed at their August 11 meeting.
On August 16, Messrs. Redstone, Dauman and Dooley met with Mr. Karmazin.
Mr. Karmazin proposed various alternative transactions involving the two
companies, including swapping Viacom's television stations for the cable
television networks of CBS and combining the entire businesses of Viacom and
CBS. Mr. Karmazin emphasized the complementary nature of the assets of the two
companies. Mr. Redstone indicated interest in the swap transaction, but did not
express a conclusion regarding a possible merger. Mr. Karmazin said that he
would like to make a more detailed presentation regarding the businesses of CBS
to Messrs. Redstone, Dauman and Dooley. The parties agreed to meet again on
August 24.
On August 24, Mr. Karmazin again met with Messrs. Redstone, Dauman and
Dooley. Mr. Karmazin presented information regarding CBS, describing the
performance of its assets, strategies for growth and the benefits of selling
advertising across different advertising media. At the conclusion of the
presentation, Mr. Karmazin again suggested a merger involving the two companies,
proposing that CBS acquire Viacom at a premium to market value. Mr. Redstone
indicated that he would not be interested in selling his stake in Viacom, but
indicated that, in light of the strong strategic fit between the two companies,
he would consider a merger of equals priced at market value, in which Mr.
Redstone's controlling interest in Viacom was preserved in the combined company
through the issuance of Viacom's non-voting Class B common stock to the
shareholders of CBS. Mr. Redstone indicated that, if such a transaction was
pursued, he would recommend a role for Mr. Karmazin in which he would serve as
President and Chief Operating Officer of the combined company. Mr. Karmazin
indicated his willingness to consider these terms and said that he would like to
discuss such a transaction with members of the CBS Board of Directors.
On August 26, the CBS Board held a special meeting at which Mr. Karmazin
reviewed for the Board the conversations and contacts he had had with Mr.
Redstone to date and the current status of
52
<PAGE>
discussions regarding the structure and terms of a possible transaction with
Viacom. Mr. Karmazin and Fredric G. Reynolds, CBS' Executive Vice President and
Chief Financial Officer, also reviewed for the Board the capital structure and
share ownership of Viacom. The CBS Board authorized Mr. Karmazin to continue his
discussions with Mr. Redstone. Following the August 26 meeting, detailed
publicly available information and analyst reports relating to the share
ownership of Viacom were distributed to the CBS Board.
On August 25 and 26, representatives of Shearman & Sterling, counsel to
Viacom, held various discussions with representatives of Cravath, Swaine &
Moore, legal counsel to CBS, and representatives of Evercore, financial advisors
to CBS, concerning the structure of a possible transaction, exchange ratio
mechanisms and related matters.
On August 26, Mr. Redstone and Mr. Karmazin met to continue their
discussions regarding management of the combined company and ways to assure the
CBS Board of Directors as to the management of the combined company in light of
the controlling shareholdings of Mr. Redstone.
On August 27, representatives of Viacom, Morgan Stanley & Co.
Incorporated, financial advisors to Viacom, and Shearman & Sterling met with
representatives of CBS, Evercore and Cravath, Swaine & Moore to discuss the
structure and exchange ratio for a possible transaction, board composition and
management issues, the due diligence review process and related matters. The
parties also finalized and executed a confidentiality agreement at this meeting.
On August 29, senior executives and professional advisors of each of Viacom
and CBS met to exchange financial, legal and business due diligence information.
The due diligence process, which included review of documents and interviews
with executives and professional advisors of each company, continued through the
signing of the merger agreement.
On August 30, Mr. Redstone and Mr. Karmazin discussed further the proposed
governance of the combined company. The discussions related to Mr. Karmazin's
proposed responsibilities and powers as Chief Operating Officer and Mr.
Redstone's responsibilities and powers as Chief Executive Officer as well as
whether the proposed responsibilities of the Chief Operating Officer were
inconsistent with the continued involvement of Messrs. Dauman and Dooley as
senior managers of Viacom following the merger. Mr. Redstone advised Mr.
Karmazin that Messrs. Dauman and Dooley had indicated to Mr. Redstone that, in
view of the strategic benefits to Viacom of the proposed transaction, they would
be willing to resign from their respective management positions at Viacom at the
closing of the transaction if that would facilitate the resolution of the
governance arrangements for the combined company. Messrs. Redstone and Karmazin
also confirmed their understanding that the combined board of directors would
consist of a majority of Viacom representatives. These points were discussed
further on August 31 between Mr. Redstone and Mr. Karmazin.
On August 30, Shearman & Sterling delivered a draft merger agreement to
Cravath, Swaine & Moore.
On August 31, the CBS Board held a special meeting to continue the Board's
previous discussions regarding a possible transaction between CBS and Viacom.
Mr. Karmazin described in detail the discussions with Mr. Redstone leading up to
the current proposal for a merger of CBS with Viacom. Mr. Karmazin and other
members of CBS' senior management discussed with the CBS Board their views of
various aspects of the proposed transaction. Louis Briskman, CBS' Executive
Vice
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President and General Counsel, and representatives of Cravath, Swaine & Moore
discussed with the CBS Board its fiduciary duties with regard to its
consideration of the proposed transaction under applicable law. Representatives
of Evercore discussed with the CBS Board their views and preliminary analyses of
the financial aspects of the proposed transaction. The CBS Board reviewed and
considered, among other things, the initial results of the due diligence
investigation conducted to date, the proposed terms of the transaction, the
impact of the proposed transaction on CBS' other pending transactions and the
proposed terms relating to the management, board representation and governance
of the combined company. Following extensive discussion of these matters, the
CBS Board directed Mr. Karmazin to negotiate further with Viacom on the basis of
the CBS Board's recommendations with respect to the matters discussed during the
meeting, including matters relating to the management, board representation and
governance of the combined company.
Following the CBS Board meeting on August 31, Cravath, Swaine & Moore and
Shearman & Sterling reviewed and discussed those areas identified by the CBS
Board of Directors as important for Mr. Karmazin to have delegated authority to
manage, those areas which a majority of the board of directors of the combined
company should have authority over and those areas requiring a supermajority
board vote, and the conceptual framework for implementing this arrangement.
Representatives of Cravath, Swaine & Moore and Shearman & Sterling negotiated
the terms of these arrangements, including related changes to the Restated
Certificate of Incorporation and By-laws of Viacom, together with the terms and
conditions of the merger agreement and Mr. Karmazin's employment agreement,
throughout the period from August 31 through the signing of definitive
documentation on September 6. In addition, Morgan Stanley, on behalf of Viacom,
and Evercore on behalf of CBS, continued to negotiate the exchange ratio through
September 2.
On September 2, the Board of Directors of Viacom, at a special meeting,
received a presentation regarding the proposed terms of the transaction from
Viacom's outside counsel, and management received a presentation from Morgan
Stanley regarding the financial terms of the transaction and discussed the
proposed terms and the risks and merits of the proposed transaction.
On September 2, the special meeting of the CBS Board reconvened and Mr.
Karmazin recounted for the CBS Board the events that had transpired since the
meeting recessed on August 31. Mr. Karmazin described in detail the proposed
terms that had been negotiated with Viacom with respect to the corporate
governance of Viacom following consummation of the proposed transaction, and
explained to the CBS Board that such governance arrangements would be reflected
in the proposed new Restated Certificate of Incorporation and By-laws of Viacom
as well as in a voting agreement between National Amusements, the holder of a
majority of Viacom's voting stock, and CBS. Following extensive discussion among
the members of the CBS Board, Mr. Karmazin, other members of CBS' senior
management, representatives of Cravath, Swaine & Moore and representatives of
Evercore, the CBS Board directed Mr. Karmazin to negotiate definitive agreements
and related documentation based on the terms outlined by Mr. Karmazin during the
meeting.
On September 5, the CBS Board held a special meeting to continue the
Board's discussions with respect to the proposed merger and to consider the
merger agreement and the transactions contemplated thereby, including the
proposed consideration to be issued to CBS shareholders and the proposed terms
regarding the powers of the board of directors, the chief executive officer and
the chief operating officer of Viacom following the merger. Mr. Karmazin and
other members of CBS' senior management, representatives of Cravath, Swaine &
Moore and representatives of Evercore made presentations to the CBS Board and
discussed with the CBS Board their views and analyses of various
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aspects of the proposed transaction. Evercore delivered its oral opinion
(subsequently confirmed in writing) that, based upon the matters presented to
the CBS Board and as set forth in its opinion, as of such date, the exchange
ratio was fair, from a financial point of view, to the shareholders of CBS.
After further deliberation, the CBS Board unanimously approved the merger
and the merger agreement and authorized, among other things, the execution of
the merger agreement, the voting agreement and the stockholder agreement and
unanimously recommended that CBS shareholders vote to adopt the merger
agreement.
On September 5, the Compensation Committee of the Viacom Board met to
review and, subject to approval of the merger by the Viacom Board, approved the
proposed terms of Mr. Redstone's and Mr. Karmazin's employment agreements, the
resignation agreements for Messrs. Dauman and Dooley and the Viacom executive
severance plan.
Also on September 5, at a special meeting of the Viacom Board, the Board
heard presentations on the results of the due diligence investigation and the
status of the negotiation of the merger agreement and related agreements and
received an updated presentation from Morgan Stanley. Morgan Stanley also
delivered to the Viacom Board its oral opinion that the exchange ratio was fair
from a financial point of view to Viacom. The Board also was briefed on and
ratified the actions of the Compensation Committee, in the case of the
resignation agreements of Messrs. Dauman and Dooley and the employment agreement
of Mr. Redstone, without the participation of such individuals. The Board then
discussed the proposed terms and conditions of the transaction extensively,
following which the Board adjourned the meeting in order to consider the results
of further negotiations.
During the evening of September 5, management of CBS and Viacom and their
respective legal advisors continued their negotiations regarding the terms of
the merger agreement and, in particular, the proposed terms regarding the
respective powers of the board of directors, chief executive officer and chief
operating officer.
On the morning of September 6, the Board of Directors of Viacom met and
reviewed the finalized terms of the proposed transactions. Following a
discussion, the Viacom Board unanimously approved the merger agreement and the
transactions contemplated thereby. In the afternoon of September 6, CBS and
Viacom executed the merger agreement, National Amusements executed the voting
agreement and the stockholder agreement, Viacom and Messrs. Redstone and
Karmazin executed their respective employment agreements, and Viacom executed
resignation agreements with Messrs. Dauman and Dooley.
Reasons for the Merger and Board Recommendations
Viacom
The Viacom Board carefully considered the terms of the merger and believes
that the merger serves the best interests of Viacom and its shareholders. As a
result, the Viacom Board declared that the merger agreement was advisable,
unanimously approved the merger agreement and unanimously recommends that the
Viacom shareholders vote "for" the proposal to adopt the merger agreement.
The Viacom Board considered a number of factors, including those listed
below. The Viacom Board did not consider it practical, and did not try, to
rank or weigh the importance of each factor, and
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different members of the Viacom Board may have given different weight to
different factors. The Viacom Board also considered presentations by, and
consulted with, members of Viacom's management as well as its financial advisors
and outside and inside legal counsel. The list of factors set forth below is not
exhaustive but is believed to include all material factors considered by
Viacom's Board.
CBS Assets and Relationship with the Existing Businesses of Viacom. The
------------------------------------------------------------------
Viacom Board considered the quality and breadth of the assets of CBS (including
the radio and outdoor advertising assets of Infinity) and its financial
condition, competitive position and prospects for growth. In particular, the
Board considered the complementary nature of the businesses of CBS and Viacom in
that Viacom is a leader in the cable television programming, motion picture and
television production businesses and CBS is a leader in the television network
distribution, television and radio broadcasting and outdoor advertising
businesses. The Board recognized the tremendous opportunities for the combined
company to reach large audiences and cross-promote and cross-market its assets
among various distribution outlets. Similarly, the Board recognized that the
combined company would have greater opportunities to increase its advertising,
licensing and other revenue than either company would on its own. The Board
also considered potential economies of scale by combining these businesses. The
Board took into account that the combined company would have an increased
dependence on the advertising market, but concluded that the risk of such
dependence was outweighed by the strategic benefits of the transaction.
Financial Terms. The Viacom Board considered that the merger of equals
---------------
structure, in which no premium would be paid to the shareholders of either
company, would create a company with considerable financial resources. The
Viacom Board considered the historical trading ranges of Viacom Class B common
stock and CBS common stock as compared with the proposed exchange ratio. The
Viacom Board also considered the fact that the merger would be tax-free to
Viacom's shareholders. In addition, the Viacom Board considered the pro forma
effect of the proposed transaction on the financial condition and results of the
combined company and the price of CBS as compared with other comparable
companies using various methods of valuation.
Management and Governance Provisions. The Viacom Board considered the
------------------------------------
experience and accomplishments of Mr. Karmazin and other members of CBS
management and the benefits of Mr. Karmazin's service as President and Chief
Operating Officer and Mr. Redstone's continuing service as Chairman and Chief
Executive Officer to the Viacom shareholders. The Viacom Board weighed these
benefits against the limitations the proposed governance structure would impose
on its power to manage the combined company by majority vote of the board of the
combined company and concluded that these limitations represented an acceptable
balance of management responsibilities.
Support of Sumner Redstone. The Viacom Board considered the fact that
--------------------------
Viacom's controlling shareholder, National Amusements, which in turn is
controlled by Mr. Redstone, supported the proposed transaction and was prepared
to sign a voting agreement, in which National Amusements would agree to vote its
shares in favor of the proposed transaction.
Presentation and Opinion of Morgan Stanley. At its meeting on September 6,
------------------------------------------
the Viacom Board considered the financial presentation made to the Viacom Board
on September 5 and the oral opinion rendered by Morgan Stanley on September 5,
subsequently confirmed in writing, that, as of that date, the proposed exchange
ratio was fair to Viacom from a financial point of view.
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<PAGE>
Regulatory Matters. The Viacom Board considered the fact that Viacom might
------------------
be required to divest or reduce its interest in United Paramount Network and
Viacom and/or CBS would be required to divest a number of television and radio
stations in the event that current law and regulations were not amended or
waived. The Viacom Board also considered the ability to obtain other necessary
regulatory approvals.
Terms, Conditions, Termination Provisions and Termination Fee. The Viacom
-------------------------------------------------------------
Board reviewed the representations, warranties, covenants and conditions to
consummation of the proposed transaction and the circumstances under which CBS
would have the right to terminate the merger agreement. The Viacom Board
considered the fact that the vote of the Viacom shareholders was assured by
reason of the voting agreement to be entered into by National Amusements and
that CBS would have the right to terminate the merger agreement under certain
specified circumstances if there was a superior proposal. The Viacom Board
considered the circumstances in which a termination fee would be payable in the
event that the merger agreement was terminated. The Viacom Board considered that
there could be no assurance that the acquisition of Outdoor Systems by Infinity
or King World by CBS would be consummated. The Viacom Board also considered the
fact that the merger would not be conditioned on the completion of the pending
CBS transactions with King World and Outdoor Systems.
THE VIACOM BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF VIACOM CLASS A
COMMON STOCK VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT.
CBS
Reasons for the Merger. At its meeting on September 5, 1999, the CBS Board
of Directors determined that the merger is in the best interests of CBS, has
unanimously approved the merger and the merger agreement and unanimously
recommended that CBS shareholders vote to adopt the merger agreement.
In reaching its decision to approve the merger and the merger agreement and
to recommend that CBS shareholders vote to adopt the merger agreement, the CBS
Board of Directors consulted with senior management and its financial and legal
advisors and considered a number of factors, including the following:
. recent trends in the entertainment and media industries and that a
combination of Viacom, a leading "content provider" in the entertainment
and media industries, with CBS, a leading distributor and marketer of
programming, would create an even stronger global competitor in the
entertainment and media industries;
. the opportunity to create the premier seller of advertising in the media
industry;
. the opportunity for synergies and revenue generation through cross-
promoting and cross-marketing the combined company's film, television,
radio, theme park, home video, publishing, outdoor advertising and
Internet businesses;
. that the merger would benefit the shareholders of CBS because they would
participate in the value generated by increases in the opportunities for
revenue generation through their equity participation in Viacom;
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. the management and corporate governance arrangements agreed to between
CBS and Viacom that would provide for a strong management team drawn
from both companies that would work together to integrate the two
companies, to realize growth opportunities, to achieve synergistic
benefits, and to successfully implement strategies of the combined
company, including that:
. the Board of Directors of Viacom would be expanded from ten to
eighteen directors. The eight additional directors will
initially be selected from and designated by the Board of
Directors of CBS and vacancies in this group will be filled
during the initial three-year term by independent directors
designated by these eight CBS directors;
. Mr. Redstone, the current Chairman and Chief Executive Officer
of Viacom, would continue to serve as Chairman and Chief
Executive Officer of Viacom and would be responsible, in
consultation with the President and Chief Operating Officer, for
corporate policy and strategy;
. Mr. Karmazin, the current President and Chief Executive Officer
of CBS, would serve as President and Chief Operating Officer of
the combined company, would directly report to the CEO and
consult with the CEO on all major decisions and would have
responsibility for the supervision, coordination and management
of the combined company's business;
. Mr. Karmazin, as President and Chief Operating Officer, would be
entitled to manage the combined company's business, subject to
the ability of the combined company's board of directors to take
action with the approval of at least 14 directors. However, in a
number of areas the President and Chief Operating Officer would
not be entitled to act without the approval of, and the combined
company's board would be entitled to act by, a majority of the
directors; and
. the governance arrangements described above would be in effect
for a period of three years from the closing of the merger.
. the expected qualification of the merger as a tax-free reorganization;
. the oral opinion of Evercore, delivered on September 5, 1999, which was
subsequently confirmed in a written opinion, a copy of which is attached
as Annex I to this joint proxy statement/prospectus, that, subject to
the assumptions and limitations contained in that opinion, as of that
date, the exchange ratio was fair, from a financial point of view, to
the shareholders of CBS, and the financial presentation made by Evercore
to the CBS Board of Directors in connection with delivering that
opinion; and
. the terms and conditions of the merger agreement, including the right of
CBS to consider and negotiate superior proposals, as well as the
possible effects of the provisions regarding termination fees.
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The CBS Board of Directors also considered other factors relating to the
merger, and their impact on CBS shareholders, including:
. the existence of a controlling shareholder of the combined company
following the merger and the non-voting security to be received by CBS
shareholders in the merger;
. the financial condition, cash flows and results of operations of CBS and
Viacom, on both a historical and prospective basis;
. the historical market prices and trading information with respect to CBS
common stock and Viacom non-voting Class B common stock, including that
the Viacom non-voting Class B common stock and the Viacom Class A common
stock have historically traded at comparable levels;
. the impact of the merger on CBS' customers, suppliers and employees;
. current industry, economic and market conditions;
. the prospects of CBS as an independent company;
. the belief that the terms of the merger agreement, including the
parties' representations, warranties and covenants, and the conditions
to their respective obligations are reasonable;
. the fact that Viacom might be required to divest or reduce its interest
in United Paramount Network and that Viacom and/or CBS would be required
to divest a number of television and radio stations in the event that
current law and regulations were not amended or waived;
. the regulatory approvals required to complete the merger and the
prospects for receiving those approvals;
. reports from CBS management and its advisors as to their due diligence
investigations of Viacom;
. the status, timing and tax considerations relating to the potential
split-off of Blockbuster to the shareholders of Viacom;
. the risk that the operations of CBS and Viacom might not be successfully
integrated;
. the risk that, despite the efforts of CBS and Viacom, key management and
other personnel might not remain employed by the combined company after
the merger; and
. the risk that potential benefits of the merger might not be fully
realized.
The CBS Board of Directors believed that the risks to the merger were
outweighed by the potential benefits of the merger.
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The discussion of the information and factors considered by the CBS Board
of Directors in making its decision is not intended to be exhaustive but is
believed to include all material factors considered by the CBS Board of
Directors. In view of the variety of material factors considered in connection
with its evaluation of the merger, the CBS Board of Directors did not find it
practicable to, and did not, quantify or otherwise assign relative weights to,
the specific factors considered in reaching its determination. In addition,
individual members of the CBS Board of Directors may have given different weight
to different factors.
Recommendation of the CBS Board of Directors. After careful consideration,
the CBS Board of Directors has determined that the merger is in the best
interests of CBS, has unanimously approved the merger and the merger agreement
and unanimously recommends that CBS shareholders vote "for" the adoption of the
merger agreement.
Opinions of Financial Advisors
Viacom
Under a letter agreement dated as of September 2, 1999, Viacom engaged
Morgan Stanley to act as its financial advisor in connection with a possible
combination with CBS. The Viacom Board of Directors selected Morgan Stanley to
act as its financial advisor based on Morgan Stanley's qualifications, expertise
and reputation, as well as its knowledge of the business and affairs of Viacom.
On September 5, 1999, Morgan Stanley delivered an oral opinion to the Viacom
Board of Directors which was subsequently confirmed in writing, that, as of that
date, and based upon and subject to the considerations set forth in the written
opinion, the exchange ratio was fair from a financial point of view to Viacom.
The full text of the opinion, which sets forth, among other things, the
assumptions made, procedures followed, matters considered and limitations on the
scope of the review undertaken by Morgan Stanley in rendering its opinion, is
attached as Annex H to this joint proxy statement/prospectus. Morgan Stanley's
written opinion is directed to the Viacom Board of Directors and only addresses
the fairness of the exchange ratio to Viacom as of the date of the opinion.
Morgan Stanley's written opinion does not address any other aspect of the merger
and does not constitute a recommendation to any Viacom shareholder as to how to
vote at the Viacom special meeting. The summary of the opinion set forth in this
joint proxy statement/prospectus is qualified in its entirety by reference to
the full text of the opinion attached as Annex H hereto. The following is only a
summary of the Morgan Stanley opinion. Viacom shareholders are urged to, and
should, read the opinion carefully and in its entirety.
In arriving at Morgan Stanley's opinion, Morgan Stanley, among other
things:
. reviewed certain publicly available financial statements and other
information of Viacom and CBS;
. reviewed and analyzed certain internal financial statements and other
financial and operating data concerning Viacom and CBS prepared by the
respective managements of Viacom and CBS;
. discussed the past and current operations and financial condition and
the prospects of Viacom and CBS with senior executives of Viacom and CBS
including their estimates
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of the strategic operating benefits of the merger and analyzed the pro
forma impact of the merger on Viacom's financial ratios;
. reviewed the reported prices and trading activity for the Class B common
stock of Viacom and the common stock of CBS;
. compared the financial performance of Viacom and CBS and the prices and
trading activity of Viacom and CBS with that of certain other comparable
publicly traded companies and their securities;
. participated in discussions and negotiations among representatives of
Viacom, CBS and their respective financial and legal advisors;
. reviewed the merger agreement and certain related documents; and
. performed such other analyses and considered such other factors that
Morgan Stanley deemed appropriate.
Morgan Stanley assumed and relied upon without independent verification the
accuracy and completeness of the information it reviewed for the purposes of its
opinion. With respect to the financial projections, Morgan Stanley assumed that
they had been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of Viacom
and CBS. Morgan Stanley has not made any independent valuation or appraisal of
the assets or liabilities of Viacom and CBS, nor has Morgan Stanley been
furnished with any such appraisals. Morgan Stanley has assumed that the merger
will be consummated in accordance with the terms set forth in the merger
agreement. Morgan Stanley's opinion is necessarily based on economic, market
and other conditions as in effect on, and the information made available to it
as of, the date of its opinion.
The following is a brief description of certain analyses performed by
Morgan Stanley in connection with its oral opinion and the preparation of its
written opinion letter. These summaries of financial analyses include
information presented in tabular format. In order to understand the financial
analysis used by Morgan Stanley, the tables must be read together with the text
of each summary. The tables alone do not constitute a complete description of
the financial analyses.
Historical Public Market Trading Value. Morgan Stanley reviewed the stock
--------------------------------------
price performance of CBS based on an analysis of the historical closing prices
and trading volumes for the one year period beginning September 3, 1998 and
ending September 3, 1999. The following table lists the low, average and high
daily closing prices of shares of CBS common stock for the periods indicated.
Historical CBS Common Stock Prices
----------------------------------
Low Average High
---------- ----------- ---------
Last One Year $18.00 $36.90 $50.44
Last Nine Months 26.75 40.93 50.44
Last Six Months 35.38 43.98 50.44
Last Three Months 40.56 45.07 50.44
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Low Average High
---------- ----------- ---------
Last One Month 44.13 46.71 50.44
Last Two Weeks 45.88 47.81 50.44
Comparative Stock Price Performance. As part of its analysis, Morgan
-----------------------------------
Stanley reviewed the stock price performance of Viacom Class B common stock and
CBS common stock and compared this performance with the following peer groups:
Viacom Peer Group CBS Peer Group
- ------------------------------- ----------------------------------
The Walt Disney Company A.H. Belo Corporation
Fox Entertainment Group, Inc. Clear Channel Communications, Inc.
The Seagram Company Ltd. Hearst-Argyle Television, Inc.
Time Warner Inc. Sinclair Broadcast Group, Inc.
Young Broadcasting Inc.
Morgan Stanley observed that over the one year period from September 3,
1998 to September 3, 1999, the closing market prices appreciated as set forth
below:
% Total Appreciation
---------------------
Viacom 56%
CBS 80
Viacom Peer Group 23
(equity market capitalization-weighted index)
CBS Peer Group 42
(equity market capitalization-weighted index)
No company used in the stock price performance comparison is identical to
Viacom or CBS. In evaluating the stock price performance comparison, Morgan
Stanley made judgements and assumptions with regard to industry performance,
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Viacom and CBS, e.g. the impact of competition
on Viacom or CBS and the industry, industry growth and the absence of material
adverse change in the financial condition and prospects of Viacom or CBS or the
industry or in the financial markets.
Securities Research Analysts' Future Price Targets. Morgan Stanley
--------------------------------------------------
reviewed and analyzed future public market trading price targets for Viacom
Class B common stock and CBS common stock prepared and published by securities
research analysts during the period from May 5, 1999 to August 18, 1999 for
Viacom and May 26, 1999 to August 20, 1999 for CBS. Based upon discussions with
senior executives of Viacom and CBS, these analysts' projections were viewed by
Morgan Stanley as being representative of the future prospects of Viacom and
CBS. These targets reflected each analyst's
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estimate of the future public market trading price of Viacom Class B common
stock and CBS common stock at the end of the particular period considered for
each estimate. Applying equity discount rates of 13.4% for Viacom and 12.8% for
CBS, Morgan Stanley arrived at a range of present values as of September 3, 1999
of these targets as set forth below:
Present Value Range
-------------------
Low High
-------- ---------
Viacom Public Market Trading Price Target $42 $50
CBS Public Market Trading Price Target 46 53
Morgan Stanley noted that the public market trading price targets published
by the securities research analysts do not reflect current market trading prices
and that these estimates are subject to uncertainties, including the future
financial performance of Viacom and CBS and future financial market conditions.
Peer Group Comparison. Morgan Stanley compared financial information of
---------------------
Viacom and CBS with corresponding financial information for their respective
peer groups.
Morgan Stanley analyzed, among other things, for each company, the current
aggregate value, i.e., equity value adjusted for capital structure, expressed as
a multiple of earnings before interest, taxes, depreciation and amortization
expense, or EBITDA.
As of June 30, 1999 and based on estimates of EBITDA taken from selected
securities research analysts, the statistics derived from this analysis are set
forth below:
<TABLE>
<CAPTION>
Viacom Peer Group CBS Peer Group
--------------------------- ----------------------
Viacom Median High Low CBS Median High Low
------ ------ ----- ----- ----- ------ ------- -----
1999 EBITDA Multiple 17.1x 15.7x 19.0x 14.4x 22.7x 11.7x 25.7x 8.8x
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2000 EBITDA Multiple 14.5 13.3 16.6 12.7 19.6 10.0 22.6 8.1
</TABLE>
No company used in the peer group comparison is identical to Viacom or CBS.
In evaluating the peer group companies, Morgan Stanley made judgements and
assumptions with regard to industry performance, business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Viacom and CBS, such as the impact of competition on Viacom or CBS and the
industry, industry growth and the absence of material adverse change in the
financial condition and prospects of Viacom or CBS or the industry or in the
financial market in general. Mathematical analysis, such as determining the
average or median, is not in itself a meaningful method of using peer group
data.
Discounted Cash Flow Analysis. Morgan Stanley performed a discounted cash
-----------------------------
flow analysis of CBS' business. A discounted cash flow analysis involves an
analysis of the present value of projected cash flows and a terminal value using
discount rates and terminal year free cash flow perpetual growth rates as
indicated below. Morgan Stanley analyzed CBS' business using a forecast for the
period beginning January 1, 1999 and ending December 31, 2003, based on
estimates published by securities research analysts. Based upon discussions
with senior executives of CBS, these analysts' projections were viewed by Morgan
Stanley as being representative of the future prospects of CBS. Morgan
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Stanley estimated the CBS common stock discounted cash flow value by using a
discount rate of 10% and a perpetual growth rate applied to 2003 free cash flow
ranging from 4.5% to 5.5%. This analysis yielded a range of per share values for
CBS common stock of approximately $45 to $54.
Morgan Stanley also performed a discounted cash flow analysis of Viacom's
business. Morgan Stanley analyzed Viacom's business using a forecast for the
period beginning January 1, 1999 and ending December 31, 2003, based on
estimates published by securities research analysts. Based upon discussions
with senior executives of Viacom, these analysts' projections were viewed by
Morgan Stanley as being representative of the future prospects of Viacom.
Morgan Stanley estimated the Viacom Class B common stock discounted cash flow
value by using a discount rate of 10% and terminal multiples of estimated 2003
EBITDA ranging from 13.0x to 15.0x. This analysis yielded a range of per share
values for Viacom Class B common stock of approximately $39 to $45.
Sum-of-the-Parts Analysis. Morgan Stanley performed a sum-of-the-parts
-------------------------
analysis of CBS' business. A sum-of-the-parts analysis involves a separate
valuation of each of CBS' core businesses. The valuation methodology applied to
each component is set forth below:
Component Valuation Methodology
- --------- --------------------
Infinity Broadcasting Corporation Market Value of CBS' 700 million shares
Television Assets (a) 13x-15x 2000E EBITDA
Cable Programming (CMT/TNN) 17x-19x 2000E EBITDA
King World Productions, Inc. CBS net purchase price
Internet Holdings Morgan Stanley equity research estimate
________________
(a) Includes an analysis of CBS' Television Station group and Television
Network which were each analyzed as separate components.
This analysis yielded a range of per share values for CBS common stock of
approximately $42-$47.
Relative Contribution Analysis. Morgan Stanley compared pro forma
------------------------------
contribution of each of Viacom and CBS, based on securities research analyst
estimates, to the resultant combined company assuming completion of the merger.
Morgan Stanley adjusted these statistics to reflect each company's respective
capital structure and then compared them to the pro forma ownership by Viacom
shareholders of the common stock of the combined company, implied by the
exchange ratio, of approximately 46%. Morgan Stanley performed this analysis
with and without Blockbuster as part of Viacom to reflect Viacom's previously
announced intention to split-off Blockbuster to the Viacom shareholders and as a
consequence, deconsolidate Blockbuster for accounting purposes. The results in
terms of both EBITDA and after tax cash flow or ATCF, are set forth below:
Viacom Equity Contribution
----------------------------
With Without
Blockbuster Blockbuster
------------- -------------
2000E EBITDA 55.3% 46.9%
2001E EBITDA 54.5 45.9
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With Without
Blockbuster Blockbuster
------------- -------------
2002E EBITDA 53.1 44.9
2000E ATCF 55.5 44.5
2001E ATCF 56.2 45.4
2002E ATCF 55.2 45.1
Historical Exchange Ratio Analysis. Morgan Stanley compared the exchange
----------------------------------
ratio of 1.085 to the ratio of the closing market prices of Viacom Class B
common stock and CBS common stock on September 3, 1999. Morgan Stanley also
compared this ratio to selected average historical ratios of the closing market
prices of CBS common stock to Viacom Class B common stock over various periods
ending September 3, 1999. Morgan Stanley then calculated the premiums
represented by the exchange ratio over these ratios. The results of this
analysis are set forth below:
% Premium/
Market (Discount) to
Price Ratio Market Price Ratio
----------- ------------------
Current (9/3/99) 1.086x (0.1)%
Prior 5 Days 1.109 (2.2)
Prior 10 Days 1.123 (3.4)
Prior 20 Days 1.116 (2.8)
Prior 30 Days 1.097 (1.1)
Prior 45 Days 1.071 1.3
Prior 60 Days 1.064 2.0
Last 6 Months 1.043 4.0
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all of its
analyses as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Furthermore, selecting any
portion of Morgan Stanley's analyses, without considering all analyses, would
create an incomplete view of the process underlying the Morgan Stanley opinion.
In addition, Morgan Stanley may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting from
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of Viacom or CBS.
In performing its analysis, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Viacom or CBS. Any
estimates contained in the analyses performed by Morgan Stanley are not
necessarily indicative of actual values, which may be significantly more or less
favorable than suggested by such estimates. The analyses performed were
prepared solely as a part of Morgan Stanley's analysis of the fairness of the
exchange ratio to Viacom in connection with the delivery of Morgan Stanley's
opinion to Viacom's Board of Directors. The analyses do not purport to
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<PAGE>
be appraisals or to reflect the prices at which Viacom Class B common stock or
CBS common stock might actually trade.
The exchange ratio was determined through arm's-length negotiations between
Viacom and CBS and was approved by the Viacom Board of Directors. Morgan
Stanley's opinion to the Viacom Board of Directors was one of many factors taken
into consideration by the Viacom Board of Directors in making its determination
to approve the merger. Consequently, the Morgan Stanley analyses described above
should not be viewed as determinative of the opinion of the Viacom Board of
Directors with respect to the value of CBS or of whether the Viacom Board of
Directors would have been willing to agree to different consideration.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the ordinary course of
Morgan Stanley's trading, brokerage and financing activities, Morgan Stanley or
its affiliates may at any time hold long or short positions, may trade, make a
market or otherwise effect transactions, for its own account or for the accounts
of customers, in the securities of Viacom or CBS.
Pursuant to an engagement letter dated September 2, 1999, Viacom has agreed
to pay Morgan Stanley a $10 million fee ($7.5 million of which is contingent
upon closing of the merger), for advisory services rendered and to reimburse
Morgan Stanley for reasonable expenses incurred. Viacom has also agreed to
indemnify Morgan Stanley and its affiliates, their respective directors,
officers, agents and employees and each person, if any, controlling Morgan
Stanley or any of its affiliates, against certain liabilities and expenses,
including certain liabilities under the federal securities laws, arising out of
Morgan Stanley's engagement. In the past, Morgan Stanley and its affiliates
have provided financial advisory and financing services for Viacom and CBS and
have received fees for the rendering of these services.
CBS
CBS retained Evercore to act as financial advisor to CBS and to render a
fairness opinion, from a financial point of view, in connection with the merger.
On September 5, 1999, Evercore delivered its oral opinion to the CBS Board of
Directors which was subsequently confirmed in a written opinion, that, as of
that date, the exchange ratio was fair, from a financial point of view, to the
shareholders of CBS.
The full text of the written opinion of Evercore is set forth as Annex I to
this joint proxy statement/prospectus and describes the assumptions made,
general procedures followed, matters considered and limits on the review
undertaken. Evercore's opinion is directed only to whether the exchange ratio
is fair, from a financial point of view, to the holders of CBS common stock and
does not constitute a recommendation of the merger over other courses of action
that may be available to CBS or constitute a recommendation to any CBS
shareholder as to how that shareholder should vote with respect to the merger.
The summary of the opinion of Evercore set forth in this joint proxy
statement/prospectus is qualified in its entirety by reference to the full text
of such opinion, attached as Annex I. Shareholders of CBS are urged to read the
opinion carefully and in its entirety.
In connection with rendering its opinion, Evercore has, among other things:
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. analyzed various publicly available financial statements and other
information relating to CBS and Viacom;
. analyzed various internal financial statements and other non-public
financial and operating data concerning CBS, which were prepared by and
furnished to Evercore or reviewed for Evercore by the management of CBS,
and concerning Viacom, which were prepared by and furnished to Evercore
or reviewed for Evercore by the management of Viacom;
. analyzed various financial projections for 1999 concerning CBS, which
were prepared by the management of CBS, and concerning Viacom, which
were prepared by the management of Viacom;
. discussed the past and current operations and financial condition and
the prospects of CBS with the management of CBS;
. discussed the past and current operations and financial condition and
the prospects of Viacom with the management of Viacom;
. reviewed the reported prices and trading activity of the CBS common
stock and Viacom Class B common stock;
. compared the market valuation and financial performance of CBS and
Viacom with that of several other comparable publicly traded companies;
. reviewed the financial terms to the extent available of certain
comparable acquisition transactions;
. participated in discussions and negotiations among representatives of
CBS, Viacom, and their respective financial and legal advisers;
. reviewed the merger agreement and the related exhibits and schedules;
. reviewed various information concerning cost savings and combination
benefits expected to result from the merger that was furnished to
Evercore or reviewed for Evercore by the managements of CBS and Viacom;
and
. performed other analyses and examinations and considered other factors
as Evercore in its sole judgment deemed appropriate.
For purposes of its analysis and opinion, Evercore assumed and relied,
without independent verification, upon the accuracy and completeness of the
information reviewed by Evercore or reviewed for Evercore. With respect to the
financial projections of CBS and Viacom for 1999 which were furnished to
Evercore by the managements of CBS and Viacom, and certain analyses concerning
the potential cost savings and combination benefits expected to result from the
merger which were reviewed for Evercore by the management of CBS, Evercore
assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and good faith judgments of the future
competitive, operating and regulatory environments and related financial
performance of CBS and Viacom, respectively. Evercore did not make nor assume
any responsibility for making any independent valuation or appraisal of the
assets or liabilities of CBS or Viacom, nor was Evercore furnished with any such
appraisals. Evercore's opinion was necessarily based on economic, market
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<PAGE>
and other conditions as in effect on, and the information and agreements made
available to Evercore as of the date of its opinion. Evercore assumed, with the
approval of CBS, that the merger would qualify as a tax-free reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended. Evercore's opinion did not address CBS' underlying business decision to
effect the merger nor constitute a recommendation to any CBS shareholder as to
how that shareholder should vote with respect to the merger. Furthermore,
Evercore expressed no opinion as to the price or range of prices at which the
shares of Viacom Class B common stock would trade at any future time.
For purposes of its analyses, Evercore primarily relied upon publicly
available Wall Street research estimates for each company, and subsequently
compared those estimates to internal budgets for 1999 for each company to
confirm the reasonableness of the analysts' expectations.
For purposes of rendering its opinion, Evercore assumed, in all respects
material to its analysis, that the representations and warranties of each party
contained in the merger agreement were true and correct, that each party would
perform all the covenants and agreements required under the merger agreement,
and that all conditions to the consummation of the merger would be satisfied
without being waived.
In connection with a presentation to the CBS Board on September 5, 1999,
Evercore advised CBS' Board that, in evaluating the exchange ratio, Evercore had
performed a variety of financial analyses with respect to CBS and Viacom, all as
summarized below:
Historical Exchange Ratio Analysis. Evercore reviewed the daily closing
----------------------------------
prices of CBS common stock and Viacom Class B common stock to determine the
implied exchange ratio based upon the relative prices of CBS common stock and
Viacom Class B common stock for each considered time period. Evercore analyzed
the implied exchange ratio between CBS common stock and Viacom Class B common
stock for various time periods between January 2, 1998 and September 3, 1999.
Evercore noted that the agreed to exchange ratio of 1.085 was within the range
of historical implied exchange ratios in the periods examined. The historical
implied exchange ratios for the periods are shown below:
<TABLE>
<CAPTION>
CBS Viacom Implied
Share Price Class B Exchange
----------- Share Price Ratio
----------- --------
<S> <C> <C> <C>
September 3, 1999 $48.94 $45.06 1.0860
10-Day Average 47.81 42.59 1.1225
20-Day Average 46.71 41.86 1.1159
30-Day Average 46.15 42.10 1.0964
45-Day Average 45.86 42.91 1.0688
60-Day Average 45.07 42.43 1.0621
90-Day Average 44.63 41.73 1.0695
1999 Year-to-Date Avg. (through 9/3/99) 41.57 42.11 0.9871
1998 Full-Year Average 30.33 28.64 1.0591
Merger Exchange Ratio 1.0850
</TABLE>
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Contribution Analysis. Evercore analyzed the relative contributions of CBS
---------------------
and Viacom to the pro forma combined company with respect to revenues,
consolidated EBITDA, EBITDA less minority interest (adjusted to exclude minority
interests in the EBITDA of Infinity for CBS and in Blockbuster for Viacom),
equity market value, and enterprise value for the projected fiscal years ending
in 1999 and 2000. Evercore also reviewed the pro forma ownership of the
combined company, taking into account each company's outstanding options and
warrants on common stock treated under the treasury stock method.
<TABLE>
<CAPTION>
FY 1999E FY 2000E
-------------------- ----------------
Contribution Percentage: CBS Viacom CBS Viacom
-------- ---------- ----- ---------
<S> <C> <C> <C> <C>
Revenue 39.9% 60.1% 39.5% 60.5%
Consolidated EBITDA 52.0% 48.0% 52.2% 47.8%
EBITDA Less Min. Int. (a) 47.2% 52.8% 47.6% 52.4%
Equity Market Value 54.7% 45.3%
Enterprise Value 53.0% 47.0%
Pro Forma Economic Ownership Based on Exchange Ratio:
CBS 54.6%
Viacom 45.4%
</TABLE>
(a) Excludes 35.8% minority interest in Infinity for CBS and 17.7% minority
interest in Blockbuster for Viacom.
Pro Forma Merger Analysis. Primarily relying on Wall Street research
-------------------------
estimates, Evercore analyzed the potential pro forma effects of the merger on
CBS' projected free cash flow per share based on various assumptions regarding
the merger. For the purposes of this analysis, free cash flow was defined as
EBITDA less interest expense less cash taxes less capital expenditures. This
analysis indicated that the merger would initially be dilutive to CBS' free cash
flow per share. The actual results achieved by the combined company may vary
from projected results and the variations may be material.
Review of Selected Merger-of-Equals Transactions. Evercore reviewed the
------------------------------------------------
financial terms, to the extent publicly available, of nine selected merger-of-
equals transactions. Evercore reviewed the premiums implied in the selected
merger-of-equals transactions relative to market value contributions, assuming a
constant market capitalization based on closing stock prices prior to the
announcement of such transactions.
Evercore noted that, if the merger had closed on September 3, 1999,
utilizing the Viacom closing stock price on September 3, 1999, and assuming the
exchange ratio of 1.085, CBS shareholders would have received Viacom Class B
common stock having a market value representing a discount of 0.1% to the CBS
common stock September 3, 1999 closing price. Evercore compared this implied
discount to the implied premiums/discounts for similar periods prior to public
announcement in the following comparable merger-of-equals transactions:
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<PAGE>
. Honeywell Inc. / AlliedSignal Inc.;
. GTE Corporation / Bell Atlantic Corporation;
. Wells Fargo & Company / Norwest Corporation;
. Monsanto Company / American Home Products Corporation;
. BankAmerica Corporation / NationsBank Corp.;
. First Chicago NBD Corporation / Banc One Corporation;
. Citicorp / Travelers Group, Inc.;
. HFS Incorporated / CUC International Inc.; and
. NYNEX Corporation/ Bell Atlantic Corporation.
In each of the above transactions, the shareholders of the first-named
company were to receive shares of the second-named company. Evercore considered
these merger-of-equals transactions to be reasonably similar to the merger, but
none of these precedents is identical to the merger.
The following table presents the premiums or discounts contemplated in the
merger and implied in these other transactions, from the perspective of the
shareholders of the first-named company, compared with the previous trading day
closing price per share:
<TABLE>
<CAPTION>
Premium to Prior Day Closing Price
-----------------------------------
<S> <C>
CBS/Viacom -0.1%
Precedent "Merger-of-Equals" Transactions:
Average 3.5%
Median 5.5%
Low -5.8%
High 9.3%
</TABLE>
Selected Comparable Company Analysis. Evercore compared selected
------------------------------------
financial, market and operating information of CBS with corresponding data of
other selected publicly traded companies with similar operations to those of
CBS. Evercore compared the adjusted enterprise value to adjusted EBITDA
multiples of the consolidated CBS Corporation to a selected group of publicly
traded radio broadcasting and outdoor advertising companies. Adjusted
enterprise value for a given company was defined as total enterprise value
(equity market value plus total debt and preferred stock, less cash and cash
equivalents) less the value of unconsolidated stakes in other companies, less
the value of segments within the company that trade at multiples that are
significantly different from the rest of the company, and plus the value of any
minority stakes in consolidated businesses. Adjusted EBITDA for a given company
was defined as EBITDA less the EBITDA contributed by segments within the company
that trade at multiples that are significantly different from the rest of the
company. This selected group of publicly traded radio broadcasting and outdoor
advertising companies was comprised of:
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. AM/FM Inc.;
. Citadel Communications Corporation;
. Clear Channel Communications, Inc.;
. Cox Radio, Inc.;
. Cumulus Media, Inc.;
. Emmis Communications Corporation;
. Entercom Communications Corp.;
. Hispanic Broadcasting Corporation;
. Infinity Broadcasting Corporation;
. Radio One, Inc.; and
. Saga Communications, Inc.
Evercore selected these radio broadcasting and outdoor advertising
companies because Evercore considered them to have operations similar to the
operations of CBS in this business segment. All multiples were calculated based
on closing prices as of September 3, 1999. For the comparable companies, EBITDA
projections were based on publicly available Wall Street research estimates.
Evercore noted that the closing price of CBS common stock on September 3, 1999
of $48.94 represented a multiple of EBITDA that was within the range found for
the CBS-comparable companies set forth above. To illustrate, Evercore
highlighted the following multiples of adjusted enterprise value to adjusted
1999E and 2000E EBITDA:
<TABLE>
<CAPTION>
Adj. Enterprise Value to Adj. EBITDA
------------------------------------
FY 1999E FY 2000E
----------------- -----------------
<S> <C> <C>
CBS Consolidated 20.8x 18.2x
Radio & Outdoor Advertising (a):
Average 22.5x 19.5x
Low 13.4x 12.0x
High 28.7x 24.2x
</TABLE>
(a) The analysis of Radio & Outdoor comparables excludes Hispanic Broadcasting
because its multiples were not in line with other comparables.
Evercore compared the adjusted enterprise value to adjusted EBITDA
multiples of CBS, excluding its majority-owned stake in Infinity, to a selected
group of publicly traded television broadcasting companies. Evercore looked at
CBS excluding Infinity due to the fact that many Wall Street research analysts
also analyze CBS in this manner in order to isolate the implied valuation of the
non-radio/outdoor advertising assets. In doing so, Evercore excluded the
financial impact of Infinity on the EBITDA of CBS. Evercore also reduced the
enterprise value of CBS used in the calculation by an amount equal to the market
value of Infinity common stock held by CBS plus Infinity's net debt balance.
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The group of publicly traded television broadcast companies selected for
this comparative analysis was comprised of:
. A.H. Belo Corporation;
. Granite Broadcasting Corporation;
. Hearst-Argyle Television, Inc.;
. Paxson Communications Corporation;
. Sinclair Broadcasting Group, Inc.;
. United Television, Inc.; and
. Young Broadcasting, Inc.
Evercore selected these television broadcasting companies because Evercore
considered them to have operations similar to the operations of CBS, excluding
Infinity, in this business segment. All multiples were calculated based on
closing prices as of September 3, 1999. For the comparable companies, EBITDA
projections were based on publicly available Wall Street research estimates.
Evercore highlighted the following multiples of adjusted enterprise value to
adjusted 1999E and 2000E EBITDA:
<TABLE>
<CAPTION>
Adj. Enterprise Value to Adj. EBITDA
------------------------------------
FY 1999E FY 2000E
----------------- -----------------
<S> <C> <C>
CBS Excluding Infinity (a) 19.2x 16.8x
Television Broadcasting (b):
Average 12.0x 10.9x
Low 9.0x 7.9x
High 14.2x 12.9x
</TABLE>
(a) Also excludes TV network and Internet assets.
(b) The analysis of Television Broadcasting comparables excludes Paxson
Communications because its multiples were not in line with other
comparables.
Evercore also compared certain financial, market and operating information
of Viacom with corresponding data of other selected publicly traded companies
with similar operations. Evercore compared the adjusted enterprise value to
adjusted EBITDA multiples of Viacom to a selected group of publicly traded
entertainment companies. The selected group of publicly traded entertainment
companies was comprised of:
. The Walt Disney Company;
. The News Corporation Limited;
. Time Warner Inc.;
. The Seagram Company Ltd.;
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. Fox Entertainment Group, Inc.; and
. USA Networks, Inc.
Evercore selected these entertainment companies because Evercore considered
them to have operations similar to the operations of Viacom. All multiples were
calculated based on closing prices as of September 3, 1999. For the comparable
companies, EBITDA projections were based on publicly available Wall Street
research estimates. Evercore noted that the closing price of Viacom Class B
common stock on September 3, 1999 of $45.06 represented a multiple of Adjusted
EBITDA that was within the range found for the Viacom-comparable companies set
forth above. To illustrate, Evercore highlighted the following multiples of
adjusted enterprise value to adjusted 1999E and 2000E EBITDA:
<TABLE>
<CAPTION>
Adj. Enterprise Value to Adj. EBITDA
------------------------------------
FY 1999E FY 2000E
----------------- -----------------
<S> <C> <C>
Viacom (a) 20.2x 17.5x
Entertainment Comparable Firms (b):
Average 16.3x 13.8x
Low 12.2x 9.8x
High 20.8x 17.8x
</TABLE>
(a) Excludes Blockbuster.
(b) The analysis of Entertainment comparables excludes News Corp. due to its
relatively high concentration on publishing operations.
No company used in the comparable company analyses summarized above is
identical to CBS or Viacom. Accordingly, any analysis of the fairness of the
consideration to be received by the holders of CBS common stock in the merger
involves complex considerations and judgements concerning differences in the
potential financial and operating characteristics of the comparable companies
and other factors in relation to the trading values of the comparable companies.
Selected Comparable Transaction Analysis. Evercore reviewed the implied
----------------------------------------
transaction multiples paid in selected comparable merger and acquisition
transactions and compared these multiples to the multiples implied by the
consideration paid to CBS shareholders in the merger. Evercore noted that, if
the merger had closed on September 3, 1999, utilizing the closing price of
Viacom Class B common stock on September 3, 1999 of $45.06, and assuming the
exchange ratio of 1.085, CBS shareholders would have received Viacom Class B
common stock having a market value equal to $48.89 per each share of CBS common
stock owned. Evercore analyzed the adjusted enterprise value of CBS, derived
from this implied price per share, as a multiple of adjusted EBITDA and compared
this multiple to multiples of EBITDA paid in selected mergers and acquisitions
of radio broadcasting and outdoor advertising companies. The following
selection of mergers and acquisitions of radio broadcasting and outdoor
advertising companies was used for purposes of this analysis:
. Chancellor Media Outdoor Corporation / Lamar Advertising Co.
. Outdoor Systems, Inc. / Infinity Broadcasting Corporation
. Jacor Communications, Inc. / Clear Channel Communications, Inc.
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. Capstar Broadcasting Corporation / Chancellor Media Corp.
. Universal Outdoor Holdings, Inc. / Clear Channel Communications, Inc.
. American Radio Systems Corporation / CBS Corporation
. SFX Broadcasting, Inc. / Capstar Broadcasting Corporation
. Viacom Radio / Evergreen Media Corp.
. Chancellor Media Corp. / Evergreen Media Corp.
. Infinity Broadcasting Corporation / Westinghouse Electric Corporation
Evercore also performed this analysis for the following selection of
mergers and acquisitions involving television broadcasting companies:
. Gaylord Entertainment / CBS Corporation
. Kelly Broadcasting / Hearst-Argyle Television, Inc.
. Pulitzer Publishing Company (TV & Radio) / Hearst-Argyle Television,
Inc.
. Sullivan Broadcasting / Sinclair Broadcast Group, Inc.
. LIN Television Corporation / Hicks Muse Tate & Furst
. Heritage Media Corporation / The News Corporation Limited
. Heritage Media Corporation / Sinclair Broadcast Group, Inc.
. A.H. Belo Corporation / Scripps Howard
. Argyle TV / Hearst-Argyle Television, Inc.
. Providence Journal Company / A.H. Belo Corporation
. First Media Television, L.P. / Meredith Corporation
. New World Communications Group, Inc. / The News Corporation Limited
. Renaissance Communications Corporation / Tribune Company
. Multimedia, Inc. / Gannett Co., Inc.
Evercore selected these transactions because they involved companies in
business segments in which CBS has operations. Evercore noted that the multiple
implied by the merger as of September 3, 1999 is within the range of multiples
paid in comparable transactions, and, therefore, that these analyses of
multiples supported a fairness determination concerning the merger.
Transaction Value to EBITDA
---------------------------
Merger Offer for CBS
CBS Consolidated 20.8x
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<PAGE>
CBS Excluding Infinity 19.2x
Radio & Outdoor Transactions:
Average 17.7x
Low 14.2x
High 21.0x
Television Broadcasting Transactions:
Average 14.4x
Low 9.8x
High 23.3x
Additionally, Evercore analyzed the adjusted enterprise value of Viacom as
a multiple of adjusted EBITDA and compared this multiple to multiples of EBITDA
paid in a selection of mergers and acquisitions of entertainment companies. The
following selection of mergers and acquisitions of entertainment companies was
used for purposes of this analysis:
. PolyGram N.V. / The Seagram Company Ltd.
. Metro-Goldwyn-Mayer Inc. / Management
. Turner Broadcasting System, Inc. / Time Warner Inc.
. CBS, Inc. / Westinghouse Electric Corp.
. Capital Cities / ABC, Inc. / The Walt Disney Company
. MCA, Inc. / The Seagram Company Ltd.
. Blockbuster Entertainment Corporation / Viacom Inc.
. Paramount Communications Inc. / Viacom Inc.
Evercore selected these transactions because they involved companies in
business segments in which Viacom has operations. Evercore noted that the
multiple implied by Viacom's closing price on September 3, 1999 is within the
range of multiples paid in comparable transactions.
Transaction Value to EBITDA
---------------------------
Viacom (a) 20.2x
Entertainment Transactions (b):
Average 15.9x
Low 12.3x
High 21.0x
(a) Excludes Blockbuster.
(b) The analysis of Entertainment transactions excludes Blockbuster
Entertainment Corporation/Viacom Inc. transaction due to the retail nature
of Blockbuster's business.
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No transaction used in the comparable transaction analyses summarized above
is identical to the merger. Accordingly, any analysis of the fairness of the
consideration to be received by the holders of CBS common stock in the merger
involves complex considerations and judgments concerning differences in the
potential financial and operating characteristics of the comparable transactions
and other factors in relation to the acquisition values of the comparable
companies.
Discounted Cash Flow Analysis. Evercore estimated the present value of the
-----------------------------
future stand-alone, unlevered free cash flows that could be produced by CBS. The
net present value ranges were estimated by applying one-year forward terminal
value multiples ranging from 16.0x to 18.0x 2004E EBITDA and discount rates
ranging from 11.0% to 14.0%. This analysis indicated a value per share of CBS
common stock ranging from approximately $42.03 to $52.60, as compared to the per
share price of $48.89 for CBS common stock that was implied by the exchange
ratio as of September 3, 1999.
Evercore also performed a discounted cash flow analysis for Viacom.
Evercore estimated the present value of the future stand-alone, unlevered free
cash flows that could be produced by Viacom. The net present value ranges were
estimated by applying one-year forward terminal value multiples ranging from
16.0x to 18.0x 2004E EBITDA and discount rates ranging from 11.0% to 14.0%. This
analysis indicated a value per share of Viacom Class B common stock ranging from
approximately $42.80 to $53.18, as compared to the per share price for Viacom
Class B common stock of $45.06 on September 3, 1999.
Sum-of-the-Parts Analysis. Evercore estimated the value of CBS by
-------------------------
calculating the implied value of its different components at different multiples
and then adding these values to arrive at a value for the consolidated entity.
For this sum-of-the-parts valuation, Evercore valued CBS' syndication business
at a range of 10.0x to 12.0x 2000E EBITDA, CBS' television segment at a fixed
amount for the network and at a range of 13.0x to 15.0x 2000E EBITDA for its
television stations, and CBS' cable network division at a range of 16.0x to
18.0x 2000E EBITDA. The remaining businesses of CBS (corporate overhead,
Internet assets, and CBS' stake in Infinity) were valued at fixed amounts. The
sum-of-the parts valuation yielded a CBS common stock valuation range of $45.26
to $48.39 per share, as compared to the per share price of $48.89 for CBS common
stock that was implied by the exchange ratio as of September 3, 1999.
Evercore also estimated the value of Viacom with a similar sum-of-the-parts
analysis. Evercore used a range of values for each of Viacom's business segments
and assets. These values were based on multiples of EBITDA, subscribers or
revenues, or on other metrics such as market value or historical cost. The sum-
of-the parts valuation yielded a Viacom Class B common stock valuation range of
$44.60 to $51.83 per share, as compared to the per share price for Viacom Class
B common stock of $45.06 on September 3, 1999.
The foregoing summary does not purport to be a complete description of the
analyses performed by Evercore or of its presentation to CBS' Board. The
preparation of financial analyses and a fairness opinion is not susceptible to
partial analysis or summary description. Evercore believes that its analyses
and the summary set forth above must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the processes
underlying the analysis conducted by Evercore and its opinion. Evercore has not
indicated that any of the analyses which it performed had a greater significance
than any other.
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In determining the appropriate analyses to conduct and when performing
those analyses, Evercore made numerous assumptions with respect to industry
performance, general business, financial, market and economic conditions and
other matters, many of which are beyond the control of CBS or Viacom. The
analyses which Evercore performed are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by the analyses. The analyses were prepared solely as
part of Evercore's analysis as to whether the exchange ratio is fair, from a
financial point of view, to the holders of CBS common stock. The analyses are
not appraisals and the estimates of values of companies do not reflect the
prices at which a company might actually be sold or the prices at which any
securities may trade at the present time or at any time in the future.
Evercore is a nationally recognized investment banking firm that is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions. CBS retained Evercore based on these
qualifications as well as its familiarity with CBS and Viacom. Evercore has
previously provided various investment banking and financial advisory services
to CBS, for which Evercore received customary fees for the rendering of these
services.
Pursuant to the terms of an engagement letter with Evercore, CBS agreed to
pay Evercore a fee equal to $2,500,000 following delivery of Evercore's fairness
opinion and $7,500,000 upon the completion of the merger. Whether or not the
merger is completed, CBS has agreed under the engagement letter to reimburse
Evercore for all its reasonable out-of-pocket expenses, including the reasonable
fees and disbursements of its counsel, incurred in connection with its
engagement by CBS, and to indemnify Evercore against certain liabilities and
expenses in connection with its engagement.
