SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 31, 1995
CAPITAL CITIES/ABC, INC.
(Exact name of registrant as specified in its charter)
New York 1-4278 14-1284013
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
77 West 66th Street, New York, N.Y. 10023
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 456-7777
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
Capital Cities/ABC, Inc. (the "registrant") and The Walt
Disney Company ("Disney") have entered into an Agreement and Plan of
Reorganization dated as of July 31, 1995 (the "Reorganization
Agreement"), which is filed herewith as Exhibit 2 and is incorporated
herein by reference.
The registrant and Disney have issued a joint press release
announcing the Reorganization Agreement, which is filed herewith as
Exhibit 99.1 and is incorporated herein by reference.
Concurrently with the execution and delivery of the
Reorganization Agreement, Disney entered into a Stock Agreement dated
July 31, 1995, with Berkshire Hathaway Inc. and Thomas S. Murphy, Chairman
of the Board and Chief Executive Officer of the registrant, which is
filed herewith as Exhibit 99.2 and is incorporated herein by reference.
The registrant and Disney have also entered into a
Programming Agreement dated July 31, 1995, which is filed herewith as
Exhibit 99.3 and is incorporated herein by reference.
As of August 2, 1995, five purported class action suits
have been filed in the Supreme Court of the State of New York,
County of New York, against the registrant, the registrant's board of
directors and, in four such suits, Disney. The complaints in such
suits are filed herewith as Exhibits 99.4, 99.5, 99.6, 99.7 and 99.8
and are incorporated herein by reference. The registrant believes
that these suits are without merit and intends to vigorously defend
against them.
Item 7. Financial Statements and Exhibits.
(c) The following exhibits are filed with this report:
Exhibit Number Description
2 Agreement and Plan of
Reorganization dated as of
July 31, 1995, between the
registrant and Disney.
99.1 Press Release of the registrant
and Disney issued July 31, 1995.
99.2 Stock Agreement dated as of
July 31, 1995, among Disney,
Berkshire Hathaway Inc. and
Thomas S. Murphy.
99.3 Programming Agreement dated as
of July 31, 1995, between the
registrant and Disney.
99.4 Complaint filed in Radwell v.
Bauman, et al., Supreme Court of
the State of New York, County of
New York, Index No. 118835/95,
July 31, 1995.
<PAGE>
99.5 Complaint filed in Sloan,
et al. v. Murphy, et al.,
Supreme Court of the State of
New York, County of New York,
Index No. 95118838, July 31,
1995.
99.6 Complaint filed in Luria, et al.
v. Capital Cities/ABC, Inc.,
et al., Supreme Court of the State of
New York, County of New York,
Index No. 95118961, August 1,
1995.
99.7 Complaint filed in Doniger, et al.
v. Capital Cities/ABC, Inc., et al.,
Supreme Court of the State of New
York, County of New York, Index
No. 95118819, July 31, 1995.
99.8 Complaint filed in Stack v. Capital
Cities/ABC, Inc., et al., Supreme
Court of the State of New York,
County of New York, Index
No. 95118820, July 31, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
CAPITAL CITIES/ABC, INC.
By: /s/ Ronald J. Doerfler
---------------------------------
Name: Ronald J. Doerfler
Title: Senior Vice President and
Chief Financial Officer
Dated: August 3, 1995
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
2 Agreement and Plan of
Reorganization dated as of July
31, 1995, between the registrant
and Disney.
99.1 Press Release of the registrant
and Disney issued July 31, 1995.
99.2 Stock Agreement dated as of July
31, 1995, among Disney, Berkshire
Hathaway Inc. and Thomas S.
Murphy.
99.3 Programming Agreement dated as of
July 31, 1995, between the
registrant and Disney.
99.4 Complaint filed in Radwell v.
Bauman, et al., Supreme Court of
the State of New York, County of
New York, Index No. 118835/95,
July 31, 1995.
99.5 Complaint filed in Sloan, et al.
v. Murphy, et al., Supreme Court
of the State of New York, County
of New York, Index No. 95118838,
July 31, 1995.
99.6 Complaint filed in Luria, et al.
v. Capital Cities/ABC, Inc.,
Supreme Court of the State of New
York, County of New York, Index
No. 95118961, August 1, 1995.
99.7 Complaint filed in Doniger,
et al. v. Capital Cities/ABC, Inc.,
et al., Supreme Court of the
State of New York, County of New
York, Index No. 95118819, July
31, 1995.
99.8 Complaint filed in Stack v.
Capital Cities/ABC, Inc., et al.,
Supreme Court of the State of New
York, County of New York, Index
No. 95118820, July 31, 1995.
======================================================================
EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION
between
THE WALT DISNEY COMPANY
and
CAPITAL CITIES/ABC, INC.
Dated as of July 31, 1995
============================================================
<PAGE>
Table of Contents
Page
RECITALS ........................................... 1
ARTICLE 1
FORMATION OF HOLDING COMPANY AND
SUBSIDIARIES............................... 2
1.1. Organization of Holding Company............ 2
1.2. Directors and Officers of Holding
Company.................................... 2
1.3. Organization of Merger Subsidiaries........ 2
1.4. Actions of Directors and Officers.......... 3
1.5. Actions of Purchaser and Company........... 3
ARTICLE 2
THE MERGERS; CLOSING....................... 3
2.1. The Mergers................................ 3
2.2. The Closing................................ 4
ARTICLE 3
DIRECTORS AND OFFICERS OF THE
MERGER SUBSIDIARIES AND SURVIVING
CORPORATIONS............................... 4
3.1. Directors.................................. 4
3.2. Officers................................... 5
ARTICLE 4
EFFECT OF THE MERGERS ON SECURITIES OF THE
PURCHASER, THE COMPANY AND THE MERGER
SUBSIDIARIES............................... 5
4.1. Merger Sub Stock........................... 5
4.2. Cancellation of Holding Company Capital
Stock...................................... 5
4.3. Conversion of Purchaser Stock.............. 5
4.4. Conversion of Company Common Stock......... 6
4.5. Company Common Stock Elections............. 8
4.6. Proration.................................. 10
4.7. Dividends, Fractional Shares, Etc.......... 12
i
<PAGE>
Page
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
COMPANY.................................... 13
5.1. Existence; Good Standing; Corporate
Authority................................. 13
5.2. Authorization, Validity and Effect of
Agreements................................ 14
5.3. Capitalization............................ 14
5.4. Subsidiaries.............................. 15
5.5. Other Interests........................... 16
5.6. No Conflict; Required Filings and
Consents.................................. 16
5.7. Compliance................................ 17
5.8. SEC Documents............................. 18
5.9. Litigation................................ 19
5.10. Absence of Certain Changes................ 19
5.11. Taxes..................................... 19
5.12. Employee Benefit Plans.................... 20
5.13. Labor Matters............................. 21
5.14. No Brokers................................ 21
5.15. Opinion of Financial Advisor.............. 21
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF
PURCHASER................................. 22
6.1. Existence; Good Standing; Corporate
Authority................................. 22
6.2. Authorization, Validity and Effect of
Agreements................................ 22
6.3. Capitalization............................ 23
6.4. Subsidiaries.............................. 23
6.5. Other Interests........................... 24
6.6. No Conflict; Required Filings and
Consents.................................. 24
6.7. Compliance................................ 25
6.8. SEC Documents............................. 26
6.9. Litigation................................ 27
6.10. Absence of Certain Changes................ 27
6.11. Taxes..................................... 27
6.12. Employee Benefit Plans.................... 28
6.13. Labor Matters............................. 28
6.14. Opinion of Financial Advisor.............. 29
6.15. No Brokers................................ 29
ii
<PAGE>
Page
ARTICLE 7
COVENANTS................................... 29
7.1. Alternative Proposals....................... 29
7.2. Interim Operations.......................... 31
7.3. Meetings of Stockholders.................... 33
7.4. Filings, Other Action....................... 34
7.5. Inspection of Records....................... 35
7.6. Publicity................................... 35
7.7. Registration Statement...................... 35
7.8. Listing Application......................... 37
7.9. Further Action.............................. 37
7.10. Affiliate Letters........................... 37
7.11. Expenses.................................... 37
7.12. Insurance; Indemnity........................ 37
7.13. Rights Agreements........................... 39
7.14. Takeover Statute............................ 39
7.15. Conduct of Business by Holding Company
and the Merger Subsidiaries Pending the
Mergers..................................... 39
7.16. Employee Benefits........................... 40
7.17. Conveyance Taxes............................ 40
7.18. Gains Tax................................... 41
ARTICLE 8
CONDITIONS.................................. 41
8.1. Conditions to Each Party's Obligation to
Effect the Mergers.......................... 41
8.2. Conditions to Obligation of Company to
Effect the Mergers.......................... 42
8.3. Conditions to Obligation of Purchaser to
Effect the Mergers.......................... 43
ARTICLE 9
TERMINATION................................. 44
9.1. Termination by Mutual Consent............... 44
9.2. Termination by Either Purchaser or
Company..................................... 44
9.3. Termination by Company...................... 45
9.4. Termination by Purchaser.................... 45
9.5. Effect of Termination and Abandonment....... 46
9.6. Extension, Waiver........................... 47
iii
<PAGE>
Page
ARTICLE 10
GENERAL PROVISIONS....................... 47
10.1. Nonsurvival of Representations,
Warranties and Agreements................ 47
10.2. Notices.................................. 47
10.3. Assignment; Binding Effect............... 48
10.4. Entire Agreement......................... 48
10.5. Amendment................................ 48
10.6. Governing Law............................ 49
10.7. Counterparts............................. 49
10.8. Headings................................. 49
10.9. Interpretation........................... 49
10.10. Waivers.................................. 49
10.11. Incorporation of Exhibits................ 49
10.12. Severability............................. 49
10.13. Enforcement of Agreement................. 50
10.14. Subsidiaries............................. 50
- -------------
Exhibit A Form of Affiliate Letter
Exhibit B Form of Registration Rights Agreement
iv
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement"), dated as of July 31, 1995, between The Walt
Disney Company, a Delaware corporation (the "Purchaser") and
Capital Cities/ABC, Inc., a New York corporation (the
"Company").
RECITALS
A. The Boards of Directors of the Purchaser and the
Company have approved, and deem it advisable and in the best
interests of their respective companies and stockholders to
consummate the reorganization (the "Reorganization") provided
for herein, pursuant to which a newly-formed holding company
("Holding Company") will acquire all of the common stock of
each of the Purchaser and the Company through mergers of
Subsidiaries (as defined in Section 10.14) of Holding Company
with and into each of the Purchaser and the Company.
B. For federal income tax purposes, it is intended
that (i) the Purchaser Merger (as hereinafter defined)
qualify as an exchange under the provisions of Section 351 of
the United States Internal Revenue Code of 1986, as amended
(the "Code") and/or as a reorganization under the provisions
of Section 368(a) of the Code and (ii) that the Company
Merger (as hereinafter defined) qualify as an exchange under
the provisions of Section 351 of the Code.
C. Concurrently with the execution hereof, in order
to induce the Purchaser to enter into this Agreement, the
Purchaser is entering into a Stock Agreement (the "Stock
Agreement") with Berkshire Hathaway, Inc. and Thomas S.
Murphy providing for certain voting and other restrictions
with respect to the shares of Company Common Stock (as
defined in Section 4.4 herein) beneficially owned by
Berkshire Hathaway, Inc. upon the terms and conditions
specified therein.
D. The Purchaser and the Company desire to make
certain representations, warranties, covenants and agreements
in connection with the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing,
and of the representations, warranties, covenants and
agreements contained herein, the parties hereto hereby agree
as follows:
<PAGE>
ARTICLE 1
FORMATION OF HOLDING COMPANY AND SUBSIDIARIES
1.1. Organization of Holding Company. As promptly
as practicable following the execution of this Agreement and
receipt of any required approvals, the Purchaser and the
Company shall cause Holding Company to be organized under the
laws of the State of Delaware. The Certificate of
Incorporation and By-Laws of Holding Company shall be in such
forms as shall be determined by Purchaser as soon as
practicable following the execution of this Agreement;
provided that the Certificate of Incorporation of Holding
Company shall be substantially in the form of the Certificate
of Incorporation of the Purchaser. The authorized capital
stock of Holding Company shall consist initially of
1,200,000,000 shares of common stock, $.01 par value (the
"Holding Company Common Stock"), of which one share shall be
issued to the Purchaser and one share shall be issued to the
Company at a price of $1.00 per share, and 100,000,000 shares
of preferred stock, $.10 par value (the "Holding Company
Preferred Stock"), none of which shall be initially issued.
1.2. Directors and Officers of Holding Company. (i)
Upon formation of Holding Company, the directors andolding
Company. officers of Holding Company shall be designated by
the Purchaser. Each such officer and director shall remain in
office until his or her successors are elected.
1.3. Organization of Merger Subsidiaries. As
promptly as practicable following the execution of this
Agreement, the Purchaser and the Company shall cause the
following companies (the "Merger Subsidiaries") to be
organized for the sole purpose of effectuating the Purchaser
Merger and the Company Merger contemplated herein:
(i) DCA Merger Corp., a corporation organized under
the laws of the State of Delaware ("Merger Sub A"). The
Certificate of Incorporation and By-laws of Merger Sub A
shall be in such forms as shall be determined by the
Purchaser as soon as practicable following the execution of
this Agreement. The authorized capital stock of Merger Sub A
shall initially consist of 100 shares of common stock, par
value $.01 per share, which shall be issued to Holding
Company at a price of $1.00 per share.
(ii) DCB Merger Corp., a corporation organized
under the laws of the State of New York ("Merger Sub B" and,
together with Merger Sub A, the "Merger Subsidiaries"). The
Certificate of Incorporation and By-laws of Merger Sub B
shall be in such forms as shall be determined by the
Purchaser as soon as practicable
<PAGE>
following the execution of this Agreement. The authorized
capital stock of Merger Sub B shall initially consist of 100
shares of common stock, par value $.01 per share, which shall
be issued to Holding Company at a price of $1.00 per share.
1.4. Actions of Directors and Officers. As promptly
as practicable following the execution of this Agreement, the
Purchaser shall designate the directors and officers of
Merger Sub A and Merger Sub B. The Purchaser and the Company
shall cause (i) Holding Company to elect the directors of the
Merger Subsidiaries, (ii) the directors of Merger Sub A and
Merger Sub B to elect their respective officers, (iii) the
directors of Holding Company to ratify and approve this
Agreement and to approve the forms of the Merger Agreements
(as defined in Section 2.1), (iv) the Merger Agreements to be
executed on behalf of the parties thereto, and (v) the
directors and officers of the Merger Subsidiaries to take
such steps as may be necessary or appropriate to complete the
organization of the Merger Subsidiaries and to approve the
Merger Agreements.
1.5. Actions of Purchaser and Company. As promptly
as practicable following the execution of this Agreement, as
the holders of all of the outstanding shares of capital stock
of Holding Company, the Purchaser and the Company shall cause
Holding Company to ratify and approve this Agreement, and
shall cause Holding Company, as the sole shareholder of each
of the Merger Subsidiaries, to adopt the Merger Agreements.
Each of the Purchaser and the Company shall cause Holding
Company and the Merger Subsidiaries to perform their
respective obligations under this Agreement and the Merger
Agreements.
ARTICLE 2
THE MERGERS; CLOSING
2.1. The Mergers. Pursuant to Plans of Merger, in
forms to be mutually agreed upon by the Purchaser and the
Company (sometimes hereinafter referred to individually as
the "Purchaser Merger Agreement" and the "Company Merger
Agreement", respectively, and collectively as the "Merger
Agreements"), upon the terms and subject to the conditions
set forth in this Agreement and in the Merger Agreements:
(a) Merger Sub A shall be merged with and into the
Purchaser (the "Purchaser Merger") in accordance with
the applicable provisions of the laws of the State of
Delaware. Purchaser shall be the surviving corporation
in the Purchaser Merger and shall continue its corporate
existence under the laws of the State of Delaware. As a
<PAGE>
result of the Purchaser Merger, Purchaser shall become a
wholly owned Subsidiary of Holding Company. The effects
and consequences of the Purchaser Merger shall be as set
forth in the Purchaser Merger Agreement.
(b) Merger Sub B will be merged with and into the
Company (the "Company Merger"), in accordance with the
applicable provisions of the laws of the State of New
York. The Company shall be the surviving corporation in
the Company Merger and shall continue its corporate
existence under the laws of the State of New York. As a
result of the Company Merger, the Company shall become a
wholly owned Subsidiary of Holding Company. The effects
and consequences of the Company Merger shall be as set
forth in the Company Merger Agreement. The term
"Mergers" shall mean the Purchaser Merger and the
Company Merger.
(c) The term "Effective Time" shall mean the time
and date which is the later of (i) the date and time of
the filing of the certificate of merger relating to the
Purchaser Merger with the Secretary of State of the
State of Delaware (or such other date and time as may be
specified in such certificate as may be permitted by
Delaware) and (ii) the date and time of the filing of a
certificate of merger by the Department of State of the
State of New York with respect to the Company Merger (or
such other date and time as may be specified in such
certificate as may be permitted by law).
2.2. The Closing. Subject to the terms and
conditions of this Agreement, the closing of the transactions
contemplated by this Agreement and the Merger Agreements (the
"Closing") shall take place (a) at the offices of Dewey
Ballantine, 1301 Avenue of the Americas, New York, New York,
at 10:00 a.m., local time, on the first business day
following the day on which the last to be fulfilled or waived
of the conditions set forth in Article 8 shall be fulfilled
or waived in accordance herewith or (b) at such other time,
date or place as the Purchaser and the Company may agree. The
date on which the Closing occurs is hereinafter referred to
as the "Closing Date."
ARTICLE 3
DIRECTORS AND OFFICERS OF THE MERGER SUBSIDIARIES AND
SURVIVING CORPORATIONS
3.1. Directors. The directors of the Purchaser
immediately prior to the Effective Time shall be the
directors of the surviving corporation of the Purchaser
Merger as of the Effective Time and until their successors
are duly appointed or elected in accordance with applicable
<PAGE>
law. The directors of Merger Sub B immediately prior to the
Effective Time shall be the directors of the surviving
corporation of the Company Merger as of the Effective Time
and until their successors are duly appointed or elected in
accordance with applicable law.
3.2. Officers. The officers of the Purchaser and
the Company immediately prior to the Effective Time shall be
the officers of the surviving corporations of the Purchaser
Merger and the Company Merger, respectively, as of the
Effective Time and until their successors are duly appointed
or elected in accordance with applicable law.
ARTICLE 4
EFFECT OF THE MERGERS ON SECURITIES OF
THE PURCHASER, THE COMPANY AND THE MERGER SUBSIDIARIES
4.1. Merger Sub Stock. At the Effective Time, each
share of the common stock of Merger Sub A outstanding
immediately prior to the Effective Time shall be converted
into and shall become one share of common stock of the
surviving corporation of the Purchaser Merger. At the
Effective Time, each share of the common stock of Merger Sub
B outstanding immediately prior to the Effective Time shall
be converted into and shall become one share of common stock
of the surviving corporation of the Company Merger.
4.2. Cancellation of Holding Company Capital Stock.
At the Effective Time, each share of the capital stock of
Holding Company issued and outstanding immediately prior to
the Effective Time shall be cancelled and cease to exist.
4.3. Conversion of Purchaser Stock. (a) Subject to
Section 4.3(b), at the Effective Time, each share of common
stock, par value $0.025 per share, of the Purchaser, together
with the associated Purchaser Rights (as hereinafter defined)
("Purchaser Common Stock") issued and outstanding at the
Effective Time shall be converted into one share of Holding
Company Common Stock. Upon such conversion, all such shares
of Purchaser Common Stock shall be cancelled and cease to
exist, and each certificate theretofore representing any such
shares shall, without any action on the part of the holder
thereof, be deemed to represent an equivalent number of
shares of Holding Company Common Stock.
(b) At the Effective Time, each share of Purchaser
Common Stock which is held in the treasury of the Purchaser
immediately prior to the Effective Time shall, by virtue of
the Mergers, cease to be outstanding and shall be
<PAGE>
cancelled and retired without payment of any consideration
therefor.
4.4. Conversion of Company Common Stock. (a) Except
as otherwise provided in Section 4.6 and subject to Sections
4.4(c) and 4.4(d), at the Effective Time each issued and
outstanding share of Common Stock, $.10 par value of the
Company (the "Company Common Stock"), shall be converted into
at the election of the holder thereof one of the following
(as adjusted pursuant to Section 4.6, the "Merger
Consideration"):
(i) for each such share of Company Common Stock
with respect to which an election to receive Holding
Company Common Stock has been effectively made and not
revoked or lost, pursuant to Sections 4.5(c), (d) and
(e) (a "Stock Election"), the right to receive (x) one
share of Holding Company Common Stock plus (y) a number
of shares of Holding Company Common Stock equal to a
fraction, the numerator of which is $65 and the
denominator of which is the Purchaser Common Stock Price
(collectively, the "Stock Consideration"). The
"Purchaser Common Stock Price" means an amount equal to
the average of the closing sales prices of Purchaser
Common Stock on the New York Stock Exchange Composite
Tape on each of the ten consecutive trading days
immediately preceding the second trading day prior to
the date of the Effective Time;
(ii) for each such share of Company Common Stock
(other than shares as to which a Stock Election was
made), the right to receive in cash from the Purchaser,
without interest, an amount equal to $65 plus the
Purchaser Common Stock Price (collectively, the "Cash
Consideration").
(b) As a result of the Company Merger and without
any action on the part of the holder thereof, at the
Effective Time all shares of Company Common Stock shall cease
to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of shares of Company
Common Stock shall thereafter cease to have any rights with
respect to such shares of Company Common Stock, except the
right to receive, without interest, the Merger Consideration
and cash for fractional shares of Holding Company Common
Stock in accordance with Sections 4.7(c) upon the surrender
of a certificate representing such shares of Company Common
Stock (a "Company Certificate").
(c) Notwithstanding anything contained in this
Section 4.4 to the contrary, each share of Company Common
Stock issued and held in the Company's treasury immediately
prior to the Effective Time shall, by virtue of the Company
<PAGE>
Merger, cease to be outstanding and shall be cancelled and
retired without payment of any consideration therefor.
(d) Notwithstanding anything in this Section 4.4 to
the contrary, shares of Company Common Stock which are issued
and outstanding immediately prior to the Effective Time and
which are held by stockholders who have not voted such shares
in favor of the Company Merger and who shall have properly
exercised their rights of appraisal for such shares in the
manner provided by the New York Business Corporation Law (the
"NYBCL") (the "Dissenting Shares") shall not be converted
into or be exchangeable for the right to receive the Merger
Consideration, unless and until such holder shall have failed
to perfect or shall have effectively withdrawn or lost his
right to appraisal and payment, as the case may be. If such
holder shall have so failed to perfect or shall have
effectively withdrawn or lost such right, his shares shall
thereupon be deemed to have been converted into and to have
become exchangeable for, at the Effective Time, the right to
receive the Merger Consideration, without any interest
thereon. The Company shall give the Purchaser prompt notice
of any Dissenting Shares (and shall also give the Purchaser
prompt notice of any withdrawals of such demands for
appraisal rights) and the Purchaser shall have the right to
direct all negotiations and proceedings with respect to any
such demands. Neither the Company nor the surviving
corporation of the Company Merger shall, except with the
prior written consent of the Purchaser, voluntarily make any
payment with respect to, or settle or offer to settle, any
such demand for appraisal rights.
(e) At the Effective Time, each outstanding
option or right to purchase shares of Company Common Stock
(a "Company Option") shall, if agreed by the holder of any
such Company Option, be assumed by Holding Company in such
manner that it is converted into an option to purchase shares
of Holding Company Common Stock, as provided below.
Following the Effective Time, each such Company Option shall
be exercisable upon the same terms and conditions as then
are applicable to such Company Option, except that (i) each
such Company Option shall be exercisable for that number of
shares of Holding Company Common Stock equal to the product
of (x) the number of shares of Company Common Stock for
which such Company Option was exercisable and (y) the Stock
Consideration specified in Section 4.4(a)(i) (before
adjustment pursuant to Section 4.6(c)) and (ii) the exercise
price of such option shall be equal to the exercise price of
such option as of the date hereof divided by the Stock
Consideration (before adjustment pursuant to Section
4.6(c)). It is the intention of the parties that, to the
extent that any such Company Option constituted an
"incentive stock option" (within the meaning of Section 422
<PAGE>
of the Code) immediately prior to the Effective Time, such
option continue to qualify as an incentive stock option to
the maximum extent permitted by Section 422 of the Code, and
that the assumption of the Company Stock Options provided by
this Section 4.4(e) satisfy the conditions of Section 424(a)
of the Code. From and after the date of this Agreement, no
additional options to purchase shares of Company Common
Stock shall be granted under the Company stock option plans
or otherwise (other than an aggregate of 75,000 options to
acquire Company Common Stock granted pursuant to the terms
existing on the date hereof of the Company's stock option
plan). Notwithstanding the foregoing provisions of this
Section 4.4(e) or any other provision of this Agreement, the
Company and the holder of any Company Option may amend such
Company Option so that the holder of such Company Option (if
it is outstanding at the Effective Time) may elect to
receive, in settlement thereof, for each share of Company
Common Stock subject to a Company Option an amount (subject
to any applicable withholding tax) in cash equal to the Cash
Consideration (before adjustment pursuant to Section 4.6(d))
minus the per share exercise or purchase price of such
Company Option as of the date hereof. Except as otherwise
agreed to by the parties, the Company shall use reasonable
efforts to ensure that no person shall have any right under
any stock option plan (or any option granted thereunder) or
other plan, program or arrangement with respect to,
including any right to acquire, equity securities of the
Company following the Effective Time.
4.5. Company Common Stock Elections. (a) Each
person who, at the Effective Time, is a record holder of
shares of Company Common Stock (other than holders of shares
of Company Common Stock to be cancelled as set forth in
Section 4.4(c) or Dissenting Shares) shall have the right to
submit an Election Form (as defined in Section 4.5(c))
specifying the number of shares of Company Common Stock that
such person desires to have converted into the right to
receive Holding Company Common Stock pursuant to the Stock
Election and the number of shares of Company Common Stock
that such person desires to have converted into the right to
receive cash (a "Cash Election")
(b) Promptly after the Allocation Determination
(as defined in Section 4.5(d)), (i) Holding Company shall
deposit (or cause to be deposited) with a bank or trust
company to be designated by Purchaser and reasonably
acceptable to the Company (the "Exchange Agent"), for the
benefit of the holders of shares of Company Common Stock,
for exchange in accordance with this Article IV, cash in the
amount sufficient to pay the aggregate cash portion of the
Merger Consideration and (ii) Holding Company shall deposit
(or cause to be deposited) with the Exchange Agent, for the
benefit of the holders of shares of Purchaser Common Stock
<PAGE>
and for the benefit of holders of shares of Company Common
Stock, certificates representing the shares of Holding
Company Common Stock ("Holding Company Certificates") for
exchange in accordance with this Article IV (the cash and
shares deposited pursuant to clauses (i) and (ii) being
hereinafter referred to as the "Exchange Fund"). Holding
Company Common Stock into which Purchaser Common Stock and
Company Common Stock shall be converted pursuant to the
Mergers shall be deemed to have been issued at the Effective
Time.
(c) As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder
of record of Company Common Stock immediately prior to the
Effective Time (excluding any shares of Company Common Stock
which will be cancelled pursuant to Section 4.4(c) or
Dissenting Shares) (A) a letter of transmittal (the "Company
Letter of Transmittal") (which shall specify that delivery
shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon delivery of such Company
Certificates to the Exchange Agent and shall be in such form
and have such other provisions as Purchaser shall specify),
(B) instructions for use in effecting the surrender of the
Company Certificates in exchange for the Merger
Consideration with respect to the shares of Company Common
Stock formerly represented thereby, and (C) an election form
(the "Election Form") providing for such holders to make the
Cash Election or the Stock Election. As of the Election
Deadline (as hereinafter defined) all holders of Company
Common Stock immediately prior to the Effective Time that
shall not have submitted to the Exchange Agent or shall have
properly revoked an effective, properly completed, Election
Form shall be deemed to have made a Cash Election.