Directors, Management and Corporate Governance of the Combined Company
Pursuant to the merger agreement, the proposed new Restated Certificate of
Incorporation and By-laws, and the stockholder agreement between National
Amusements and CBS, Viacom, CBS and National Amusements have agreed to certain
corporate governance arrangements which generally cannot be changed for three
years following the merger without approval of at least 14 directors and, in
certain cases, approval of the combined company's shareholders. These corporate
governance arrangements are described below.
Chairman and Chief Executive Officer. Mr. Redstone, the current Chairman
and CEO of Viacom, will remain the Chairman and CEO of Viacom following the
merger. Mr. Redstone, as CEO, will be responsible, in consultation with the
President and COO, for Viacom's corporate policy and strategy and will chair all
Board and shareholder meetings at which he is present. If Mr. Redstone ceases
to be the CEO at any time during the first three years following the merger, or
if Mr. Redstone is no longer the CEO at the effective time of the merger, Mr.
Karmazin will be the CEO and will retain the COO functions described below.
President and Chief Operating Officer. Mr. Karmazin, the current
President and CEO of CBS, will be the President and COO of Viacom following the
merger. The COO will report directly to the CEO and must consult with the CEO
on all major decisions affecting the combined company. Mr. Karmazin, as COO,
will be responsible for supervising, coordinating and managing the combined
company's business, operations, activities, operating expenses, capital
allocation, officers (other than the CEO) and employees, including hiring,
terminating, changing positions and allocating responsibilities of those
officers and employees (other than hiring of the Chief Financial Officer,
Controller and General Counsel, which can only be done by majority vote of the
combined company's board). All officers, other than the CEO, and employees will
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report directly or indirectly to the COO. During the three-year period following
the merger, Mr. Karmazin cannot be terminated or demoted, whether he is COO or
CEO, and none of the COO functions may be changed, unless approved by a vote of
at least 14 directors.
Board of Directors. At the effective time of the merger, the Board of
Directors of Viacom will be expanded to 18 directors. The Board size may not be
changed during the three-year period following the merger without the approval
of at least 14 directors. Eight of the 18 directors initially will be
individuals who were directors of CBS on September 6, 1999, or any independent
directors of CBS subsequently appointed to the CBS Board of Directors, as
selected by the CBS Board of Directors prior to the effective time of the
merger. The Viacom Board, subject to the fiduciary duties of its members, and
National Amusements, pursuant to its voting agreement with CBS, are required to
take all action necessary to fill any vacancy in any of the eight CBS
directorships with an independent director designated by a majority of the
remaining CBS directors. No CBS director serving on the Viacom Board may be
removed from office during the three-year period following the merger unless the
removal is for cause and is approved by at least 14 directors. The remaining
ten directors will be the Viacom directors immediately prior to the effective
time of the merger. Of these ten directors, two must either be the current
independent directors of Viacom or other disinterested, independent persons that
are chief executive officers, chief operating officers, chief financial officers
or former chief executive officers of a Fortune 500 company or a non-U.S. public
company of comparable size. Subject to the preceding sentence, National
Amusements, which is controlled by Mr. Redstone, through its majority ownership
of Viacom Class A common stock, has the ability to cause the Viacom nominees to
be elected to serve as the ten remaining directors.
Actions of the Board of Directors. All actions to be taken by the Board
of Directors of Viacom following the merger will require the approval of at
least 14 directors, except for the actions specified below, which will require
approval only by a majority of the Board:
Acquisitions, Divestitures, Joint Ventures, Guarantees
------------------------------------------------------
. Any acquisition, equity investment or joint venture by Viacom or any
of its subsidiaries for more than $25 million.
. Any divestiture or other sale of assets not in the ordinary course by
Viacom or any of its subsidiaries for more than $25 million.
. Any real estate purchase, sale or lease by Viacom or any of its
subsidiaries for more than $25 million.
. Any guarantee by Viacom or any of its subsidiaries of an obligation of
a third party where the obligation guaranteed is more than $25
million.
. Notwithstanding any of the above, any acquisition or divestiture by
Viacom or any of its subsidiaries of (1) internet or internet related
businesses for more than $25 million but less than $100 million, with
the value thereof represented by multi-year commitments for
advertising, promotion and content licensing, is excluded, so long as
the aggregate of these acquisitions or divestitures, in each case,
does not exceed $550 million and (2) radio or outdoor advertising
businesses for more than $25 million but less than $100 million is
excluded, so long as the aggregate of these acquisitions or
divestitures, in each case, does not exceed $300 million; provided
that (A) any
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divestiture of shares of a publicly traded internet or internet
related business with a value of up to $75 million is excluded and
will not be included in the calculation of any of the threshold
amounts set forth above, (B) Board approval may be secured (but is not
required) for any transaction of more than $25 million but less than
$100 million where the regular meeting schedule of the Board so
permits (and is not otherwise required), (C) the Board will be
provided with information about and a status report on the
transactions completed without Board approval and (D) this limit of
authority will be reviewed 12 months following the merger and may be
amended only with the approval of 14 directors.
. Any contract of Viacom or any of its subsidiaries not in the ordinary
course with a value in excess of $25 million.
. Notwithstanding any of the above, any of the foregoing transactions
that is approved by a majority of the Board will not be included in
the calculation of any of the threshold amounts set forth above.
Employee Matters
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. Employee benefit plans of Viacom or any of its subsidiaries: (1)
creating a new plan, (2) suspending or terminating an existing plan or
(3) adopting any amendment that materially increases costs to Viacom
or any subsidiary.
. Entering into any modifications or amendments to the employment
agreements with the CEO or the COO.
General
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. The Annual Report on Form 10-K.
. The proxy statement and notice of meeting, including annual or special
meeting date, location, record date for voting.
. Any issuance of Viacom stock, or options, warrants or other similar
rights, including stock appreciation rights or debt or other
securities convertible into or exchangeable for Viacom stock.
. Any issuance of debt unless the debt is short term and is within the
spending limits of the annual operating budget or is replacing
existing debt.
. Annual capital expenditure and annual operating budgets and individual
capital expenditures in excess of $25 million for Viacom or any of its
subsidiaries.
. Viacom or any of its subsidiaries pays a dividend or repurchases its
stock from a third party.
. Review and approval of any action or transaction where Board action is
required by law, other than (S) 141(a) of the DGCL, or by the terms of
the transaction, in all cases other than as specifically set forth in
Viacom's proposed new Restated Certificate of Incorporation.
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. Review and approval of Board minutes.
. Subject to other provisions of Viacom's proposed new Restated
Certificate of Incorporation, determining Board administration,
including number of directors, meeting schedule, nominees, committees,
director compensation, director and officer insurance authorization,
internal investigations and retention of advisors in connection with
the foregoing, and decisions regarding indemnification of individuals.
. Subject to other provisions of Viacom's proposed new Restated
Certificate of Incorporation, amendments to the proposed new Restated
Certificate of Incorporation and By-laws of Viacom.
. Commencement and settlement of major litigation.
. Selection of independent auditors.
. All matters on which Viacom's Board of Directors has historically
taken action other than (1) matters relating to the subject matters
addressed in this list and not requiring approval of the Board of
Directors under Viacom's proposed new Restated Certificate of
Incorporation and (2) those matters delegated to the COO, including
all of the COO functions set forth in Viacom's proposed new Restated
Certificate of Incorporation.
Committees of the Board. The Board of Directors of Viacom may delegate
any of its responsibilities to a committee. During the three-year period
following the merger, except with respect to the Compensation Committee and the
Officers Nominating Committee described below, CBS directors must be represented
on each committee in the same proportion as their representation on the full
Board of Directors, with a minimum of one CBS director on each committee.
Viacom's proposed new Restated Certificate of Incorporation specifically
provides for two committees, the Officers Nominating Committee and the
Compensation Committee:
Officers Nominating Committee. The Officers Nominating Committee
-----------------------------
will be composed of the COO or, in the event Mr. Karmazin is CEO, the CEO.
During the three-year period following the merger, the Officers Nominating
Committee has the power, subject to the powers of the Compensation
Committee, to hire, elect, terminate, change positions, allocate
responsibilities and determine non-equity compensation of officers and
employees, other than the Chairman, CEO and COO. The Officers Nominating
Committee will not, however, have the power to fill the position of Chief
Financial Officer, Controller or General Counsel without approval by a
majority of the Board of Directors, although the Officers Nominating
Committee will have the power to terminate the employment of the persons
holding those positions. Any action taken by the Officers Nominating
Committee may be overturned by a vote of at least 14 directors.
Compensation Committee. The Compensation Committee will be
-----------------------
composed of three CBS directors who are independent directors and three
non-CBS directors, all of whom are independent. Except as set forth in the
following sentence, all compensation must be approved by the Compensation
Committee. The Compensation Committee does not have the power to approve
the annual compensation of any talent, as that term is commonly used in the
media or entertainment industries, or of any employee whose annual cash
compensation, measured as
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salary plus target bonus is less than $1 million. These powers are
delegated to the Officers Nominating Committee.
Subsidiaries. The CEO and COO will be elected or appointed to the boards
of directors of all public subsidiaries of Viacom following the merger. In
addition, the Board of Directors of Viacom will have the right, in consultation
with the COO or, if Mr. Karmazin is the CEO, the CEO, to implement corporate
governance arrangements for any public subsidiary of Viacom consistent with the
corporate governance arrangements contained in Viacom's proposed new Restated
Certificate of Incorporation.
Accounting Treatment
The merger will be accounted for as a purchase for financial accounting
purposes in accordance with generally accepted accounting principles. For
purposes of preparing Viacom's consolidated financial statements, Viacom will
establish a new accounting basis for CBS' assets and liabilities based upon
their fair values, the merger consideration and the costs of the merger. Viacom
believes that any excess of cost over the fair value of the net assets of CBS
will be recorded as goodwill and other intangible assets. A final determination
of the intangible asset lives and required purchase accounting adjustments,
including the allocation of the purchase price to the assets acquired and
liabilities assumed based on their respective fair values, has not yet been
made. Accordingly, the purchase accounting adjustments made in connection with
the development of the unaudited pro forma combined financial information
appearing elsewhere in or incorporated by reference into this joint proxy
statement/prospectus are preliminary and have been made solely for purposes of
developing that pro forma information. Viacom will determine the fair value of
certain of CBS' assets and liabilities and will make appropriate purchase
accounting adjustments, including adjustments to the amortization period of the
intangible assets, upon completion of that determination.
Federal Income Tax Consequences
The following discussion summarizes the material United States federal
income tax consequences of the merger assuming that it is consummated as
contemplated by this joint proxy statement/prospectus. This discussion is based
on the Internal Revenue Code, U.S. Treasury regulations, judicial decisions and
administrative rulings as of the date hereof, all of which are subject to
change, including changes with retroactive effect. The discussion below does
not address any state, local or foreign tax consequences of the merger. This
discussion assumes that shareholders hold such shares as capital assets. The
tax treatment of a shareholder may vary depending upon the shareholder's
particular situation, and certain shareholders (including individuals who hold
options in respect of CBS common stock, insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, and persons who are
neither citizens nor residents of the United States or that are foreign
corporations, foreign partnerships or foreign estates or trusts as to the United
States) may be subject to special rules not discussed below. Neither Viacom nor
CBS has requested or will request an advance ruling from the Internal Revenue
Service as to the tax consequences of the merger.
EACH CBS SHAREHOLDER IS URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS
TO THE PARTICULAR TAX CONSEQUENCES TO HIM, HER OR IT OF THE MERGER, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS, AND OF CHANGES
IN APPLICABLE TAX LAWS.
Federal Income Tax Consequences of the Merger. Cravath, Swaine & Moore,
counsel to CBS, and Paul, Weiss, Rifkind, Wharton & Garrison, counsel to Viacom,
will each render an opinion
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as to the qualification of the merger as a tax-free reorganization under Section
368 of the Internal Revenue Code. An opinion of counsel is not binding on the
Internal Revenue Service or the courts. Further, the opinions of Cravath, Swaine
& Moore and Paul, Weiss, Rifkind, Wharton & Garrison referred to above are based
on, among other things, current law and certain representations as to factual
matters made by, among others, CBS and Viacom. Any change in current law, which
may or may not be retroactive, or failure of any such factual representations to
be true, correct and complete in all material respects would jeopardize the
conclusions reached by counsel in their opinions. Neither CBS nor Viacom is
currently aware of any facts or circumstances that would cause any
representations made by it to Cravath, Swaine & Moore and Paul, Weiss, Rifkind,
Wharton & Garrison to be untrue or incorrect in any material respect. These
opinions state that:
(i) The merger will qualify as a reorganization under Section 368(a)
of the Internal Revenue Code and each of CBS and Viacom will be a party to
that reorganization within the meaning of Section 368(b) of the Internal
Revenue Code.
(ii) Except for any payment received in lieu of fractional shares and
to the extent that any payment by Viacom of transfer taxes is treated as
taxable consideration received by the CBS shareholders, a shareholder will
not recognize any income, gain or loss as a result of the receipt of Viacom
Class B common stock.
(iii) A CBS shareholder's tax basis for the shares of Viacom Class B
common stock, including any fractional share interest for which payment is
received, will equal such shareholder's tax basis in shares of CBS common
stock held immediately before the merger.
(iv) A CBS shareholder's holding period for the Viacom Class B common
stock, will include the period during which the shares of CBS common stock
were held.
Payment received by a CBS shareholder in lieu of a fractional share
interest of Viacom Class B common stock will be treated as having been received
in exchange for the fractional share interest of Viacom Class B common stock
that the shareholder would otherwise have been entitled to receive. This receipt
of this payment will result in gain or loss measured by the difference between
the tax basis allocable to the fractional share interest and the amount of
payment received. The gain or loss will be capital gain or loss to the
shareholder.
Viacom and CBS do not believe that any significant transfer taxes will be
payable as a consequence of the merger. Viacom's payment of any transfer taxes
that, to the knowledge of Viacom and CBS, may be payable as a consequence of the
merger should not be treated as taxable consideration received by CBS
shareholders in the merger. If the payment of any such taxes were treated as
taxable consideration, the CBS shareholders would recognize income or gain in an
amount not in excess of the amount of such taxable consideration.
Backup Withholding. Under the backup withholding rules, a holder of Viacom
Class B common stock may be subject to backup withholding at the rate of 31%
with respect to payment received in exchange for the fractional share interest
unless the shareholder (i) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact or (ii) provides a
taxpayer identification number and certifies that the taxpayer identification
number is correct and the taxpayer is not subject to backup withholding for
specified reasons, and otherwise complies with applicable requirements of the
backup withholding rules. Any amount withheld under these rules will be
credited against the shareholder's federal income tax liability.
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Merger Consideration
At the effective time of the merger, each outstanding share of CBS common
stock, including any shares held by any direct or indirect wholly owned
subsidiary of Viacom or CBS but excluding any shares owned by Viacom or CBS as
provided in the following paragraph, will be converted into the right to receive
1.085 fully paid and nonassessable shares of Viacom non-voting Class B common
stock, except that a payment will be made in lieu of fractional shares as
described below. As of the effective time of the merger, all shares of CBS
common stock will no longer be outstanding and will automatically be cancelled
and will cease to exist and each holder of a certificate representing any shares
of CBS common stock will cease to have any rights other than the right to
receive the merger consideration. The exchange ratio was determined through
arm's-length negotiations between CBS and Viacom.
As of the effective time of the merger, any shares of CBS common stock
owned immediately prior to the effective time of the merger by Viacom or CBS,
excluding any shares held by any direct or indirect wholly owned subsidiary of
Viacom or CBS, will be cancelled and retired and will cease to exist and no
consideration will be delivered in exchange for these shares.
Conversion of Shares; Procedures for Exchange of Certificates; Fractional Shares
The conversion of CBS common stock into the right to receive Viacom non-
voting Class B common stock and payment instead of fractional shares will occur
automatically at the effective time of the merger. As soon as practicable after
the effective time of the merger, . or another bank or trust company designated
by Viacom and acceptable to CBS, in its capacity as 1 exchange agent, will send
a transmittal letter to each former CBS shareholder. The transmittal letter
will contain instructions on how to obtain shares of Viacom Class B common stock
in exchange for shares of CBS common stock. CBS shareholders should not send in
their stock certificates until they receive the transmittal letter and
accompanying materials from the exchange agent.
In the event of a transfer of ownership of CBS common stock which is not
registered in the records of CBS' transfer agent, a certificate representing the
proper number of shares of Viacom Class B common stock may be issued to a person
other than the person in whose name the certificate surrendered is registered if
the certificate is properly endorsed or otherwise is in proper form for transfer
and the person requesting the issuance pays any required transfer or other taxes
required by reason of the issuance of shares of Viacom Class B common stock to a
person other than the registered holder of the certificate or establishes to the
satisfaction of Viacom that the taxes have been paid or are not applicable.
All shares of Viacom Class B common stock issued upon conversion of shares
of CBS common stock, together with any payment in lieu of fractional shares of
Viacom Class B common stock, will be deemed to have been issued and paid in full
satisfaction of all rights pertaining to the shares of CBS common stock, subject
to Viacom's obligation to pay any dividends or make any other distributions with
a record date after the effective time of the merger that may have been declared
or made by Viacom on shares of Viacom Class B common stock after the effective
time of the merger and which remain unpaid prior to the issuance of Viacom Class
B common stock in exchange for CBS common stock.
No fractional shares of Viacom Class B common stock will be issued to any
CBS shareholder upon surrender of certificates previously representing CBS
common stock. For each fractional share
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that would otherwise be issued, Viacom, through the exchange agent, will pay to
CBS shareholders an amount equal to the product obtained by multiplying the
fractional share interest to which the shareholder would otherwise be entitled
by the closing price for a share of Viacom Class B common stock on the
Consolidated Tape, Network A, as reported in The Wall Street Journal (Northeast
edition), or any other authoritative source, on the first trading day
immediately following the effective time of the merger.
Litigation
On September 7, 1999, three purported shareholder class action lawsuits
were filed against CBS, and the members of the CBS Board of Directors; one in
the Supreme Court of the State of New York and two in the Philadelphia County
Court of Common Pleas. These complaints allege, among other things, that the
defendants have breached their fiduciary duties by failing to maximize
shareholder value in connection with entering into the merger agreement. The
complaints seek, among other things, an order enjoining completion of the
merger. CBS believes that the complaints are without merit and plans to defend
vigorously against the complaints.
Effective Time of the Merger
The effective time of the merger will be the time of the filing of the
certificate of merger with the Secretary of State of the State of Delaware or
any later time as is agreed upon by Viacom and CBS and specified in the
certificate of merger.
Federal Securities Laws Consequences
The Viacom Class B common stock to be issued pursuant to the merger
agreement will not be subject to any restrictions on transfer arising under the
Securities Act of 1933, except for shares issued to any CBS shareholder who may
be deemed to be an "affiliate" of CBS or Viacom for purposes of Rule 145 under
the Securities Act. It is expected that each affiliate will enter into an
agreement with Viacom providing that the affiliate will not transfer any Viacom
Class B common stock received in the merger except in compliance with the resale
provisions of Rules 144 or 145 under the Securities Act or as otherwise
permitted under the Securities Act. The merger agreement requires CBS to use
reasonable best efforts to cause its affiliates to enter into these agreements,
and CBS has represented and warranted that it has advised its affiliates of the
resale restrictions imposed by applicable securities laws. This joint proxy
statement/prospectus does not cover resales of Viacom Class B common stock
received by any person upon consummation of the merger, and no person is
authorized to make any use of this joint proxy statement/prospectus in
connection with any resale.
Stock Exchange Quotation
It is a condition to the consummation of the merger that the shares of
Viacom Class B common stock to be issued pursuant to the merger agreement be
authorized for listing on the New York Stock Exchange, subject to official
notice of issuance. Viacom will file a listing application with the New York
Stock Exchange.
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Viacom's Board of Directors After the Merger
As of the effective time of the merger, it is anticipated that the Board
will consist of the ten current directors of Viacom, as well as the eight
individuals who will be designated by CBS prior to the effective time of the
merger.
Dissenters' and Appraisal Rights
Under the Pennsylvania Business Corporation Law, holders of CBS common
stock are not entitled to dissenters' rights in connection with the merger.
Under the Delaware General Corporation Law, holders of Viacom Class A
common stock and Viacom Class B common stock are not entitled to appraisal
rights as a result of the merger.
Delisting and Deregistration of CBS Common Stock
If the merger is consummated, the shares of CBS common stock will be
delisted from the NYSE, the Boston Stock Exchange, the Chicago Stock Exchange,
the Pacific Exchange and the Philadelphia Stock Exchange and will be
deregistered under the Exchange Act.
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THE MERGER AGREEMENT AND
RELATED AGREEMENTS
The Merger Agreement
Effective Time and Closing of the Merger
The closing of the merger will take place on the first business day after
the satisfaction or, if permissible, waiver of the conditions to closing set
forth in the merger agreement. On the closing date, Viacom and CBS will
consummate the merger by filing (1) a certificate of merger with the Secretary
of State of the State of Delaware and (2) articles of merger with the Department
of State of the Commonwealth of Pennsylvania. The effective time of the merger
will be the filing of the certificate of merger with the Secretary of State of
the State of Delaware, or any later time as may be agreed by the parties and
specified in the certificate of merger.
Conversion of Securities
At the effective time of the merger, each share of CBS common stock issued
and outstanding immediately prior to the effective time of the merger, including
any shares owned by any direct or indirect wholly owned subsidiary of Viacom or
CBS but excluding any shares to be cancelled pursuant to the following sentence,
will be converted into the right to receive 1.085 shares of Viacom Class B
common stock. At the effective time of the merger, each share held in the
treasury of CBS and each share owned by Viacom immediately prior to the
effective time of the merger will be cancelled and extinguished and no payment
will be made for those shares. After the effective time of the merger, each
certificate that previously represented shares of CBS common stock will
represent only the right to receive Viacom Class B common stock into which the
shares of CBS common stock are converted in the merger and payment instead of
fractional shares of Viacom Class B common stock.
As soon as practicable after the effective time of the merger, . or
another bank or trust company designated by Viacom and acceptable to CBS, in its
capacity as exchange agent, will send a transmittal letter to each former CBS
shareholder. The transmittal letter will contain instructions on how to obtain
shares of Viacom Class B common stock in exchange for shares of CBS common
stock. CBS shareholders should not send in their stock certificates until they
receive the transmittal materials from the exchange agent.
Viacom's Proposed New Restated Certificate of Incorporation and By-laws
Viacom's proposed new Restated Certificate of Incorporation and By-laws
give effect to the governance arrangements agreed between Viacom and CBS. You
can find more information on the governance arrangements in the section titled
"The Merger--Directors, Management and Corporate Governance of the Combined
Company."
Representations and Warranties of Viacom and CBS
Viacom and CBS made mutual customary representations and warranties in the
merger agreement regarding the following:
. corporate organization and qualification to do business of each of the
companies and their subsidiaries;
. validity and effectiveness of charters and by-laws;
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. capitalization of the companies;
. authority to enter into the merger agreement;
. absence of conflicts between the merger agreement and the merger, on
the one hand, and other contractual and legal obligations of the
companies, on the other hand;
. requirement of consents, approvals, filings or other authorizations to
enter into the merger agreement and consummate the merger;
. possession and effectiveness of all permits and licenses and contracts
necessary to carry on business as currently conducted;
. absence of material non-competition agreements;
. operation of business in material compliance with permits, licenses
and applicable laws;
. compliance with all applicable SEC filing requirements and accuracy
and completeness of SEC filings;
. financial statements contained in SEC filings;
. absence of changes or events since December 31, 1998;
. litigation;
. employee benefit plans;
. labor matters;
. environmental matters;
. intellectual property;
. tax matters;
. Year 2000 compliance;
. opinion of financial advisors;
. shareholder vote required to adopt the merger agreement;
. use of brokers;
. inapplicability of certain state anti-takeover provisions; and
. in the case of CBS, that neither the merger agreement nor the merger
would give rise to the exercise or issuance of rights under its
shareholders' rights plan.
None of the representations and warranties made in the merger agreement survive
the closing of the merger.
No Solicitation Provision
CBS has agreed not to, directly or indirectly, through any officer,
director, agent or otherwise, initiate, solicit or knowingly encourage, or take
any other action knowingly to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
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"competing transaction", which is defined in the merger agreement as any
transaction, other than the merger, that would result in a third party or its
shareholders acquiring more than 35% of the voting power of the CBS common stock
then outstanding or more than 35% of the assets of CBS and its subsidiaries,
taken as a whole, or enter into or maintain or continue discussions or negotiate
with any person in furtherance of any related inquiries or to obtain a competing
transaction, or agree to or endorse any competing transaction, or authorize any
of the officers, directors or employees of CBS or any agent or representative of
CBS to take any such action. CBS has agreed to notify Viacom as promptly as
practicable of all the relevant material details relating to all inquiries and
proposals that CBS, or any officer, director, employee, agent or representative,
may receive relating to any of the foregoing matters.
Notwithstanding the foregoing, prior to the adoption of the merger
agreement by the shareholders of CBS, the Board of Directors of CBS is not
prohibited from:
(1) furnishing information to, or entering into and engaging in
discussions or negotiations with, any person that makes a bona fide
unsolicited written proposal that the Board of Directors of CBS determines
in good faith, after consultation with CBS' financial advisors and
independent legal counsel, can be reasonably expected to result in a
"superior proposal", which is defined in the merger agreement as any
proposal that would result in a third party acquiring, directly or
indirectly, more than 50% of the voting power of the outstanding CBS common
stock or all or substantially all the assets of CBS and its subsidiaries,
taken as a whole, for consideration which the Board of Directors of CBS
determines in its good faith judgment to be more favorable to CBS'
shareholders than the merger with Viacom, provided that CBS must notify
Viacom of its intention to provide information to, or enter into
negotiations with, a third party concerning a superior proposal, keep
Viacom informed of the status and material terms of any superior proposal
and enter into a confidentiality agreement with the third party on
customary terms;
(2) complying with its disclosure and other obligations under
applicable laws; or
(3) failing to make or withdrawing or modifying its recommendation to
shareholders regarding adoption of the merger agreement following the
making of a superior proposal if the Board of Directors of CBS, after
consultation with and based upon advice of independent legal counsel,
determines in good faith that the action is necessary for the Board of
Directors of CBS to comply with its fiduciary duties under applicable law.
Mutual Covenants of Viacom and CBS
Viacom and CBS have agreed as follows:
. each company will cooperate to file the SEC documents necessary to
complete the merger;
. each company will call and hold a shareholder's meeting to vote upon
the adoption of the merger agreement;
. each company will solicit proxies in favor of the adoption of the
merger agreement, unless it determines, after receiving advice from
independent legal counsel, that failure to do so is required in order
for its directors to comply with their fiduciary duties under
applicable law;
. each company will promptly make all governmental filings necessary to
consummate the merger and otherwise use best efforts to consummate the
merger, including, if
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necessary, committing to or effecting the disposition of those of its
assets or businesses as are required to be divested in order to obtain
the consent of the FCC or to avoid or cause to be removed any other
legal impediment that would otherwise prevent or materially delay the
consummation of the merger;
. each party will use reasonable best efforts to obtain any third party
consents necessary, proper or advisable to consummate the merger;
. each company will continue to allow the other company reasonable
access to its corporate records;
. Viacom's proposed new Restated Certificate of Incorporation and By-
laws following the merger will contain the indemnification provisions
in favor of officers and directors that are contained in Viacom's
current Restated Certificate of Incorporation and By-laws;
. subject to certain dollar limitations, for six years following the
merger Viacom will maintain directors' and officers' liability
insurance covering those persons who are currently covered by CBS'
directors' and officers' liability insurance policy on terms
comparable to CBS' existing coverage;
. each company will promptly notify the other company of any event that
would likely cause any representation or warranty to be untrue or
inaccurate or any covenant or condition not to be complied with or
satisfied, or of any failure to comply with or satisfy any covenant or
condition;
. neither company will take any action that would undermine the
qualification of the merger as a tax-free reorganization under Section
368 of the Internal Revenue Code;
. Viacom will promptly prepare and submit an application to the New York
Stock Exchange for the listing of the new shares of Viacom Class B
common stock;
. the companies will consult with each other regarding any public
announcements they make concerning the merger;
. the Viacom Board of Directors will take all necessary action to
increase the number of Board members to eighteen and to cause to be
appointed eight designees of CBS;
. CBS will take the necessary action to render its shareholders' rights
agreement inapplicable to the merger agreement and the merger;
. Viacom will assume the debt and other liabilities and obligations of
CBS;
. CBS will notify Viacom of all persons that may be deemed affiliates of
CBS under Rule 145 of the Securities Act, and CBS will use its
reasonable best efforts to obtain from each affiliate a letter in
which the affiliate agrees to comply with the resale restrictions of
Rules 144 and 145 under the Securities Act following the merger;
. Viacom will take measures to give continuing employees credit under
Viacom's benefit plans for prior service with CBS; and
. both companies may establish retention and severance agreements
consistent with terms and conditions set forth in the merger
agreement.
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Conduct of Business Prior to the Closing
Viacom and CBS have each agreed that, subject to certain exceptions,
between the execution of the merger agreement and the effective time of the
merger, each company and its respective subsidiaries will:
. conduct their businesses in the ordinary course of business and in a
manner consistent with past practice;
. use their reasonable best efforts to preserve substantially intact
their business organizations and to keep available the services of
their current officers, employees and consultants; and
. use their reasonable best efforts to preserve their current
relationships with customers, distributors, dealers, suppliers and
other persons that have significant business relations with the
companies.
Viacom and CBS have also agreed that subject to certain exceptions, prior
to the effective time of the merger, without the prior written agreement of the
other party, they and their subsidiaries will not:
. amend or otherwise change their charters or by-laws in a manner that
would have a material adverse effect;
. issue, sell or otherwise dispose of equity securities, except for (A)
in the case of CBS and its subsidiaries (1) the issuance of common
stock upon the exercise of outstanding options, (2) the issuance of
common stock in connection with pending transactions, (3) the grant of
options to purchase up to 22,200,000 shares of CBS common stock and
(4) the grant of options to purchase up to 12,500,000 shares of
Infinity Broadcasting Corporation and (B) in the case of Viacom and
its subsidiaries (1) the issuance of common stock upon the exercise of
outstanding options and (2) the grant of options to purchase up to
6,000,000 shares of Viacom Class B common stock;
. sell, encumber or otherwise dispose of any assets material to the
respective companies and their subsidiaries, taken as a whole, other
than in the ordinary course of business consistent with past practice;
. declare, make or pay any dividend or other distribution other than (1)
intercompany cash dividends, (2) in the case of CBS and its
subsidiaries, dividends made or paid by Infinity not to exceed
$500,000,000 and (3) in the case of Viacom and its subsidiaries,
dividends made or paid by Blockbuster not to exceed $50,000,000;
. reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of their or their subsidiaries'
capital stock;
. except in connection with acquisitions that individually do not exceed
$200,000,000 and in the aggregate do not exceed $1,000,000,000 and
except, in the case of CBS and its subsidiaries, in connection with
pending transactions, (1) acquire or otherwise invest in other
companies or business organizations or (2) incur any indebtedness
other than in the ordinary course of business and other than in
connection with refinancings;
. enter into or amend any material contract, agreement or transaction
that would not be in the ordinary course of business and that would be
reasonably likely to prevent or materially delay the consummation of
the merger;
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. authorize any capital expenditures which are in the aggregate in
excess of the amounts currently budgeted for fiscal year 1999 and,
with respect to fiscal year 2000, 10% in excess of the 1999 amount, in
each case for the respective companies and their subsidiaries taken as
a whole;
. increase compensation to executive officers or employees, except in
accordance with retention or severance arrangements generally agreed
to between the parties or as required by law or any existing agreement
and except for increases in the ordinary course of business consistent
with past practice;
. grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director or executive
officer, provided that no CBS or Viacom subsidiary will be restricted
by any of the foregoing from (1) entering into employment contracts
with newly-hired or promoted executive officers, or making severance
payments, on terms substantially consistent with currently existing
contracts or (2) providing for the payment of severance to executive
officers or employees on terms substantially consistent with past
practice;
. materially change their accounting practices;
. make any tax election that, individually or in the aggregate, would
have a material adverse effect, or settle or compromise any material
tax liability; and
. enter into any contract, agreement, lease, license, permit, franchise
or other instrument or obligation which, if in existence and known
prior to the execution of the merger agreement, would have conflicted
with the entrance into and performance of the merger agreement in a
manner that would give rise to a material adverse effect.
Notwithstanding any of the foregoing:
. CBS is not restricted from taking actions in connection with the
consummation of the pending acquisitions of King World, Outdoor
Systems and certain television station assets from Gaylord
Entertainment Company on terms previously agreed to with these parties
or, unless Viacom has consented, on other terms that would not be
reasonably likely to have an impact that is both material and
detrimental to CBS and its subsidiaries, taken as a whole;
. Viacom is not restricted from consummating an exchange offer of
Blockbuster shares owned by Viacom for shares of Viacom common stock
owned by the shareholders of Viacom in accordance with procedures
agreed upon between Viacom and CBS; and
. neither Infinity nor Blockbuster is restricted from taking any action
that would otherwise violate any of the restrictions on conduct of
business prior to the effective time of the merger if its Board of
Directors determines that the action is required to be taken in the
exercise of the Board's fiduciary duties.
Stock Options and Employee Benefit Plans
Stock Options and Other Stock Plans
-----------------------------------
Each outstanding unexpired and unexercised option or warrant to purchase
shares of common stock of CBS will be automatically converted at the effective
time of the merger into an option or warrant to purchase shares of Viacom Class
B common stock, in a number determined by multiplying the number of shares of
CBS common stock that could have been purchased under the CBS option or
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warrant by the exchange ratio of 1.085. The exercise price of these options will
equal the per-share exercise price of the corresponding CBS option or warrant
divided by the exchange ratio. The substitute options or warrants will be
subject to the same terms and conditions as the corresponding CBS options or
warrants and the vesting of the options or warrants will accelerate on account
of the merger to the extent provided in the applicable option or warrant. After
the effective time of the merger:
. all references to CBS in CBS' equity based compensation plans and
agreements will be deemed to refer to Viacom; and
. Viacom will assume all of CBS' obligations with respect to the
substitute options and warrants.
Viacom will issue to each CBS option or warrant holder a document
evidencing its assumption of the options and warrants. Viacom has agreed to
file a Form S-8 or other appropriate registration statement covering the shares
of Viacom Class B common stock underlying the assumed options and warrants no
later than one business day after the effective time of the merger and to keep
the registration statement current.
Other Employee Arrangements
---------------------------
Viacom will recognize service with CBS under Viacom's employee benefit
plans, except where the crediting would result in duplication of benefits, and
will honor all personal and sick days accrued by CBS employees who continue
employment with Viacom after the effective time of the merger.
Viacom may pay up to a total of $30 million to its employees as retention
bonuses, payable on or after the effective time of the merger. Viacom has also
established severance arrangements for its corporate staff, including the
executive severance plan described in the section captioned "Interests of
Certain Persons in the Merger -- Viacom -- Executive Severance Plan." CBS may
also establish similar retention, severance and compensation arrangements as
long as the total cost of those arrangements is not materially greater than the
cost of Viacom's arrangements.
Conditions to Closing
The obligations of Viacom and CBS to consummate the merger are subject to
the satisfaction or waiver of the following conditions:
. adoption of the merger agreement by the shareholders of CBS and
Viacom;
. expiration or termination of any applicable waiting period under the
HSR Act;
. no governmental authority or court having entered an order or taken
other legal action making the merger illegal or otherwise prohibiting
its consummation;
. the SEC having declared the Viacom registration statement, of which
this joint proxy statement/prospectus forms a part, effective and
there existing no stop order or other action to suspend the
effectiveness of the registration statement;
. the making by both companies of all required filings and notices, and
the receipt by both companies of all required governmental consents,
approvals or other authorizations, other than those which, if not
obtained, would not have a material adverse effect, at or after the
effective time of the merger, on the business, results of operations
or financial condition of CBS, Viacom and their subsidiaries,
collectively taken as a whole;
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. authorization for listing on the New York Stock Exchange of the shares
of Viacom Class B common stock to be issued to CBS shareholders,
subject to official notice of issuance;
. the continued truthfulness and accuracy of the representations and
warranties, except where the failure to be true or correct would not
have, individually or in the aggregate, a material adverse effect, and
the performance or compliance in all material respects with all
material agreements, and receipt from the other party of a certificate
of an officer certifying to the foregoing; and
. each company having received an opinion from its tax counsel that the
merger will qualify as a tax-free reorganization under Section 368 of
the Internal Revenue Code.
Termination and Termination Fees
The merger agreement may be terminated and the merger abandoned at any time
prior to the closing date:
. by mutual written consent of Viacom and CBS;
. by either company if the transaction is not completed on or prior to
August 31, 2000;
. by CBS upon written notice to Viacom of the existence of a competing
proposal for the acquisition of more than 50% of the voting power of
CBS or all or substantially all of the assets of CBS and its
subsidiaries, taken as a whole, for consideration which CBS' Board of
Directors determines in its good faith judgment to be more favorable
to CBS shareholders than the merger, provided, however, that
termination pursuant to this provision will not be effective until
Viacom has had two days within which to match the competing proposal
and until CBS pays the termination fee described below;
. by either company if CBS does not receive the required shareholder
approval;
. by either company upon the other company's breach of a representation,
warranty, covenant or agreement, or if any representation or warranty
becomes untrue, in either case so that the seventh condition to
closing set forth above cannot be satisfied on or before August 31,
2000; or
. by either company if a governmental authority has taken any final and
non-appealable action prohibiting the consummation of the merger.
If CBS terminates the merger agreement in accordance with the provision set
forth in the third bullet point above, CBS is required to pay Viacom a
termination fee of $1 billion. CBS is also required to pay Viacom a $1 billion
termination fee if all of the following occur: (1) either company terminates
the merger agreement as a result of the CBS shareholders failing to adopt the
merger agreement; (2) a competing proposal for the acquisition of more than 50%
of the voting power or assets of CBS has been made public at or prior to the
time of the failure to adopt the merger agreement, and (3) within 12 months
after termination, CBS consummates, or enters into a binding agreement with
respect to, a competing proposal.
The Voting Agreement
Simultaneously with the execution of the merger agreement, National
Amusements, which is controlled by Mr. Redstone and which holds approximately
68% of the voting power of Viacom, entered into a voting agreement with CBS in
which it has agreed to vote all of its shares of Viacom
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Class A common stock in favor of the adoption of the merger agreement and
against any proposals in opposition to the merger agreement. National Amusements
has also agreed in the voting agreement not to transfer ownership of any of its
shares of Viacom Class A common stock unless the transferee unconditionally
agrees in writing to be bound by the voting agreement. The voting agreement
terminates upon the earlier of the termination of the merger agreement or the
effective time of the merger.
The Stockholder Agreement
Simultaneously with the execution of the merger agreement, National
Amusements also entered into a stockholder agreement with CBS, pursuant to which
National Amusements has agreed, for a period of three years following the
merger, to support the governance arrangements agreed to between Viacom and CBS.
Among other things, National Amusements has agreed to:
. cause to be nominated and elected to the Viacom Board eight directors
designated by CBS or by the CBS designees, so that there are eight CBS
directors on the Viacom Board at all times;
. take all action necessary to ensure that any vacancy in a CBS
directorship is filled immediately by an independent director
designated by a majority of the remaining CBS directors;
. take all action necessary to ensure that no CBS director is removed
unless the removal is for cause and is approved by at least 14 members
of the Viacom Board;
. take all action necessary to cause any vacancy in a seat currently
held by a Viacom independent director to be filled by an independent
director that meets the qualifications stated in the proposed new
Restated Certificate of Incorporation;
. not take any action to amend, modify or repeal, or adopt provisions or
take other actions that would be inconsistent with, the provisions of
Viacom's proposed new Restated Certificate of Incorporation and By-
Laws that relate to the governance structure of Viacom during the
three year period following the merger;
. not transfer any of its shares of Viacom Class A common stock unless
the transferee unconditionally agrees in writing to be bound by the
stockholder agreement; and
. take all action necessary to ensure that it or its transferees own at
all times a majority of the outstanding shares of voting stock of
Viacom.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the respective recommendations of the Viacom Board and
the CBS Board with regard to the merger, you should be aware that, as described
below, certain members of the respective managements and Boards of Directors of
Viacom and CBS may have interests in the merger that are different from, or in
addition to, your interests, and that may create potential conflicts of
interest. Three executive officers of Viacom are members of the ten-person
Viacom Board that approved the merger. Two executive officers of CBS are members
of the 11-person CBS Board that approved the merger.
Viacom
Continuing Board Positions. All ten members of the current Viacom Board
are expected to continue as members of the Viacom Board following the effective
time of the merger, including Messrs. Redstone, Dauman and Dooley.
Employment Agreement with Mr. Redstone. Viacom entered into an
employment agreement with Mr. Redstone to serve as its Chairman and CEO
following the effective time of the merger. Mr. Redstone will receive an annual
base salary of $1 million and an annual bonus, with an established target bonus
of $5 million and a maximum bonus of $10 million for calendar year 2000,
prorated to reflect the actual number of days that the agreement is in effect
during the year 2000. The target and maximum bonus amounts increase by 10%
annually through 2003. Mr. Redstone will also receive deferred compensation of
$2 million during calendar year 2000, prorated to reflect the number of days the
agreement is in effect during the year 2000, thereafter to be increased annually
by 10% of his salary and deferred compensation for the preceding year. He will
also receive a grant of options to purchase 2,000,000 shares of Viacom Class B
common stock, vesting in three equal annual installments.
Resignation Agreements. Pursuant to agreements entered into with Viacom
on September 6, 1999, Messrs. Dauman and Dooley have agreed to resign from
Viacom effective at the effective time of the merger. Messrs. Dauman and Dooley
will each continue to serve as Deputy Chairman and Executive Vice President of
Viacom until the effective time of the merger and will each receive the
following payments:
(1) as soon as practicable after their resignations:
. a one-time cash payment equal to the amount that
would have been payable under their current
employment agreements through their original terms,
or December 31, 2003,
. payouts of all deferred compensation accounts and the
balance of their accounts under the Viacom Excess
Investment Plan, and
. a transaction bonus in the amount of $5,000,000; and
(2) on the earlier of the effective time of the merger and the
date on which Viacom pays 1999 bonuses to its executive
officers generally, the greatest of:
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. 110% of their respective bonuses received for 1998,
. amounts which, when added to their salary and
deferred compensation payable for 1999, would produce
the highest 1999 total cash compensation paid to any
other executive officer of Viacom or any of its
affiliates, and
. an amount the Viacom Board determines is appropriate
to compensate each executive for his contribution to
Viacom in 1999.
Assuming the merger were consummated on January 1, 2000 and the 1999 bonuses
were paid at 110%, it is estimated that each of Messrs. Dauman and Dooley would
each receive aggregate payments under (1) and (2) above (excluding any payouts
of deferred compensation accounts and Viacom Excess Investment Plan balances) of
approximately $41 million.
All equity-based compensation awards previously granted to Messrs.
Dauman and Dooley will vest on the effective date of their resignation and each
stock option will continue to be exercisable in accordance with its terms until
December 31, 2003, subject to their compliance with the provisions of their
resignation agreements. In addition, Viacom will provide each of Messrs. Dauman
and Dooley with an office that is comparable in quality and size to his current
office at a location of his choice in midtown Manhattan, subject to Viacom's
approval, and a secretary until December 31, 2003, or until he obtains full time
employment, if earlier.
Messrs. Dauman and Dooley will continue to participate in all savings,
retirement, welfare and fringe benefit plans of Viacom, or will receive the cash
equivalent of these benefits with an income tax gross up, through December 31,
2003, or, with respect to any welfare benefit, the date on which they become
entitled to comparable benefits through a subsequent employer, if earlier. Mr.
Dauman will also receive all additional service credit necessary to provide him
with 20 years of service under any Viacom plans for which that credit would
entitle him to additional benefits.
In the event that either executive is terminated by Viacom without
"cause," or terminates his own employment for "good reason," as these terms are
defined in their respective agreements, prior to the effective time of the
merger, that executive will be entitled to all of the payments described above
promptly following his termination, except for the $5 million transaction bonus,
which will be paid at the effective time of the merger. If the merger agreement
is terminated or the transactions contemplated by the merger agreement are
abandoned, the Viacom Board will determine in its good faith discretion whether
to pay Mr. Dauman and Mr. Dooley all or any part of the $5 million transaction
bonus.
The agreements provide for a gross-up payment to be made to Messrs.
Dauman and Dooley to eliminate the effects of any possible imposition under the
Internal Revenue Code of the "golden parachute" excise tax on any payment or
benefit they receive under their agreements or otherwise.
Messrs. Dauman and Dooley will be bound by certain restrictive
covenants, including a noncompetition covenant that applies for one year
following their termination of employment.
Executive Severance Plans. Viacom adopted executive severance plans
covering its approximately ten Senior Vice Presidents, which includes two Vice
Presidents who are treated as Senior Vice Presidents for this purpose, and 64
Vice Presidents that became effective on September 6, 1999 and continues in
effect for one year following the effective time of the merger. The benefits
provided under the executive severance plans are conditioned on the
participant's execution of a release
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in favor of Viacom and replace the severance benefits provided to participants
under their employment agreements with Viacom and any other Viacom severance
plan, program, policy or arrangement.
Upon a termination of a participant's employment by Viacom without
"cause" or by the participant for "good reason," as those terms are defined in
the executive severance plans, Viacom will pay each participant a one-time cash
payment equal to the sum of any earned, unpaid base salary, automobile
allowance, vacation pay and pro-rated bonus through the date of termination and
the base salary, target bonus (prorated for partial years) and automobile
allowance he would have earned if he had remained employed for two years, in the
case of a Vice President, or three years, in the case of a Senior Vice
President. These payments will be made assuming increases in base salary and
bonus compensation consistent with the participant's existing employment
agreement and, after the expiration of such agreement, at an annualized rate
consistent with the last regular increase under the agreement. For participants
who do not have employment agreements and for participants whose employment
agreements did not specify a rate of increase, the salary increase shall be a
rate of increase, consistent with the participants's last regular increase, but
not in excess of 8% per year.
All equity-based compensation awards previously granted to a
participant will vest on the date of his or her involuntary termination, and
each stock option will continue to be exercisable in accordance with its terms,
for two years, in the case of a Vice President, and three years, in the case of
a Senior Vice President, or through the option's original expiration date, if
earlier.
Additionally, for two years following termination in the case of a Vice
President and three years following termination in the case of a Senior Vice
President, each participant will be entitled to participate in Viacom's medical,
dental and life insurance plans until he or she secures full-time employment
that provides him or her with comparable coverage, and will either be provided
with car insurance or be reimbursed for his or her car insurance.
On the date of termination, participants will be:
. credited with age and service (two years for Vice Presidents,
three years for Senior Vice Presidents) for all purposes under
all qualified and non-qualified retirement plans of Viacom,
and
. credited with age and service (two years for Vice Presidents,
three years for Senior Vice Presidents) under Viacom's retiree
welfare benefit plans. Any increases in the annual amount
credited to the accounts of active employees will apply to the
participants.
In the case of Senior Vice Presidents only, for a period of one year
following their termination, or, if earlier, until the participant secures full-
time employment, they will be provided with an office comparable in both quality
and size to the office they had prior to their termination, at a location of
their choice, subject to Viacom's consent. Viacom will bear the cost of
relocating the participant and will provide him or her with a secretary.
Each participant will continue to be bound by the non-solicitation,
non-disparagement, confidentiality and cooperation with litigation covenants in
his existing employment agreement, but the noncompetition covenant in each of
the existing agreements will be waived by Viacom.
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The executive severance plan provides for a gross-up payment to be made
to the participants to eliminate the effects of the imposition under the
Internal Revenue Code of the "golden parachute" excise tax, if any, on any
payment or benefit they may receive under the executive severance plans or
otherwise.
CBS
Continuing Board Positions. Eight members of the CBS Board of
---------------------------
Directors, to be designated by the CBS Board prior to the effective time of the
merger, will become members of the Viacom Board as of the effective time of the
merger. One of the eight will be Mr. Karmazin.
Stock Options. At ., approximately . shares of CBS common stock were
--------------
subject to options granted to executive officers and directors under
compensatory equity-based plans of CBS. With certain exceptions, all of these
outstanding CBS stock options that have not yet become exercisable, other than
stock options granted on or after July 28, 1999, will become exercisable as a
result of the merger. As of ., 1999, . CBS options were outstanding of which .
were exercisable.
Restricted Stock. At ., approximately . shares of CBS common stock had
-----------------
been granted to executive officers and directors in the form of restricted stock
awards under compensatory equity plans of CBS. All restrictions to which these
restricted stock awards are subject will lapse and will be deemed earned as a
result of the merger.
Employment Agreement with Mr. Karmazin. In contemplation of the merger,
---------------------------------------
Viacom entered into an employment agreement with Mr. Karmazin that becomes
effective only upon the consummation of the merger, except for a stock "lock-up"
provision described below, which became effective upon the signing of the
employment agreement, and continues through December 31, 2003. Pursuant to the
agreement, Mr. Karmazin will serve as the President and COO of Viacom.
Mr. Karmazin will receive an annual base salary of $1 million and an
annual bonus, with an established target bonus of $5 million and a maximum bonus
of $10 million for calendar year 2000, prorated to reflect the actual number of
days that the agreement is in effect during the year 2000, which target and
maximum amounts will increase by 10% annually. Mr. Karmazin will also receive
deferred compensation of $2 million during calendar year 2000, prorated to
reflect the number of days that the agreement is in effect during the year 2000,
thereafter to be increased annually during the remainder of his employment in an
amount equal to 10% of his salary and deferred compensation for the preceding
year. The agreement provides for a grant of options to purchase 2,000,000 shares
of Viacom Class B common stock, vesting in three equal annual installments.
During his employment term, Mr. Karmazin will be provided with $5 million of
life insurance. Mr. Karmazin will also be entitled to a gross-up for any "golden
parachute" excise tax that may be imposed on him under the Internal Revenue Code
as a result of any payment or benefit he receives under his agreement or
otherwise.
The agreement provides that Mr. Karmazin will not, except in limited
circumstances, sell or otherwise dispose of his shares of CBS common stock, or,
following the merger, Viacom stock for the period beginning September 6, 1999,
the date the agreement was signed, and ending three years after the effective
time of the merger.
In the event of a termination of Mr. Karmazin's employment without
"cause" or his voluntary resignation for "good reason," as such terms are
defined in his employment agreement, during the
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employment term Mr. Karmazin will be entitled to receive salary, bonus, deferred
compensation, perquisites, medical and dental coverage, life insurance coverage
for the balance of the employment term, a supplemental pension benefit under
Viacom's Excess Pension Plan and an office including secretarial assistance for
up to six months after his employment terminates. Also upon such termination,
Mr. Karmazin's stock options including options that would have vested during the
employment term will remain exercisable for six months following the date of
termination but not beyond their expiration dates.
CBS has the right under the merger agreement to establish retention,
severance and compensation arrangements for its officers and employees which are
similar to the retention and severance arrangements described above in
"Interests of Certain Persons in the Merger--Viacom" provided that the aggregate
cost of such CBS arrangements does not materially exceed the aggregate cost of
Viacom's similar arrangements. At present, CBS has not made any final
determination as to the types of arrangements which it may establish or the
officers or other employees who will be eligible to participate in such
arrangements.
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THE COMPANIES
Viacom's Business
Viacom is a diversified entertainment company with operations in six
segments: (i) Networks, (ii) Entertainment, (iii) Video, (iv) Parks, (v)
Publishing and (vi) Online. Approximately 18% of Blockbuster's common stock was
recently sold to the public.
Networks
Viacom owns and operates advertiser-supported basic cable television
program services and premium subscription television program services in the
United States and internationally. Viacom's MTV Networks division includes such
owned and operated program services as:
. MTV: MUSIC TELEVISION in the United States, Europe and
Latin America;
. NICKELODEON in the United States, Latin America, Scandinavia,
Japan and the Commonwealth of Independent States;
. NICK AT NITE in the United States;
. VH1 Music First in the United States, United Kingdom and
Germany;
. MTV's spin-off, MTV2 in the United States and Europe; and
. TV LAND in the United States.
Viacom's MTV Networks division also participates in program services as
a joint venturer, including MTV in Asia and Brazil and NICKELODEON in the United
Kingdom and Australia.
Viacom's Showtime Networks Inc. subsidiary owns and operates SHOWTIME,
THE MOVIE CHANNEL/TM/, and FLIX/(R)/, and is a joint venture partner in and
manager of the SUNDANCE CHANNEL/(R)/. Also, Viacom is a joint venture partner in
(a) COMEDY CENTRAL/(R)/, an advertiser-supported basic cable program service in
the United States, (b) GULF DTH LDC, a satellite direct-to-home platform
offering programming in the Middle East and (c) NOGGIN/TM/, a
subscription-supported, non-commercial children's educational program service,
which is distributed by cable and satellite and includes a related online
service.
Entertainment
The principal businesses of Viacom's Entertainment segment are:
. PARAMOUNT PICTURES, which produces, acquires and distributes
feature-length motion pictures;
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. PARAMOUNT HOME VIDEO, which distributes motion pictures and
television product produced by Paramount and third parties on
videocassette and disc in the U.S. and Canada;
. PARAMOUNT TELEVISION, VIACOM PRODUCTIONS, SPELLING TELEVISION
and BIG TICKET TELEVISION, which produce, acquire and
distribute series, miniseries, specials and
made-for-television movies primarily for network television,
first-run syndication, pay television and basic cable
television;
. THE PARAMOUNT STATIONS GROUP, which owns and operates 17
television stations and programs two additional stations
pursuant to local marketing agreements;
. FAMOUS PLAYERS, which owns and operates movie theatres in
Canada; and
. FAMOUS MUSIC, a music publisher.
Additionally, the Company has joint venture interests in television
broadcasting, international motion picture and video distribution and television
programming services, including:
. UNITED PARAMOUNT NETWORK, in which the Company is a 50% joint
venture partner. Pursuant to current FCC regulations, Viacom
may not be permitted to maintain its 50% ownership interest
together with ownership of the CBS network;
. UNITED INTERNATIONAL PICTURES (UIP); the Company owns a
one-third interest in this venture which distributes
Paramount's, Universal's and MGM's motion pictures outside the
U.S. and Canada. MGM announced this year that it intends to
withdraw from UIP effective October 31, 2000;
. UNITED CINEMAS INTERNATIONAL (UCI); the Company owns a 50%
interest in this venture which owns and operates movie
theatres in Europe, Latin America and Asia; and
. CINEMA INTERNATIONAL B.V. (CIBV), in which the Company
currently is a 50% joint venture partner but has agreed to
become the sole owner, which distributes Paramount's motion
pictures on videocassette and disc outside the U.S. and Canada
and acquires and distributes motion pictures and television
product produced by third parties.
. Various international television programming services,
including the Movie Channel Middle East and the Paramount
Comedy Channel in the UK.
Video
The Company operates the home video and video game rental and retailing
business through BLOCKBUSTER INC. As of December 31, 1998, the Company operated
or franchised approximately 6,380 stores in the U.S., its territories and 25
other countries. BLOCKBUSTER offers titles primarily for rental and also offers
titles for purchase on a "sell-through" and previously viewed basis. During
1998, BLOCKBUSTER implemented revenue-sharing arrangements directly with major
motion picture
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studios, including PARAMOUNT PICTURES, thereby increasing the availability of
newly released videos in its domestic stores. In all of its domestic stores and
many of its stores outside of the U.S., BLOCKBUSTER rents video games and sells
previously played video games. In addition, in several hundred domestic stores
and certain international markets, BLOCKBUSTER rents and sells digital versatile
discs and rents DVD players.
Parks
Through PARAMOUNT PARKS, Viacom owns and operates five regional theme
parks and a themed attraction in the United States and Canada. Each of the theme
parks features attractions based on Viacom's intellectual properties.
Publishing
Through SIMON & SCHUSTER, Viacom publishes and distributes consumer
hardcover books, trade paperbacks, mass-market paperbacks, children's books,
audiobooks, electronic books and CD-ROM products in the United States and
internationally. SIMON & SCHUSTER's flagship imprints include SIMON & SCHUSTER,
POCKET BOOKS, SCRIBNER, and THE FREE PRESS. SIMON & SCHUSTER also develops
special imprints and publishes titles based on MTV, NICKELODEON and PARAMOUNT
PICTURES products. SIMON & SCHUSTER distributes its products directly and
through third parties. SIMON & SCHUSTER also delivers content and sells products
on Internet Web sites operated by various imprints or linked to individual
titles.
Online
Viacom operates Internet sites which are targeted to the current
audiences of its various MTV, VH1 and NICKELODEON program services, including
NOGGIN, as well as to new audiences such as those who do not receive cable or
direct-to-home satellite services. In addition to providing entertainment and
information on such Internet sites, Viacom also sells its own licensed and third
party merchandise.
CBS' Business
CBS is one of the largest radio and television broadcasters in the
United States. CBS operates its businesses through its Television, Cable and
Infinity segments. The Television segment consists of CBS' 15 owned and operated
television stations, which are located in seven of the nation's ten largest
markets, and the CBS television network. The CBS television network operations
are subdivided into five areas: entertainment; news; sports; enterprises, which
produces, distributes and markets first-run and off-network programming; and new
media consisting of CBS' Internet businesses. CBS' Cable segment consists of
CBS' cable networks, including The Nashville Network, Country Music Television
and two regional sports networks and a global provider of satellite services to
broadcast, cable and corporate networks. The Infinity segment corresponds to
CBS' majority owned subsidiary, Infinity Broadcasting Corporation, which
conducts CBS' radio and outdoor advertising businesses.
Infinity Broadcasting Corporation owns and operates approximately 160
AM and FM radio stations located in 35 markets. TDI Worldwide, Inc., a wholly
owned subsidiary of Infinity, is one of the largest outdoor advertising
companies in the United States and sells space on various media,
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including buses, trains, train platforms and terminals throughout commuter rail
systems and on painted billboards and phone kiosks.
CBS' Internet businesses, which consist primarily of its operation of
the Internet sites CBS.com and Country.com, also include CBS' minority
investments in three public companies, SportsLine USA, Inc. (NASDAQ: SPLN),
which publishes several sports Internet sites, including CBS.SportsLine.com,
MarketWatch.com, Inc. (NASDAQ: MKTW), which publishes the Internet site
CBS.MarketWatch.com. and Medscape Inc. (NASDAQ: MSCP), which publishes a
consumer health Internet site. CBS' other Internet investments include
Storerunner, Inc., Office.com, Inc., Switchboard, Inc., ThirdAge Media, Inc.,
Intelligent Systems for Retail, Inc., which operates Webvan.com, Jobs.com, Inc.,
Medscape Inc., Women's Consumer Network LLC. and Wrenchead.com, Inc., as well as
its majority interest in the Internet portal operated by iWon, Inc. CBS has also
entered into definitive agreements to acquire equity interests in Big E
Entertainment (NASDAQ: BIGE), which operates Hollywood.com, and Rx.com, Inc., a
leading Internet retail pharmacy.
In addition to the acquisitions listed above, on March 31, 1999, CBS
entered into a definitive merger agreement with King World Productions, Inc.
King World is the distributor of a number of shows, including "The Oprah Winfrey
Show," "Wheel of Fortune," "Jeopardy!" and "Hollywood Squares." The consummation
of the merger with King World is subject to certain conditions, including
approval by King World stockholders. On April 12, 1999, CBS announced its
agreement with Gaylord Entertainment Company pursuant to which CBS will acquire
television broadcast station KTVT-TV Dallas-Fort Worth, Texas. On May 27, 1999,
Infinity entered into a definitive agreement to acquire Outdoor Systems, Inc.
Outdoor Systems is the largest outdoor advertising company in North America,
operating bulletin, poster, mall and transit advertising display faces in the
United States, Canada and Mexico. The consummation of the merger with Outdoor
Systems is subject to certain conditions including approval by Outdoor Systems
and Infinity shareholders and review by certain regulatory bodies. CBS believes
that the completion of King World, Outdoor Systems and KTVT-TV transactions will
occur by the end of 1999.
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REGULATORY MATTERS AND THIRD-PARTY APPROVALS
Antitrust
Viacom and CBS each have filed a Premerger Notification and Report Form
for review under the HSR Act with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice. The HSR Act provides for an
initial 30 calendar day waiting period following the filing by the parties of
the Premerger Notification and Report Forms before the merger may be
consummated. Viacom made its filing on September 20, 1999 and CBS made its
filing on September 23, 1999. However, the Antitrust Division of the Department
of Justice and the Federal Trade Commission continue to have the authority to
challenge the merger on antitrust grounds before and after the merger is
completed. The HSR Act further provides that if, within the initial 30 calendar
day waiting period, the Federal Trade Commission or the Department of Justice
issues a request for additional information or documents, the waiting period
will be extended until 11:59 p.m. on the twentieth day after the date of
substantial compliance by both filing parties with the request.
Viacom and CBS conduct operations in a number of foreign countries
where regulatory filings or approvals with applicable authorities will be
required in connection with the consummation of the merger.
At a minimum, premerger notification filings with national antitrust
authorities will be required in the following foreign jurisdictions: Brazil,
Canada, Germany, Ireland, Japan, The Netherlands and South Africa. A
post-closing submission will be required with the antitrust authorities in
Austria. The Brazilian antitrust filing was made on September 28, 1999. The
Irish antitrust filing was made on October 6, 1999. The required premerger
filings with the antitrust authorities in the remaining jurisdictions are
expected to be made promptly.
Consummation of the merger is conditioned upon, among other things, the
absence of any preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction which prohibits or restricts
the consummation of the merger. Viacom and CBS believe that all material filings
and approvals have been made or obtained, or will be made or obtained, as the
case may be.
Federal Regulation of Television and Radio Broadcasting
General. Television and radio broadcasting are subject to the
jurisdiction of the Federal Communications Commission under the Communications
Act of 1934, as amended, most recently amended further by the Telecommunications
Act of 1996. The Communications Act prohibits the operation of broadcasting
stations except under a license issued by the FCC and empowers the FCC, among
other actions, to issue, renew, revoke and modify broadcasting licenses; assign
frequency bands; determine stations' frequencies, locations and operating power;
regulate some of the equipment used by stations; adopt other regulations to
carry out the provisions of the Communications Act; impose penalties for
violation of such regulations; and impose annual fees as well as fees for
processing applications and other administrative functions. Under the
Communications Act, the FCC also regulates certain aspects of the operation of
cable television systems and other electronic media that compete with broadcast
stations.
The Communications Act prohibits the assignment of a broadcast license
or the transfer of control of a licensee without prior approval of the FCC. The
merger is subject to such FCC approval
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of the transfer of control of CBS and its various licensee subsidiaries to
Viacom. Because the application for transfer of control of CBS will involve a
substantial change in ownership or control, the application must be placed on
public notice for a period of no less than 30 days during which time petitions
to deny the application may be filed by the public. If the FCC grants the
application, interested parties would have 30 days from the date of public
notice of the grant to seek reconsideration or review of that grant by the full
commission, or as the case may be, a court of competent jurisdiction. The full
commission has an additional 10 days to set aside on its own motion any action
taken by the FCC's staff, if action on the application were made in the first
instance by the staff of the FCC; if action is made in the first instance by the
full commission, the full commission may set aside its own action within 30 days
of public notice of such action. When passing on an assignment or transfer
application, the FCC is prohibited from considering whether the public interest
might be served by an assignment or transfer to any party other than the
assignee or transferee specified in the application.
License Renewals. Under the Telecommunications Act, the FCC is
authorized to renew broadcast licenses for terms of up to eight years. The
Telecommunications Act requires renewal of a broadcast license if the FCC finds
that (i) the station has served the public interest, convenience and necessity;
(ii) there have been no serious violations of either the Communications Act or
the FCC's rules and regulations by the licensee; and (iii) there have been no
other serious violations that taken together constitute a pattern of abuse. In
making its determination, the FCC may consider petitions to deny but cannot
consider whether the public interest would be better served by a person other
than the renewal applicant. Under the Telecommunications Act, competing
applications for the same frequency may be accepted only after the FCC has
denied an incumbent's application for renewal of license. Applications for
renewal of licenses for one television station owned by CBS and 10 radio
stations owned by Infinity are currently pending before the FCC. Petitions to
deny were filed against the renewal applications of seven of the radio stations;
however, CBS continues to believe that it will receive renewal of these
licenses.
Ownership Regulation. The Communications Act, FCC rules and regulations
and the Telecommunications Act also regulate broadcast ownership. The FCC has
promulgated rules that, among other matters, limit the ability of individuals
and entities to own or have an official position or ownership interest (an
"attributable" interest) above a certain level in broadcast stations as well as
other specified mass media entities. As detailed below, in August 1999, the FCC
substantially revised a number of its multiple ownership and attribution rules.
However, these rules will not become effective until November 16, 1999 and may
still be modified or reconsidered in subsequent proceedings. In three separate
orders, the FCC revised its rules regarding restrictions on television
ownership, radio-television cross-ownership, and attribution of broadcast
ownership interests. The three orders, which resolve a number of rulemaking
proceedings launched at the beginning of the decade, take into consideration
mandates included in the Telecommunications Act, which liberalized the radio
ownership rules and directed the FCC to consider similar deregulation for
television. The FCC's various broadcast ownership rules, inclusive of the recent
revisions, are summarized below:
Local Radio Ownership. With respect to radio licenses, the maximum
allowable number of stations that can be commonly owned in a market varies
depending on the number of radio stations within that market, as determined
using a method prescribed by the FCC. In large markets, i.e., markets with more
than 45 stations, one company may own, operate or control up to eight radio
stations, with no more than five in any one service (AM or FM).
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Local Television Ownership. The so-called "TV duopoly" rule has until
recently prohibited common ownership or control of two television stations with
overlapping Grade B signal contours, irrespective of the stations' markets. The
FCC's new TV duopoly rule embodies a market-based test which permits parties to
own two TV stations without regard to contour overlap provided they are located
in separate markets (also referred to as "Designated Market Areas," or "DMAs").
In addition, the new rules permit parties in larger DMAs to own up to two
television stations in the same DMA so long as at least eight independently
owned and operating full-power television stations remain in the market and at
least one of the two stations is not among the top four-ranked stations in the
market based on audience share. In addition, without regard to numbers of
remaining or independently owned TV stations, the FCC will permit television
duopolies within the same DMA so long as the predicted Grade B signal contours
of the stations involved do not overlap. Satellite stations (i.e., stations
which simply rebroadcast the programming of a "parent" station) will continue to
be exempt from the duopoly rule if located in the same DMA as the "parent"
station. The duopoly rule also applies to same-market local marketing
agreements, a form of time brokerage also known as LMAs, involving more than 15%
of the brokered station's program time, although current LMAs will be exempt
from the TV duopoly rule for a limited period of time (either two or five years,
depending on the date of the adoption of the LMA). Further, the FCC may grant a
waiver of the TV duopoly rule if one of the two television stations is a
"failed" or "failing" station, or the proposed transaction would result in the
construction of a new television station.
Following consummation of the merger, and exclusive of other
acquisitions, the combined company could potentially have duopolies in the
following six television markets: Philadelphia, Boston, Dallas, Miami, Detroit,
and Pittsburgh. While the combined company will seek to maintain ownership of
the television stations in these markets under the new television duopoly rules,
there can be no assurance that the combined company will be able to retain two
television stations in each of the duopoly markets. On November 16, 1999, the
first date applications can be filed proposing duopolies under the revised TV
duopoly rule, more than one application might be filed relating to stations in
these markets, all of which may not be able to be granted because of the
requirement that eight independent voices must remain in the market. The FCC has
proposed that in such situations, random selection be employed to determine the
order in which the simultaneously filed applications will be processed.
National Television Ownership Cap. On the national level, the FCC
imposes a 35 percent national audience reach cap for television ownership, under
which one party may not have an attributable interest in television stations
which reach more than 35 percent of all U.S. television households. The
Commission discounts the audience reach of a UHF station for this purpose by 50
percent. The FCC will consider whether to change the national ownership cap and
the "UHF discount" as part of the biennial review of its broadcast ownership
rules initiated in 1998. Additionally, under the new FCC rules, for entities
that have attributable interests in two stations in the same market, the FCC
counts the audience reach of that market only once for national cap purposes.
The television stations currently held by Viacom and CBS would have an
aggregate national audience reach for purposes of the national ownership cap of
approximately 41%. As these stations would exceed the FCC's 35% national
ownership cap under the merger, it will be necessary, absent legislative or
regulatory relief, to divest certain television stations in order to comply with
the national ownership cap.
Dual Network Rule. In the Telecommunications Act, Congress directed the
FCC to liberalize its rule, which then generally prohibited television stations
from affiliating with an entity that
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maintained more than one national network. The FCC's implementing regulation
states that a television broadcast station may not affiliate with an entity that
maintains one of the existing four major networks (ABC, CBS, NBC, and Fox) and
one of certain other qualifying networks in existence as of February 8, 1996.
The legislative history of the dual network rule suggests that the rule was
intended to prohibit one of the four major networks from acquiring either of The
WB or United Paramount Network. The FCC is reviewing this rule as part of the
biennial review.
Although the acquisition of an ownership interest in CBS will be
reviewed by the FCC under the dual network rule, the FCC regulations do not
identify the amount and nature of the ownership interest required to trigger the
dual network prohibition. Accordingly, it is possible that, absent either
legislative or regulatory relief, the combined company might be required to
divest some or all of Viacom's 50% interest in United Paramount Network.
Radio-Television Cross Ownership. The so-called "one-to-a-market" rule
has until recently prohibited common ownership or control of a radio station
(either AM, FM or both) and a television station in the same market, subject to
waivers in some circumstances. The FCC's new radio-television cross-ownership
rule embodies a graduated test based on the number of independently owned media
voices in the local market. In large markets, i.e., markets with at least 20
independently owned media voices, a single entity can own up to one television
station and seven radio stations or, if permissible under the new TV duopoly
rule, two television stations and six radio stations.
Under the FCC's new rules, waivers of the one-to-a-market rule will be
granted only under the failed station test. Unlike under the TV duopoly rule,
the FCC will not waive the radio-television cross-ownership rules in situations
of failing or unbuilt stations.
In accordance with the schedule imposed by the FCC for comments under
the proposed FCC rules, by November 16, 1999, licensees with existing
conditional waivers of the one-to-a-market rule must demonstrate to the FCC
their compliance or non-compliance with the new rule. The FCC's Mass Media
Bureau will replace these waivers with permanent approvals as appropriate.
Existing conditional waivers which do not comply with the new rule will be
extended until the conclusion of the FCC's biennial review in 2004; the same
grandfathering relief will be afforded to pending applications for conditional
waivers filed on or before July 29, 1999, which are ultimately granted by the
Commission. Any application proposing a radio/television combination filed after
that date must comply with the new rules. Also, the grandfathered status of
radio/TV combinations will terminate upon an assignment or transfer of control.
While CBS currently holds conditional temporary waivers granted under
the prior FCC one-to-a-market rule allowing CBS to operate station combinations
of one TV station and up to eight radio stations in numerous markets, the
"grandfathered" status of the combinations will end as a result of the merger.
Under the new FCC one-to-a-market rule, the combined company exceeds radio-
television cross-ownership caps and may need to divest up to an aggregate of 12
radio stations in Los Angeles, Chicago, Dallas, Washington/Baltimore and
Sacramento.
Attribution of Ownership. Under the FCC's recently revised attribution
rules, a direct or indirect purchaser of certain types of securities of the
combined company could violate FCC regulations or policies if that purchaser
owned or acquired an "attributable" interest in other media properties in the
same area as stations owned by the combined company in a manner prohibited by
the FCC. Under the FCC's revised rules, an "attributable" interest for purposes
of the Commission's
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broadcast ownership rules generally includes (1) equity (voting and non-voting)
and debt interests ("equity/debt plus"), which combined exceed 33% of a
licensee's total assets, if the interest holder is a "major program supplier" to
a licensee (supplying more than 15% of total weekly programming), or a same-
market media entity (TV, radio, cable or newspaper); (2) 5% or greater voting
stock interest (however, equity interests up to 49% are nonattributable if the
licensee is controlled by a single majority shareholder and the interest holder
is not otherwise attributable under the "equity/debt plus" standard); (3) 20% or
greater voting stock interest, if the holder is a qualified passive investor
(bank trust department, mutual fund or insurance company); (4) any equity
interest in a limited liability company or limited partnership (unless properly
"insulated" from management activities); and (5) all officers and directors of a
licensee and its direct or indirect parent.
Under the new rules, all non-conforming interests acquired before
November 7, 1996 are permanently grandfathered and thus do not constitute
attributable ownership interests. Any nonconforming interests acquired after
that date need to be brought into compliance by August 5, 2000.
Alien Ownership. The Communications Act restricts the ability of
foreign entities or individuals to own or hold certain interests in broadcast
licenses. As applicable to the combined company, non-U.S. citizens,
collectively, may directly or indirectly own or vote up to twenty percent of the
capital stock of a corporate licensee. In addition, a broadcast license may not
be granted to or held by any corporation that is controlled, directly or
indirectly, by any other corporation more than one-fourth of whose capital stock
is owned or voted by non-U.S. citizens or their representatives, by foreign
governments or their representatives, or by non-U.S. corporations, if the FCC
finds that the public interest will be served by the refusal or revocation of
such license. The FCC has interpreted this provision of the Communications Act
to require an affirmative public interest finding before a broadcast license may
be granted to or held by any such corporation, and the FCC has made such
affirmative findings only in limited circumstances.
Other Regulations, Legislation and Recent Developments Affecting Broadcast
Stations
Digital Television Service. The FCC has taken a number of steps to
implement digital television broadcasting service in the United States. The FCC
has adopted a digital television table of allotments that provides all
authorized television stations with a second channel on which to broadcast a
digital television signal. The FCC has attempted to provide digital television
coverage areas that are comparable to stations' existing service areas. The FCC
has ruled that television broadcast licensees may use their digital channels for
a wide variety of services such as high-definition television, multiple channels
of standard definition television programming, audio, data, and other types of
communications, subject to the requirement that each broadcaster provide at
least one free video channel equal in quality to the current technical standard.
Digital television channels will generally be located in the range of
channels from channel 2 through channel 51. The FCC has required affiliates of
ABC, CBS, Fox and NBC in the top 10 television markets begin digital
broadcasting by May 1, 1999. Many stations, including several of the combined
company's stations, have already begun digital broadcasting. Affiliates of the
four major networks in the top 30 markets must begin digital broadcasting by
November 1, 1999, and all other commercial broadcasters must do so by May 1,
2002.
The FCC's plan calls for the digital television transition period to
end in the year 2006, at which time the FCC expects that television broadcasters
will cease non-digital broadcasting and return
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one of their two channels to the government, allowing that spectrum to be
recovered for other uses. Under the Balanced Budget Act, however, the FCC is
authorized to extend the December 31, 2006 deadline for reclamation of a
television station's non-digital channel if, in any given market one or more
television stations affiliated with ABC, CBS, NBC or Fox is not broadcasting
digitally, and the FCC determines that such stations have "exercised due
diligence" in attempting to convert to digital broadcasting; or less than 85% of
the television households in the station's market subscribe to a multichannel
video service that carries at least one digital channel from each of the local
stations in that market, and less than 85% of the television households in the
market can receive digital signals off the air using either a set-top converter
box for an analog television set or a new digital television set.
The FCC is currently considering whether cable television system
operators should be required to carry stations' digital television signals in
addition to the currently required carriage of stations' analog signals. In July
1998, the FCC issued a Notice of Proposed Rulemaking posing several different
options for the carriage of digital signals and solicited comments from all
interested parties. The FCC has yet to issue a decision on this matter.
The implementation of digital television will also impose substantial
additional costs on television stations because of the need to replace equipment
and because some stations will need to operate at higher utility costs and there
can be no assurance that our television stations will be able to increase
revenue to offset such costs. The FCC is also considering imposing new public
interest requirements on television licensees in exchange for their receipt of
digital television channels. In addition, the Telecommunications Act allows the
FCC to charge a spectrum fee to broadcasters who use the digital spectrum to
offer subscription-based services. The FCC has adopted rules that require
broadcasters to pay a fee of 5% of gross revenues received from ancillary or
supplementary uses of the digital spectrum for which they charge subscription
fees, excluding revenues from the sale of commercial time. Neither Viacom nor
CBS can predict what future actions the FCC might take with respect to digital
television, nor can either company predict the effect of the FCC's present
digital television implementation plan or such future actions on the combined
company's business. The combined company will incur considerable expense in the
conversion to digital television and is unable to predict the extent or timing
of consumer demand for any such digital television services.
Digital Audio Radio Service and Low-Power FM. The Commission has
authorized or is considering various digital audio radio services ("DARS"). In
January 1995, the Commission adopted rules to allocate spectrum for satellite
DARS. The Commission has issued two authorizations to launch and operate
satellite DARS. The FCC also has undertaken an inquiry into the terrestrial
broadcast of DARS signals, including a conversion to in-band on-channel
transmissions by existing radio broadcasters. Neither Viacom nor CBS can predict
the impact of either satellite or terrestrial DARS on its business. CBS has a
significant ownership interest in USA Digital Radio, Inc., which is developing
an in-band on-channel terrestrial DARS technology.
In addition, the FCC recently proposed the creation of a new low-power
FM ("LPFM") radio service that would operate in the existing FM band. The
Commission is in the process of collecting comments on this proposal and at this
time neither Viacom nor CBS can predict either the outcome of this proceeding or
the impact, if any, that LPFM might have on the combined company's broadcast
operations.
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Internet
Federal, state and international laws and regulations either in effect
or under consideration that govern interactive or online communications prohibit
the transmission of obscene, indecent, or otherwise unlawful communications and
impose restrictions on the collection, use, and disclosure of personally
identifiable information about both children and adults. Such prohibitions and
restrictions could affect the business and operations of the combined company.
In addition, certain of the businesses operated by CBS and Viacom permit online
users to post and access content and to communicate through a web site or
comparable vehicle. In some instances, the material posted or communicated by
third parties may infringe the copyrights or trademarks of others, be subject to
libel, fraud, or other claims, or otherwise be actionable. Although Federal
legislation limits the liability of web site operators for copyright
infringement and certain other civil claims by users of their systems, the
precise contours of these limitations are not yet clear. Similarly, the combined
company may face claims of liability by third parties who believe users of the
combined company's web sites infringe their interests and there can be no
assurance any such liabilities will not have an adverse effect on the combined
company's businesses or operations.
Certain businesses operated by both CBS and Viacom permit users to
perform musical works and sound recordings over the Internet. The owners of the
copyrights in the performed musical works and the sound recordings may be
entitled to receive license fees for some or all of these performances. Further,
license fees may need to be paid for the copies of the works that are stored on
the combined company's servers to facilitate such performances. Certain of these
fees have not yet been set, and there can be no assurance that such fees will
not have an adverse effect on the combined company's businesses or operations.
Proposals for additional or revised statutory or regulatory
requirements are considered by Congress, the FTC, the FCC, other Federal
agencies, and state and local governments from time to time, and a number of
such proposals are under consideration at this time. Moreover, both the FTC and
state attorneys general are actively monitoring online offerings in connection
with consumer protection concerns. It is possible that certain of the provisions
and requirements described herein are now, and in the future may be, the subject
of Federal or state legislation, agency proceedings or court litigation. It is
not possible to predict what legal, legislative, regulatory or judicial changes,
if any, may occur or their impact on the combined company's businesses or
operations.
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DESCRIPTION OF VIACOM CAPITAL STOCK FOLLOWING THE MERGER
The following summary of the terms of the capital stock of Viacom
following the merger does not purport to be complete and is qualified in its
entirety by reference to Viacom's proposed new Restated Certificate of
Incorporation, attached to this joint proxy statement/prospectus as Annex B,
Viacom's amended By-laws, attached to this joint proxy statement/prospectus as
Annex C, the DGCL and the merger agreement.
The authorized capital stock of Viacom consists of 500 million shares
of Viacom Class A common stock, three billion shares of Viacom Class B common
stock and 200 million shares of preferred stock, par value $0.01 per share,
issuable in series.
Viacom Class A Common Stock
As of September ., 1999, the most recent practicable date prior to the
printing of this joint proxy statement/prospectus, there were 139,923,921 shares
of Viacom Class A common stock issued and outstanding. All outstanding shares of
Viacom Class A common stock are fully paid and non-assessable. Shares of Viacom
Class A common stock are not redeemable. Holders of shares of Viacom Class A
common stock are entitled to one vote per share.
So long as there are 10,000 shares of Viacom Class A common stock
outstanding, each record holder of shares of Viacom Class A common stock may
convert any or all of its shares into an equal number of shares of Viacom Class
B common stock.
Viacom Class B Common Stock
Viacom Class B common stock has rights, privileges, limitations,
restrictions and qualifications identical to Viacom Class A common stock except
that shares of Viacom Class B common stock have no voting rights other than
those required by the DGCL. As of October ., 1999, the most recent practicable
date prior to the printing of this joint proxy statement/prospectus, there were
605,085,135 shares of Viacom Class B common stock issued and outstanding. All
outstanding shares of Viacom Class B common stock are fully paid and
non-assessable. Shares of Viacom Class B common stock are not redeemable.
Voting and Other Rights of Viacom Common Stock
Voting Rights. Under Viacom's proposed new Restated Certificate of
Incorporation, except as noted below or otherwise required by the DGCL, holders
of the outstanding shares of Viacom Class A common stock vote together with the
holders of the outstanding shares of all other classes of capital stock of
Viacom entitled to vote, without regard to class. At the present time, however,
there are no outstanding shares of any other class of capital stock of Viacom
entitled to vote. Under Viacom's proposed new Restated Certificate of
Incorporation (1) each holder of an outstanding share of Viacom Class A common
stock is entitled to cast one vote for each share registered in the name of the
holder and (2) the affirmative vote of the holders of a majority of the
outstanding shares of Viacom Class A common stock is necessary to approve any
consolidation or merger of Viacom with or into another corporation pursuant to
which shares of Viacom Class A common stock would be converted into or exchanged
for any securities or other consideration.
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A holder of an outstanding share of Viacom Class B common stock is not
entitled, except as may be required by the DGCL, to vote on any question
presented to the shareholders of Viacom, including but not limited to whether to
increase or decrease, but not below the number of shares then outstanding, the
number of authorized shares of Viacom Class B common stock. Subject to the
preceding sentence, any future change in the number of authorized shares of
Viacom Class B common stock or any consolidation or merger of Viacom with or
into another corporation pursuant to which shares of Viacom Class B common stock
would be converted into or exchanged for any securities or other consideration
could be consummated with the approval of the holders of a majority of the
outstanding shares of Viacom Class A common stock and without any action by the
holders of shares of Viacom Class B common stock.
Dividends. Subject to the rights and preferences of any outstanding
preferred stock, dividends on Viacom Class A common stock and Viacom Class B
common stock are payable out of the funds of Viacom legally available therefor
when, as and if declared by the Viacom Board.
Rights in Liquidation. In the event Viacom is liquidated, dissolved or
wound up, whether voluntarily or involuntarily, the net assets of Viacom would
be divided ratably among the holders of the then outstanding shares of Viacom
Class A common stock and Viacom Class B common stock after payment or provision
for payment of the full preferential amounts to which the holders of any series
of preferred stock of Viacom then issued and outstanding would be entitled.
Split, Subdivision or Combination. If Viacom splits, subdivides or
combines the outstanding shares of Viacom Class A common stock or Viacom Class B
common stock, the outstanding shares of the other class of Viacom common stock
shall be proportionally split, subdivided or combined in the same manner and on
the same basis as the outstanding shares of the other class of Viacom common
stock have been split, subdivided or combined.
Preemptive Rights. Shares of Viacom Class A common stock and Viacom
Class B common stock do not entitle a holder to any preemptive rights enabling a
holder to subscribe for or receive shares of stock of any class or any other
securities convertible into shares of stock of any class of Viacom. The Viacom
Board possesses the power to issue shares of authorized but unissued Viacom
Class A common stock and Viacom Class B common stock without further shareholder
action, subject to the requirements of applicable law and stock exchanges,
unless National Amusements would no longer hold a majority of the outstanding
shares of voting stock of Viacom as a result of the issuance. The number of
authorized shares of Viacom Class A common stock and Viacom Class B common stock
could be increased with the approval of the holders of a majority of the
outstanding shares of Viacom Class A common stock and without any action by the
holders of shares of Viacom Class B common stock.
Trading Market. The outstanding shares of Viacom Class A common stock
and Viacom Class B common stock are listed for trading on the NYSE. The
Registrar and Transfer Agent for Viacom common stock is The Bank of New York.
Alien Ownership. Viacom's proposed new Restated Certificate of
Incorporation provides that Viacom may prohibit the ownership or voting of a
percentage of its equity securities in order to ensure compliance with the
requirements of the Communications Act.
Viacom Preferred Stock
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Unless National Amusements would no longer hold a majority of the
outstanding shares of voting stock of Viacom as a result of the issuance, the
Viacom Board, without further action by the shareholders, is authorized to issue
preferred stock from time to time in one or more series, with such distinctive
serial designations as may be stated or expressed in the resolution or
resolutions providing for the issue of such stock adopted from time to time by
the Board of Directors; and in the resolution or resolutions providing for the
issuance of shares of each particular series, the Board of Directors is also
expressly authorized to fix: (1) the right to vote, if any; (2) the
consideration for which the shares of the series are to be issued; (3) the
number of shares constituting the series, which number may be increased (except
as otherwise fixed by the Board of Directors) or decreased (but not below the
number of shares then outstanding) from time to time by action of the Board of
Directors; (4) the rate of dividends and the times at which dividends will be
payable on the series and the preference, if any, which the dividends will have
relative to dividends payable on shares of any other preferred stock of Viacom;
(5) whether dividends will be cumulative or noncumulative, and, if cumulative,
the date or dates from which dividends will be cumulative; (6) the rights, if
any, of holders in the event of any voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets, dissolution or winding up
of the affairs of Viacom; the rights, if any, of holders to convert the shares
into or exchange the shares for shares of any other preferred stock of Viacom or
for any debt securities of Viacom, and the terms and conditions, including price
and rate of exchange, of the conversion or exchange; (7) whether shares of the
series will be subject to redemption, and the redemption price or prices and
other terms or redemption, if any, including redemption prices payable in shares
of Viacom Class A common stock or Viacom Class B common stock; (8) the terms and
amounts of any sinking fund for the purchase or redemption of shares of the
series; and (9) any and all other powers, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions pertaining to shares of the series permitted by law.
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COMPARISON OF RIGHTS OF HOLDERS OF
VIACOM COMMON STOCK AND CBS COMMON STOCK
The rights of Viacom shareholders are governed by Delaware law,
including the DGCL, and Viacom's current Restated Certificate of Incorporation
and By-laws. The rights of CBS shareholders are governed by Pennsylvania law,
including the Pennsylvania Business Corporation Law, and CBS' Restated Articles
of Incorporation and By-laws. Upon consummation of the merger, holders of shares
of CBS common stock will become holders of shares of Viacom non-voting Class B
common stock. Consequently, following the merger, Delaware law and Viacom's
proposed new Restated Certificate of Incorporation and its By-laws, both as
amended as a result of the merger, will govern the rights of former CBS
shareholders. Copies of Viacom's current Restated Certificate of Incorporation
and By-laws and CBS' Restated Articles of Incorporation and By-laws have been
filed with the SEC and will be sent to any shareholder of Viacom or CBS upon
request. Copies of Viacom's proposed new Restated Certificate of Incorporation
and By-laws, as they will be amended as a result of the merger, are attached as
Annexes B and C to this joint proxy statement/prospectus.
A tabular comparison of shareholder rights of Viacom and CBS
shareholders both before and after the effective time of the merger is attached
to this joint proxy statement/prospectus as Annex J. Annex J is not intended to
be a complete statement of all differences or a complete description of the
specific provisions referred to in this summary, and the identification of
specific differences is not intended to indicate that other significant
differences do not exist. Other than voting rights, there is no difference
between the rights of holders of Viacom Class A common stock and Viacom Class B
common stock.
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SHAREHOLDER PROPOSALS
The Viacom board will consider proposals of shareholders intended to be
presented for action at Viacom's next (or, if the merger is completed, the
combined company's) annual meeting of shareholders. A shareholder proposal must
be submitted in writing and be received at Viacom's principal executive offices,
1515 Broadway, New York, NY 10036, Attn: Corporate Secretary. The deadline for
shareholders to submit proposals pursuant to Rule 14a-8 of the Securities
Exchange Act of 1934, as amended, for inclusion in Viacom's proxy statement and
form of proxy for the annual meeting is . . If a shareholder wishes to submit
notice of a proposal outside of the processes of Rule 14a-8 of the Securities
Exchange Act, the proposal must be submitted in writing and be received by
Viacom no later than . . If notice of a shareholder proposal submitted outside
of the processes of Rule 14a-8 of the Exchange Act is received by Viacom
after . , then Viacom's proxy for the annual meeting may confer discretionary
authority to vote on such matter without any discussion of such matter in the
proxy statement for the annual meeting.
If the merger is not completed, CBS will hold a 2000 annual meeting of
shareholders. If such meeting is held, shareholders' proposals must be in
writing, addressed to the CBS Secretary, and received at the principal executive
offices of CBS on or before November 26, 1999, to be considered for inclusion in
the proxy materials relating to that meeting. Shareholder nominees or proposals
outside of the processes of Rule 14a-8 of the Exchange Act must be sent to the
CBS Secretary at the principal executive offices of CBS for receipt between
January 5, 2000 and February 4, 2000 and must include the information required
by CBS' By-laws. In the event the combination is completed, there will not be an
annual meeting of CBS in 2000.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
offered hereby and the merger will be passed upon for Viacom by Michael D.
Fricklas, Esq., Senior Vice President, General Counsel and Secretary of Viacom.
EXPERTS
The consolidated financial statements of Viacom incorporated into this
document by reference to Viacom's Annual Report on Form 10-K for the year ended
December 31, 1998, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements and the related financial
statement schedule of CBS, as of December 31, 1998 and 1997 and for each of the
years in the three year period ended December 31, 1998, incorporated by
reference in this joint proxy statement/prospectus from CBS' Annual Report on
Form 10-K for the year ended December 31, 1998, have been audited by KPMG LLP,
independent auditors, as stated in their reports, which are incorporated in this
document by reference, and have been so incorporated in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of King World incorporated in
this joint proxy statement/prospectus by reference from CBS' Current Report on
Form 8-K dated on or about October 8, 1999, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in
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their report with respect thereto and is incorporated in this document by
reference in reliance upon the authority of said firm as experts in giving said
report.
WHERE YOU CAN FIND MORE INFORMATION AND
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Viacom and CBS are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and each accordingly files reports
and other information with the SEC. Reports, proxy statements and other
information filed by Viacom or CBS with the SEC can be inspected and copied at
the public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 or at its regional offices located at Suite
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661 and at Seven World Trade Center, 13th Floor, New York, New York 10048, and
copies of these materials can be obtained from the Public Reference Section of
the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates, or
by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet
site that contains reports, proxy statements and other information regarding
registrants that file electronically, such as Viacom and CBS. The address of the
SEC's Internet site is http://www.sec.gov.
Viacom has filed a registration statement on Form S-4 under the
Securities Act of 1933, of which this joint proxy statement/prospectus forms a
part, relating to the Viacom Class B common stock to be issued in connection
with the merger. This joint proxy statement/prospectus does not contain all the
information set forth in the registration statement, certain portions of which
are omitted in accordance with the rules and regulations of the SEC. For further
information pertaining to Viacom, CBS and the Viacom Class B common stock,
reference is made to the registration statement and its exhibits. Statements
contained in this joint proxy statement/prospectus or in any document
incorporated in this joint proxy statement/prospectus by reference as to the
contents of any contract or other document referred to within this document or
other documents that are incorporated by reference are not necessarily complete
and, in each instance, reference is made to the copy of the applicable contract
or other document filed as an exhibit to the registration statement or otherwise
filed with the SEC. Each statement contained in this joint proxy
statement/prospectus is qualified in its entirety by reference to the underlying
documents.
Viacom Class A and Class B common stock are listed on the NYSE and were
previously listed on the American Stock Exchange. Reports, proxy statements and
other information concerning Viacom can be inspected at the offices of the NYSE,
20 Broad Street, New York, New York 10005 and the American Stock Exchange, 86
Trinity Place, New York, New York 10006. CBS common stock is listed on the NYSE,
the Chicago Stock Exchange, the Boston Stock Exchange, the Philadelphia Stock
Exchange and the Pacific Stock Exchange. Reports, proxy statements and other
information concerning CBS can also be inspected at the offices of the NYSE.
This joint proxy statement/prospectus incorporates documents by
reference that are not included as part of this document. Viacom and CBS
undertake to provide, without charge, to each person, including any beneficial
owner of Viacom Class A common stock, Viacom Class B common stock and CBS Common
Stock, to whom a copy of this joint proxy statement/prospectus has been
delivered, upon written or oral request, a copy of any and all of the documents
that have been incorporated into this document by reference, other than exhibits
to those documents unless the exhibits are specifically incorporated into this
document by reference. Requests for these documents should be
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directed, in the case of documents relating to Viacom or any of its
subsidiaries, to Viacom Inc., 1515 Broadway, 53/rd/ Floor, New York, New York
10036, Attention: Investor Relations, phone number: (212) 258-6700, and, in the
case of documents relating to CBS or any of its subsidiaries, to CBS
Corporation, 51 W. 52/nd/ Street, New York, New York 10019, . phone number:
(212) 975-4321. In order to ensure timely delivery of requested documents,
requests should be made by November . , 1999.
The following documents, which have been filed with the SEC by Viacom
(File No. 1-9553) and CBS (File No. 1-977), are incorporated into this document
by reference:
Viacom
(a) the Annual Report on Form 10-K of Viacom for the fiscal
year ended December 31, 1998;
(b) the Viacom Quarterly reports on Form 10-Q for the periods
ended March 31, 1999 and June 30, 1999; and
(c) the Current Reports on Form 8-K of Viacom filed May 18,
1999, June 24, 1999 and September 8, 1999, as amended.
CBS
(a) the Annual Report on Form 10-K, as amended by Form 10-K/A,
of CBS for the fiscal year ended December 31, 1998;
(b) the CBS Quarterly report on Form 10-Q, as amended by Form
10-Q/A, for the period ended March 31, 1999 and the CBS Quarterly
report on Form 10-Q for the period ended June 30, 1999;
(c) the Current Reports on Form 8-K of CBS filed January 29,
1999, February 5, 1999, April 1, 1999, April 13, 1999, April 30, 1999,
June 4, 1999, June 28, 1999, July 30, 1999, August 4, 1999, September
8, 1999 and September 15, 1999;
(d) the Current Report on Form 8-K of CBS filed on or about
October 8, 1999 which includes certain historical financial statements
of King World;
(e) the description of CBS common stock contained in CBS'
registration statement on Form 10 dated May 15, 1935; and
(f) the definitive Proxy Statement filed on March 25, 1999, in
connection with CBS' 1999 Annual Meeting.
All references within this document to:
(a) the Form 10-K of CBS for the fiscal year ended December
31, 1998, refer to that Form 10-K as amended by the Form 10-K/A; and
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(b) the Form 10-Q for the period ended March 31, 1999, refer
to that Form 10-Q as amended by the Form 10-Q/A.
All documents filed by Viacom and CBS according to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, after the date of this joint proxy
statement/prospectus and prior to the date of the special shareholders' meetings
are incorporated by reference into this joint proxy statement/prospectus and are
considered a part of this joint proxy statement/prospectus from the date of
filing of those documents.
Any statement contained within this joint proxy statement/prospectus or
in any document incorporated by reference will be deemed to be modified or
superseded for purposes of this joint proxy statement/prospectus to the extent
that the statement contained in this joint proxy statement/prospectus or in any
subsequently filed document that also is or is deemed to be incorporated by
reference in this joint proxy statement/prospectus modifies or supersedes that
statement. Statements so modified or superseded will not be deemed, except as so
modified or superseded, to constitute a part of this joint proxy
statement/prospectus.
No person has been authorized to give any information or to make any
representation other than as contained in this joint proxy statement/prospectus
in connection with the Viacom Class B common stock to be issued in connection
with the merger and, if given or made, the information or representation must
not be relied upon as having been authorized. This joint proxy
statement/prospectus does not constitute an offer to sell or a solicitation of
an offer to purchase securities in any jurisdiction in which, or to any person
to whom, it would be unlawful to make such an offer or solicitation. Neither the
delivery of this joint proxy statement/prospectus nor any distribution of the
securities offered hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of Viacom or CBS since
the date of this joint proxy statement/prospectus or that the information
contained in this joint proxy statement/prospectus is correct as of any time
subsequent to that date. All information in this joint proxy
statement/prospectus regarding Viacom has been provided by Viacom, and all
information regarding CBS has been provided by CBS.
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ANNEX A
================================================================================
AGREEMENT AND PLAN OF MERGER
Between
VIACOM INC.
and
CBS CORPORATION
Dated as of September 6, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
THE MERGER
1.01. The Merger............................................................2
1.02. Effective Time; Closing...............................................2
1.03. Effect of the Merger..................................................2
1.04. Certificate of Incorporation and By-Laws..............................2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
2.01. Conversion of Securities..............................................3
2.02. Exchange of Certificates..............................................4
2.03. Stock Transfer Books..................................................6
2.04. Stock Options and Other Stock Plans...................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CBS
3.01. Organization and Qualification; Subsidiaries..........................8
3.02. Certificate of Incorporation and By-Laws..............................8
3.03. Capitalization........................................................9
3.04. Authority Relative to Agreement.......................................9
3.05. No Conflict; Required Filings and Consents...........................10
3.06. Permits and Licenses; Contracts......................................11
3.07. SEC Filings; Financial Statements....................................12
3.08. Absence of Certain Changes or Events.................................13
3.09. Absence of Litigation................................................13
3.10. Employee Benefit Plans...............................................13
3.11. Labor Matters........................................................15
3.12. Environmental Matters................................................15
3.13. Trademarks, Patents and Copyrights...................................16
3.14. Taxes................................................................17
3.15. Tax Matters..........................................................17
3.16. Year 2000 Compliance.................................................17
3.17. Opinion of Financial Advisors........................................18
<PAGE>
ii
Section Page
- ------- ----
3.18. Vote Required........................................................18
3.19. Brokers..............................................................18
3.20. Pennsylvania Law.....................................................18
3.21. Rights Agreement.....................................................19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VIACOM
4.01. Organization and Qualification; Subsidiaries.........................19
4.02. Certificate of Incorporation and By-Laws.............................20
4.03. Capitalization.......................................................20
4.04. Authority Relative to Agreement......................................21
4.05. No Conflict; Required Filings and Consents...........................21
4.06. Permits and Licenses; Contracts......................................22
4.07. SEC Filings; Financial Statements....................................23
4.08. Absence of Certain Changes or Events.................................24
4.09. Absence of Litigation................................................24
4.10. Employee Benefit Plans...............................................24
4.11. Labor Matters........................................................26
4.12. Environmental Matters................................................26
4.13. Trademarks, Patents and Copyrights...................................27
4.14. Taxes................................................................27
4.15. Tax Matters..........................................................28
4.16. Year 2000 Compliance.................................................28
4.17. Opinion of Financial Advisors........................................28
4.18. Vote Required........................................................29
4.19. Section 203 of Delaware Law..........................................29
4.20. Brokers..............................................................29
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.01. Conduct of Business by CBS Pending the Merger........................29
5.02. Conduct of Business by Viacom Pending the Merger.....................32
5.03. Other Actions........................................................35
<PAGE>
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Section Page
- ------- ----
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01. Registration Statement; Joint Proxy Statement........................35
6.02. Stockholders' Meetings...............................................38
6.03. Appropriate Action; Consents; Filings................................38
6.04. Access to Information; Confidentiality...............................39
6.05. No Solicitation of Competing Transactions............................40
6.06. Directors' and Officers' Indemnification and Insurance...............41
6.07. Notification of Certain Matters......................................42
6.08. Tax Treatment........................................................42
6.09. Stock Exchange Listing...............................................42
6.10. Public Announcements.................................................43
6.11. Viacom's Directors...................................................43
6.12. Rights Agreement.....................................................43
6.13. Assumption of Debt and Leases........................................43
6.14. Affiliates of CBS....................................................44
6.15. Prior Service........................................................44
6.16. Employee Matters.....................................................44
ARTICLE VII
CONDITIONS TO THE MERGER
7.01. Conditions to the Obligations of Each Party..........................45
7.02. Conditions to the Obligations of Viacom..............................46
7.03. Conditions to the Obligations of CBS.................................46
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01. Termination..........................................................47
8.02. Effect of Termination................................................48
8.03. Amendment............................................................48
8.04. Waiver...............................................................48
8.05. Expenses.............................................................49
<PAGE>
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Section Page
- ------- ----
ARTICLE IX
GENERAL PROVISIONS
9.01. Non-Survival of Representations, Warranties and Agreements...........50
9.02. Notices..............................................................50
9.03. Interpretation, Certain Definitions..................................51
9.04. Severability.........................................................53
9.05. Entire Agreement; Assignment.........................................53
9.06. Parties in Interest..................................................53
9.07. Specific Performance.................................................53
9.08. Governing Law........................................................54
9.09. Consent to Jurisdiction..............................................54
9.10. Counterparts.........................................................54
9.11. WAIVER OF JURY TRIAL.................................................54
EXHIBITS
Exhibit A-1 Restated Certificate of Incorporation
Exhibit A-2 By-laws
Exhibit 6.14. Form of CBS Affiliate Letter
<PAGE>
Index of Defined Terms
Defined Term Location of Definition
- ------------ ----------------------
affiliate.......................................................Section 9.03(a)
Agreement.......................................................Recitals
Articles of Merger..............................................Section 1.02
Blockbuster.....................................................Section 4.02
Blockbuster Options.............................................Section 4.03
beneficial owner................................................Section 9.03(b)
Blue Sky Laws...................................................Section 3.05(b)
business day....................................................Section 9.03(c)
CBS.............................................................Recitals
CBS Alternative Transaction Fee.................................Section 8.05(b)
CBS Benefit Plans...............................................Section 3.10(a)
CBS Common Stock................................................Section 2.01(a)
CBS Disclosure Schedule.........................................Article III
CBS FCC Licenses................................................Section 3.06(c)
CBS Financial Advisor...........................................Section 3.17
CBS Indentures..................................................Section 6.13(a)
CBS Licensed Facilities.........................................Section 3.06(c)
CBS Material Adverse Effect.....................................Section 3.01
CBS Options.....................................................Section 2.04(a)
CBS Permits.....................................................Section 3.06(a)
CBS Preferred Stock.............................................Section 3.03
CBS Rights Agreement............................................Section 3.03
CBS SEC Reports.................................................Section 3.07(a)
CBS Stock Option Plans..........................................Section 2.04(a)
CBS Superior Proposal...........................................Section 6.05(c)
CBS Systems.....................................................Section 3.16(b)
CBS Year 2000 Compliant.........................................Section 3.16(b)
CBS Year 2000 Plan..............................................Section 3.16(a)
CERCLA..........................................................Section 3.12(d)
Certificate of Merger...........................................Section 1.02
Certificates....................................................Section 2.02(b)
Closing.........................................................Section 1.02
Closing Date....................................................Section 1.02
Code............................................................Recitals
Communications Act..............................................Section 3.05(b)
Competing Transaction...........................................Section 6.05(b)
Confidentiality Agreement.......................................Section 6.04(c)
Continuing Employees............................................Section 6.15
control.........................................................Section 9.03(d)
controlled by...................................................Section 9.03(d)
<PAGE>
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Defined Term Location of Definition
- ------------ ----------------------
Delaware Law....................................................Recitals
Effective Time..................................................Section 1.02
Environmental Laws..............................................Section 3.12(d)
Environmental Permits...........................................Section 3.12(d)
ERISA...........................................................Section 3.10(a)
Exchange Act....................................................Section 2.04(c)
Exchange Agent..................................................Section 2.02(a)
Exchange Fund...................................................Section 2.02(a)
Exchange Ratio..................................................Section 2.01(a)
Expenses........................................................Section 8.05(a)
FCC.............................................................Section 3.05(b)
Governmental Authority..........................................Section 9.03(e)
Hazardous Materials.............................................Section 3.12(d)
HSR Act.........................................................Section 3.05(b)
Infinity........................................................Section 3.02
IRS.............................................................Section 3.10(a)
King World......................................................Section 3.03
knowledge.......................................................Section 9.03(f)
Laws............................................................Section 3.05(a)
Merger..........................................................Recitals
NYSE............................................................Section 3.03
Order...........................................................Section 6.03(b)
Parent..........................................................Recitals
Parent Stockholder Agreement....................................Recitals
Parent Voting Agreements........................................Recitals
Pending Transactions............................................Section 5.01
Pennsylvania Law................................................Recitals
person..........................................................Section 9.03(g)
Proxy Statement.................................................Section 6.01(a)
Registration Statement..........................................Section 6.01(a)
Representatives.................................................Section 6.04(a)
Rights..........................................................Section 3.03
SEC.............................................................Article III
Securities Act..................................................Section 3.05(b)
Shares..........................................................Section 2.01(a)
Split-off.......................................................Section 5.02
Stockholders' Meeting...........................................Section 6.02
subsidiaries....................................................Section 9.03(h)
subsidiary......................................................Section 9.03(h)
<PAGE>
iii
Defined Term Location of Definition
- ------------ ----------------------
Substituted Option..............................................Section 2.04(a)
Surviving Corporation...........................................Section 1.01
Tax.............................................................Section 3.14(a)
Taxes...........................................................Section 3.14(a)
Terminating CBS Breach..........................................Section 8.01(f)
Terminating Viacom Breach.......................................Section 8.01(e)
under common control with.......................................Section 9.03(d)
Viacom..........................................................Recitals
Viacom Benefit Plans............................................Section 4.10(a)
Viacom Class A Common Stock.....................................Recitals
Viacom Class B Common Stock.....................................Recitals
Viacom Disclosure Schedule......................................Article IV
Viacom Employee Arrangements....................................Section 6.16(a)
Viacom FCC Licenses.............................................Section 4.06(c)
Viacom Financial Advisor........................................Section 4.17
Viacom Licensed Facilities......................................Section 4.06(c)
Viacom Material Adverse Effect..................................Section 4.01
Viacom Options..................................................Section 4.03
Viacom Permits..................................................Section 4.06(a)
Viacom Preferred Stock..........................................Section 4.03
Viacom Proposals................................................Recitals
Viacom SEC Reports..............................................Section 4.07(a)
Viacom Stock Option Plans.......................................Section 4.03
Viacom Systems..................................................Section 4.16(b)
Viacom Year 2000 Compliant......................................Section 4.16(b)
Viacom Year 2000 Plan...........................................Section 4.16(a)
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of September 6, 1999
(this "Agreement") between VIACOM INC., a Delaware corporation ("Viacom"), and
CBS CORPORATION, a Pennsylvania corporation ("CBS").
WHEREAS, the Boards of Directors of CBS and Viacom have
determined that it is in the best interests of their respective companies and
stockholders to combine their respective businesses in a "merger of equals"
transaction to be effected as set forth in this Agreement;
WHEREAS, the Board of Directors of CBS has (i) determined that
the merger of CBS with and into Viacom on the terms set forth in this Agreement
(the "Merger") pursuant to the General Corporation Law of the State of Delaware
("Delaware Law") and the Business Corporation Law of the Commonwealth of
Pennsylvania ("Pennsylvania Law") is fair to CBS and the holders of Shares (as
defined in Section 2.01) and is in the best interests of CBS and (ii) approved
this Agreement, the Merger and the other transactions contemplated hereby and
has recommended that the shareholders of CBS adopt this Agreement;
WHEREAS, the Board of Directors of Viacom has determined that
the Merger is fair to, and in the best interests of, Viacom and its stockholders
and has approved and determined to be advisable this Agreement, the Merger and
the other transactions contemplated hereby and has recommended that the holders
of the Class A Common Stock, par value $.01 per share, of Viacom (the "Viacom
Class A Common Stock") (i) approve the issuance of Class B Common Stock, par
value $.01 per share, of Viacom (the "Viacom Class B Common Stock") in the
Merger and (ii) approve the amendment to the Restated Certificate of
Incorporation as set forth in this Agreement, (iii) approve the Merger and (iv)
adopt this Agreement (together, the "Viacom Proposals");
WHEREAS, concurrently with the execution of this Agreement and
as an inducement to CBS to enter into this Agreement, National Amusements, Inc.,
a Maryland corporation and the holder of a majority of the shares of Class A
Common Stock ("Parent"), and CBS have entered into (i) a Stockholder Agreement
(the "Parent Stockholder Agreement") pursuant to which Parent has agreed, among
other things, to cause the election of eight members of the Board of Directors
of Viacom designated by CBS for a period of three years following the Merger and
(ii) a Voting Agreement (together with the Parent Stockholder Agreement, the
"Parent Voting Agreements") pursuant to which Parent has agreed, among other
things, to vote its shares of Viacom Class A Common Stock in favor of adoption
of this Agreement and the other transactions contemplated by this Agreement and
to take certain other actions in support of the Merger;
WHEREAS, for Federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization under the provisions of Section
368(a) of the United States Internal Revenue Code of 1986, as amended (the
"Code");
<PAGE>
2
WHEREAS, as an inducement to Viacom to enter into this
Agreement, concurrently with the execution and delivery of this Agreement, Mel
Karmazin is entering into an employment agreement with Viacom, to be effective
at the Effective Time (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained and intending to be legally
bound hereby, Viacom and CBS hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in Article VII, and in accordance with Section 252 of
Delaware Law and Section 1921 of Pennsylvania Law, at the Effective Time CBS
shall be merged with and into Viacom. As a result of the Merger, the separate
corporate existence of CBS shall cease and Viacom shall be the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 1.02. Effective Time; Closing. The closing of the
Merger (the "Closing") shall take place on the first business day after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII (such date, the "Closing Date"). On the Closing Date, the parties hereto
shall cause the Merger to be consummated by filing (a) a certificate of merger
(the "Certificate of Merger") with the Secretary of State of the State of
Delaware, in such form as is required by, and executed and acknowledged in
accordance with, Section 252 of Delaware Law and (b) articles of merger (the
"Articles of Merger") with the Department of State of the Commonwealth of
Pennsylvania, in such form as is required by, and executed in accordance with,
Section 1927 of Pennsylvania Law. The term "Effective Time" means the date and
time of the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware (or such later time as may be agreed by the parties hereto
and specified in the Certificate of Merger). The Closing will be held at the
offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022
(or such other place as the parties may agree).
SECTION 1.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law and Pennsylvania Law. Without limiting the generality of the
foregoing, at the Effective Time all the property, rights, privileges, powers
and franchises of CBS shall vest in the Surviving Corporation and all debts,
liabilities, obligations, restrictions, disabilities and duties of CBS shall
become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation.
SECTION 1.04. Certificate of Incorporation and By-Laws. (a)
The Restated Certificate of Incorporation of Viacom, as in effect immediately
prior to the Effective Time, shall
<PAGE>
3
be amended as of the Effective Time to be and read in its entirety in the form
set forth as Exhibit A-1 and, as so amended, such Restated Certificate of
Incorporation shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) The By-laws of Viacom, as in effect immediately prior to
the Effective Time, shall be amended as of the Effective Time so as to read in
their entirety in the form set forth as Exhibit A-2 and, as so amended, such
By-laws shall be the by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of Viacom, CBS or the
holders of any of the following securities:
(a) Each share of common stock, par value $1.00 per share, of
CBS ("CBS Common Stock"; all issued and outstanding shares of CBS
Common Stock being hereinafter collectively referred to as the
"Shares") issued and outstanding immediately prior to the Effective
Time (other than any Shares to be cancelled or converted pursuant to
Section 2.01(b)) shall be converted, subject to Section 2.02(e), into
the right to receive 1.085 shares (the "Exchange Ratio") of Viacom
Class B Common Stock.
(b) Each Share held in the treasury of CBS and each Share
owned by Viacom immediately prior to the Effective Time shall be
cancelled and extinguished without any conversion thereof and no
payment shall be made with respect thereto, and each Share owned by any
direct or indirect wholly owned subsidiary of Viacom or CBS (other than
Shares held by benefit plans or trusts (including Rabbi trusts))
immediately prior to the Effective Time shall be converted into the
right to receive a number of shares of Viacom Class B Common Stock
equal to the Exchange Ratio.
(c) If, prior to the Effective Time (and as permitted by
Sections 5.01 and/or 5.02), the outstanding Shares or shares of Viacom
Class B Common Stock shall have been increased, decreased, changed into
or exchanged for a different number or class of shares or securities as
a result of a reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, combination or exchange of
shares or other similar change in capitalization, then an appropriate
and proportionate adjustment shall be made to the Exchange Ratio.
<PAGE>
4
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent.
Viacom shall deposit, or shall cause to be deposited, with such bank or trust
company designated by Viacom and reasonably acceptable to CBS (the "Exchange
Agent"), for the benefit of the holders of Shares, for exchange in accordance
with this Article II through the Exchange Agent, certificates representing the
shares of Viacom Class B Common Stock (such certificates for shares of Viacom
Class B Common Stock, together with any dividends or distributions with respect
thereto and any cash in lieu of fractional shares of Viacom Class B Common Stock
payable pursuant to Section 2.02(e), being hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 2.01 in exchange for outstanding
Shares. The Exchange Agent shall, pursuant to irrevocable instructions, deliver
the Viacom Class B Common Stock contemplated to be issued pursuant to Section
2.01 out of the Exchange Fund. Except as contemplated by Section 2.02(f) hereof,
the Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As promptly as practicable after the
Effective Time, Viacom shall cause the Exchange Agent to mail to each holder of
a certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates") (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent, and shall be in customary form) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for certificates
representing whole shares of Viacom Class B Common Stock, together with any
dividends or distribution with respect thereto and any cash in lieu of
fractional shares. Upon surrender to the Exchange Agent of a Certificate for
exchange and cancellation, together with such letter of transmittal, duly
executed, and such other documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Viacom Class B Common Stock which such holder has the right to receive in
respect of the Shares formerly represented by such Certificate (after taking
into account all Shares then held by such holder), cash in lieu of fractional
shares of Viacom Class B Common Stock to which such holder is entitled pursuant
to Section 2.02(e) and any dividends or other distributions to which such holder
is entitled pursuant to Section 2.02(c), and the Certificate so surrendered
shall forthwith be cancelled. In the event of a transfer of ownership of Shares
that is not registered in the transfer records of CBS, a certificate
representing the proper number of shares of Viacom Class B Common Stock may be
issued to a transferee if the Certificate representing such Shares is presented
to the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the certificate representing
shares of Viacom Class B Common Stock, cash in lieu of any fractional shares of
Viacom Class B Common Stock to which such holder is entitled pursuant to Section
2.02(e) and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.02(c).
<PAGE>
5
(c) Distributions with Respect to Unexchanged Shares of Viacom
Class B Common Stock. No dividends or other distributions with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Viacom Class B Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.02(e), until the holder of such
Certificate shall surrender such Certificate. Subject to the effect of escheat,
Tax (as defined in Section 3.14) or other applicable Laws (as defined in Section
3.05), following surrender of any such Certificate, there shall be paid to the
record holder thereof, without interest, (i) promptly, the amount of any cash
payable with respect to a fractional share of Viacom Class B Common Stock to
which such holder is entitled pursuant to Section 2.02(e) and the amount of
dividends or other distributions with a record date after the Effective Time and
theretofore paid with respect to such whole shares of Viacom Class B Common
Stock, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time and a payment
date occurring after surrender, payable with respect to such whole shares of
Viacom Class B Common Stock.
(d) No Further Rights in CBS Common Stock. All shares of
Viacom Class B Common Stock issued upon conversion of the Shares in accordance
with the terms hereof (including any cash paid pursuant to Sections 2.02(c) or
(e)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Shares.
(e) No Fractional Shares. No certificates or scrip
representing fractional shares of Viacom Class B Common Stock shall be issued
upon the surrender for exchange of Certificates, and such fractional share
interests will not entitle the owner thereof to vote or to any other rights of a
stockholder of Viacom. Each holder of a fractional share interest shall be paid
an amount in cash equal to the product obtained by multiplying (i) such
fractional share interest to which such holder (determined after taking into
account all fractional share interests then held by such holder) would otherwise
be entitled by (ii) the closing price for a share of Viacom Class B Common Stock
on the Consolidated Tape, Network A, as reported in The Wall Street Journal
(Northeast edition) or any other authoritative source on the first trading day
immediately following the Effective Time. From time to time after the Effective
Time, as promptly as practicable after the determination of the amount of cash,
if any, to be paid to any holders of fractional share interests who have
surrendered their Certificates to the Exchange Agent, the Exchange Agent shall
so notify Viacom, and Viacom shall deposit such amount with the Exchange Agent
and shall cause the Exchange Agent to forward payments to such holder of
fractional share interests subject to and in accordance with the terms of
Sections 2.02(b) and (c).
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of CBS Common Stock for six (6)
months after the Effective Time shall be delivered to Viacom, upon demand, and
any holders of CBS Common Stock who have not theretofore complied with this
Article II shall thereafter look only to Viacom for the shares of Viacom Class B
Common Stock, any cash in lieu of fractional shares of Viacom Class
<PAGE>
6
B Common Stock to which they are entitled pursuant to Section 2.02(e) and any
dividends or other distributions with respect to Viacom Class B Common Stock to
which they are entitled pursuant to Section 2.02(c). Any portion of the Exchange
Fund remaining unclaimed by holders of Shares as of a date which is immediately
prior to such time as such amounts would otherwise escheat to or become property
of any government entity shall, to the extent permitted by applicable Law,
become the property of Viacom free and clear of any claims or interest of any
person previously entitled thereto.