(d) Any Cash Election (other than a deemed Cash
Election) or Stock Election shall have been validly made
only if the Exchange Agent shall have received by 5:00 p.m.
New York, New York time on a date (the "Election Deadline")
to be mutually agreed upon by the Purchaser and the Company
(which date shall not be later than the twentieth business
day after the Effective Time), an Election Form properly
completed and executed (with the signature or signatures
thereof guaranteed to the extent required by the Election
Form) by such holder accompanied by such holder's Company
Certificates, or by an appropriate guarantee of delivery of
such Company Certificates from a member of any registered
national securities exchange or of the National Association
of Securities Dealers, Inc. or a commercial bank or trust
company in the United States as set forth in such Election
Form. Any holder of Company Common Stock who has made an
election by submitting an Election Form to the Exchange
Agent may at any time prior to the Election Deadline change
such holder's election by submitting a revised Election
<PAGE>
Form, properly completed and signed that is received by the
Exchange Agent prior to the Election Deadline. Any holder of
Company Common Stock may at any time prior to the Election
Deadline revoke his election and withdraw his Company
Certificates deposited with the Exchange Agent by written
notice to the Exchange Agent received by the close of
business on the day prior to the Election Deadline. As soon
as practicable after the Election Deadline, the Exchange
Agent shall determine the allocation of the cash portion of
the Merger Consideration and the stock portion of the Stock
Consideration and shall notify Holding Company of its
determination (the "Allocation Determination").
(e) Upon surrender of a Company Certificate for
cancellation to the Exchange Agent, together with the
Company Letter of Transmittal, duly executed, and such other
documents as Purchaser or the Exchange Agent shall
reasonably request, the holder of such Company Certificate
shall be entitled to receive promptly after the Election
Deadline in exchange therefor (A) a certified or bank
cashier's check in the amount equal to the cash, if any,
which such holder has the right to receive pursuant to the
provisions of this Article IV (including any cash in lieu of
fractional shares of Holding Company Common Stock pursuant
to Section 4.8(c)), and (B) a Holding Company Certificate
representing that number of shares of Holding Company Common
Stock, if any, which such holder has the right to receive
pursuant to this Article IV (in each case less the amount of
any required withholding taxes), and the Company Certificate
so surrendered shall forthwith be cancelled. Until
surrendered as contemplated by this Section 4.5, each
Company Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the
Merger Consideration with respect to the shares of Company
Common Stock formerly represented thereby.
(f) Purchaser shall have the right to make rules,
not inconsistent with the terms of this Agreement, governing
the validity of the Election Forms, the manner and extent to
which Cash Elections or Stock Elections are to be taken into
account in making the determinations prescribed by Section
4.6, the issuance and delivery of certificates for Holding
Company Common Stock into which shares of Company Common
Stock or Purchaser Common Stock are converted in the
Mergers, and the payment of cash for shares of Company
Common Stock converted into the right to receive cash in the
Company Merger.
4.6. Proration. (a) As is more fully set forth
below, the maximum number of shares of Holding Company
Common Stock to be issued to holders of Company Common Stock
(the "Stock Cap") shall not exceed the number of Outstanding
Company Shares. "Outstanding Company Shares" shall mean
<PAGE>
those shares of Company Common Stock outstanding immediately
prior to the Effective Time minus (x) shares of Company
Common Stock which will be cancelled pursuant to Section
4.4(c) and (y) Dissenting Shares (as long as such remain
Dissenting Shares).
(b) As is more fully set forth below, the
aggregate amount of cash to be paid to holders of
Outstanding Company Shares (the "Cash Cap") shall not exceed
the product of (x) $65 and (y) the number of Outstanding
Company Shares; provided, however, that the Purchaser shall
have the right, in its sole discretion, to increase the Cash
Cap so long as notice of such change is given to holders of
the Outstanding Company Shares in the Company Letter of
Transmittal or in any other manner reasonably calculated to
so notify holders of Outstanding Company Shares not later
than the day the Letter of Transmittal is transmitted to
holders of Outstanding Company Shares.
(c) In the event that the aggregate number of
shares of Holding Company Common Stock represented by the
Stock Elections received by the Exchange Agent (the
"Requested Stock Amount") exceeds the Stock Cap, each holder
making a Stock Election shall receive, for each share of
Company Common Stock for which a Stock Election has been
made, (x) a number of shares of Holding Company Common Stock
equal to the product of the Stock Consideration and the
Stock Proration Factor (as defined below) (such product, the
"Prorated Stock Amount") and (y) cash in an amount equal to
the product of (A) the Stock Consideration minus the
Prorated Stock Amount and (B) the Purchaser Common Stock
Price. The "Stock Proration Factor" shall be a fraction, the
numerator of which is the Stock Cap and the denominator of
which is the Requested Stock Amount.
(d) In the event that the aggregate amount of cash
represented by the Cash Elections received by the Exchange
Agent (the "Requested Cash Amount") exceeds the Cash Cap (as
such amount may have been increased at Purchaser's sole
discretion pursuant to Section 4.6(b)), each holder making a
Cash Election (and each holder who is deemed to have made a
Cash Election pursuant to Section 4.5(c)) shall receive, for
each share of Company Common Stock for which a Cash Election
has been made, (x) cash in an amount equal to the product of
the Cash Consideration and a fraction, the numerator of
which is the Cash Cap and the denominator of which is the
Requested Cash Amount (such product, the "Prorated Cash
Amount") and (y) a number of shares of Holding Company
Common Stock equal to a fraction, the numerator of which is
equal to the Cash Consideration minus the Prorated Cash
Amount and the denominator of which is the Purchaser Common
Stock Price.
<PAGE>
4.7. Dividends, Fractional Shares, Etc. (a)
Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared after the
Effective Time on Holding Company Common Stock shall be paid
with respect to any shares of Company Common Stock
represented by a Company Certificate, until such Company
Certificate is surrendered for exchange as provided herein.
Subject to the effect of applicable laws, following
surrender of any such Company Certificate, there shall be
paid to the holder of the Holding Company Certificates
issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time
theretofore payable with respect to such whole shares of
Holding Company Common Stock and not paid, less the amount
of any withholding taxes which may be required thereon, and
(ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole
shares of Holding Company Common Stock, less the amount of
any withholding taxes which may be required thereon.
(b) At or after the Effective Time, there shall be
no transfers on the stock transfer books of the Purchaser or
the Company of the shares of Purchaser Common Stock or
Company Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time,
certificates representing any such shares are presented to
the surviving corporations of the Purchaser Merger or the
Company Merger, they shall be cancelled and exchanged for
certificates for the consideration, if any, deliverable in
respect thereof pursuant to this Agreement and the Merger
Agreements in accordance with the procedures set forth in
this Article 4. Company Certificates surrendered for
exchange by any person constituting an "affiliate" of the
Company for purposes of Rule 145(c) under the Securities Act
of 1933, as amended (the "Securities Act"), shall not be
exchanged until the Purchaser has received a written
agreement from such person as provided in Section 7.10.
(c) No fractional shares of Holding Company Common
Stock shall be issued pursuant to the Company Merger. In
lieu of the issuance of any fractional share of Holding
Company Common Stock pursuant to the Company Merger, cash
adjustments will be paid to holders in respect of any
fractional share of Holding Company Common Stock that would
otherwise be issuable, and the amount of such cash
adjustment shall be equal to the product of such fractional
amount and the Purchaser Common Stock Price.
(d) Any portion of the Exchange Fund (including
the proceeds of any investments thereof and any shares of
<PAGE>
Holding Company Common Stock) that remains unclaimed by the
former stockholders of the Purchaser and the Company six
months after the Effective Time shall be delivered to the
Holding Company. Any former stockholder of the Purchaser or
the Company who have not theretofore complied with this
Article 4 shall thereafter look only to the applicable
surviving corporation for payment of the applicable merger
consideration, cash in lieu of fractional shares and unpaid
dividends and distributions on the Holding Company Common
Stock deliverable in respect of each share of Purchaser
Common Stock or Company Common Stock such stockholder holds
as determined pursuant to this Agreement, in each case
without any interest thereon.
(e) None of the Purchaser, the Company, the
Holding Company, the surviving corporations of the Mergers,
the Exchange Agent or any other person shall be liable to
any former holder of shares of Purchaser Common Stock or
Company Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property,
escheat or similar laws.
(f) In the event that any Company Certificate
shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming such
Company Certificate to be lost, stolen or destroyed and, if
required by Holding Company, the posting by such person of a
bond in such reasonable amount as Holding Company may direct
as indemnity against any claim that may be made against it
with respect to such Company Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed
Company Certificate the applicable merger consideration,
cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Holding Company Common Stock as
provided in Section 4.7, deliverable in respect thereof
pursuant to this Agreement and the Company Merger Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth in the disclosure letter
delivered at or prior to the execution hereof to the
Purchaser (the "Company Disclosure Letter") or in the
Company Reports (as defined below), the Company represents
and warrants to the Purchaser as of the date of this
Agreement as follows:
5.1. Existence; Good Standing; Corporate
Authority. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company is duly licensed
<PAGE>
or qualified to do business as a foreign corporation and is
in good standing under the laws of any other state of the
United States in which the character of the properties owned
or leased by it or in which the transaction of its business
makes such qualification necessary, except where the failure
to be so qualified or to be in good standing would not have
a material adverse effect on the business, results of
operations or financial condition of the Company and its
Subsidiaries taken as a whole (a "Company Material Adverse
Effect"). The Company has all requisite corporate power and
authority to own, operate and lease its properties and carry
on its business as now conducted. Each of the Company's
Significant Subsidiaries (as defined in Section 10.14
hereof) is a corporation or partnership duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the
corporate or partnership power and authority to own its
properties and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in
good standing in each jurisdiction in which the ownership of
its property or the conduct of its business requires such
qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would
not have a Company Material Adverse Effect. The copies of
the Company's Certificate of Incorporation and Bylaws
previously made available to the Purchaser are true and
correct.
5.2. Authorization, Validity and Effect of
Agreements. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and all
agreements and documents contemplated hereby. Subject only
to the approval of this Agreement and the transactions
contemplated hereby by the holders of two-thirds of the
outstanding shares of Company Common Stock, the consummation
by the Company of the transactions contemplated hereby has
been duly authorized by all requisite corporate action. This
Agreement constitutes, and all agreements and documents
contemplated hereby (when executed and delivered pursuant
hereto for value received) will constitute, the valid and
legally binding obligations of the Company, enforceable in
accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general
principles of equity.
5.3. Capitalization. The authorized capital
stock of the Company consists of 300,000,000 shares of
Company Common Stock and 4,000,000 shares of preferred
stock, no par value (the "Company Preferred Stock"). As of
July 15, 1995, there were 154,061,655 shares of Company
Common Stock, and no shares of Company Preferred Stock,
<PAGE>
issued and outstanding, plus 29,873,305 shares of Company
Common Stock held in the Company's treasury. Since such
date, (i) no additional shares of capital stock of the
Company have been issued, except pursuant to the terms
existing on the date hereof of the Company's stock option
and employee stock purchase plans and other similar employee
benefit plans (the "Company Stock Plans") and (ii) no
options or other rights to acquire shares of the Company's
capital stock have been granted (other than an aggregate of
75,000 options to acquire Company Common Stock granted
pursuant to the terms existing on the date hereof of the
Company's stock option plan). The Company has no outstanding
bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into
or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter (other than
the preferred stock purchase rights of the Company (the
"Rights") issued pursuant to the Rights Agreement, dated
December 14, 1989, between the Company and Harris Trust
Company (the "Company Rights Agreement")). All issued and
outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. There are not at the date of this
Agreement any existing options, warrants, calls,
subscriptions, convertible securities, or other rights,
agreements or commitments which obligate the Company or any
of its Subsidiaries to issue, transfer or sell any shares of
capital stock of the Company or any of its Subsidiaries
(other than under the Company Stock Plans and other than the
Rights).
5.4. Subsidiaries. The Company owns directly or
indirectly each of the outstanding shares of capital stock
(or other ownership interests having by their terms ordinary
voting power to elect a majority of directors or others
performing similar functions with respect to such Company
Significant Subsidiary) of each of the Company's Significant
Subsidiaries. Each of the outstanding shares of capital
stock of each of the Company's Significant Subsidiaries is
duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by the
Company. Each of the outstanding shares of capital stock of
each Significant Subsidiary of the Company is owned,
directly or indirectly, by the Company free and clear of all
liens, pledges, security interests, claims or other
encumbrances other than liens imposed by local law which are
not material. The following information for each Significant
Subsidiary of the Company has been previously provided to
the Purchaser, if applicable: (i) its name and jurisdiction
of incorporation or organization; (ii) its authorized
capital stock or share capital; and (iii) the number of
issued and outstanding shares of capital stock or share
capital. All of the Subsidiaries of the Company other than
the Significant Subsidiaries, when taken together, do
<PAGE>
not in the aggregate constitute a Significant Subsidiary of
the Company.
5.5. Other Interests. Except for interests in the
Company Subsidiaries, neither the Company nor any Company
Significant Subsidiary owns directly or indirectly any
interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or
entity (other than (i) non-controlling investments in the
ordinary course of business and corporate partnering,
development, cooperative marketing and similar undertakings,
arrangements entered into in the ordinary course of business
and (ii) other investments of less than $100,000,000).
5.6. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the
Company do not, and the consummation by the Company of the
transactions contemplated hereby will not, (i) conflict with
or violate the certificate of incorporation or by-laws or
equivalent organizational documents of (x) the Company or
(y) any Significant Subsidiary, (ii) subject to making the
filings and obtaining the approvals identified in Section
5.6(b) hereof, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the
Company or any Company Subsidiary or by which any property
or asset of the Company or any Company Subsidiary is bound
or affected, or (iii) subject to making the filings and
obtaining the approvals identified in Section 5.6(b) hereof,
result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a
default) under, result in the loss of a material benefit
under, or give to others any right of purchase or sale, or
any right of termination, amendment, acceleration, increased
payments or cancellation of, or result in the creation of a
lien or other encumbrance on any property or asset of the
Company or any Company Subsidiary pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation
to which the Company or any Company Subsidiary is a party or
by which the Company or any Company Subsidiary or any
property or asset of the Company or any Company Subsidiary
is bound or affected, except, in the case of clauses (i)(y),
(ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not
prevent or delay consummation of any of the transactions
contemplated hereby in any material respect, or otherwise
prevent the Company from performing its obligations under
this Agreement in any material respect, and would not,
individually or in the aggregate, have a Company Material
Adverse Effect. The execution and delivery of this
Agreement by the Company do not, and the consummation by the
Company of the transactions contemplated hereby will not,
<PAGE>
result in any material breach of or constitute a material
default (or an event which with notice or lapse of time or
both would become a material default) under, result in the
loss of a material benefit under, or give to others any
right of purchase or sale, or any right of termination,
amendment, acceleration, increased payments or cancellation
of, or result in the creation of a lien or other encumbrance
on any property or asset of the Company or any Company
Subsidiary pursuant to, any Material Contract to which the
Company or any Company Subsidiary is a party or by which the
Company or any Company Subsidiary or any property or asset
of the Company or any Company Subsidiary is bound or
affected. For the purposes hereof, "Material Contract" shall
mean any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other
instrument or obligation that is material to the ownership
or operation of any of ESPN, Lifetime Television and A&E
Television Network (each a "Station"), or any network
affiliate agreement.
(b) The execution and delivery of this Agreement
by the Company do not, and the performance of this Agreement
and the consummation by the Company of the transactions
contemplated hereby will not, require any consent, approval,
authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or
foreign (each a "Governmental Entity"), except (i) for (A)
applicable requirements, if any, of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the Securities
Act of 1933, as amended (the "Securities Act"), state
securities or "blue sky" laws ("Blue Sky Laws") and state
takeover laws, (B) the pre- merger notification requirements
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder (the
"HSR Act"), (C) applicable approvals of the Federal
Communications Commission (the "FCC") pursuant to the
Communications Act of 1934, as amended, and any regulations
promulgated thereunder (the "Communications Act"), (D)
filing and recordation of appropriate merger and similar
documents as required by New York law and Delaware law and
(E) applicable requirements, if any, of the Code and state,
local and foreign tax laws, and (ii) where failure to obtain
such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or
delay consummation of any of the transactions contemplated
hereby in any material respect, or otherwise prevent the
Company from performing its obligations under this Agreement
in any material respect, and would not, individually or in
the aggregate, have a Company Material Adverse Effect.
5.7. Compliance. Neither the Company nor any
Company Subsidiary is in conflict with, or in default or
violation of, (i) any law, rule, regulation, order, judgment
<PAGE>
or decree applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company
or any Company Subsidiary is bound or affected, or (ii) any
note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation
to which the Company or any Company Subsidiary is a party or
by which the Company or any Company Subsidiary or any
property or asset of the Company or any Company Subsidiary
is bound or affected, in each case except for any such
conflicts, defaults or violations that would not,
individually or in the aggregate, have a Company Material
Adverse Effect. The Company and its Subsidiaries have
obtained all licenses, permits and other authorizations and
have taken all actions required by applicable law or
governmental regulations in connection with their business
as now conducted, where the failure to obtain any such item
or to take any such action would have, individually or in
the aggregate, a Company Material Adverse Effect. The
Company and the Company Subsidiaries that are FCC licensees
are financially qualified, and to the best of the Company's
knowledge, are otherwise qualified to be FCC licensees. The
Company is not aware of any facts or circumstances that
might prevent or delay any necessary FCC approval of the
transactions contemplated hereby.
5.8. SEC Documents. (a) The Company has filed all
forms, reports and documents required to be filed by it with
the Securities and Exchange Commission ("SEC") since
December 31, 1992 (collectively, the "Company Reports"). As
of their respective dates, the Company Reports and any such
reports, forms and other documents filed by the Company with
the SEC after the date of this Agreement (i) complied, or
will comply, as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange
Act, and the rules and regulations thereunder and (ii) did
not, or will not, contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in
the light of the circumstances under which they were made,
not misleading. The representation in clause (ii) of the
preceding sentence shall not apply to any misstatement or
omission in any Company Report filed prior to the date of
this Agreement which was superseded by a subsequent Company
Report filed prior to the date of this Agreement. No Company
Subsidiary is required to file any report, form or other
document with the SEC.
(b) Each of the consolidated balance sheets of
Company included in or incorporated by reference into the
Company Reports (including the related notes and schedules)
fairly presents the consolidated financial position of
Company and the Company Subsidiaries as of its date, and
each of the consolidated statements of income, retained
<PAGE>
earnings and cash flows of Company included in or
incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents
the results of operations, retained earnings or cash flows,
as the case may be, of Company and the Company Subsidiaries
for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments
which would not be material in amount or effect), in each
case in accordance with generally accepted accounting
principles consistently applied during the periods involved,
except as may be noted therein. Neither Company nor any of
the Company Subsidiaries has any liabilities or obligations
of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of Company or in the
notes thereto, prepared in accordance with generally
accepted accounting principles consistently applied, except
for (i) liabilities or obligations that were so reserved on,
or reflected in (including the notes to), the consolidated
balance sheet of the Company as of December 31, 1994 or
March 31, 1995; (ii) liabilities or obligations arising in
the ordinary course of business since March 31, 1995, (iii)
liabilities or obligations which would not, individually or
in the aggregate, have a Company Material Adverse Effect and
(iv) payments required as a result of the Reorganization
under the acceleration provisions of the terms existing on
the date hereof of the Company's employee benefit plans,
which acceleration provisions are referred to in the Company
Disclosure Letter.
5.9. Litigation. There are no actions, suits or
proceedings pending against Company or the Company
Subsidiaries or, to the actual knowledge of the executive
officers of Company, threatened against Company or the
Company Subsidiaries, at law or in equity, or before or by
any federal or state commission, board, bureau, agency or
instrumentality, that are reasonably likely to have a
Company Material Adverse Effect.
5.10. Absence of Certain Changes. Except as
specifically contemplated by this Agreement, since December
31, 1994, there has not been (i) any Company Material
Adverse Effect; (ii) any declaration, setting aside or
payment of any dividend or other distribution with respect
to its capital stock (other than regular quarterly cash
dividends not in excess of $.05 per share); or (iii) any
material change in its accounting principles, practices or
methods.
5.11. Taxes. (a) Each of the Company and the
Company Subsidiaries has filed all material tax returns and
reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely
<PAGE>
filed and granted and have not expired, and all tax returns
and reports are complete and accurate in all respects,
except to the extent that such failures to file, have
extensions granted that remain in effect or be complete and
accurate in all respects, as applicable, individually or in
the aggregate, would not have a Company Material Adverse
Effect. The Company and each of the Company Subsidiaries has
paid (or the Company has paid on its behalf) all taxes shown
as due on such tax returns and reports. The most recent
financial statements contained in the Company Reports
reflect an adequate reserve for all taxes payable by the
Company and the Company Subsidiaries for all taxable periods
and portions thereof accrued through the date of such
financial statements, and no deficiencies for any taxes have
been proposed, asserted or assessed against the Company or
any Company Subsidiary that are not adequately reserved for,
except for inadequately reserved taxes and inadequately
reserved deficiencies that would not, individually or in the
aggregate, have a Company Material Adverse Effect. No
requests for waivers of the time to assess any taxes against
the Company or any Company Subsidiary have been granted or
are pending, except for requests with respect to such taxes
that have been adequately reserved for in the most recent
financial statements contained in the Company Reports, or,
to the extent not adequately reserved, the assessment of
which would not, individually or in the aggregate, have a
Company Material Adverse Effect.
(b) Neither the Company nor any Company Subsidiary
has taken any action or has any knowledge of any fact or
circumstance that is reasonably likely to prevent the
Company Merger from qualifying as an exchange described in
Section 351(a) or Section 351(b) of the Code.
(c) As used in this Section 5.11 and in Section
6.11, "taxes" shall include all Federal, state, local and
foreign income, franchise, property, sales, use, excise and
other taxes, including obligations for withholding taxes
from payments due or made to any other person and any
interest, penalties or additions to tax.
5.12. Employee Benefit Plans. Except as described
in the Company Reports or as would not have a Company
Material Adverse Effect, (i) all employee benefit plans or
programs maintained for the benefit of the current or former
employees or directors of the Company or any Company
Subsidiary that are sponsored, maintained or contributed to
by the Company or any Company Subsidiary, or with respect to
which the Company or any Company Subsidiary has any
liability, including without limitation any such plan that
is an "employee benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974
("ERISA"), are in compliance with all applicable
<PAGE>
requirements of law, including ERISA and the Code, and (ii)
neither the Company nor any Company Subsidiary has any
liabilities or obligations with respect to any such employee
benefit plans or programs, whether accrued, contingent or
otherwise, nor to the knowledge of the executive officers of
the Company are any such liabilities or obligations expected
to be incurred. The execution of, and performance of the
transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any benefit
plan, policy, arrangement or agreement or any trust or loan
that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebted-
ness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee.
The only severance agreements or severance policies
applicable to the Company or its Subsidiaries are the
agreements and policies specifically referred to in the
Company Disclosure Letter.
5.13. Labor Matters. There is no labor strike,
labor dispute, work slowdown, stoppage or lockout actually
pending, or to the knowledge of the executive officers of
the Company, threatened against or affecting the Company or
any Company Subsidiary, except as would not, individually or
in the aggregate, have a Company Material Adverse Effect.
There is no unfair labor practice or labor arbitration
proceeding pending or, to the knowledge of the executive
officers of the Company, threatened against the Company or
its Subsidiaries relating to their business, except for any
such proceeding which would not have a Company Material
Adverse Effect.
5.14. No Brokers. The Company has not entered into
any contract, arrangement or understanding with any person
or firm which may result in the obligation of the Company or
the Purchaser to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby, except that the
Company has retained Allen & Company Incorporated as its
financial advisor, the arrangements with which have been
disclosed in writing to the Purchaser prior to the date
hereof. Other than the foregoing arrangements, the Company
is not aware of any claim for payment of any finder's fees,
brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement
or the consummation of the transactions contemplated hereby.
5.15. Opinion of Financial Advisor. The Company
has received the opinion of Allen & Company Incorporated to
the effect that, as of the date hereof, the consideration to
be received by the holders of the Company Common Stock in
<PAGE>
the Company Merger is fair to such holders from a financial
point of view.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as set forth in the disclosure letter
delivered at or prior to the execution hereof to the Company
(the "Purchaser Disclosure Letter") or in the Purchaser
Reports (as defined below), the Purchaser represents and
warrants to the Company as of the date of this Agreement as
follows:
6.1. Existence; Good Standing; Corporate
Authority. The Purchaser is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Purchaser is duly
licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any
other state of the United States in which the character of
the properties owned or leased by it or in which the
transaction of its business makes such qualification
necessary, except where the failure to be so qualified or to
be in good standing would not have a material adverse effect
on the business, results of operations or financial
condition of the Purchaser and its Subsidiaries taken as a
whole (a "Purchaser Material Adverse Effect"). The Purchaser
has all requisite corporate power and authority to own,
operate and lease its properties and carry on its business
as now conducted. Each of the Purchaser's Significant
Subsidiaries is a corporation or partnership duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the
corporate or partnership power and authority to own its
properties and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in
good standing in each jurisdiction in which the ownership of
its property or the conduct of its business requires such
qualification, except for jurisdic- tions in which such
failure to be so qualified or to be in good standing would
not have a Purchaser Material Adverse Effect. The copies of
the Purchaser's Certificate of Incorporation and Bylaws
previously made available to the Company are true and
correct.
6.2. Authorization, Validity and Effect of
Agreements. The Purchaser has the requisite corporate power
and authority to execute and deliver this Agreement and all
agreements and documents contemplated hereby. Subject only
to the approval of this Agreement and the transactions
contemplated hereby by the holders of a majority of the
<PAGE>
outstanding shares of Purchaser Common Stock, the consumma-
tion by the Purchaser of the transactions contemplated
hereby has been duly authorized by all requisite corporate
action. This Agreement constitutes, and all agreements and
documents contemplated hereby (when executed and delivered
pursuant hereto for value received) will constitute, the
valid and legally binding obligations of the Purchaser,
enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general
principles of equity.
6.3. Capitalization. The authorized capital stock
of the Purchaser consists of 1,200,000,000 shares of
Purchaser Common Stock, and 100,000,000 shares of preferred
stock, $.10 par value (the "Purchaser Preferred Stock"). As
of July 15, 1995, there were 522,526,566 shares of Purchaser
Common Stock and no shares of Purchaser Preferred Stock,
issued and outstanding, plus 50,986,941 shares of Purchaser
Common Stock held in the Purchaser's treasury. Since such
date, no additional shares of capital stock of the Purchaser
have been issued except pursuant to the Purchaser's stock
option and employee stock purchase plans, pension plans and
other similar employee benefit plans (the "Purchaser Stock
Plans"). The Purchaser has no outstanding bonds, debentures,
notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable
for securities having the right to vote) with the
stockholders of the Purchaser on any matter (other than the
preferred stock purchase rights of the Purchaser (the
"Purchaser Rights") issued pursuant to the Rights Agreement,
dated as of June 21, 1989, between the Purchaser and Bank of
America (the "Purchaser Rights Agreement")). All such issued
and outstanding shares of Purchaser Common Stock are duly
authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. Except as contemplated by this
Agreement, there are not at the date of this Agreement any
existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or
commitments which obligate the Purchaser or any of its
Subsidiaries to issue, transfer or sell any shares of
capital stock of the Purchaser or any of its Subsidiaries
(other than under the Purchaser Stock Plans and other than
the Rights).