(g) No Liability. Neither Viacom nor CBS shall be liable to
any holder of Shares for any such Shares (or dividends or distributions with
respect hereto) or cash delivered to a public official pursuant to any abandoned
property, escheat or similar Law.
(h) Lost, Stolen or Destroyed Certificates. In the event that
any Certificate has been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by Viacom, the posting by such person of a
bond in such reasonable amount as Viacom may direct as indemnity against any
claim that may be made against it with respect to such Certificate, Viacom will,
in exchange for such lost, stolen or destroyed Certificate, issue or cause to be
issued the number of whole shares of Viacom Common Stock and pay or cause to be
paid the amounts deliverable in respect thereof pursuant to Section 2.02(e) and
2.02(c).
(i) Withholding Rights. Viacom shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Shares such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of state,
local or foreign Tax Law. To the extent that amounts are so withheld by Viacom,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Shares in respect of which such deduction
and withholding was made by Viacom.
SECTION 2.03. Stock Transfer Books. At the Effective Time, the
stock transfer books of CBS shall be closed and there shall be no further
registration of transfers of Shares thereafter on the records of CBS. From and
after the Effective Time, the holders of Certificates shall cease to have any
rights with respect to such Shares except as otherwise provided herein or by any
Laws. On or after the Effective Time, any Certificates presented to the Exchange
Agent or Viacom for any reason shall be converted into shares of Viacom Class B
Common Stock, any cash in lieu of fractional shares of Viacom Class B Common
Stock to which the holders thereof are entitled pursuant to Section 2.02(e) and
any dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.02(c).
<PAGE>
7
SECTION 2.04. Stock Options and Other Stock Plans. (a) Prior
to the Effective Time, Viacom and CBS shall take such action as may be necessary
to cause each unexpired and unexercised option or warrant to purchase Shares
which are outstanding immediately prior to the Effective Time (collectively,
"CBS Options"), whether granted under CBS's stock option plans set forth in
Section 2.04 of the CBS Disclosure Schedule (as defined below) or otherwise, to
be automatically converted at the Effective Time into an option or warrant
(collectively, a "Substituted Option") to purchase a number of shares of Viacom
Class B Common Stock equal to the number of Shares that could have been
purchased (assuming full vesting) under such CBS Option multiplied by the
Exchange Ratio (rounded to the nearest whole number of shares of Viacom Class B
Common Stock) at a price per share of Viacom Class B Common Stock equal to the
per-share option exercise price specified in the CBS Option divided by the
Exchange Ratio (rounded down to the nearest whole cent). Except as otherwise
provided in this Agreement, such Substituted Option shall otherwise be subject
to the same terms and conditions as such CBS Option (except that all vesting
periods with respect thereto shall, to the extent provided by the terms thereof,
accelerate, and be subject to any other rights which arise under the CBS Stock
Option Plans or the option agreements evidencing awards thereunder as a result
of the transactions contemplated by this Agreement). The date of grant of the
Substituted Option shall be the date on which the corresponding CBS Option was
granted. At the Effective Time, (i) all references in the related stock option
agreements to CBS shall be deemed to refer to Viacom and (ii) Viacom shall
assume all of CBS's obligations with respect to CBS Options as so amended. As
promptly as reasonably practicable after the Effective Time, Viacom shall issue
to each holder of an outstanding CBS Option a document evidencing the foregoing
assumption by Viacom. Employee and director deferrals and director common stock
equivalents and all other equity based compensation that references CBS Common
Stock will as of and after the Effective Time, be deemed to refer to Viacom
Class B Common Stock (as adjusted to reflect the Exchange Ratio).
(b) In respect of each CBS Option assumed by Viacom, and the
shares of Viacom Class B Common Stock underlying such CBS Option, Viacom shall,
no later than one Business Day after the Effective Time, file and keep current a
Form S-8 or other appropriate registration statement for as long as any
Substituted Options remain outstanding.
(c) Prior to the Effective Time, Viacom and CBS shall take all
steps reasonably necessary to cause the transactions contemplated hereby and any
other dispositions of equity securities of CBS (including derivative securities)
or acquisitions of Viacom equity securities (including derivative securities) in
connection with this Agreement by each individual who (a) is a director or
officer of Viacom or (b) at the Effective Time, will become a director or
officer of Viacom, to be exempt under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
<PAGE>
8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CBS
Except as disclosed in the report on Form 10-K dated March 24,
1999 for the year ended December 31, 1998, the Reports on Form 10-K/A, Form
10-Q, Form 10-Q/A and Form 8-K since December 31, 1998 or the proxy statement
dated March 25, 1999, in each case in the form filed by CBS with the United
States Securities and Exchange Commission (the "SEC") or in a separate
disclosure schedule which has been delivered by CBS to Viacom prior to the
execution of this Agreement (the "CBS Disclosure Schedule") (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant to the extent specified therein and such other representations and
warranties or covenants to the extent a matter in such section is disclosed in
such a way as to make its relevance to the information called for by such other
representation and warranty or covenant readily apparent), CBS hereby represents
and warrants to Viacom:
SECTION 3.01. Organization and Qualification; Subsidiaries.
Each of CBS and its subsidiaries is a corporation or entity duly incorporated or
formed, validly existing and in good standing under the laws of its jurisdiction
of incorporation or formation and has the requisite corporate power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to have such power, authority and governmental approvals would
not have a CBS Material Adverse Effect (as defined below). Each of CBS and its
subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not have a CBS Material
Adverse Effect. The term "CBS Material Adverse Effect" means any change, effect
or circumstance that is or is reasonably likely to be materially adverse to the
business, results of operations or financial condition of CBS and its
subsidiaries taken as a whole, other than any change, effect or circumstance
relating to or resulting from (i) general changes in the media or entertainment
industries or the advertising markets, (ii) changes in general economic
conditions or securities markets in general or (iii) this Agreement or the
transactions contemplated hereby or the announcement thereof.
SECTION 3.02. Certificate of Incorporation and By-Laws. CBS
has made available to Viacom a complete and correct copy of the Articles of
Incorporation and the Bylaws, each as amended to date, of CBS and Infinity
Broadcasting Corporation, a Delaware corporation ("Infinity"). The Articles of
Incorporation and By-laws (or equivalent organizational documents) of CBS and
its subsidiaries are in full force and effect. Except as would not have a CBS
Material Adverse Effect, none of CBS or its subsidiaries is in violation of any
provision of its Articles of Incorporation or By-laws (or equivalent
organizational documents).
<PAGE>
9
SECTION 3.03. Capitalization. The authorized capital stock of
CBS consists of 1,100,000,000 Shares and 25,000,000 shares of preferred stock,
par value $1.00 per share (the "CBS Preferred Stock"). As of August 31, 1999,
(a) 705,119,425 Shares were issued and outstanding, all of which were validly
issued, fully paid and nonassessable, (b) 40,099,599 Shares were held in the
treasury of CBS, (c) 51,007,538 Shares were reserved for future issuance
pursuant to outstanding unexercised employee stock options granted pursuant to
the CBS stock option plans or otherwise and (d) 70,365,195 Shares were reserved
for future issuance in connection with the merger of a wholly owned subsidiary
of CBS with and into King World Productions, Inc. ("King World") and 9,910,600
(or some equivalent amount of CBS Preferred Stock, if appropriate), measured at
the September 3, 1999 New York Stock Exchange (the "NYSE") Closing Price, were
reserved for future issuance in connection with the acquisition from Gaylord
Entertainment Company of television station KVTV, Dallas/Fort Worth, Texas. As
of the date of this Agreement, no shares of CBS Preferred Stock are outstanding.
As of the date of this Agreement, except for the issuance of Shares pursuant to
the exercise of CBS Options and options to purchase 5,850,555 shares of Class A
Common Stock, par value $0.01 per share, of Infinity, outstanding prior to
August 31, 1999, no shares of capital stock of CBS or any of its subsidiaries
have been issued since August 31, 1999. Except as set forth in this Section
3.03, and except for the Series A participating preferred stock purchase rights
of CBS (the "Rights") issued pursuant to the Rights Agreement, dated as of
December 28, 1995, between CBS and First Chicago Trust Company of New York (the
"CBS Rights Agreement"), as of the date of this Agreement there are no options,
warrants or other rights, agreements (including registration rights agreements),
arrangements or commitments of any character relating to the issued or unissued
capital stock of CBS or any of its subsidiaries or obligating CBS or any of its
subsidiaries to issue or sell any shares of capital stock of, or other equity
interests in, CBS or any of its subsidiaries. All shares of capital stock of CBS
and its subsidiaries subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
As of the date of this Agreement, there are no outstanding contractual material
obligations of CBS or any subsidiary to repurchase, redeem or otherwise acquire
any shares of capital stock of CBS or any of its subsidiaries or to provide
material funds to, or make any material investment (in the form of a loan
capital contribution or otherwise) in, any person.
SECTION 3.04. Authority Relative to Agreement. CBS has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the Merger and the other
transactions contemplated hereby. The execution and delivery of this Agreement
by CBS and the consummation by CBS of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of CBS are
necessary to authorize the execution and delivery of this Agreement or to
consummate the Merger and the other transactions contemplated hereby (other
than, with respect to the Merger, the adoption of this Agreement by the
affirmative vote of a majority of the votes cast by all shareholders entitled to
vote at the CBS Stockholders' Meeting (as defined in Section 6.02) and the
filing and
<PAGE>
10
recordation of appropriate merger documents as required by Pennsylvania Law).
This Agreement has been duly and validly executed and delivered by CBS and,
assuming the due authorization, execution and delivery by Viacom, this Agreement
constitutes a legal, valid and binding obligation of CBS, enforceable against
CBS in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by CBS does not, and the
performance of this Agreement by CBS will not, (i) conflict with or violate the
Articles of Incorporation or By-laws of (A) CBS or Infinity or (B) any of its
other subsidiaries, (ii) assuming the consents, approvals, authorizations and
waivers specified in Section 3.05(b) have been received and the waiting periods
referred to therein have expired, and any condition precedent to such consent,
approval, authorization, or waiver has been satisfied, conflict with or violate
any domestic (federal, state or local) or foreign law, rule, regulation, order,
judgment or decree (collectively, "Laws") applicable to CBS or any of its
subsidiaries or by which any property or asset of CBS or any of its subsidiaries
is bound or affected or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any right of termination, amendment, acceleration, or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of CBS or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture or credit agreement, or, to CBS's knowledge as of the date
of this Agreement, any other contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which CBS or any of its
subsidiaries is a party or by which CBS or any of its subsidiaries or any
property or asset of CBS or any of its subsidiaries is bound or affected,
except, in the case of clauses (i)(B), (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences of the type referred to
above which would not have a CBS Material Adverse Effect or would not prevent or
materially delay the consummation of the Merger; provided, however, that for
purposes of this Section 3.05(a), the definition of CBS Material Adverse Effect
shall be read so as not to include clause (iii) of the definition thereof.
(b) The execution and delivery of this Agreement by CBS do
not, and the performance of this Agreement by CBS will not, require any consent,
approval, authorization, waiver or permit of, or filing with or notification to,
any governmental or regulatory authority, domestic, foreign or supranational,
except for applicable requirements of the Exchange Act, the Securities Act of
1933, as amended (the "Securities Act"), state securities or "blue sky" laws
("Blue Sky Laws"), the pre-merger notification arrangements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), such filings, approvals and waivers
of the Federal Communications Commission or any successor entity (the "FCC") as
may be required under the Communications Act of 1934, as amended, and the rules,
regulations and of the FCC thereunder (collectively, the "Communications Act"),
applicable requirements of the Investment Canada Act of 1985 and the Competition
Act (Canada), any other non-United States competition, antitrust and investment
law, filing and recordation of appropriate merger documents as required by
Delaware Law and Pennsylvania Law and the rules of the NYSE and except where
failure to obtain such consents,
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11
approvals, authorizations or permits, or to make such filings or notifications,
would not have a CBS Material Adverse Effect or would not prevent or materially
delay the consummation of the Merger; provided, however, that for purposes of
this Section 3.05(b), the definition of CBS Material Adverse Effect shall be
read so as not to include clause (iii) of the definition thereof.
SECTION 3.06. Permits and Licenses; Contracts. (a) Each of CBS
and its subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders necessary for CBS or any of its subsidiaries to own, lease
and operate the properties of CBS and its subsidiaries or to carry on their
business as it is now being conducted and contemplated to be conducted (the "CBS
Permits"), and no suspension or cancellation of any of the CBS Permits is
pending or, to the knowledge of CBS, threatened, except where the failure to
have, or the suspension or cancellation of, any of the CBS Permits would not
have a CBS Material Adverse Effect. None of CBS or any of its subsidiaries is in
conflict with, or in default or violation of, (i) any Laws applicable to CBS or
any of its subsidiaries or by which any property or asset of CBS or any of its
subsidiaries is bound or affected, (ii) any of the CBS Permits or (iii) any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which CBS or any of its
subsidiaries is a party or by which CBS or any of its subsidiaries or any
property or asset of CBS or any of its subsidiaries is bound or affected, except
for any such conflicts, defaults or violations that would not have a CBS
Material Adverse Effect.
(b) Except as would not have a CBS Material Adverse Effect,
and to the knowledge of CBS, except as would not have a material adverse effect
on the Surviving Corporation following the Effective Time, none of CBS or any of
its subsidiaries is a party to any contracts or agreements that limits the
ability of CBS or any of its subsidiaries or, after the Effective Time, Viacom
or any of its subsidiaries, to compete in any line of business or with any
person or engage in any business in any geographic area, in each case except for
competition in businesses that neither CBS nor Viacom are currently engaged in
or will reasonably foreseeably engage in.
(c) CBS and its subsidiaries have operated the radio and
television stations and associated facilities for which CBS or any of its
subsidiaries holds licenses from the FCC, in each case which are owned or
operated by CBS and its subsidiaries (the "CBS Licensed Facilities"), in
material compliance with the terms of the CBS Permits issued by the FCC to CBS
and its subsidiaries ("CBS FCC Licenses"), and in material compliance with the
Communications Act, and CBS and its subsidiaries have timely filed or made all
applications, reports and other disclosures required by the FCC to be filed or
made with respect to the CBS Licensed Facilities and have timely paid all FCC
regulatory fees with respect thereto, in each case except as would not have a
CBS Material Adverse Effect. As of the date hereof, to CBS's knowledge, there is
not now pending or threatened before the FCC any material investigation,
proceeding, notice of violation, order of forfeiture or complaint against CBS or
any of its subsidiaries, relating to any
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12
of the CBS Licensed Facilities or FCC regulated services conducted by CBS that,
if adversely decided, would have a CBS Material Adverse Effect.
SECTION 3.07. SEC Filings; Financial Statements. (a) CBS and
Infinity have filed all forms, reports and documents required to be filed by it
with the SEC from December 31, 1996 to the date of this Agreement, including:
(i) Annual Reports on Form 10-K, (ii) Quarterly Reports on Form 10-Q and (iii)
proxy statements relating to CBS's and Infinity's meetings of shareholders
(whether annual or special) (the forms, reports and other documents referred to
in clauses (i), (ii), (iii) and all other forms, reports and other registration
statements filed by CBS or Infinity with the SEC as of the date of this
Agreement, including all amendments and supplements thereto filed with the SEC
as of the date of this Agreement, above being referred to herein, collectively,
as the "CBS SEC Reports"). The CBS SEC Reports, as well as all forms, reports
and documents to be filed by CBS or Infinity with the SEC after the date hereof
and prior to the Effective Time, (i) were or will be prepared in accordance with
the requirements of the Securities Act, and the Exchange Act, as the case may
be, and the rules and regulations thereunder, (ii) did not at the time they were
filed, or will not at the time they are filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, and (iii) did not at
the time they were filed, or will not at the time they are filed, omit any
documents required to be filed as exhibits thereto. No CBS subsidiary, except
Infinity, is subject to the periodic reporting requirements of the Exchange Act.
(b) Each of the financial statements (including, in each case,
any notes thereto) contained in the CBS SEC Reports and each of the financial
statements to be filed by CBS or Infinity with the SEC after the date hereof and
prior to the Effective Time was or will be prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presented in all material respects or will fairly
present in all material respects the consolidated financial position, results of
operations and cash flows of CBS and its subsidiaries as at the respective dates
thereof and for the respective periods indicated therein in accordance with
generally accepted accounting principles (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which were not and are
not expected to be material).
(c) Except as and to the extent set forth in the CBS SEC
Reports, CBS and its subsidiaries do not have any liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise) other than
liabilities and obligations which, individually or in the aggregate, would not
have a CBS Material Adverse Effect.
(d) CBS has heretofore furnished to Viacom complete and
correct copies of all material amendments and modifications that have not been
filed by CBS or Infinity with the SEC to all agreements, documents and other
instruments that previously had been filed by CBS or Infinity with the SEC and
are currently in effect.
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13
SECTION 3.08. Absence of Certain Changes or Events. (a) Since
December 31, 1998, except as disclosed in any CBS SEC Report or as contemplated
by this Agreement, there has not been any change, event or circumstance which,
when taken individually or together with all other changes, events or
circumstances, has had or would have a CBS Material Adverse Effect, and (b)
since December 31, 1998 to the date of this Agreement, except as disclosed in
any CBS SEC Report (i) each of CBS and its subsidiaries has conducted its
businesses only in the ordinary course and in a manner consistent with past
practice and (ii) there has not been (A) any material change by CBS or any of
its subsidiaries in its material accounting policies, practices and procedures,
(B) any entry by CBS or any of its subsidiaries into any commitment or
transaction material to CBS and its subsidiaries taken as a whole other than in
the ordinary course of business consistent with past practice, (C) any
declaration, setting aside or payment of any dividend or distribution in respect
of any capital stock of CBS or any of its subsidiaries (other than cash
dividends payable by any wholly owned subsidiary to another subsidiary or CBS),
or (D) any increase in the compensation payable or to become payable to any
corporate officers or heads of divisions of CBS or any of its subsidiaries,
except in the ordinary course of business consistent with past practice.
SECTION 3.09. Absence of Litigation. Except as disclosed in
any CBS SEC Report, there is no claim, action, proceeding or investigation
pending or, to the knowledge of CBS, threatened against CBS or any of its
subsidiaries, or any property or asset of CBS or any of its subsidiaries, before
any court, arbitrator or Governmental Authority, in each case except as would
not have a CBS Material Adverse Effect. As of the date of this Agreement, none
of CBS, any of its subsidiaries nor any property or asset of CBS or any of its
subsidiaries is subject to any order, writ, judgment, injunction, decree,
determination or award imposed by any court, arbitration or Governmental
Authority, in each case except as would not have a CBS Material Adverse Effect.
SECTION 3.10. Employee Benefit Plans. (a) With respect to each
employee benefit plan, program, arrangement and contract (including, without
limitation, any "employee benefit plan", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
maintained or contributed to by CBS or any of its subsidiaries, or with respect
to which CBS or any of its subsidiaries could incur liability under Section 4069
of ERISA, other than multiemployer plans within the meaning of Section 3(37) of
ERISA (the "CBS Benefit Plans"), CBS will provide to Viacom within 15 days of
the date of this Agreement a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the Internal Revenue Service (the "IRS"), (ii)
such CBS Benefit Plan, (iii) each trust agreement relating to such CBS Benefit
Plan, (iv) the most recent summary plan description for each CBS Benefit Plan
for which a summary plan description is required, (v) the most recent actuarial
report or valuation relating to a CBS Benefit Plan subject to Title IV of ERISA,
if any, and (vi) the most recent determination letter, if any, issued by the IRS
with respect to any CBS Benefit Plan qualified under Section 401(a) of the Code.
CBS will, promptly following the date of this Agreement, request a copy of each
CBS Benefit Plan that is a multiemployer plan within the meaning of
<PAGE>
14
Section 3(37) of ERISA from the trustees of such multiemployer plan and CBS
shall deliver such copy of the plan to Viacom promptly upon its receipt thereof.
(b) Each CBS Benefit Plan has been administered in accordance
with its terms, and in compliance with applicable laws, except as would not have
a CBS Material Adverse Effect. CBS and its subsidiaries have performed all
obligations required to be performed by them under, are not in any respect in
default under or in violation of, and have no knowledge of any default or
violation by any party to, any CBS Benefit Plans, except as would not have a CBS
Material Adverse Effect. With respect to the CBS Benefit Plans, no event has
occurred and, to the knowledge of CBS, there exists no condition or set of
circumstances, in connection with which CBS or any of its subsidiaries is
reasonably likely to be subject to any liability under the terms of such CBS
Benefit Plans, ERISA, the Code or any other applicable Law except as would not,
individually or in the aggregate, have a CBS Material Adverse Effect. Neither
CBS nor any of its subsidiaries has any actual or contingent liability under
Title IV of ERISA (other than the payment of premiums to the Pension Benefit
Guaranty Corporation), including, without limitation, any liability in
connection with (i) the termination or reorganization of any employee benefit
plan subject to Title IV of ERISA or (ii) the withdrawal from any Multiemployer
Plan or Multiple Employer Plan, and no fact or event exists which is reasonably
likely to give rise to any such liability, in each case except as would not,
individually or in the aggregate, have a CBS Material Adverse Effect.
(c) CBS has made available to Viacom: (i) copies of all
employment agreements with the top five most highly compensated executive
officers of CBS and its subsidiaries; (ii) copies of all material severance
agreements, programs and policies of CBS or any of its subsidiaries with or
relating to its or its subsidiaries' employees; and (iii) copies of all material
plans, programs, agreements and other arrangements of CBS or any of its
subsidiaries with or relating to its or its subsidiaries' employees which
contain change in control provisions. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, "golden parachute" or otherwise) becoming due to any director,
officer or employee of CBS or any of its subsidiaries from CBS or any of its
affiliates under any CBS Benefit Plan or otherwise, which payment is material in
relation to the compensation previously provided to such individual (other than
payments resulting from a change in responsibilities or reporting obligations of
individual employees), (ii) materially increase any benefits otherwise payable
under any CBS Benefit Plan, which increase is material in relation to the
benefits previously provided or (iii) result in any acceleration of the time of
payment or vesting of any material benefits.
(d) Each CBS Benefit Plan that is intended to be qualified
under Section 401(a) of the Code or Section 401(k) of the Code has timely
received a favorable determination letter from the IRS covering all of the
provisions applicable to the Plan for which determination letters are currently
available that the CBS Benefit Plan is so qualified and each trust established
<PAGE>
15
in connection with any CBS Benefit Plan which is intended to be exempt from
federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that it is so exempt, and no fact or event has
occurred since the date of such determination letter or letters from the IRS
which is reasonably likely to adversely affect the qualified status of any such
CBS Benefit Plan or the exempt status of any such trust.
SECTION 3.11. Labor Matters. There is no labor dispute, strike
or work stoppage against CBS or any of its subsidiaries pending or, to the
knowledge of CBS, threatened which would reasonably be expected to interfere
with the respective business activities of CBS or any of its subsidiaries,
except for such disputes, strikes or work stoppages which would not have a CBS
Material Adverse Effect. There is no charge or complaint against CBS or any of
its subsidiaries by the National Labor Relations Board or any comparable state
agency pending or threatened in writing, except for such charges or complaints
(or related unfair labor practices) which would not have a CBS Material Adverse
Effect.
SECTION 3.12. Environmental Matters. Except as would not,
individually or in the aggregate, have a CBS Material Adverse Effect:
(a) CBS and its subsidiaries (i) are in compliance with all,
and are not subject to any asserted liability or, to CBS's knowledge,
any liability (including liability with respect to current or former
subsidiaries or operations), in each case with respect to any,
Environmental Laws (as defined below), (ii) hold or have applied for
all Environmental Permits (as defined below) and (iii) are in
compliance with their respective Environmental Permits;
(b) neither CBS nor any CBS subsidiary has received any
written notice, demand, letter, claim or request for information
alleging that CBS or any of its subsidiaries is or may be in violation
of, or liable under, any Environmental Law;
(c) neither CBS nor any of its subsidiaries (i) has entered
into or agreed to any consent decree or order or is subject to any
judgment, decree or judicial order relating to compliance with
Environmental Laws, Environmental Permits or the investigation,
sampling, monitoring, treatment, remediation, removal or cleanup of
Hazardous Materials (as defined below) and, to the knowledge of CBS, no
investigation, litigation or other proceeding is pending or threatened
in writing with respect thereto, or (ii) is an indemnitor in connection
with any threatened or asserted claim by any third-party indemnitee for
any liability under any Environmental Law or relating to any Hazardous
Materials; and
(d) none of the real property owned or leased by CBS or any of
its subsidiaries is listed or, to the knowledge of CBS, proposed for
listing on the "National Priorities List"
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16
under CERCLA, as updated through the date hereof, or any similar state
or foreign list of sites requiring investigation or cleanup. For
purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended as of the date
hereof.
"Environmental Laws" means any applicable federal, state,
local or foreign statute, law, ordinance, regulation, rule, code,
treaty, writ or order and any enforceable judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent decree, judgment, stipulation, injunction, permit,
authorization, policy, opinion, or agency requirement, in each case
having the force and effect of law, relating to the pollution,
protection, investigation or restoration of the environment, health and
safety or natural resources, including those relating to the use,
handling, presence, transportation, treatment, storage, disposal,
release, threatened release or discharge of Hazardous Materials or
noise, odor, wetlands, pollution, contamination or any injury or threat
of injury to persons or property or to the siting, construction,
operation, closure and post- closure care of waste disposal, handling
and transfer facilities.
"Environmental Permits" means any permit, approval,
identification number, license and other authorization required under
any Environmental Law.
"Hazardous Materials" means (i) any petroleum, petroleum
products, by- products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (ii) any
chemical, material or other substance defined or regulated as toxic or
hazardous or as a pollutant or contaminant or waste under any
Environmental Law.
SECTION 3.13. Trademarks, Patents and Copyrights. Except as
would not have a CBS Material Adverse Effect, CBS and its subsidiaries own, or
possess adequate licenses or other valid rights to use, all material patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, service marks, service mark rights, trade secrets, applications to
register, and registrations for, the foregoing trademarks, know-how and other
proprietary rights and information used in connection with the business of CBS
and its subsidiaries as currently conducted, and no assertion or claim has been
made in writing challenging the validity of any of the foregoing which would
have a CBS Material Adverse Effect. To the knowledge of CBS, the conduct of the
business of CBS and its subsidiaries as currently conducted does not conflict in
any way with any patent, patent right, license, trademark, trademark right,
trade name, trade name right, service mark or copyright of any third party,
except for such conflicts which would not have a CBS Material Adverse Effect.
<PAGE>
17
SECTION 3.14. Taxes. (a) For purposes of this Agreement, "Tax"
or "Taxes" means any and all taxes, fees, levies, duties, tariffs, imposts, and
other charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any governmental or taxing authority including, without limitation: taxes or
other charges on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs' duties, tariffs, and similar charges.
(b) Except as would not have a CBS Material Adverse Effect:
(i) each of CBS and each of its subsidiaries has timely filed all federal,
state, local and foreign tax returns and reports (including extensions) required
to be filed by it and has paid and discharged all Taxes shown as due thereon and
has paid all of such other Taxes as are due, other than such payments as are
being contested in good faith by appropriate proceedings; (ii) neither the IRS
nor any other taxing authority or agency, domestic or foreign, is now asserting
or, to the knowledge of CBS after due inquiry, threatening to assert against CBS
or any of its subsidiaries any deficiency or claim for Taxes; (iii) no waiver of
any statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax has been granted by CBS or any of its subsidiaries; (iv)
the accruals and reserves for Taxes reflected in the CBS 1998 Balance Sheet and
the most recent quarterly financial statements are adequate to cover all Taxes
accruable through the date thereof in accordance with generally accepted
accounting principles; (v) no election under Section 341(f) of the Code has been
made by CBS or any of its subsidiaries; (vi) CBS and each of its subsidiaries
has withheld or collected and paid over to the appropriate governmental
authorities or is properly holding for such payment all Taxes required by law to
be withheld or collected; (vii) there are no liens for Taxes upon the assets of
CBS or any of its subsidiaries, other than liens for Taxes that are being
contested in good faith by appropriate proceedings and (viii) CBS has not
constituted a "distributing corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code in the two years prior to the date of
this Agreement.
SECTION 3.15. Tax Matters. None of CBS or any of its
affiliates has taken or agreed to take any action that would prevent the Merger
from constituting a transaction qualifying under Section 368(a) of the Code.
None of CBS or any of its affiliates or agents is aware of any agreement, plan
or other circumstance that would prevent the Merger from qualifying under
Section 368(a) of the Code, that could prevent them from providing
representations required in Sections 7.02(c) or 7.03(c), or that could prevent
the opinions described in such Sections from being given and to the knowledge of
CBS, the Merger will so qualify.
SECTION 3.16. Year 2000 Compliance. (a) CBS has adopted a plan
that it believes will cause CBS Systems (as defined
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18
below) to be CBS Year 2000 Compliant (as defined below) (such plan, as it may be
amended, modified or supplemented from time to time being, the "CBS Year 2000
Plan") in all material respects. CBS has taken, and between the date of this
Agreement and the Effective Time will continue to take, all reasonable steps to
implement the CBS Year 2000 Plan with respect to the CBS Systems.
Notwithstanding anything in this Section 3.16 to the contrary, CBS does not
represent or warrant that CBS Systems (or any other operations, systems,
equipment or software of CBS or its subsidiaries or any of their respective
affiliates) are or will be CBS Year 2000 Compliant at or prior to the Effective
Time, regardless of whether the CBS Year 2000 Plan has or has not been
implemented or complied with.
(b) For purposes of this Section 3.16, (i) "CBS Systems" shall
mean all computer, hardware, software, systems, and equipment (including
embedded microcontrollers in non-computer equipment) embedded within or required
to operate the current products of CBS and its subsidiaries, and/or material to
or necessary for CBS and its subsidiaries to carry on their respective
businesses as currently conducted; and (ii) "CBS Year 2000 Compliant" means that
CBS Systems will (A) manage, accept, process, store and output data involving
dates reasonably expected to be encountered in the foreseeable future and (B)
accurately process date data from, into and between the 20th and 21st centuries
and each date during the years 1999 and 2000.
SECTION 3.17. Opinion of Financial Advisors. CBS has received
the written opinion of Evercore Group Inc. (the "CBS Financial Advisor") on or
prior to the date of this Agreement, to the effect that, as of the date of such
opinion, the Exchange Ratio is fair to the shareholders of CBS from a financial
point of view, and CBS will deliver a copy of such opinion to Viacom promptly
after the date of this Agreement.
SECTION 3.18. Vote Required. The affirmative vote of a
majority of the votes cast by all shareholders entitled to vote at the CBS
Stockholders' Meeting is the only vote of the holders of any class or series of
capital stock of CBS necessary to adopt this Agreement.
SECTION 3.19. Brokers. No broker, finder or investment banker
(other than the CBS Financial Advisor) is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger based upon arrangements
made by or on behalf of CBS.
SECTION 3.20. Pennsylvania Law. Pursuant to its By-laws, CBS
has opted out of anti-takeover provisions contained in the Pennsylvania Law
relating to (i) "control share acquisitions" (Sections 2561 through 2568 of the
Pennsylvania Law) and (ii) disgorgement of profits by certain controlling
shareholders following attempts to acquire control (Sections 2571 through 2576
of the Pennsylvania Law). Section 2538 of the Pennsylvania Law relating to
"interested shareholder transactions" and Sections 2551 through 2556 of the
Pennsylvania Law relating to "business combinations with interested
shareholders" are not applicable to this Agreement or the transactions
contemplated hereby.
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19
SECTION 3.21. Rights Agreement. As of the date of this
Agreement, the copy of the Rights Agreement, including all amendments and
exhibits thereto, that is set forth as an exhibit to CBS's Form 8-K, filed with
the SEC on January 9, 1996, is a complete and correct copy thereof. Neither the
execution of this Agreement nor the consummation of the Merger will (A) cause
the Rights issued pursuant to the Rights Agreement to become exercisable, (B)
cause Viacom to become an Acquiring Person or a Principal Party (as each term is
defined in the Rights Agreement) or (C) give rise to a Distribution Date (as
such term is defined in the Rights Agreement).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VIACOM
Except as disclosed in the report on Form 10-K dated March 31,
1999 for the year ended December 31, 1998, the reports on Form 10-Q and Form 8-K
since December 31, 1998 or the proxy statement dated April 16, 1999, in each
case in the form filed by Viacom with the SEC or in a separate disclosure
schedule which has been delivered by Viacom to CBS prior to the execution of
this Agreement (the "Viacom Disclosure Schedule") (each section of which
qualifies the correspondingly numbered representation and warranty or covenant
to the extent specified therein and such other representations and warranties or
covenants to the extent a matter in such section is disclosed in such a way as
to make its relevance to the information called for by such other representation
and warranty or covenant readily apparent), Viacom hereby represents and
warrants to CBS that:
SECTION 4.01. Organization and Qualification; Subsidiaries.
Each of Viacom and its subsidiaries is a corporation or entity duly incorporated
or formed, validly existing and in good standing, under the laws of its
jurisdiction of incorporation or formation, and has the requisite corporate
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to have such power, authority and
governmental approvals would not have a Viacom Material Adverse Effect (as
defined below). Each of Viacom and its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not have a Viacom Material Adverse Effect. The term
"Viacom Material Adverse Effect" means any change, effect or circumstance that
is or is reasonably likely to be materially adverse to the business, results of
operations or financial condition of Viacom and its subsidiaries taken as a
whole, other than any change, effect or circumstance relating to or resulting
from (i) general changes in the media or entertainment industries or the
advertising markets, (ii) changes in general economic conditions or securities
<PAGE>
20
markets in general or (iii) this Agreement or the transactions contemplated
hereby or the announcement thereof.
SECTION 4.02. Certificate of Incorporation and By-Laws. Viacom
has made available to CBS a complete and correct copy of the Certificate of
Incorporation and the By-laws, each as amended to date, of Viacom and
Blockbuster Corporation ("Blockbuster"). The Certificates of Incorporation and
By-laws (or equivalent organizational documents) of Viacom and its subsidiaries
are in full force and effect. Except as would not have a Viacom Material Adverse
Effect, none of Viacom or its subsidiaries is in violation of any provision of
its Certificate of Incorporation or By-laws (or equivalent organizational
documents).
SECTION 4.03. Capitalization. The authorized capital stock of
Viacom consists of 500,000,000 shares of Viacom Class A Common Stock,
3,000,000,000 shares of Viacom Class B Common Stock and 200,000,000 shares of
Preferred Stock, par value $.01 per share, of Viacom ("Viacom Preferred Stock").
As of September 3, 1999 (a) 139,923,921 shares of Viacom Class A Common Stock
and 605,085,135 shares of Viacom Class B Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable, (b)
1,356,400 shares of Viacom Class A Common Stock and 47,101,300 shares of Viacom
B Common Stock were held in the treasury of Viacom, (c) no shares of Viacom
Class A Common Stock or Viacom Class B Common Stock were held by subsidiaries of
Viacom and (d) as of September 3, 1999, approximately 1,898,946 shares of Viacom
Class B Common Stock were reserved for future issuance pursuant to stock options
or stock incentive rights (collectively "Viacom Options") granted pursuant to
Viacom's stock option plans and arrangements (the "Viacom Stock Option Plans").
As of September 3, 1999, no shares of Viacom Preferred Stock were issued and
outstanding. As of the date of this Agreement, except for the issuance of Viacom
Class B Common Stock pursuant to the exercise of Viacom Options and options to
purchase 11,600,000 shares of Class A Common Stock, par value $.01 per share, of
Blockbuster (the "Blockbuster Options") outstanding prior to September 3, no
shares of capital stock of Viacom or any of its subsidiaries have been issued
since September 3, 1999. Except as set forth in this Section 4.03, as of the
date of this Agreement, there are no options, warrants or other rights,
agreements (including registration rights agreements), arrangements or
commitments of any character relating to the issued or unissued capital stock of
Viacom or any of its subsidiaries or obligating Viacom or any of its
subsidiaries to issue or sell any shares of capital stock of, or other equity
interests in, Viacom or any of its subsidiaries. All shares of capital stock of
Viacom and its subsidiaries subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
As of the date of this Agreement, there are no outstanding contractual material
obligations of Viacom or any subsidiary to repurchase, redeem or otherwise
acquire any shares of capital stock of Viacom or any of its subsidiaries or to
provide material funds to, or make any material investment (in the form of a
loan capital contribution or otherwise) in, any person. The Stockholder (as
defined in the Parent Voting Agreements) is the holder of a majority of the
issued and outstanding shares of Viacom Class A Common Stock.
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21
SECTION 4.04. Authority Relative to Agreement. Viacom has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the Merger and the other
transactions contemplated hereby. The execution and delivery of this Agreement
by Viacom and the consummation by Viacom of the Merger and the other
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Viacom are necessary to authorize the execution and delivery of this Agreement
or to consummate the Merger and the other transactions contemplated hereby
(other than, with respect to the Merger, the approval of the Viacom Proposals by
the holders of a majority of the then outstanding shares of Viacom Class A
Common Stock and the filing and recordation of appropriate merger documents as
required by Delaware Law and Pennsylvania Law). This Agreement has been duly and
validly executed and delivered by Viacom and, assuming the due authorization,
execution and delivery by CBS, this Agreement constitutes a legal, valid and
binding obligation of Viacom, enforceable against Viacom in accordance with its
terms.
SECTION 4.05. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by Viacom does not, and the
performance of this Agreement by Viacom and the performance by Parent of the
Parent Voting Agreements will not, (i) conflict with or violate the Certificate
of Incorporation or By-laws (or similar organization documents) of (A) Viacom or
Blockbuster or (B) any of its other subsidiaries, (ii) assuming the consents,
approvals and authorizations specified in Section 4.05(b) have been received and
the waiting periods referred to therein have expired, and any condition
precedent to such consent, approval, authorization, or waiver has been
satisfied, conflict with or violate any Law applicable to Viacom or any of its
subsidiaries or by which any property or asset of Viacom or any of its
subsidiaries is bound or affected or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Viacom or any of its subsidiaries
pursuant to, any note, bond, mortgage, indenture or credit agreement, or, to
Viacom's knowledge as of the date of this Agreement, any other, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Viacom or any of its subsidiaries is a party or by which Viacom or any
of its subsidiaries or any property or asset of Viacom or any of its
subsidiaries is bound or affected, except, in the case of clauses (i)(B), (ii)
and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences of the type referred to above which would not have a Viacom Material
Adverse Effect or would not prevent or materially delay the consummation of the
Merger; provided, however, that for purposes of this Section 4.05(a), the
definition of Viacom Material Adverse Effect shall be read so as not to include
clause (iii) of the definition thereof.
(b) The execution and delivery of this Agreement by Viacom do
not, the performance of this Agreement by Viacom and the performance by Parent
of the Parent Voting Agreements will not, require any consent, approval,
authorization, waiver or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic, foreign or
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22
supranational, except for applicable requirements of the Exchange Act, the
Securities Act, Blue Sky Laws, the HSR Act, such filings, approvals and waivers
as may be required by the Communications Act, applicable requirements of the
Investment Canada Act of 1985 and the Competition Act (Canada), any other
non-United States competition, antitrust and investment law, filing and
recordation of appropriate merger documents as required by Delaware Law and
Pennsylvania Law and the rules of the NYSE and except where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not have a Viacom Material Adverse Effect or would not
prevent or materially delay the consummation of the Merger; provided, however,
that for purposes of this Section 4.05(b), the definition of Viacom Material
Adverse Effect shall be read so as not to include clause (iii) of the definition
thereof.
SECTION 4.06. Permits and Licenses; Contracts. (a) Each of
Viacom and its subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders necessary for Viacom or any of its
subsidiaries to own, lease and operate the properties of Viacom and its
subsidiaries or to carry on their business as it is now being conducted and
contemplated to be conducted (the "Viacom Permits"), and no suspension or
cancellation of any of the Viacom Permits is pending or, to the knowledge of
Viacom, threatened, except where the failure to have, or the suspension or
cancellation of, any of the Viacom Permits would not have a Viacom Material
Adverse Effect. None of Viacom or any of its subsidiaries is in conflict with,
or in default or violation of (i) any Laws applicable to Viacom or any of its
subsidiaries or by which any property or asset of Viacom or any of its
subsidiaries is bound or affected, (ii) any of the Viacom Permits, or (iii) any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Viacom or any of its
subsidiaries is a party or by which Viacom or any of its subsidiaries or any
property or asset of Viacom or any of its subsidiaries is bound or affected,
except for any such conflicts, defaults or violations that would not have a
Viacom Material Adverse Effect.
(b) Except as would not have a Viacom Material Adverse Effect,
and to the knowledge of Viacom, except as would not have a material adverse
effect on the Surviving Corporation following the Effective Time, none of Viacom
or any of its subsidiaries is a party to any contracts or agreements that limits
the ability of Viacom or any of its subsidiaries to compete in any line of
business or with any person or engage in any business in any geographic area, in
each case except for competition in businesses that neither CBS nor Viacom are
currently engaged in or will reasonably foreseeably engage in.
(c) Viacom and its subsidiaries have operated the radio and
television stations and associated facilities for which Viacom or any of its
subsidiaries holds licenses from the FCC, in each case which are owned or
operated by Viacom and its subsidiaries (the "Viacom Licensed Facilities"), in
material compliance with the terms of the Viacom Permits issued by the FCC to
Viacom and its subsidiaries ("Viacom FCC Licenses"), and in material compliance
with the
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23
Communications Act, and Viacom and its subsidiaries have timely filed
or made all applications, reports and other disclosures required by the FCC to
be filed or made with respect to the Viacom Licensed Facilities and have timely
paid all FCC regulatory fees with respect thereto, in each case except as would
not have a Viacom Material Adverse Effect. As of the date hereof, to Viacom's
knowledge, there is not now pending or threatened before the FCC any material
investigation, proceeding, notice of violation, order of forfeiture or complaint
against Viacom or any of its subsidiaries, relating to any of the Viacom
Licensed Facilities or FCC regulated services conducted by CBS that, if
adversely decided, would have a Viacom Material Adverse Effect.
SECTION 4.07. SEC Filings; Financial Statements. (a) Viacom
and Blockbuster have filed all forms, reports and documents required to be filed
by it with the SEC from December 31, 1996 to the date of this Agreement,
including: (i) Annual Reports on Form 10-K, (ii) Quarterly Reports on Form 10-Q
and (iii) proxy statements relating to Viacom's and Blockbuster's meetings of
stockholders (whether annual or special) (the forms, reports and other documents
referred to in clauses (i), (ii), (iii) and all other forms, reports and other
registration statements filed by Viacom or Blockbuster with the SEC as of the
date of this Agreement, including all amendments and supplements thereto filed
with the SEC as of the date of this Agreement, above being referred to herein,
collectively, as the "Viacom SEC Reports"). The Viacom SEC Reports, as well as
all forms, reports and documents to be filed by Viacom or Blockbuster with the
SEC after the date hereof and prior to the Effective Time, (i) were or will be
prepared in accordance with the requirements of the Securities Act, and the
Exchange Act, as the case may be, and the rules and regulations thereunder, (ii)
did not at the time they were filed, or will not at the time they are filed,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading, and (iii) did not at the time they were filed, or will not at the
time they are filed, omit any documents required to be filed as exhibits
thereto. No Viacom subsidiary, except Blockbuster, is subject to the periodic
reporting requirements of the Exchange Act.
(b) Each of the financial statements (including, in each case,
any notes thereto) contained in the Viacom SEC Reports and each of the financial
statements to be filed by Viacom or Blockbuster with the SEC after the date
hereof and prior to the Effective Time was or will be prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each fairly presented in all material respects or will
fairly present in all material respects the consolidated financial position,
results of operations and cash flows of Viacom and its subsidiaries as at the
respective dates thereof and for the respective periods indicated therein in
accordance with generally accepted accounting principles (subject, in the case
of unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected to be material).
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24
(c) Except as and to the extent set forth in the Viacom SEC
Reports, Viacom and its subsidiaries do not have any liability or obligation of
any nature (whether accrued, absolute, contingent or otherwise) other than
liabilities and obligations which, individually or in the aggregate, would not
have a Viacom Material Adverse Effect.
(d) Viacom has heretofore furnished to CBS complete and
correct copies of all material amendments and modifications that have not been
filed by Viacom or Blockbuster with the SEC to all agreements, documents and
other instruments that previously had been filed by Viacom or Blockbuster with
the SEC and are currently in effect.
SECTION 4.08. Absence of Certain Changes or Events. (a) Since
December 31, 1998, except as disclosed in any Viacom SEC Report or as
contemplated by this Agreement, there has not been any change, event or
circumstance which, when taken individually or together with all other changes,
events or circumstances, has had or would have a Viacom Material Adverse Effect,
and (b) since December 31, 1998 to the date of this Agreement, except as
disclosed in any Viacom SEC Reports (i) each of Viacom and its subsidiaries has
conducted its businesses only in the ordinary course and in a manner consistent
with past practice and (ii) there has not been (A) any material change by Viacom
or any of its subsidiaries in its material accounting policies, practices and
procedures, (B) any entry by Viacom or any of its subsidiaries into any
commitment or transaction material to Viacom and its subsidiaries taken as a
whole other than in the ordinary course of business consistent with past
practice, (C) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Viacom or any of its
subsidiaries (other than cash dividends payable by any wholly owned subsidiary
to another subsidiary or Viacom), or (D) any increase in the compensation
payable or to become payable to any corporate officers or heads of divisions of
Viacom or any of its subsidiaries, except in the ordinary course of business
consistent with past practice.
SECTION 4.09. Absence of Litigation. Except as disclosed in
any Viacom SEC Report, there is no claim, action, proceeding or investigation
pending or, to the knowledge of Viacom, threatened against Viacom or any of its
subsidiaries, or any property or asset of Viacom or any of its subsidiaries,
before any court, arbitrator or Governmental Authority, in each case except as
would not have a Viacom Material Adverse Effect. As of the date of this
Agreement, none of Viacom, any of its subsidiaries nor any property or asset of
Viacom or any of its subsidiaries is subject to any order, writ, judgment,
injunction, decree, determination or award imposed by any court, arbitration or
Governmental Authority, in each case except as would not have a Viacom Material
Adverse Effect.
SECTION 4.10. Employee Benefit Plans. (a) With respect to each
employee benefit plan, program, arrangement and contract (including, without
limitation, any "employee benefit plan", as defined in Section 3(3) of ERISA),
maintained or contributed to by Viacom or any of its subsidiaries, or with
respect to which Viacom or any of its subsidiaries could incur liability under
Section 4069 of ERISA, other than multiemployer plans within the meaning of
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25
Section 3(37) of ERISA (the "Viacom Benefit Plans"), Viacom will provide to CBS
within 15 days of this Agreement a true and correct copy of (i) the most recent
annual report (Form 5500) filed with the IRS, (ii) such Viacom Benefit Plan,
(iii) each trust agreement relating to such Viacom Benefit Plan, (iv) the most
recent summary plan description for each Viacom Benefit Plan for which a summary
plan description is required, (v) the most recent actuarial report or valuation
relating to a Viacom Benefit Plan subject to Title IV of ERISA, if any, and (vi)
the most recent determination letter, if any, issued by the IRS with respect to
any Viacom Benefit Plan qualified under Section 401(a) of the Code. Viacom will
promptly following the date of this Agreement request a copy of each Viacom
Benefit Plan that is a multiemployer plan within the meaning of Section 3(37) of
ERISA from the trustees of such multiemployer plan and Viacom shall deliver such
copy of the plan to CBS promptly upon its receipt thereof.
(b) Each Viacom Benefit Plan has been administered in
accordance with its terms, and in compliance with applicable laws, except as
would not have a Viacom Material Adverse Effect. Viacom and its subsidiaries
have performed all obligations required to be performed by them under, are not
in any respect in default under or in violation of, and have no knowledge of any
default or violation by any party to, any Viacom Benefit Plans, except as would
not have a Viacom Material Adverse Effect. With respect to the Viacom Benefit
Plans, no event has occurred and, to the knowledge of Viacom, there exists no
condition or set of circumstances, in connection with which Viacom or any of its
subsidiaries is reasonably likely to be subject to any liability under the terms
of such Viacom Benefit Plans, ERISA, the Code or any other applicable Law except
as would not have a Viacom Material Adverse Effect. Neither Viacom nor any of
its subsidiaries has any actual or contingent liability under Title IV of ERISA
(other than the payment of premiums to the Pension Benefit Guaranty Corporation)
except as would not have a Viacom Material Adverse Effect. Neither Viacom nor
any of its subsidiaries has any actual or contingent liability under Title IV of
ERISA (other than the payment of premiums to the Pension Benefit Guaranty
Corporation), including, without limitation, any liability in connection with
(i) the termination or reorganization of any employee benefit plan subject to
Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan or Multiple
Employer Plan, and no fact or event exists which is reasonably likely to give
rise to any such liability, except as would not, individually or in the
aggregate, have a Viacom Material Adverse Effect.
(c) Viacom has made available to CBS (i) copies of all
employment agreements with the top five most highly compensated executive
officers of Viacom or any of its subsidiaries; (ii) copies of all material
severance agreements, programs and policies of Viacom or any of its subsidiaries
with or relating to its or its subsidiaries' employees; and (iii) copies of all
material plans, programs, agreements and other arrangements of Viacom or any of
its subsidiaries with or relating to its or its subsidiaries' employees which
contain change in control provisions. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, "golden parachute" or otherwise) becoming due to any director,
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26
officer or employee of Viacom or any of its subsidiaries from Viacom or any of
its affiliates under any Viacom Benefit Plan or otherwise, which payment is
material in relation to the compensation previously provided to such individual
(other than payments resulting from a change in responsibilities or reporting
obligations of individual employees), (ii) materially increase any benefits
otherwise payable under any Viacom Benefit Plan, which increase is material in
relation to the benefits previously provided or (iii) result in any acceleration
of the time of payment or vesting of any material benefits.
(d) Each Viacom Benefit Plan that is intended to be qualified
under Section 401(a) of the Code or Section 401(k) of the Code has timely
received a favorable determination letter from the IRS covering all of the
provisions applicable to the Plan for which determination letters are currently
available that the Viacom Benefit Plan is so qualified and each trust
established in connection with any Viacom Benefit Plan which is intended to be
exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so exempt, and no fact
or event has occurred since the date of such determination letter or letters
from the IRS which is reasonably likely to adversely affect the qualified status
of any such Viacom Benefit Plan or the exempt status of any such trust.
SECTION 4.11. Labor Matters. There is no labor dispute, strike
or work stoppage against Viacom or any of its subsidiaries pending or, to the
knowledge of Viacom, threatened which would reasonably be expected to interfere
with the respective business activities of Viacom or any of its subsidiaries,
except for such disputes, strikes or work stoppages which would not have a
Viacom Material Adverse Effect. There is no charge or complaint against Viacom
or any of its subsidiaries by the National Labor Relations Board or any
comparable state agency pending or threatened in writing, except for such
charges or complaints (or related unfair labor practices) which would not have a
Viacom Material Adverse Effect.
SECTION 4.12. Environmental Matters. Except as would not,
individually or in the aggregate, have a Viacom Material Adverse Effect:
(a) Viacom and its subsidiaries (i) are in compliance with
all, and are not subject to any asserted liability or, to Viacom's
knowledge, any liability (including liability with respect to current
or former subsidiaries or operations), in each case with respect to
any, Environmental Laws (as defined below), (ii) hold or have applied
for all Environmental Permits (as defined below) and (iii) are in
compliance with their respective Environmental Permits;
(b) neither Viacom nor any Viacom subsidiary has received any
written notice, demand, letter, claim or request for information
alleging that Viacom or any of its subsidiaries is or may be in
violation of, or liable under, any Environmental Law;
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27
(c) neither Viacom nor any of its subsidiaries (i) has entered
into or agreed to any consent decree or order or is subject to any
judgment, decree or judicial order relating to compliance with
Environmental Laws, Environmental Permits or the investigation,
sampling, monitoring, treatment, remediation, removal or cleanup of
Hazardous Materials (as defined below) and, to the knowledge of Viacom,
no investigation, litigation or other proceeding is pending or
threatened in writing with respect thereto, or (ii) is an indemnitor
in connection with any threatened or asserted claim by any third-party
indemnitee for any liability under any Environmental Law or relating to
any Hazardous Materials; and
(d) none of the real property owned or leased by Viacom or any
of its subsidiaries is listed or, to the knowledge of Viacom, proposed
for listing on the "National Priorities List" under CERCLA, as updated
through the date hereof, or any similar state or foreign list of sites
requiring investigation or cleanup.
SECTION 4.13. Trademarks, Patents and Copyrights. Except as
would not have a Viacom Material Adverse Effect, Viacom and its subsidiaries
own, or possess adequate licenses or other valid rights to use, all material
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, service marks, service mark rights, trade secrets,
applications to register, and registrations for, the foregoing trademarks,
service marks, know-how and other proprietary rights and information used in
connection with the business of Viacom and its subsidiaries as currently
conducted, and no assertion or claim has been made in writing challenging the
validity of any of the foregoing which would have a Viacom Material Adverse
Effect. To the knowledge of Viacom, the conduct of the business of Viacom and
its subsidiaries as currently conducted does not conflict in any way with any
patent, patent right, license, trademark, trademark right, trade name, trade
name right, service mark or copyright of any third party, except for such
conflicts which would not have a Viacom Material Adverse Effect.
SECTION 4.14. Taxes. Except as would not have a Viacom
Material Adverse Effect, (a) each of Viacom and each of its subsidiaries has
timely filed all federal, state, local and foreign tax returns and reports
(including extensions) required to be filed by it and has paid and discharged
all Taxes shown as due thereon and has paid all of such other Taxes as are due,
other than such payments as are being contested in good faith by appropriate
proceedings, (b) neither the IRS nor any other taxing authority or agency,
domestic or foreign, is now asserting or, to the knowledge of Viacom after due
inquiry, threatening to assert against Viacom or any of its subsidiaries any
deficiency or claim for Taxes, (c) no waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any Tax has been
granted by Viacom or any of its subsidiaries, (d) the accruals and reserves for
Taxes reflected in the Viacom 1998 Balance Sheet and the most recent quarterly
financial statements are adequate to cover all Taxes accruable through the date
thereof in accordance with generally accepted accounting principles, (e) no
election under Section 341(f) of the Code has been made by Viacom or any of its
subsidiaries, (f) Viacom and each of its subsidiaries has withheld or collected
and paid over to
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28
the appropriate governmental authorities or is properly holding for such payment
all Taxes required by law to be withheld or collected, (g) there are no liens
for Taxes upon the assets of Viacom or any of its subsidiaries, other than liens
for Taxes that are being contested in good faith by appropriate proceedings and
(h) Viacom has not constituted a "distributing corporation" (within the meaning
of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code in the two years prior to the
date of this Agreement.
SECTION 4.15. Tax Matters. None of Viacom or any of its
affiliates has taken or agreed to take any action that would prevent the Merger
from constituting a transaction qualifying under Section 368(a) of the Code.
None of Viacom or any of its affiliates or agents is aware of any agreement,
plan or other circumstance that would prevent the Merger from qualifying under
Section 368(a) of the Code, that could prevent them from providing
representations required in Sections 7.02(c) or 7.03(c), or that could prevent
the opinions described in such Sections from being given and to the knowledge of
Viacom the Merger will so qualify.
SECTION 4.16. Year 2000 Compliance. (a) Viacom has adopted a
plan that it believes will cause Viacom Systems (as defined below) to be Viacom
Year 2000 Compliant (as defined below) (such plan, as it may be amended,
modified or supplemented from time to time being, the "Viacom Year 2000 Plan")
in all material respects. Viacom has taken, and between the date of this
Agreement and the Effective Time will continue to take, all reasonable steps to
implement the Viacom Year 2000 Plan with respect to the Viacom Systems.
Notwithstanding anything in this Section 4.16 to the contrary, Viacom does not
represent or warrant that Viacom Systems (or any other operations, systems,
equipment or software of Viacom or its subsidiaries or any of their respective
affiliates) are or will be Viacom Year 2000 Compliant at or prior to the
Effective Time, regardless of whether the Viacom Year 2000 Plan has or has not
been implemented or complied with.
(b) For purposes of this Section 4.16, (i) "Viacom Systems"
shall mean all computer, hardware, software, systems, and equipment (including
embedded microcontrollers in non-computer equipment) embedded within or required
to operate the current products of Viacom and its subsidiaries, and/or material
to or necessary for Viacom and its subsidiaries to carry on their respective
businesses as currently conducted; and (ii) "Viacom Year 2000 Compliant" means
that Viacom Systems will (A) manage, accept, process, store and output data
involving dates reasonably expected to be encountered in the foreseeable future
and (B) accurately process date data from, into and between the 20th and 21st
centuries and each date during the years 1999 and 2000.
SECTION 4.17. Opinion of Financial Advisors. Viacom has
received the written opinion of Morgan Stanley Dean Witter & Co. (the "Viacom
Financial Advisor") on or prior to the date of this Agreement, to the effect
that, as of the date of such opinion, the Exchange Ratio
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29
is fair to the stockholders of Viacom, from a financial point of view, and
Viacom will deliver a copy of such opinion to CBS promptly after the date of
this Agreement.
SECTION 4.18. Vote Required. The affirmative vote of the
holders of a majority of the outstanding Viacom Class A Common Stock is the only
vote of the holders of any class or series of capital stock of Viacom necessary
to approve the transactions contemplated by this Agreement.
SECTION 4.19. Section 203 of Delaware Law. The Board of
Directors of Viacom has approved this Agreement and such Viacom approval is
sufficient to render inapplicable to this Agreement, the Parent Voting
Agreements and the transactions contemplated hereby and thereby the provisions
of Section 203 of Delaware Law.
SECTION 4.20. Brokers. No broker, finder or investment banker
(other than the Viacom Financial Advisor) is entitled to any brokerage, finder's
or other fee or commission in connection with the Merger based upon arrangements
made by or on behalf of Viacom.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by CBS Pending the Merger.
CBS covenants and agrees that, between the date of this Agreement and the
Effective Time, except (w) as contemplated by this Agreement or as set forth in
Section 5.01 of the CBS Disclosure Schedule, (x) as Viacom shall otherwise agree
in advance in writing, which agreement shall not be unreasonably withheld or
delayed, (y) for actions taken in connection with the consummation of the
acquisitions of King World, Outdoor Systems, Inc. and Gaylord Entertainment
Company (the "Pending Transactions") on substantially the same terms that have
heretofore been agreed between such parties or on such other terms and
conditions which would not be reasonably likely to have an impact that is both
material and detrimental to Circle and its subsidiaries, taken as a whole,
unless Viacom shall have consented thereto, such consent not to be unreasonably
withheld or delayed, and (z) for the exercise of options, warrants and similar
securities which would otherwise expire prior to the Effective Time, or the
exercise of any put rights, call rights, rights of first refusal and other
similar rights, in each case under agreements in existence on the date of this
Agreement and otherwise in accordance with the terms of this Agreement, the
business of CBS and its subsidiaries shall be conducted only in, and CBS and its
subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and CBS and its
subsidiaries shall use their reasonable best efforts to preserve substantially
intact CBS's business organization, to keep available the services of the
current officers, employees and consultants of CBS and its subsidiaries
(provided that the foregoing covenant to use reasonable best efforts shall not
require CBS to offer retention bonuses to such
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individuals) and to preserve the current relationships of CBS and its
subsidiaries with customers, distributors, dealers, suppliers and other persons
with which CBS and its subsidiaries have significant business relations. By way
of amplification and not limitation, between the date of this Agreement and the
Effective Time, CBS will not do, and will not permit any of its subsidiaries to
do, directly or indirectly, any of the following except in compliance with the
exceptions listed above:
(a) amend or otherwise change the Articles of Incorporation or
By-laws of CBS or any CBS subsidiary other than Infinity if such
amendment or change would have a CBS Material Adverse Effect;
(b) issue, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance
of, (i) any shares of its or its subsidiaries' capital stock, or any
options, warrants, convertible securities or other rights of any kind
to acquire any shares of its or its subsidiaries' capital stock or any
other ownership interest (including any phantom interest), of CBS or
any of its subsidiaries (except (A) for the issuance of Shares issuable
pursuant to CBS Options or shares of Infinity common stock pursuant to
Infinity stock options outstanding on the date hereof, (B) for the
issuance of options, and other stock grants of CBS or Shares which do
not provide for accelerated vesting in connection with the Merger and
the other transactions contemplated by this Agreement (except as
permitted under any severance arrangement established by CBS in
accordance with Section 6.16 hereof or with respect to 1,200,000
options to be issued to two senior executives of Kingworld upon its
acquisition by CBS), (x) to purchase a maximum of 5,000,000 Shares, (y)
to purchase a maximum of 17,200,000 Shares as set forth in Section 5.01
of the CBS Disclosure Schedule and (z) to purchase a maximum of
12,500,000 shares of Infinity common stock as set forth in Section 5.01
of the CBS Disclosure Schedule, in each case in the ordinary course of
business consistent with past practice and allocated to persons who are
officers, employees, directors, independent contractors and production
company writers and talent of CBS or Infinity, as applicable, or any of
their respective subsidiaries (including past practice of any such
subsidiary before its acquisition by CBS) and (C) the issuance of
shares of CBS and Infinity stock in connection with the Pending
Transactions) or (ii) any assets material to CBS and its subsidiaries,
taken as a whole, except for sales in the ordinary course of business
and in a manner consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its or its subsidiaries' capital stock other than
cash dividends payable by any wholly owned CBS subsidiary to another
CBS subsidiary or CBS and other than dividends made or paid by
Infinity, so long as the aggregate amount of such dividends paid by
Infinity shall not exceed $500,000,000;
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31
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its or its
subsidiaries' capital stock;
(e) (i) except in connection with the Pending Transactions and
in connection with acquisitions which individually do not exceed
$200,000,000 and in the aggregate do not exceed $1,000,000,000 (A)
acquire (including by merger, consolidation, or acquisition of stock or
assets), or otherwise make any investment in, any corporation,
partnership, limited liability company, other business organization or
any division thereof, or any material amount of assets; or (B) incur
any indebtedness for borrowed money, issue any debt securities, assume,
guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, agree to amend or
otherwise modify in any manner any agreement or instrument pursuant to
which CBS has incurred indebtedness, or make any loans or advances,
except in the ordinary course of business and consistent with past
practice, except the refinancing of existing indebtedness, borrowings
under commercial paper programs in the ordinary course of business or
borrowings under existing bank lines of credit in the ordinary course
of business, (ii) enter into any material contract, agreement or
transaction, other than (X) in the ordinary course of business, and (Y)
which would not be reasonably likely to prevent or materially delay the
consummation of the Merger, (iii) authorize any capital expenditures
which are, in the aggregate, in excess of the amounts currently
budgeted for the fiscal year 1999 (including the applicable 1999
capital expenditures of the companies subject to the Pending
Transactions) and, with respect to fiscal year 2000, 10% in excess of
such amount, in each case for CBS and its subsidiaries taken as a whole
or (iv) enter into or amend any contract, agreement, commitment or
arrangement which would require CBS to take any action prohibited by
this subsection (e) and will, or will cause Infinity to, not amend in
any material respect, or waive any material right or condition under or
relating to the definitive agreements relating to the Pending
Transactions, in each case except for any such amendment or waiver the
impact of which would not be reasonably likely to be both material and
detrimental to CBS and its subsidiaries, taken as a whole;
(f) increase the compensation payable or to become payable to
its executive officers or employees, except as set forth in Section
6.16 or as required by Law or by the terms of any collective bargaining
agreement or other agreement currently in effect between CBS or any
subsidiary of CBS and any executive officer or employee thereof and
except for increases in the ordinary course of business in accordance
with past practices, or grant any severance or termination pay to, or
enter into any employment or severance agreement with, any director or
executive officer of it or any of its subsidiaries, or establish,
adopt, enter into or amend in any material respect or take action to
accelerate any rights or benefits under any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, executive officer or
employee, provided that
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32
this clause shall not prevent any CBS subsidiary from (i) entering into
employment contracts with newly-hired or promoted executive officers,
or from making severance payments, on terms substantially consistent
with the contractual arrangements currently existing at such subsidiary
or (ii) providing for the payment of severance to executive officers or
employees on terms substantially consistent with the past practices of
such subsidiary (including past practice preceding such subsidiaries'
acquisition by CBS);
(g) change in any material respect (except as required by the
SEC or changes in United States generally accepted accounting
principles which become effective after the date of this Agreement) any
accounting policies, practices or procedures;
(h) make any tax election that, individually or in the
aggregate, would have a CBS Material Adverse Effect or settle or
compromise any material Tax liability; or
(i) enter into any contract, agreement, lease, license,
permit, franchise or other instrument or obligation which if in
existence and known to CBS prior to the date of this Agreement would
have resulted in a breach of Section 3.05, except to the extent the
conflict, violation, breach, default or occurrence of the type referred
to therein giving rise to such breach would not have a CBS Material
Adverse Effect;
provided, that Infinity shall not be prohibited from taking any action under
this Section 5.01 which the Board of Directors of Infinity determines is
required to be taken in the exercise of the Board's fiduciary duties to the
stockholders of Infinity (other than CBS).
SECTION 5.02. Conduct of Business by Viacom Pending the
Merger. Viacom covenants and agrees that, between the date of this Agreement and
the Effective Time, except (w) as contemplated by this Agreement or as set forth
in Schedule 5.02 of the Viacom Disclosure Schedule, (x) as CBS shall otherwise
agree in advance in writing, which agreement shall not be unreasonably withheld
or delayed (y) for the exercise of options, warrants and similar securities
which would otherwise expire prior to the Effective Time, or the exercise of any
put rights, call rights, rights of first refusal and other similar rights, in
each case under agreements in existence on the date of this Agreement and
otherwise in accordance with the terms of this Agreement and (z) an exchange
offer of Blockbuster shares owned by Viacom for shares of Viacom Class B Common
Stock owned by the stockholders of Viacom (the "Split-off") in accordance with
the procedures set forth in Section 5.02 of the Viacom Disclosure Schedule, the
business of Viacom and its subsidiaries shall be conducted only in, and Viacom
and its subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and Viacom and its
subsidiaries shall use their reasonable best efforts to preserve substantially
intact Viacom's business organization, to keep available the services of the
current officers, employees and consultants of Viacom and its subsidiaries
(provided that the foregoing covenant to use reasonable best efforts shall not
require Viacom to offer retention bonuses to such individuals) and to preserve
the current relationships of Viacom and its subsidiaries with
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33
customers, distributors, suppliers and other persons with which Viacom and its
subsidiaries have significant business relations. By way of amplification and
not limitation, between the date of this Agreement and the Effective Time,
Viacom will not do, and will not permit any of its subsidiaries to do, directly
or indirectly, any of the following except in compliance with the exceptions
listed above:
(a) amend or otherwise change the Certificate of Incorporation
or By-laws of Viacom or Blockbuster, or any other Viacom subsidiary if
such amendment or change would have a Viacom Material Adverse Effect;
(b) issue, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance
of, (i) any shares of its or its subsidiaries' capital stock, or any
options, warrants, convertible securities or other rights of any kind
to acquire any shares of its or its subsidiaries' capital stock or any
other ownership interest (including any phantom interest), of Viacom or
any of its subsidiaries (except (A) for the issuance of Shares issuable
pursuant to Viacom Options outstanding on the date hereof and (B) for
the issuance of options, which do not provide for accelerated vesting
or other consequences in connection with the Merger and the other
transactions contemplated by this Agreement, to purchase a maximum of
6,000,000 shares of Viacom Class B Common Stock in the ordinary course
of business consistent with past practice and allocated to persons who
are officers, employees, directors, independent contractors and
production company writers and talent of Viacom or any of its
subsidiaries on a basis substantially consistent with past practice),
or (ii) any assets material to Viacom and its subsidiaries, taken as a
whole, except for sales in the ordinary course of business and in a
manner consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its or its subsidiaries' capital stock other than
cash dividends payable by any wholly owned Viacom subsidiary to another
Viacom subsidiary or Viacom, other than dividends made or paid by
Blockbuster, so long as the aggregate amount of such dividends paid by
Blockbuster shall not exceed $50,000,000;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its or its
subsidiaries' capital stock;
(e) (i) except in connection with acquisitions which
individually do not exceed $200,000,000 and in the aggregate do not
exceed $1,000,000,000 (A) acquire (including by merger, consolidation,
or acquisition of stock or assets), or otherwise make any investment
in, any corporation, partnership, limited liability company, other
business organization or any division thereof, or any material amount
of assets; or (B) incur any indebtedness for borrowed money, issue any
debt securities, assume, guarantee or
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34
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, agree to amend or otherwise modify in any
manner any agreement or instrument pursuant to which Viacom has
incurred indebtedness, or make any loans or advances, except in the
ordinary course of business and consistent with past practice, except
the refinancing of existing indebtedness, borrowings under commercial
paper programs in the ordinary course of business or borrowings under
existing bank lines of credit in the ordinary course of business, (ii)
enter into any contract, agreement or transaction, other than (X) in
the ordinary course of business, consistent with past practice and (Y)
which would not be reasonably likely to prevent or materially delay the
consummation of the Merger, (iii) authorize any capital expenditures
which are, in the aggregate, in excess of the amount currently budgeted
therefor (and previously disclosed to CBS) for the fiscal year ending
December 31, 1999, and, with respect to fiscal year December 31, 2000,
10% in excess of such amount, in each case for Viacom and its
subsidiaries taken as a whole or (iv) enter into or amend any contract,
agreement, commitment or arrangement which would require Viacom to take
any action prohibited by this subsection (e);
(f) increase the compensation payable or to become payable to
its executive officers or employees, except as required by Law or by
the terms of any collective bargaining agreement or other agreement
currently in effect between Viacom or any subsidiary of Viacom and any
executive officer or employee thereof and except for increases in the
ordinary course of business in accordance with past practices, or grant
any severance or termination pay to, or enter into any employment or
severance agreement with, any director or executive officer of it or
any of its subsidiaries, or establish, adopt, enter into or amend in
any material respect or take action to accelerate any rights or
benefits under any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any director, executive officer or employee, provided that
this clause shall not prevent any Viacom subsidiary from (i) entering
into employment contracts with newly- hired or promoted executive
officers on terms substantially consistent with the contractual
arrangements currently existing at such subsidiary or (ii) providing
for the payment of severance to executive officers or employees on
terms substantially consistent with the past practices of such
subsidiary;
(g) change in any material respect (except as required by the
SEC or changes in United States generally accepted accounting
principles which become effective after the date of this Agreement) any
accounting policies, practices or procedures;
(h) make any tax election that, individually or in the
aggregate, would have a Viacom Material Adverse Effect or settle or
compromise any material Tax liability; or
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35
(i) enter into any contract, agreement, lease, license,
permit, franchise or other instrument or obligation which if in
existence and known to Viacom prior to the date of this Agreement would
have resulted in a breach of Section 4.05, except to the extent the
conflict, violation breach, default or occurrence of the type referred
to therein giving rise to such breach would not have a Viacom Material
Adverse Effect;
provided, that Blockbuster shall not be prohibited from taking any action under
this Section 5.02 which the Board of Directors of Blockbuster determines is
required to be taken in the exercise of the Board's fiduciary duties to the
stockholders of Blockbuster (other than Viacom).
SECTION 5.03. Other Actions. Except as required by Law, CBS
and Viacom shall not, and shall not permit any of their respective subsidiaries
to, take any action that would, or that is reasonably likely to, result in any
of the conditions to the Merger set forth in Article VII not being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement; Joint Proxy Statement.
(a) As promptly as practicable after the execution of this Agreement, (i) Viacom
and CBS shall cooperate in preparing and each shall cause to be filed with the
SEC a joint proxy statement (together with any amendments thereof or supplements
thereto, the "Proxy Statement") relating to the meetings of Viacom's and CBS's
stockholders to be held to consider approval and adoption of this Agreement and
the Viacom Proposals and (ii) Viacom shall prepare and file with the SEC a
registration statement on Form S-4 (together with all amendments thereto, the
"Registration Statement") in which the Proxy Statement shall be included as a
prospectus, in connection with the registration under the Securities Act of the
shares of Viacom Class B Common Stock to be issued to the shareholders of CBS
pursuant to the Merger. Each of Viacom and CBS shall use its reasonable best
efforts to cause the Registration Statement to become effective as promptly as
practicable, and, prior to the effective date of the Registration Statement,
Viacom shall use reasonable best efforts to take all or any action required
under any applicable federal or state securities Laws in connection with the
issuance of shares of Viacom Class B Common Stock pursuant to the Merger. Each
of Viacom and CBS shall furnish all information concerning it as may reasonably
be requested by the other party in connection with such actions and the
preparation of the Registration Statement and Proxy Statement. As promptly as
practicable after the Registration Statement shall have become effective, each
of Viacom and CBS shall mail the Proxy Statement to its stockholders and to its
shareholders, respectively. Each of Viacom and CBS shall also promptly file, use
reasonable best efforts to cause to become effective as promptly as practicable
and, if required, mail to its stockholders and shareholders, respectively, any
<PAGE>
36
amendment to the Registration Statement or Proxy Statement which may become
necessary after the date the Registration Statement is declared effective.
(b) (i) The Proxy Statement shall include the recommendation
of the Board of Directors of Viacom to the stockholders of Viacom in favor of
approval of the Viacom Proposals; provided, however, that the Board of Directors
of Viacom may take or disclose to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or make any disclosure required
under applicable Law and may, prior to the date of its Stockholders' Meeting,
withdraw, modify, or change any such recommendation to the extent that the Board
of Directors of Viacom determines in good faith that such withdrawal,
modification or change is required in order to comply with its fiduciary duties
to Viacom's stockholders under applicable Law after receiving advice from
independent legal counsel (who may be Viacom's regularly engaged outside legal
counsel).
(ii) The Proxy Statement shall include the recommendation of
the Board of Directors of CBS to the shareholders of CBS in favor of adoption of
this Agreement; provided, however, that the Board of Directors of CBS may take
or disclose to its shareholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or make any disclosure required under
applicable Law and may, prior to the date of its Stockholders' Meeting,
withdraw, modify, or change any such recommendation to the extent that the Board
of Directors of CBS determines in good faith that such withdrawal, modification
or change is required in order to comply with its fiduciary duties under
applicable Law after receiving advice from independent legal counsel (who may be
CBS's regularly engaged outside legal counsel).
(c) Notwithstanding any withdrawal, modification or change in
any approval or recommendation of the Board of Directors of CBS or Viacom, as
the case may be, each of CBS and Viacom agree to hold their respective
Stockholders Meeting in accordance with the time period specified in Section
6.02.
(d) No amendment or supplement to the Proxy Statement or the
Registration Statement will be made by Viacom or CBS without the approval of the
other party, which shall not be unreasonably withheld or delayed. Each of Viacom
and CBS will advise the other, promptly after it receives notice thereof, of the
time when the Registration Statement has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of the Viacom Class B Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement or the Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional information.
(e) The information supplied by CBS for inclusion in the
Registration Statement and the Proxy Statement (including by incorporation by
reference) shall not, at (i) the time the Registration Statement is declared
effective, (ii) the time the Proxy Statement (or any
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37
amendment thereof or supplement thereto) is first mailed to the stockholders and
shareholders of Viacom and CBS, respectively, (iii) the time of each of the
Stockholders' Meetings (as hereinafter defined), and (iv) the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. If at any time prior to the Effective Time any event or
circumstance relating to CBS or any of its subsidiaries, or their respective
officers or directors, should be discovered by CBS which, pursuant to the
Securities Act or Exchange Act, should be set forth in an amendment or a
supplement to the Registration Statement or Proxy Statement, CBS shall promptly
inform Viacom. All documents that CBS is responsible for filing with the SEC in
connection with the Merger will comply as to form in all material respects with
the applicable requirements of the Securities Act and the Exchange Act.
(f) The information supplied by Viacom for inclusion in the
Registration Statement and the Proxy Statement (including by incorporation by
reference) shall not, at (i) the time the Registration Statement is declared
effective, (ii) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of Viacom and the
shareholders of CBS, (iii) the time of each of the Stockholders' Meetings, and
(iv) the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading. If at any time prior to the
Effective Time any event or circumstance relating to Viacom or any of its
subsidiaries, or their respective officers or directors, should be discovered by
Viacom which, pursuant to the Securities Act or Exchange Act, should be set
forth in an amendment or a supplement to the Registration Statement or Proxy
Statement, Viacom shall promptly inform CBS. All documents that Viacom is
responsible for filing with the SEC in connection with the Merger will comply as
to form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act.
(g) Viacom and CBS each hereby (i) consents to the use of its
name and, on behalf of its subsidiaries and affiliates, the names of such
subsidiaries and affiliates and to the inclusion of financial statements and
business information relating to such party and its subsidiaries and affiliates
(in each case, to the extent required by applicable securities laws) in any
registration statement or proxy statement prepared by Viacom, CBS or any person
or entity with which Viacom or CBS, consistent with their obligations under this
Agreement, has entered into, or may prior to the Effective Time enter into, a
definitive acquisition agreement, (ii) agrees to use its reasonable best efforts
to obtain the written consent of any person or entity retained by it which may
be required to be named (as an expert or otherwise) in such registration
statement or proxy statement; provided, that such party shall not be required to
make any material payment to such person or entity in connection with such
party's efforts to obtain any such consent, and (iii) agrees to cooperate, and
agrees to use its reasonable best efforts to cause its subsidiaries and
affiliates to cooperate, with any legal counsel, investment banker, accountant
or other agent or representative retained by any of the parties specified in
clause (i) in connection with the preparation of any and all information
required, as determined after consultation with each party's
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38
counsel, to be disclosed by applicable securities laws in any such registration
statement or proxy statement.
(h) CBS and Viacom will use their best efforts to complete the
pro forma financial statements with respect to the Merger, in a form suitable
for filing in connection with a registration statement under the Securities Act,
as soon as possible, and in any event within 10 days after the execution of this
Agreement.
(i) CBS shall consult with Viacom, and provide Viacom
reasonable opportunity to review and comment on, and CBS and Viacom will use
their respective reasonable best efforts to agree on, CBS's and Infinity's
accounting for the Pending Transactions.
SECTION 6.02. Stockholders' Meetings. Each of Viacom and CBS
shall call and hold a meeting of its stockholders or shareholders, respectively
(collectively, the "Stockholders' Meetings"), as promptly as practicable for the
purpose of voting upon, in the case of Viacom, the Viacom Proposals, and, in the
case of CBS, the adoption of this Agreement, and CBS and Viacom shall hold the
Stockholders' Meeting as soon as practicable after the date on which the
Registration Statement becomes effective and will use reasonable best efforts to
hold the Stockholders' Meetings on the same day. Each of Viacom and CBS shall
use its reasonable best efforts to solicit from its stockholders proxies in
favor of the adoption of this Agreement, in the case of CBS, and the Viacom
Proposals, in the case of Viacom, and shall take all other action necessary or
advisable to secure the vote of its stockholders and shareholders, respectively,
required by the NYSE, Pennsylvania Law or Delaware Law, as applicable, to obtain
such approvals; provided, however, that Viacom or CBS, as applicable, shall not
be obligated to solicit proxies in favor of the adoption of this Agreement, in
the case of CBS, or in favor of the Viacom Proposals, in the case of Viacom, at
its Stockholders' Meeting to the extent that the Board of Directors of Viacom or
CBS, as applicable, determines in good faith that such failure to solicit
proxies is required in order to comply with its fiduciary duties under
applicable Law after receiving advice to such effect from independent legal
counsel (who may be such party's regularly engaged outside legal counsel);
provided, further, however, that notwithstanding anything to the contrary in the
foregoing, each of CBS and Viacom shall hold its Stockholders Meeting in
accordance with the time periods specified in the first sentence of this Section
6.02.
SECTION 6.03. Appropriate Action; Consents; Filings. (a) Each
of the parties hereto shall (i) make promptly its respective filings, and
thereafter make any other required submissions under the HSR Act with respect to
the transactions contemplated herein and (ii) make promptly filings with or
applications to the FCC with respect to the transactions contemplated herein.
The parties hereto will use their respective best efforts, and will take all
actions necessary, to consummate and make effective the transactions
contemplated herein and to cause the conditions to the Merger set forth in
Article VII to be satisfied, (including using best efforts, and taking all
actions necessary, to obtain all licenses, permits, consents, approvals,
authorizations, waivers, qualifications and orders of Governmental Authorities
as are necessary
<PAGE>
39
for the consummation of the transactions contemplated herein),
and will do so in a manner designed to obtain such regulatory clearance and the
satisfaction of such conditions as expeditiously as possible.
(b) CBS and Viacom each agree to take promptly any and all
steps necessary to avoid or eliminate each and every impediment and obtain all
consents or waivers under any antitrust, competition or communications or
broadcast Law that may be asserted by any U.S. federal, state and local and
non-United States antitrust or competition authority, or by the FCC or
similar authority, so as to enable the parties to close the transactions
contemplated by this Agreement as expeditiously as possible, including
committing to or effecting, by consent decree, hold separate orders, trust, or
otherwise, the sale or disposition of such of its assets or businesses as are
required to be divested in order to obtain the consent of the FCC to or avoid
the entry of, or to effect the dissolution of, any decree, order, judgment,
injunction, temporary restraining order or other order in any suit or
proceeding, that would otherwise have the effect of preventing or materially
delaying the consummation of the Merger and the other transactions contemplated
by this Agreement. In addition, each of CBS and Viacom agree to take promptly
any and all steps necessary to obtain any consent or to vacate or lift any
order, writ, judgment, injunction, decree, stipulation, determination or award
entered by or with any Governmental Authority (each, an "Order") relating to
antitrust or communications or broadcast matters that would have the effect of
making any of the transactions contemplated by this Agreement illegal or
otherwise prohibiting or materially delaying their consummation. The parties
will expeditiously agree on a complete plan for compliance with applicable FCC
ownership requirements for inclusion in the FCC filings and will expeditiously
make such filings (including such agreed plan) with the FCC following the date
of this Agreement.
(c) Each of Viacom and CBS shall give (or shall cause its
respective subsidiaries to give) any notices to third parties, and Viacom and
CBS shall use, and cause each of its subsidiaries to use, its reasonable best
efforts to obtain any third party consents, necessary, proper or advisable to
consummate the Merger. Each of the parties hereto will furnish to the other such
necessary information and reasonable assistance as the other may request in
connection with the preparation of any required governmental filings or
submissions and will cooperate in responding to any inquiry from a Governmental
Authority, including immediately informing the other party of such inquiry,
consulting in advance before making any presentations or submissions to a
Governmental Authority, and supplying each other with copies of all material
correspondence, filings or communications between either party and any
Governmental Authority with respect to this Agreement.
SECTION 6.04. Access to Information; Confidentiality. (a) From
the date hereof to the Effective Time, to the extent permitted by applicable Law
and contracts, Viacom will provide to CBS (and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives, collectively, "Representatives") access to all
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40
information and documents which CBS may reasonably request regarding the
business, assets, liabilities, employees and other aspects of Viacom.
(b) From the date hereof to the Effective Time, to the extent
permitted by applicable Law and contracts, CBS will provide to Viacom and its
Representatives access to all information and documents which Viacom may
reasonably request regarding the business, assets, liabilities, employees and
other aspects of CBS.
(c) The parties shall comply with, and shall cause their
respective Representatives to comply with all of their respective obligations
under the Confidentiality Agreement dated August 27, 1999 (the "Confidentiality
Agreement") between CBS and Viacom.
(d) No investigation pursuant to this Section 6.04 shall
affect any representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto.
SECTION 6.05. No Solicitation of Competing Transactions. (a)
CBS shall not, directly or indirectly, through any officer, director, agent or
otherwise, initiate, solicit or knowingly encourage (including by way of
furnishing non-public information), or take any other action knowingly to
facilitate, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Competing Transaction (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain a Competing Transaction,
or agree to or endorse any Competing Transaction, or authorize any of the
officers, directors or employees of CBS or any investment banker, financial
advisor, attorney, accountant or other agent or representative of CBS to take
any such action, and CBS shall notify Viacom as promptly as practicable of all
of the relevant material details relating to all inquiries and proposals which
CBS or any such officer, director, employee, investment banker, financial
advisor, attorney, accountant or other agent or representative may receive
relating to any of such matters, provided, however, that prior to the adoption
of this Agreement by the shareholders of CBS, nothing contained in this Section
6.05 shall prohibit the Board of Directors of CBS from (i) furnishing
information to, or entering into and engaging in discussions or negotiations
with, any person that makes a bona fide unsolicited written proposal that the
Board of Directors of CBS determines in good faith, after consultation with
CBS's financial advisors and independent legal counsel, can be reasonably
expected to result in a CBS Superior Proposal; provided, that prior to
furnishing such information to, or entering into discussions or negotiations
with, such person, CBS (1) provides notice to Viacom to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person and provides in any such notice to Viacom in reasonable detail the
identity of the person making such proposal and the material terms and
conditions of such proposal, (2) provides Viacom with all information regarding
CBS provided or to be provided to such person which Viacom has not previously
been provided, and provided, further that CBS shall keep Viacom informed, on a
prompt basis, of the status and material terms of any such proposal and
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the status of any such discussions and negotiations and (3) receives from such
person or entity an executed confidentiality agreement containing customary
terms (which need not contain "standstill" or similar provisions), (ii)
complying with Rule 14e-2 promulgated under the Exchange Act with regard to a
tender or exchange offer or making any disclosure required under applicable Law
or (iii) failing to make or withdrawing or modifying its recommendation referred
to in Section 6.01 following the making of a CBS Superior Proposal if, solely in
the case of this clause (iii), the Board of Directors of CBS, after consultation
with and based upon the advice of independent legal counsel, determines in good
faith that such action is necessary for the Board of Directors of CBS to comply
with its fiduciary duties under applicable law.
(b) For purposes of this Agreement, "Competing Transaction"
shall mean any of the following involving CBS: (i) any merger, consolidation,
share exchange, business combination, issuance or purchase of securities or
other similar transaction other than transactions specifically permitted
pursuant to Section 5.01 of this Agreement; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of the assets of CBS in a single
transaction or series of related transactions; (iii) any tender offer or
exchange offer for CBS securities or the filing of a registration statement
under the Securities Act in connection with any such exchange offer; in the case
of clauses (i), (ii) or (iii) above, which transaction would result in a third
party (or its shareholders) acquiring more than 35% of the voting power of the
Shares then outstanding or more than 35% of the assets of CBS and its
subsidiaries, taken as a whole; or (iv) any public announcement of an agreement,
proposal, plan or intention to do any of the foregoing, either during the
effectiveness of this Agreement or at any time thereafter.
(c) For purposes of this Agreement, a "CBS Superior Proposal"
means any proposal made by a third party which would result in such party (or in
the case of a parent-to- parent merger, its stockholders) acquiring, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, share exchange, business combination, share purchase, asset
purchase, recapitalization, liquidation, dissolution, joint venture or similar
transaction, more than 50% of the voting power of the Shares then outstanding or
all or substantially all the assets of CBS and its subsidiaries, taken as a
whole, for consideration which the Board of Directors of CBS determines in its
good faith judgment to be more favorable to CBS's shareholders than the Merger.
SECTION 6.06. Directors' and Officers' Indemnification and
Insurance. (a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the Certificate of Incorporation and By-laws of Viacom on the date of
this Agreement, which provisions shall not be amended, repealed or otherwise
modified after the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at any time prior to the Effective Time
were directors or officers of CBS in respect of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), unless such modification is
required by law.
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(b) The Surviving Corporation shall maintain in effect for six
years from the Effective Time directors' and officers' liability insurance
covering those persons who are currently covered by CBS's directors' and
officers' liability insurance policy on terms comparable to such existing
insurance coverage; provided, however, that in no event shall the Surviving
Corporation be required to expend pursuant to this Section 6.06 more than an
amount per year equal to 300% of current annual premiums paid by CBS for such
insurance and; provided, further that if the annual premiums exceed such amount,
Viacom shall be obligated to obtain a policy with the greatest coverage
available for an annual cost not exceeding such amount.
(c) This Section 6.06 shall survive the consummation of the
Merger, is intended to benefit each indemnified party, shall be binding, jointly
and severally, on all successors and assigns of the Surviving Corporation, and
shall be enforceable by the indemnified parties and their successors.
SECTION 6.07. Notification of Certain Matters. CBS shall give
prompt notice to Viacom, and Viacom shall give prompt notice to CBS, of (i) the
occurrence, or nonoccurrence, of any event the occurrence, or nonoccurrence, of
which would be likely to cause (x) any representation or warranty contained in
this Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(ii) any failure of CBS or Viacom, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.07 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.08. Tax Treatment. (a) The Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the income tax regulations promulgated under the Code.
(b) Between the date of this Agreement and the Effective Time,
neither CBS nor Viacom nor their affiliates shall directly or indirectly take
any action that could prevent the Merger from qualifying as a reorganization
under Section 368(a) of the Code, that could prevent each of them from providing
representations required from them in Sections 7.02(c) or 7.03(c), or that could
prevent the opinions described in such Sections from being provided. Each of
them shall use all reasonable efforts to cause the opinions described in such
Sections to be provided, and to cause similar opinions to be provided at the
date of filing of the Registration Statement.
(c) Neither CBS nor Viacom shall (without the consent of the
other) take any action, except as specifically contemplated by this Agreement,
that could adversely affect the intended tax treatment of the Pending
Transactions.
SECTION 6.09. Stock Exchange Listing. Viacom shall as promptly
as reasonably practicable prepare and submit to NYSE a listing application
covering the shares of
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43
Viacom Class B Common Stock to be issued in the Merger and the shares of Viacom
Class B Common Stock underlying the CBS Options outstanding immediately prior to
the Effective Time and shall use its best efforts to cause such shares to be
approved for listing on the NYSE prior to the Effective Time.
SECTION 6.10. Public Announcements. Viacom and CBS shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement and shall not issue any such
press release or make any such public statement without the prior consent of the
other (which consent shall not be unreasonably withheld or delayed), except as
may be required by Law or any listing agreement with the NYSE to which Viacom or
CBS is a party. The parties have agreed on the text of a joint press release by
which Viacom and CBS will announce the execution of this Agreement.
SECTION 6.11. Viacom's Directors. The Board of Directors of
Viacom shall take all such action as may be necessary to cause the number of
directors on the Board of Directors of Viacom to be increased to eighteen as of
the Effective Time and to cause to be appointed to the Board of Directors of
Viacom as of the Effective Time eight designees of CBS, one of whom shall be Mel
Karmazin (unless Mel Karmazin shall no longer be available to serve in such
capacity) and the other seven of whom shall consist of CBS directors designated
in writing by CBS to Viacom prior to the mailing of the Proxy Statement as set
forth in Exhibit A-1 hereto.
SECTION 6.12. Rights Agreement. The Board of Directors of CBS
shall take such action as is necessary to render the Rights inapplicable to the
Merger and the other transactions contemplated by this Agreement.
SECTION 6.13. Assumption of Debt and Leases. (a) With respect
to debt issued by CBS under indentures qualified under the Trust Indenture Act
of 1939, and any other debt of CBS the terms of which require Viacom to assume
such debt in order to avoid default thereunder (collectively, the "CBS
Indentures"), Viacom shall execute and deliver to the trustees or other
representatives in accordance with the terms of the respective CBS Indentures,
Supplemental Indentures, in form satisfactory to the respective trustees or
other representatives, expressly assuming the obligations of CBS with respect to
the due and punctual payment of the principal of (and premium, if any) and
interest, if any, on all debt securities issued by CBS under the respective
Indentures and the due and punctual performance of all the terms, covenants and
conditions of the respective CBS Indentures to be kept or performed by CBS and
shall deliver such Supplemental Indentures to the respective trustees or other
representatives under the CBS Indentures.
(b) Viacom shall, promptly upon the reasonable request of CBS,
provide CBS with a letter which states that Viacom agrees that, as the Surviving
Corporation in the Merger, as
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44
of and following the Effective Time, it will succeed to, honor, and satisfy all
obligations and liabilities of CBS.
SECTION 6.14. Affiliates of CBS. CBS represents and warrants
to Viacom that prior to the date of the CBS Stockholders' Meeting CBS will
deliver to Viacom a letter identifying all persons who may be deemed affiliates
of CBS under Rule 145 of the Securities Act, including, without limitation, all
directors and executive officers of CBS, and CBS represents and warrants to
Viacom that CBS has advised the persons identified in such letter of the resale
restrictions imposed by applicable securities laws. CBS shall use its reasonable
best efforts to obtain from each person identified in such letter a written
agreement, substantially in the form of Exhibit 6.14. CBS shall use its
reasonable best efforts to obtain as soon as practicable from any person who may
be deemed to have become an affiliate of CBS after CBS's delivery of the letter
referred to above and prior to the Effective Time, a written agreement
substantially in the form of Exhibit 6.14.
SECTION 6.15. Prior Service. With respect to any medical and
dental benefits provided to Continuing Employees as of or following the
Effective Time under Viacom's benefit plans, Viacom agrees that it will waive
waiting periods and pre-existing condition requirements under such plans (to the
extent waived under CBS's plans), and will give Continuing Employees credit for
any co-payments and deductibles actually paid by such employees under CBS's
medical and dental plans during the calendar year in which the Effective Time
occurs. In addition, service with CBS shall be recognized for all purposes under
Viacom's compensation and benefit plans, programs, policies and arrangements,
except where crediting such service would result in a duplication of benefits.
Without limiting the generality of the foregoing, Viacom shall honor all
vacation, personal and sick days accrued by Continuing Employees under CBS's
plans, policies, programs and arrangements immediately prior to the Effective
Time.
SECTION 6.16. Employee Matters. (a) Viacom may establish
retention and severance arrangements for its officers or employees consistent
with the terms and conditions set forth in Section 6.16 of the Viacom Disclosure
Schedule (the "Viacom Employee Arrangements").
(b) CBS may establish retention and severance and similar
compensation arrangements for its officers and employees; provided that the
aggregate amount expended pursuant to such arrangements does not materially
exceed the estimated value of the Viacom Employee Arrangements.
(c) Each of CBS and Viacom shall consult with the other on the
design and implementation of the retention arrangements and the allocations of
the payments thereunder.
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45
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party. The
obligations of CBS and Viacom to consummate the Merger are subject to the
satisfaction or waiver of the following conditions:
(a) (i) this Agreement shall have been adopted by the
affirmative vote of a majority of the votes cast by all shareholders
entitled to vote at the CBS Stockholders' Meeting in accordance with
Pennsylvania Law and CBS's Articles of Incorporation and (ii) the
Viacom Proposals shall have been approved by the affirmative vote of
the holders of a majority of the Viacom Class A Common Stock;
(b) any applicable waiting period under the HSR Act relating
to the Merger shall have expired or been terminated;
(c) no Governmental Authority or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law, rule, regulation, executive order or Order which is
then in effect and has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger;
(d) the Registration Statement shall have been declared
effective, and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such
purpose shall be pending before or threatened by the SEC;
(e) (i) all authorizations, consents, waivers, orders or
approvals for the Merger required to be obtained and all conditions
precedent to such authorizations, consents, waivers, orders or
approvals shall have been satisfied, and all filings, notices or
declarations required to be made, by Viacom and CBS prior to the
consummation of the Merger and the transactions contemplated hereunder,
shall have been obtained from, and made with, the FCC and competition
and antitrust Governmental Authorities in Canada and either the
European Union or the United Kingdom, as applicable, and (ii) all other
authorizations, consents, waivers, orders or approvals for the Merger
required to be obtained, and all other filings, notices or declarations
required to be made, by Viacom and CBS prior to the consummation of the
Merger and the transactions contemplated hereunder, shall have been
obtained from, and made with, all required Governmental Entities,
except for such authorizations, consents, waivers, orders, approvals,
filings, notices or declarations the failure to obtain or make which
would not have a material adverse effect, at or after the Effective
Time, on the business, results of operations or financial condition of
CBS and its subsidiaries and Viacom and its subsidiaries, collectively
taken as a whole; and
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46
(f) the shares of Viacom Class B Common Stock issuable to
CBS's shareholders in the Merger and to holders of CBS Options
outstanding immediately prior to the Effective Time shall have been
authorized for listing on the NYSE, subject to official notice of
issuance.
SECTION 7.02. Conditions to the Obligations of Viacom. The
obligations of Viacom to consummate the Merger are subject to the satisfaction
or waiver of the following further conditions:
(a) each of the representations and warranties of CBS
contained in this Agreement shall be true and correct as of the
Effective Time as though made on and as of the Effective Time (except
to the extent expressly made as of an earlier date, in which case as of
such date), except where the failure to be so true and correct would
not have, individually or in the aggregate, a CBS Material Adverse
Effect, and Viacom shall have received a certificate of an officer of
CBS to such effect;
(b) CBS shall have performed or complied in all material
respects with all material agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time, and Viacom shall have received a certificate of an
officer of CBS to that effect; and
(c) Viacom shall have received the opinion of Paul, Weiss,
Rifkind, Wharton & Garrison, in form and substance reasonably
satisfactory to Viacom, to the effect that the Merger will be treated
for federal income tax purposes as a reorganization qualifying under
the provisions of section 368(a) of the Code, and Viacom and CBS will
each be a party to the reorganization within the meaning of Section
368(b) of the Code. In rendering such opinion, counsel may require and
rely upon representations contained in certificates of officers of CBS
and Viacom.
SECTION 7.03. Conditions to the Obligations of CBS. The
obligations of CBS to consummate the Merger are subject to the satisfaction or
waiver of the following further conditions:
(a) each of the representations and warranties of Viacom
contained in this Agreement shall be true and correct as of the
Effective Time as though made on and as of the Effective Time (except
to the extent expressly made as of an earlier date, in which case as of
such date), except where failure to be so true and correct would not
have, individually or in the aggregate, a Viacom Material Adverse
Effect, and CBS shall have received a certificate of an officer of
Viacom to such effect;
(b) Viacom shall have performed or complied in all material
respects with all material agreements and covenants required by this
Agreement to be performed or
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47
complied with by it on or prior to the Effective Time, and CBS shall
have received a certificate of an officer of Viacom to that effect; and
(c) CBS shall have received the opinion of Cravath, Swaine &
Moore, in form and substance reasonably satisfactory to CBS, to the
effect that the Merger will be treated for federal income tax purposes
as a reorganization qualifying under the provisions of section 368(a)
of the Code, and Viacom and CBS will each be a party to such
reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinion, counsel may require and rely upon
representations contained in certificates of officers of Viacom and
CBS.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval and adoption of this Agreement, as
follows:
(a) by mutual written consent duly authorized by the Boards of
Directors of each of Viacom and CBS;
(b) by either Viacom or CBS, if the Effective Time shall not
have occurred on or before August 31, 2000; provided, however, that the
right to terminate this Agreement under this Section 8.01(b) shall not
be available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur by such time;
(c) by CBS upon delivery to Viacom of written notice that a
Competing Proposal constitutes a CBS Superior Proposal; provided,
however, that such termination pursuant to this subsection (c) shall
not be effective until two business days have elapsed following
delivery to Viacom of such written notice (which written notice will
inform Viacom of the material terms and conditions of the CBS Superior
Proposal); provided, further, however, that such termination under this
subsection (c) shall not be effective until CBS has made payment to
Viacom of the amounts required to be paid pursuant to Section 8.05;
(d) by either CBS or Viacom, if this Agreement shall fail to
receive the requisite vote for adoption at the CBS Stockholders'
Meeting;
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48
(e) by CBS, upon a breach of any representation, warranty,
covenant or agreement on the part of Viacom set forth in this
Agreement, or if any representation or warranty of Viacom shall have
become untrue, in either case such that the conditions set forth in
Section 7.03(a) or (b) are not capable of being satisfied on or before
August 31, 2000 (a "Terminating Viacom Breach");
(f) by Viacom, upon breach of any representation, warranty,
covenant or agreement on the part of CBS set forth in this Agreement,
or if any representation or warranty of CBS shall have become untrue,
in either case such that the conditions set forth in Sections 7.02(a)
or (b) are not capable of being satisfied on or before August 31, 2000
("Terminating CBS Breach"); or
(g) by either Viacom or CBS, if any Governmental Authority
shall have issued an Order or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such Order or other action shall
have become final and nonappealable.
SECTION 8.02. Effect of Termination. Subject to Section 8.05
hereof, in the event of termination of this Agreement pursuant to Section 8.01,
this Agreement shall forthwith become void, there shall be no liability under
this Agreement on the part of Viacom or CBS or any of their respective officers
or directors and all rights and obligations of each party hereto shall cease;
provided, however, that nothing herein shall relieve any party from liability
for the willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; provided, however, that,
after the approval and adoption of this Agreement by either the stockholders of
Viacom or shareholders of CBS, there shall not be any amendment that by Law
requires further approval by the stockholders of Viacom or shareholders of CBS
without the further approval of such stockholders or such shareholders. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time,
any party hereto may (a) extend the time for the performance of any obligation
or other act of any other party hereto, (b) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) subject to the proviso of Section 8.03, waive compliance
with any agreement or condition contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
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49
SECTION 8.05. Expenses. (a) Except as set forth in this
Section 8.05, all Expenses (as defined below) incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses, whether or not the Merger or any other
transaction is consummated, except that CBS and Viacom each shall pay one-half
of all Expenses relating to (i) printing, filing and mailing the Registration
Statement and the Proxy Statement and all SEC and other regulatory filing fees
incurred in connection with the Registration Statement and the Proxy Statement,
(ii) any filing with the FCC or similar authority and (iii) any filing with
antitrust authorities. "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Registration Statement and the Proxy Statement, the solicitation of
stockholder and shareholder approvals, the filing of any required notices under
the HSR Act or other similar regulations and all other matters related to the
closing of the Merger and the other transactions contemplated by this Agreement.
(b) CBS agrees that:
(i) if CBS shall terminate this Agreement pursuant to
Section 8.01(c); or
(ii) if (A) Viacom or CBS shall terminate this Agreement
pursuant to Section 8.01(d) due to the failure of CBS's shareholders to
approve this Agreement, (B) at or prior to the time of such failure to
so approve this Agreement a Competing Transaction with respect to CBS
shall have been made public and (C) within twelve months after such
termination (i) a Competing Transaction is consummated or (ii) a
binding agreement to enter into a Competing Transaction is entered into
by CBS (solely for purposes of this Section 8.05(b)(ii), the term
"Competing Transaction" shall have the meaning assigned to such term in
Section 6.05(b) except that references to "35%" in the definition of
"Competing Transaction" in Section 6.05(b) shall be deemed to be
references to 50%),
then CBS shall pay to Viacom an amount equal to $1,000,000,000 (the "CBS
Alternative Transaction Fee").
(c) Each of CBS and Viacom agrees that the agreements
contained in Section 8.05(b) are an integral part of the transactions
contemplated by this Agreement.
(d) All payments to Viacom under this Section 8.05 shall be
made by wire transfer of immediately available funds to an account designated by
Viacom.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement and
any certificate delivered pursuant hereto by any person shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
8.01, as the case may be, except that this Section 9.01 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time or after termination of this Agreement.
SECTION 9.02. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by facsimile, by courier service or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 9.02):
if to Viacom:
Viacom Inc.
1515 Broadway
New York, New York 10036
Telecopier: (212) 258-6134
Attention: Senior Vice President,
General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier No.: (212) 848-7179
Attention: Creighton O'M. Condon, Esq. and
Stephen R. Volk, Esq.
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if to CBS:
CBS Corporation
51 West 52nd Street
35th Floor
New York, New York 10019
Telecopier No.: (212) 597-4031
Attention: Louis J. Briskman, Esq.
Executive Vice President and
General Counsel
with copies to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Telecopier No.: (212) 474-3700
Attention: Allen Finkelson, Esq. and
Scott A. Barshay, Esq.
SECTION 9.03. Interpretation, Certain Definitions. When a
reference is made in this Agreement to an Article, Section or Exhibit, such
reference shall be to an Article or Section of, or an Exhibit to, this Agreement
unless otherwise indicated. The table of contents and headings for this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
statute defined or referred to herein or in any agreement or instrument that is
referred to herein means such statute as from time to time amended, modified or
supplemented, including (in the case of statutes) by succession of comparable
successor statutes. References to a person are also its permitted successors and
assigns.
For purposes of this Agreement, the term:
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52
(a) "affiliate" of a specified person means a person who
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such specified person;
(b) "beneficial owner" with respect to any shares means a
person who shall be deemed to be the beneficial owner of such shares
(i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 promulgated under the Exchange Act)
beneficially owns, directly or indirectly, (ii) which such person or
any of its affiliates or associates has, directly or indirectly, (A)
the right to acquire (whether such right is exercisable immediately or
subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration
rights, exchange rights, warrants or options, or otherwise, or (B) the
right to vote pursuant to any agreement, arrangement or understanding
or (iii) which are beneficially owned, directly or indirectly, by any
other persons with whom such person or any of its affiliates or
associates or any person with whom 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 such shares;
(c) "business day" means any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or,
in the case of determining a date when any payment is due, any day on
which banks are not required or authorized to close in the City of New
York;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management and policies of a person, whether through the
ownership of voting securities, as trustee or executor, by contract or
credit arrangement or otherwise;
(e) "Governmental Authority" means any United States (federal,
state or local) or foreign government, or governmental, regulatory or
administrative authority, agency or commission;
(f) "knowledge" means the actual knowledge of the following
officers and employees of CBS and Viacom, without benefit of an
independent investigation of any matter, as to (i) CBS: Mel Karmazin,
Leslie Moonves, Louis Briskman and Robert Freedline, and (ii) Viacom:
Sumner Redstone, Philippe Dauman, Thomas Dooley, Michael Fricklas,
George Smith and Susan Gordon;
(g) "person" means an individual, corporation, limited
liability company, partnership, limited partnership, syndicate, person
(including, without limitation, a
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53
"person" as defined in Section 13(d)(3) of the Exchange Act), trust,
association or entity or government, political subdivision, agency or
instrumentality of a government; and
(h) "subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which
such person (either above or through or together with any other
subsidiary), owns, directly or indirectly, more than 50% of the stock
or other equity interests, the holders of which are generally entitled
to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
SECTION 9.04. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
Law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the Merger is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Merger be consummated as originally contemplated to the fullest
extent possible.
SECTION 9.05. Entire Agreement; Assignment. This Agreement
(including the Exhibits, the CBS Disclosure Schedule and the Viacom Disclosure
Schedule which are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein), the Parent Voting Agreements and the
Confidentiality Agreement constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. The parties agree to comply with all
covenants and agreements set forth on the CBS Disclosure Schedule and the Viacom
Disclosure Schedule as if such covenants and agreements were fully set forth in
this Agreement. This Agreement shall not be assigned by operation of law or
otherwise.
SECTION 9.06. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, other than Article II and Section 6.06 (which are
intended to be for the benefit of the persons covered thereby and may be
enforced by such persons).
SECTION 9.07. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
<PAGE>
54
SECTION 9.08. Governing Law. This Agreement shall be governed
by, and construed in accordance with the laws of the State of Delaware, except
for such provisions where Pennsylvania Law is mandatorily applicable, which
provisions shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
SECTION 9.09. Consent to Jurisdiction. (a) Each of Viacom and
CBS hereby irrevocably submits to the exclusive jurisdiction of the courts of
the State of Delaware and to the jurisdiction of the United States District
Court for the State of Delaware, for the purpose of any action or proceeding
arising out of or relating to this Agreement and each of Viacom and CBS hereby
irrevocably agrees that all claims in respect to such action or proceeding may
be heard and determined exclusively in any Delaware state or federal court. Each
of Viacom and CBS agrees that a final judgment in any action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
(b) Each of Viacom and CBS irrevocably consents to the service
of the summons and complaint and any other process in any other action or
proceeding relating to the transactions contemplated by this Agreement, on
behalf of itself or its property, by personal delivery of copies of such process
to such party. Nothing in this Section 9.09 shall affect the right of any party
to serve legal process in any other manner permitted by law.
SECTION 9.10. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH OF VIACOM AND CBS
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 THIS AGREEMENT OR THE ACTIONS OF VIACOM OR CBS IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, Viacom and CBS have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
VIACOM INC.
By: /s/ Sumner M. Redstone
------------------------------
Name:
Title:
CBS CORPORATION
By: /s/ Fredric Reynolds
------------------------------
Name:
Title:
Exhibit A-1 to the Merger Agreement is
attached as Annex B to the Joint
Proxy Statement/Prospectus
Exhibit A-2 to the Merger Agreement is
attached as Annex C to the
Joint Proxy Statement/Prospectus
<PAGE>
EXHIBIT 6.14 TO
THE MERGER AGREEMENT
FORM OF AFFILIATE LETTER
Viacom Inc.
1515 Broadway
New York, New York 10036
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may
be deemed to be an "affiliate" of CBS Corporation, a Pennsylvania corporation
(the "Company"), as the term "affiliate" is defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger dated as of September , 1999 (the "Agreement"),
between Viacom Inc., a Delaware corporation ("Viacom"), and the Company, the
Company will be merged with and into Viacom (the "Merger").
As a result of the Merger, I may receive (i) shares of Class
B common stock, par value $.01 per share, of Viacom (the "Viacom Class B Common
Stock"), or (ii) an option (a "Substituted Option") to purchase a number of
shares of Viacom Class B Common Stock (the Viacom Class B Common Stock and the
Substituted Options collectively referred to as the "Viacom Securities"). In
respect of shares of Viacom Class B Common Stock, I would receive such shares in
exchange for shares owned by me of common stock, par value $1.00 per share, of
the Company (the "Company Common Stock"). In respect of the Substituted Options,
I would receive such options in exchange for options to purchase Company Common
Stock held by me under the CBS Stock Option Plans (as defined in the Agreement).
I represent, warrant and covenant to Viacom that in the event
I receive any Viacom Securities as a result of the merger:
A. I shall not make any sale, transfer or other disposition
of the Viacom Securities in violation of the Act or the Rules and
Regulations.
B. I have carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of
Viacom Securities to the extent I felt necessary, with my counsel or
counsel for the Company.
C. I have been advised that the issuance of Viacom Securities
to me pursuant to the Merger has been registered with the Commission
under the Act on a Registration
<PAGE>
2
Statement Form S-4. However, I have also been advised that, because at
the time the Merger is submitted for a vote of the stockholders of the
Company, (a) I may be deemed to be an affiliate of the Company and (b)
the distribution by me of the Viacom Securities has not been
registered under the Act, I may not sell, transfer or otherwise
dispose of Viacom Securities issued to me in the Merger unless (i)
such sale, transfer or other disposition is made in conformity with
the volume and other limitations of Rule 145 promulgated by the
Commission under the Act, (ii) such sale, transfer or other
disposition has been registered under the Act or (iii) in the opinion
of counsel reasonably acceptable to Viacom, such sale, transfer or
other disposition is otherwise exempt from registration under the Act.
D. I understand that Viacom is under no obligation to
register the sale, transfer or other disposition of the Viacom
Securities by me or on my behalf under the Act or to take any other
action necessary in order to make compliance with an exemption from
such registration available solely as a result of the Merger.
E. I also understand that there will be placed on the
certificates for the Viacom Securities issued to me, or any
substitutions therefor, a legend stating in substance:
"THE [SHARES] [OPTIONS] REPRESENTED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE [SHARES] [OPTIONS]
REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED __________
BETWEEN THE REGISTERED HOLDER HEREOF AND VIACOM, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF
VIACOM."
F. I also understand that unless a sale or transfer is made
in conformity with the provisions of Rule 145, or pursuant to a
registration statement, Viacom reserves the right to put the following
legend on the certificates issued to my transferee:
"THE [SHARES] [OPTIONS] REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE
ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE [SHARES] [OPTIONS] HAVE
BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE
IN
<PAGE>
3
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING
OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."
It is understood and agreed that the legends set forth in
paragraphs E and F above shall be removed by delivery of substitute certificates
without such legend if the undersigned shall have delivered to Viacom a copy of
a letter from the staff of the Commission, or an opinion of counsel reasonably
satisfactory to Viacom in form and substance reasonably satisfactory to Viacom,
to the effect that such legend is not required for purposes of the Act.
Execution of this letter should not be considered an
admission on my part that I am an "affiliate" of the Company as described in the
first paragraph of this letter, or as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of this
letter.
Very truly yours,
------------------------------------
Name:
Accepted this ____ day of
__________, ____, by
VIACOM INC.
By:
-------------------------------------
Name:
Title:
<PAGE>
ANNEX B
RESTATED CERTIFICATE OF INCORPORATION
OF
VIACOM INC.
(Originally incorporated on November 10, 1986 under the name Arsenal Holdings,
Inc.)
ARTICLE I
NAME
The name of this Corporation is Viacom Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT FOR SERVICE
The registered office of the Corporation in the State of Delaware is located
at 1013 Centre Road, City of Wilmington, County of New Castle. The name and
address of the Corporation's registered agent for service of process in Delaware
is:
Corporation Service Company
1013 Centre Road
Wilmington, Delaware 19805-1297
ARTICLE III
CORPORATE PURPOSES
The purpose of the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
CAPITAL STOCK
(1) Shares, Classes and Series Authorized.
(a) The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 3,700,000,000 shares. The
classes and the aggregate number of shares of stock of each class which the
Corporation shall have authority to issue are as follows:
(i) 500,000,000 shares of Class A Common Stock, $0.01 par value ("Class
A Common Stock").
(ii) 3,000,000,000 shares of Class B Common Stock, $0.01 par value
("Class B Common Stock").
<PAGE>
(iii) 200,000,000 shares of Preferred Stock, $0.01 par value
("Preferred Stock").
(b) The number of authorized shares of Class B Common Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote.
(2) Powers and Rights of the Class A Common Stock and the Class B Common
Stock.
Except as otherwise expressly provided in this Restated Certificate of
Incorporation, all issued and outstanding shares of Class A Common Stock and
Class B Common Stock shall be identical and shall entitle the holders thereof to
the same rights and privileges.
A. Voting Rights and Powers. Except as otherwise provided in this Restated
Certificate of Incorporation or required by law, with respect to all matters
upon which stockholders are entitled to vote, the holders of the outstanding
shares of Class A Common Stock shall vote together with the holders of any
other outstanding shares of capital stock of the Corporation entitled to
vote, without regard to class, and every holder of outstanding shares of
Class A Common Stock shall be entitled to cast thereon one vote in person or
by proxy for each share of Class A Common Stock standing in his name. The
holders of shares of Class A Common Stock shall have the relevant class
voting rights set forth in Article IX. Except as otherwise required by law,
the holders of outstanding shares of Class B Common Stock shall not be
entitled to any votes upon any questions presented to stockholders of the
Corporation, including but not limited to, whether to increase or decrease
(but not below the number of shares then outstanding) the number of
authorized shares of Class B Common Stock.
B. Dividends. Subject to the rights and preferences of the Preferred Stock
set forth in this Article IV and in any resolution or resolutions providing
for the issuance of such stock as set forth in Section (3) of this Article
IV, the holders of Class A Common Stock and Class B Common Stock shall be
entitled to receive ratably such dividends as may from time to time be
declared by the Board of Directors out of funds legally available therefor.
2
<PAGE>
C. Distribution of Assets Upon Liquidation. In the event the Corporation
shall be liquidated, dissolved or wound up, whether voluntarily or
involuntarily, after there shall have been paid or set aside for the holders
of all shares of the Preferred Stock then outstanding the full preferential
amounts to which they are entitled under the resolutions authorizing the
issuance of such Preferred Stock, the net assets of the Corporation remaining
thereafter shall be divided ratably among the holders of Class A Common Stock
and Class B Common Stock.
D. Split, Subdivision or Combination. If the Corporation shall in any
manner split, subdivide or combine the outstanding shares of Class A Common
Stock or Class B Common Stock, the outstanding shares of the other class of
Common Stock shall be proportionally split, subdivided or combined in the
same manner and on the same basis as the outstanding shares of the other
class of Common Stock have been split, subdivided or combined.
E. Conversion. So long as there are 10,000 shares of Class A Common Stock
outstanding, each record holder of shares of Class A Common Stock or Class B
Common Stock may convert any or all of such shares into an equal number of
shares of Class B Common Stock by surrendering the certificates for such
shares, accompanied by payment of documentary, stamp or similar issue or
transfer taxes, if any, along with a written notice by such record holder to
the Corporation stating that such record holder desires to convert such
shares into the same number of shares of Class B Common Stock and requesting
that the Corporation issue all of such Class B Common Stock to the persons
named therein, setting forth the number of shares of Class B Common Stock to
be issued to each such person and the denominations in which the certificates
therefor are to be issued.
(3)Powers and Rights of the Preferred Stock.
Subject to Article XIII of this Restated Certificate of Incorporation, the
Preferred Stock may be issued from time to time in one or more series, with such
distinctive serial designations as may be stated or expressed in the resolution
or resolutions providing for the issue of such stock adopted from time to time
by the Board of Directors; and in such resolution or resolutions providing for
the issuance of shares of each particular series, the Board of Directors is also
expressly authorized to fix; the right to vote, if any; the consideration for
which the shares of such series are to be issued; the number of shares
constituting such series, which number may be increased (except as otherwise
fixed by the
3
<PAGE>
Board of Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by action of the Board of Directors; the
rate of dividends upon which and the times at which dividends on shares of such
series shall be payable and the preference, if any, which such dividends shall
have relative to dividends on shares of any other class or classes or any other
series of stock of the Corporation; whether such dividends shall be cumulative
or noncumulative, and, if cumulative, the date or dates from which dividends on
shares of such series shall be cumulative; the rights, if any, which the holders
of shares of such series shall have in the event of any voluntary or involuntary
liquidation, merger, consolidation, distribution or sale of assets, dissolution
or winding up of the affairs of the Corporation; the rights, if any, which the
holders of shares of such series shall have to convert such shares into or
exchange such shares for shares of any other class or classes or any other
series of stock of the Corporation or for any debt securities of the Corporation
and the terms and conditions, including, without limitation, price and rate of
exchange, of such conversion or exchange, whether shares of such series shall be
subject to redemption, and the redemption price or prices and other terms of
redemption, if any, for shares of such series including, without limitation, a
redemption price or prices payable in shares of Class A Common Stock or Class B
Common Stock; the terms and amounts of any sinking fund for the purchase or
redemption of shares of such series; and any and all other powers, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof pertaining to shares of such
series permitted by law.