6.4. Subsidiaries. The Purchaser owns directly or
indirectly each of the outstanding shares of capital stock
of each of the Purchaser's Significant Subsidiaries (or
other ownership interests having by their terms ordinary
voting power to elect a majority of directors or others
performing similar functions with respect to such Purchaser
Significant Subsidiary). Each of the outstanding shares of
capital stock of each of the Purchaser's Significant
<PAGE>
Subsidiaries is duly authorized, validly issued, fully paid
and nonassessable, and is owned, directly or indirectly, by
the Purchaser. Each of the outstanding shares of capital
stock of each Significant Subsidiary of the Purchaser is
owned, directly or indirectly, by the Purchaser free and
clear of all liens, pledges, security interests, claims or
other encumbrances other than liens imposed by local law
which are not material. The following information for each
Significant Subsidiary of the Purchaser has been previously
made available to the Company, if requested and if
applicable: (i) its name and jurisdiction of incorporation
or organization; (ii) its authorized capital stock or share
capital; and (iii) the number of issued and outstanding
shares of capital stock or share capital.
6.5. Other Interests. Except for interests in the
Purchaser Subsidiaries, neither the Purchaser nor any
Purchaser Significant Subsidiary owns directly or indirectly
any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or
entity (other than (i) passive investments in securities in
the ordinary course of business and corporate partnering,
development, cooperative marketing and similar undertakings
and arrangements entered into in the ordinary course of
business and (ii) other investments of less than
$100,000,000).
6.6. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the
Purchaser does not, and the consummation by the Purchaser of
the transactions contemplated hereby will not, (i) conflict
with or violate the certificate of incorporation or by-laws
or equivalent organizational documents of (x) the Purchaser
or (y) any Significant Subsidiary, (ii) subject to making
the filings and obtaining the approvals identified in
Section 6.6(b) hereof, conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to
the Purchaser or any Purchaser Subsidiary or by which any
property or asset of the Purchaser or any Purchaser
Subsidiary is bound or affected, or (iii) subject to making
the filings and obtaining the approvals identified in
Section 6.6(b) hereof, result in any breach of or constitute
a default (or an event which with notice or lapse of time or
both would become a default) under, result in the loss of a
material benefit under, or give to others any right of
termination, amendment, acceleration, increased payments or
cancellation of, or result in the creation of a lien or
other encumbrance on any property or asset of the Purchaser
or any Purchaser Subsidiary pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which
the Purchaser or any Purchaser Subsidiary is a party or by
which the Purchaser or any Purchaser Subsidiary or any
<PAGE>
property or asset of the Purchaser or any Purchaser
Subsidiary is bound or affected, except, in the case of
clauses (i)(y), (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which
would not prevent or delay consummation of any of the
transactions contemplated hereby in any material respect, or
otherwise prevent the Purchaser from performing its
obligations under this Agreement in any material respect,
and would not, individually or in the aggregate, have a
Purchaser Material Adverse Effect.
(b) The execution and delivery of this Agreement
by the Purchaser does not, and the performance of this
Agreement and the consummation of the transactions
contemplated hereby will not, require any consent, approval,
authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for (A) applicable
requirements, if any, of the Exchange Act, the Securities
Act, Blue Sky Laws and state takeover laws, (B) the pre-
merger notification requirements of the HSR Act, (C)
applicable approvals of the FCC pursuant to the
Communications Act, (D) filing and recordation of
appropriate merger and similar documents as required by New
York law and Delaware law and (E) applicable requirements,
if any, of the Code and state, local and foreign tax laws,
and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of
any of the transactions contemplated hereby in any material
respect, or otherwise prevent the Purchaser or Merger Sub
from performing its obligations under this Agreement in any
material respect, and would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect.
6.7. Compliance. Neither the Purchaser nor any
Purchaser Subsidiary is in conflict with, or in default or
violation of, (i) any law, rule, regulation, order, judgment
or decree applicable to the Purchaser or any Purchaser
Subsidiary or by which any property or asset of the
Purchaser or any Purchaser Subsidiary is bound or affected,
or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other
instrument or obligation to which the Purchaser or any
Purchaser Subsidiary is a party or by which the Purchaser or
any Purchaser Subsidiary or any property or asset of the
Purchaser or any Purchaser Subsidiary is bound or affected,
in each case except for any such conflicts, defaults or
violations that would not, individually or in the aggregate,
have a Purchaser Material Adverse Effect. The Purchaser and
its Subsidiaries have obtained all licenses, permits and
other authorizations and have taken all actions required by
applicable law or governmental regulations in connection
with their business as now conducted, where the failure to
<PAGE>
obtain any such item or to take any such action would have,
individually or in the aggregate, a Purchaser Material
Adverse Effect. The Purchaser and the Purchaser's
Subsidiaries that are FCC licensees are financially
qualified, and to the best of the Purchaser's knowledge, are
otherwise qualified to be FCC licensees. The Purchaser is
not aware of any facts or circumstances that might prevent
or delay any necessary FCC approval of the transactions
contemplated hereby.
6.8. SEC Documents. (a) The Purchaser has filed
all forms, reports and documents required to be filed by it
with the SEC since September 30, 1992 (collectively, the
"Purchaser Reports"). As of their respective dates, the
Purchaser Reports, and any such reports, forms and other
documents filed by the Purchaser with the SEC after the date
of this Agreement (i) complied, or will comply, as to form in
all material respects with the applicable requirements of the
Securities Act, the Exchange Act, and the rules and regulations
thereunder and (ii) did not, or will not, contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they
were made, not misleading. The representation in clause (ii) of
the preceding sentence shall not apply to any misstatement or
omission in any Purchaser Report filed prior to the date of
this Agreement which was superseded by a subsequent
Purchaser Report filed prior to the date of this Agreement.
No Purchaser Subsidiary is required to file any report, form
or other document with the SEC.
(b) Each of the consolidated balance sheets
included in or incorporated by reference into the Purchaser
Reports (including the related notes and schedules) fairly
presents the consolidated financial position of the
Purchaser and the Purchaser Subsidiaries as of its date, and
each of the consolidated statements of income, retained
earnings and cash flows included in or incorporated by
reference into the Purchaser Reports (including any related
notes and schedules) fairly presents the results of
operations, retained earnings or cash flows, as the case may
be, of the Purchaser and the Purchaser Subsidiaries for the
periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments which would
not be material in amount or effect), in each case in
accordance with generally accepted accounting principles
consistently applied during the periods involved, except as
may be noted therein. Neither the Purchaser nor any of the
Purchaser Subsidiaries has any liabilities or obligations of
any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of the Purchaser or in
<PAGE>
the notes thereto, prepared in accordance with generally
accepted accounting principles consistently applied, except
for (i) liabilities and obligations that were reserved on or
reflected in (including the notes to), the consolidated
balance sheet of the Purchaser as of September 30, 1994 or
March 31, 1995, (ii) liabilities arising in the ordinary
course of business since March 31, 1995, (iii) liabilities
or obligations which would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect and (iv)
payments required as a result of the Reorganization under
the acceleration provisions of the terms of the Purchaser's
employee benefit plans.
6.9. Litigation. There are no actions, suits or
proceedings pending against the Purchaser or the Purchaser
Subsidiaries or, to the actual knowledge of the executive
officers of the Purchaser, threatened against the Purchaser
or the Purchaser Subsidiaries, at law or in equity, or
before or by any federal or state commission, board, bureau,
agency or instrumentality, that are reasonably likely to
have a Purchaser Material Adverse Effect.
6.10. Absence of Certain Changes. Except as
specifically contemplated by this Agreement, since December
31, 1994, there has not been (i) any Purchaser Material
Adverse Effect; (ii) any declaration, setting aside or
payment of any dividend or other distribution with respect
to its capital stock (other than regular quarterly cash
dividends including any increase thereof consistent with
past practice); or (iii) any material change in its
accounting principles, practices or methods.
6.11. Taxes. (a) Each of the Purchaser and the
Purchaser Subsidiaries has filed all material tax returns
and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely
filed and granted and have not expired, and all tax returns
and reports are complete and accurate in all respects,
except to the extent that such failures to file, have
extensions granted that remain in effect or be complete and
accurate in all respects, as applicable, individually or in
the aggregate, would not have a Purchaser Material Adverse
Effect. The Purchaser and each of the Purchaser Subsidiaries
has paid (or the Purchaser has paid on its behalf) all taxes
shown as due on such tax returns and reports. The most
recent financial statements contained in the Purchaser
Reports reflect an adequate reserve for all taxes payable by
the Purchaser and the Purchaser Subsidiaries for all taxable
periods and portions thereof accrued through the date of
such financial statements, and no deficiencies for any taxes
have been proposed, asserted or assessed against the
Purchaser or any Purchaser Subsidiary that are not
adequately reserved for, except for
<PAGE>
inadequately reserved taxes and inadequately reserved
deficiencies that would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect. No
requests for waivers of the time to assess any taxes against
the Purchaser or any Purchaser Subsidiary have been granted
or are pending, except for requests with respect to such
taxes that have been adequately reserved for in the most
recent financial statements contained in the Purchaser
Reports, or, to the extent not adequately reserved, the
assessment of which would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect.
(b) Neither the Purchaser nor any Purchaser
Subsidiary has taken any action or has any knowledge of any
fact or circumstance that is reasonably likely to prevent
the Purchaser Merger from qualifying as at least one of (i)
an exchange described in Section 351(a) or Section 351(b) of
the Code or (ii) a reorganization described in Section
368(a) of the Code.
6.12. Employee Benefit Plans. Except as described
in the Purchaser Reports or as would not have a Purchaser
Material Adverse Effect, (i) all employee benefit plans or
programs maintained for the benefit of the current or former
employees or directors of Purchaser or any Purchaser
Subsidiary that are sponsored, maintained or contributed to
by Purchaser or any Purchaser Subsidiary, or with respect to
which Purchaser or any Purchaser Subsidiary has any
liability, including without limitation any such plan that
is an "employee benefit plan" as defined in Section 3(3) of
ERISA, are in compliance with all applicable requirements of
law, including ERISA and the Code, and (ii) neither
Purchaser nor any Purchaser Subsidiary has any liabilities
or obligations with respect to any such employee benefit
plans or programs, whether accrued, contingent or otherwise,
nor to the knowledge of the executive officers of Purchaser
are any such liabilities or obligations expected to be
incurred. Except as disclosed in the Purchaser Reports or
pursuant to the Disney Salaried Savings and Investment Plan,
the execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or
upon the occurrence of any additional or subsequent events)
constitute an event under any benefit plan, policy,
arrangement or agreement or any trust or loan that will or
may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebted- ness,
vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any employee.
6.13. Labor Matters. There is no labor strike,
labor dispute, work slowdown, stoppage or lockout actually
pending, or to the knowledge of the executive officers of
the Purchaser, threatened against or affecting the Purchaser
<PAGE>
or any Purchaser Subsidiary, except as would not,
individually or in the aggregate, have a Purchaser Material
Adverse Effect. There is no unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of the
executive offices of the Purchaser, threatened against the
Purchaser or its Subsidiaries relating to their business,
except for any such proceeding which would not have a
Purchaser Material Adverse Effect.
6.14. Opinion of Financial Advisor. The Purchaser
has received the opinion of Bear, Stearns & Co. Inc. to the
effect that, as of the date hereof, the Reorganization is
fair to the holders of Purchaser Common Stock from a
financial point of view.
6.15. No Brokers. The Purchaser has not entered
into any contract, arrangement or understanding with any
person or firm which may result in the obligation of the
Company or the Purchaser to pay any finder's fee, brokerage
or agent's commissions or other like payments in connection
with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby except
that the Purchaser has retained Bear, Stearns & Co. Inc. and
James D. Wolfensohn Incorporated as its financial advisors,
the arrangements with which have been disclosed in writing
to the Company prior to the date hereof. Other than the
foregoing arrangements, the Company is not aware of any
claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
ARTICLE 7
COVENANTS
7.1. Alternative Proposals. Prior to the Effective
Time, the Company agrees (a) that neither it nor any of its
Subsidiaries shall, nor shall it or any of its Subsidiaries
permit their respective officers, directors, employees,
agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by it
or any of its Subsidiaries) to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its
stockholders) with respect to a merger, acquisition,
consolidation or similar transaction involving, and purchase
of (i) all or any significant portion of the assets of the
Company and its Subsidiaries taken as a whole, or of any
Subsidiary of the Company which owns or operates any
Station, (ii) 25% or more of the outstanding shares of
<PAGE>
Company Common Stock or (iii) 25% of the outstanding shares
of the capital stock of any Subsidiary of the Company which
owns or operates any Station (any such proposal or offer
being hereinafter referred to as an "Alternative Proposal")
or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions
with, any person relating to an Alternative Proposal
(excluding the Mergers contemplated by this Agreement), or
otherwise facilitate any effort or attempt to make or
implement an Alternative Proposal; and (b) that it will
notify the Purchaser immediately if any such inquiries or
proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to
be initiated or continued with, it; provided, however, that
nothing contained in this Section 7.1 shall prohibit the
Board of Directors of the Company from (i) furnishing
information to or entering into discussions or negotiations
with, any person or entity that makes an unsolicited bona
fide Alternative Proposal, if, and only to the extent that,
(A) the Board of Directors of the Company, based upon the
advice of outside counsel, determines in good faith that
such action is required for the Board of Directors to comply
with its fiduciary duties to stockholders imposed by law,
(B) prior to furnishing such information to, or entering
into discussions or negotiations with, such person or
entity, the Company provides written notice to the Purchaser
to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person
or entity, and (C) the Company keeps the Purchaser informed
of the status and all material information with respect to
any such discussions or negotiations; and (ii) to the extent
applicable, complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Alternative Proposal. Nothing
in this Section 7.1 shall (x) permit the Company to
terminate this Agreement (except as specifically provided in
Article 9 hereof), (y) permit the Company to enter into any
agreement with respect to an Alternative Proposal for as
long as this Agreement remains in effect (it being agreed
that for as long as this Agreement remains in effect, the
Company shall not enter into any agreement with any person
that provides for, or in any way facilitates, an Alternative
Proposal (other than a confidentiality agreement in
customary form)), or (z) affect any other obligation of the
Company under this Agreement. Nothing contained in this
Section 7.1 or any other provision of this Agreement shall
prohibit the Company or any of its Subsidiaries from
engaging in any discussions or providing any information or
data, or entering into any agreement with any person to the
extent the Company or any of its Subsidiaries is obligated
to do so pursuant to the terms of any agreement relating to
a Station as in effect on the date hereof; provided that
nothing in this sentence shall be deemed to limit the
Company's representation set forth in Section 5.6.
<PAGE>
7.2. Interim Operations. (a) Prior to the
Effective Time, except as set forth in the Company
Disclosure Letter or as contemplated by any other provision
of this Agreement, unless the Purchaser has consented in
writing thereto, the Company:
(i) Shall, and shall cause each of its Significant
Subsidiaries to, conduct its operations according to
their usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(ii) Shall use its reasonable efforts, and shall
cause each of its Significant Subsidiaries to use its
reasonable efforts, to preserve intact their business
organizations and goodwill, keep available the services
of their respective officers and employees and maintain
satisfactory relationships with those persons having
business relationships with them;
(iii) Shall not amend its Certificate of
Incorporation or Bylaws or comparable governing
instruments (other than Bylaw amendments which are not
material to the Company or to the consummation of the
transactions contemplated by this Agreement);
(iv) Shall promptly notify the Purchaser of any
breach of any representation or warranty contained
herein or any Company Material Adverse Effect;
(v) Shall promptly deliver to the Purchaser true
and correct copies of any report, statement or schedule
filed with the SEC subsequent to the date of this
Agreement;
(vi) Shall not (x) except pursuant to the
exercise of options, warrants, conversion rights and
other contractual rights existing on the date hereof and
disclosed pursuant to this Agreement, issue any shares
of its capital stock, effect any stock split or
otherwise change its capitalization as it existed on the
date hereof, (y) grant, confer or award any option,
warrant, conversion right or other right not existing on
the date hereof to acquire any shares of its capital
stock (other than an aggregate of 75,000 options to
acquire Company Common Stock pursuant to the terms
existing on the date hereof of the Company's stock
option plan) or grant, confer or award any bonuses or
other forms of cash incentives to any officer, director
or key employee except consistent with past practice or
grant or confer any awards (other than those granted as
of the date hereof) under the Incentive Compensation
Plan of the Company (as amended through December 9,
1993), (z) increase any compensation under any
employment agreement with any of
<PAGE>
its present or future officers, directors or employees,
except for normal increases consistent with past
practice, grant any severance or termination pay to, or
enter into any employment or severance agreement with
any officer or director or amend any such agreement in
any material respect other than severance arrangements
which are consistent with past practice with respect to
employees terminated by the Company, or (aa) adopt any
new employee benefit plan (including any stock option,
stock benefit or stock purchase plan) or amend any
existing employee benefit plan in any material respect;
(vii) Shall not (i) declare, set aside or pay any
dividend or make any other distribution or payment with
respect to any shares of its capital stock or other
ownership interests (other than regular quarterly cash
dividends not in excess of $.05 per share) or (ii)
directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock or capital stock
of any of its Subsidiaries, or make any commitment for
any such action;
(viii) Shall not, and shall not permit any of its
Subsidiaries to, sell, lease or otherwise dispose of any
of its assets (including capital stock of Subsidiaries)
except in the ordinary course of business, or to acquire
any business or assets, in each case for an amount
exceeding $100,000,000;
(ix) Shall not incur any material amount of
indebtedness for borrowed money or make any loans,
advances or capital contributions to, or investments
(other than non-controlling investments in the ordinary
course of business) in, any other person other than a
wholly owned Company Subsidiary, or issue or sell any
debt securities, other than borrowings under existing
lines of credit in the ordinary course of business, in
each case in an amount exceeding $100,000,000;
(x) Shall not, except as previously approved by the
Board of Directors of the Company and identified to the
Purchaser prior to the date hereof, or except in the
ordinary course of business, authorize or make capital
expenditures in excess of $200,000,000 in the aggregate;
(xi) Shall not mortgage or otherwise encumber or
subject to any lien any properties or assets except as
would not be reasonably likely to have a Company
Material Adverse Effect;
(xii) Shall not make any change to its accounting
(including tax accounting) methods, principles or
practices, except as may be required by generally
<PAGE>
accepted accounting principles and except, in the case
of tax accounting methods, principles or practices, in
the ordinary course of business of the Company or any of
its Subsidiaries; and
(xiii) shall not, nor shall it permit any of its
Subsidiaries to, enter into any program production or
distribution arrangements, including without limitation
joint venture arrangements, with a term in excess of one
year without consulting with the Purchaser prior
thereto.
(b) Prior to the Effective Time, except as set
forth in the Purchaser Disclosure Letter or as contemplated
by this Agreement, unless the Company has consented in
writing thereto, the Purchaser:
(i) shall not issue any shares of its capital stock
at less than fair market value (other than pursuant to
any Purchaser Stock Plans) or effect any stock split of
its capital stock;
(ii) shall not amend its Certificate of
Incorporation (provided that the Purchaser may issue up
to $100,000,000 of its preferred stock);
(iii) shall promptly notify the Company of any
breach of any representation or warranty contained
herein or any Purchaser Material Adverse Effect;
(iv) shall promptly deliver to the Company true and
correct copies of any report, statement or schedule
filed with the SEC subsequent to the date of this
Agreement; and
(v) shall not declare, set aside or pay any
dividend or make any other distribution or payment with
respect to any shares of its capital stock or other
ownership interests (other than regular quarterly cash
dividends including any increases thereof consistent
with past practice).
7.3. Meetings of Stockholders. Each of the
Purchaser and the Company will take all action necessary in
accordance with applicable law and its Certificate of
Incorporation and Bylaws to convene a meeting of its
stockholders as promptly as practicable to consider and vote
upon (i) in the case of the Purchaser, the approval of this
Agreement, the Purchaser Merger Agreement and the Purchaser
Merger and (ii) in the case of the Company, the approval of
this Agreement and the Company Merger Agreement and the
Company Merger. The Board of Directors of each of the
Purchaser and the Company shall recommend such approval and
the Purchaser and the Company shall each take all lawful
<PAGE>
action to solicit such approval, including, without
limitation, timely mailing the Proxy Statement/Prospectus (as
defined in Section 7.7); provided, however, that such
recommendation or solicitation is subject to any action
(including any withdrawal or change of its recommendation)
taken by, or upon authority of, the Board of Directors of the
Purchaser or the Company, as the case may be, in the exercise
of its good faith judgment based upon the advice of outside
counsel as to its fiduciary duties to its stockholder imposed
by law.
7.4. Filings, Other Action. Subject to the terms
and conditions herein provided, the Company and the Purchaser
shall: (a) promptly make their respective filings and
thereafter make any other required submissions under the HSR
Act and the Communications Act; (b) use all reasonable
efforts to cooperate with one another in (i) determining
which filings are required to be made prior to the Effective
Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the
Effective Time from, governmental or regulatory authorities
of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby and (ii) timely making all such filings
and timely seeking all such consents, approvals, permits or
authorizations; and (c) use all reasonable efforts to take,
or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate to
consummate and make effective the transactions contemplated
by this Agreement. The parties hereto recognize and
acknowledge that under applicable rules and regulations of
the FCC, certain assets currently held by, or attributable
to, the Purchaser, the Company or their officers or directors
cannot be held by, or be attributable to, Holding Company or
its officers and directors after the Effective Time, unless
appropriate waivers of such rules and regulations are
obtained. In no event shall the obtaining of permanent
waivers with respect to assets of the Purchaser or its
officers or directors be a condition to consummation of the
Mergers. In no event shall a permanent waiver be sought
without also seeking in the alternative to obtain a temporary
waiver to allow the consummation of the Mergers including the
divestiture of assets or other action required in order to
obtain such waiver. If necessary in order to obtain the FCC's
approval of the transactions contemplated hereby the
Purchaser and the Company will divest any or all of such
assets and take such other actions prior to consummation of
the transactions contemplated hereby. If, at any time after
the Effective Time, any further action is necessary or
desirable to carry out the purpose of this Agreement, the
proper officers and directors of the
<PAGE>
Purchaser and the Company shall take all such necessary
action.
7.5. Inspection of Records. From the date hereof to
the Effective Time, each of the Company and the Purchaser
shall, subject to any applicable rules and regulations of the
FCC, (i) allow all designated officers, attorneys,
accountants and other representatives of the other reasonable
access at all reasonable times to the offices, records and
files, correspondence, audits and properties, as well as to
all information relating to commitments, contracts, titles
and financial position, or otherwise pertaining to the
business and affairs, of the Company and the Purchaser and
their respective Subsidiaries, as the case may be, (ii)
furnish to the other, the other's counsel, financial
advisors, auditors and other authorized representatives such
financial and operating data and other information as such
persons may reasonably request and (iii) instruct the
employees, counsel and financial advisors of the Company or
the Purchaser, as the case may be, to cooperate with the
other in the other's investigation of the business of it and
its Subsidiaries.
7.6. Publicity. The initial press release relating
to this Agreement shall be a joint press release and
thereafter the Company and the Purchaser shall, subject to
their respective legal obligations (including requirements of
stock exchanges and other similar regulatory bodies), consult
with each other, and use reasonable efforts to agree upon the
text of any press release, before issuing any such press
release or otherwise making public statements with respect to
the transactions contemplated hereby and in making any
filings with any federal or state governmental or regulatory
agency or with any national securities exchange with respect
thereto.
7.7. Registration Statement. The Purchaser and the
Company shall cooperate and promptly prepare and the
Purchaser shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the
Securities Act, with respect to the Holding Company Common
Stock issuable in the Mergers, a portion of which
Registration Statement shall also serve as the joint proxy
statement with respect to the meetings of the stockholders of
the Company and of the Purchaser in connection with the
Mergers (the "Proxy Statement/Prospectus"). The respective
parties will cause the Proxy Statement/Prospectus and the
Form S-4 to comply as to form in all material respects with
the applicable provisions of the Securities Act, the Exchange
Act and the rules and regulations thereunder. The Purchaser
shall use all reasonable efforts, and the Company will
cooperate with the Purchaser, to have the Form S-4 declared
effective by the SEC as promptly as practicable and
<PAGE>
to keep the Form S-4 effective as long as is necessary to
consummate the Mergers. The Purchaser shall, as promptly as
practicable, provide copies of any written comments received
from the SEC with respect to the Form S-4 to the Company and
advise the Company of any verbal comments with respect to the
Form S-4 received from the SEC. The Purchaser shall use its
best efforts to obtain, prior to the effective date of the
Form S-4, all necessary state securities law or "Blue Sky"
permits or approvals required to carry out the transactions
contemplated by this Agreement and will pay all expenses
incident thereto. The Purchaser agrees that the Proxy
Statement/Prospectus and each amendment or supplement thereto
at the time of mailing thereof and at the time of the
respective meetings of stockholders of the Company and the
Purchaser, or, in the case of the Form S-4 and each amendment
or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not
apply to the extent that any such untrue statement of a
material fact or omission to state a material fact was made
by the Purchaser in reliance upon and in conformity with
written information concerning the Company furnished to the
Purchaser by the Company specifically for use in the Proxy
Statement/Prospectus. The Company agrees that the written
information concerning the Company provided by it for
inclusion in the Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing
thereof and at the time of the respective meetings of
stockholders of the Company and the Purchaser, or, in the
case of written information concerning the Company provided
by the Company for inclusion in the Form S-4 or any amendment
or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading. No amendment or supplement to the Proxy
Statement/Prospectus will be made by the Purchaser or the
Company without the approval of the other party. The
Purchaser will advise the Company, promptly after it receives
notice thereof, of the time when the Form S-4 has become
effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the
qualification of the Purchaser Common Stock issuable in
connection with the Mergers for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the
Proxy Statement/Prospectus or the Form S-4 or comments
thereon and responses thereto or requests by the SEC for
additional information.
<PAGE>
7.8. Listing Application. The Purchaser shall
promptly cause Holding Company to prepare and submit to the
NYSE and the Pacific Exchanges listing applications covering
the shares of Holding Company Common Stock issuable in the
Mergers, and shall use reasonable efforts to obtain, prior to
the Effective Time, approval for the listing of such Holding
Company Common Stock, subject to official notice of issuance.
7.9. Further Action. Each party hereto shall,
subject to the fulfillment at or before the Effective Time of
each of the conditions of performance set forth herein or the
waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the
Mergers.
7.10. Affiliate Letters. At least 30 days prior to
the Closing Date, the Company shall deliver to the Purchaser
a list of names and addresses of those persons who were, in
the Company's reasonable judgment, at the record date for its
stockholders' meeting to approve the Mergers, "affiliates"
(each such person, an "Affiliate") of the Company within the
meaning of Rule 145 of the rules and regulations promulgated
under the Securities Act. The Company shall use all
reasonable efforts to deliver or cause to be delivered to the
Purchaser, prior to the Closing Date, from each of the
Affiliates of the Company identified in the foregoing list,
an Affiliate Letter in the form attached hereto as Exhibit A.
Holding Company shall be entitled to place legends as
specified in such Affiliate Letters on the certificates
evidencing any Holding Company Common Stock to be received by
such Affiliates pursuant to the terms of this Agreement, and
to issue appropriate stop transfer instructions to the
transfer agent for the Holding Company Common Stock,
consistent with the terms of such Affiliate Letters.
7.11. Expenses. Whether or not the Mergers are
consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses except as
expressly provided herein and except that (a) the filing fee
in connection with the HSR Act filing, (b) the filing fee in
connection with the filing of the Form S-4 or Proxy State-
ment/Prospectus with the SEC (c) the filing fees in
connection with necessary applications to the FCC and (d) the
expenses incurred in connection with printing and mailing the
Form S-4 and the Proxy Statement/Prospectus, shall be shared
equally by the Company and the Purchaser.
7.12. Insurance; Indemnity. (a) From and after the
Effective Time, Holding Company shall indemnify, defend and
hold harmless to the fullest extent that the Company
<PAGE>
would have been permitted under applicable law each person
who is now, or has been at any time prior to the date hereof,
an officer or director of the Company (individually, an
"Indemnified Party" and collectively, the "Indemnified
Parties"), against all losses, claims, damages, liabilities,
costs or expenses (including attorneys' fees), judgments,
fines, penalties and amounts paid in settlement in connection
with any claim, action, suit, proceeding or investigation
arising out of or pertaining to acts or omissions, or alleged
acts or omissions, by them in their capacities as such
occurring at or prior to the Effective Time. In the event of
any such claim, action, suit, proceeding or investigation (an
"Action"), (i) any Indemnified Party wishing to claim
indemnification shall promptly notify Holding Company
thereof, (ii) Holding Company shall pay the reasonable fees
and expenses of counsel selected by the Indemnified Party,
which counsel shall be reasonably acceptable to Holding
Company, in advance of the final disposition of any such
Action to the full extent permitted by applicable law, upon
receipt of any undertaking required by applicable law, and
(iii) the Holding Company will cooperate in the defense of
any such matter; provided, however, that Holding Company
shall not be liable for any settlement effected without its
written consent and provided, further, that Holding Company
shall not be obligated pursuant to this Section to pay the
fees and disbursements of more than one counsel for all
Indemnified Parties in any single Action except to the extent
that, in the opinion of counsel for the Indemnified Parties,
two or more of such Indemnified Parties have conflicting
interests in the outcome of such action.
(b) Holding Company shall cause the surviving
corporation of the Company Merger to keep in effect
provisions in its Certificate of Incorporation and Bylaws
providing for exculpation of director and officer liability
and its indemnification of the Indemnified Parties to the
fullest extent permitted under the NYBCL, which provisions
shall not be amended except as required by applicable law or
except to make changes permitted by law that would enlarge
the Indemnified Parties' right of indemnification.
(c) For a period of three years after the Effective
Time, Holding Company shall cause to be maintained officers'
and directors' liability insurance covering the Indemnified
Parties who are currently covered, in their capacities as
officers and directors, by the Company's existing officers'
and directors' liability insurance policies on terms
substantially no less advantageous to the Indemnified Parties
than such existing insurance; provided, however, that Holding
Company shall not be required in order to maintain or procure
such coverage to pay an annual premium in excess of one and
one-half times the current
<PAGE>
annual premium paid by the Company for its existing coverage
(the "Cap") (which current annual premium the Company
represents and warrants to be approximately $300,000); and
provided, further, that if equivalent coverage cannot be
obtained, or can be obtained only by paying an annual premium
in excess of the Cap, Holding Company shall only be required
to obtain as much coverage as can be obtained by paying an
annual premium equal to the Cap.
(d) The provisions of this Section shall survive
the consummation of the Mergers and expressly are intended to
benefit each of the Indemnified Parties.
7.13. Rights Agreements. Each of the Purchaser and
the Company shall take all necessary action prior to the
Effective Time to cause the dilution provisions of the
Purchaser Rights Agreement and the Company Rights Agreement,
respectively, to be inapplicable to the transactions
contemplated by this Agreement, without any payment to
holders of rights issued pursuant to such Rights Agreements.
7.14. Takeover Statute. If any "fair price",
"moratorium", "control share acquisition" or other form of
antitakeover statute or regulation shall become applicable to
the transactions contemplated hereby or the transactions
contemplated by the Stock Agreement, the Company and the
members of the Board of Directors of the Company shall grant
such approvals and take such actions as are reasonably
necessary so that the transactions contemplated hereby and
the transactions contemplated by the Stock Agreement may be
consummated as promptly as practicable on the terms
contemplated hereby and thereby and otherwise act to
eliminate or minimize the effects of such statute or
regulation on the transactions contemplated hereby and
thereby.
7.15. Conduct of Business by Holding Company and
the Merger Subsidiaries Pending the Mergers. Prior to the
Effective Time and subject to any applicable regulatory
approvals, the Purchaser and the Company shall cause Holding
Company and the Merger Subsidiaries to (a) perform their
respective obligations hereunder and under this Agreement and
the Merger Agreements in accordance with the terms hereof and
thereof and take all other actions necessary or appropriate
for the consummation of the transactions contemplated hereby
and thereby, (b) not incur directly or indirectly any
liabilities or obligations except those incurred in
connection with the consummation of this Agreement and the
Merger Agreements and the transactions contemplated hereby
and thereby, (c) not engage directly or indirectly in any
business or activities of any type or kind whatsoever and not
enter into any agreements or arrangements with any person or
entity, or be subject to or be bound by
<PAGE>
any obligation or undertaking which is not contemplated by
this Agreement or the Merger Agreements and (d) not create,
grant or suffer to exist any lien upon their respective
properties or assets which would attach to any properties or
assets of the Purchaser or the Company after the Effective
Time.
7.16. Employee Benefits. Purchaser will cause to
remain in effect for the benefit of the Company's employees
for a period of at least two years after the Effective Time
all employee benefit plans of the Company and its
Subsidiaries (including the Company's existing severance
policies and programs but excluding stock and incentive
compensation plans and those plans that are the subject of
collective bargaining) in effect on the date of this
Agreement and, with respect to employees who are subject to
collective bargaining, all benefits shall be provided in
accordance with the applicable collective bargaining
agreement ; provided,however, that no severance payments
shall be required to be made to any employee of the Company
or any Company Subsidiary who is not terminated by the
Company or any Company Subsidiary. No amendment shall be made
to any such plan that materially adversely affects the rights
or interests of the plan participants or beneficiaries except
to the extent required by applicable law or to maintain tax
qualifications. In the event that any employee of the Company
or its Subsidiaries is at any time after the Effective Time
transferred to the Purchaser or any affiliate of Purchaser or
becomes a participant in an employee benefit plan, program or
arrangement maintained by or contributed by the Purchaser or
its affiliates, Purchaser shall cause such plan, program or
arrangement to treat the prior service of such employee with
the Company or its Subsidiaries, to the extent such prior
service is recognized under the comparable plan, program or
arrangement of the Company, as service rendered to the
Purchaser or its affiliates, as the case may be; provided,
however, that in administering such plans, programs or
arrangements of Purchaser or its affiliates, Purchaser may
cause a reduction of benefits under any such plans, programs
or arrangements to the extent necessary to avoid duplication
of benefits with respect to the same covered matter or years
of service.
7.17. Conveyance Taxes. The Company and the
Purchaser shall cooperate in the preparation, execution and
filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees,
and any similar taxes which become payable in connection with
the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective
Time.
<PAGE>
7.18. Gains Tax. The Company shall pay, without
deduction or withholding from any amount payable to the
holders of Company Common Stock, any New York State Tax on
Gains Derived from Certain Real Property Transfers (the
"Gains Tax"), New York State Real Estate Transfer Tax, New
York City Real Property Transfer Tax and New York State Stock
Transfer Tax (the "Transfer Taxes") and any similar taxes
imposed by any other State of the United States (and any
penalties and interest with respect to such taxes), which
become payable in connection with the transactions
contemplated by this Agreement, on behalf of the stockholders
of the Company. The Company and the Purchaser shall cooperate
in the preparation, execution and filing of any required
returns with respect to such taxes (including returns on
behalf of the stockholders of the Company) and in the
determination of the portion of the consideration allocable
to the real property of the Company and the Company
Subsidiaries in New York State and City (or in any other
jurisdiction, if applicable). The terms of the Proxy
Statement/Prospectus shall provide that the stockholders of
the Company shall be deemed to have agreed to be bound by the
allocation established pursuant to this Section in the
preparation of any return with respect to the Gains Tax and
the Transfer Taxes and any similar taxes, if applicable.
ARTICLE 8
CONDITIONS
8.1. Conditions to Each Party's Obligation to
Effect the Mergers. The respective obligation of each party
to effect the Mergers shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions
contemplated hereby shall have been approved in the manner
required by applicable law or by the applicable regulations
of any stock exchange or other regulatory body, as the case
may be, by the holders of the issued and outstanding shares
of capital stock of the Company and the Purchaser,
respectively.
(b) The waiting period applicable to the
consummation of the Mergers under the HSR Act shall have
expired or been terminated.
(c) Neither of the parties hereto shall be subject
to any order or injunction of a court of competent
jurisdiction which prohibits the consummation of the
transactions contemplated by this Agreement. In the event any
such order or injunction shall have been issued, each
<PAGE>
party agrees to use its reasonable efforts to have any such
injunction lifted.
(d) The Form S-4 shall have become effective and
shall be effective at the Effective Time, and no stop order
suspending effectiveness of the Form S-4 shall have been
issued, no action, suit, proceeding or investigation by the
SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, or, to the knowledge of the
Purchaser or the Company, threatened, and all necessary
approvals under state securities laws relating to the
issuance or trading of the Purchaser Common Stock to be
issued to the Company stockholders in connection with the
Mergers shall have been received.
(e) All orders and approvals of the FCC required in
connection with the consummation of the transactions
contemplated hereby shall have been obtained or made, whether
or not any appeal or request for reconsideration of such
order is pending, or whether the time for filing any such
appeal or request for reconsideration or for any sua sponte
action by the FCC has expired.
(f) All consents, authorizations, orders and
approvals of (or filings or registrations with) any
governmental commission, board or other regulatory body
(other than the FCC) required in connection with the
execution, delivery and performance of this Agreement shall
have been obtained or made, except for filings in connection
with the Mergers and any other documents required to be filed
after the Effective Time and except where the failure to have
obtained or made any such consent, authorization, order,
approval, filing or registration would not have a material
adverse effect on the business, results of operations or
financial condition of the Purchaser and the Company (and
their respective Subsidiaries), taken as a whole, following
the Effective Time.
(g) The Holding Company Common Stock to be issued
to the Company stockholders in connection with the Mergers
shall have been approved for listing on the NYSE, subject
only to official notice of issuance.
8.2. Conditions to Obligation of Company to Effect
the Mergers. The obligation of the Company to effect the
Mergers shall be subject to the fulfillment at or prior to
the Closing Date of the following conditions:
(a) The Purchaser shall have performed in all
material respects its agreements contained in this Agreement
required to be performed on or prior to the Closing Date, the
representations and warranties of the Purchaser and
<PAGE>
Merger Sub contained in this Agreement and in any document
delivered in connection herewith shall be true and correct as
of the Closing Date, except (i) for changes specifically
permitted by this Agreement and (ii) that those
representations and warranties which address matters only as
of a particular date shall remain true and correct as of such
date, and the Company shall have received a certificate of
the President or a Vice President of the Purchaser, dated the
Closing Date, certifying to such effect.
(b) The Company shall have received the opinion of
Cravath, Swaine & Moore, special counsel to the Company,
based upon reasonably requested representation letters and
dated the Closing Date, to the effect that (i) the Company
Merger will be treated as a transfer of property to Holding
Company by the holders of Company Common Stock described in
Section 351(a) or Section 351(b) of the Code and (ii) no gain
or loss will be recognized for federal income tax purposes by
the Company in connection with the Company Merger.
(c) From the date of this Agreement through the
Effective Time, there shall not have occurred any change in
the financial condition, business or operations of the
Purchaser and its Subsidiaries, taken as a whole, that would
have or would be reasonably likely to have a Purchaser
Material Adverse Effect.
(d) The Holding Company shall have executed a
Registration Rights Agreement substantially in the form
attached hereto as Exhibit B.
8.3. Conditions to Obligation of Purchaser to
Effect the Mergers. The obligation of the Purchaser to effect
the Mergers shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions:
(a) The Company shall have performed in all
material respects its agreements contained in this Agreement
required to be performed on or prior to the Closing Date, the
representations and warranties of the Company contained in
this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing Date,
except (i) for changes specifically permitted by this
Agreement and (ii) that those representations and warranties
which address matters only as of a particular date shall
remain true and correct as of such date, and the Purchaser
shall have received a certificate of the President or a Vice
President of the Company, dated the Closing Date, certifying
to such effect.
(b) The Purchaser shall have received the opinion
of Dewey Ballantine, special counsel to the
<PAGE>
Purchaser, based upon reasonably requested representation
letters and dated the Closing Date, to the effect that (i)
the Purchaser Merger will be treated as an exchange governed
by Section 351 of the Code or as a reorganization governed by
Section 368 of the Code and (ii) no gain or loss will be
recognized for federal income tax purposes by the Purchaser
in connection with the Purchaser Merger.
(c) From the date of this Agreement through the
Effective Time, there shall not have occurred any change in
the financial condition, business or operations of the
Company and its Subsidiaries, taken as a whole, that would
have or would be reasonably likely to have a Company Material
Adverse Effect.
(d) The Stock Agreement shall have remained in full
force and effect through the Effective Time.
(e) After the Effective Time, no person shall have
any right under any stock option plan (or any option granted
thereunder) or other plan, program or arrangement to acquire
any equity securities of the Company.
ARTICLE 9
TERMINATION
9.1. Termination by Mutual Consent. This Agreement
may be terminated and the Mergers may be abandoned at any
time prior to the Effective Time, before or after the
approval of this Agreement by the stockholders of the
Purchaser or the Company, by the mutual consent of the
Purchaser and the Company.
9.2. Termination by Either Purchaser or Company.
This Agreement may be terminated and the Mergers may be
abandoned by action of the Board of Directors of either the
Purchaser or the Company if (a) the Mergers shall not have
been consummated by October 1, 1996, or (b) the approval of
the Company's stockholders required by Section 8.1(a) shall
not have been obtained at a meeting duly convened therefor or
at any adjournment thereof, or (c) the approval of the
Purchaser's stockholders required by Section 8.1(a) shall not
have been obtained at a meeting duly convened therefor or at
any adjournment thereof, (d) a United States federal or state
court of competent jurisdiction or United States federal or
state governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action
shall have become final and
<PAGE>
non-appealable; provided, that the party seeking to terminate
this Agreement pursuant to this clause (d) shall have used
all reasonable efforts to remove such injunction, order or
decree; and provided, in the case of a termination pursuant
to clause (a) above, that the terminating party shall not
have breached in any material respect its obligations under
this Agreement in any manner that shall have proximately
contributed to the failure to consummate the Mergers by
October 1, 1996 or (e) the FCC shall have issued an order or
ruling or taken other action denying approval of the
transactions contemplated by this Agreement, and such order,
ruling or other action shall have become final and
non-appealable.
9.3. Termination by Company. This Agreement may be
terminated and the Mergers may be abandoned at any time prior
to the Effective Time, before or after the adoption and
approval by the stockholders of the Company referred to in
Section 8.1(a), by action of the Board of Directors of the
Company, if (a) in the exercise of its good faith judgment as
to fiduciary duties to its stockholders imposed by law, as
advised by outside counsel, the Board of Directors of the
Company determines that such termination is required by
reason of an Alternative Proposal being made; provided that
the Company shall notify the Purchaser promptly of its
intention to terminate this Agreement or enter into a
definitive agreement with respect to any Alternative
Proposal, but in no event shall such notice be given less
than 48 hours prior to the public announcement of the
Company's termination of this Agreement; or (b) there has
been a breach by the Purchaser of any representation or
warranty contained in this Agreement which would have or
would be reasonably likely to have a Purchaser Material
Adverse Effect; or (c) there has been a material breach of
any of the covenants or agreements set forth in this
Agreement on the part of the Purchaser, which breach is not
curable or, if curable, is not cured within 30 days after
written notice of such breach is given by the Company to the
Purchaser; or (d) the Board of Directors of the Purchaser
shall have withdrawn or modified in a manner materially
adverse to the Company its approval or recommendation of this
Agreement or the Mergers. Notwithstanding the foregoing, the
Company's ability to terminate this Agreement pursuant to
Section 9.2 or this 9.3 is conditioned upon the prior payment
by the Company of any amounts owed by it pursuant to Section
9.5(a)(i).
9.4. Termination by Purchaser. This Agreement may
be terminated and the Mergers may be abandoned at any time
prior to the Effective Time, before or after the approval by
the stockholders of the Purchaser referred to in Section
8.1(a), by action of the Board of Directors of the Purchaser,
if (a) the Board of Directors of the Company
<PAGE>
shall have withdrawn or modified in a manner materially
adverse to the Purchaser its approval or recommendation of
this Agreement or the Mergers or shall have recommended an
Alternative Proposal to the Company stockholders, or (b)
there has been a breach by the Company of any representation
or warranty contained in this Agreement which would have or
would be reasonably likely to have a Company Material Adverse
Effect, or (c) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the
part of the Company, which breach is not curable or, if
curable, is not cured within 30 days after written notice of
such breach is given by the Purchaser to the Company.
9.5. Effect of Termination and Abandonment. (a) In
the event that any person shall have made an Alternative
Proposal for the Company and thereafter (i) this Agreement is
terminated pursuant to Section 9.3(a) or Section 9.4 or (ii)
this Agreement is terminated for any other reason (other than
the breach of this Agreement by the Purchaser and other than
pursuant to Section 9.2(c)) and, in the case of this clause
(ii) only, a definitive agreement with respect to such
Alternative Proposal is executed within one year after such
termination, then the Company shall pay the Purchaser a fee
of $400,000,000, which amount shall be payable by wire
transfer of same day funds either on the date contemplated in
the last sentence of Section 9.3 if applicable or, otherwise,
within two business days after such amount becomes due. The
Company acknowledges that the agreements contained in this
Section 9.5(a) are an integral part of the transactions
contemplated in this Agreement, and that, without these
agreements, the Purchaser would not enter into this
Agreement; accordingly, if the Company fails to promptly pay
the amount due pursuant to this Section 9.5(a), and, in order
to obtain such payment, the Purchaser commences a suit which
results in a judgment against the Company for the fee set
forth in this Section 9.5(a), the Company shall pay to the
Purchaser its costs and expenses (including attorneys' fees)
in connection with such suit, together with interest on the
amount of the fee at the rate of 12% per annum.
(b) In the event of termination of this Agreement
and the abandonment of the Mergers pursuant to this Article
9, all obligations of the parties hereto shall terminate,
except the obligations of the parties pursuant to this
Section 9.5 and Section 7.11 and except for the provisions of
Sections 10.3, 10.4, 10.6, 10.8, 10.9, 10.12, 10.13 and
10.14. Moreover, in the event of termination of this
Agreement pursuant to Section 9.3 or 9.4, nothing herein
shall prejudice the ability of the non-breaching party from
seeking damages from any other party for any willful breach
of this Agreement, including without
<PAGE>
limitation, attorneys' fees and the right to pursue any
remedy at law or in equity.
9.6. Extension, Waiver. At any time prior to the
Effective Time, any party hereto, by action taken by its
Board of Directors, may, to the extent legally allowed, (a)
extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to
such party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party
contained herein. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such
party.
ARTICLE 10
GENERAL PROVISIONS
10.1. Nonsurvival of Representations, Warranties
and Agreements. All representations, warranties and
agreements in this Agreement or in any instrument delivered
pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Mergers and
shall not survive the Mergers, provided, however, that the
agreements contained in Article 4, Section 7.12, Section 7.16
and this Article 10 shall survive the Mergers and Section 9.5
shall survive termination.
10.2. Notices. Any notice required to be given
hereunder shall be sufficient if in writing, and sent by
facsimile transmission and by courier service (with proof of
service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid),
addressed as follows:
If to the Purchaser: If to the Company:
The Walt Disney Company Capital Cities/ABC, Inc.
500 South Buena Vista Street 77 West 66th Street
Burbank, CA 91521 New York, NY 10023
Attention: Attention:
Sanford M. Litvack Alan N. Braverman
Telecopier No.: Telecopier No.:
(818) 563-4160 (212) 456-6908
<PAGE>
With copies to: With copies to:
Dewey Ballantine Cravath, Swaine & Moore
1301 Avenue of the Americas Worldwide Plaza
New York, NY 10019 825 Eighth Avenue
Attention: New York, NY 10019
Morton A. Pierce Attention:
Mark R. Baker Samuel C. Butler
Telecopier No.: Telecopier No.:
(212) 259-6333 (212) 474-3700
or to such other address as any party shall specify by
written notice so given, and such notice shall be deemed to
have been delivered as of the date so telecommunicated,
personally delivered or mailed.
10.3. Assignment; Binding Effect. Neither this
Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the
preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their
respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the
provisions of Section 7.12 and Section 7.16, nothing in this
Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto or their respective
heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by
reason of this Agreement.
10.4. Entire Agreement. This Agreement, the
Exhibits, the Company Disclosure Letter, the Purchaser
Disclosure Letter, the Confidentiality Agreement dated July
29, 1995, between the Company and the Purchaser and any
documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless
made in writing and signed by all parties hereto.
10.5. Amendment. This Agreement may be amended by
the parties hereto, by action taken by their respective
Boards of Directors, at any time before or after approval of
matters presented in connection with the Mergers by the
stockholders of the Company and the Purchaser, but after any
such stockholder approval, no amendment shall be made which
by law requires the further approval of stockholders without
obtaining such further approval. This Agreement may not be
<PAGE>
amended except by an instrument in writing signed on behalf
of each of the parties hereto.
10.6. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware without regard to its rules of conflict of
laws, except that the provisions of Article 2 and Article 4
with respect to the Company Merger shall be governed by and
construed in accordance with the laws of the State of New
York.
10.7. Counterparts. This Agreement may be executed
by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all
such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of
copies hereof each signed by less than all, but together
signed by all of the parties hereto.
10.8. Headings. Headings of the Articles and
Sections of this Agreement are for the convenience of the
parties only, and shall be given no substantive or
interpretive effect whatsoever.
10.9. Interpretation. In this Agreement, unless the
context otherwise requires, words describing the singular
number shall include the plural and vice versa, and words
denoting any gender shall include all genders and words
denoting natural persons shall include corporations and
partnerships and vice versa.
10.10. Waivers. Except as provided in this
Agreement, no action taken pursuant to this Agreement,
including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver
by the party taking such action of compliance with any
representations, warranties, covenants or agreements
contained in this Agreement. The waiver by any party hereto
of a breach of any provision hereunder shall not operate or
be construed as a waiver of any prior or subsequent breach of
the same or any other provision hereunder.
10.11. Incorporation of Exhibits. The Company
Disclosure Letter, the Purchaser Disclosure Letter and all
Exhibits attached hereto and referred to herein are hereby
incorporated herein and made a part hereof for all purposes
as if fully set forth herein.
10.12. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and
<PAGE>
provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision
shall be interpreted to be only so broad as is enforceable.
10.13. Enforcement of Agreement. The parties hereto
agree that irreparable damage would occur in the event that
any of the provisions of this Agreement was not performed in
accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and
provisions hereof in any Delaware Court, this being in
addition to any other remedy to which they are entitled at
law or in equity.
10.14. Subsidiaries. As used in this Agreement, the
word "Subsidiary" when used with respect to any party means
any corporation or other organization, whether incorporated
or unincorporated, of which such party directly or indirectly
owns or controls at least a majority of the securities or
other interests having by their terms ordinary voting power
to elect a majority of the board of directors or others
performing similar functions with respect to such corporation
or other organization, or any organization of which such
party is a general partner. When a reference is made in this
Agreement to Significant Subsidiaries, the words "Significant
Subsidiaries" shall refer to Subsidiaries (as defined above)
which constitute "significant subsidiaries" under Rule 405
promulgated by the SEC under the Securities Act.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement and caused the same to be duly delivered on their
behalf on the day and year first written above.
ATTEST: THE WALT DISNEY COMPANY
By:/s/ David K. Thompson By:/s/ Michael D. Eisner
---------------------- ------------------------
David K. Thompson Michael D. Eisner
Senior Vice President Chairman of the Board
Assistant General Counsel and Chief Executive Officer
ATTEST: CAPITAL CITIES/ABC, INC.
By: /s/ Alan N. Braverman By: /s/ Thomas S. Murphy
--------------------- -----------------------
Alan N. Braverman Thomas S. Murphy
Vice President and Chairman of the Board
General Counsel and Chief Executive Officer
<PAGE>
EXHIBIT A
TO REORGANIZATION
AGREEMENT
FORM OF AFFILIATE LETTER
The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Ladies and Gentlemen:
I have been advised that as of the date of this
letter I may be deemed to be an "affiliate" of __________, a
New York corporation (the "Company"), as the term "affiliate"
is (i) defined for purposes of paragraphs (c) and (d) of Rule
145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended
(the "Act"), or (ii) used in and for purposes of Accounting
Series, Releases 130 and 135, as amended, of the Commission.
Pursuant to the terms of the Agreement and Plan of
Reorganization dated as of _____________, 1995 (the
"Agreement"), between ________________________, a Delaware
corporation (the "Purchaser") and the Company, the Company
will be merged with and into Merger Sub B (as defined in the
Agreement) (the "Merger").
As a result of the Merger, I may receive shares of
Common Stock, par value $.___ per share, of the Holding
Company (as defined in the Agreement) (the "Holding Company
Securities") in exchange for shares owned by me of Common
Stock, par value $.10 per share, of the Company.
I represent, warrant and covenant to the Purchaser
that in the event I receive any Holding Company Securities as
a result of the Merger:
A. I shall not make any sale, transfer or other
disposition of the Holding Company Securities in violation of
the Act or the Rules and Regulations.
B. I have carefully read this letter and the
Agreement and discussed the requirements of such documents
and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of the Purchaser Securities to
the extent I felt necessary, with my counsel or counsel for
the Company.
C. I have been advised that the issuance of Holding
Company Securities to me pursuant to the Merger has been
registered with the Commission under the Act on a
Registration Statement on Form S-4. However, I have also
<PAGE>
been advised that, since at the time the Merger was submitted
for a vote of the stockholders of the Company, I may be
deemed to have been an affiliate of the Company and the
distribution by me of the Holding Company Securities has not
been registered under the Act, I may not sell, transfer or
otherwise dispose of the Holding Company Securities issued to
me in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such
sale, transfer or other disposition is made in conformity
with Rule 145 promulgated by the Commission under the Act, or
(iii) in the opinion of counsel reasonably acceptable to the
Holding Company, or pursuant to a "no action" letter obtained
by the undersigned from the staff of the Commission, such
sale, transfer or other disposition is otherwise exempt from
registration under the Act.
D. I understand that, except as may be provided in
any registration rights agreement entered into by the Holding
Company and the undersigned, the Holding Company is under no
obligation to register the sale, transfer or other
disposition of the Holding Company Securities by me or on my
behalf under the Act or to take any other action necessary in
order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer
instructions will be given to the Holding Company's transfer
agents with respect to the Holding Company Securities and
that there will be placed on the certificates for the Holding
Company Securities issued to me, or any substitutions
therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE
WITH THE TERMS OF AN AGREEMENT DATED ____________,
BETWEEN THE REGISTERED HOLDER HEREOF AND
____________________________, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF
------------------------."
F. I also understand that unless the transfer by me
of my Holding Company Securities has been registered under
the Act or is a sale made in conformity with the provisions
of Rule 145, the Holding Company reserves the right to put
the following legend on the certificates issued to my
transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED
A-2
<PAGE>
SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE
HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY
NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR IN ACCORDANCE WITH AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
It is understood and agreed that the legends set
forth in paragraphs E and F above shall be removed by
delivery of substitute certificates without such legend if
such legend is not required for purposes of the Act or this
Agreement. It is understood and agreed that such legends and
the stop orders referred to above will be removed if (i) two
years shall have elapsed from the date the undersigned
acquired the Securities received in the Merger and the
provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) three years shall have elapsed from the
date the undersigned acquired the Holding Company Securities
received in the Merger and the provisions of Rule 145(d)(3)
are then available to the undersigned, or (iii) the Holding
Company has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to the
Holding Company, or a "no action" letter obtained by the
undersigned from the staff of the Commission, to the effect
that the restrictions imposed by Rule 145 under the Act no
longer apply to the undersigned.