(4)Issuance of Class A Common Stock, Class B Common Stock and Preferred
Stock.
Subject to Article XIII of this Restated Certificate of Incorporation, the
Board of Directors of the Corporation may from time to time authorize by
resolution the issuance of any or all shares of Class A Common Stock, Class B
Common Stock and Preferred Stock herein authorized in accordance with the terms
and conditions set forth in this Restated Certificate of Incorporation for such
purposes, in such amounts, to such persons, corporations, or entities, for such
consideration, and in the case of the Preferred Stock, in one or more series,
all as the Board of Directors in its discretion may determine and without any
vote or other action by any of the stockholders of the Corporation, except as
otherwise required by law.
4
<PAGE>
ARTICLE V
DIRECTORS
(1) Power of the Board of Directors. Subject to Article XIII of this Restated
Certificate of Incorporation, the property and business of the Corporation shall
be controlled and managed by or under the direction of its Board of Directors.
In furtherance, and not in limitation of the powers conferred by the laws of the
State of Delaware, the Board of Directors is expressly authorized, subject in
all cases to Article XIII of this Restated Certificate of Incorporation:
(a) To make, alter, amend or repeal the By-Laws of the Corporation;
provided that no By-Laws hereafter adopted shall invalidate any prior act of
the Directors that would have been valid if such By-Laws had not been
adopted;
(b) To determine the rights, powers, duties, rules and procedures that
affect the power of the Board of Directors to manage and direct the property,
business and affairs of the Corporation, including, without limitation, the
power to designate and empower committees of the Board of Directors, to
elect, appoint and empower the officers and other agents of the Corporation,
and to determine the time and place of, and the notice requirements for Board
meetings, as well as the manner of taking Board action; and
(c) To exercise all such powers and do all such acts as may be exercised
by the Corporation, subject to the provisions of the laws of the State of
Delaware, this Restated Certificate of Incorporation, and the By-Laws of the
Corporation.
(2) Number and Qualifications of Directors. The number of directors
constituting the entire Board of Directors shall be fixed from time to time by
resolution of the Board of Directors but shall not be less than three nor more
than twenty. Directors shall be elected to hold office for a term of one year.
As used in this Restated Certificate of Incorporation, the term "entire Board of
Directors" means the total number of Directors fixed in the manner provided in
this Article V Section (2) and in the By-Laws.
5
<PAGE>
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS AND OTHERS
(1)Action Not By or on Behalf of Corporation. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent (including,
without limitation, a trustee) of another corporation, partnership, joint
venture, trust or other enterprise, against judgments, fines, amounts paid in
settlement and expenses (including, without limitation, attorneys' fees),
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner reasonably believed to be
in or not opposed to the best interests of the Corporation, and with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(2)Action By or on Behalf of Corporation. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, or other
enterprise against expenses (including, without limitation, attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the court in
6
<PAGE>
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability and in view of all of the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
(3)Successful Defense. To the extent that a present or former Director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in Section
1 or 2 of this Article VI, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including, without limitation,
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(4) Determination of Right to Indemnification in Certain Circumstances. Any
indemnification under Section 1 or 2 of this Article VI (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the present or former Director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 or 2 of this Article IV.
Such determination shall be made, with respect to a person who is a Director or
officer at the time of such determination, (1) by a majority vote of the
Directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) by a committee of such Directors designated by a
majority vote of such Directors, even though less than a quorum, or (3) if there
are no such Directors, or if such Directors so direct, by independent legal
counsel in a written opinion, or (4) by the stockholders of the Corporation
entitled to vote thereon.
(5) Advance Payment of Expenses.
(a) Expenses (including attorneys' fees) incurred by a Director or officer
in defending any civil, criminal, administrative or investigative action, suit
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such Director or officer, to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article.
(b) Expenses (including attorneys' fees) incurred by any other employee or
agent in defending any civil, criminal, administrative or investigative action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition
7
<PAGE>
of such action, suit or proceeding upon such terms and conditions, if any, as
the Corporation deems appropriate.
(6)Not Exclusive. The indemnification and advancement of expenses provided
by, or granted pursuant to, the other sections of this Article VI shall not be
deemed exclusive of any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under any statute, by-law, agreement,
vote of stockholders or disinterested Directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office. Without limiting the foregoing, the Corporation is authorized to enter
into an agreement with any Director, officer, employee or agent of the
Corporation providing indemnification for such person against expenses,
including, without limitation, attorneys' fees, judgments, fines and amounts
paid in settlement that result from any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative,
including, without limitation, any action by or in the right of the Corporation,
that arises by reason of the fact that such person is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, to the full
extent allowed by law, except that no such agreement shall provide for
indemnification for any actions that constitute fraud, actual dishonesty or
willful misconduct.
(7)Insurance. The Corporation may purchase and maintain insurance on behalf
of any person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving as the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
(8)Certain Definitions. For the purposes of this Article VI, (A) any
Director, officer, employee or agent of the Corporation who shall serve as a
director, officer, employee or agent of any other corporation, joint venture,
trust or other enterprise of which the Corporation, directly or indirectly, is
or was a stockholder or creditor, or in which the Corporation is or was in any
way interested, or (B) any director, officer, employee or agent of any
subsidiary corporation, joint venture, trust or other enterprise wholly
8
<PAGE>
owned by the Corporation, shall be deemed to be serving as such director,
officer, employee or agent at the request of the Corporation, unless the Board
of Directors of the Corporation shall determine otherwise. In all other
instances where any person shall serve as a director, officer, employee or agent
of another corporation, joint venture, trust or other enterprise of which the
Corporation is or was a stockholder or creditor, or in which it is or was
otherwise interested, if it is not otherwise established that such person is or
was serving as such director, officer, employee or agent at the request of the
Corporation, the Board of Directors of the Corporation may determine whether
such service is or was at the request of the Corporation, and it shall not be
necessary to show any actual or prior request for such service. For purposes of
this Article VI, references to a corporation include all constituent
corporations absorbed in a consolidation or merger as well as the resulting or
surviving corporation so that any person who is or was a director, officer,
employee or agent of such a constituent corporation or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article VI with respect
to the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity. For purposes of this
Article VI, references to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the Corporation" shall include any service as a director, officer,
employee or agent of the Corporation which imposes duties on, or involves
services by, such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries, and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article VI.
(9)The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
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<PAGE>
ARTICLE VII
DIRECTOR LIABILITY TO THE CORPORATION
(a)A Director's liability to the Corporation for breach of duty to the
Corporation or its stockholders shall be limited to the fullest extent permitted
by Delaware law as now in effect or hereafter amended. In particular no Director
of the Corporation shall be liable to the Corporation or any of its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the Director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, as the same exists or
hereafter may be amended, or (iv) for any transaction from which the Director
derived an improper personal benefit.
(b)Any repeal or modification of the foregoing paragraph (a) by the
stockholders of the Corporation entitled to vote thereon shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification.
(c)If the General Corporation Law of the State of Delaware is amended to
authorize corporate action further eliminating or limiting the liability of
directors, then a director of the Corporation, in addition to the circumstances
in which he is not now liable, shall be free of liability to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended.
ARTICLE VIII
RESERVATION OF RIGHT TO AMEND
CERTIFICATE OF INCORPORATION
Subject to Article XIII of this Restated Certificate of Incorporation, the
Corporation reserves the right to amend, alter, change or repeal any provision
contained in this Restated Certificate of Incorporation in the manner now or
hereafter prescribed by law, and all the provisions of this Restated Certificate
of Incorporation and all rights and powers conferred in this Restated
Certificate of Incorporation on stockholders, directors and officers are subject
to this reserved power.
Each reference in the Restated Certificate of Incorporation to "the Restated
Certificate of Incorporation", "hereunder", "hereof", or words of like import
and each reference to the
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Restated Certificate of Incorporation set forth in any amendment to the Restated
Certificate of Incorporation shall mean and be a reference to the Restated
Certificate of Incorporation as supplemented and amended through such amendment
to the Restated Certificate of Incorporation.
ARTICLE IX
VOTING RIGHTS
(1)Class A Common Stock. In addition to any other approval required by law or
by this Restated Certificate of Incorporation, the affirmative vote of a
majority of the then outstanding shares of Class A Common Stock, voted
separately as a class, shall be necessary to approve any consolidation of the
Corporation with another corporation, any merger of the Corporation into another
corporation or any merger of any other corporation into the Corporation pursuant
to which shares of Common Stock are converted into or exchanged for any
securities or any other consideration.
(2)Preferred Stock. Subject to Article XIII of this Restated Certificate of
Incorporation, in addition to any other approval required by law or by this
Restated Certificate of Incorporation, each particular series of any class of
Preferred Stock shall have such right to vote, if any, as shall be fixed in the
resolution or resolutions, adopted by the Board of Directors, providing for the
issuance of shares of such particular series.
ARTICLE X
STOCK OWNERSHIP
AND THE FEDERAL COMMUNICATIONS LAWS
(1)Requests for Information. So long as the Corporation or any of its
subsidiaries holds any authorization from the Federal Communications Commission
(or any successor thereto), if the Corporation has reason to believe that the
ownership, or proposed ownership, of shares of capital stock of the Corporation
by any stockholder or any person presenting any shares of capital stock of the
Corporation for transfer into his name (a "Proposed Transferee") may be
inconsistent with, or in violation of, any provision of the Federal
Communications Laws (as hereinafter defined), such stockholder or Proposed
Transferee, upon request of the Corporation, shall furnish promptly to the
Corporation such information (including, without limitation, information with
respect to citizenship, other ownership interests and affiliations) as the
Corporation shall reasonably request to determine whether the ownership of, or
the exercise of any rights with respect
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to, shares of capital stock of the Corporation by such stockholder or Proposed
Transferee is inconsistent with, or in violation of, the Federal Communications
Laws. For purposes of this Article X, the term "Federal Communications Laws"
shall mean any law of the United States now or hereafter in effect (and any
regulation thereunder) pertaining to the ownership of, or the exercise of the
rights of ownership with respect to, capital stock of corporations holding,
directly or indirectly, Federal Communications Commissions authorizations,
including, without limitation, the Communications Act of 1934, as amended (the
"Communications Act"), and regulations thereunder pertaining to the ownership,
or the exercise of the rights of ownership, of capital stock of corporations
holding, directly or indirectly, Federal Communications Commission
authorizations, by (i) aliens, as defined in or under the Communications Act, as
it may be amended from time to time, (ii) persons and entities having interests
in television or radio stations, daily newspapers and cable television systems
or (iii) persons or entities, unilaterally or otherwise, seeking direct or
indirect control of the Corporation, as construed under the Communications Act,
without having obtained any requisite prior Federal regulatory approval to such
control.
(2)Denial of Rights, Refusal to Transfer. If any stockholder or Proposed
Transferee from whom information is requested should fail to respond to such
request pursuant to Section (1) of this Article or the Corporation shall
conclude that the ownership of, or the exercise of any rights of ownership with
respect to, shares of capital stock of the Corporation, by such stockholder or
Proposed Transferee, could result in any inconsistency with, or violation of,
the Federal Communications Laws, the Corporation may refuse to permit the
transfer of shares of capital stock of the Corporation to such Proposed
Transferee, or may suspend those rights of stock ownership the exercise of which
would result in any inconsistency with, or violation of, the Federal
Communications Laws, such refusal of transfer or suspension to remain in effect
until the requested information has been received and the Corporation has
determined that such transfer, or the exercise of such suspended rights, as the
case may be, is permissible under the Federal Communications Laws, and the
Corporation may exercise any and all appropriate remedies, at law or in equity,
in any court of competent jurisdiction, against any such stockholder or Proposed
Transferee, with a view towards obtaining such information or preventing or
curing any situation which would cause any inconsistency with, or violation of,
any provision of the Federal Communications Laws.
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(3)Legends. The Corporation may note on the certificates of its capital stock
that the shares represented by such certificates are subject to the restrictions
set forth in this Article.
(4)Certain Definitions. For purposes of this Article, the word "person" shall
include not only natural persons but partnerships, associations, corporations,
joint ventures and other entities, and the word "regulation" shall include not
only regulations but rules, published policies and published controlling
interpretations by an administrative agency or body empowered to administer a
statutory provision of the Federal Communications Laws.
ARTICLE XI
TRANSACTIONS WITH DIRECTORS AND OFFICERS
No contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the board or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose if (a) the material
facts as to his relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the committee, and the
Board of Directors or the committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum, or (b)
the material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of such stockholders, or (c) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified by the
Board of Directors, a committee thereof, or the stockholders entitled to vote
thereon. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
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ARTICLE XII
COMPROMISE AND REORGANIZATION
Whenever a compromise or arrangement is proposed between this Corporation and
its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agrees to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
ARTICLE XIII
GOVERNANCE OF THE CORPORATION
DURING SPECIFIED PERIOD
(1) Definitions. As used in this Article XIII, the following terms shall have
the following meanings:
(a) "CBS" shall mean CBS Corporation, a Pennsylvania corporation, immediately
prior to the Effective Time.
(b) "CBS Directors" shall mean (i) eight (8) of those directors serving as
members of the Board of Directors of CBS on September 6, 1999 (or any
Independent Directors elected or appointed prior to the Effective Time to serve
as a CBS Director) who are designated as such by the Board of Directors of CBS
prior to the Effective Time and (ii) any Replacement CBS Director (as defined in
Section 2(b) of this Article XIII).
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(c) "CEO" shall mean the Chief Executive Officer.
(d) "COO" shall mean the President and Chief Operating Officer.
(e) "Effective Time" shall mean the time of filing of the Certificate of Merger
to which this Certificate of Incorporation is attached.
(f) "Independent Director" shall mean a disinterested, independent person
(determined in accordance with customary standards for independent directors
applicable to U.S. public companies).
(g) "NAI" shall mean National Amusements, Inc., a Maryland corporation, and its
successors or assigns.
(h) "Specified Independent Directors" shall mean the directors of
the Corporation first elected after 1993 and who are not management of the
Corporation or NAI (together with any replacements of such persons).
(i) "Specified Period" shall mean the period of three years commencing at the
Effective Time.
(j) "Stockholder Agreement" shall mean the Stockholder
Agreement dated as of September 6, 1999, by and between NAI and CBS, relating to
Corporation governance matters.
(k) "Viacom Directors" shall mean the ten (10) directors of the Corporation
serving as the Board of Directors of the Corporation immediately prior to the
Effective Time (including the Specified Independent Directors).
(2) Directors.
(a) Effective immediately at the Effective Time, the Board of Directors shall
consist of eighteen (18) directors. The number of directors may be fixed by
resolution of the Board from time to time, provided, however, that the size of
the Board of Directors may not be changed during the Specified Period without
the approval of at least fourteen (14) directors. At the Effective Time, ten
(10) directors shall be Viacom Directors and eight (8) directors shall be CBS
Directors.
(b) Until the expiration of the Specified Period, the Board of Directors
(subject to the fiduciary duties of the directors) shall take all action
necessary to ensure that any seat on the Board of Directors held by (i) a CBS
Director which becomes vacant is filled promptly by a person qualifying
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as an Independent Director and designated to fill such seat by a majority of the
CBS Directors remaining on the Board of Directors (a "Replacement CBS Director")
and (ii) a Specified Independent Director which becomes vacant is filled
promptly by an Independent Director who is the chief executive officer, chief
operating officer or chief financial officer or former chief executive officer
of a Fortune 500 company or a non-U.S. public company of comparable size.
(c) During the Specified Period, all committees of the Board of Directors (other
than the Compensation Committee and the Officers Nominating Committee) shall
have such number of CBS Directors as equals the total number of members of the
Committee multiplied by a fraction, the numerator of which is eight (8) and the
denominator of which is eighteen (18), rounded to the closest whole number;
provided that in no event shall any committee have (x) fewer than one (1) CBS
Director or (y) less than a majority of Viacom Directors.
(d) During the Specified Period, the Board of Directors shall not take any
action or fail to take any action which would have the effect of eliminating,
limiting, restricting, avoiding or otherwise modifying the effect of the
provisions set forth in this Article XIII (e.g., by creating a holding company
structure if the certificate of incorporation or similar document of such
holding company does not contain equivalent provisions).
(3) Chairman and Chief Executive Officer.
(a) At the Effective Time, Sumner Redstone shall remain the Chairman and CEO. In
the event that Sumner Redstone is not the CEO at the Effective Time or ceases to
be the CEO at any time during the Specified Period, then Mel Karmazin, if he is
COO at such time, shall succeed to the position of CEO for the remainder of the
Specified Period. During any such period of succession, Mel Karmazin shall
continue to exercise the powers, rights, functions and responsibilities of the
COO in addition to exercising those of the CEO.
(b) The Chairman shall chair all meetings of the Board of Directors and
stockholders at which he is present.
(c) The CEO shall be responsible, in consultation with the COO, for corporate
policy and strategy and the COO shall consult on all major decisions with, and
shall report directly to, the CEO, during the Specified Period; provided,
however, that the CEO shall not exercise any powers, rights, functions or
responsibilities of the COO unless Mel Karmazin is the CEO.
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(4) President and Chief Operating Officer.
(a) At the Effective Time, the President and Chief Operating Officer of the
Corporation shall be Mel Karmazin. During the Specified Period, Mel Karmazin may
not be terminated or demoted from the position of COO (or, in the event that
Sumner Redstone is not the CEO, from the position of CEO) and no COO Functions
(as defined below) may be changed without the affirmative vote of at least
fourteen (14) directors.
(b) Subject to the requirement that the COO consult with the CEO on all major
decisions, the powers, rights, functions and responsibilities of the COO
(collectively, the "COO Functions") shall include, without limitation, the
following:
(i) supervising, coordinating and managing the Corporation's business,
operations, activities, operating expenses and capital allocation;
(ii) matters relating to officers (other than the Chairman, CEO and COO)
and employees, including, without limitation, hiring (subject to (A) the
specific Board of Directors authority described below with respect to the
CFO, the General Counsel and the Controller and (B) Section 5 below),
terminating, changing positions and allocating responsibilities of such
officers and employees; and
(iii) substantially all of the powers, rights, functions and
responsibilities typically exercised by a chief operating officer.
All officers (other than the Chairman, CEO and COO) will report, directly
or indirectly, to the COO (this reporting relationship will be deemed a COO
Function).
(c) In the event that Mel Karmazin is not COO or CEO, the Board may terminate
the COO's employment, eliminate the COO position and the Officers Nominating
Committee and reallocate the COO Functions without regard to the other
provisions of this Article XVIII.
(5) Officers Nominating Committee; Compensation Committee.
(a) Subject to the powers of the Compensation Committee set forth below,
during the Specified Period, all powers of the Board of Directors, including,
without limitation, the right to hire, elect, terminate, change positions,
allocate responsibilities or determine non-equity compensation, with respect to
officers and employees, shall be exercised, subject
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to clauses (b) and (c) below, by, and delegated to, the Officers Nominating
Committee of the Board of Directors. The Officers Nominating Committee shall
consist solely of the member of the Board of Directors who is the COO, except
that in the event Mel Karmazin succeeds to the position of CEO, the sole member
of the Officers Nominating Committee shall be the member of the Board of
Directors who is the CEO.
(b) The Officers Nominating Committee shall have no powers with respect to the
Chairman, CEO and COO, and shall not have the power to fill the positions of
Chief Financial Officer, Controller or General Counsel of the Corporation
without the approval of the Board of Directors; provided that this provision
shall in no way affect the other powers and authorities of the Officers
Nominating Committee with respect to the Chief Financial Officer, Controller and
General Counsel positions, including, without limitation, the power to terminate
employment of persons holding such positions.
(c) The Compensation Committee shall not be required to, or have any power to,
approve the annual compensation of (i) any employee if the total value of such
employee's annual cash compensation (assuming for this purpose that the actual
bonus of each officer and employee is equal to his or her target bonus) is less
than $1 million or (ii) talent (as such term is commonly used in the media or
entertainment industries), in each such case which power shall be delegated to
the Officers Nominating Committee. The annual compensation of all other officers
and employees and any equity or equity-based compensation of any officer or
employee must be approved by the Compensation Committee.
(d) The Compensation Committee shall consist of three CBS Directors who are
Independent Directors and three non-CBS Directors, two of whom will be the
Specified Independent Directors and the other of whom will be an Independent
Director.
(e) Any decision or determination of the Officers Nominating
Committee may be reversed or overridden by (and only by) the affirmative vote of
at least fourteen (14) directors.
(6) Stockholder Agreement.
The Stockholder Agreement may not be amended, and no provision thereof may
be modified or waived, except with the approval of at least fourteen (14)
directors.
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(7) Issuance of Voting Stock.
During the Specified Period, in addition to any other approval required by
law or by this Restated Certificate of Incorporation, the Corporation may not
issue (i) additional shares of Class A Common Stock or (ii) any shares of
Preferred Stock or any other class or series of stock or securities, in each
case with, or convertible into or exchangeable or exercisable for stock or other
securities with, the right to vote on any matter on which stockholders are
entitled to vote if the result would be that parties bound by the Stockholder
Agreement could fail to own at least a majority of the outstanding shares of
voting stock of the Corporation.
(8) Voting
During the Specified Period, except for those actions set forth on Annex I
to this Restated Certificate of Incorporation, which shall require the approval
of the Board of Directors, all action by the Board of Directors shall require
the affirmative vote of at least fourteen (14) directors. At all meetings of the
Board of Directors a majority of the full Board of Directors shall constitute a
quorum for the transaction of business and the act of a majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute or this Restated Certificate of Incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the Directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
(9) Amendment.
Until the expiration of the Specified Period the provisions of any Article
of this Restated Certificate which refer to this Article XIII, the provisions of
this Article XIII, and the provisions of Article VIII of the by-laws of the
Corporation, may not be amended, altered, repealed or waived in any respect
without the approval of at least fourteen (14) directors.
(10) Successors.
During the Specified Period, the provisions of this Article XIII shall be
applicable to (i) any successor to the Corporation as the result of a merger,
consolidation or other business combination, whether or not the Corporation is
the surviving company in such transaction, or otherwise and (ii) any corporation
or other entity with respect to which the
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Corporation or its successor is or becomes a direct or indirect subsidiary, the
Board of Directors shall not permit the Corporation to be a party to any
transaction which would not comply with the foregoing without the approval of at
least fourteen (14) directors.
(11) Subsidiaries.
The Board of Directors shall have the right, following consultation with
the COO or, if Mel Karmazin is the CEO, the CEO, with respect to any public
company which is a subsidiary of the Corporation, to take such steps as the
Board of Directors reasonably determines are necessary to implement corporate
governance arrangements applicable to such subsidiary in a manner as consistent
as practicable with the provisions contained in this Restated Certificate of
Incorporation; provided that any such steps shall not vest in the Board of
Directors greater power or provide the COO with fewer rights than those provided
for in this Restated Certificate of Incorporation.
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ANNEX I
TO VIACOM INC. RESTATED
CERTIFICATE OF INCORPORATION
The provisions of this Annex I shall form a part of, and be incorporated
in all respects in, the Restated Certificate of Incorporation to which this
Annex I is attached. The following actions shall require the approval of a
majority of the directors:
A. Acquisitions, Divestitures, Joint Ventures, Guarantees
* Any acquisition, equity investment or joint venture (each an
"Acquisition") by the Corporation or any of its subsidiaries for more than
$25 million.
* Any divestiture or other sale of assets (each a "Divestiture") (not in the
ordinary course) by the Corporation or any of its subsidiaries for more
than $25 million (based on purchase price or net book value of assets).
* Any real estate purchase, sale or lease by the Corporation or any of
its subsidiaries for more than $25 million.
* Any guarantee by the Corporation or any of its subsidiaries of an
obligation of a third party where the obligation guaranteed is more than
$25 million.
* Notwithstanding the above, any Acquisition or Divestiture by the
Corporation or any of its subsidiaries of (a) internet or internet
related businesses for more than $25 million but less than $100
million, with the value thereof represented by multi-year commitments
for advertising, promotion and content licensing, is excluded, so long
as the aggregate of such Acquisitions or Divestitures, in each case,
does not exceed $550 million and (b) radio or outdoor advertising
businesses for more than $25 million but less than $100 million, is
excluded, so long as the aggregate of such Acquisitions or
Divestitures, in each case, does not exceed $300 million; provided
that (i) any Divestiture of shares of a publicly traded internet or
internet related business with a value of up to $75 million is
excluded and shall not be included in the calculation of any of the
threshold amounts set forth above, (ii) Board approval may be secured
(but is not required) for any transaction of more than $25 million but
less than $100 million where the regular meeting schedule of the Board
so permits (and shall not otherwise be required), (iii) the Board will
be provided with information about and a status report on such
transactions completed without Board approval and (iv) this limit of
authority will be reviewed in 12 months from the Effective Time (as
defined in Article XIII of the Restated Certificate) and may be
amended only with the approval of 14 members of the Board of Directors.
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* Any contract of the Corporation or any of its subsidiaries not in the
ordinary course with a value in excess of $25 million.
* Notwithstanding the above, any of the foregoing transactions that is
approved by the Board shall not be included in the calculation of any of
the threshold amounts set forth above.
B. Employee Matters
* Employee benefit plans (at the Corporation or a subsidiary):
(a) creating a new plan, (b) suspending or terminating an existing
plan, (c) any amendment that materially increases cost to the
Corporation or subsidiary
* Entering into any modifications or amendments to the employment
agreements with the CEO or the COO.
C. General
* The Annual Report on Form 10-K
* Proxy statement and notice of meeting (including annual or special
meeting date, location, record date for voting)
* Any issuance of Corporation stock, or options, warrants or other similar
rights (including stock appreciation rights) or debt or other securities
convertible into or exchangeable for Corporation stock
* Any issuance of debt unless such debt is short term and is within the
spending limits of the annual operating budget or is replacing
existing debt
* Annual capital expenditure and annual operating budgets and individual
capital expenditure transactions in excess of $25 million for the
Corporation or any of its subsidiaries
* Any Corporation or subsidiary pays a dividend or repurchases stock
from a third party
* Review and approve any action or transaction where Board action is
required by law (other than ss. 141(a) of the Delaware General Corporation
Law) or by the terms of the transaction (in all cases other than as
specifically set forth in the Restated Certificate of Incorporation)
* Review and approve Board minutes
* Subject to Article XIII of the Restated Certificate of Incorporation,
determine Board administration, including number of directors, meeting
schedule, nominees, committees, director compensation, D&O insurance
authorization, internal investigations and retention of advisors in
connection therewith, and decisions regarding indemnification of
individuals
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* Subject to Article XIII of the Restated Certificate of Incorporation,
amendments to the Restated Certificate of Incorporation and by-laws of
the Corporation
* Commencement and settlement of major litigation
* Selection of independent auditors
* All matters on which the Corporation Board of Directors has
historically taken action other than (1) matters relating to the subject
matters addressed in this Annex I and not requiring approval of the Board
of Directors hereunder and (2) those matters delegated to the COO,
including all of the COO Functions (as defined in Article XIII of this
Restated Certificate of Incorporation).
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ANNEX C
VIACOM INC.
AMENDED AND RESTATED
B Y - L A W S
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such
other places both within and without the state of Delaware as the board of
directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of stockholders may be held at such time
and place, within or without the State of Delaware, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof. The annual
meeting of stockholders may be held at such place, within or without the State
of Delaware, as shall be designated by the board of directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
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Section 2. The annual meeting of stockholders for the purpose
of electing directors and for the transaction of such other business as may
properly come before the meeting shall be held at such date and hour as shall be
determined by the board of directors or, in the absence of such determination,
on the third Thursday of the ninth month after the month end most nearly
coinciding with the close of the fiscal year of the Corporation.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote at such meeting not less than ten nor more than sixty days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice
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3
of the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept open at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 5. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the Restated
Certificate of Incorporation, may be called by the affirmative vote of a
majority of the board of directors, the Chairman of the Board, the Chief
Executive Officer, the Vice Chairman of the Board or the President and Chief
Operating Officer and shall be called by the Chairman of the Board, the Chief
Executive Officer, the Vice Chairman of the Board, the President and Chief
Operating Officer or Secretary at the request in writing of the holders of
record of at least 50.1% of the aggregate voting power of all outstanding shares
of capital stock of the Corporation entitled to vote generally in the election
of Directors, acting together as a single class. Such request shall state the
purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given not less than ten nor more than sixty days
before
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4
the date of the meeting to each stockholder of record entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the aggregate voting
power of the shares of the capital stock issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the Restated Certificate of
Incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
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Section 9. When a quorum is present at any meeting, the vote
of the holders of a majority of the aggregate voting power of the shares of the
capital stock having voting power present in person or represented by proxy
shall decide any question brought before such meeting, unless the question is
one upon which, by provision of applicable law or of the Restated Certificate of
Incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question.
Section 10. At every meeting of the stockholders, each
stockholder shall be entitled to vote, in person or by proxy executed in writing
by the stockholder or his duly authorized attorney-in-fact, each share of the
capital stock having voting power held by such stockholder in accordance with
the provisions of the Restated Certificate of Incorporation and, if applicable,
the certificate of designations relating thereto, but no proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period.
Section 11. Any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
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6
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by stockholders
representing not less than the minimum number of votes that would be necessary
to authorize or take such actions at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of such action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. The Secretary shall file such
consents with the minutes of the meetings of the stockholders.
Section 12. At all meetings of stockholders, the chairman of
the meeting shall have absolute authority over matters of procedure, and there
shall be no appeal from the ruling of the chairman.
Section 13. Attendance of a stockholder, in person or by
proxy, at any meeting shall constitute a waiver of notice of such meeting,
except where the stockholder, in person or by proxy, attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
<PAGE>
7
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the
entire Board of Directors shall be fixed as set forth in Article XIII of the
Restated Certificate of Incorporation, and shall not be less than three nor more
than eighteen. Directors shall have such qualifications as may be prescribed by
these by-laws. Directors need not be stockholders. If required by regulations of
the Federal Communications Commission, each director shall be a citizen of the
United States of America
Section 2. Subject to the rights of the holders of any series
of Preferred Stock or any other class of capital stock of the corporation then
outstanding (other than the Common Stock), and subject to Article XIII of the
Restated Certificate of Incorporation, vacancies in the board of directors for
any reason, including by reason of an increase in the authorized number of
directors, shall, if occurring prior to the expiration of the term of office in
which the vacancy occurs, be filled by a majority of the directors then in
office, though less than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual meeting of
stockholders of the Corporation or until their successors are duly elected and
shall qualify, unless sooner displaced. Subject to
<PAGE>
8
Article XIII of the Restated Certificate of Incorporation, if there are no
directors in office, then an election of directors may be held in the manner
provided by statute.
Section 3. The property and business of the Corporation shall
be controlled and managed in accordance with the terms of the Restated
Certificate of Incorporation by its board of directors which may, subject to
Article XIII of the Restated Certificate of Incorporation, exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Restated Certificate of Incorporation or by these by-laws
directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the Corporation, or any
committees thereof, may hold meetings, both regular and special, either within
or without the State of Delaware.
Section 5. A regular annual meeting of the board of
directors, including newly elected directors, shall be held immediately after
each annual meeting of stockholders at the place of such stockholders' meeting,
and no notice of such meeting to the directors shall be necessary in order
legally to constitute the meeting, provided a quorum shall be present. If such
meeting is held at any other time or
<PAGE>
9
place, notice thereof must be given or waived as hereinafter provided for
special meetings of the board of directors.
Section 6. Additional regular meetings of the board of
directors shall be held on such dates and at such times and at such places as
shall from time to time be determined by the board of directors.
Section 7. The Chairman of the Board, the Chief Executive
Officer, Vice Chairman of the Board or the President and Chief Operating Officer
of the Corporation and the Secretary may call a special meeting of the board of
directors at any time by giving notice, specifying the business to be transacted
at and the purpose or purposes of the meeting, to each member of the board at
least twenty-four (24) hours before the time appointed.
Section 8. At all meetings of the board a majority of the
full board of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by statute, the Restated Certificate of
Incorporation or these by-laws. If a quorum shall not be present at any meeting
of the board of directors, the directors present thereat may adjourn the meeting
from time to time, without
<PAGE>
10
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, setting forth the action so taken, and the writing
or writings are filed with the minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the Restated
Certificate of Incorporation or these by-laws, members of the board of
directors, or any committee thereof, may participate in a meeting of the board
of directors, or any committee, by means of conference telephone or similar
communications equipment whereby all persons participating in the meeting can
hear each other, and such participation in a meeting shall constitute presence
in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. Designation of Committees. Subject to Article
XIII of the Restated Certificate of Incorporation, the board of directors may,
by resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of
<PAGE>
11
the directors of the Corporation. Subject to Article XIII of the Restated
Certificate of Incorporation, the board of directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
Section 12. Vacancies. Subject to Article XIII of the
Restated Certificate of Incorporation, in the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member.
Section 13. Powers. Subject to Article XIII of the Restated
Certificate of Incorporation, any such committee, to the extent provided in the
resolution of the board of directors, shall have and may exercise all the powers
and authority of the board of directors to the extent provided by Section 141(c)
of the General Corporation Law of the State of Delaware as it exists now or may
hereafter be amended.
Section 14. Each committee of the board of directors shall
keep regular minutes of its meetings and report the same to the board of
directors when required.
<PAGE>
12
COMPENSATION OF DIRECTORS
Subject to Article XIII of the Restated Certificate of
Incorporation:
Section 15. Unless otherwise restricted by the Restated
Certificate of Incorporation or these by-laws, the board of directors shall have
the authority to fix the compensation of directors. All directors may be paid
their expenses, if any, of attendance at each meeting of the board of directors,
and directors who are not full-time employees of the Corporation may be paid a
fixed sum for attendance at each meeting of the board of directors and/or a
stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation and expenses for attending committee meetings.
REMOVAL OF DIRECTORS
Subject to Article XIII of the Restated Certificate of
Incorporation:
Section 16. Subject to the rights of the holders of any
series of Preferred Stock or any other class of capital stock of the Corporation
(other than the Common Stock) then outstanding, (a) any director, or the entire
<PAGE>
13
board of directors, may be removed from office at any time prior to the
expiration of his term of office, with or without cause, only by the affirmative
vote of the holders of record of outstanding shares representing at least a
majority of all of the aggregate voting power of outstanding shares of capital
stock of the Corporation then entitled to vote generally in the election of
directors, voting together as a single class at a special meeting of
stockholders called expressly for that purpose; provided that, any director may
be removed from office by the affirmative vote of a majority of the entire board
of directors, at any time prior to the expiration of his term of office, as
provided by law, in the event a director fails to meet the qualifications stated
in these by-laws for election as a director or in the event such director is in
breach of any agreement between such director and the Corporation relating to
such director's service as a director or employee of the Corporation.
INDEMNIFICATION OF DIRECTORS
Section 17. The Corporation shall have the right to indemnify
directors, officers and agents of the Corporation to the fullest extent
permitted by the General Corporation Law of Delaware and by the Restated
Certificate of Incorporation, as both may be amended from time to time.
<PAGE>
14
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of applicable law
or of the Restated Certificate of Incorporation or of these by-laws, notice is
required to be given to any director or stockholder, it shall be construed to
mean written or printed notice given either personally or by mail or wire
addressed to such director or stockholder, at his address as it appears on the
records of the Corporation, with postage or other charges thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail or at the appropriate office for
transmission by wire. Notice to directors may also be given by telephone.
Section 2. Whenever any notice is required to be given under
the provisions of applicable law or of the Restated Certificate of Incorporation
or of these by-laws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
Section 3. Attendance at a meeting shall constitute a waiver
of notice except where a director or shareholder attends a meeting for the
express purpose of
<PAGE>
15
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
Section 4. Neither the business to be transacted at, nor the
purpose of, any regular meeting of the board of directors need be specified in
the notice or waiver of notice of such meeting.
ARTICLE V
OFFICERS
Subject to Article XIII of the Restated Certificate of
Incorporation:
Section 1. The officers of the Corporation shall be elected
by the board of directors at its first meeting after each annual meeting of the
stockholders and shall be a President and Chief Operating Officer, a Treasurer
and a Secretary. The board of directors may also elect a Chairman of the Board,
a Chief Executive Officer, one or more Vice Chairmen of the Board and Vice
Presidents and one or more Assistant Treasurers and Assistant Secretaries. Any
number of offices may be held by the same person, except that the offices of
President and Chief Operating Officer and Secretary shall not be held by the
same person. Vice Presidents may be given distinctive designations such as
Executive Vice President or Senior Vice President. Every officer shall be a
citizen of the United States of America.
<PAGE>
16
Section 2. The board of directors may elect such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
Section 3. The officers of the Corporation shall hold office
until their successors are elected or appointed and qualify or until their
earlier resignation or removal. Any officer elected or appointed by the board of
directors may be removed at any time with or without cause by the affirmative
vote of a majority of the whole board of directors. Any vacancy occurring in any
office of the Corporation shall be filled by the board of directors.
CHAIRMAN OF THE BOARD
Section 4. The Chairman of the Board, if any shall be
elected, shall preside at all meetings of the board of directors and the
stockholders and shall have such other powers and perform such other duties as
may from time to time be assigned to him by the board of directors.
VICE CHAIRMAN OF THE BOARD
Section 5. The Vice Chairman of the Board, if any shall be
elected, or if there be more than one, the Vice Chairmen of the Board in order
of their election, shall, in
<PAGE>
17
the absence of the Chairman of the Board, or in the case the Chairman of the
Board shall resign, retire, become deceased or otherwise cease or be unable to
act, perform the duties and exercise the powers of the Chairman of the Board. In
addition, the Vice Chairman of the Board shall have such other powers and
perform such other duties as may from time to time be assigned to him by the
board of directors.
THE CHIEF EXECUTIVE OFFICER
Section 6. The Chief Executive Officer shall be responsible,
in consultation with the President and Chief Operating Officer, for corporate
policy and strategy. The President and Chief Operating Officer shall consult on
all major decisions with, and shall report directly to, the Chief Executive
Officer; provided, however, that the Chief Executive Officer shall not exercise
any powers, rights, functions or responsibilities of the President and Chief
Operating Officer unless Mel Karmazin is the Chief Executive Officer.
THE PRESIDENT AND CHIEF OPERATING OFFICER
Section 7. Subject to Article XIII of the Restated
Certificate of Incorporation and to the requirement that the President and Chief
Operating Officer consult with the Chief Executive Officer on all major
decisions, the
<PAGE>
18
President and Chief Operating Officer shall be responsible for:
(i) supervising, coordinating and managing
the Corporation's business, operations and
activities, operating expenses and capital
allocation;
(ii) matters relating to officers (other than the
Chairman, the Chief Executive Officer and the President and
Chief Operating Officer) and employees, including, without
limitation, hiring, terminating, changing positions and
allocation of responsibilities of such officers and
employees;
(iii) substantially all of the powers, rights,
functions and responsibilities typically exercised
by a chief operating officer; and
(iv) all officers (other than the Chairman, the
Chief Executive Officer and the President and Chief Operating
Officer) will report, directly or indirectly, to the
President and Chief Operating Officer.
THE VICE-PRESIDENTS
Section 8. The Vice-Presidents shall have such powers and
perform such duties as may from time to time be assigned to them by the board of
directors or the President and Chief Operating Officer.
<PAGE>
19
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees of the board of directors when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the board of directors, and shall perform such other duties as may
be prescribed by the board of directors or the President and Chief Operating
Officer, under whose supervision he shall be. He shall have custody of the
corporate seal of the Corporation and he, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such Assistant
Secretary. The board of directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
Section 10. The Assistant Secretary, if any shall be elected,
or if there be more than one, the Assistant
<PAGE>
20
Secretaries in the order determined by the board of directors (or if there be no
such determination, then in the order of their election), shall, in the absence
of the Secretary or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the Secretary and shall have such other powers
and perform such other duties as may from time to time be assigned to them by
the board of directors or the President and Chief Operating Officer.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The Treasurer, under the supervision of the
President and Chief Operating Officer, shall have charge of the corporate funds
and securities and shall keep or cause to be kept full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositaries as may be designated by or at the direction
of the board of directors.
Section 12. The Treasurer shall disburse or cause to be
disbursed the funds of the Corporation as may be ordered by or at the direction
of the President and Chief Operating Officer or the board of directors, taking
proper vouchers for such disbursements, and subject to the
<PAGE>
21
supervision of the President and Chief Operating Officer, shall render to the
board of directors, when they or either of them so require, an account of his
transactions as Treasurer and of the financial condition of the Corporation.
Section 13. If required by the board of directors, the
Treasurer shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 14. The Assistant Treasurer, if any shall be elected,
or if there shall be more than one, the Assistant Treasurers in the order
determined by the board of directors (or if there be no such determination, then
in the order of their election), shall, in the absence of the Treasurer or in
the event of his inability or refusal to act, perform the duties and exercise
the powers of the Treasurer and shall have such other powers and perform such
other duties as may from time to time be assigned to them by the board of
directors.
<PAGE>
22
Section 15. In addition to the corporate officers elected by
the board of directors pursuant to this Article V, the President and Chief
Operating Officer may, from time to time, appoint one or more other persons as
appointed officers who shall not be deemed to be corporate officers, but may,
respectively, be designated with such titles as the President and Chief
Operating Officer may deem appropriate. The President and Chief Operating
Officer may prescribe the powers to be exercised and the duties to be performed
by each such appointed officer, may designate the term for which each such
appointment is made, and may, from time to time, terminate any or all of such
appointments. Such appointments and termination of appointments shall be
reported to the board of directors.
ARTICLE VI
CERTIFICATES Of STOCK
Section 1. Every holder of shares of capital stock in the
Corporation shall be entitled to have a certificate sealed with the seal of the
Corporation and signed by, or in the name of the Corporation by, the Chairman of
the Board, the Chief Executive Officer, Vice Chairman of the Board or the
President and Chief Operating Officer and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by him in the
<PAGE>
23
Corporation. If the Corporation shall be authorized to issue more than one class
of stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Any or all of the signatures on the certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar
<PAGE>
24
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of capital stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of
<PAGE>
25
succession, assignation or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution, or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meetings, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
<PAGE>
26
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
Corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property or in
shares of the capital stock, subject to the provisions of any statute, the
Restated Certificate of Incorporation and these by-laws.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the Corporation
<PAGE>
27
available for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purposes as the directors shall
think conducive to the interest of the Corporation, and the directors may modify
or abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the Corporation.
CHECKS
Section 4. All checks or demands for money of the Corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be as
specified by the board of directors.
<PAGE>
28
SEAL
Section 6. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
CONTRACTS
Section 7. An Officer of the Corporation may sign any note,
bond, or mortgage of the Corporation in furtherance of the Corporation's
ordinary business and in order to implement any action authorized by these
by-laws.
ARTICLE VIII
RESTATED CERTIFICATE OF INCORPORATION
In addition to all other provisions of the Restated
Certificate of Incorporation, and notwithstanding that these by-laws may contain
any provision contrary thereto, these by-laws shall be subject in all respects
to Article XIII of the Restated Certificate of Incorporation.
ARTICLE IX
AMENDMENTS
In furtherance of and not in limitation of the powers
conferred by statute, the board of directors of the
<PAGE>
29
Corporation from time to time may make, amend, alter, change or repeal the
by-laws of the Corporation; provided, that any by-laws made, amended, altered,
changed or repealed by the board of directors or the stockholders of the
Corporation may be amended, altered, changed or repealed, and that any by-laws
may be made, by the stockholders of the Corporation. Notwithstanding any other
provisions of the Restated Certificate of Incorporation of the Corporation or
these by-laws (and notwithstanding the fact that a lesser percentage may be
specified by law, the Restated Certificate of Incorporation or these by-laws),
the affirmative vote of not less than a majority of the aggregate voting power
of all outstanding shares of capital stock of the Corporation then entitled to
vote generally in this election of Directors, voting together as a single class,
shall be required for the stockholders of the Corporation to amend, alter,
change, repeal or adopt any by-laws of the Corporation.
<PAGE>
ANNEX D
================================================================================
VOTING AGREEMENT
By
NATIONAL AMUSEMENTS, INC.
(Stockholder)
and
CBS CORPORATION
Dated as of September 6, 1999
================================================================================
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT, dated as of September 6, 1999 (this
"Agreement"), by NATIONAL AMUSEMENTS, INC., a Maryland corporation (the
"Stockholder"), to and for the benefit of CBS CORPORATION, a Pennsylvania
corporation ("CBS").
WHEREAS, as of the date hereof, the Stockholder owns of
record and beneficially 93,658,988 shares of Class A Common Stock (the "Viacom
Class A Common Stock"; such shares, together with any shares of Viacom Class A
Common Stock and any other shares of voting stock of Viacom acquired by the
Stockholder prior to the termination of this Agreement being referred to herein
as the "Stockholder's Shares"), par value $.01 per share, of VIACOM, INC., a
Delaware corporation ("Viacom");
WHEREAS, concurrently with the execution of this Agreement,
CBS and Viacom are entering into an Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"; capitalized terms used and not
otherwise defined herein shall have the respective meanings assigned to them in
the Merger Agreement), pursuant to which, upon the terms and subject to the
conditions thereof, CBS will be merged with and into Viacom (the "Merger"); and
WHEREAS, as a condition to the willingness of Viacom and CBS
to enter into the Merger Agreement, CBS has requested the Stockholder to agree,
and in order to induce CBS to enter into the Merger Agreement, the Stockholder
is willing to agree, to vote in favor of the Viacom Proposals (as defined in the
Merger Agreement), upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, and intending to be legally
bound hereby, the parties hereby agree as follows:
Section 1. Voting of Stockholder's Shares. Until the
termination of this Agreement in accordance with the terms hereof, the
Stockholder hereby agrees that, at the Viacom Stockholders' Meeting or any other
meeting of the stockholders of Viacom, however called, and in any action by
written consent of the stockholders of Viacom, the Stockholder will vote all of
the Stockholder's Shares (i) in favor of the Viacom Proposals and (ii) against
any action, proposal or agreement that would or could reasonably be expected to
result in a breach of any covenant, representation or warranty or any other
obligation or agreement of Viacom under the Merger Agreement or which would or
could reasonably be expected to result in any of the conditions to the Merger
Agreement not being fulfilled.
Section 2. No Inconsistent Agreements. The Stockholder hereby
covenants and agrees that, except as contemplated by this Agreement and the
Merger Agreement, the Stockholder shall not enter into any voting agreement or
grant a proxy or power of attorney with respect to the Stockholder's Shares
which is inconsistent with this Agreement.
<PAGE>
2
Section 3. Transfer of Stockholder's Shares. The Stockholder
hereby covenants and agrees that the Stockholder shall not transfer record or
beneficial ownership of any of the Stockholder's Shares unless the transferee
unconditionally agrees in writing to be bound by the terms and conditions of
this Agreement.
Section 4. Representations and Warranties of Stockholder. The
Stockholder hereby represents and warrants to CBS as follows:
(a) Authority Relative to This Agreement. The Stockholder has
all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by the Stockholder and the consummation by the Stockholder
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Stockholder, and no other
corporate proceedings on the part of the Stockholder are necessary to
authorize this Agreement or to consummate such transactions. This
Agreement has been duly and validly executed and delivered by the
Stockholder and, assuming the due authorization, execution and
delivery by CBS, constitutes a legal, valid and binding obligation of
the Stockholder, enforceable against the Stockholder in accordance
with its terms.
(b) No Conflict. (i) The execution and delivery of this
Agreement by the Stockholder do not, and the performance of this
Agreement by the Stockholder shall not, (A) conflict with or violate
the Certificate of Incorporation or By-laws or equivalent
organizational documents of the Stockholder, (B) conflict with or
violate any law, rule, regulation, order, judgment or decree
applicable to the Stockholder or by which the Stockholder's Shares are
bound or affected or (C) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation
of a lien or encumbrance on any of the Stockholder's Shares pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
the Stockholder is a party or by which the Stockholder or the
Stockholder's Shares are bound or affected, except, in the case of
clauses (B) and (C), for any such conflicts, violations, breaches,
defaults or other occurrences which would not prevent or delay the
performance by the Stockholder of its obligations under this
Agreement.
(ii) The execution and delivery of this Agreement by the
Stockholder do not, and the performance of this Agreement by the
Stockholder shall not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity
except for applicable requirements, if any, of the Securities Exchange
Act of 1934, as amended, and except where the failure to obtain such
consents, approvals,
<PAGE>
3
authorizations or permits, or to make such filings or notifications,
would not prevent or delay the performance by the Stockholder of its
obligations under this Agreement.
(c) Title to the Shares. As of the date hereof, the
Stockholder is the record and beneficial owner of 93,658,988 shares of
Viacom Class A Common Stock. The Stockholder's Shares are all the
voting securities of Viacom owned, either of record or beneficially,
by the Stockholder. The Stockholder's Shares are owned free and clear
of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on the Stockholder's voting
rights, charges and other encumbrances of any nature whatsoever. The
Stockholder has not appointed or granted any proxy, which appointment
or grant is still effective, with respect to the Stockholder's Shares.
Section 5. Termination. This Agreement shall terminate upon
the earlier to occur of (a) the Effective Time and (b) the termination of the
Merger Agreement in accordance with the terms thereof. No such termination of
this Agreement shall relieve any party hereto from any liability for any breach
of this Agreement prior to termination.
Section 6. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by facsimile, by courier service or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 6):
if to the Stockholder:
National Amusements, Inc.
200 Elm Street
Dedham, Massachusetts 02026
Telecopier No.: (781) 461-1412
Attention: General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier No.: (212) 848-7179
Attention: Creighton O'M. Condon, Esq. and
Stephen R. Volk, Esq.
<PAGE>
4
if to CBS:
CBS Corporation
51 West 52nd Street
35th Floor
New York, New York 10019
Telecopier No.: (212) 597-4031
Attention: Louis J. Briskman, Esq.
Executive Vice President and
General Counsel
with copies to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Telecopier No.: (212) 474-3700
Attention: Allen Finkelson, Esq. and
Scott A. Barshay, Esq.
Section 7. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
Law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of this Agreement is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement be consummated as
originally contemplated to the fullest extent possible.
Section 8. Entire Agreement; Assignment. This Agreement and
the Merger Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise, by either of the parties
hereto without the prior written consent of the other party hereto. Any
purported assignment in violation of this Section 8 shall be void. Subject to
the preceding sentences of this Section 8, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties hereto and their
respective successors and assigns.
<PAGE>
5
Section 9. Parties in Interest; Certain Events. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement. The Stockholder agrees that
this Agreement and the obligations hereunder shall attach to the Stockholder's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of the Stockholder's Shares shall pass, whether by
operation of law or otherwise. In the event of any stock split, stock dividend,
merger, reorganization, recapitalization or other change in the capital
structure of Viacom affecting the capital stock of Viacom, or the acquisition of
additional shares of Viacom Class A Common Stock or other voting securities of
Viacom by the Stockholder, the number of Stockholder's Shares shall be adjusted
appropriately and this Agreement and the obligations hereunder shall attach to
any additional shares of Viacom Class A Common Stock or other voting securities
of Viacom issued to or acquired by the Stockholder.
Section 10. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
Section 11. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware, without
regard to any principles of conflicts of laws of such State.
Section 12. Consent to Jurisdiction. (a) Each of the
Stockholder and CBS hereby irrevocably submits to the exclusive jurisdiction of
the courts of the State of Delaware and to the jurisdiction of the United States
District Court for the State of Delaware, for the purpose of any action or
proceeding arising out of or relating to this Agreement and each of CBS and the
Stockholder hereby irrevocably agrees that all claims in respect to such action
or proceeding shall be heard and determined exclusively in any Delaware state or
federal court. Each of CBS and the Stockholder agrees that a final judgment in
any action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of CBS and the Stockholder irrevocably consents to
the service of the summons and complaint and any other process in any other
action or proceeding relating to the transactions contemplated by this
Agreement, on behalf of itself or its property, by personal delivery of copies
of such process to such party. Nothing in this Section 12 shall affect the right
of any party to serve legal process in any other manner permitted by law.
Section 13. Headings. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
<PAGE>
6
Section 14. Amendments. This Agreement may be amended or
modified, and the terms and conditions hereof may be waived, only by a written
instrument signed by the parties hereto or, in the case of a waiver, by each
party waiving compliance.
Section 15. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 16. WAIVER OF JURY TRIAL. EACH OF CBS AND THE
STOCKHOLDER 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 THIS AGREEMENT OR THE ACTIONS OF CBS AND THE
STOCKHOLDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
THEREOF.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
NATIONAL AMUSEMENTS, INC.
By /s/ Sumner M. Redstone
--------------------------------------
Name: Sumner M. Redstone
Title: Chairman, President
& Chief Executive Officer
CBS CORPORATION
By /s/ Fredric G. Reynolds
--------------------------------------
Name: Fredric G. Reynolds
Title: Executive Vice President,
Chief Financial Officer
<PAGE>
ANNEX E
================================================================================
STOCKHOLDER AGREEMENT
By
NATIONAL AMUSEMENTS, INC.
(Stockholder)
and
CBS CORPORATION
Dated as of September 6, 1999
================================================================================
<PAGE>
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of September 6, 1999 (this
"Agreement"), by NATIONAL AMUSEMENTS, INC., a Maryland corporation (the
"Stockholder"), to and for the benefit of CBS CORPORATION, a Pennsylvania
corporation ("CBS"), and its assigns by operation of law.
WHEREAS, as of the date hereof, the Stockholder owns of record and
beneficially 93,658,988 shares of Class A Common Stock (the "Viacom Class A
Common Stock"; such shares, together with any shares of Viacom Class A Common
Stock and any other shares of voting stock of Viacom (together with the Viacom
Class A Common Stock, the "Voting Stock") acquired by the Stockholder during the
Specified Period (as defined in Section 1 of this Agreement) being collectively
referred to herein as the "Stockholder's Shares"), par value $.01 per share, of
VIACOM INC., a Delaware corporation ("Viacom");
WHEREAS, concurrently with the execution of this Agreement, CBS and
Viacom are entering into an Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"; capitalized terms used and not otherwise defined
herein shall have the respective meanings assigned to them in the Merger
Agreement), pursuant to which, upon the terms and subject to the conditions
thereof, CBS will be merged with and into Viacom (the "Merger"); and
WHEREAS, as a condition to the willingness of Viacom and CBS to enter
into the Merger Agreement, CBS has requested the Stockholder to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereby agree as follows:
Section 1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(a) "CBS Directors" shall mean (i) eight (8) of those directors
serving as members of the Board of Directors of CBS on the date of this
Agreement (or any Independent Directors elected or appointed prior to the
Effective Time to serve as a CBS Director) who are designated as such by the
Board of Directors of CBS prior to the Effective Time and (ii) any Replacement
CBS Director.
(b) "Independent Director" shall mean a disinterested, independent
person (determined in accordance with customary standards for independent
directors applicable to U.S. public companies).
(c) "Replacement CBS Director" shall mean a person qualifying as an
Independent Director and designated by a majority of the CBS Directors remaining
on the Board of Directors of Viacom to fill a seat on the Board of Directors of
Viacom vacated by a CBS Director or such a seat with respect to which a CBS
Director does not seek reelection.
2
<PAGE>
(d) "Specified Independent Directors" shall mean the directors of
Viacom first elected after 1993 and who are not management of Viacom or the
Stockholder (together with any replacements of such persons).
(e) "Specified Period" shall mean the period of three years commencing
at the Effective Time.
Section 2. Covenants of the Stockholder.
(a) The Stockholder shall cause to be nominated and elected each CBS
Director, including any Replacement CBS Director, so that there are eight CBS
Directors on the Board of Directors of Viacom at all times;
(b) the Stockholder shall take all action necessary to ensure that any
seat on the Board of Directors of Viacom vacated by a CBS Director or such a
seat with respect to which a CBS Director elects not to seek reelection is
filled by a Replacement CBS Director immediately following the designation of
such person as such and notice thereof to the Stockholder;
(c) the Stockholder shall take all action necessary to ensure that no
CBS Director is removed as a director of Viacom unless such removal is for cause
and is approved by at least 14 members of the Board of Directors of Viacom;
(d) in the event that any Specified Independent Director shall resign,
vacate his directorship, fail to stand as a director, fail to be elected as a
director, or otherwise be removed as or for any reason cease to be a director of
Viacom, the Stockholder shall take all necessary action to cause such Specified
Independent Director to be replaced by an Independent Director; provided that
any such replacement Specified Independent Director shall be the chief executive
officer, chief operating officer or chief financial officer or former chief
executive officer of a Fortune 500 company or a non-U.S. public company of
comparable size;
(e) unless approved by a vote of at least 14 members of the Board of
Directors of Viacom, the Stockholder shall not take any action to amend, modify
or repeal Article XIII of the Restated Certificate of Incorporation of Viacom
(in the form attached as Exhibit A-1 of the Merger Agreement) or Article VIII of
the By-laws of Viacom (in the form attached as Exhibit A-2 of the Merger
Agreement), or otherwise vote in favor of or take any action or fail to take any
action which would have the effect of eliminating, limiting, restricting,
avoiding or otherwise modifying the effect of any provision contained therein
(e.g., by creating a holding company structure if the certificate of
incorporation or similar document of such holding company does not contain
equivalent provisions). Without limiting the generality of the foregoing, the
Stockholder further agrees to take all necessary action to ensure that such
provisions shall be applicable to (i) any successor to Viacom as the result of a
merger, consolidation or other business combination, whether or not Viacom is
the surviving corporation in such transaction, or otherwise and (ii) any
corporation or other entity with respect to which Viacom or its successor is or
becomes a direct or indirect subsidiary, and the Stockholder shall take all
necessary action to ensure that Viacom shall not be a party to any transaction
which would not comply with the provisions of this paragraph (e) unless such
transaction is approved by a vote of at least 14 members of the Board of
Directors of Viacom;
(f) the Stockholder shall take all necessary action, including without
limitation by voting and/or holding the Stockholder's Shares, to ensure that the
Stockholder or transferees
3
<PAGE>
thereof (in accordance with Section 4 of this Agreement) owns, beneficially and
of record, on an outstanding and fully diluted basis, a majority of the shares
of Voting Stock, at all times (and refrain from taking any action that would
have the opposite result); and
(g) each of the CBS Directors are intended third-party beneficiaries
of this Agreement and shall have the right to enforce the provisions of this
Agreement.