A-3
<PAGE>
Execution of this letter should not be considered
an admission on my part that I am an "affiliate" of the
Company as described in the first paragraph of this letter or
as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this
letter.
Very truly yours,
--------------------------
Name:
Accepted this_______ day of
____________, 199__ by
THE WALT DISNEY COMPANY
By:_________________________
Name:
Title:
A-4
<PAGE>
EXHIBIT B TO
REORGANIZATION AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as
of [ ], 1995, between THE WALT
DISNEY COMPANY, a Delaware corporation (the
"Holding Company"), and the persons listed on
the signature pages hereto (each an
"Affiliate" and collectively, the
"Affiliates").
This Agreement is made pursuant to Section 8.2(d) of the
Agreement and Plan of Reorganization dated as of [ ], 1995 (as such
agreement may be amended from time to time, the "Merger Agreement"),
between [ ], a Delaware corporation (the "Purchaser") and [ ], a
New York corporation (the "Company"). In order to induce each
Affiliate to deliver an Affiliate Letter as contemplated by Section
7.10 of the Merger Agreement, and in further consideration therefor,
the Purchaser has agreed to cause the Holding Company to execute and
deliver this Agreement and provide the registration rights set forth
in this Agreement.
Accordingly, it is hereby agreed as follows:
1. Definitions. Capitalized terms used but not
otherwise defined herein shall have the meanings assigned to
such terms in the Merger Agreement. For purposes of this
Agreement, the following terms shall have the following
meanings:
"Blackout Period" has the meaning specified in
Section 6(a).
"Business Day" means a day, other than a Saturday
or Sunday, on which banking institutions and securities
exchanges in New York, New York are required to be open.
"Counsel to the Holders" means the single law firm
from time to time representing the Holders, as appointed by
the Holders of a majority in number of the Registrable
Securities, which law firm shall be reasonably acceptable to
the Holding Company.
"Effective Period" means, with respect to any
Holder, a period commencing on the date of this Agreement and
ending on the earlier of (i) the first date as of which all
Registrable Securities cease to be Registrable Securities and
(ii) the date on which such Holder may sell
<PAGE>
Registrable Securities in accordance with Rule 145(d)(3)
under the Securities Act.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Holder" means (i) each Affiliate and each person
who is an affiliate (as defined in Rule 405 of the Securities
Act) of such Affiliate that is a holder of Registrable
Securities and (ii) each Person that is a registered holder
of Registrable Securities who received or will receive
certificates for Registrable Securities bearing a legend
pursuant to paragraph E of an Affiliate Letter; provided,
however, that, if such Person is not an Affiliate, such
Person has agreed in writing to become a Holder hereunder and
to be bound by the terms and conditions of this Agreement.
"NASD" means the National Association of Securities
Dealers, Inc.
"Prospectus" means the prospectus included in any
Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered
by any Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such
prospectus.
"Registrable Securities" means, collectively,
(i) the shares of Holding Company Common Stock (including any
associated Rights) issued pursuant to the Merger, (ii) any
shares of securities of the Holding Company purchased
pursuant to the exercise of any Right issued together with a
share of Holding Company Common Stock as described in Section
4.2 of the Merger Agreement (the securities referred to in
(i) and (ii) are, collectively, the "Shares") and (iii) any
securities paid, issued or distributed in respect of any
Shares by way of stock dividend or distribution or stock
split or in connection with a combination of shares,
recapitalization, reorganization, merger, consolidation or
otherwise. Securities will cease to be Registrable Securities
in accordance with Section 2 hereof.
"Registration Expenses" means any and all
reasonable expenses incident to performance of or compliance
with this Agreement, including, without limitation, (i) all
<PAGE>
SEC, NASD and securities exchange registration and filing
fees, (ii) all fees and expenses of complying with state
securities or blue sky laws (including reasonable fees and
disbursements of counsel for any underwriters in connection
with blue sky qualifications of the Registrable Securities),
(iii) all printing, messenger and delivery expenses, (iv) all
fees and expenses incurred in connection with the listing of
the Registrable Securities on any securities exchange or
automated quotation system pursuant to Section 7(h), (v) the
fees and disbursements of counsel for the Holding Company and
of its independent public accountants, (vi) the reasonable
fees and expenses of any special experts retained by the
Holding Company in connection with the requested
registration, (vii) the reasonable fees and expenses of
Counsel to the Holders and (viii) out-of-pocket expenses of
underwriters customarily paid by the issuer to the extent
provided for in any underwriting agreement, but excluding (x)
underwriting discounts and commissions and transfer taxes, if
any, and (y) any fees or disbursements of counsel to the
Holders or any Holder (other than Counsel to the Holders).
"Registration Statement" means any registration
statement of the Holding Company referred to in Section 3 or
4, including any Prospectus, amendments and supplements to
any such registration statement, including post-effective
amendments, and all exhibits and all material incorporated by
reference in any such registration statement.
"Registration Hold Period" means a Section 7(e)
Period or a Section 7(m) Period.
"Related Securities" means any securities of the
Holding Company similar or identical to any of the
Registrable Securities, including, without limitation,
Holding Company Common Stock and all options, warrants,
rights and other securities convertible into, or exchangeable
or exercisable for, Holding Company Common Stock.
"Section 7(e) Period" has the meaning specified in
Section 7(e).
"Section 7(m) Period" has the meaning specified in
Section 7(m).
"Securities Act" means the Securities Act of 1933,
as amended.
<PAGE>
"Shelf Registration" means a "shelf" registration
statement on an appropriate form pursuant to Rule 415 under
the Securities Act (or any successor rule that may be adopted
by the SEC).
"underwritten registration or underwritten
offering" shall mean an underwritten offering in which
securities of the Holding Company are sold to an underwriter
for reoffering to the public.
2. Securities Subject to This Agreement. The
securities entitled to the benefits of this Agreement are the
Registrable Securities. For the purposes of this Agreement,
Registrable Securities will cease to be Registrable
Securities when and to the extent that (i) a Registration
Statement covering Registrable Securities has been declared
effective under the Securities Act and Registerable
Securities have been disposed of pursuant to such effective
Registration Statement, (ii) Registrable Securities are
distributed to the public pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act,
(iii) Registrable Securities have been otherwise transferred
to a party that is not an affiliate of an Affiliate and new
certificates for such Registrable Securities not bearing the
legends specified in paragraphs (E) and (F) of the form of
Affiliate Letter shall have been delivered by the Holding
Company or (iv) Registrable Securities have ceased to be
outstanding.
3. Piggy-Back Registration Rights. (a) Whenever
during the Effective Period the Holding Company shall propose
to file a registration statement under the Securities Act
relating to the public offering of Holding Company Common
Stock for cash pursuant to a firm commitment underwritten
offering (other than pursuant to a registration statement on
Form S-4 or Form S-8 or any successor forms, or filed in
connection with an exchange offer or an offering of
securities solely to existing stockholders or employees of
the Holding Company), the Holding Company shall (i) give
written notice at least 15 Business Days prior to the filing
thereof to each Holder of Registrable Securities then
outstanding, specifying the approximate date on which the
Holding Company proposes to file such registration statement
and advising such Holder of his right to have any or all of
the Registrable Securities then held by such Holder included
among the securities to be covered thereby and (ii) at the
written request of any such Holder given to the Holding
Company at least two Business Days prior to the proposed
filing date, include among the securities covered by such
<PAGE>
registration statement the number of Registrable Securities
which such Holder shall have requested be so included
(subject, however, to reduction in accordance with paragraph
(b) of this Section). The Holding Company shall use
commercially reasonable efforts to cause the managing
underwriter of the proposed underwritten offering to permit
the Holders of Registrable Securities requested to be
included in the Registration Statement for such offering to
include such securities in such offering on the same terms
and conditions as any similar securities of the Holding
Company included therein.
(b) Each Holder of Registrable Securities desiring
to participate in an offering pursuant to Section 3(a) may
include shares of Holding Company Common Stock in any
Registration Statement relating to such offering to the
extent that the inclusion of such shares of Holding Company
Common Stock shall not reduce the number of shares of Holding
Company Common Stock to be offered and sold by the Holding
Company or any other person (other than a Holder) pursuant
thereto. If the lead managing underwriter selected by the
Holding Company for an underwritten offering pursuant to
Section 3(a) determines that marketing factors require a
limitation on the number of shares of Holding Company Common
Stock to be offered and sold by the stockholders of the
Holding Company in such offering, there shall be included in
the offering only that number of shares of Holding Company
Common Stock, if any, that such lead managing underwriter
reasonably and in good faith believes will not jeopardize the
success of the offering of all the shares of Holding Company
Common Stock that the Holding Company desires to sell for its
own account. In such event and provided the managing
underwriter has so notified the Holding Company in writing,
the number of shares of Holding Company Common Stock to be
offered and sold by stockholders of the Holding Company,
including Holders of Registrable Securities, desiring to
participate in such offering shall be allocated among such
stockholders of the Holding Company on a pro rata basis based
on their holdings of Holding Company Common Stock (subject to
any written agreements between two or more Holders requiring
a different priority).
(c) Nothing in this Section 3 shall create any
liability on the part of the Holding Company to the Holders
of Registrable Securities if the Holding Company for any
reason should decide not to file a registration statement
proposed to be filed under Section 3(a) or to withdraw such
registration statement subsequent to its filing, regardless
<PAGE>
of any action whatsoever that a Holder may have taken,
whether as a result of the issuance by the Holding Company of
any notice hereunder or otherwise.
(d) A request by Holders to include Registrable
Securities in a proposed underwritten offering pursuant to
Section 3(a) shall not be deemed to be a request for a demand
registration pursuant to Section 4.
4. Demand Registration Rights. (a) Upon the written
request during the Effective Period of Holders of at least
25% of the Registrable Securities that the Holding Company
effect the registration with the SEC under and in accordance
with the provisions of the Securities Act of all or part of
such Holder's or Holders' Registrable Securities (which
written request shall specify the aggregate number of shares
of Registrable Securities requested to be registered and the
means of distribution), the Holding Company will file a
Registration Statement covering such Holder's or Holders'
Registrable Securities requested to be registered within 20
Business Days after receipt of such request; provided,
however, that the Holding Company shall not be required to
take any action pursuant to this Section 4:
(1) if prior to the date of such request the
Holding Company shall have effected three
registrations pursuant to this Section 4;
(2) if the Holding Company has effected a
registration pursuant to this Section 4 within the
120- day period next preceding such request which
permitted Holders of Registrable Securities to
register Registrable Securities;
(3) if the Holding Company shall at the time
have effective a Shelf Registration pursuant to
which the Holder or Holders that requested
registration could effect the disposition of such
Holder's or Holders' Registrable Securities in the
manner requested;
(4) if the Registrable Securities which the
Holding Company shall have been requested to
register shall have a then current market value of
less than $50,000,000, unless such registration
request is for all remaining Registrable Securities;
or
(5) during the pendency of any Blackout Period;
<PAGE>
provided further, however, that the Holding Company shall be
permitted to satisfy its obligations under this Section 4(a)
by amending (to the extent permitted by applicable law) any
registration statement previously filed by the Holding
Company under the Securities Act so that such registration
statement (as amended) shall permit the disposition (in
accordance with the intended methods of disposition specified
as aforesaid) of all of the Registrable Securities for which
a demand for registration has been made under this Section
4(a). If the Holding Company shall so amend a previously
filed registration statement, it shall be deemed to have
effected a registration for purposes of this Section 4.
(b) The Holders delivering such request may
distribute the Registrable Securities covered by such request
by means of an underwritten offering or any other means, as
determined by the Holders of a majority of Registrable
Securities so requested to be registered.
(c) A registration requested pursuant to this
Section 4 shall not be deemed to be effected for purposes of
this Section 4 if it has not been declared effective by the
SEC or become effective in accordance with the Securities Act
and the rules and regulations thereunder.
(d) Holders of a majority in number of the
Registrable Securities to be included in a Registration
Statement pursuant to this Section 4 may, at any time prior
to the effective date of the Registration Statement relating
to such registration, revoke such request by providing a
written notice to the Holding Company revoking such request.
The Holders of Registrable Securities who revoke such request
shall reimburse the Holding Company for all its out-
of-pocket expenses incurred in the preparation, filing and
processing of the Registration Statement; provided, however,
that, if such revocation was based on (x) the Holding
Company's failure to comply in any material respect with its
obligations hereunder or (y) the occurrence of a Blackout
Period, such reimbursement shall not be required and the
remaining provisions of this Section 4(d) shall not apply.
(e) The Holding Company will not include any
securities which are not Registrable Securities in any
Registration Statement filed pursuant to a demand made under
this Section 4 without the prior written consent of the
Holders of a majority in number of the Registrable Securities
covered by such Registration Statement.
<PAGE>
5. Selection of Underwriters. In connection with
any underwritten offering pursuant to a Registration
Statement filed pursuant to a demand made pursuant to Section
4, Holders of a majority in number of the Registrable
Securities to be included in the Registration Statement shall
have the right to select a managing underwriter or
underwriters to administer the offering, which managing
underwriter or underwriters shall be reasonably satisfactory
to the Holding Company.
6. Blackout Period. (a) If (i) during the Effective
Period, the Holding Company shall file or propose to file a
registration statement (other than in connection with the
registration of securities issuable pursuant to a continuous
"at the market offering" pursuant to Rule 415(a)(4) under the
Securities Act, an employee stock option, stock purchase,
dividend reinvestment plan or similar plan or pursuant to a
merger, exchange offer or a transaction of the type specified
in Rule 145(a) under the Securities Act) with respect to any
securities of the Holding Company and (ii) with reasonable
prior notice, (A) the Holding Company (in the case of a
non-underwritten offering pursuant to such registration
statement) advises the Holders in writing that a sale or
distribution of Registrable Securities would adversely affect
such offering or (B) the managing underwriter or underwriters
(in the case of an underwritten offering) advise the Holding
Company in writing (in which case the Holding Company shall
notify the Holders), that a sale or distribution of
Registrable Securities would adversely affect such offering,
then the Holding Company shall not be obligated to effect the
initial filing of a Registration Statement pursuant to
Section 4 during the period commencing on the date that is 30
days prior to the date the Holding Company in good faith
estimates (as certified in writing by an officer of the
Holding Company to the Holder following a request for
registration pursuant to Section 4(a)) will be the date of
filing of, and ending on the date which is 90 days following
the effective date of, such registration statement (a
"Section 6(a) Period").
(b) If the Holding Company determines in good faith
that the registration and distribution of Registrable
Securities (i) would materially impede, delay or interfere
with any pending financing (other than a financing of the
type described in Section 6(a)), acquisition, corporate
reorganization or other significant transaction involving the
Holding Company or (ii) would require disclosure of non-
public material information, the disclosure of which would
<PAGE>
materially and adversely affect the Holding Company, and, in
the case of (ii), the Holding Company is concurrently
forbidding purchases or sales in the open market by senior
executives of the Holding Company, the Holding Company shall
promptly give the Holders written notice of such
determination and shall be entitled to postpone the filing or
effectiveness of a Registration Statement for a reasonable
period of time not to exceed 90 days (a "Section 6(b) Period"
and, together with a Section 6(a) Period, a "Blackout
Period"); provided, however, that the Holding Company shall
deliver to Counsel to the Holders (as identified at such time
to the Company) a general statement, signed by an officer of
the Holding Company, of the reasons for such postponement or
restriction on use and an estimate of the anticipated delay.
The Holding Company shall promptly notify each Holder of the
expiration or earlier termination of a Section 6(b) Period.
(c) Notwithstanding anything in this Section 6 to
the contrary, (i) the beginning of any Blackout Period shall
be at least 120 days after the end of the prior Blackout
Period and (ii) the aggregate number of days included in all
Blackout Periods and all Registration Hold Periods during any
consecutive 12 month period during the Effective Period shall
not exceed 180 days.
7. Registration Procedures. If and whenever the
Holding Company is required to use commercially reasonable
efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided
in this Agreement, the Holding Company will, as expeditiously
as possible:
(a) prepare and file with the SEC a Registration
Statement with respect to such Registrable Securities on
any form for which the Holding Company then qualifies or
which counsel for the Holding Company shall deem
appropriate, and which form shall be available for the
sale of the Registrable Securities in accordance with
the intended methods of distribution thereof (including,
if so requested by the Holders, distributions under Rule
415 under the Securities Act pursuant to a Shelf
Registration Statement), and use commercially reasonable
efforts to cause such Registration Statement to become
and remain effective;
(b) prepare and file with the SEC amendments and
post-effective amendments to such Registration Statement
and such amendments and supplements to the
<PAGE>
Prospectus used in connection therewith as may be
necessary to maintain the effectiveness of such
registration or as may be required by the rules,
regulations or instructions applicable to the
registration form utilized by the Holding Company or by
the Securities Act or rules and regulations thereunder
necessary to keep such Registration Statement effective
for up to 90 days, in the case of an underwritten
offering, or 180 days, in any other case (or longer
period in the event of a Registration Hold Period during
such 90 or 180 days, as provided in this Section 7) and
cause the Prospectus as so supplemented to be filed
pursuant to Rule 424 under the Securities Act, and to
otherwise comply with the provisions of the Securities
Act with respect to the disposition of all securities
covered by such Registration Statement until the earlier
of (x) such 90th or 180th day (or longer period) and (y)
such time as all Registrable Securities covered by such
Registration Statement have ceased to be Registrable
Securities; provided that a reasonable time before
filing a Registration Statement or Prospectus, or any
amendments or supplements thereto, the Holding Company
will furnish to the Holders, the managing underwriter
and their respective counsel for review and comment,
copies of all documents proposed to be filed and will
not file any such documents (other than as aforesaid) to
which any of them reasonably object prior to the filing
thereof;
(c) furnish to each Holder of such Registrable
Securities such number of copies of such Registration
Statement and of each amendment and post-effective
amendment thereto (in each case including all exhibits),
any Prospectus or Prospectus supplement and such other
documents as such Holder may reasonably request in order
to facilitate the disposition of the Registrable
Securities by such Holder (the Holding Company hereby
consenting to the use (subject to the limitations set
forth in the last paragraph of this Section 7) of the
Prospectus or any amendment or supplement thereto in
connection with such disposition);
(d) use commercially reasonable efforts to register
or qualify such Registrable Securities covered by such
Registration Statement under such other securities or
blue sky laws of such jurisdictions as each Holder shall
reasonably request, and do any and all other acts and
things which may be reasonably
<PAGE>
necessary or advisable to enable such Holder to
consummate the disposition in such jurisdictions of the
Registrable Securities owned by such Holder, except that
the Holding Company shall not for any such purpose be
required to qualify generally to do business as a
foreign corporation in any jurisdiction where, but for
the requirements of this Section 7(d), it would not be
obligated to be so qualified, to subject itself to
taxation in any such jurisdiction, or to consent to
general service of process in any such jurisdiction;
(e) notify each Holder of any such Registrable
Securities covered by such Registration Statement, at
any time when a Prospectus relating thereto is required
to be delivered under the Securities Act within the
appropriate period mentioned in Section 7(b), of the
Holding Company's becoming aware that the Prospectus
included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances then existing
(the period during which the Holders are required to
refrain from effective public sales or distributions in
such case being referred to as a "Section 7(e) Period"),
and prepare and furnish to such Holder a reasonable
number of copies of an amendment to such Registration
Statement or related Prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such
Registrable Securities, such Prospectus shall not
include an untrue statement of a material fact or omit
to state a material fact required to be stated therein
or necessary to make the statements therein not
misleading in light of the circumstances then existing,
and the time during which such Registration Statement
shall remain effective pursuant to Section 7(b) shall be
extended by the number of days in the Section 7(e)
Period;
(f) notify each Holder of Registrable Securities
covered by such Registration Statement at any time,
(1) when the Prospectus or any Prospectus
supplement or post-effective amendment has been
filed, and, with respect to the Registration
Statement or any post-effective amendment, when the
same has become effective;
<PAGE>
(2) of any request by the SEC for amendments
or supplements to the Registration Statement or the
Prospectus or for additional information;
(3) of the issuance by the SEC of any stop
order of which the Holding Company or its counsel
is aware or should be aware suspending the
effectiveness of the Registration Statement or any
order preventing the use of a related Prospectus,
or the initiation or any threats of any proceedings
for such purposes;
(4) of the receipt by the Holding Company of
any written notification of the suspension of the
qualification of any of the Registrable Securities
for sale in any jurisdiction or the initiation or
any threats of any proceeding for that purpose; and
(5) if at any time the representations and
warranties of the Holding Company contemplated by
paragraph (i)(1) below cease to be true and correct
in any material respect;
(g) otherwise use commercially reasonable efforts
to comply with all applicable rules and regulations of
the SEC, and make available to the Holders an earnings
statement which shall satisfy the provisions of Section
11(a) of the Securities Act, provided that the Holding
Company shall be deemed to have complied with this
paragraph if it has complied with Rule 158 under the
Securities Act;
(h) use commercially reasonable efforts to cause
all such Registrable Securities to be listed on any
securities exchange or automated quotation system on
which the Holding Company Common Stock is then listed,
if such Registrable Securities are not already so listed
and if such listing is then permitted under the rules of
such exchange or automated quotation system, and to
provide a transfer agent and registrar for such
Registrable Securities covered by such Registration
Statement no later than the effective date of such
Registration Statement;
(i) enter into agreements (including underwriting
agreements) and take all other appropriate and
reasonable actions in order to expedite or facilitate
the disposition of such Registrable Securities and in
<PAGE>
such connection, whether or not an underwriting
agreement is entered into and whether or not the
registration is an underwritten registration:
(1) make such representations and warranties
to the Holders of such Registrable Securities and
the underwriters, if any, in form, substance and
scope as are customarily made by issuers to
underwriters in comparable underwritten offerings;
(2) obtain opinions of counsel to the Holding
Company thereof (which counsel and opinions (in
form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any,
and the Holders of a majority in number of the
Registrable Securities being sold) addressed to
each Holder and the underwriters, if any, covering
the matters customarily covered in opinions
requested in comparable underwritten offerings and
such other matters as may be reasonably requested
by the Holders of a majority in number of the
Registrable Securities being sold and the managing
underwriter, if any;
(3) obtain "cold comfort" letters and
bring-downs thereof from the Holding Company's
independent certified public accountants addressed
to the selling Holders of Registrable Securities
and the underwriters, if any, such letters to be in
customary form and covering matters of the type
customarily covered in "cold comfort" letters by
independent accountants in connection with
underwritten offerings;
(4) if requested, provide indemnification in
accordance with the provisions and procedures of
Section 10 hereof to all parties to be indemnified
pursuant to said Section; and
(5) deliver such documents and certificates as
may be reasonably requested by the Holders of a
majority in number of the Registrable Securities
being sold and the managing underwriters, if any,
to evidence compliance with clause (f) above and
with any customary conditions contained in the
underwriting agreement or other agreement entered
into by the Holding Company.
<PAGE>
(j) cooperate with the Holders of Registrable
Securities covered by such Registration Statement and
the managing underwriter or underwriters or agents, if
any, to facilitate, to the extent commercially
reasonable under the circumstances, the timely
preparation and delivery of certificates (not bearing
any restrictive legends) representing the securities to
be sold under such Registration Statement, and enable
such securities to be in such denominations and
registered in such names as the managing underwriter or
underwriters or agents, if any, or such Holders may
request;
(k) if reasonably requested by the managing
underwriter or underwriters or a Holder of Registrable
Securities being sold in connection with an underwritten
offering, incorporate in a Prospectus supplement or
post-effective amendment such information as the
managing underwriters and the Holders of a majority in
number of the Registrable Securities being sold agree
should be included therein relating to the plan of
distribution with respect to such Registrable
Securities, including, without limitation, information
with respect to the principal amount of Registrable
Securities being sold to such underwriters, the purchase
price being paid therefor by such underwriters and with
respect to any other terms of the underwritten offering
of the Registrable Securities to be sold in such
offering and make all required filings of such
Prospectus supplement or post-effective amendment as
promptly as practicable upon being notified of the
matters to be incorporated in such Prospectus supplement
or post-effective amendment;
(l) provide any Holder of Registrable Securities
included in such Registration Statement, any underwriter
participating in any disposition pursuant to such
Registration Statement and any attorney, accountant or
other agent retained by any such Holder or underwriter
(collectively, the "Inspectors") with reasonable access
to appropriate officers of the Holding Company and the
Holding Company's subsidiaries to ask questions and to
obtain information reasonably requested by any such
Inspector and make available for inspection all
financial and other records and other information,
pertinent corporate documents and properties of any of
the Holding Company and its subsidiaries and affiliates
(collectively, the "Records"), as shall be reasonably
necessary to enable
<PAGE>
them to exercise their due diligence responsibility;
provided, however, that the Records that the Holding
Company determines, in good faith, to be confidential
and which it notifies the Inspectors in writing are
confidential shall not be disclosed to any Inspector
unless such Inspector signs a confidentiality agreement
reasonably satisfactory to the Holding Company but in
any event permitting disclosure by an Inspector if (i)
the disclosure of such Records is necessary to avoid or
correct a misstatement or omission of a material fact in
such Registration Statement or (ii) the release of such
Records is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction; provided
further, however, that any decision regarding the
disclosure of information pursuant to subclause (i)
shall be made only after consultation with counsel for
the applicable Inspectors. Each Holder of Registrable
Securities agrees that it will, promptly after learning
that disclosure of such Records is sought in a court
having jurisdiction, give notice to the Holding Company
and allow the Holding Company, at the Holding Company's
expense, to undertake appropriate action to prevent
disclosure of such Records; and
(m) in the event of the issuance of any stop order
of which the Holding Company or its counsel is aware or
should be aware suspending the effectiveness of the
Registration Statement or of any order suspending or
preventing the use of any related Prospectus or
suspending the qualification of any Registrable
Securities included in the Registration Statement for
sale in any jurisdiction, the Holding Company will use
commercially reasonable efforts promptly to obtain its
withdrawal; and the period for which the Registration
Statement shall be kept effective shall be extended by a
number of days equal to the number of days between the
issuance and withdrawal of any stop orders (a "Section
7(m) Period").
The Holding Company may require each Holder of
Registrable Securities as to which any registration is being
effected to furnish the Holding Company with such information
regarding such Holder and pertinent to the disclosure
requirements relating to the registration and the
distribution of such securities as the Holding Company may
from time to time reasonably request in writing.
<PAGE>
Each Holder of Registrable Securities agrees that,
upon receipt of any notice from the Holding Company of the
happening of any event of the kind described in Section 7(e),
such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the Prospectus or
Registration Statement covering such Registrable Securities
until such Holder's receipt of the copies of the supplemented
or amended Prospectus contemplated by Section 7(e), and, if
so directed by the Holding Company, such Holder will deliver
to the Holding Company (at the Holding Company's expense) all
copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
8. Registration Expenses. The Holding Company will
pay all Registration Expenses in connection with all
registrations of Registrable Securities pursuant to Sections
3 and 4 upon the written request of any of the Holders, and
each Holder shall pay (x) any fees or disbursements of
counsel to such Holder (other than Counsel to the Holders)
and (y) all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition
of such Holder's Registrable Securities pursuant to the
Registration Statement.
9. Reports Under the Exchange Act. The Holding
Company agrees to:
(a) file with the SEC in a timely manner all
reports and other documents required of the Holding
Company under the Exchange Act; and
(b) furnish to any Holder, during the Effective
Period, forthwith upon request (A) a written statement
by the Holding Company that it has complied with the
current public information and reporting requirements of
Rule 144 under the Securities Act and the Exchange Act
and (B) a copy of the most recent annual or quarterly
report of the Holding Company and such other reports and
documents so filed by the Holding Company.
10. Indemnification; Contribution.
(a) Indemnification by the Holding Company. The Holding
Company agrees to indemnify and hold harmless each Holder of
Registrable Securities, its officers, directors, agents,
trustees, stockholders and each Person who controls such
Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act), against all losses,
<PAGE>
claims, damages, liabilities and expenses (including
reasonable attorneys' fees, disbursements and expenses)
incurred by such party pursuant to any actual or threatened
action, suit, proceeding or investigation arising out of or
based upon (i) any violation by the Holding Company (or its
officers, directors or controlling persons) of any Federal or
state law, rule or regulation applicable to the Holding
Company and relating to any action required or inaction by
the Holding Company (or such other person) in connection with
any Registration Statement, (ii) any untrue or alleged untrue
statement of material fact contained in the Registration
Statement, any Prospectus or preliminary Prospectus, or any
amendment or supplement to any of the foregoing or (iii) any
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein (in the case of a Prospectus or a
preliminary Prospectus, in light of the circumstances then
existing) not misleading, except in each case insofar as the
same arise out of or are based upon any such untrue statement
or omission made in reliance on and in conformity with
information with respect to such indemnified party furnished
in writing to the Holding Company by such indemnified party
or its counsel expressly for use therein. In connection with
an underwritten offering, the Holding Company will indemnify
the underwriters thereof, their officers, directors, agents,
trustees, stockholders and each Person who controls such
underwriters (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the same
extent as provided above with respect to the indemnification
of the Holders of Registrable Securities. Notwithstanding the
foregoing provisions of this Section 10(a), the Holding
Company will not be liable to any Holder of Registrable
Securities (or any officer, director, agent, trustee,
stockholder or controlling person thereof), any Person who
participates as an underwriter in the offering or sale of
Registrable Securities or any other Person, if any, who
controls such Holder or underwriter (within the meaning of
Section 15 of the Securities Act or Section 20 of the
Exchange Act), under the indemnity agreement in this Section
10(a) for any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense that arises out
of such Holder's or other Person's failure to send or deliver
a copy of the final Prospectus to the Person asserting an
untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of
the sale of the Registrable Securities to such Person if such
statement or omission was corrected in such final Prospectus
and the Holding Company has previously furnished copies
thereof to
<PAGE>
such Holder or other Person in accordance with this
Agreement.
(b) Indemnification by Holders of Registrable
Securities. In connection with the Registration Statement,
each Holder will furnish to the Holding Company in writing
such information, including the name, address and the amount
of Registrable Securities held by such Holder, as the Holding
Company reasonably requests for use in such Registration
Statement or the related Prospectus and agrees to indemnify
and hold harmless (in the same manner and to the same extent
as set forth in Section 10(a)) the Holding Company, all other
Holders or any underwriter, as the case may be, and any of
their respective affiliates, directors, officers, agents,
trustees, stockholders and controlling Persons (within the
meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act), against any losses, claims, damages,
liabilities and expenses resulting from (i) any violation by
such Holder (or its officers, directors, agents, trustees,
stockholders or controlling persons) of any Federal or state
law, rule or regulation relating to action required of or
inaction by such Holder (or other Person) in connection with
its offer and sale of Registrable Securities and (ii) any
untrue or alleged untrue statement of a material fact
contained in, or any omission or alleged omission of a
material fact required to be stated in, such Registration
Statement or Prospectus or any amendment or supplement to
either of them or necessary to make the statements therein
(in the case of a Prospectus, in the light of the
circumstances then existing) not misleading, but only to the
extent that any such untrue statement or omission is made in
reliance on and in conformity with information with respect
to such Holder furnished in writing to the Holding Company by
such Holder or its counsel specifically for inclusion
therein.
(c) Conduct of Indemnification Proceedings. Any
Person entitled to indemnification hereunder agrees to give
prompt written notice to the indemnifying party after the
receipt by such indemnified party of any written notice of
the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which
such indemnified party may claim indemnification or
contribution pursuant to this Agreement (provided that
failure to give such notification shall not affect the
obligations of the indemnifying party pursuant to this
Section 10 except to the extent the indemnifying party shall
have been actually prejudiced as a result of such failure).
In case any such action shall be brought against any
<PAGE>
indemnified party and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party
shall not be liable to such indemnified party under these
indemnification provisions for any legal expenses of other
counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation,
unless in the reasonable judgment of any indemnified party a
conflict of interest is likely to exist, based on the written
opinion of counsel, between such indemnified party and any
other of such indemnified parties with respect to such claim,
in which event the indemnifying party shall be obligated to
pay the reasonable fees and expenses of such additional
counsel or counsels. No indemnifying party, in defense of any
such action, suit, proceeding or investigation, shall, except
with the consent of each indemnified party, consent to the
entry of any judgment or entry into any settlement which does
not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such action, suit,
proceeding or investigation to the extent the same is covered
by the indemnity obligation set forth in this Section 10. No
indemnified party shall consent to entry of any judgment or
enter into any settlement without the consent of each
indemnifying party.
(d) Contribution. If the indemnification from the
indemnifying party provided for in this Section 10 is
unavailable to an indemnified party hereunder in respect of
any losses, claims, damages, liabilities or expenses referred
to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and expenses in
such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified party in
connection with the actions which resulted in such losses,
claims, damages, liabilities and expenses, as well as any
other relevant equitable considerations. The relative fault
of such indemnifying party and indemnified party shall be
<PAGE>
determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct
or prevent such action. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 10(c), any
legal and other fees and expenses reasonably incurred by such
indemnified party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 10(d)
were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section
10(d), no underwriter shall be required to contribute any
amount in excess of the underwriting discount or commission
applicable to the Registrable Securities underwritten by it.
No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation. Each Holder's
obligation to contribute is several in the proportion that
the proceeds of the offering received by such Holder bears to
the total proceeds of the offering, and not joint.
If indemnification is available under this Section
10, the indemnifying parties shall indemnify each indemnified
party to the full extent provided in Section 10(a) or (b), as
the case may be, without regard to the relative fault of said
indemnifying parties or indemnified party or any other
equitable consideration provided for in this Section 10(d).
(e) In no event shall any Holder of Registrable
Securities be liable or required to contribute any amount
under this Section 10 or otherwise in respect of any untrue
or alleged untrue statement or omission or alleged omission
for amounts in excess of the amount by which the total price
at which the Registrable Securities of such Holder were
offered to the public exceeds the amount of any damages
<PAGE>
which such Holder has otherwise been required to pay by
reason of such untrue statement or omission.
(f) The provisions of this Section 10 shall be in
addition to any liability which any indemnifying party may
have to any indemnified party and shall survive the
termination of this Agreement.
11. Participation in Underwritten Offerings. No
Holder of Registrable Securities may participate in any
underwritten offering pursuant to Section 3 hereunder unless
such Holder (a) agrees to sell such Holder's securities on
the basis provided in any underwriting arrangements approved
by the Holding Company in its reasonable discretion and (b)
completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such
underwriting arrangements.
12. Miscellaneous. (a) Remedies. Each Holder of
Registrable Securities in addition to being entitled to
exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its
rights under this Agreement.
(b) Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given,
unless the Holding Company has obtained the written consent
of Holders of at least a majority in number of the
Registrable Securities then outstanding.
(c) Notices. Any notice required to be given
hereunder shall be sufficient if in writing, and sent by
facsimile transmission and by courier service (with proof of
service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid),
addressed as follows:
(i) if to a Holder of Registrable Securities, at
the address of such Holder below such Holder's name on
the signature pages hereof or, if not a party hereto or
the date hereof, such other address as such Holder may
designate to the Holding Company in writing; and
<PAGE>
(ii) if to the Holding Company to:
with copies to:
or to such other address as any party shall specify by
written notice so given, and such notice shall be deemed to
have been delivered as of the date so telecommunicated,
personally delivered or mailed.
(d) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the parties
hereto, any Holder other than the Affiliates and any
successors thereof; provided, however, that (i) any Holder
shall have agreed in writing to become a Holder under this
Agreement and to be bound by the terms and conditions hereof
and (ii) subject to clause (i), this Agreement and the
provisions of this Agreement that are for the benefit of the
Holders shall not be assignable by any Holder to any Person
that is not so permitted to be a Holder, and any such
purported assignment shall be null and void.
(e) Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered
one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the
parties and delivered to the other parties.
(f) Descriptive Headings. The descriptive headings
used herein are inserted for convenience of reference only
and are not intended to be part of or to affect the meaning
or interpretation of this Agreement.
(g) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
New York, regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof.
(h) Severability. In the event that any one or more
of the provisions contained herein, or the application
thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every
other respect and of the remaining provisions contained
herein shall not be in any way impaired thereby and that all
<PAGE>
remaining provisions contained herein shall not be in any way
impaired thereby.
(i) Entire Agreement. This Agreement is intended by
the parties as a final expression and a complete and
exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter hereof. There
are no restrictions, promises, warranties or undertakings
with respect to the subject matter hereof, other than those
set forth or referred to herein and therein. This Agreement
supersedes all prior agreements and understandings between
the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
THE WALT DISNEY COMPANY,
by
-------------------------
Name:
Title:
[AFFILIATES],
by
-------------------------
Name:
Title:
EXHIBIT 99.1
Contact: Capital Cities/ABC Inc. The Walt Disney Company
----------------------- -----------------------
Patricia J. Matson, Media John Dreyer, Media
212-456-7325 818-560-5300
Julie Hoover, Media Tom Deegan, Media
212-456-6641 818-560-1572
Joseph M. Fitzgerald, Investors Winifred Markus Webb, Investors
212-456-7008 818-560-5758
For Immediate Release
---------------------
DISNEY, CAPITAL CITIES/ABC AGREE TO MERGE
--$19 Billion Transaction Will Enhance Shareholder
Values By Creating World's Leading Entertainment
And Communications Company--
BURBANK, CA, AND NEW YORK, JULY 31,1995--The Walt Disney Company
(NYSE: DIS) and Capital Cities/ABC Inc. (NYSE: CCB), two of the
world's leading entertainment and media companies, today announced
that they have agreed to merge. The combined enterprise will have a
unique ability in creating, packaging and delivering entertainment,
news, and sports--all of which will generate significant new
opportunities for domestic and international growth.
Under terms of the agreement, which has been approved by the Board of
Directors of each company, Capital Cities/ABC shareholders will have
the right to receive one share of Disney common stock and $65 in cash
for each of their shares. At current share prices, the value of the
transaction is approximately $19 billion.
In a joint statement, Michael D. Eisner and Thomas S. Murphy, chairman
and chief executive officer of Disney and Capital Cities/ABC,
respectively, said: "The combined company will become a vital and
dynamic force in the entertainment and media business, reaching family
audiences worldwide and providing them with unparalleled news,
information and entertainment both inside and outside the home.
"Disney and Capital Cities/ABC have created some of the most
recognized and respected brands in the world. The merger will create
tremendous value for the shareholders of each company by taking full
advantage of the complementary strengths of each organization. The
combined enterprise will be better equipped to
<PAGE>
grow, to provide valuable services for our viewers, listeners,
readers, sports fans and vacationers, and to capture the imagination
of future generations."
As a result of the merger, Capital Cities/ABC Inc. will become a
wholly-owned subsidiary of Disney. The combined enterprise, which will
be known as The Walt Disney Company, will be led by Mr. Eisner, who
will continue as chairman and CEO. Mr. Murphy, chairman and CEO of
Capital Cities/ABC, will relinquish his current titles on the
effective date of the merger and join Disney's Board of Directors.
Robert A. Iger will continue in his role as president of Capital
Cities/ABC. The companies had combined annual revenues in 1994 of
approximately $16.5 billion.
"This transaction is a once-in-a-lifetime opportunity to create an
outstanding entertainment and media company," Mr. Eisner said. "The
merger positions us for substantial growth worldwide and puts us in a
strong competitive position in an industry which, by this transaction,
we are helping to define. The Walt Disney Company will now have more
global outlets to provide the highest quality entertainment, news and
sports programming."
"We sought a merger with Capital Cities/ABC in particular because of
our tremendous respect for the management team Tom Murphy has
assembled and the outstanding collection of broadcasting and
publishing assets they have built," Mr. Eisner said.
Mr. Murphy said, "This is a terrific opportunity for our shareholders
and employees and will result in a world-class organization dedicated
to providing the finest in information, entertainment and news. The
dynamism of Disney, under the leadership of Michael Eisner, combined
with the experience and energy of our operations under Bob Iger, makes
this the most exciting new business venture in many years."
Mr. Iger said, "I have always had tremendous respect for The Walt
Disney Company and its excellent management. Our assets and reach can
help increase the scope of what is already a world-wide enterprise;
but it will be our enthusiasm and spirit, added to theirs, that will
give this combination a special dimension. I am very excited to be a
part of this new venture and to have the opportunity to help build a
unique force in international media."
Under terms of the merger, any shareholder of Capital Cities/ABC can
elect to receive proportionally more cash or common stock than
provided for in the exchange ratio, subject to proration if either the
stock or cash portion is oversubscribed, and subject
<PAGE>
to the option of Disney to increase the cash portion if requested by
Capital Cities/ABC shareholders.
The transaction, which is subject to regulatory review and approval of
the shareholders of each company, is expected to be completed by early
1996. The companies noted that because their businesses are
complementary, they do not expect staff reductions as a result of the
combination.
The Walt Disney Company is a worldwide leader in motion pictures and
television production, theme parks and consumer products. Its film
division, led by the success of animated titles like Pocahontas, The
Lion King, and Aladdin, has been either first or second at the
domestic theatrical box office over the past five years.
In television, Disney offers more than 58 hours a week of network and
syndicated shows in the U.S. Two of its top network shows, Home
Improvement and Ellen, run on the ABC network. Disney will establish a
new record with the launch of 9 new shows in syndication during the
1995 season. In addition, Disney's international television
programming is seen by audiences on every continent.
The Disney Channel, with 14 million U.S. subscribers, is currently
extending its reach overseas. It made its foreign debut in Taiwan this
spring and will debut in the U.K. this fall. Disney recently launched
Super RTL as a joint-venture channel in Germany with a significant
amount of Disney programming.
In addition to its film and television activities, Disney owns and
operates theme parks in California (Disneyland) and Florida (Walt
Disney World). The company also receives royalties from Tokyo
Disneyland and owns 39% of Disneyland Paris. Disney also licenses its
characters to manufacturers worldwide, operates 400 Disney Stores
around the world, and publishes books, magazines and music.
In addition to the ABC Television Network, which consists of 225
affiliated stations reaching 99.9 percent of the nation's television
households, Capital Cities/ABC owns and operates 8 television
stations, with plans to purchase two others in August, reaching about
25 percent of the U.S. market.
Capital Cities/ABC also has a significant and rapidly expanding
international operation--one of the most aggressive of any U.S. media
company. These holdings include significant equity interests in
Tele-Munchen and RTL2, Munich; Scandinavian
<PAGE>
Broadcasting Systems, Luxembourg; Hamster Productions and Eurosport,
Paris; and The Japan Sports Channel, Tokyo.
Capital Cities/ABC also owns:
o 80 percent of ESPN, Inc., which includes ESPN, its U.S. flagship
sports channel which reaches 67 million households and, through its
international program services, over 100 million households overseas;
as well as ESPN2, serving 22 million households;
o 21 radio stations and radio networks serving more than 3,400
radio stations;
o 50 percent of Lifetime Television, serving 58 million U.S.
households;
o 37.5 percent of A&E Television Networks, reaching 56 million
domestic households;
o a large publishing group, with 7 daily newspapers, weekly newspapers
and shopping guides, various specialty and business periodicals and
books; and
o a multimedia group which develops and manages business opportunities
in new and emerging media technologies.
EXHIBIT 99.2
STOCK AGREEMENT
STOCK AGREEMENT, dated as of July 31, 1995, among The Walt
Disney Company, a Delaware corporation ("Purchaser"), Berkshire
Hathaway, Inc., a Delaware corporation ("BH") and Thomas S. Murphy
(solely for purposes of Section 1.04 hereof).
WHEREAS, as of the date hereof subsidiaries and affiliates
of BH (the "Shareholders") own (either beneficially or of record)
20,000,000 shares of common stock, par value $0.10 per share ("Company
Common Stock"), of Capital Cities/ABC Inc., a New York corporation
(the "Company") (all such shares and any shares hereafter acquired by
the Shareholders prior to the termination of this Agreement being
referred to herein as the "Shares");
WHEREAS, concurrently herewith, the Purchaser and the
Company are entering into an Agreement and Plan of Reorganization (as
such Agreement may hereafter be amended from time to time, the "Merger
Agreement"), pursuant to which, upon the terms and subject to the
conditions thereof, Merger Sub B (as defined in the Merger Agreement)
will be merged (the "Company Merger") with and into the Company; and
WHEREAS, as a condition to the willingness of the Purchaser
to enter into the Merger Agreement, the Purchaser has requested that
each Shareholder agree, and, in order to induce the Purchaser to enter
into the Merger Agreement, each Shareholder has agreed to grant the
Purchaser proxies to vote such Shareholder's Shares;
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties, covenants and agreements set forth
herein and in the Merger Agreement, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
SECTION 1.01. Transfer of Shares. Until the close of
business on the date of the special meeting of shareholders called to
consider and vote upon the Company Merger (the "Special Meeting") and
except as otherwise provided herein, BH will cause each Shareholder
not to (a) sell, pledge or otherwise dispose of any of its Shares, (b)
deposit its Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares or grant any
proxy with respect thereto or (c) enter into any contract, option or
other arrangement or undertaking with respect to the direct or
indirect acquisition or sale, assignment, transfer or other
disposition of any Company Common Stock.
<PAGE>
SECTION 1.02. Voting of Shares; Further Assurances. BH will
cause each Shareholder, by this Agreement, with respect to those
Shares that it owns of record on the record date for voting at the
Special Meeting, to vote such shares (or to execute written consents
with respect to such Shares) (i) in favor of the adoption of the
Merger Agreement and approval of the Company Merger and the other
transactions contemplated by the Merger Agreement, (ii) against any
Alternative Proposal (as defined in the Merger Agreement) and (iii) in
favor of any other matter necessary to consummation of the
transactions contemplated by the Merger Agreement and considered and
voted upon at the Special Meeting. BH will cause each Shareholder to
cause the Shares owned by it beneficially to be voted in accordance
with the foregoing. BH acknowledges receipt and review of a copy of
the Merger Agreement.
SECTION 1.03. No Solicitation. Prior to the Effective Time,
(a) BH shall not permit any Shareholder or any subsidiary of any
Shareholder or any of their respective officers, directors, employees,
agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of its
subsidiaries) to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or
offer to the Company's shareholders) with respect to an Alternative
Proposal (as defined in the Merger Agreement) or engage in any
negotiations concerning, or provide any confidential information or
data to, or have any discussions with, any person relating to an
Alternative Proposal, or otherwise facilitate any effort or attempt to
make or implement an Alternative Proposal and (b) BH will cause each
Shareholder to notify the Purchaser immediately if any such inquiries
or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or
continued with, it.
Section 1.04. Prior Proxy. Thomas S. Murphy hereby agrees to
relinquish all rights with respect to, and to not exercise any rights
or powers pursuant to, the proxies given by the Shareholders pursuant
to that certain Agreement dated July 2, 1986 among Capital Cities
Communications, Inc., a New York corporation, and the Shareholders, as
amended, and releases each Shareholder from any further liability or
obligation thereunder to the extent necessary to comply with this
Agreement.
ARTICLE II
SECTION 2.01. Notices. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed
to have been duly given or made as of the date delivered, mailed or
transmitted, and shall be effective upon receipt, if delivered
personally, mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses
(or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the
telecopier number specified below:
<PAGE>
(a) If to the Purchaser:
The Walt Disney Company
500 South Buena Vista Street
Burbank, CA 91521
Attention: General Counsel
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Attention: Morton A. Pierce
Telecopier No.: (212) 259-6333
(b) If to a Shareholder, at the address set forth on
Schedule I hereto.
Berkshire Hathaway, Inc.
1440 Kiewit Plaza
Omaha, NE 68131
Attention: Warren E. Buffett
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Samuel C. Butler
Telecopier No.: (212) 474-3700
SECTION 2.02. Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 2.03. 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
transactions contemplated hereby 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 to the fullest extent
<PAGE>
permitted by applicable law in an acceptable manner to the end that
the transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 2.04. Entire Agreement. This Agreement constitutes
the entire agreement of the parties and supersedes all prior
agreements and undertakings, both written and oral, between the
parties, or any of them, with respect to the subject matter hereof.
SECTION 2.05. Certain Events. BH agrees that this Agreement
and the obligations hereunder shall attach to each Shareholder's
Shares and shall be binding upon any person to which legal or
beneficial ownership (as such term is applied under Rule 13d-3 of the
Exchange Act) of such Shares shall pass, whether by operation of law
or otherwise. Notwithstanding any transfer of Shares, the transferor
shall remain liable for the performance of all obligations under this
Agreement of the transferor.
SECTION 2.06. Assignment. This Agreement shall not be
assigned by operation of law or otherwise.
SECTION 2.07. 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 person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 2.08. 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 in equity.
SECTION 2.09. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State
of New York, without giving effect to principles of conflicts of laws.
SECTION 2.10. Counterparts. This Agreement may be executed
in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to
be an original but all of which, taken together, shall constitute one
and the same agreement.
SECTION 2.11. Termination. This Agreement shall terminate
automatically immediately upon termination of the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
THE WALT DISNEY COMPANY
By:/s/ Michael D. Eisner
-------------------------
Name: Michael D. Eisner
Title: Chairman of the Board
and Chief Executive Officer
BERKSHIRE HATHAWAY, INC.
By:/s/ Warren E. Buffett
-------------------------
Name: Warren E. Buffett
Title: Chairman of the Board
and Chief Executive Officer
/s/ Thomas S. Murphy
-------------------------
Thomas S. Murphy
(solely for purposes of Section 1.04 hereof)
EXHIBIT 99.3
[Letterhead of The Walt Disney Company]
July 31, 1995
Mr. Thomas Murphy
Chief Executive Officer
Capital Cities/ABC Inc.
77 West 66th Street
New York, New York 10023-6298
Programming Agreement
Dear Tom:
This letter will summarize the agreement reached today
between The Walt Disney Company ("Disney") and Capital Cities/ABC Inc.
("ABC") with respect to the establishment of a strategic alliance for
the production of television programming for the ABC network.
The purpose of the alliance will be to enhance the overall
program offering of the ABC network by providing ABC with access to
Disney programming on an ongoing basis, subject to the provisions of
this Agreement. The key components of this relationship are:
(1) Saturday Morning Programming
During each of the three ABC programming seasons commencing
with the Fall 1996 season (or, at Disney's option, the Fall 1997
season), Disney shall provide to ABC, and ABC shall present, subject
to pre-existing ABC commitments, a full slate of Saturday morning (8
a.m. to noon) programming designed for the children's market,
consisting of Disney-produced programs, including animation, and
programming acquired by Disney from third parties. Disney shall create
an overall programming environment for this time period with a
distinctive identity and interstitial material reflecting Disney
standards of quality. Such programming shall, to the extent required
by the network, conform to the needs of the network to provide
affiliates with programming responsive to the affiliates' obligation
to air qualifying children's programming pursuant to FCC regulations.
<PAGE>
Mr. Thomas Murphy
July 31, 1995
Page 2
(2) Magical World of Disney
During each of the three ABC programming seasons commencing
with the Fall 1996 season, Disney shall provide to ABC, and ABC shall
present, a weekly one-hour Disney- themed program to be presented
under the name "Magical World of Disney" or a similar name reasonably
acceptable to both parties. ABC shall run the program in a prime-time
time slot determined by ABC after consultation with Disney.
(3) Specials
During each of the three ABC programming seasons commencing
with the Fall 1996 season, Disney shall provide to ABC, and ABC shall
present, three prime-time specials, each being at least 60 minutes in
length and presented in a time slot determined by ABC after
consultation with Disney, featuring Disney-themed materials (e.g.,
"The Making of Pocahontas" or "Disneyland's 40th Anniversary").
All programs provided to ABC pursuant to this Agreement
shall be so provided (a) subject to ABC's ultimate creative approval
of content; provided that in the event any Disney program is
disapproved, or a program series is cancelled, Disney shall have the
right to provide, and ABC shall present, substitute programming
subject to such approval; and (b) on terms and conditions consistent
with then-prevailing industry standards for comparable programs
(including ABC's Standards and Practices requirements). Each party
agrees to enter into definitive programming agreements with respect to
such programs giving effect to such terms and conditions.
This Agreement shall be terminable (a) by ABC, by written
notice to Disney delivered within 60 days following any termination by
ABC of the Agreement and Plan of Reorganization, dated as of the date
hereof, between Disney and ABC (the "Reorganization Agreement"),
authorized by the Reorganization Agreement in the event that (i)
Disney does not obtain approval of the FCC to consummate the
transactions contemplated by the Reorganization Agreement or (ii)
ABC's or Disney's shareholders do not approve the transactions
contemplated by the Reorganization Agreement in a shareholder vote
thereon, (iii) failure to meet a condition in Section 8.1 or 8.2 of
the Reorganization
<PAGE>
Mr. Thomas Murphy
July 31, 1995
Page 3
Agreement that gives ABC a right of termination of the Reorganization
Agreement or (iv) termination under Section 9.1, 9.2 or 9.3(b) or (c)
of the Reorganization Agreement, and (b) by Disney, by written notice
following any other authorized termination of the Reorganization
Agreement, delivered to ABC no later than 90 days prior to the next
scheduled first-run broadcast of the programs described in paragraphs
(2) and (3) above or 180 days prior to the next scheduled first-run
broadcast of the programs described in paragraph (1), whichever is
earlier.
If the foregoing correctly reflects your understanding of
our agreement, please so indicate by countersigning the enclosed copy
of this letter whereupon this letter shall constitute a binding
agreement between Disney and ABC.
Very truly yours,
/s/ Michael D. Eisner
Acknowledged and agreed
as of the date first above written.
CAPITAL CITIES/ABC INC.
By: /s/ Thomas S. Murphy
-------------------------------
Thomas Murphy
Chief Executive Officer
EXHIBIT 99.4
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- ---------------------------------------
HARRIET RADWELL,
Index No. 118835/95
Plaintiff,
-against- COMPLAINT
ROBERT P. BAUMAN, NICHOLAS F. BRADY,
WARREN E. BUFFETT, DANIEL B. BURKE, CLASS ACTION
FRANK T. CARY, JOHN B. FAIRCHILD,
LEONARD H. GOLDENSON, ROBERT A. IGER,
FRANK S. JONES, ANN DIBBLE JORDAN,
JOHN H. MULLER, JR., THOMAS S. MURPHY,
WYNDHAM ROBERTSON, M. CABELL
WOODWARD, JR., THE WALT DISNEY COMPANY
and CAPITAL CITIES/ABC, INC.
Defendants.
- ---------------------------------------
Plaintiff, as and for her complaint, alleges as follows upon
information and belief except as to paragraph 2, which is alleged upon
knowledge. Plaintiff's information and belief is based upon, inter
alia, the investigation made by plaintiff by and through her counsel.
1. Plaintiff brings this action on behalf of the public
holders of the outstanding common stock of Capital Cities/ABC, Inc.
("ABC" or "the Company") for injunctive and other relief in connection
with the proposed acquisition of ABC by The Walt Disney Company
("Disney") for an unfair and inadequate price.
<PAGE>
2. Plaintiff is and was at all times relevant hereto a
common stockholder of ABC.
3. (a) ABC is a New York corporation with principal
executive offices at 77 West 66th Street, New York, New York. ABC,
directly or through its subsidiaries, operates the ABC Television
Network, eight television stations, the ABC Radio Networks and 21
radio stations, and provides programming for cable television. The
Company, through joint ventures, is engaged in international
broadcast/cable services and television production and distribution.