Section 3. No Inconsistent Agreements. The Stockholder hereby
covenants and agrees that the Stockholder shall not enter into any voting
agreement or grant a proxy or power of attorney with respect to the
Stockholder's Shares which is inconsistent with this Agreement.
Section 4. Transfer of Stockholder's Shares. The Stockholder hereby
covenants and agrees that the Stockholder shall not transfer record or
beneficial ownership of any of the Stockholder's Shares unless the transferee
unconditionally agrees in writing to be bound by the terms and conditions of
this Agreement.
Section 5. Representations and Warranties of Stockholder. The
Stockholder hereby represents and warrants to CBS as follows:
(a) Authority Relative to This Agreement. The Stockholder has all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of the Stockholder, and no other corporate proceedings on the
part of the Stockholder are necessary to authorize this Agreement or to
consummate such transactions. This Agreement has been duly and validly
executed and delivered by the Stockholder and, assuming the due
authorization, execution and delivery by CBS, constitutes a legal, valid
and binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms.
(b) No Conflict. (i) The execution and delivery of this Agreement by
the Stockholder do not, and the performance of this Agreement by the
Stockholder shall not, (A) conflict with or violate the Certificate of
Incorporation or By-laws or equivalent organizational documents of the
Stockholder, (B) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Stockholder or by which the
Stockholder's Shares are bound or affected or (C) result in any breach of
or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancelation of or result in the
creation of a lien or encumbrance on any of the Stockholder's Shares
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which the Stockholder is a party or by which the Stockholder or the
Stockholder's Shares are bound or affected, except, in the case of clauses
(B) and (C), for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent or delay the performance by the
Stockholder of its obligations under this Agreement.
(ii) The execution and delivery of this Agreement by the Stockholder
do not, and the performance of this Agreement by the Stockholder shall not,
require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental
4
<PAGE>
Entity except for applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended, and except where the failure to obtain
such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay the performance by the
Stockholder of its obligations under this Agreement.
(c) Title to the Shares. As of the date hereof, the Stockholder is the
record and beneficial owner of 93,658,988 shares of Viacom Class A Common
Stock. The Stockholder's Shares are all the voting securities of Viacom
owned, either of record or beneficially, by the Stockholder. The
Stockholder's Shares are owned free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Stockholders voting rights, charges and other
encumbrances of any nature whatsoever. The Stockholder has the sole right
to vote and transfer the Stockholder's Shares, and the Stockholder has not
appointed or granted any proxy, which appointment or grant is still
effective, with respect to the Stockholder's Shares.
Section 6. Effectiveness; Termination. This Agreement shall become
effective as of the date of this Agreement, provided that the Stockholder shall
have no obligation under Section 2(a), (b), (c) and (e) until the commencement
of the Specified Period. This Agreement shall terminate at the close of business
on the final day of the Specified Period.
Section 7. Notices. All notices, requests, claims, demand and other
communications under this Agreement shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in Person, by facsimile, by courier service or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 7):
if to Stockholder
National Amusements, Inc.
200 Elm Street
Dedham, MA 02026
Telecopier No.: (781) 461-1412
Attention: General Counsel
with copies to:
Shearman & Sterling
599 Lexington Avenue
New York, Now York 10022
Telecopier No.: (212) 848-7179
Attention: Creighton O'M. Condon, Esq. and
Stephen R. Volk, Esq.
5
<PAGE>
if to CBS:
CBS Corporation
51 West 52nd Street
35th Floor
New York, New York 10019
Telecopier No.: (212) 597-4031
Attention: Louis J. Briskman, Esq.
Executive Vice President
and General Counsel
with copies to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Telecopier No.: (212) 474-3700
Attention: Allen Finkelson, Esq. and
Scott A. Barshay, Esq.
Section 8. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated by this Agreement be consummated as originally
contemplated to the fullest extent possible.
Section 9. Entire Agreement; Assignment. This Agreement and the Merger
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
either of the parties hereto without the prior written consent of the other
party hereto, except that CBS may assign, its rights, interests and obligations
under this Agreement to Viacom by operation of law. Any purported assignment in
violation of this Section 9 shall be void.
Section 10. Parties in Interest; Certain Events. This Agreement shall
be binding upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement except as set forth in Section 2(g). The
Stockholder agrees that this Agreement and the obligations hereunder shall
attach to the Stockholder's Shares and shall be binding upon any person or
entity to which legal or beneficial ownership of the Stockholder's Shares shall
pass, whether by operation of law or otherwise, including the Stockholder's
heirs, guardians, administrators or successors. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in the
capital structure of Viacom affecting the capital stock of Viacom, or the
acquisition of additional shares of Viacom Class A Common Stock or other voting
securities of Viacom by the Stockholder, the
6
<PAGE>
number of Stockholder's Shares shall be adjusted appropriately and this
Agreement and the obligations hereunder shall attach to any additional shares of
Viacom Class A Common Stock or other voting securities of Viacom issued to or
acquired by the Stockholder.
Section 11. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
Section 12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to any principles of conflicts of laws of such State.
Section 13. Consent to Jurisdiction. (a) Each of the Stockholder and
CBS hereby irrevocably submits to the exclusive jurisdiction of the courts of
the State of Delaware and to the jurisdiction of the United States District
Court for the State of Delaware, for the purpose of any action or proceeding
arising out of or relating to this Agreement and each of CBS and the Stockholder
hereby irrevocably agrees that all claims in respect to such action or
proceeding shall be heard and determined exclusively in any Delaware state or
federal court. Each of CBS and the Stockholder agrees that a final judgment in
any action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of CBS and the Stockholder irrevocably consents to the
service of the summons and complaint and any other process in any other action
or proceeding relating to the transactions contemplated by this Agreement, on
behalf of itself or its property, by personal delivery of copies of such process
to such party. Nothing in this Section 13 shall affect the right of any party to
serve legal process in any other manner permitted by law.
Section 14. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
Section 15. Amendments. This Agreement may be amended or modified, and
the terms and conditions hereof may be waived, only (i) by a written instrument
signed by the parties hereto or, in the case of a waiver, by each party waiving
compliance and (ii) after the Effective Time if any such amendment or waiver is
concurred in by at least 14 members of the Board of Directors of Viacom.
Section 16. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
Section 17. WAIVER OF JURY TRIAL. EACH OF CBS AND THE STOCKHOLDER
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 THIS AGREEMENT OR THE ACTIONS OF CBS AND THE STOCKHOLDER IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
7
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
NATIONAL AMUSEMENTS, INC.
by /s/ Sumner M. Redstone
-----------------------------------
Name: Sumner M. Redstone
Title: Chairman, President
& Chief Executive Officer
CBS CORPORATION
by /s/ Fredric G. Reynolds
-----------------------------------
Name: Fredric G. Reynolds
Title:Executive Vice President,
Chief Financial Officer
8
<PAGE>
ANNEX F
VIACOM INC.
September 6, 1999
Sumner M. Redstone
The Carlyle Hotel
Suite 3201
35 East 76th Street
New York, New York 10021
Dear Mr. Redstone:
This is to confirm our agreement that, effective as of the
Effective Time (as defined in the Agreement and Plan of Merger (the "Merger
Agreement") between Viacom Inc. ("Viacom") and CBS Corporation ("CBS"), dated as
of the date hereof) (the "Effective Date"), you shall be paid the following
compensation by Viacom, in addition to any compensation, benefits and
perquisites you have heretofore received from Viacom.
As the sole compensation for services to be rendered by you in
all capacities to Viacom, its subsidiaries and affiliates, you will receive the
following compensation.
(a) Salary: For all the services rendered by you in any
capacity to Viacom, its subsidiaries and affiliates, Viacom agrees to pay you a
base salary at the rate of $1,000,000 per annum ("Salary"), payable in
accordance with Viacom's then effective payroll practices.
(b) Bonus Compensation: In addition to your Salary, you shall
be entitled to receive bonus compensation for each of the calendar years during
your employment with Viacom, determined and payable as follows ("Bonus"):
(i) Your Bonus for each of the calendar years during your
employment with Viacom will be based upon a
measurement of performance against objectives in
accordance with Viacom's Short-Term Incentive Plan
and its Senior Executive Short-Term Incentive Plan,
as the same may be amended from time to time
(collectively, the "STIP"), which objectives shall be
no less favorable to you than the objectives used to
determine the amount of bonus payable to any other
executive of Viacom whose bonus is based in
<PAGE>
Sumner M. Redstone 2 September 6, 1999
whole or in part on corporate performance and who
participates in the STIP.
(ii) Your Target Bonus and Maximum Bonus opportunity for
each calendar year (prorated for calendar year 2000
by multiplying such amount by a fraction, the
numerator of which is the number of days in 2000
following the Effective Date, and the denominator of
which is 365) during your employment with Viacom
shall be as follows:
Year Target Maximum
-------------- ---------------- -----------
2000 $5,000,000 $10,000,000
2001 $5,500,000 $11,000,000
2002 $6,050,000 $12,100,000
2003 and $6,655,000 $13,310,000
thereafter
(iii) Your Bonus for any calendar year shall be payable by
February 28 of the following year.
(c) Deferred Compensation: In addition to your Salary and
Bonus, you shall earn, in respect of calendar year 2000 and each calendar year
thereafter during your employment with Viacom, an additional amount ("Deferred
Compensation"), the payment of which (together with the return thereon as
provided in this paragraph (c)) shall be deferred until January of the first
calendar year following the year in which you cease to be an "executive officer"
of Viacom, as defined for purposes of the Securities Exchange Act of 1934, as
amended. The amount of Deferred Compensation for calendar year 2000 shall be
$2,000,000, prorated by multiplying such amount by a fraction, the numerator of
which is the number of days in 2000 following the Effective Date, and the
denominator of which is 365. The amount of Deferred Compensation for calendar
years 2001 through 2003 shall be subject to annual increases each January 1st,
commencing January 1, 2001, in an amount equal to 10% of the sum of your Salary
and Deferred Compensation for the preceding year. Deferred Compensation shall be
credited to a bookkeeping account maintained by Viacom on your behalf, the
balance of which account shall periodically be credited (or debited) with deemed
positive (or negative) return calculated in the same manner, and at the same
times, as the deemed return on your account under the excess 401(k) plan of
Viacom (as such plan may be amended from time to time) is determined or, if you
do not participate in such plan, with a return to be mutually agreed by the
Company and you. Viacom's obligation to pay the Deferred Compensation (including
the return thereon provided for in this paragraph (c)) shall be an unfunded
obligation to be satisfied from the general funds of Viacom.
<PAGE>
Sumner M. Redstone 3 September 6, 1999
(d) Grant: You will be awarded a grant (the "Grant") under
Viacom's 1997 Long-Term Management Incentive Plan (the "1997 LTMIP") of stock
options to purchase 2,000,000 shares of Viacom's Class B Common Stock, effective
as of the Effective Date, with an exercise price equal to the fair-market value
of Viacom's Class B Common Stock on the date of the Grant. The Grant shall vest
in three equal installments on the first, second and third anniversaries of the
Effective Date. Such stock options shall be subject to terms identical in all
material respects to those applicable to the grant to be made to Mr. Karmazin as
of the Effective Date.
If you agree with the foregoing terms, please execute this
letter in the space provided below and return a copy to the undersigned.
VIACOM INC.
By: /s/ Philippe P. Dauman
------------------------
Philippe P. Dauman
Deputy Chairman
ACCEPTED AND AGREED:
/s/ Sumner M. Redstone
- ------------------------
Sumner M. Redstone
September 6, 1999
<PAGE>
ANNEX G
VIACOM INC.
September 6, 1999
Mel Karmazin
1 Central Park West
New York, New York 10023
Dear Mel:
Viacom Inc. ("Viacom"), having an address at 1515 Broadway,
New York, New York 10036, agrees to employ you and you agree to accept such
employment upon the following terms and conditions:
1. Term. The term of your employment hereunder shall commence
on the Effective Time (as defined in the Agreement and Plan of Merger between
Viacom and CBS Corporation ("CBS"), dated as of the date hereof (the "Merger
Agreement"), pursuant to which CBS shall merge with and into Viacom) (the
"Effective Date") and, unless terminated by Viacom or you pursuant to paragraph
8 hereof, shall continue through and until December 31, 2003. The period from
the Effective Date through December 31, 2003 shall hereinafter be referred to as
the "Employment Term," notwithstanding any earlier termination pursuant to
paragraph 9. In the event that the Merger Agreement is terminated or otherwise
abandoned, this Agreement shall be void ab initio.
2. Duties. During the Employment Term, you agree to devote
your entire business time, attention and energies to the business of Viacom and
its subsidiaries. This is not intended to prevent you from engaging in other
activities that do not conflict with or interfere with the performance of your
duties and responsibilities hereunder. You will be President and Chief Operating
Officer of Viacom reporting directly and solely to Sumner M. Redstone, the
Chairman of the Board and Chief Executive Officer of Viacom (the "Chairman"),
and, upon the termination of the Chairman's service as Chief Executive Officer
during the Employment Term, you shall be appointed the Chief Executive Officer.
You will perform such duties and have such responsibilities set forth in Article
XIII of the Amended and Restated Certificate of Incorporation of Viacom to be
effective as of the Effective Date (the "Certificate of Incorporation"), a copy
of which is attached hereto as Exhibit A. You will have such authority as is
necessary for the performance of your obligations hereunder. You shall serve as
a member of the Boards of Directors of Viacom and Circular. Your principal place
of business shall be at Viacom's headquarters in the New York City metropolitan
area and you shall not be required to relocate
<PAGE>
2
outside of the New York City metropolitan area. You shall be entitled to
continue to serve on the corporate, charitable and educational boards of which
you are a member as of the date hereof.
3. Compensation. As the sole compensation for services to be
rendered by you during the Employment Term in all capacities to Viacom, its
subsidiaries and affiliates, you will receive the following compensation.
(a) Salary: For all the services rendered by you in any
capacity to Viacom, its subsidiaries and affiliates, Viacom agrees to pay you a
base salary at the rate of $1,000,000 per annum ("Salary"), payable in
accordance with Viacom's then effective payroll practices.
(b) Bonus Compensation: In addition to your Salary, you shall
be entitled to receive bonus compensation for each of the calendar years during
the Employment Term, determined and payable as follows ("Bonus"):
(i) Your Bonus for each of the calendar years during the
Employment Term will be based upon a measurement of
performance against objectives in accordance with
Viacom's Short-Term Incentive Plan and its Senior
Executive Short-Term Incentive Plan, as the same may be
amended from time to time (collectively, the "STIP"),
which objectives shall be no less favorable to you than
the objectives used to determine the amount of bonus
payable to any other executive of Viacom whose bonus is
based in whole or in part on corporate performance and
who participates in the STIP.
(ii) Your Target Bonus and Maximum Bonus opportunity for each
calendar year (prorated for calendar year 2000 by
multiplying such amount by a fraction, the numerator of
which is the number of days in 2000 following the
Effective Date, and the denominator of which is 365)
during the Employment Term shall be as follows:
Year Target Maximum
------------ -------------------- ------------
2000 $5,000,000 $10,000,000
2001 $5,500,000 $11,000,000
2002 $6,050,000 $12,100,000
2003 $6,655,000 $13,310,000
(iii) Your Bonus for any calendar year shall be payable by
February 28 of the following year (even if not during
the Employment Term).
<PAGE>
3
(c) Deferred Compensation: In addition to your Salary and
Bonus, you shall earn, in respect of calendar year 2000 and each calendar year
during the Employment Term after 2000, an additional amount ("Deferred
Compensation"), the payment of which (together with the return thereon as
provided in this paragraph 3(c)) shall be deferred until January of the first
calendar year following the year in which you cease to be an "executive officer"
of Viacom, as defined for purposes of the Securities Exchange Act of 1934, as
amended. The amount of Deferred Compensation for calendar year 2000 shall be
$2,000,000, prorated by multiplying such amount by a fraction, the numerator of
which is the number of days in 2000 following the Effective Date, and the
denominator of which is 365. The amount of Deferred Compensation for calendar
years 2001 through 2003 shall be subject to annual increases each January 1st,
commencing January 1, 2001, in an amount equal to 10% of the sum of your Salary
and Deferred Compensation for the preceding year. Deferred Compensation shall be
credited to a bookkeeping account maintained by Viacom on your behalf, the
balance of which account shall periodically be credited (or debited) with deemed
positive (or negative) return calculated in the same manner, and at the same
times, as the deemed return on your account under the excess 401(k) plan of
Viacom (as such plan may be amended from time to time) is determined (it being
understood and agreed that if at any time during which the Deferred Compensation
remains payable your excess 401(k) account balance is distributed in full to
you, your Deferred Compensation account shall continue to be credited or debited
with a deemed return based on the investment portfolio in which your excess
401(k) account was notionally invested immediately prior to its distribution).
Viacom's obligation to pay the Deferred Compensation (including the return
thereon provided for in this paragraph 3(c)) shall be an unfunded obligation to
be satisfied from the general funds of Viacom.
(d) Grant: You will be awarded a grant (the "Grant") under
Viacom's 1997 Long-Term Management Incentive Plan (the "1997 LTMIP") of stock
options to purchase 2,000,000 shares of Viacom's Class B Common Stock (such
number to be adjusted for any stock split, stock dividend or other similar
transaction that would result in an adjustment under the terms of the 1997 LTMIP
if such options were granted on the date hereof), effective as of the Effective
Date, with an exercise price equal to the fair-market value of Viacom's Class B
Common Stock on the Effective Date. Except as provided herein, the Grant shall
be made in accordance with the standard terms of stock option awards under the
1997 LTMIP (a copy of the standard form of such stock option awards is attached
hereto as Exhibit B), shall vest in three equal installments on the first,
second and third anniversaries of the Effective Date and shall be for a ten-year
term. In the event you cease to be employed by the Company for any reason upon
the expiration of the Employment Term, you shall be able to exercise the Grant
for two years following such termination.
<PAGE>
4
4. Benefits.
(a) You shall be entitled to participate in such medical,
dental and life insurance, 401(k), pension and other plans as Viacom may have or
establish from time to time and in which any other Viacom executives are
eligible to participate. The foregoing, however, shall not be construed to
require Viacom to establish any such plans or to prevent the modification or
termination of such plans once established, and no such action or failure
thereof shall affect this Agreement; provided, however, that no modification of
any plans in which you participate shall be made which results in treating you
less favorably than other senior executives of Viacom. It is further understood
and agreed that all benefits (including without limitation, Viacom's Pension and
Excess Pension Plans, short term disability program, Long-Term Disability
program and any supplement thereto, life insurance and any applicable death
benefit) you may be entitled to as an employee of Viacom shall be based upon
your Salary and, your Deferred Compensation, as set forth in paragraphs 3(a) and
(c) hereof, and not upon any bonus compensation due, payable or paid to you
hereunder, except where the benefit plan expressly provides otherwise. In
addition, it is hereby expressly agreed that you shall retain all benefits that
you have accrued under any compensation and benefit plans of CBS. You shall be
entitled to four (4) weeks vacation.
(b) Viacom shall provide you with no less than Five Million
Dollars ($5,000,000) of term life insurance during the Employment Term. You
shall have the right to assign the policy for such life insurance to your spouse
or issue or to a trust or trusts primarily for the benefit of your spouse and/or
issue.
(c) In addition to the benefits described in paragraphs 4(a)
and (b) hereof, Viacom agrees that you shall be credited for service accrued or
deemed accrued prior to the Effective Date with CBS or any of its subsidiaries
or predecessors for all purposes under any employee benefit plans, programs or
arrangement established or maintained by Viacom or any of its subsidiaries;
provided, however that such crediting of service shall not operate to duplicate
any benefit or the funding of any such benefit.
(d) Notwithstanding anything herein to the contrary, if it is
determined that any payment or benefit provided to you (whether hereunder or
otherwise, and including any payments or benefits resulting from the
transactions contemplated by the Merger Agreement) would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax, together with any interest or
penalties thereon, is herein referred to as an "Excise Tax"), then you shall be
entitled to an additional cash payment (a "Gross-Up Payment") in an amount that
will place you in the same after-tax economic position that you would have
enjoyed if the Excise Tax had not applied to the payment. The amount of the
Gross-Up Payment shall be determined by Viacom's regular independent auditors.
No Gross-Up Payments shall be payable hereunder if Viacom's auditors determine
that
<PAGE>
5
such payments are not subject to an Excise Tax. Viacom's auditors shall be
paid by Viacom for services performed hereunder.
5. Business Expenses. During the Employment Term, you shall be
reimbursed for such reasonable travel and other expenses incurred in the
performance of your duties hereunder as are customarily reimbursed to senior
executives of Viacom.
6. Perquisites. You shall be eligible for all perquisites made
available by Viacom from time to time during the Employment Term to other senior
executives of Viacom. Without limiting the generality of the foregoing, you
shall be entitled to (i) a car allowance and insurance in accordance with
Viacom's policy and (ii) use of a private airplane on a basis no less favorable
than as provided by CBS to you as of the date of execution of this Agreement,
or, if more beneficial to you, as provided by Viacom to any of its senior
executives.
7. Exclusive Employment, Confidential Information, Etc.
(a) Non-Competition. You agree that your employment hereunder
is on an exclusive basis, and that during the period of your employment
hereunder and, in the event during the Employment Term, of (x) a termination of
your employment pursuant to paragraph 9(a) hereof or (y) your resignation
without Good Reason, for a period of eighteen (18) months following the date of
such termination or resignation, as the case may be (the "Non-Compete Period"),
you will not engage in any other business activity which is in conflict with
your duties and obligations hereunder. You agree that during the Non-Compete
Period you shall not directly or indirectly engage in or participate as an
officer, employee, director, agent of or consultant for any business directly
competitive with that of Viacom, nor shall you make any investments in any
company or business competing with Viacom; provided, however, that nothing
herein shall prevent you from investing as less than a two (2%) percent
shareholder in the securities of any company listed on a national securities
exchange or quoted on an automated quotation system.
(b) Confidential Information. You agree that you shall not,
during the Employment Term or at any time thereafter, use for your own purposes,
or disclose to or for the benefit of any third party, any trade secret or other
confidential information of Viacom or any of its affiliates or predecessors
(except as may be required by law or in the performance of your duties hereunder
consistent with Viacom's policies) and that you will comply with any
confidentiality obligations of Viacom to a third party, whether under agreement
or otherwise. Notwithstanding the foregoing, confidential information shall be
deemed not to include information which (i) is or becomes generally available to
the public other than as a result of a disclosure by you or any other person who
directly or indirectly receives such information from you or at your direction
or (ii) is or becomes available to you on a non-confidential basis from a source
which is entitled to disclose it to you.
<PAGE>
6
(c) No Employee Solicitation. You agree that, during the
Employment Term and for one (1) year thereafter, you shall not, directly or
indirectly, engage, employ, or solicit the employment of any person who is then
or has been within six (6) months prior thereto, an employee of Viacom or any of
Viacom's affiliates or predecessors.
(d) Viacom Ownership. The results and proceeds of your
services hereunder, including, without limitation, any works of authorship
resulting from your services during your employment with Viacom and/or any of
its affiliates or predecessors and any works in progress, shall be
works-made-for-hire and Viacom shall be deemed the sole owner throughout the
universe of any and all rights of whatsoever nature therein, whether or not now
or hereafter known, existing, contemplated, recognized or developed, with the
right to use the same in perpetuity in any manner Viacom determines in its sole
discretion without any further payment to you whatsoever. If, for any reason,
any of such results and proceeds shall not legally be a work-for-hire and/or
there are any rights which do not accrue to Viacom under the preceding sentence,
then you hereby irrevocably assign and agree to assign any and all of your
right, title and interest thereto, including, without limitation, any and all
copyrights, patents, trade secrets, trademarks and/or other rights of whatsoever
nature therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed to Viacom, and Viacom shall have the right to use the
same in perpetuity throughout the universe in any manner Viacom determines
without any further payment to you whatsoever. You shall, from time to time, as
may be requested by Viacom, do any and all things which Viacom may deem useful
or desirable to establish or document Viacom's exclusive ownership of any and
all rights in any such results and proceeds, including, without limitation, the
execution of appropriate copyright and/or patent applications or assignments. To
the extent you have any rights in the results and proceeds of your services that
cannot be assigned in the manner described above, you unconditionally and
irrevocably waive the enforcement of such rights. This paragraph 7(d) is subject
to, and shall not be deemed to limit, restrict, or constitute any waiver by
Viacom of any rights of ownership to which Viacom may be entitled by operation
of law by virtue of Viacom or any of its affiliates or predecessors being your
employer.
(e) Litigation. You agree that, during the Employment Term,
for one (1) year thereafter and, if longer, during the pendancy of any
litigation or other proceeding, (i) you shall not communicate with anyone (other
than your own attorneys and tax advisors and, except to the extent required by
law or necessary in the performance of your duties hereunder) with respect to
the facts or subject matter of any pending or potential litigation, or
regulatory or administrative proceeding involving any of Viacom's affiliates or
predecessors, other than any litigation or other proceeding in which you are a
party-in-opposition, without giving prior notice to Viacom or Viacom's counsel,
and (ii) in the event that any other party attempts to obtain information or
documents from you with respect to matters possibly related to such litigation
or other proceeding, you shall promptly so notify Viacom's counsel unless you
are prohibited from doing so under applicable law.
<PAGE>
7
(f) No Right to Write Books, Articles, Etc. During the
Employment Term, except as authorized by Viacom, you shall not prepare or assist
any person or entity in the preparation of any books, articles, television or
motion picture productions or other creations, concerning Viacom or any of
Viacom's affiliates or predecessors or any of their officers, directors, agents,
employees, suppliers or customers.
(g) Return of Property. All documents, data, recordings, or
other property, whether tangible or intangible, including all information stored
in electronic form, obtained or prepared by or for you and utilized by you in
the course of your employment with Viacom or any of its affiliates or
predecessors shall remain the exclusive property of Viacom. In the event of the
termination of your employment for any reason, Viacom reserves the right, to the
extent permitted by law and in addition to any other remedy Viacom may have, to
deduct from any monies otherwise payable to you the following: (i) the full
amount of any debt you owe to Viacom or any of its affiliates or predecessors at
the time of or subsequent to the termination of your employment with Viacom, and
(ii) the value of the Viacom property which you retain in your possession after
the termination of your employment with Viacom. In the event that the law of any
state or other jurisdiction requires the consent of an employee for such
deductions, this Agreement shall serve as such consent.
(h) Non-Disparagement. You and, to the extent set forth in the
next sentence, Viacom agree that each party shall not, during the Employment
Term and for one (1) year thereafter criticize, ridicule or make any statement
which disparages or is derogatory of the other party in any communications with
any customer or client. Viacom's obligations under the preceding sentence shall
be limited to communications by its senior corporate executives having the rank
of Senior Vice President or above.
(i) Injunctive Relief. Viacom has entered into this Agreement
in order to obtain the benefit of your unique skills, talent, and experience.
You acknowledge and agree that any violation of paragraphs 7(a) through (k)
hereof will result in irreparable damage to Viacom, and, accordingly, Viacom may
obtain injunctive and other equitable relief for any breach or threatened breach
of such paragraphs, in addition to any other remedies available to Viacom.
(j) Survival; Modification of Terms. Your obligations under
paragraphs 7(a) through (i) hereof shall remain in full force and effect for the
entire period provided therein notwithstanding the termination of the Employment
Term pursuant to paragraph 9 hereof or otherwise. You and Viacom agree that the
restrictions and remedies contained in paragraphs 7(a) through (k) are
reasonable and that it is your intention and the intention of Viacom that such
restrictions and remedies shall be enforceable to the fullest extent permissible
by law. If it shall be found by a court of competent jurisdiction that any such
restriction or remedy is unenforceable but would be enforceable if some part
thereof were deleted or the period or area of application reduced, then such
restriction or remedy shall apply with such modification as shall be necessary
to make it enforceable.
<PAGE>
8
(k) No Selling of Viacom Stock without Board Consent. In
consideration of your employment hereunder, you hereunder agree that, except as
otherwise provided herein, during the period commencing on the date hereof and
ending on the third anniversary of the Effective Date, you shall not sell or
dispose of (nor exercise any limited rights or stock appreciation rights with
respect to) any shares of capital stock of CBS or Viacom held by you, your
immediate family members (which does not include your former spouse), or trusts
or other entities in which you or your immediate family members have a
controlling interest or are beneficiaries (together, the "Family Affiliates" and
each, a "Family Affiliate") that you or any Family Affiliate now hold, or in the
future may acquire, including, without limitation, shares that you or any Family
Affiliate receive pursuant to the transactions contemplated by the Merger
Agreement (whether in exchange for shares of CBS common stock or otherwise),
under any stock options or other equity-based compensation awards made to you by
CBS or by Viacom under this Agreement or under any other agreement awarding you
shares of capital stock of Viacom, without first obtaining the consent of (i) if
prior to the Effective Date, the Chairman, or (ii) if on or following the
Effective Date, fourteen of the eighteen members of the Board of Viacom. This
restriction shall lapse in the event that, during the Employment Term, you are
terminated without Cause, resign for Good Reason, die or become disabled.
Notwithstanding the foregoing, between the first anniversary of the Effective
Date and the second anniversary of the Effective Date you and the Family
Affiliates collectively may sell or dispose of a number of shares equal to up to
10% of the shares held by you and the Family Affiliates on the Effective Date
(including, for this purpose, the shares underlying any equity-based
compensation awards held by you on the Effective Date, but not shares underlying
any equity-based compensation awards granted to you pursuant to paragraph 3(d)
or at any time after the Effective Date). Between the second anniversary of the
Effective Date and the third anniversary of the Effective Date, you and the
Family Affiliates collectively may sell or dispose of a number of shares equal
to up to 10% of the shares held by you and the Family Affiliates on the second
anniversary of the Effective Date (including, for this purpose, the shares
underlying any equity-based compensation awards held by you on the Effective
Date, but not shares underlying any equity-based compensation awards granted to
you pursuant to paragraph 3(d) or at any time after the Effective Date), plus
any shares that were not sold or disposed of by you and the Family Affiliates
collectively under the prior year's limits. Notwithstanding the foregoing, you
may transfer shares to Family Affiliates, but such shares shall remain subject
to the restrictions contained in this paragraph 7(k).
8. Incapacity. In the event you become totally medically
disabled at any time during the Employment Term and are not expected to be able
to substantially perform your duties for a six (6) consecutive month period, the
Chairman, at any time after such disability has in fact continued for 60
consecutive days, may determine that Viacom requires such duties and
responsibilities be performed by another executive. In the event you become
disabled, you will first receive benefits under Viacom's short-term disability
program for the first 26 weeks of consecutive absence. Thereafter, you will be
eligible to receive benefits under Viacom's Long-Term Disability ("LTD") program
or any supplement thereto, in accordance with its terms.
<PAGE>
9
Upon receipt of benefits under the LTD program you will also be entitled to
receive, subject to applicable withholding taxes:
(i) a Target Bonus prorated for the portion of calendar
year through the date on which you become eligible to
receive benefits under the LTD program, payable at
the time that the Bonus for such calendar year would
otherwise be paid;
(ii) prorated Deferred Compensation for the calendar year
in which such benefits commence and Deferred
Compensation attributable to prior calendar years,
payable, together with the return thereon as provided
in paragraph 3(c), prior to January 31 of the
calendar year following the calendar year in which
such benefits commence;
(iii) stock options granted to you under the 1997 LTMIP
which are exercisable on or prior to the date as of
which benefits commence under the LTD program or that
would have vested and become exercisable on or before
the last day of the Employment Term will be
exercisable for two (2) years after the date as of
which such benefits commence or, if later, until
December 31, 2003, but in no event may such stock
options be exercised following the expiration date of
such stock options; and
In the event that you thereafter become able to substantially perform your
duties, you will then be entitled to receive from Viacom your Salary and
Deferred Compensation at the rate being paid to you immediately prior to the
commencement of such disability, and your Bonus calculated pursuant to paragraph
3(b) hereof, through the remainder of the Employment Term reduced by any
employment compensation earned by you for any work or service performed for any
other person.
9. Termination.
(a) Termination for Cause. Viacom may, at its option,
terminate your employment under this Agreement forthwith for "cause", and Viacom
shall thereafter have no further obligations under this Agreement, including,
without limitation, any obligation to pay Salary or Bonus or provide benefits
under this Agreement; provided, however, that Viacom may terminate this
Agreement pursuant to this paragraph only with the affirmative vote of fourteen
of the eighteen members of the Board of Viacom at a meeting called for such
purpose at which you and a counsel of your choosing shall have an opportunity to
be heard. For purposes of this Agreement, termination of this Agreement for
"cause" shall mean termination for embezzlement, fraud or other conduct which
would constitute a felony, conviction of a felony, or willful unauthorized
disclosure of confidential information, or if you at any time materially breach
this Agreement (including, without limitation, your failure, neglect of or
refusal to substantially
<PAGE>
10
perform your obligations hereunder as set forth in paragraphs 2, 7(k) and 12
hereof), except in the event of your disability as set forth in paragraph 8.
Anything herein to the contrary notwithstanding, Viacom will give you written
notice prior to terminating this Agreement for your material breach setting
forth the exact nature of any alleged breach and the conduct required to cure
such breach. Except for a breach which by its nature cannot be cured, you shall
have ten (10) business days from the giving of such notice within which to cure
and within which period Viacom cannot terminate this Agreement for the stated
reasons.
(b) Good Reason Termination. You may terminate your employment
hereunder for "Good Reason" at any time during the Employment Term by written
notice to Viacom not more than thirty (30) days after the occurrence of the
event constituting "Good Reason". Such notice shall state an effective date no
earlier than thirty (30) business days after the date it is given. Viacom shall
have ten (10) business days from the giving of such notice within which to cure.
Good Reason shall mean any of the following, without your prior written consent,
other than in connection with the termination of your employment for "cause" (as
defined above) or in connection with your permanent disability:
(i) the assignment to you by Viacom of duties
substantially inconsistent with your positions,
duties, responsibilities, titles or offices, the
withdrawal of a material part of your
responsibilities or a change in your reporting
relationship, as set forth in paragraph 2 or in
Article XIII of the Certificate of Incorporation as
in effect on the Effective Date;
(ii) a reduction by Viacom in your Salary or Target Bonus
as in effect at the date hereof or as the same may be
increased from time to time during the Employment
Term;
(iii) Viacom's requiring you to be based anywhere other
than the New York City metropolitan area, except for
required travel on Viacom's business to any extent
substantially consistent with business travel
obligations of other senior executives of Viacom;
(iv) Viacom's violation of Article XIII of the Certificate
of Incorporation; or
(v) the material breach by Viacom of its obligations
hereunder.
(c) Termination Without Cause. Viacom may terminate your
employment under this Agreement without "cause" (as defined above) at any time
during the Employment Term by written notice to you; provided, however, that
Viacom may terminate your employment pursuant to this paragraph only with the
affirmative vote of fourteen of the eighteen members of the Board of Viacom.
<PAGE>
11
(d) Termination Payments, Etc. In the event that your
employment terminates pursuant to paragraph 9(b) or 9(c) hereof, you shall be
entitled to receive, subject to applicable withholding taxes:
(i) your Salary as provided in paragraph 3(a) until the
end of the Employment Term, payable in accordance
with Viacom's then effective payroll practices;
(ii) bonus compensation for each calendar year during the
Employment Term equal to your Target Bonus as set
forth in paragraph 3(b);
(iii) Deferred Compensation for each calendar year during
the Employment Term as set forth in paragraph 3(c);
Deferred Compensation attributable to the calendar
year in which the termination pursuant to paragraph
9(b) or 9(c) hereof occurs and to prior calendar
years shall be payable, together with the return
thereon as provided in paragraph 3(c), prior to
January 31 of the calendar year following such
termination; and Deferred Compensation attributable
to subsequent calendar years shall be payable,
together with the return thereon as provided in
paragraph 3(c), prior to January 31 of each such
following calendar year;
(iv) your perquisites as provided in paragraph 6 until the
end of the Employment Term, payable in accordance
with Viacom's then effective payroll practices;
(v) medical and dental insurance coverage until the end
of the Employment Term or, if earlier, the date on
which you become eligible for medical and dental
coverage from a third party employer; during this
period, Viacom will pay an amount equal to the
applicable COBRA premiums (or such other amounts as
may be required by applicable law) (which amount will
be included in your income for tax purposes to the
extent required by applicable law); at the end of
such period, you may elect to continue your medical
and dental insurance coverage at your own expense for
the balance, if any, of the period required by law;
(vi) life insurance coverage as set forth in paragraph
4(b) until the end of the Employment Term (the amount
of such insurance to be reduced by the amount of any
insurance provided by a new employer without cost to
you);
(vii) stock options granted to you under the 1997 LTMIP
which are exercisable on or prior to the date of the
termination of your employment under paragraph 9(b)
or 9(c) or that would have vested and become
exercisable
<PAGE>
12
on or before the last day of the Employment Term will
be exercisable for two (2) years after the date of
such termination or, if later, until December 31,
2003, but in no event may such stock options be
exercised following the expiration date of such stock
options;
(viii) a supplemental pension benefit calculated in
accordance with the terms of the Excess Pension Plan
and paragraph 4(c) as though you were employed
through the end of the Employment Term; and
(ix) provision of an appropriate office and secretarial
assistance for up to six (6) months after the
termination of your employment.
The payments provided for in (i) above are in lieu of any severance or income
continuation or protection under any Viacom plan that may now or hereafter
exist. The payments and benefits to be provided pursuant to this paragraph 9(d)
shall constitute liquidated damages, and shall be deemed to satisfy and be in
full and final settlement of all obligations of Viacom to you under this
Agreement.
(e) Termination of Benefits. Notwithstanding anything in this
Agreement to the contrary (except as otherwise provided in paragraph 9(d) with
respect to medical, dental and life insurance and Excess Pension Plan benefits
or in paragraphs 7 and 8 with respect to continued exercisability of options),
coverage under all Viacom benefit plans and programs (including, without
limitation, vacation, 401(k), excess 401(k) and pension plans, LTD and
accidental death and dismemberment and business travel and accident insurance)
will terminate upon the termination of your employment except to the extent
otherwise expressly provided in such plans or programs.
10. Death. If you die prior to the end of the Employment Term,
your beneficiary or estate shall be entitled to receive your Salary up to the
date on which the death occurs, a pro-rated Target Bonus and pro-rated Deferred
Compensation for the calendar year in which the death occurs and Deferred
Compensation attributable to prior calendar years payable, together with the
return thereon as provided in paragraph 3(c), prior to January 31 of the
following calendar year. In addition, the vesting of all stock options granted
under the 1997 LTMIP that are not exercisable as of the date on which the death
occurs shall be accelerated, and your beneficiary or estate shall be entitled to
exercise such stock options, together with all stock options that are
exercisable as of the date of your death, for two (2) years after the date of
death or, if later, until December 31, 2003, but in no event may such stock
options be exercised following the expiration date of such stock options.
11. Section 317 and 507 of the Federal Communications Act. You
represent that you have not accepted or given nor will you accept or give,
directly or indirectly, any money, services or other valuable consideration from
or to anyone other than Viacom for the inclusion of
<PAGE>
13
any matter as part of any film, television program or other production produced,
distributed and/or developed by Viacom and/or any of its affiliates or
predecessors.
12. Equal Opportunity Employer. You acknowledge that Viacom is
an equal opportunity employer. You agree that you will comply with Viacom
policies regarding employment practices and with applicable federal, state and
local laws prohibiting discrimination on the basis of race, color, creed,
national origin, age, sex or disability.
13. Indemnification.
(a) Viacom shall indemnify and hold you harmless, to the
maximum extent permitted by law and by the Certificate of Incorporation and/or
the Bylaws of Viacom, against judgments, fines, amounts paid in settlement of
and reasonable expenses incurred by you in connection with the defense of any
action or proceeding (or any appeal therefrom) in which you are a party by
reason of your position as President and Chief Operating Officer or any other
office you may hold with Viacom or its affiliates or by reason of any prior
positions held by you with Viacom or any of its affiliates or predecessors or
for any acts or omissions made by you in good faith in the performance of any of
your duties as an officer of Viacom.
(b) To the extent that Viacom maintains officers' and
directors' liability insurance, you will be covered under such policy.
14. Notices. All notices required to be given hereunder shall
be given in writing, by personal delivery or by mail at the respective addresses
of the parties hereto set forth above, or at such other address as may be
designated in writing by either party. Any notice given by mail shall be deemed
to have been given three days following such mailing.
15. Assignment. This is an Agreement for the performance of
personal services by you and may not be assigned by you or Viacom except that
Viacom may assign this Agreement to any affiliate of or any successor in
interest to Viacom.
16. New York Law, Etc. This Agreement and all matters or
issues collateral thereto shall be governed by the laws of the State of New York
applicable to contracts entered into and performed entirely therein. Any action
to enforce this Agreement shall be brought in the state or federal courts
located in the City of New York.
17. No Implied Contract. Nothing contained in this Agreement
shall be construed to impose any obligation on Viacom to renew this Agreement or
any portion thereof. The parties intend to be bound only upon execution of a
written agreement and no negotiation, exchange of draft or partial performance
shall be deemed to imply an agreement. Neither the continuation of employment
nor any other conduct shall be deemed to imply a continuing agreement upon the
expiration of this Agreement.
<PAGE>
14
18. Entire Understanding. This Agreement contains the entire
understanding of the parties hereto relating to the subject matter herein
contained, and can be changed only by a writing signed by both parties hereto.
19. Void Provisions. If any provision of this Agreement, as
applied to either party or to any circumstances, shall be adjudged by a court to
be void or unenforceable, the same shall be deemed stricken from this Agreement
and shall in no way affect any other provision of this Agreement or the validity
or enforceability of this Agreement.
20. Supersedes Previous Agreement. Effective as of the
Effective Date, this Agreement shall supersede and cancel all prior agreements
relating to your employment by Viacom or any of its affiliates and predecessors,
including, without limitation, the employment agreement with Westinghouse
Electric Corporation, dated as of June 20, 1996, and any amendments thereto.
Notwithstanding the preceding sentence, this Agreement is not intended, and
shall not be construed, to affect your rights in any compensation or benefits
that have been granted or accrued prior to the beginning of the Employment Term.
<PAGE>
15
If the foregoing correctly sets forth our understanding,
please sign one copy of this letter and return it to the undersigned, whereupon
this letter shall constitute a binding agreement between us.
Very truly yours,
VIACOM INC.
By: /s/ Michael D. Fricklas
-------------------------------
Michael D. Fricklas
Senior Vice President, General
Counsel and Secretary
ACCEPTED AND AGREED:
/s/ Mel Karmazin
- ----------------------
Mel Karmazin
<PAGE>
EXHIBIT A
Article XIII of the Amended and Restated Certificate of Incorporation
(attached)
<PAGE>
EXHIBIT B
Form of the Award Agreement
(attached)
<PAGE>
EXHIBIT A-1
RESTATED CERTIFICATE OF INCORPORATION
OF
VIACOM INC.
ARTICLE XIII
GOVERNANCE OF THE CORPORATION
DURING SPECIFIED PERIOD
(1) Definitions. As used in this Article XIII, the following terms shall have
the following meanings:
(a) "CBS" shall mean CBS Corporation, a Pennsylvania corporation, immediately
prior to the Effective Time.
(b) "CBS Directors" shall mean (i) eight (8) of those directors serving as
members of the Board of Directors of CBS on September 6, 1999 (or any
Independent Directors elected or appointed prior to the Effective Time to serve
as a CBS Director) who are designated as such by the Board of Directors of CBS
prior to the Effective Time and (ii) any Replacement CBS Director (as defined in
Section 2(b) of this Article XIII).
14
<PAGE>
(e) "CEO" shall mean the Chief Executive Officer.
(d) "COO" shall mean the President and Chief Operating Officer.
(e) "Effective Time" shall mean the time of filing of the Certificate of Merger
to which this Certificate of Incorporation is attached.
(f) "Independent Director" shall mean a disinterested, independent person
(determined in accordance with customary standards for independent directors
applicable to U.S. public companies).
(g) "NAI" shall mean National Amusements, Inc., a Maryland corporation, and its
successors or assigns.
(h) "Specified Independent Directors" shall mean the directors of
the Corporation first elected after 1993 and who are not management of the
Corporation or NAI (together with any replacements of such persons).
(i)"Specified Period" shall mean the period of three years commencing at the
Effective Time.
(j) "Stockholder Agreement" shall mean the Stockholder
Agreement dated as of September 6, 1999, by and between NAI and CBS, relating to
Corporation governance matters.
(k) "Viacom Directors" shall mean the ten (10) directors of the Corporation
serving as the Board of Directors of the Corporation immediately prior to the
Effective Time (including the Specified Independent Directors).
(2) Directors.
(a) Effective immediately at the Effective Time, the Board of Directors
shall consist of eighteen (18) directors. The number of directors may be fixed
by resolution of the Board from time to time, provided, however, that the size
of the Board of Directors may not be changed during the Specified Period without
the approval of at least fourteen (14) directors. At the Effective Time, ten
(10) directors shall be Viacom Directors and eight (8) directors shall be CBS
Directors.
(b) Until the expiration of the Specified Period, the Board of Directors
(subject to the fiduciary duties of the directors) shall take all action
necessary to ensure that any seat on the Board of Directors held by (i) a CBS
Director which becomes vacant is filled promptly by a person qualifying
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<PAGE>
as an Independent Director and designated to fill such seat by a majority of the
CBS Directors remaining on the Board of Directors (a "Replacement CBS Director")
and (ii) a Specified Independent Director which becomes vacant is filled
promptly by an Independent Director who is the chief executive officer, chief
operating officer or chief financial officer or former chief executive officer
of a Fortune 500 company or a non-U.S. public company of comparable size.
(c) During the Specified Period, all committees of the Board of Directors (other
than the Compensation Committee and the Officers Nominating Committee) shall
have such number of CBS Directors as equals the total number of members of the
Committee multiplied by a fraction, the numerator of which is eight (8) and the
denominator of which is eighteen (18), rounded to the closest whole number;
provided that in no event shall any committee have (x) fewer than one (1) CBS
Director or (y) less than a majority of Viacom Directors.
(d) During the Specified Period, the Board of Directors shall not take any
action or fail to take any action which would have the effect of eliminating,
limiting, restricting, avoiding or otherwise modifying the effect of the
provisions set forth in this Article XIII (e.g., by creating a holding company
structure if the certificate of incorporation or similar document of such
holding company does not contain equivalent provisions).
(3) Chairman and Chief Executive Officer.
(a) At the Effective Time, Sumner Redstone shall remain the Chairman and CEO. In
the event that Sumner Redstone is not the CEO at the Effective Time or ceases to
be the CEO at any time during the Specified Period, then Mel Karmazin, if he is
COO at such time, shall succeed to the position of CEO for the remainder of the
Specified Period. During any such period of succession, Mel Karmazin shall
continue to exercise the powers, rights, functions and responsibilities of the
COO in addition to exercising those of the CEO.
(b) The Chairman shall chair all meetings of the Board of Directors and
stockholders at which he is present.
(c) The CEO shall be responsible, in consultation with the COO, for corporate
policy and strategy and the COO shall consult on all major decisions with, and
shall report directly to, the CEO, during the Specified Period; provided,
however, that the CEO shall not exercise any powers, rights, functions or
responsibilities of the COO unless Mel Karmazin is the CEO.
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<PAGE>
(4) President and Chief Operating Officer.
(a) At the Effective Time, the President and Chief Operating Officer of the
Corporation shall be Mel Karmazin. During the Specified Period, Mel Karmazin may
not be terminated or demoted from the position of COO (or, in the event that
Sumner Redstone is not the CEO, from the position of CEO) and no COO Functions
(as defined below) may be changed without the affirmative vote of at least
fourteen (14) directors.
(b) Subject to the requirement that the COO consult with the CEO on all major
decisions, the powers, rights, functions and responsibilities of the COO
(collectively, the "COO Functions") shall include, without limitation, the
following:
(i) supervising, coordinating and managing the Corporation's business,
operations, activities, operating expenses and capital allocation;
(ii) matters relating to officers (other than the Chairman, CEO and COO)
and employees, including, without limitation, hiring (subject to (A) the
specific Board of Directors authority described below with respect to the
CFO, the General Counsel and the Controller and (B) Section 5 below),
terminating, changing positions and allocating responsibilities of such
officers and employees; and
(iii) substantially all of the powers, rights, functions and
responsibilities typically exercised by a chief operating officer.
All officers (other than the Chairman, CEO and COO) will report, directly
or indirectly, to the COO (this reporting relationship will be deemed a COO
Function).
(c) In the event that Mel Karmazin is not COO or CEO, the Board may terminate
the COO's employment, eliminate the COO position and the Officers Nominating
Committee and reallocate the COO Functions without regard to the other
provisions of this Article XVIII.
(5) Officers Nominating Committee; Compensation Committee.
(a) Subject to the powers of the Compensation Committee set forth below,
during the Specified Period, all powers of the Board of Directors, including,
without limitation, the right to hire, elect, terminate, change positions,
allocate responsibilities or determine non-equity compensation, with respect to
officers and employees, shall be exercised, subject
17
<PAGE>
to clauses (b) and (c) below, by, and delegated to, the Officers Nominating
Committee of the Board of Directors. The Officers Nominating Committee shall
consist solely of the member of the Board of Directors who is the COO, except
that in the event Mel Karmazin succeeds to the position of CEO, the sole member
of the Officers Nominating Committee shall be the member of the Board of
Directors who is the CEO.
(b) The Officers Nominating Committee shall have no powers with respect to the
Chairman, CEO and COO, and shall not have the power to fill the positions of
Chief Financial Officer, Controller or General Counsel of the Corporation
without the approval of the Board of Directors; provided that this provision
shall in no way affect the other powers and authorities of the Officers
Nominating Committee with respect to the Chief Financial Officer, Controller and
General Counsel positions, including, without limitation, the power to terminate
employment of persons holding such positions.
(c) The Compensation Committee shall not be required to, or have any power to,
approve the annual compensation of (i) any employee if the total value of such
employee's annual cash compensation (assuming for this purpose that the actual
bonus of each officer and employee is equal to his or her target bonus) is less
than $1 million or (ii) talent (as such term is commonly used in the media or
entertainment industries), in each such case which power shall be delegated to
the Officers Nominating Committee. The annual compensation of all other officers
and employees and any equity or equity-based compensation of any officer or
employee must be approved by the Compensation Committee.
(d) The Compensation Committee shall consist of three CBS Directors who are
Independent Directors and three non-CBS Directors, two of whom will be the
Specified Independent Directors and the other of whom will be an Independent
Director.
(e) Any decision or determination of the Officers Nominating
Committee may be reversed or overridden by (and only by) the affirmative vote of
at least fourteen (14) directors.
(6) Stockholder Agreement.
The Stockholder Agreement may not be amended, and no provision thereof may
be modified or waived, except with the approval of at least fourteen (14)
directors.
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<PAGE>
(7) Issuance of Voting Stock.
During the Specified Period, in addition to any other approval required by
law or by this Restated Certificate of Incorporation, the Corporation may not
issue (i) additional shares of Class A Common Stock or (ii) any shares of
Preferred Stock or any other class or series of stock or securities, in each
case with, or convertible into or exchangeable or exercisable for stock or other
securities with, the right to vote on any matter on which stockholders are
entitled to vote if the result would be that parties bound by the Stockholder
Agreement could fail to own at least a majority of the outstanding shares of
voting stock of the Corporation.
(8) Voting
During the Specified Period, except for those actions set forth on Annex I
to this Restated Certificate of Incorporation, which shall require the approval
of the Board of Directors, all action by the Board of Directors shall require
the affirmative vote of at least fourteen (14) directors. At all meetings of the
Board of Directors a majority of the full Board of Directors shall constitute a
quorum for the transaction of business and the act of a majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute or this Restated Certificate of Incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the Directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
(9) Amendment.
Until the expiration of the Specified Period the provisions of any Article
of this Restated Certificate which refer to this Article XIII, the provisions of
this Article XIII, and the provisions of Article VIII of the by-laws of the
Corporation, may not be amended, altered, repealed or waived in any respect
without the approval of at least fourteen (14) directors.
(10) Successors.
During the Specified Period, the provisions of this Article XIII shall be
applicable to (i) any successor to the Corporation as the result of a merger,
consolidation or other business combination, whether or not the Corporation is
the surviving company in such transaction, or otherwise and (ii) any corporation
or other entity with respect to which the
19
<PAGE>
Corporation or its successor is or becomes a direct or indirect subsidiary, the
Board of Directors shall not permit the Corporation to be a party to any
transaction which would not comply with the foregoing without the approval of at
least fourteen (14) directors.
(11) Subsidiaries.
The Board of Directors shall have the right, following consultation with
the COO or, if Mel Karmazin is the CEO, the CEO, with respect to any public
company which is a subsidiary of the Corporation, to take such steps as the
Board of Directors reasonably determines are necessary to implement corporate
governance arrangements applicable to such subsidiary in a manner as consistent
as practicable with the provisions contained in this Restated Certificate of
Incorporation; provided that any such steps shall not vest in the Board of
Directors greater power or provide the COO with fewer rights than those provided
for in this Restated Certificate of Incorporation.
20
<PAGE>
EXHIBIT B
Form of Agreement Under the
Viacom Inc.
1997 Long-Term Management Incentive Plan
for the 1999 Stock Option Grant
------------------------------------------------------------
AGREEMENT, dated as of ____________, by and between Viacom Inc., a
Delaware corporation (the "Company"), and ______________________ (the
"Participant"), with respect to the 1999 grant of stock options under the
Company's 1997 Long-Term Management Incentive Plan, as amended (the "Plan").
This Agreement, together with the Memorandum dated _____________ and
the agreements delivered under the Plan in connection with each grant of stock
options under the Plan, constitutes the prospectus covering the shares of Class
B Common Stock subject to the Plan. The Participant can receive additional
copies of his or her Plan agreements and the Memorandum upon request to the
Administrator, Long-Term Incentive Plans, Viacom Inc., 1515 Broadway, New York,
New York 10036.
WITNESSETH:
WHEREAS, the Participant is now employed by the Company or one of its
subsidiaries in a key capacity and the Company desires to reward the
Participant, in accordance with the terms hereof, for the Participant's
contributions to the financial success of the Company by awarding the
Participant stock options to purchase shares of Class B Common Stock;
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties hereto hereby agree as follows:
ARTICLE I
TERMS OF STOCK OPTIONS
Section 1.1 Grant of Stock Options. Subject to the terms and
conditions contained herein and in the Plan, the terms of which are hereby
incorporated by reference, the Company hereby awards to the Participant,
effective as of ___________________ (the "Date of Grant"), a grant of stock
options (the "Stock Options") to purchase ______________ shares of Class B
Common Stock at an exercise price of $___________ for each share (the "Exercise
Price"). The capitalized terms used in this Agreement which are not otherwise
defined herein shall have the meanings assigned to
<PAGE>
them in Article III hereof. The Stock Options granted hereunder are not intended
to be, or qualify as, "Incentive Stock Options" within the meaning of Section
422 of the Code.
Section 1.2 Terms of Stock Options.
(a) Vesting. The Stock Options shall be exercisable only to
the extent the Participant is vested therein. The Stock Options shall
vest in one-third increments on ____________________ and
________________________.
(b) Option Period. Except as provided in Section 1.2(c)
hereof, the period during which the Stock Options may be exercised
shall expire on the tenth anniversary of the Date of Grant (the
"Expiration Date").
(c) Exercise in the Event of Termination of Employment,
Retirement, Death or Permanent Disability.
(i) Termination other than for Cause, Retirement,
Death or Permanent Disability. In the event that (A) the
Participant ceases to be an employee of the Company or any of
its subsidiaries by reason of the voluntary termination by
the Participant or the termination by the Company or any of
its subsidiaries other than for Cause, the Participant may
exercise his or her Outstanding Stock Options to the extent
then exercisable until the earlier of six months after the
date of such termination (or such longer period, not in
excess of the second anniversary of the Date of Grant of such
Stock Options, as may be determined by the Committee, in its
discretion) or the Expiration Date, (B) the Participant
ceases to be an employee of the Company or any of its
subsidiaries by reason of the Participant's Retirement, the
Participant may exercise his or her Outstanding Stock Options
to the extent then exercisable until the earlier of two years
after such date or the Expiration Date, (C) the Participant
dies during a period during which his or her Stock Options
could have been exercised by him or her, his or her
Outstanding Stock Options may be exercised to the extent
exercisable at the date of death by the person who acquired
the right to exercise such Stock Options by will or the laws
of descent and distribution until the earlier of one year
after such death (or such longer period as may be determined
by the Committee, in its discretion, prior to the expiration
of such one-year period) or the Expiration Date, or (D) the
Permanent Disability of the Participant occurs, the
Participant may exercise his or her Outstanding Stock Options
to the extent exercisable upon the onset of such Permanent
Disability until the earlier of one year after such date (or
such longer period not in excess of two years after such date
as may be determined by the Committee in its discretion) or
the Expiration Date. Upon the occurrence of an event
described in clauses (A), (B), (C) or (D) of this Section
1.2(c)(i), all rights with respect to Stock Options that are
not vested as of such event will be relinquished.
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<PAGE>
(ii) Termination for Cause. If the Participant's
employment with the Company or any of its subsidiaries ends
because of a Termination for Cause, all Outstanding Stock
Options, whether or not then vested, shall terminate
effective as of the date of such termination.
Section 1.3 Exercise of Stock Options.
(a) Whole or Partial Exercise. Subject to the
restrictions of Section 1.2(b) hereof, the Participant may
exercise all vested Stock Options granted hereunder at one
time or in installments of 100 Stock Options (or in the whole
number of unexercised Stock Options in which the Participant
is vested, if such number is less than 100) by written notice
to the Administrator, Long-Term Incentive Plans, Viacom Inc.,
1515 Broadway, New York, New York 10036. Such notice shall
(i) state the number of full Stock Options being exercised
(ii) be signed by the person or persons so exercising the
Stock Options and, in the event the Stock Options are being
exercised (pursuant to Section 1.2(c)(i) hereof) by any
person or persons other than the Participant accompanied by
proof satisfactory to the Company's counsel of the right of
such person or persons to exercise the Stock Options, and
(iii) be accompanied by full payment as set forth in Section
1.3(b) hereof.
(b) Payment of Aggregate Option Price. The written
notice of exercise described above must be accompanied by
full payment of the aggregate Exercise Price which shall be
determined by multiplying the number of Stock Options being
exercised by the Exercise Price. Such Exercise Price shall be
paid in cash (e.g. personal bank check, certified check or
official bank check). In addition, in accordance with Section
4.3 hereof, the Participant shall make an arrangement
acceptable to the Company to pay to the Company an amount
sufficient to satisfy the combined Federal, state and local
withholding tax obligations which arise in connection with
the exercise of such Stock Options.
(c) Issuance of Share Certificates. Upon
satisfaction of the conditions set forth in Section 1.3(b)
hereof, the Company shall deliver (or cause to be delivered)
a certificate or certificates for the shares of Class B
Common Stock issued pursuant to the exercise of the Stock
Options to the Participant.