The Company also publishes daily and weekly newspapers, shopping
guides, various specialized and business periodicals and books,
provides research services and also distributes information from
databases.
(b) As of February 28, 1995, ABC had over 154 million shares
of common stock outstanding.
4. Defendants Robert P. Bauman, Nicholas F. Brady, Warren E.
Buffett, Daniel B. Burke, Frank T. Cary, John B. Fairchild, Leonard H.
Goldenson, Robert A. Iger, Frank S. Jones, Ann Dibble Jordan, John H.
Muller, Jr., Thomas S. Murphy, Wyndham Robertson and M. Cabell
Woodward, Jr. (hereinafter collectively referred to as the "Individual
Defendants") are each members of ABC's Board of Directors. In
addition, defendant Murphy is Chairman of the Board and
<PAGE>
Chief Executive Officer of the Company, and defendant Iger
is President and Chief Operating Officer of the Company.
5. The Individual Defendants owed and owe ABC and its public
stockholders fiduciary obligations and were and are required to: use
their ability to manage ABC in a fair, just and equitable manner; act
in furtherance of the best interests of ABC and its stockholders; act
to maximize stockholder value; govern ABC in such a manner as to heed
the expressed views of its public shareholders; refrain from abusing
their positions of control; and not favor their own interests at the
expense of ABC and its stockholders. By reason of their fiduciary
relationships, these defendants owed and owe plaintiff and other
members of the Class (as hereinafter defined) the highest obligation
of good faith, fair dealing, loyalty and due care.
6. Defendant Disney is a Delaware corporation with principal
executive offices in Burbank, California. Its principal operating
segments are Filmed Entertainment; Theme Parks and Resorts; and
Consumer Products.
7. Each defendant herein is sued individually as a
co-conspirator and aider and abettor, as well as in his or her
capacity as a director or officer of the Company, and the liability of
each arises from the fact that each
<PAGE>
defendant has engaged in all or part of the unlawful acts,
plans, schemes, or transactions complained of herein.
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this lawsuit pursuant to CPLR ss. 901 on
behalf of herself and all other shareholders of ABC (except defendants
herein and any person, firm, trust, corporation or other entity
related to, controlled by or affiliated with any of the defendants and
any of their successors in interest (the "Class")).
9. This action is properly maintainable as a class action
for the following reasons:
(a) The Class is so numerous that joinder of all Class
members is impracticable. As of February 28, 1995, ABC had over
154 million shares of common stock outstanding. Members of the
Class are scattered throughout the United States and are so
numerous as to make it impracticable to bring them all before
this Court.
(b) There are questions of law and fact which are common to
members of the Class and which predominate over any questions
affecting only individual members. The common questions include,
inter alia, the following:
<PAGE>
(i) whether the Individual Defendants have breached
their fiduciary duties owed by them to plaintiff and the
other members of the Class by causing ABC to enter into an
agreement to merge with Disney;
(ii) whether the Individual Defendants have failed, in
violation of their fiduciary duties, to hold a fair auction
or otherwise engage in a market check;
(iii) whether Disney is offering unfair and inadequate
consideration for acquiring complete ownership and control
of ABC;
(iv) whether the Individual Defendants have failed, in
violation of their fiduciary duties, to maximize shareholder
value in connection with the proposed merger;
(v) whether plaintiff and the other members of the
Class will be irreparably damaged if the transaction alleged
herein is not enjoined;
(vi) whether the Individual Defendants have breached or
aided and abetted the breach of the fiduciary and other
common law duties owed by them to plaintiff and other
members of the Class; and
<PAGE>
(vii) whether plaintiff and other members of the Class
are being and will continue to be injured by the wrongful
conduct alleged herein and, if so, what is the proper remedy
and/or measure of damages.
(c) The claims of plaintiff are typical of the claims of
other members of the Class and plaintiff has no interests that
are adverse or antagonistic to the interests of the Class.
(d) Plaintiff is committed to the vigorous prosecution of
this action and has retained competent counsel experienced in
litigation of this nature. Accordingly, plaintiff is an adequate
representative of the Class and will fairly and adequately
protect the interests of the Class.
(e) Plaintiff anticipates that there will not be any
difficulty in the management of this litigation as a class
action.
10. For the reasons stated herein, a class action is
superior to any other method available for the fair and efficient
adjudication of this controversy since it would be impractical and
undesirable for each of the members of the Class who has suffered or
will suffer damages to bring separate actions in various parts of the
country. Classwide
<PAGE>
remedies will assure uniform standards of conduct for the
Individual Defendants and avoid the risk of inconsistent judgments.
SUBSTANTIVE ALLEGATIONS
11. As discussed below, ABC's recent operating results have
been outstanding. In the fourth quarter of 1994, ABC's earnings were
$1.56 per share, up 51% compared to the fourth quarter of 1993, and
handily beating Wall Street's consensus estimate of $1.42 per share.
As publicly announced on February 6, 1995:
The ABC Television Network reported a significant gain in
operating income as it continues to enjoy strong advertiser
demand. Earnings at ESPN were up significantly, while
television stations and radio operations also reported
substantial gains. Publishing earnings increased 17%,
reflecting moderate increases at the newspapers and
significant gains at the specialized publications.
12. The Company's 1995 first quarter results were equally
impressive. As publicly announced by the Company on April 20, 1995:
o Earnings per share for the first quarter were a record
$1.02, vs. $0.76 in 1994.
o Net revenues for the first quarter of 1995 were
$1,606,815,000, an increase of 14 percent from 1994.
o Broadcasting revenues rose 16 percent. The ABC
Television Network and company-owned local television
stations reported a significant increase in revenues,
helped by ABC coverage of the SuperBowl football game.
<PAGE>
o ESPN, the Company's television sports service,
continued to report significant revenue increases,
while radio revenues rose moderately on stepped-up
advertiser demand and radio station acquisitions. ESPN
and radio also had significant earnings gains.
o Publishing revenues rose seven percent, with newspaper
operations reporting somewhat stronger gains than the
specialized publications. Publications earnings
increased 11 percent.
13. Although moderately lower than analyst expectations, the
Company also experienced increasing financial results for the second
quarter of 1995. As publicly reported on July 25, 1995:
o Net income rose 10 percent, to $208.9 million, or $1.36
a share, from $189.5 million, or $1.23, in the quarter
a year earlier. Revenue increased 7.2 percent, to $1.65
billion.
o The broadcasting group had operating profit of $33
million, up 4.8 percent from $307.3 million a year ago.
Revenue increased nearly 8 percent to $1.36 billion
from $1.26 billion.
o Second-quarter performance of ABC was up because of
"stronger advertising demand," which offset "modest"
increases in operating expenses.
14. ABC's outstanding financial performance has also
resulted in a substantial increase in the price of its common stock.
On May 1, 1995, for example, ABC's common stock closed at $83 1/2 per
share. Less than two months
<PAGE>
later, on June 22, 1995, the stock reached a high of
$109 1/2 per share.
15. On July 31, 1995, ABC and Disney publicly announced that
the companies had agreed to merge. Under the terms of the proposed
transaction, ABC shareholders will have the right to receive one share
of Disney common stock and $65 in cash for their shares. At current
share prices, the value of the transaction is approximately $19
billion.
16. As a result of the transaction, ABC will become a
wholly-owned subsidiary of Disney. The combined enterprise will be led
by Michael D. Eisner who will be Chairman and Chief Executive Officer.
Defendant Murphy will relinquish his positions at ABC and join
Disney's Board of Directors. Defendant Iger will continue in his role
as President of ABC.
17. Based on the closing price of Disney's common stock on
July 28, 1995, ABC shareholders will receive approximately $122 for
each of their ABC shares. This represents a premium of less then 12%
as compared to the price of ABC's common shares on June 22, 1995.
18. Moreover, ABC shareholders are apparently not receiving
any price protection in the form of a "collar" to cushion against
future decline in Disney's stock price. The tremendous upsurge in
ABC's business reflected in recent
<PAGE>
financial quarters is not similarly reflected in the
acquisition price. As a result, the value of class members' investment
in ABC has been unfairly capped.
19. The terms of the proposed transaction were not the
result of an auction process or active market check; they were arrived
at without a full and thorough investigation by the Individual
Defendants; and they are intrinsically unfair and inadequate from the
standpoint of ABC's shareholders.
20. The Individual Defendants failed to make an informed
decision, as no market check of the Company's value was obtained. In
agreeing to the merger, the Individual Defendants failed to properly
inform themselves of ABC's highest transactional value.
21. The Individual Defendants have violated the fiduciary
duties owed to the public shareholders of ABC. The Individual
Defendants' agreement to the terms of the transaction, its timing, and
the failure to auction the Company and invite other bidders, and
defendants' failure to provide a market check demonstrate a clear
absence of the exercise of due care and of loyalty to ABC's public
shareholders.
<PAGE>
22. The Individual Defendants' fiduciary obligations under
these circumstances require them to:
(a) undertake an appropriate evaluation of ABC's net worth
as a merger/acquisition candidate;
(b) actively evaluate the proposed transaction and engage in
a meaningful auction with third parties in an attempt to obtain
the best value for ABC's shareholders;
(c) act independently so that the interests of ABC's
shareholders will be protected and enhanced; and
(d) adequately ensure that no conflicts of interest exist
between the Individual Defendants' own interests and their
fiduciary obligation to maximize shareholder value or, if such
conflicts exist, to ensure that all conflicts are resolved in the
best interests of ABC's public shareholders.
23. The Individual Defendants have breached their fiduciary
duties by reason of the acts and transactions complained of herein,
including their decision to merge with Disney without making any
effort to obtain the best offer possible.
24. Plaintiff and the other members of the Class have been
and will be damaged in that they have not and will not receive their
fair proportion of the value of ABC's
<PAGE>
assets and business, and have been and will be prevented
from obtaining a fair price for their shares of ABC's common
stock.
25. By reason of the foregoing, each member of the Class is
suffering irreparable injury and damages.
26. Plaintiff and other members of the Class have no
adequate remedy at law.
WHEREFORE, plaintiff and members of the Class demand
judgment against defendants as follows:
A. Declaring that this action is properly maintainable as a
class action and certifying plaintiff as the representative of
the Class;
B. Declaring that defendants have breached and are breaching
their fiduciary and other duties to plaintiff and other members
of the Class;
C. Declaring that the proposal is a legal nullity;
D. Preliminarily and permanently enjoining defendants and
their counsel, agents, employees and all persons acting under, in
concert with, or for them, from proceeding with, consummating, or
closing the proposed transaction;
E. In the event that the proposed transaction is
consummated, rescinding it and setting it aside;
<PAGE>
F. Awarding compensatory damages against defendants
individually and severally in an amount to be determined at
trial, together with prejudgment interest at the maximum rate
allowable by law, arising from the proposed transaction;
G. Awarding plaintiff her costs and disbursements and
reasonable allowances for fees of plaintiff's counsel and experts
and reimbursement of expenses; and
H. Granting plaintiff and the Class such other and further
relief as the Court may deem just and proper.
Dated: July 31, 1995
David J. Bershad
Steven G. Schulman
Lee S. Shalov
MILBERG WEISS BERSHAD
HYNES & LERACH
One Pennsylvania Plaza
New York, NY 10119-0165
(212) 594-5300
EXHIBIT 99.5
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- -----------------------------------------:
:
SHERWOOD SLOAN and SYBIL SLOAN, :
:
Plaintiffs, :
:
-against- : Civil Action No.
:
THOMAS S. MURPHY, ROBERT A. IGER, JOHN :
B. FAIRCHILD, ROBERT P. BAUMAN, :
NICHOLAS F. BRADY, DANIEL B. BURKE, : CLASS ACTION
FRANK T. CARY, LEONARD H. GOLDENSON, : COMPLAINT
FRANK S. JONES, ANN DIBBLE JORDAN and :
CAPITAL CITIES/ABC INC., :
:
Defendants. :
- -----------------------------------------:
CLASS ACTION COMPLAINT
Plaintiffs, Sherwood Sloan and Sybil Sloan, individually and
on behalf of all others similarly situated, by their attorneys, allege
the following upon information and belief, based on the investigation
of their counsel, which included, among other things, a review of
various public filings by the corporate defendant with the Securities
and Exchange Commission ("S.E.C.") and various public articles
detailed herein, except for those allegations which pertain to
plaintiffs, which allegations are based upon personal knowledge:
1. Plaintiffs bring this action on behalf of themselves and
all other public shareholders of Capital
<PAGE>
Cities/ABC Inc. ("Capital Cities" or the "Company") who are
threatened with the deprivation of the value of their
Capital Cities shares of common stock by the wrongful acts
of the defendants described herein.
2. This action is brought to enjoin the defendants from
allowing Capital Cities to be acquired by The Walt Disney Company
("Disney") for grossly inadequate consideration and in breach of
defendants' fiduciary duties. Plaintiffs allege that they and the
other public stockholders of Capital Cities common stock are entitled
to enjoin the proposed transaction or, alternatively, recover damages
in the event the transaction is consummated.
THE PARTIES
3. Plaintiffs Sherwood Sloan and Sybil Sloan are the owners
of shares of common stock of defendant Capital Cities and have been
the owner continuously of such shares since prior to the wrongs
complained of herein.
4. Defendant Capital Cities is a corporation duly existing
and organized under the laws of the State of New York, with its
principal executive offices located at 77 West 66th Street, New York,
New York 10023. Capital Cities operates in several areas of the media
business. The Company operates the ABC Television Network with over
228 primary affiliates, ABC Radio Network and several TV and
<PAGE>
radio stations. Capital Cities also publishes newspapers
and magazines and has an interest in four United States
cable networks.
5. Thomas S. Murphy, Robert A. Iger, John B. Fairchild,
Robert P. Bauman, Nicholas F. Brady, Daniel B. Burke, Frank T. Cary,
Leonard H. Goldenson, Frank S. Jones and Ann Dibble Jordan were, at
all relevant times, directors of Capital Cities and owed fiduciary
duties of good faith, care, fair dealing, loyalty, and candor to the
public shareholders of Capital Cities.
6. Defendant Thomas S. Murphy ("Murphy") was, at all
relevant times, the Chairman of the Board of Directors, Chief
Executive Officer, and a director of the Company. Murphy's
compensation from the Company for 1994 amounted to over $8.1 million.
7. Defendant Robert A. Iger ("Iger") was, at all relevant
times, the President, Chief Operating Officer and a director of the
Company. Iger's compensation from the Company for 1994 amounted to
over $1.2 million.
8. Defendant John B. Fairchild ("Fairchild") was, at all
relevant times, an Executive Vice-President, Division President and a
director of the Company.
9. Defendants Robert P. Bauman, Nicholas F. Brady, Daniel B.
Burke, Frank T. Cary, Leonard H. Goldenson,
<PAGE>
Frank S. Jones and Ann Dibble Jordan were directors of the
Company at all relevant times.
10. The above-named individual defendants (collectively the
"Individual Defendants"), as officers and/or directors and/or as
significant shareholders of the Company, owe fiduciary duties of good
faith, fair dealing, loyalty, due care, and candor to plaintiffs and
the other members of the Class (as defined below). Through their stock
ownership, directorial and/or management positions, the Individual
Defendants dominate and control the Company.
CLASS ACTION ALLEGATIONS
11. Plaintiffs bring this action pursuant to Article 9 of
New York's Civil Practice Law and Rules ("CPLR"), on behalf of
themselves and all other stockholders of the Company, as of July 31,
1995, who are or may be deprived of the opportunity to receive maximum
value for their Capital Cities common stock by the wrongful acts taken
or threatened by the defendants as further described herein (the
"Class"). Excluded from the Class are defendants herein and any
person, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants.
<PAGE>
12. This action is properly maintainable as a class action
for the following reasons:
(a) The Class is so numerous that joinder of all members is
impracticable. While the exact number of Class members is unknown to
plaintiffs at this time and can only be ascertained through
appropriate discovery, there are more than 153 million shares of
Capital Cities common stock outstanding held by approximately 9,790
shareholders of record. The holders of these shares are believed to be
geographically dispersed throughout the United States. Capital Cities
common stock is traded on the New York Stock Exchange;
(b) There are questions of law and fact which are common to
members of the Class and which predominate over questions affecting
only individual members. The common questions include, inter alia, the
following:
(i) whether defendants have engaged in conduct constituting
unfair dealing to the detriment of the Class;
(ii) whether the transaction is grossly unfair to the Class;
(iii) whether the defendants have failed, and will fail to,
negotiate in good faith with prospective purchasers of the
Company;
<PAGE>
(iv) whether defendants are engaging in a plan and scheme to
thwart and/or reject others' efforts to acquire Capital Cities;
(v) whether defendants have failed to obtain maximum value
for the Capital Cities stock held by plaintiffs and the Class;
(vi) whether defendants have breached, or aided and abetted
the breach of, their fiduciary and other common law duties owed
by them to plaintiffs and the other members of the Class;
(vii) whether defendants have disclosed all material facts
in connection with the challenged transaction; and
(viii) whether plaintiffs and the other members of the Class
would be irreparably damaged were the transactions complained of
herein consummated;
(c) The claims of plaintiffs are typical of the claims of
the other members of the Class and plaintiffs have no interests that
are adverse or antagonistic to the interests of the Class;
(d) The plaintiffs are committed to prosecuting this action
and have retained competent counsel experienced in litigation of this
nature. Plaintiffs are adequate
<PAGE>
representatives of the Class and will fairly and adequately
protect the interests of the Class;
13. Plaintiffs anticipate that there will be no difficulty
in the management of this litigation; and
14. A class action is superior to the other available
methods for adjudication of this controversy.
SUBSTANTIVE ALLEGATIONS
Capital Cities' Positive Financial Condition and Outlook
15. The financial condition of Capital Cities has improved
and its future growth is expected to increase as well. By way of
example, Capital Cities' net sales and earnings per share ("EPS") have
increased significantly each year from 1991-1994. Specifically, net
sales rose from $5.832 million in 1991 to $6.379 million in 1994.
During this same period, EPS rose form $2.23 per share to $4.42 per
share. Additionally, revenues and EPS for the first two quarters of
1995 have significantly exceeded the Company's revenues and EPS
results for the first two quarters of 1994.
The Announced Acquisition By Disney
16. On July 31, 1995, the Bloomberg Business News Wire
reported that Disney and Capital Cities reached a definitive merger
agreement on a multi-billion dollar deal within 10 days. According to
the Dow Jones New Wire, Steve
<PAGE>
Bollenbach, an officer of Disney, said that, after the two companies
had discussed a potential transaction for years, Disney's chairman and
chief executive, Michael Eisner, recently suggested to his friend,
Thomas Murphy, chairman of Capital Cities, that "the time was finally
ripe" to do a deal. Murphy responded, '"I think you're right, Michael.
Let's do it,'" Bollenbach recounted. The Bloomberg Business News Wire
stated under the terms of the transaction, which has been approved by
the Board of Directors of each company, Capital Cities shareholders
will have the right to receive one share of Disney common stock and
$65 in cash for each of their shares (the "Merger"). As a result of
the Merger, the combined company will be known as Walt Disney Co. and
Capital Cities will become a wholly-owned subsidiary of Disney.
Pursuant to the Merger, defendant Murphy will relinquish his current
titles with the Company on the effective date of the Merger and join
Disney's board. Moreover, defendant Iger will continue as president of
Capital Cities. Capital Cities also reportedly said that under the
terms of their Merger agreement, any Capital Cities shareholder can
elect to receive proportionally more cash or common stock than
provided for in the exchange ratio, subject to proration if either the
stock or cash portion is oversubscribed, and subject to the option of
<PAGE>
Disney to increase the cash portion if requested by Capital Cities
shareholders.
CAUSE OF ACTION AGAINST ALL DEFENDANTS
17. By virtue of the acts and conduct alleged herein,
defendants, in breach of their fiduciary and other common law duties,
which they owe to plaintiffs and the other members of the Class, are
not acting in good faith and are attempting to unfairly deprive
plaintiffs and other members of the Class of the true value of their
investment in Capital Cities.
18. Capital Cities shareholders will, if the transaction is
consummated, be deprived of the opportunity for substantial gains,
which the Company may realize.
19. The agreed to Merger is unfair and grossly inadequate to
the Company's Class members because, among other things:
(a) the intrinsic value of the Company's common stock is
materially in excess of the amount offered for its securities in
the Merger, giving due consideration to the Company's recent
operating results, the recent legislation deregulating the Cable
T.V. industry, the recent premium reportedly offered in a similar
widely-publicized proposed transaction between Westinghouse Corp.
and CBS, Inc., and Capital Cities'
<PAGE>
present and projected net asset value, cash flow, and
profitability;
(b) analysts following Capital Cities have projected Capital
Cities' continued profitability over the next few years, with an
increase in revenues and earnings per share for 1995 and 1996;
(c) the value of the Merger consideration payable to Capital
Cities shareholders, which offers a relatively small premium over
the Company's stock trading price as reported on July 30, 1995,
did not appropriately take into account the intrinsic value of
the Company because the Individual Defendants were presented
with, and asked to evaluate, the terms of the proposed
Acquisition in a span of time (reportedly no more than 10 days)
which was insufficient for Capital Cities' value to be accurately
ascertained through open bidding or at least a "market check"
mechanism;
(d) the Individual Defendants have a duty to maximize
shareholder value, and as such, must seriously consider other
offers and must take action as is necessary to obtain for Capital
Cities shareholders the highest value for their securities;
(e) in view of defendants' control of Capital Cities, it is
unfair and in violation of defendants'
<PAGE>
fiduciary duties to consummate a merger of the Company without
first attaining a recommendation and input by a truly independent
representative of the public stockholders, or otherwise ensuring
that a fair price is offered; and
(f) Completion of the Merger is a foregone conclusion since
both the boards of Disney and Capital Cities have already
approved it.
20. By reason of their positions with Capital Cities and the
substantial ownership of the Company, defendants are in possession of
non-public information concerning the financial condition and
prospects of Capital Cities, and especially the true value and
expected increased future value of Capital Cities and its assets,
which they have not disclosed to Capital Cities' public stockholders.
Such concealed information is of critical importance to Class members
in determining whether to approve the Merger.
21. Capital Cities is now "in play" and it is likely, if not
inevitable, that the Company will undergo a change in control with
Capital Cities shareholders presumably slated to recover a
significant, if not most, of their Merger compensation in the form of
cash. Accordingly, the Individual Defendants' fiduciary duties require
them to maximize shareholder value and to take such action as is
<PAGE>
necessary to obtain for Capital Cities shareholders the highest
available value for their securities. Based on the expressed
preference of Capital Cities for the Merger with Disney, it does not
appear that the Individual Defendants will take such action necessary
to properly comply with their fiduciary duties.
22. The Individual Defendants have thus far failed to
announce any active auction or open bidding procedures best calculated
to maximize shareholder value; nor is there any indication that the
Individual Defendants will seriously consider any other offers,
thereby causing extensive and irreparable injury to plaintiffs and the
Class.
23. Plaintiffs and other Class members are immediately
threatened by the acts and transactions complained of herein, which if
effectuated and continued, will cause irreparable injury to them, in
that the defendants' duties to act in the entire best interests of the
shareholders have and will continue to be violated as a result of the
actions described above which will cause Capital Cities shareholders
significant impairment of their rights as stockholders of the Company.
24. The defendants have at all times been fiduciaries of
stockholders. As set forth herein, they have
<PAGE>
breached and are continuing to breach their fiduciary duties to the
Company's stockholders.
25. Defendants have not, in accordance with their fiduciary
duties:
(a) adequately ensured that no conflicts of interest exist
or if such conflicts exist to ensure that all conflicts would be
resolved in the best interests of Capital Cities public
shareholders;
(b) undertaken an appropriate evaluation of the Company's
worth as a merger/acquisition candidate;
(c) taken all appropriate steps to enhance the value and
attractiveness of Capital Cities as a merger/acquisition
candidate;
(d) taken all appropriate steps to effectively expose
Capital Cities to the marketplace in an effort to create an
active auction or market check for Capital Cities; and
(e) provide Capital Cities stockholders with adequate
information to enable them to make an informed decision regarding
their investment in the Company.
26. By reason of the foregoing acts, practices, and course
of conduct, the defendants have failed to exercise ordinary care and
diligence in the exercise of
<PAGE>
their fiduciary obligations toward plaintiffs and other Capital Cities
public stockholders.
27. As a result of the actions of defendants, plaintiffs and
the other members of the Class have been and will be damaged in that
they have not, and will not, receive their fair proportion of the
value of the Company's assets and business, and will be prevented from
obtaining fair consideration for their shares of Capital Cities common
stock.
28. Unless enjoined by this Court, the Individual Defendants
will continue to breach their fiduciary and other common law duties
owed to plaintiffs and other members of the Class, all to the
irreparable harm of the plaintiffs and the Class.
29. Absent injunctive relief, plaintiffs and the other
members of the Class have been and will be damaged in that they have
not and will not receive their fair proportion of the value of the
assets and businesses of Capital Cities, and have been and will be
prevented from enhancing the value of their shares of the Company's
common stock.
30. Plaintiffs and the other members of the Class have no
adequate remedy at law.
<PAGE>
WHEREFORE, plaintiffs demand judgment as follows:
(a) Declaring this to action to be a proper class action and
certifying plaintiffs as representatives of the Class;
(b) Ordering the Individual Defendants to carry out their
fiduciary duties to plaintiffs and the other members of the
Class, including those duties of care, fairness, and candor;
(c) To the extent, if any, that the transaction complained
of is consummated prior to the entry of this Court's final
judgment, rescinding such transaction, including but not limited
to, awarding rescissory damages;
(d) Enjoining, preliminarily and permanently, the proposed
Merger under the terms presently proposed; requiring defendants
to conduct an open and fair auction of the Company to maximize
shareholder value; and requiring defendants to make full and fair
disclosure of all material facts to the Class before the
completion of any transaction;
(e) Directing that defendants pay to plaintiffs and the
Class all damages suffered and to be suffered by them as a result
of the acts and transactions alleged herein;
<PAGE>
(f) Awarding plaintiffs the costs and disbursements of the
action including allowances for plaintiffs' reasonable attorneys
and experts fees; and
(g) Granting such other further relief as may be deemed just
and proper under the circumstances.
Dated: July 31, 1995
WOLF POPPER ROSS WOLF & JONES,
L.L.P.
By:___________________________
845 Third Avenue
New York, NY 10022
(212) 759-4600
Attorneys for Plaintiffs
EXHIBIT 99.6
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- -----------------------------------------:
:
SUSAN LURIA, TRUSTEE FOR CARRIE A. :
LURIA, individually and on behalf of :
all others similarly situated, :
:
Plaintiff, :
: Index No. 95118961
-against- :
:
CAPITAL CITIES/ABC, INC., ROBERT P. :
BAUMAN, WARREN E. BUFFET, FRANK T. :
CARY, THOMAS S. MURPHY, FRANK S. JONES, :
JOHN B. FAIRCHILD, ANN D. JORDAN, :
LEONARD H. GOLDENSON, WYNDHAM :
ROBERTSON, NICHOLAS F. BRADY, DANIEL B. :
BURKE, M. CABELL WOODWARD, JR., JOHN H. :
MULLER, JR., ROBERT A. IGER and WALT :
DISNEY CO., :
:
Defendants. :
- -----------------------------------------:
CLASS ACTION COMPLAINT
Plaintiff, by and through her attorneys, alleges as
follows:
1. Plaintiff brings this action as a class action
on behalf of herself and all other shareholders of Capital
Cities/ABC Inc. ("CCA" or the "Company") who are similarly
situated, against the directors of CCA to enjoin certain
actions of the defendants related to the merger of CCA with
Walt Disney Co. ("Disney").
<PAGE>
I. PARTIES
2. Plaintiff is and has been at all relevant times
the owner of CCA common stock.