ARTICLE II
EFFECT OF CERTAIN CORPORATE CHANGES
In the event of a merger, consolidation, stock split,
dividend, distribution, combination, reclassification or recapitalization that
changes the character or amount of the Class B Common Stock, the Committee shall
make such adjustments to the number of shares of Class B
3
<PAGE>
Common Stock subject to the Stock Options or the exercise price of the Stock
Options, in each case, as it deems appropriate. Such determinations shall be
conclusive and binding for all purposes.
ARTICLE III
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Class B Common Stock" shall mean shares of
Class B Common Stock, par value $0.01 per share, of the Company.
(c) "Code" shall mean the Internal Revenue Code of
1986, as amended, including any successor law thereto.
(d) "Committee" shall mean the Senior Executive
Compensation Committee of the Board (or such other Committee as may be
appointed by the Board) except that (i) the number of directors on the
Committee shall not be less than two and (ii) each member of the
Committee shall be a "non-employee director" within the meaning of
Rule 16b-3 under the Exchange Act.
(e) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, including any successor law thereto.
(f) "Fair Market Value" of a share of Class B Common
Stock on a given date shall be the closing price of a share of Class B
Common Stock on the New York Stock Exchange or such other national
securities exchange as may be designated by the Committee or, in the
event that the Class B Common Stock is not listed for trading on a
national securities exchange but is quoted on an automated quotation
system, the average closing bid price per share of the Class B Common
Stock on such automated quotation system or, in the event that the
Class B Common Stock is not quoted on any such system, the average of
the closing bid prices per share of the Class B Common Stock as
furnished by a professional marketmaker making a market in the Class B
Common Stock designated by the Committee.
(g) "Outstanding Stock Option" shall mean a Stock
Option granted to the Participant which has not yet been exercised and
which has not yet expired in accordance with its terms.
4
<PAGE>
(h) "Permanent Disability" shall have the same
meaning as such term or a similar term has in the long-term disability
policy maintained by the Company or a subsidiary thereof for the
Participant and in effect on the date of the onset of the
Participant's Permanent Disability.
(i) "Retirement" shall mean the resignation or
termination of employment after attainment of an age and years of
service required for payment of an immediate pension pursuant to the
terms of any qualified retirement plan maintained by the Company or a
subsidiary in which the Participant participates; provided, however,
that no resignation or termination prior to a Participant's 60th
birthday shall be deemed a retirement unless the Committee so
determines in its sole discretion.
(j) "Termination for Cause" shall mean a termination
of employment with the Company or any of its subsidiaries which, as
determined by the Committee, is by reason of (i) "cause" as such term
or a similar term is defined in any employment agreement applicable to
the Participant, or (ii) if there is no such employment agreement or
if such employment agreement contains no such term, (x) dishonesty,
conviction of a felony, or willful unauthorized disclosure of
confidential information, (y) failure, neglect of or refusal by the
Participant to substantially perform the duties of the Participant's
employment, or (z) any other act or omission which is materially
injurious to the financial condition or business reputation of the
Company of any subsidiary thereof.
(k) To "vest" a Stock Option held by the Participant
shall mean to render such Stock Option exercisable, subject to the
terms of the Plan, except where the Participant's employment ends
because of a Termination for Cause.
ARTICLE IV
MISCELLANEOUS
Section 4.1 No Rights to Continued Employment. Neither this
Agreement, the Plan nor any action taken in accordance with such documents shall
be construed as giving the Participant any right to be retained by the Company
or any of its subsidiaries.
Section 4.2 Restriction on Transfer. The rights of the
Participant with respect to the Stock Options shall not be transferable by the
Participant except (i) by will or the laws of descent and distribution or (ii)
subject to the prior approval of the Committee, for transfers to members of the
Participant's immediate family or trusts whose beneficiaries are members of the
Participant's immediate family, in each case subject to the condition that the
Committee shall be satisfied that such transfer is being made for estate an/or
tax planning purposes without consideration being received therefor and subject
to such other conditions as the Committee may impose.
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Section 4.3 Tax Withholding. As a condition to the exercise
of the Stock Options, the Participant shall make a payment (or an arrangement
acceptable to the Company for the withholding of such payment) sufficient to
satisfy the combined Federal, state and local withholding tax obligations which
arise in connection with the exercise of such Stock Options.
Section 4.4 Stockholder Rights. The grant of Stock Options
under this Agreement shall not entitle the Participant or any permitted
transferee to any rights of a holder of shares of common stock of the Company,
other than when and until share certificates are delivered to the Participant
upon exercise of a Stock Option.
Section 4.5 No Restriction on Right of Company to Effect
Corporate Changes. This Agreement shall not affect in any way the right or power
of the Company or its stockholders to make or authorize any or all adjustments,
recapitalization, reorganization or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Class B Common Stock or the rights thereof or which are convertible
into or exchangeable for Class B Common Stock, or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
Section 4.6 Amendment. Other than as provided in Article II
hereof, this Agreement may not be modified, amended or waived in any manner
except by an instrument in writing signed by both parties hereto. The waiver by
either party of compliance with any provision of this Agreement by the other
party shall not operate or be construed as a waiver of any other provision of
this Agreement, or of any subsequent breach by such party of a provision of this
Agreement.
Section 4.7 Stockholder Approval. The grant of Stock Options
under this Agreement is subject to the approval of the stockholders of the
Company, at the next annual or special meeting of stockholders, to the extent
that the number of shares of Class B Common Stock subject to the Plan is
insufficient to cover the number of shares of Class B Common Stock subject to
Stock Options awarded under this Agreement.
Section 4.8 Notices. Every notice or other communication
relating to this Agreement shall be in writing, and shall be mailed to or
delivered to the party for whom it is intended at such address as may from time
to time be designated by such party in a notice mailed or delivered to the other
party as herein provided. If no such address has been specified by the
Participant, such notices or communications shall be sent to the Participant's
address as specified in the records of the Company.
Section 4.9 Headings. The headings of sections and
subsections herein are included solely for convenience of reference and shall
not affect the meaning of any of the provisions of this Agreement.
6
<PAGE>
Section 4.10 Receipt of Copy of Plan. By executing this
Agreement, the Participant acknowledges receipt of a copy of the Plan.
Section 4.11 Governing Law. This Agreement and all rights
hereunder shall be construed in accordance with and governed by the laws of the
State of Delaware.
VIACOM INC.
By:
----------------------------------------
Senior Vice President,
Human Resources and
Administration
----------------------------------------
Participant
7
<PAGE>
Annex H
September 6, 1999
Board of Directors
Viacom Inc.
1515 Broadway
New York, NY 10036
Members of the Board:
We understand that CBS Corporation ("CBS" or the "Company") and Viacom Inc.
("Viacom") have entered into an Agreement and Plan of Merger, dated as of
September 6, 1999 (the "Merger Agreement"), which provides, among other things,
for the merger of CBS with and into Viacom (the "Merger"). Pursuant to the
Merger, each issued and outstanding share of common stock, par value $1.00 per
share, of CBS ("CBS Common Stock") shall be converted into the right to receive
1.085 shares (the "Exchange Ratio") of Class B Common Stock, par value $0.01 per
share (the "Viacom Class B Common Stock") of Viacom. The terms and conditions of
the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to the
Merger Agreement is fair from a financial point of view to Viacom.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other information of the CBS and Viacom, respectively;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the CBS and Viacom
prepared by the respective managements of the CBS and Viacom;
(iii) discussed the past and current operations and financial
condition and the prospects of CBS and Viacom with senior
executives of CBS and Viacom;
(iv) analyzed certain internal financial statements and other
financial operating data concerning CBS and Viacom prepared by
the respective managements of CBS and Viacom;
<PAGE>
(v) discussed the past and current operations and financial
condition and the prospects of the Viacom with senior
executives of Viacom including their estimates of the
strategic and operational benefits of the Merger, and analyzed
the pro forma impact of the Merger on Viacom's financial
ratios;
(vi) reviewed the reported prices and trading activity for the CBS
Common Stock and the Viacom Class B Common Stock;
(vii) compared the financial performance of CBS and Viacom and the
prices and trading activity of CBS and Viacom with that of
certain other comparable publicly-traded companies and their
securities;
(viii) participated in discussions and negotiations among
representatives of CBS and Viacom and their financial and
legal advisors;
(ix) reviewed the Merger Agreement, the Voting Agreement dated as
of September 6, 1999 between CBS and certain shareholders of
Viacom and certain related documents; and
(x) performed such other analyses and considered such other
factors as we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, including information
relating to certain strategic and operational benefits of the Merger, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of CBS and Viacom, respectively. We have not made any independent valuation or
appraisal of the assets or liabilities of CBS and Viacom, nor have we been
furnished with any such appraisals. We have assumed that the Merger will be
consummated in accordance with the terms set forth in the Merger Agreement. Our
opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of Viacom in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for CBS and Viacom and have received
fees for the rendering of these services. In the ordinary course of business,
Morgan Stanley may from time to time trade in the securities of CBS and Viacom
for its own account, the accounts of investment funds under the management of
Morgan Stanley and for the accounts of its customers and, accordingly, may at
any time hold a long or short position in such securities.
<PAGE>
It is understood that this letter is for the information of the Board of
Directors of Viacom and may not be used for any other purpose without our prior
written consent, except that this opinion may be included in its entirety in any
filing made by CBS or Viacom in respect of the Merger with the Securities and
Exchange Commission. In addition, this opinion does not in any manner address
the prices at which Viacom Class B Common Stock will trade following the
consummation of the Merger, and Morgan Stanley expresses no opinion or
recommendation as to how the stockholders of CBS and Viacom should vote at the
respective stockholders' meetings held in connection with the Merger.
Based on and subject to the foregoing, we are of the opinion on the date hereof
that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to Viacom.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
/s/ Paul J. Taubman
By: ..................................
Paul J. Taubman
Managing Director
<PAGE>
Annex I
September 6, 1999
Board of Directors
CBS Corporation
51 West 52nd Street
New York, NY 10019
Members of the Board of Directors:
We understand that CBS Corporation ("CBS") has entered into an Agreement
and Plan of Merger dated as of September 6, 1999, by and between Viacom Inc.
("Viacom") and CBS (the "Merger Agreement"). Pursuant to the Merger Agreement,
CBS will merge with and into Viacom (the "Merger") and each outstanding share of
CBS Common Stock, par value $1.00 per share (the "CBS Common Stock"), will be
converted into the right to receive 1.085 shares of Viacom Class B Common Stock,
par value $0.01 per share ("Viacom Class B Common Stock"), with the number of
shares of Viacom Class B Common Stock to be received for each share of CBS
Common Stock being referred to herein as the exchange ratio (the "Exchange
Ratio").
You have asked us for our opinion as to whether the Exchange Ratio is fair,
from a financial point of view, to the holders of CBS Common Stock.
In connection with rendering our opinion, we have, among other things:
(i) analyzed certain publicly available financial statements and other
information relating to CBS and Viacom;
(ii) analyzed certain internal financial statements and other non-public
financial and operating data concerning CBS, which were prepared by
and furnished to us or reviewed for us by the management of CBS, and
concerning Viacom, which were prepared by and furnished to us or
reviewed for us by the management of Viacom;
(iii) analyzed certain financial projections concerning CBS, which were
prepared by the management of CBS, and concerning Viacom, which were
prepared by the management of Viacom;
(iv) discussed the past and current operations and financial condition
and the prospects of CBS with the management of CBS;
(v) discussed the past and current operations and financial condition
and the prospects of Viacom with the management of Viacom;
<PAGE>
September 6, 1999
Page 2
(vi) reviewed the reported prices and trading activity of the CBS Common
Stock and Viacom Class B Common Stock;
(vii) compared the market valuation and financial performance of CBS and
Viacom to that of certain other comparable publicly-traded
companies;
(viii) reviewed the financial terms to the extent available of certain
comparable acquisition transactions;
(ix) participated in discussions and negotiations among representatives
of CBS, Viacom, and their financial and legal advisers;
(x) reviewed the Merger Agreement and the related exhibits and schedules
in the form provided to us and have assumed that the final form of
such Merger Agreement, exhibits and schedules will not vary in any
respect material to our analysis;
(xi) reviewed certain information concerning cost savings and combination
benefits ("Synergies") expected to result from the Merger that was
provided to us or reviewed for us by the managements of CBS and
Viacom; and
(xii) performed such other analyses and examinations and considered such
other factors as we have in our sole judgment deemed appropriate.
For purposes of our analysis and opinion, we have assumed and relied,
without independent verification, upon the accuracy and completeness of the
information reviewed by us or reviewed for us for purposes of this opinion.
With respect to the financial projections of CBS and Viacom and the underlying
analysis concerning the potential Synergies which were furnished to us or
reviewed for us by the managements of CBS and Viacom, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the future competitive, operating and
regulatory environments and related financial performance of CBS and Viacom. We
have not made nor assumed any responsibility for making any independent
valuation or appraisal of the assets or liabilities of CBS or Viacom, nor have
we been furnished with any such appraisals. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information and
Agreements made available to us as of, the date hereof. We have, with your
approval, assumed the Merger will qualify as a tax-free reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986, as amended.
Our opinion does not address CBS's underlying business decision to effect the
Merger nor constitute a recommendation to any CBS shareholder as to how such
holder should vote with respect to the Merger. Furthermore, we express no
opinion as to the price or range of prices at which the shares of Viacom Class B
Common Stock will trade subsequent to the consummation of the Merger.
<PAGE>
September 6, 1999
Page 3
For purposes of rendering our opinion, we have assumed, in all respects
material to our analysis, that the representations and warranties of each party
contained in the Merger Agreement are true and correct, that each party will
perform all the covenants and agreements required under the Merger Agreement,
and that all conditions to the consummation of the Merger will be satisfied
without waiver thereof.
We have acted as financial advisor to the Board of Directors of CBS in
connection with the Merger and will receive a fee for our services upon the
rendering of this opinion. In the past, Evercore Partners Inc. has provided
financial advisory services for CBS and has received fees for the rendering of
these services.
It is understood that this letter and the opinion expressed herein is for
the information of the Board of Directors of CBS only and may not be quoted or
referred to or relied upon or used for any other purpose without our prior
written consent except as we and our affiliates have otherwise agreed with CBS
in writing.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to the
holders of CBS Common Stock.
Very truly yours,
EVERCORE GROUP INC.
By: /s/ David G. Offensend
----------------------------------
David G. Offensend
Vice Chairman
<PAGE>
ANNEX J
COMPARISON OF RIGHTS OF HOLDERS OF
VIACOM COMMON STOCK AND CBS COMMON STOCK
The rights of Viacom shareholders are governed by Delaware law, including
the DGCL, and Viacom's current Restated Certificate of Incorporation and By-
laws. The rights of CBS shareholders are governed by Pennsylvania law,
including the Pennsylvania Business Corporation Law, and CBS' Restated Articles
of Incorporation and By-laws. Upon consummation of the merger, holders of
shares of CBS common stock will become holders of shares of Viacom non-voting
Class B common stock. Consequently, following the merger, Delaware law and
Viacom's proposed new Restated Certificate of Incorporation and its By-laws,
both as amended as a result of the merger, will govern the rights of former CBS
shareholders. Copies of Viacom's current Restated Certificate of Incorporation
and By-laws and CBS' Restated Articles of Incorporation and By-laws have been
filed with the SEC and will be sent to any shareholder of Viacom or CBS upon
request. Copies of Viacom's proposed new Restated Certificate of Incorporation
and By-laws, as they will be amended as a result of the merger, are attached as
Annexes B and C to this joint proxy statement/prospectus.
The following table compares the rights of Viacom and CBS shareholders both
before and after the effective time of the merger. This table is not intended
to be a complete statement of all differences or a complete description of the
specific provisions referred to in this summary, and the identification of
specific differences is not intended to indicate that other significant
differences do not exist. Other than voting rights, there is no difference
between the rights of holders of Viacom Class A common stock and Viacom Class B
common stock.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Combined Company
Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Voting, generally Class A Common Stock: Common Stock: See "Viacom Before the
Merger". Shares of Viacom
. 1 vote per share. . 1 vote per share. Class B Common Stock,
including the shares which
-- No cumulative voting. -- No cumulative voting. CBS shareholders will receive
in the merger, have no voting
-- Plurality vote for -- Plurality vote for directors. rights or powers except as
directors. required by Delaware law.
-- Majority vote for all -- Majority vote for all other matters
other matters. except as set forth below where a
higher vote is required for certain
approvals and except as otherwise
Class B Common Stock: required by Pennsylvania law.
. Except as required by
Delaware law, this class has
no voting rights or powers.
- ------------------------------------------------------------------------------------------------------------------------------------
Approval of Certain Under Delaware law, subject to Under Pennsylvania law, subject to See "Viacom Before the
Business Combinations certain limited exceptions, certain limited exceptions, the Merger".
the approval of the holders of affirmative vote of a majority of the
a majority of the outstanding votes cast by all shareholders
stock entitled to vote is entitled to vote thereon is required
required for any merger or for any merger or consolidation of a
consolidation of a Delaware Pennsylvania corporation with another
corporation with another corporation or the sale, lease,
corporation or the sale, lease exchange or other
or exchange of all or
substantially all of that
corporation's
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
J-1
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Combined Company
Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
assets. disposition of all or substantially
all of that corporation's property
and assets outside of the ordinary
course of business.
- ------------------------------------------------------------------------------------------------------------------------------------
Approval of Certain Delaware law contains Pennsylvania law contains provisions See "Viacom Before the
Business Combinations provisions that may restrict that may restrict certain business Merger".
with Affiliates certain business combinations combinations between a corporation
between a corporation and its and its affiliates. See the
affiliates which are not provisions described under
wholly owned. Viacom's "Anti-Takeover Provisions".
Restated Certificate of
Incorporation and By-laws do Except as described in the next
not impose any higher voting paragraph, CBS' Restated Articles of
requirements for the approval Incorporation and By-laws do not
of these actions. impose any higher voting requirements
for the approval of business
combinations.
CBS' Restated Articles of
Incorporation require that certain
combinations with a 5% (at least)
shareholder receive the approval of
holders of a supermajority (80%) of
all shares entitled to vote and a
majority of shares held by all
shareholders other than such 5%
shareholder and its affiliates unless
the transaction is approved by a
majority of disinterested directors
or satisfies certain specified
fairness criteria with respect to the
consideration to be received and
certain other matters.
Amendment of these provisions
requires the approval of at least 80%
of the combined vote of all shares
entitled to vote generally in an
annual election of directors and a
majority of the combined vote of such
shares held by all shareholders other
than 5% shareholders and their
affiliates, voting as a class.
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Directors and Under Delaware law, the Under Pennsylvania law, the articles Under Viacom's proposed new
Size of Board certificate of incorporation of incorporation or the by-laws may Restated Certificate of
or the by-laws may specify the specify the number of directors. Incorporation, the number of
number of directors. directors will be expanded to
CBS' By-laws allow between 3 and 24 18. In addition, (1) the
Viacom's Restated Certificate directors to serve on its board. size of the Board may only be
of Incorporation allows CBS' By-laws authorize the board to changed by the affirmative
between three and 20 directors set the number of directors within vote of at least 14
to serve on their board. these limits. directors, (2) eight of the
Viacom's By-laws authorize the directors serving as CBS
board to set the number of CBS' board has set the number of directors on September 6,
directors within the directors at 11, increasing to 12 on 1999 (or any independent
parameters set by the Restated December 1, 1999. director elected or appointed
Certificate of Incorporation. prior to the effective time
of the merger to serve as a
CBS director) that are
designated by CBS' board
prior to the merger (or
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
J-2
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Combined Company
Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Viacom's board has set the Under the CBS By-laws, a majority of replacements who are
number of directors at 10. the directors must be independent independent directors) will
directors. become members of Viacom's
board at the effective time
and (3) of the 10 directors
on Viacom's board who are not
CBS' board designees, two
are directors who were first
elected to serve on the
Viacom board after 1993, are
not members of the
management of either Viacom
or National Amusements, and,
in the event they leave the
board, must be replaced with
disinterested, independent
directors who are chief
executive officers, chief
operating officers or chief
financial officers or former
chief executive officers of
a Fortune 500 company or a
non-U.S. company of
comparable size. Generally,
for a period of three years
following the merger, these
provisions cannot be changed
without the approval of at
least 14 directors.
- ------------------------------------------------------------------------------------------------------------------------------------
Term of Office Under Viacom's by-laws, each Under CBS' Restated Articles of Under Viacom's proposed new
director serves for a one-year Incorporation, CBS may, but need not, Restated Certificate of
term. create a classified board. However Incorporation and applicable
CBS has not done so and, under CBS' law, all directors will serve
By-laws, each director's term expires for a one-year term. Pursuant
at the next annual meeting. to the National Amusements
stockholder agreement, for
the three-year period
following the merger,
National Amusements agreed to
cause to be nominated and
elected each CBS director (or
replacements who are
independent directors).
- ------------------------------------------------------------------------------------------------------------------------------------
Removal of Directors Under Delaware law, any Under Pennsylvania law, unless After the effective time of
director may be removed from otherwise provided in a by-law the merger, any director may
office with or without cause adopted by the shareholders, any be removed with or without
by the affirmative vote of the director may be removed from office cause in accordance with
holders of a majority of the by the shareholders with or without Delaware law. However,
shares of outstanding stock cause by the affirmative vote of a pursuant to the National
entitled to vote in the majority of the votes cast with Amusements stockholder
election of that director. certain exceptions in the case of a agreement, for the three-year
classified board. period following the merger,
Viacom's By-laws provide for National Amusements has
the removal of directors in Under CBS' Restated Articles of agreed to take any action
accordance with Delaware law. Incorporation and its By-laws, necessary to ensure that no
directors may be removed by CBS' CBS director is removed as a
shareholders without cause only by director of Viacom unless
the affirmative vote of holders of at such removal is for cause and
least 80% of the combined vote of the is approved by at least 14
shares of outstanding stock entitled members of Viacom's board.
to vote generally in an annual
election.
- ------------------------------------------------------------------------------------------------------------------------------------
Vacancies Under Viacom's By-laws, Under CBS' By-laws, vacancies on the Under Viacom's proposed new
vacancies on the Viacom board CBS board may be filled by the board, Restated Certificate of
shall be filled by the board even if less than a quorum is Incorporation, if one of the
only, even if less than a present, or the CBS board may reduce eight CBS directors vacates
quorum is present. the size of the board. Vacancies may his or her seat, the Viacom
also be filled board, subject to its
fiduciary duties, is required
to take all
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
J-3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Combined Company
Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
by election by the shareholders. action necessary to appoint as
a successor a person
designated by a majority of
the remaining CBS directors.
National Amusements has agreed
in its shareholder agreement
with CBS to vote for such
designee.
If one of the ten Viacom
directors vacates his or her
seat, the Viacom board will
fill the vacancy. However,
if a directorship held by a
person who is a director of
Viacom first elected after
1993 and is not management of
Viacom or National
Amusements, or the
replacement of any such
person, becomes vacant, the
Viacom board, subject to its
fiduciary duties, is required
to take all action necessary
to ensure that the vacancy is
filled by a disinterested,
independent person who is the
chief executive officer,
chief operating officer or
chief financial officer or
former chief executive
officer of a Fortune-500
company or a non-U.S. public
company of comparable size.
Generally, for a period of
three years following the
merger, these provisions
cannot be changed without the
approval of at least 14
directors.
- ------------------------------------------------------------------------------------------------------------------------------------
Calling of Special Meeting Under Delaware law, special Under Pennsylvania law, for Under Viacom's By-laws,
of Shareholders meetings of shareholders may "registered corporations" such as special meetings may be
be called by the board or by CBS, special meetings of shareholders called by the:
persons authorized to do so in may be called only by the board, or
the certificate of by the officers or other persons, if . majority of the board;
incorporation or by-laws. any, provided in the by-laws, except
that an Interested Shareholder (as . chairman of the board;
Under Viacom's By-laws, defined below for purposes of the
special meetings of business combination moratorium under . chief executive officer;
shareholders of Viacom may be "Anti-Takeover Provisions") can call
called by the: a special meeting to approve certain . vice chairman of the board;
business combinations.
. majority of the board; . president and chief
Under CBS' By-laws, special meetings operating officer; or
. chairman of the board; of shareholders of CBS may be called
only by: . chairman of the board, chief
. vice chairman of the board; executive officer, the vice
. the CBS Board; or chairman of the board, the
. president; or president and chief
. the chairman of the Board. operating officer or the
. chairman of the board, vice secretary at the request of
chairman of the board, at least 50.1% of Viacom's
president or secretary at the Under CBS' By-laws, the only business Class A common stock.
request of at least 50.1% of that may be conducted at a special
Viacom's Class A common stock. meeting is the business stated in the
notice of that special meeting
Under Viacom's By-laws, the delivered
only
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
J-4
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Combined Company
Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
business that may be conducted at the direction of the CBS
at a special meeting is the Board or the chairman of the Board
business stated in the notice and matters which are incidental or
of that special meeting. germane thereto.
- ------------------------------------------------------------------------------------------------------------------------------------
Amendment to By-laws Delaware law provides that the Pennsylvania law provides that the Under Viacom's proposed new
by-laws may be amended by an by-laws may be amended by an action Restated Certificate of
action of the shareholders. of the shareholders. The by-laws may Incorporation, during the
However, the certificate of also give the power to amend the three-year period following
incorporation may also give by-laws to the board. the merger, any provisions of
the power to amend the by-laws Article VIII of Viacom's
to the board. Pennsylvania law limits the board's By-laws, which states that
power to amend the by-laws, however, the By-laws are subject to
Viacom's Restated Certificate in respect to certain matters, unless Article XIII of the proposed
of Incorporation allows the allowed by the articles of new Restated Certificate of
board to repeal, alter or incorporation. Incorporation, which contain
amend the by-laws by majority the principal provisions
vote. Under CBS' Restated Articles of setting forth the corporate
Incorporation and By-laws, CBS' governance requirements
shareholders may amend the By-laws relating to the merger, may
with the affirmative vote of holders not be amended, repealed or
of at least 80% of the combined vote waived by Viacom's board
of the shares entitled to vote without the approval of at
generally in an annual election. least 14 directors.
Also, CBS' Restated Articles of
Incorporation and By-laws allow the
board to repeal, alter or amend the
By-laws by majority vote of the
entire board.
- ------------------------------------------------------------------------------------------------------------------------------------
Amendments to certificate Under Delaware law, any Under Pennsylvania law, an amendment Under Viacom's proposed new
of incorporation provision of the certificate to the articles of incorporation Restated Certificate of
of incorporation may be requires the approval of the board Incorporation, during the
amended by the approval of the and, except in limited cases where a three-year period following
board and the affirmative vote greater vote may be required, the the merger, any provisions of
of a majority of the holders affirmative vote of a majority of the Viacom's proposed new
of the combined voting power votes cast by all shareholders Restated Certificate of
of the outstanding stock entitled to vote on the matter and Incorporation which refer to
entitled to vote, and a the affirmative vote of a majority of Article VIII of Viacom's
majority of each class the votes cast by all shareholders By-laws and the provisions of
entitled to vote as a class. within each class or series of shares Article XIII of the proposed
if such class or series of shares is new Restated Certificate of
Viacom's Restated Certificate entitled to vote on the matter as a Incorporation, which contain
of Incorporation provides that class. the principal provisions
amendments to the Restated setting forth the corporate
Certificate of Incorporation Also, Pennsylvania law provides that governance arrangements
may be adopted as allowed by shareholders of a registered following the merger, may not
Delaware law. corporation, such as CBS, are not be amended, repealed or
entitled to propose amendments to the waived without the approval
No amendments to the Restated articles of incorporation. of at least 14 directors.
Certificate of Incorporation
require a supermajority vote. Amendments to some provisions of the
CBS Restated Articles of
Incorporation require the approval of
holders of at least 80% of the
combined vote of the shares entitled
to vote generally in an
</TABLE>
J-5
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Combined Company
Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
annual election, and certain other
amendments require such vote unless
first recommended and approved by a
majority of the entire board. See
also "Approval of Certain Business
Combinations With Affiliates" above
for the required vote to amend that
provision.
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends Under Delaware law, a Under Pennsylvania law, unless See "Viacom Before the
corporation may pay dividends restricted by the by-laws, a Merger".
out of surplus or, if no corporation may pay dividends unless
surplus exists, out of net the payment would leave the
profits for the fiscal year in corporation unable to pay its debts
which the dividends are as they become due in the usual
declared and/or its preceding course of business, or unless the
fiscal year. However, payment would leave the corporation
dividends may not be declared with total assets that were less than
out of net profits if the the sum of its total liabilities plus
capital of the corporation is the amount that would be
less than the aggregate amount distributable upon dissolution to
of capital represented by any shareholders having senior rights.
issued and outstanding
preferred stock.
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Communica-tion Laws Viacom's Restated Certificate The CBS Restated Articles of See "Viacom Before the
of Incorporation provides that Incorporation and By-laws do not Merger".
it may request certain contain special provisions with
information from the respect to compliance with federal
shareholder or proposed communications laws.
shareholder in order to
determine whether ownership of
Viacom's Class A or Class B
common stock is inconsistent
with, or in violation of, any
of the federal communication
laws. If the necessary
information is not provided or
if Viacom finds that the
ownership of its Class A or
Class B common stock by a
shareholder or proposed
shareholder is inconsistent
with, or in violation of, any
of the federal communication
laws, Viacom may:
. refuse to permit the transfer
of shares of its Class A or
Class B common stock to the
proposed person or entity; or
. exercise any and all
appropriate remedies, at law
or in equity, against any
shareholder in order to obtain
the necessary information or
prevent or cure any situation
which would cause the
inconsistency with, or
violation of, the offending
provision of the federal
communications laws.
</TABLE>
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Combined Company
Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
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<S> <C> <C> <C>
Conversion As long as 10,000 shares of CBS' common stock has no conversion See "Viacom Before the
Viacom's Class A common stock features. Merger".
are outstanding, each record
holder of shares of Class A or
Class B common stock may
convert any or all of such
shares into an equal number of
shares of Class B common stock.
- ------------------------------------------------------------------------------------------------------------------------------------
Committees Under its by-laws, Viacom's Under its By-laws, CBS' board is All Committees. Under
board may create one or more required to create a compensation Viacom's proposed new Restated
committees. Each committee committee, an audit review committee Certificate of Incorporation,
would consist of one or more and a nominating and governance all committees, other than
of the directors of Viacom. committee. Each of these committees the compensation committee
shall consist of not less than two and the officers nominating
members of the board, at least two of committee, must have the same
whom are required to be independent proportion of CBS and Viacom
directors on the date of their directors as the full Viacom
appointment. CBS' By-laws require board has, with a minimum of
that all members of the compensation one CBS director on each
committee and the nominating and committee.
governance committee be independent
directors on the date of their Officers Nominating
appointment. The CBS board can also Committee. Under Viacom's
create additional standing or special proposed new Restated
committees of one or more members. Certificate of Incorporation,
Viacom will have an officers
nominating committee and Mr.
Karmazin will be the only
member of this committee.
This committee will have the
powers to hire, elect,
terminate, change positions,
allocate responsibilities or
determine non-equity
compensations, with respect
to the officers and
employees. However, this
committee will not have these
powers with respect to the
chairman, the chief executive
officer and the chief
operating officer.
This committee will not have
the power to fill the
positions of the chief
financial officer, controller
and general counsel without
the approval of the board.
However, this committee will
have all of the other powers
delegated to it for other
officers with respect to the
chief financial officer,
controller and general
counsel, including the power
to terminate employment of
persons holding those
positions.
Any decision of this
committee can be overridden
by the affirmative vote of at
least 14 directors.
Compensation Committee. Under
Viacom's proposed new
Restated Certificate of
Incorporation, this committee
shall consist of three CBS
directors who are independent
directors
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J-7
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<S> <C> <C> <C>
and three directors
who are not CBS directors.
Of the three non-CBS
directors, two will be
persons who were first
elected as directors of
Viacom after 1993 and who are
not management of Viacom or
National Amusements and the
third will be a disinterested
independent director.
This committee must approve
the annual compensation of
all other officers and
employees and any equity or
equity-based compensation of
any officer or employee.
However, this committee will
not have the power to approve
the annual compensation of:
. any employee if the total
value of such employee's
annual cash compensation is
less than $1 million; or
. any talent, as such term is
commonly used in the media
or entertainment industries.
These powers will be
delegated to the officers
nominating committee.
Generally, for a period of
three years following the
merger, these provisions
cannot be changed without the
approval of at least 14
directors.
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Officers Under Viacom's By-laws, Under its By-laws, CBS' board shall Chairman and Chief Executive
Viacom's board shall elect a elect a chairman, who may be Officer. Under Viacom's
president, a treasurer and a designated an officer of CBS, a proposed new Restated
secretary. The board may also president or a chief executive Certificate of Incorporation,
elect a chairman, one or more officer or both, such vice presidents Sumner Redstone will serve as
vice chairmen and vice as may from time to time be necessary chairman and chief executive
presidents and one or more or desirable, a secretary and a officer of Viacom and Mel
assistant treasurers and treasurer. There shall also be one or Karmazin will serve as
assistant secretaries. Any more assistant secretaries and president and chief operating
number of officers may be held treasurers and such other officers officer of Viacom. If Mr.
by the same person, except the and assistant officers as the board Redstone is not the chief
offices of president and may deem appropriate. The board executive officer at the
secretary. Vice presidents may shall elect all officers, except effective time of the merger
be given distinctive assistant officers. The term of or ceases to be the chief
designations such as executive office for all officers shall be executive officer at any time
vice president or senior vice until the organization meeting of the during the three-year period
president. The board may board following the next annual following the merger, Mr.
elect other officers and meeting of shareholders and until Karmazin will become the
agents as it deems necessary. their respective successors are chief executive officer while
The officers shall hold office elected or appointed and shall retaining his title and
until their successors are qualify, or until their earlier responsibilities as chief
elected or appointed and death, resignation or removal. The operating officer. The chief
qualify or until their earlier chairman or any officer may be executive officer shall be
resignation or removal. Any removed from office, either with or responsible, in consultation
officer elected or appointed without cause, at any time by the with the chief operating
by the board may be removed at officer, for corporate policy
any time with and strategy and the chief
operating officer shall
consult on all major
decisions with, and shall
report directly to, the chief
executive officer. However,
unless
</TABLE>
J-8
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<S> <C> <C> <C>
or without cause affirmative vote of the majority of Mr. Karmazin is the
by the affirmative vote of a the members of the board then in chief executive officer, the
majority of the whole board. office. chief executive officer will
not exercise any powers,
rights, functions or
responsibilities of the chief
operating officer.
President and Chief Operating
Officer. Under Viacom's
proposed new Restated
Certificate of Incorporation,
Mr. Karmazin will also serve
as president as well as chief
operating officer. Mr.
Karmazin may not be
terminated or demoted from
his position as chief
operating officer or chief
executive officer, if he is
serving in that capacity, and
none of his functions as
chief operating officer may
be changed without the
affirmative vote of at least
14 directors.
The chief operating officer
will:
. supervise, coordinate and
manage Viacom's business,
operations, activities,
operating expenses and
capital allocation;
. handle matters relating to
officers (other than the
chief executive officer and
chief operating officer) and
employees including hiring,
terminating, changing
positions and allocating
responsibilities, other than
(a) specific board authority
with respect to the chief
financial officer, the
general counsel and the
controller and (b) the
authority of the officers
nominating committee and the
compensation committee; and
. hold substantially all of
the powers, rights,
functions and
responsibilities typically
exercised by a chief
operating officer.
All officers (other than the
chairman, chief executive
officer and chief operating
officer) will report,
directly or
</TABLE>
J-9
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Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
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<S> <C> <C> <C>
indirectly, to
the chief operating officer.
If Mr. Karmazin is not the
chief operating officer or
chief executive officer, the
Viacom board may terminate
the chief operating officer,
eliminate that position and
the officers nominating
committee and reallocate the
functions of those positions
to whom the officers will
report.
Vice Presidents, Secretary,
Assistant Secretary,
Treasurer and Assistant
Treasurer. Under Viacom's
By-laws, the president and
chief operating officer may
assign additional duties to
the vice presidents,
secretary, assistant
secretary, treasurer and
assistant treasurer.
Generally, for a period of
three years following the
merger, these provisions
cannot be changed without the
approval of at least 14
directors.
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Shareholder Action Under Delaware law, unless the Under Pennsylvania law, unless See "Viacom Before the
certificate of incorporation otherwise restricted by the by-laws, Merger".
provides otherwise, a a shareholder action may be taken
shareholder action may be without a meeting upon the unanimous
taken if written consents are written consent of all of the
received from the holders of shareholders entitled to vote
the minimum number of votes thereon. Shareholders of a registered
that would be necessary to corporation, such as CBS, may
authorize that action at a authorize an action without a meeting
meeting at which all the by less than unanimous written
shares entitled to vote for consent only if such action without a
that action were present and meeting is permitted by the articles
voted. Viacom's Restated of incorporation. CBS' Restated
Certificate of Incorporation Articles of Incorporation do not
does not restrict the ability provide for a partial written
of shareholders to act by consent; and CBS' By-laws do not
written consent. restrict shareholder action by
unanimous written consent.
- ------------------------------------------------------------------------------------------------------------------------------------
Notice of Some Shareholder Neither Viacom's Restated Under CBS' By-laws, for nominations See "Viacom Before the
Actions Certificate of Incorporation for the election of directors to be Merger".
nor its By-laws require properly brought by a shareholder
shareholders to give Viacom before an annual meeting or a special
advance notice of director meeting at which directors are to be
nominations or business to be elected pursuant to CBS' notice of
presented at an annual or meeting, or for other business to be
general shareholders' meeting. properly brought by a shareholder
before an annual meeting, the
shareholder must have given timely
notice thereof in writing to CBS'
secretary and the shareholder must be
entitled by Pennsylvania law to
present such business at the meeting
and must
</TABLE>
J-10
<PAGE>
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Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
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<S> <C> <C> <C>
be a shareholder of record
at the time the required notice is
given and at the time of the meeting.
To be timely, a shareholder's notice
must be delivered to CBS' secretary
at CBS' principal executive offices:
.in the case of an annual meeting,
for receipt not less than 90 days nor
more than 120 days prior to the first
anniversary of the preceding year's
annual meeting (provided, if the date
of the annual meeting is advanced
more than 30 days or delayed more
than 90 days from the anniversary
date, the notice can be as late as
the 10th day following public
announcement of the meeting date); and
.with respect to the nomination of a
person or persons for election to
such position(s) as are specified in
CBS' notice of meeting in the case of
a special meeting, for receipt no
more than 120 days prior to the date
of such special meeting and no later
than the 90th day prior to the date
of such special meeting or the 10th
day following the day on which public
announcement is first made of the
date of the special meeting and of
the nominees proposed by the board to
be elected at such meeting.
In no event will the public
announcement of an adjournment or
postponement of an annual or special
meeting commence a new time period
for the giving of a shareholder's
notice. Such shareholder's notice
shall include:
.certain information relating to the
relationship, if any, between the
shareholder and the nominee being
proposed, the nominee's written
consent, and the information required
to be disclosed under the Exchange
Act;
.a brief description of the business
desired to be brought before the
meeting and the reasons therefor and
any material interest of the
</TABLE>
J-11
<PAGE>
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Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
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<S> <C> <C> <C>
shareholder and the beneficial owner
therein; and
.as to the shareholder giving the
notice and as to the beneficial
owner, if different from the
shareholder giving notice, on whose
behalf the nomination or proposal is
made, the name and address and number
of shares held by the shareholder and
beneficial owner, and a
representation by the shareholder as
to the intent to hold such shares
until the meeting and to attend the
meeting and make the proposal.
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholder Appraisal Delaware law provides for Pennsylvania law provides, with See "Viacom Before the
Rights appraisal rights on the part certain exceptions, that shareholders Merger".
of the shareholders of a of a corporation have a right to
corporation only in the case dissent from a proposed transaction
of certain mergers or and to obtain payment of the
consolidations and not in the judicially determined "fair value" of
case of other mergers, sales their shares in a merger,
or transfers of all or consolidation, division, share
substantially all of a exchange or conversion, in certain
corporation's assets or asset transfers, in transactions
amendments to a corporation's where the board grants dissenters
certificate of incorporation. rights, and in certain other plans or
Moreover, unless the amendments to the articles of
certificate of incorporation incorporation in which disparate
so provides, Delaware law does treatment is given to the holders of
not provide for appraisal shares of the same class or series
rights in connection with a unless each group has approved by a
merger or consolidation for special class vote. These dissenters'
stock listed on a national rights are not available, however,
securities exchange or for any class of stock that is either
designated as a national listed on a national securities
market system security on the exchange or held of record by more
Nasdaq stock market or held of than 2,000 shareholders (as is the
record by more than 2,000 case with CBS common stock) unless
shareholders, unless the (a) the shares are not converted
agreement of merger or solely into shares of the acquiring,
consolidation requires the surviving, new or other corporation,
holders of the stock to or solely into such shares combined
receive, in exchange for their with cash for any fractional shares;
shares, any property other (b) the shares being converted are
than shares of stock of the shares of any preferred or special
surviving corporation, shares class of stock, unless the articles
of stock of any other of incorporation, the plan, or the
corporation listed on a terms of the transaction entitle all
national securities exchange holders of the shares of the
or designated as a national preferred or special class to vote on
market system security on the the transaction and require the
Nasdaq stock market or held of approval of the affirmative vote of a
record by more than 2,000 majority of the votes cast by all
holders, cash instead of shareholders of the preferred or
fractional shares or any special class; or (c) (1) the
combination of the foregoing. transaction provides for disparate
Viacom's Restated Certificate treatment for shares of the same
of Incorporation does not class or series,
provide for appraisal rights
in these circumstances. In
addition, Delaware law denies
appraisal rights to the
shareholders of the surviving
corporation in a merger if the
merger did not require the
approval of the
</TABLE>
J-12
<PAGE>
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Combined Company
Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
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<S> <C> <C> <C>
shareholders (2) the shares being
of the surviving corporation. converted are a group of a class or
series of shares which are to receive
the same special treatment in the
transaction, and (3) the group is not
entitled to vote as a special class
for such transaction.
- ------------------------------------------------------------------------------------------------------------------------------------
Fiduciary Duties of Under Delaware law, the Under Pennsylvania law, directors See "Viacom Before the
Directors business and affairs of a have a fiduciary duty to their Merger".
corporation are managed by or corporation and are required to
under the direction of its perform their duties in good faith,
board. In exercising their in a manner they reasonably believe
powers, directors are charged to be in the best interests of the
with the fiduciary duties of corporation, and with the care,
loyalty and care to both the including reasonable inquiry, skill
corporation and the and diligence, that a person of
shareholders. A party ordinary prudence would use under
challenging the decision of a similar circumstances. Directors, in
board generally bears the considering the best interests of
burden of rebutting the their corporation, may, but are not
so-called "business judgment required to, consider the effects of
rule," a presumption that, in any action upon employees, suppliers
making a business decision, and customers of the corporation, and
directors acted on an informed upon communities in which offices or
basis, in good faith and in other establishments of the
the honest belief that the corporation are located and all other
action was taken in the best pertinent factors. Under Pennsylvania
interests of the corporation. law, absent a breach of fiduciary
Unless this presumption is duty, a lack of good faith or
rebutted, the business self-dealing, any act of the board, a
judgment exercised by committee of the board or an
directors in making their individual director is presumed to be
decisions is not subject to in the best interests of the
judicial review. To rebut corporation. The Pennsylvania Supreme
this presumption, a party must Court has recognized the common law
demonstrate that, in reaching "business judgment rule".
their decision, the directors Pennsylvania courts have not imposed
breached one or more of their any heightened obligations on
fiduciary duties. If the directors to justify their conduct in
presumption is so rebutted, the context of a potential or
the directors bear the burden proposed acquisition of control or
of demonstrating the entire required directors to maximize the
fairness of the relevant short-term financial return to
transaction. Notwithstanding shareholders.
the foregoing, Delaware courts
may subject directors'
defensive actions taken in
response to a threat to
corporate control or their
approval of a
change-of-control transaction
to enhanced scrutiny and may
require the directors to
maximize the short-term
financial interests of
shareholders.
- ------------------------------------------------------------------------------------------------------------------------------------
Limitation of Personal Delaware law permits a Under Pennsylvania law, a corporation See "Viacom Before the
Liability of Directors corporation to include in its may include in its by-laws a Merger".
certificate of incorporation a provision which eliminates the
provision that limits or liability of its directors for
eliminates the liability of monetary damages for any action taken
its directors to the or the failure to take any action,
corporation or its unless (a) the directors have
shareholders for monetary breached or failed to perform their
damages arising from a breach duties and (b) the breach or failure
of fiduciary duty, except to perform constitutes self-dealing,
under certain circumstances. willful misconduct or recklessness.
Some of these circumstances However, a Pennsylvania corporation
would include a breach of the may not eliminate the liability of
duty of loyalty to the directors where
corporation or its
shareholders, acts or
omissions not in good faith or
which involve
</TABLE>
J-13
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Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
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<S> <C> <C> <C>
intentional misconduct or a the responsibility or liability
knowing violation of law, an of a director arises under any
unlawful declartion of a criminal statute or is for the
declaration of a dividend or payment of federal, state or local
unlawful authorization of the taxes. CBS' Restated Articles of
repurchase or redemption of Incorporation and By-laws eliminate
stock or any transaction from director liability to the fullest
which the director derived an extent permitted by Pennsylvania law.
improper personal benefit.
Viacom's Restated Certificate
of Incorporation eliminates
director liability to the
fullest extent permitted by
Delaware law.
- ------------------------------------------------------------------------------------------------------------------------------------
Indemnification of Under Delaware law, a The provisions of Pennsylvania law See "Viacom Before the
Directors and Officers corporation may indemnify a regarding indemnification are Merger".
director or officer of the substantially similar to those of
corporation against expenses, Delaware law. Unlike Delaware law,
including attorneys' fees, however, Pennsylvania law expressly
judgments, fines and permits indemnification in connection
settlement amounts actually with any action, including a
and reasonably incurred in a derivative action, unless a court
civil or criminal action, suit determines that the acts or omissions
or proceeding by reason of giving rise to the claim constituted
being or having been a willful misconduct or recklessness.
representative of or serving
at the request of the CBS' Restated Articles of
corporation. This Incorporation and By-laws provide for
indemnification is available broad indemnification of directors
if the person acted in good and officers. However, CBS' By-laws
faith and reasonably believed specifically state that there will be
that his or her actions were no indemnification where the
in or not opposed to the best indemnitee initiates the claim,
interests of the corporation except for a claim to enforce by-law
and, in a criminal proceeding, indemnification rights. The By-laws
had no reasonable cause to provide for the advancement of
believe that his or her certain expenses if the person
conduct was unlawful. In an seeking indemnification agrees to
action brought by or on behalf repay all amounts advanced if it is
of the corporation, this later determined that such person is
indemnification is limited to not entitled to be indemnified
expenses incurred. Delaware pursuant to the By-laws against such
law also provides that a expenses.
corporation may advance a
director, officer, employee or
agent the expenses incurred in
defending any action, but
that, in the case of advances
to directors or officers the
corporation must first receive
an undertaking from the
officer or director to repay
the amount advanced if it is
ultimately determined that the
person is not entitled to
indemnification. A
determination of the amount of
the indemnification to be paid
in any circumstance must be
made by a majority of the
directors who are not parties
to the action, even though
less than a quorum, by a
committee of such
disinterested directors or, if
there are no such directors or
if such directors so direct,
by independent legal counsel.
No indemnification for
expenses in derivative actions
is permitted under Delaware
law if the person is found to
be liable to the corporation,
unless a
</TABLE>
J-14
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Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
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<S> <C> <C> <C>
court finds him or
her entitled to such
indemnification. If, however,
that person is successful, on
the merits or otherwise, in
defending a third-party or
derivative action,
indemnification for expenses
incurred is mandatory. The
indemnification provisions of
Delaware law are not exclusive
of any other rights to which
the party may be entitled
under any by-law, agreement or
vote of shareholders or
disinterested directors.
Viacom's Restated Certificate
of Incorporation provides for
mandatory indemnification of
its directors, officers,
employees or agents to the
fullest extent provided by
law. However, Viacom will not
indemnify
a person who was adjudged to
be liable to Viacom, unless
the court decides that such
person is entitled to Viacom's
indemnity. Viacom's Restated
Certificate of Incorporation
provides for the advancement
of expenses for its directors
and officers if they agree to
repay all amounts advanced if
it is later ultimately
determined that they are not
entitled to be indemnified.
In addition, Viacom's Restated
Certificate of Incorporation
provides for the advancement
of expenses for its employees
and agents as Viacom deems it
appropriate.
- ------------------------------------------------------------------------------------------------------------------------------------
Anti-Takeover Provisions Under Delaware law, a Pennsylvania law contains several See "Viacom Before the
corporation is prohibited from anti-takeover provisions which apply Merger".
engaging in any "business to registered corporations such as
combination" with an CBS.
"interested shareholder,"
which is defined as a person Transactions with Interested
who, together with affiliates Shareholders. Pennsylvania law
or associates, owns, or within provides that the types of
a three-year period did own, transactions listed below must be
15% or more of the approved by the affirmative vote of
corporation's voting stock for at least a majority of the votes that
a period of three years all shareholders are entitled to cast
following the date on which with respect to such transaction,
the shareholder became an excluding all voting shares owned by
interested shareholder, unless: an interested shareholder. An
interested shareholder generally
.the certificate of means, for purposes of this
incorporation provides provision, a shareholder who is a
otherwise; party to the transaction or who is
treated differently from other
.prior to the date on which shareholders, together with their
the person became an affiliates. The following types of
interested shareholder, the transactions require the special vote
board approved either the described above:
business combination or the
transaction which resulted in
the shareholder becoming an
interested
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Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
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<S> <C> <C> <C>
shareholder; .a merger or consolidation, a share
exchange or certain sales of assets
between a corporation or its
subsidiary and a shareholder of the
.the interested shareholder corporation;
owned 85% or more of the
voting stock of the .a division of the corporation, if an
corporation, excluding interested shareholder is to receive
specified shares, upon a disproportionate amount of any of
completion of the transaction the securities of any corporation
as the result of which the surviving or resulting from the
person became an interested division;
shareholder; or
.a voluntary dissolution of the
.on or after the date on which corporation, if any shareholder is to
such person became an be treated differently from others
interested shareholder, the holding shares of the same class
business combination is (other than dissenters' rights); or
approved by the board and the
affirmative vote, at a special .a reclassification, if any
meeting and not by written shareholder's percentage of voting or
consent, of at least 66 2/3% of economic share interest in the
the outstanding voting shares corporation is materially increased
of the corporation, excluding relative to substantially all other
shares held by such interested shareholders.
shareholder.
The special voting requirement with
A "business combination" respect to the above types of
includes: transactions does not apply if:
.mergers, consolidations and .the proposed transaction has been
sales or other dispositions approved by a majority of the
of 10% or more of the assets corporation's board, excluding
of a corporation to or with directors affiliated with or
an interested shareholder; nominated by the interested
shareholder;
.certain transactions .the consideration received for each
resulting in the issuance or class of stock owned by the
transfer to an interested interested shareholder is at least as
shareholder of any stock of high as the highest consideration
such corporation or its paid for that class by the interested
subsidiaries; and shareholder; or
.other transactions resulting .the transaction is a merger or
in a disproportionate consolidation involving a parent
financial benefit to an corporation which owns at least 80%
interested shareholder. of each class of the stock of each
other constituent party.
Delaware law does not contain
a "control-share acquisition" Business Combination Moratorium.
statute similar to that Pennsylvania law provides for a
contained in Pennsylvania law. five-year moratorium on business
combinations with a registered
</TABLE>
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<PAGE>
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<S> <C> <C> <C>
corporation by an interested
shareholder after the date such
person first becomes an interested
shareholder. For this purpose,
interested shareholder generally
means someone who owns stock with 20%
or more of the combined vote of
shares entitled to elect directors or
who held such amount in the last five
years and is still an affiliate.
Following the expiration of the
five-year moratorium, a business
combination with that interested
shareholder must be approved by
either:
.a majority of the shares not held by
the interested shareholder or its
affiliates and associates; or
.a majority of the shares cast
including those shares held by the
interested shareholder, and the
business combination (a) must meet
certain fair price criteria and (b)
the interested shareholder cannot
have increased its holdings during
the five-year period.
"Business combinations" include:
.mergers, consolidations, share
exchanges or divisions of a
registered corporation or its
subsidiary: with an interested
shareholder; or with, involving or
resulting in any other corporation
which is, or after such merger,
consolidation, share exchanges or
division would be, an affiliate or
associate of such interested
shareholder;
.a sale, lease, exchange, mortgage,
pledge, transfer or other disposition
to or with an interested shareholder
or any affiliate or associate of an
interested shareholder of assets of
the corporation or any subsidiary
having a value equal to at least 10%
of (a) the assets, (b) all the
outstanding shares or (c) the earning
power or net income on a consolidated
basis, of such registered corporation
or its
</TABLE>
J-17
<PAGE>
<TABLE>
<CAPTION>
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Combined Company
Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
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<S> <C> <C> <C>
subsidiary;
.the adoption of a plan of
liquidation or dissolution proposed
by the interested shareholder or its
affiliates or associates; and
.other specified self-dealing
transactions between such registered
corporation and an interested
shareholder or any affiliate or
associate thereof.
The five-year moratorium does not
apply to:
.business combinations with persons
who became interested shareholders
with the prior approval of the board;
.business combinations that were
approved by the board prior to the
date on which the shareholder became
an interested shareholder;
.business combinations approved by
all of the holders of the outstanding
common shares; and
.business combinations approved by a
majority of the voting shares, not
including any voting shares
beneficially owned by the interested
shareholder or any affiliate or
associate of the interested
shareholder, at a meeting called for
such purpose no earlier than three
months after the date the interested
shareholder became the beneficial
owner of 80% of the voting shares,
provided that the interested
shareholder continues to beneficially
own 80% of the voting shares at the
time of such meeting and certain fair
price criteria are met and the
interested shareholder has not
increased its holdings.
Shareholder Right to Have Shares
Purchased in Control Transactions.
Under Pennsylvania law, when a person
or group of persons acting together
holds 20% of the shares entitled to
vote in the election of directors,
any other
</TABLE>
J-18
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Combined Company
Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
holder of voting shares of
the registered corporation who
objects can, within a reasonable time
after the control person or group of
persons acquires the 20% stake,
require the control group to purchase
his or her shares at a fair value.
Fair value is defined as not less
than the highest price per share paid
by the control person at any time
during the 90-day period ending on
the date of the control transaction
plus any value, including any value
paid or payable for the acquisition
of control, that may not be reflected
in such price.
- ------------------------------------------------------------------------------------------------------------------------------------
Rights Plan Viacom does not have a rights On December 29, 1995, the board of See "Viacom Before the
plan. directors of CBS adopted a Merger".
shareholder rights plan providing for
the distribution of one right for
each share of its 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 CBS' voting stock or a party
announces an offer to acquire 30% or
more of CBS' voting stock. The rights
will not become exercisable as a
result of the merger because of prior
approval of the merger by the board
of directors of CBS. The rights
initially have an exercise price of
$64 per share and expire on January
9, 2006; however, the CBS Board 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
preferred shares or shares in an
acquiring entity at half of market
value. CBS 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.
- ------------------------------------------------------------------------------------------------------------------------------------
Rights of Inspection Under Delaware law, every Under Pennsylvania law every See "Viacom Before the
shareholder, upon proper shareholder, upon proper written Merger".
written demand stating the demand stating the purpose, may
purpose, may inspect the inspect the corporate books and
corporate books and records as records as long as the inspection is
long as the inspection is for for a proper purpose and during
a proper purpose and during normal business hours. A "proper
normal business hours. A purpose" is any purpose reasonably
"proper purpose" is any related to the
purpose reasonably related to
the interest of the
</TABLE>
J-19
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Combined Company
Shareholder Rights Viacom Before the Merger CBS Before the Merger Shareholder Rights
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
inspecting person as a interest of the inspecting person
shareholder. as a shareholder.
- ------------------------------------------------------------------------------------------------------------------------------------
Liquidation Rights The rights of the holders of Holders of shares of CBS' common See "Viacom Before the
shares of Viacom's common stock upon the liquidation or Merger".
stock upon the liquidation or dissolution of CBS have the right to
dissolution of Viacom are receive (on a parity with any
substantially the same as preferred stock ranking on a parity
those of the holders of shares with the common for this purpose) any
of CBS' common stock upon the surplus that remains after paying or
liquidation or dissolution of providing for all liabilities of CBS
CBS. and after all distributions have been
made to stock having a preference to
the common with respect to
liquidation/dissolutions.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
J-20
<PAGE>
Preliminary Proxy Materials
CBS CORPORATION
Proxy solicited by the Board of Directors for Special Meeting of
Shareholders, ____________, 1999
(See Joint Proxy Statement/Prospectus for discussion of item.)
The undersigned appoints ______, ______ and ______, and each of them, jointly
and severally, as proxies, with power of substitution, to vote all shares of CBS
Corporation common stock which the undersigned is entitled to vote on all
matters which may properly come before the Special Meeting of Shareholders of
CBS Corporation to be held at __________ on ______ __, 1999, beginning at ____
a.m. eastern standard time, or any adjournment thereof, including upon matters
set forth in the Notice of Special Meeting dated ______ __, 1999, and the
related joint proxy statement/prospectus, copies of which have been received by
the undersigned, and in their discretion upon any adjournment of the meeting.
Attendance of the undersigned at the meeting or any adjourned session of the
meeting will not be deemed to revoke this proxy unless the undersigned
affirmatively indicates the intention of the undersigned to vote the shares
represented by this proxy in person before the exercise of this proxy.
(change of address)
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
If you have written in the above space,
please mark the corresponding box on the
reverse side of this card.
CBS CORPORATION
P. O. BOX 11004
NEW YORK, N.Y. 10203-0004
You are encouraged to specify your choices by marking the appropriate boxes on
the reverse side. The proxies cannot vote your shares unless you sign and
return this proxy card.
(Continued, and to be signed and dated, on the reverse side.)
<PAGE>
(continued from other side)
PRELIMINARY PROXY MATERIALS
DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
- --------------------------------------------------------------------------------
1. To adopt the Agreement and Plan of Merger, dated as of September 6, 1999,
between CBS Corporation and Viacom Inc., a Delaware corporation.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The shares represented by this Proxy Card will be voted as specified above, but
of no specification is made they will be voted FOR Item 1 and at the discretion
of the proxies on any other matter that may properly come before the meeting.
Please sign, date and return promptly in the accompanying envelope.
Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, director, administrator, trustee or guardian, give
full name and title as such.
- --------------------------------------------------------------------------------
Signature of Share Owner(s)
- --------------------------------------------------------------------------------
Signatire of Share Owner(s)
Dated: ,1999
---------------------------------------------------------------------
Votes MUST be indicated
(x) in black or blue ink. [_]
To change your address, mark this box and correct on reverse side.
[ ]
If you plan to attend the Special Meeting, please check this box.
[ ]