3. Defendant CCA is a corporation organized and
existing under the laws of the State of New York with
executive offices located at 77 West 66th Street, New York,
New York. The Company operates the ABC Television and Radio
Networks, and owns various newspapers and magazines. As of
December 31, 1994, there were approximately 154 million
shares of CCA common stock issued and outstanding held by
approximately 8,610 shareholders of record, which shares
trade on the New York Stock Exchange.
4.(a) Defendant Thomas S. Murphy ("Murphy") is and
was at all relevant times Chairman and Chief Executive
Officer of CCA.
(b) Defendant Robert A. Iger ("Iger") is and was at
all relevant times President, Chief Operating Officer and a
director of CCA.
(c) Defendant John B. Fairchild ("Fairchild") is
and was at all relevant times Executive Vice President and a
director.
(d) Defendants Robert P. Bauman ("Bauman"), Warren
E. Buffet ("Buffet"), Frank T. Cary ("Cary"), Frank S. Jones
("Jones"), Ann D. Jordan ("Jordan"),
<PAGE>
Leonard H. Goldenson ("Goldenson"), Wyndham Robertson
("Robertson"), Nicholas F. Brady ("Brady"), Daniel B. Burke
("Burke"), M. Cabell Woodward, Jr. ("Woodward"), and John H.
Muller, Jr. ("Muller") are and have been at all relevant
times directors of CCA.
5. Defendant Disney is a corporation organized and
existing under the laws of the State of Delaware with
executive offices located in Burbank, California. As of
September 31, 1993, Disney had over 535.5 million shares of
common stock outstanding held by over 408,000 shareholders of
record. Defendant Disney is named herein as an aider and
abettor to the breach of fiduciary duty described herein.
6. By virtue of the positions of defendants named
in paragraph 4 ("Individual Defendants") as officers and
directors of CCA, said defendants were and are in a fiduciary
relationship with plaintiff and the other public stockholders
of the Company, and owe to plaintiff and the other members of
the Class the highest obligations of good faith and fair
dealing.
II. CLASS ACTION ALLEGATIONS
7. Plaintiff brings this action for declaratory,
injunctive and other relief on her own behalf and as a class
action, pursuant to Rule 901 et seq. of the New York Civil
Practice Law and Rules ("CPLR") and on behalf of all common
<PAGE>
stockholders of CCA (except defendants herein and any person,
firm, trust, corporation or other entity related to or
affiliated with any of the defendants) or their successors in
interest, who are being deprived of the opportunity to
maximize the value of their CCA shares by the wrongful acts
of the defendants as described herein.
8. This action is properly maintainable as a class
action for the following reasons:
(a) The Class of stockholders for whose benefit
this action is brought is so numerous that joinder of all
class members is impracticable. There are approximately 154
million common shares of CCA outstanding, owned by
approximately 8,610 stockholders. Members of the Class are
scattered throughout the United States.
(b) There are questions of law and fact which are
common to members of the Class and which predominate over all
questions affecting only individual members, including
whether the defendants have breached the fiduciary duties
owed by them to plaintiff and members of the Class by reason
of the acts described herein.
(c) The claims of plaintiff are typical of the
Claims of the other members of the Class and plaintiff has no
interests that are adverse or antagonistic to the interests
of the Class.
<PAGE>
(d) Plaintiff is committed to the vigorous
prosecution of this action and has retained competent counsel
experienced in litigation of this nature. Accordingly,
plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
(e) The prosecution of separate actions by
individual members of the Class would create a risk of
inconsistent or varying adjudications with respect to
individual members of the Class and establish incompatible
standards of conduct for the party opposing the Class.
(f) Defendants have acted and are about to act on
grounds generally applicable to the Class, thereby making
appropriate final injunctive or corresponding declaratory
relief with respect to the Class as a whole.
III. BACKGROUND AND SUBSTANTIVE ALLEGATIONS
9. On or about July 31, 1995, CCA and Disney
announced on Dow Jones Newswire that they had entered into a
merger agreement pursuant to which each share of CCA common
stock would be exchanged for one share of Disney common stock
and $65 in cash (the "Merger"). The Merger is valued at
approximately $19 billion.
10. In the July 31, 1995 press release, Disney and
CCA stated that under the terms of the merger agreement,
<PAGE>
any CCA shareholder can elect to receive proportionally more
cash or common stock than provided for in the exchange ratio,
subject to proration if either the stock or cash portion is
oversubscribed, and subject to the option of Disney to
increase the cash portion if requested by CCA shareholders.
11. Defendant Murphy, following the Merger, will
relinquish his positions at CCA and join the Disney Board of
Directors.
12. According to reports on Dow Jones Newswire
Disney and CCA agreed to the Merger within 10 days of
discussing a business combination.
13. In agreeing to this change in control, the
Individual Defendants were obligated to maximize the value to
be received by CCA shareholders. However, in hastily agreeing
to the Merger, the actions taken by the Individual Defendants
are in gross disregard of the fiduciary duties each of them
owes to plaintiff and the other members of the Class, in that
they have failed to adequately investigate the market to
obtain the highest price and/or the best possible transaction
for CCA shareholders.
14. CCA also has in place a shareholders' rights
plan ("poison pill") which operates to make a takeover by an
unwanted party prohibitively expensive. Thus, no third
<PAGE>
party, as a practical matter, could bid for the Company
without the tacit approval of the Individual Defendants.
15. The consideration offered to CCA shareholders
pursuant to the announced terms of the Merger is inherently
speculative; it is unclear whether Disney will decide to
exercise its right to change the mix of cash to stock and
therefore it is impossible to estimate the value of the
consideration before shareholders tender their shares. By
agreeing to this speculative arrangement, the Individual
Defendants have abdicated their obligation to protect the
interests of all CCA shareholders, and thus violated their
fiduciary duties.
16. Defendant Disney, without which the Merger
would not occur, and with knowledge of the Individual
Defendants' breach of fiduciary duty, has rendered
substantial assistance to the Individual Defendants and
stands to profit handsomely from the Merger.
17. Plaintiff and the other Class members are
immediately threatened by the acts and transactions
complained of herein which will cause irreparable injury to
them in that they will be denied the opportunity to share in
enhanced shareholder value.
18. Plaintiff and the Class have no adequate remedy
at law.
<PAGE>
WHEREFORE, plaintiff demands judgment and
preliminary and permanent relief, including injunctive
relief, in her favor and in favor of the Class and against
defendants as follows:
A. Declaring that this action is properly
maintainable as a class action, and certifying plaintiff as a
class representative;
B. Declaring that the defendants and each of them
have committed a gross abuse of trust and have breached their
fiduciary duties to plaintiff and the other members of the
Class;
C. Granting injunctive relief with respect to the
Merger;
D. Requiring defendants to conduct an unencumbered
market check in a manner designed to maximize shareholder
value and enjoin defendants from erecting any unlawful
barriers to the acquisition of the Company by any third party
which would make CCA less attractive as an acquisition
candidate;
E. Enjoining CCA from enacting or implementing any
defensive measures which would otherwise prohibit a third
party from making a competing bid for the Company;
F. Awarding plaintiff and the Class compensatory
damages;
<PAGE>
G. Awarding plaintiff and the Class the costs and
disbursements of this action, including reasonable attorneys'
fees and expenses; and
H. Granting such other and further relief as this
Court may deem just and proper.
DATED: August 1, 1995
Yours, etc.
ZWERLING, SCHACHTER, ZWERLING
& KOPPEL, LLP
767 Third Avenue
New York, NY 10017-2023
(212) 223-3900
SAVETT FRUTKIN PODELL
& RYAN, P.C.
320 Walnut Street, Suite 508
Philadelphia, PA 19106
(215) 923-5400
Attorneys for Plaintiff
EXHIBIT 99.7
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- ------------------------------------------:
:
LISA JORGENSON DONIGER, Custodian for :
Perrin Linda Doniger UTMA/DC, :
LON GROSSMAN and LEE ROSENTHAL, : Index No.
:
Plaintiffs, :
:
-against- :
: CLASS ACTION
CAPITAL CITIES/ABC, INC., WALT DISNEY : COMPLAINT
CO., THOMAS S. MURPHY, ROBERT A. IGER, : 95118819
JOHN B. FAIRCHILD, ROBERT P. BAUMAN, :
NICHOLAS F. BRADY, WARREN E. BUFFETT, :
DANIEL B. BURKE, FRANK T. CARY, :
LEONARD H. GOLDENSON, FRANK S. JONES, :
ANN DIBBLE JORDAN, JOHN H. MULLER, :
JR., WYNDHAM ROBERTSON and M. CABELL :
WOODWARD, JR., : JURY TRIAL DEMANDED
:
Defendants. :
- ------------------------------------------:
Plaintiffs, by their attorneys, allege upon
information and belief, except as to paragraph 1 which is
alleged upon knowledge, as follows:
THE PARTIES
1. Plaintiffs are the owners of shares of the
common stock of defendant Capital Cities/ABC, Inc. ("Cap
Cities" or the "Company") and have been the owners
continuously of such shares since prior to the wrongs
complained of herein.
<PAGE>
2. Defendant Cap Cities is a corporation duly
existing and organized under the laws of the State of New
York, with its principal offices located at 77 West 66th
Street, New York, New York. The Company owns and operates
television and radio stations, publishes newspapers and trade
publications, and offers cable programming.
3. As of April 28, 1995, there were over 150
million shares of the Company's common stock outstanding held
by almost 9,700 shareholders of record.
4. Defendant Thomas S. Murphy ("Murphy") is and at
all times relevant hereto has been Chairman of the Board,
President and Chief Executive Officer of Cap Cities.
5. Defendant Robert A. Iger ("Iger") is and at all
times relevant hereto was Cap Cities' President and Chief
Operating Officer, and a director of the Company.
6. Defendant John B. Fairchild ("Fairchild") is and
was at all relevant times an Executive Vice President and
Director of Cap Cities.
7. Defendants Robert P. Bauman, Nicholas F. Brady,
Warren E. Buffett, Daniel B. Burke, Frank T. Cary, Leonard H.
Goldenson, Frank S. Jones, Ann Dibble Jordan, John H. Muller,
Jr., Wyndham Robertson and M. Cabell Woodward, Jr. were, at
all relevant times, directors of Cap Cities.
<PAGE>
8. The defendants referred to in paragraphs 4 and 5
above are collectively referred to herein as the "Individual
Defendants."
9. Defendant Walt Disney Co. ("Disney") is a
Delaware corporation which is charged herein with aiding and
abetting the breaches of fiduciary duties committed by the
other defendants.
10. By reason of the above Individual Defendants'
positions with the Company as officers and/or directors, said
individuals are in a fiduciary relationship with plaintiffs
and the other public stockholders of Cap Cities, and owe
plaintiffs and the other members of the class the highest
obligations of good faith, fair dealing, due care, loyalty
and full, candid and adequate disclosure.
Class Action Allegations
11. Plaintiffs bring this action on their own
behalf and as a class action pursuant to CPLR ss. 901 on
behalf of themselves and all Cap Cities securities holders or
their successors in interest, similarly situated (the
"Class"). Excluded from the class are defendants herein and
any person, firm, trust, corporation, or other entity related
to or affiliated with any of the defendants.
12. This action is properly maintainable as a class
action.
<PAGE>
13. The class is so numerous that joinder of all
members is impracticable. As of April 28, 1995, there were
approximately 150 million shares of Cap Cities common stock
outstanding held by over 9,700 shareholders of record.
14. There are questions of law and fact which are
common to the class and which predominate over questions
affecting any individual class members. The common questions
include, inter alia, the following:
(a) whether defendants have taken all reasonable
steps to enhance the value of Cap Cities as an
acquisition candidate;
(b) whether certain defendants have conflicts in
seeking to maximize Cap Cities' attractiveness and value
as an acquisition candidate;
(c) whether Cap Cities' independent directors have
taken all reasonable steps to neutralize any conflicts
of interest among the Cap Cities Board;
(d) whether plaintiffs and the other members of the
class will be irreparably damaged if defendants fail to
take all necessary steps to maximize the value of Cap
Cities; and
(e) whether defendants have breached, or aided and
abetted the breach of, fiduciary and other common law
<PAGE>
duties owed by them to plaintiffs and the other members
of the class.
15. The plaintiffs are committed to prosecuting
this action and have retained competent counsel experienced
in litigation of this nature. The claims of plaintiffs are
typical of the claims of the other members of the class and
plaintiffs have the same interests as the other members of
the class. Accordingly, plaintiffs are adequate
representatives of the class and will fairly and adequately
protect the interests of the class.
16. Plaintiffs anticipate that there will be no
difficulty in the management of this litigation.
17. Defendants have acted on grounds generally
applicable to the class with respect to the matters
complained of herein, thereby making appropriate the relief
sought herein with respect to the class as a whole.
SUBSTANTIVE ALLEGATIONS
18. Recently, there has been a renewed interest in
the acquisition of broadcasting and cable properties such as
Cap Cities. Westinghouse has recently expressed an interest
in acquiring CBS, Inc. at a premium price of approximately
35% over its recent average trading price. In addition,
recent regulatory activities have resulted in a change of
regulations enhancing the attractiveness of cable
<PAGE>
operations such as Cap Cities' "ESPN," "Lifetime" and "A&E"
cable networks.
19. Cap Cities' stock has not had an opportunity
for these changed circumstances to be reflected in the stock
price. In addition, Cap Cities' stock price has come under
recent pressure, and recently declined from a high of
$109-1/2 to $96 per share, as a result of earnings which
barely missed analysts' expectations.
20. On July 31, 1995, Cap Cities announced that its
board had approved a "merger" with Disney wherein each Cap
Cities shareholder would receive one Disney common share and
$65 cash for each Cap Cities common share. On Friday, July
28, 1995, Disney stock closed at $56-7/8 and Cap Cities stock
closed at $96-1/2 per share. The value of the transaction per
each Cap Cities common share is approximately $121-7/8
constituting an approximately 23% premium over the market
price. By comparison, CBS, Inc. may receive a premium of at
least 33% over its market price despite the fact that CBS has
none of the valuable cable properties which Cap Cities owns.
21. There has been no announcement that Cap Cities
was for sale and it does not appear that an independent
committee of the Board was constituted to evaluate and
recommend the transaction. Such a committee is
<PAGE>
essential to ensure the fair consideration of the public
stockholders' rights in light of the dominance of Cap Cities'
Board by two major shareholders, Warren Buffett and Thomas
Murphy.
22. Notwithstanding the announcement of definite
merger terms, the consideration to be received by Cap Cities'
stockholders is as yet indefinite and speculative because
under the terms of the merger agreement, Cap Cities
stockholders can elect to receive proportionately more cash
or common stock than provided for in the exchange ratio,
subject to proration if either the stock or cash portion is
oversubscribed and subject to the option of Disney to
increase the cash portion if requested by Cap Cities'
shareholders.
23. The independent director defendants, if any,
have thus far failed to announce their participation in, or
oversight of, discussions with potentially interested
acquirers of Cap Cities and have failed to announce any
active auction or open bidding procedures best calculated to
maximize shareholder value.
24. The defendants have not, in accordance with
their fiduciary duties:
(a) acted independently so that the interests of
Cap Cities' public shareholders would be protected;
<PAGE>
(b) adequately ensured that no conflicts of
interest exist or, if such conflicts exist, to ensure
that all conflicts would be resolved in the best
interests of Cap Cities' public shareholders; and
(c) taken all appropriate steps to enhance Cap
Cities' value and attractiveness as a merger
acquisition, restructuring or recapitalization
candidate.
25. Because the individual defendants dominate and
control the business and corporate affairs of Cap Cities, and
are in possession of private corporate information concerning
Cap Cities' assets, businesses and future prospects, there
exists an imbalance and disparity of knowledge and economic
power between them and the public stockholders of Cap Cities
which makes it inherently unfair for them to pursue any
proposed transaction which will benefit the interests of some
large stockholders disproportionately to the exclusion of
other means of maximizing stockholder value.
26. Unless enjoined by this Court, the defendants
will continue to breach their fiduciary duties owed to
plaintiffs and the other members of the Class, and may
consummate the proposed transaction which will exclude the
Class from its fair proportionate share of Cap Cities'
<PAGE>
valuable assets and businesses, and/or benefit them in the
unfair manner complained of herein, all to the irreparable
harm of the Class, as aforesaid.
27. Plaintiffs and the Class have no adequate
remedy at law.
WHEREFORE, plaintiffs demand judgment, as follows:
A. Declaring this to be a proper class action;
B. Ordering defendants to carry out their fiduciary
duties to plaintiffs and the other members of the Class,
including those of due care and candor;
C. Rescinding any transactions effected by the
defendants in an unfair manner and for an unfair price and in
the event such transaction is consummated prior to trial,
awarding rescissory damages;
D. Enjoining the complained of transaction or any
related transactions;
E. Ordering defendants, jointly and severally, to
pay to plaintiffs and the Class all damages suffered and to
be suffered by them as a result of the acts and transactions
alleged herein;
F. Ordering defendants, jointly and severally, to
account to plaintiffs and the Class for all profits realized
and to be realized by them as a result of the transaction
complained of and pending such accounting to hold such
<PAGE>
profits in a constructive trust for the benefit of plaintiffs
and the other members of the class;
G. Awarding plaintiffs the costs and disbursements
of the action, including allowance for plaintiffs' reasonable
attorneys' and experts' fees; and
H. Granting such other and further relief as may be
just and proper in the premises.
Dated: July 31, 1995
Yours, etc.
ABBEY & ELLIS
212 East 39th Street
New York, New York 10016
Telephone: (212) 889-3700
SCHIFFRIN & CRAIG, LTD.
Three Bala Plaza East
Suite 500
Bala Cynwyd, Pennsylvania 19004
Telephone: (215) 667-7706
FARUQI & FARUQI
415 Madison Avenue
New York, New York 10017
Telephone: (212) 986-1074
ROBERT C. SUSSER, ESQ.
6 East 43rd Street
Suite 1900
New York, New York 10017
Telephone: (212) 808-0298
Counsel for Plaintiffs
EXHIBIT 99.8
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- -----------------------------------------:
:
JOHN STACK, :
:
Plaintiff, : Index No.
:
-against- :
:
CAPITAL CITIES/ABC, INC., WALT DISNEY : CLASS ACTION
CO., THOMAS S. MURPHY, ROBERT A. IGER, : COMPLAINT
JOHN B. FAIRCHILD, ROBERT P. BAUMAN, :
NICHOLAS F. BRADY, WARREN E. BUFFETT, : 95118820
DANIEL B. BURKE, FRANK T. CARY, LEONARD :
H. GOLDENSON, FRANK S. JONES, ANN :
DIBBLE JORDAN, JOHN H. MULLER, JR., : JURY TRIAL
WYNDHAM ROBERTSON and M. CABELL : DEMANDED
WOODWARD, JR., :
:
Defendants. :
- -----------------------------------------:
Plaintiff, by his attorneys, alleges upon
information and belief, except as to paragraph 1 which is
alleged upon knowledge, as follows:
THE PARTIES
1. Plaintiff is the owner of shares of the common
stock of defendant Capital Cities/ABC, Inc. ("Cap Cities" or
the "Company") and has been the owner continuously of such
shares since prior to the wrongs complained of herein.
2. Defendant Cap Cities is a corporation duly
existing and organized under the laws of the State of New
York, with its principal offices located at 77 West 66th
<PAGE>
Street, New York, New York. The Company owns and operates
television and radio stations, publishes newspapers and trade
publications, and offers cable programming.
3. As of April 28, 1995, there were over 150
million shares of the Company's common stock outstanding held
by almost 9,700 shareholders of record.
4. Defendant Thomas S. Murphy ("Murphy") is and at
all times relevant hereto has been Chairman of the Board,
President and Chief Executive Officer of Cap Cities.
5. Defendant Robert A. Iger ("Iger") is and at all
times relevant hereto was Cap Cities' President and Chief
Operating Officer, and a director of the Company.
6. Defendant John B. Fairchild ("Fairchild") is and
was at all relevant times an Executive Vice President and
Director of Cap Cities.
7. Defendants Robert P. Bauman, Nicholas F. Brady,
Warren E. Buffett, Daniel B. Burke, Frank T. Cary, Leonard H.
Goldenson, Frank S. Jones, Ann Dibble Jordan, John H. Muller,
Jr., Wyndham Robertson and M. Cabell Woodward, Jr. were, at
all relevant times, directors of Cap Cities.
8. The defendants referred to in paragraphs 4 and 5
above are collectively referred to herein as the "Individual
Defendants."
<PAGE>
9. Defendant Walt Disney Co. ("Disney") is a
Delaware corporation which is charged herein with aiding and
abetting the breaches of fiduciary duties committed by the
other defendants.
10. By reason of the above Individual Defendants'
positions with the Company as officers and/or directors, said
individuals are in a fiduciary relationship with plaintiff
and the other public stockholders of Cap Cities, and owe
plaintiff and the other members of the class the highest
obligations of good faith, fair dealing, due care, loyalty
and full, candid and adequate disclosure.
CLASS ACTION ALLEGATIONS
11. Plaintiff brings this action on his own behalf
and as a class action pursuant to CPLR ss. 901 on behalf of
himself and all Cap Cities securities holders or their
successors in interest, similarly situated (the "Class").
Excluded from the class are defendants herein and any person,
firm, trust, corporation, or other entity related to or
affiliated with any of the defendants.
12. This action is properly maintainable as a class
action.
13. The class is so numerous that joinder of all
members is impracticable. As of April 28, 1995, there were
<PAGE>
approximately 150 million shares of Cap Cities common stock
outstanding held by over 9,700 shareholders of record.
14. There are questions of law and fact which are
common to the Class and which predominate over questions
affecting any individual class members. The common questions
include, inter alia, the following:
(a) whether defendants have taken all reasonable
steps to enhance the value of Cap Cities as an
acquisition candidate;
(b) whether certain defendants have conflicts in
seeking to maximize Cap Cities' attractiveness and value
as an acquisition candidate;
(c) whether Cap Cities' independent directors have
taken all reasonable steps to neutralize any conflicts
of interest among the Cap Cities Board;
(d) whether plaintiff and the other members of the
class will be irreparably damaged if defendants fail to
take all necessary steps to maximize the value of Cap
Cities; and
(e) whether defendants have breached, or aided and
abetted the breach of, fiduciary and other common law
duties owed by them to plaintiff and the other members
of the class.
<PAGE>
15. The plaintiff is committed to prosecuting this
action and has retained competent counsel experienced in
litigation of this nature. The claims of plaintiff are
typical of the claims of the other members of the class and
plaintiff has the same interests as the other members of the
class. Accordingly, plaintiff is an adequate representative
of the class and will fairly and adequately protect the
interests of the class.
16. Plaintiff anticipates that there will be no
difficulty in the management of this litigation.
17. Defendants have acted on grounds generally
applicable to the class with respect to the matters
complained of herein, thereby making appropriate the relief
sought herein with respect to the class as a whole.
SUBSTANTIVE ALLEGATIONS
18. Recently, there has been a renewed interest in
the acquisition of broadcasting and cable properties such as
Cap Cities. Westinghouse has recently expressed an interest
in acquiring CBS, Inc. at a premium price of approximately
35% over its recent average trading price. In addition,
recent regulatory activities have resulted in a change of
regulations enhancing the attractiveness of cable operations
such as Cap Cities' "ESPN," "Lifetime" and "A&E" cable
networks.
<PAGE>
19. Cap Cities' stock has not had an opportunity
for these changed circumstances to be reflected in the stock
price. In addition, Cap Cities' stock price has come under
recent pressure, and recently declined from a high of
$109-1/2 to $96 per share, as a result of earnings which
barely missed analysts' expectations.
20. On July 31, 1995, Cap Cities announced that its
board had approved a "merger" with Disney wherein each Cap
Cities shareholder would receive one Disney common share and
$65 cash for each Cap Cities common share. On Friday, July
28, 1995, Disney stock closed at $56-7/8 and Cap Cities stock
closed at $96-1/2 per share. The value of the transaction per
each Cap Cities common share is approximately $121-7/8,
constituting an approximately 23% premium over the market
price. By comparison, CBS, Inc. may receive a premium of at
least 33% over its market price despite the fact that CBS has
none of the valuable cable properties which Cap Cities owns.
21. There has been no announcement that Cap Cities
was for sale and it does not appear that an independent
committee of the Board was constituted to evaluate and
recommend the transaction. Such a committee is essential to
ensure the fair consideration of the public stockholders'
rights in light of the dominance of Cap
<PAGE>
Cities' Board by two major shareholders, Warren Buffett and
Thomas Murphy.
22. Notwithstanding the announcement of definite
merger terms, the consideration to be received by Cap Cities'
stockholders is as yet indefinite and speculative because
under the terms of the merger agreement, Cap Cities
stockholders can elect to receive proportionately more cash
or common stock than provided for in the exchange ratio,
subject to proration if either the stock or cash portion is
oversubscribed and subject to the option of Disney to
increase the cash portion if requested by Cap Cities'
shareholders.
23. The independent director defendants, if any,
have thus far failed to announce their participation in, or
oversight of, discussions with potentially interested
acquirors of Cap Cities and have failed to announce any
active auction or open bidding procedures best calculated to
maximize shareholder value.
24. The defendants have not, in accordance with
their fiduciary duties:
(a) acted independently so that the interests of
Cap Cities' public shareholders would be protected;
(b) adequately ensured that no conflicts of
interest exist or, if such conflicts exist, to ensure
<PAGE>
that all conflicts would be resolved in the best
interests of Cap Cities' public shareholders; and
(c) taken all appropriate steps to enhance Cap
Cities' value and attractiveness as a merger
acquisition, restructuring or recapitalization
candidate.
25. Because the individual defendants dominate and
control the business and corporate affairs of Cap Cities, and
are in possession of private corporate information concerning
Cap Cities' assets, businesses and future prospects, there
exists an imbalance and disparity of knowledge and economic
power between them and the public stockholders of Cap Cities
which makes it inherently unfair for them to pursue any
proposed transaction which will benefit the interests of some
large stockholders disproportionately to the exclusion of
other means of maximizing stockholder value.
26. Unless enjoined by this Court, the defendants
will continue to breach their fiduciary duties owed to
plaintiff and the other members of the Class, and may
consummate the proposed transaction which will exclude the
Class from its fair proportionate share of Cap Cities'
valuable assets and businesses, and/or benefit them in the
<PAGE>
unfair manner complained of herein, all to the irreparable
harm of the Class, as aforesaid.
27. Plaintiff and the Class have no adequate remedy
at law.
WHEREFORE, plaintiff demands judgment, as follows:
A. Declaring this to be a proper class action;
B. Ordering defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class,
including those of due care and candor;
C. Rescinding any transactions effected by the
defendants in an unfair manner and for an unfair price and in
the event such transaction is consummated prior to trial,
awarding rescissory damages;
D. Enjoining the complained-of transaction or any
related transactions;
E. Ordering defendants, jointly and severally, to
pay to plaintiff and the Class all damages suffered and to be
suffered by them as a result of the acts and transactions
alleged herein;
F. Ordering defendants, jointly and severally, to
account to plaintiff and the Class for all profits realized
and to be realized by them as a result of the transaction
complained of and pending such accounting to hold such
<PAGE>
profits in a constructive trust for the benefit of plaintiff
and the other members of the Class;
G. Awarding plaintiff the costs and disbursements
of the action, including allowance for plaintiff's reasonable
attorneys' and experts' fees; and
H. Granting such other and further relief as may be
just and proper in the premises.
Dated: July 31, 1995
Yours, etc.
ABBEY & ELLIS
212 East 39th Street
New York, NY 10016
Telephone: (212) 889-3700
BERGER & MONTAGUE, P.C.
1622 Locust Street
Philadelphia, PA 19103
Telephone: (215) 875-3000
Counsel for Plaintiff
