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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
SPELLING ENTERTAINMENT GROUP INC.
(Name of Subject Company)
SPELLING ENTERTAINMENT GROUP INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Title of Class of Securities)
847807104
(CUSIP Number of Class of Securities)
SALLY SUCHIL, ESQ.
SENIOR VICE PRESIDENT--
GENERAL COUNSEL, SECRETARY AND ADMINISTRATION
5700 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90036
(323) 965-5700
(Name, address and telephone number of person authorized to receive
notice and communication on behalf of the person(s) filing statement).
WITH A COPY TO:
ROBERT B. PINCUS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
ONE RODNEY SQUARE
WILMINGTON, DELAWARE 19801
(302) 651-3000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Spelling Entertainment Group Inc., a
Delaware corporation (the "Company"), and the address of the principal executive
offices of the Company is 5700 Wilshire Boulevard, Los Angeles, California
90036. The title of the class of equity securities to which this statement
relates is the common stock, par value $0.001 per share (the " Common Stock" or
the "Shares"), of the Company.
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to the tender offer by VSEG Acquisition Inc., a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of Viacom
International Inc., a Delaware corporation ("Parent"), disclosed in a Tender
Offer Statement on Schedule 14D-1, dated May 21, 1999 (the "Schedule 14D-1"), to
purchase all issued and outstanding Shares at a price of $9.75 per Share, net to
the seller in cash (the "Per Share Amount"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated May 21, 1999 (the "Offer to
Purchase"), and the related Letter of Transmittal (which together constitute the
"Offer"). Parent is a wholly owned subsidiary of Viacom Inc., a Delaware
corporation ("Viacom").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 17, 1999 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Merger Agreement provides that, among other things, as soon as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement, in
accordance with the relevant provisions of the General Corporation Law of the
State of Delaware, as amended (the "DGCL"), Purchaser will be merged with and
into the Company. Following consummation of the Merger, the Company will
continue as the surviving corporation (the "Surviving Corporation") and will be
a direct wholly owned subsidiary of Parent. At the effective time of the Merger
(the "Effective Time"), each Share issued and outstanding immediately prior to
the Effective Time held by the holders of Shares, other than Parent and its
affiliates (the "Public Stockholders"), will be canceled and, subject to
appraisal rights under the DGCL, converted automatically into the right to
receive $9.75 in cash, or, in the event any higher price is paid in the Offer,
such higher price (the "Merger Consideration"), without interest.
A copy of the Merger Agreement is filed herewith as Exhibit 1 and is
incorporated herein by reference.
As set forth in the Schedule 14D- 1, the principal executive offices of
Parent and Purchaser are located at 1515 Broadway, New York, New York 10036.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
there are no material contracts, agreements, arrangements or understandings and
no actual or potential conflicts of interest between the Company or its
affiliates and (i) the Company's executive officers, directors or affiliates or
(ii) Parent or the Purchaser or their respective executive officers, directors
or affiliates.
ARRANGEMENTS WITH PARENT, PURCHASER OR THEIR AFFILIATES
THE MERGER AGREEMENT
The following is a summary of certain material provisions of the Merger
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the
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Merger Agreement, a copy of which is filed as Exhibit 1 hereto and is
incorporated herein by reference. Capitalized terms not otherwise defined below
shall have the meanings set forth in the Merger Agreement.
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five business
days after the initial public announcement of Purchaser's intention to commence
the Offer. The obligation of Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to the satisfaction of certain
conditions that are described in the enclosed Offer to Purchase under the
caption "THE TENDER OFFER--Section 12. Certain Conditions of the Offer."
Purchaser and Parent have agreed that, without the prior written consent of the
Special Committee, no change in the Offer may be made which decreases the price
per Share payable in the Offer, which reduces the maximum number of Shares to be
purchased in the Offer, which changes the form of consideration payable in the
Offer, which adds to, modifies or supplements the conditions to the Offer set
forth in the enclosed Offer to Purchase under the caption "THE TENDER
OFFER--Section 12. Certain Conditions of the Offer," or which extends the
expiration date of the Offer beyond the twentieth business day following
commencement thereof; PROVIDED, HOWEVER, Purchaser may extend the expiration
date of the Offer, (i) upon the occurrence of any of the events set forth in the
enclosed Offer to Purchase under the caption "THE TENDER OFFER--Section 12.
Certain Conditions of the Offer," (ii) to the extent necessary to respond to
comments on the Offer Documents from the Commission and (iii) on one additional
occasion, for a period not to exceed ten business days. Purchaser and Parent may
also make such other changes in the terms or conditions of the Offer as are not
materially adverse to the holders of Shares without the prior written consent of
the Special Committee. The term "Offer Documents" means the Schedule 14D-1, the
Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3"), the
enclosed Offer to Purchase and the other documents, in each case filed by
Purchaser and Parent with the Commission in connection with the Offer, together
with all supplements and amendments thereto.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with the DGCL, at the Effective
Time, Purchaser shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Purchaser will cease and the Company
shall continue as the Surviving Corporation. Upon consummation of the Merger,
each Share issued and outstanding immediately prior to the Effective Time held
by a Public Stockholder (other than any Shares as to which the holder has
perfected his or her Delaware law appraisal rights ("Dissenting Shares")) shall
be canceled and shall be converted automatically into the right to receive from
Surviving Corporation the Merger Consideration payable, without interest. Each
Share not held by a Public Stockholder immediately prior to the Effective Time
shall be canceled without any conversion thereof and no payment or distribution
shall be made with respect thereto.
Pursuant to the Merger Agreement, each share of common stock, par value $.01
per share, of Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
DIRECTORS AND OFFICERS, CERTIFICATE OF INCORPORATION AND BY-LAWS. The
Merger Agreement provides that the directors of Purchaser immediately prior to
the Effective Time (including Mr. Spelling) and the officers of the Company
immediately prior to the Effective Time will be the initial directors and
officers of the Surviving Corporation. The Merger Agreement also provides that
Mr. Spelling, the current Vice Chairman of the Board, will be the Chairman of
the Surviving Corporation. The Merger Agreement provides that the Certificate of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, will be amended as set forth in the Merger Agreement, and the Certificate
of Incorporation as so amended at the Effective Time, will be the Certificate of
Incorporation of the
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Surviving Corporation. The Merger Agreement also provides that the By-laws of
Purchaser, as in effect immediately prior to the Effective Time, will be the
By-laws of the Surviving Corporation.
TREATMENT OF STOCK OPTIONS; OPTIONHOLDER AGREEMENTS. Pursuant to the Merger
Agreement, the Company shall take all actions necessary (including obtaining any
and all required consents from employees) such that immediately after the Tender
Offer Acceptance Date (as defined below), each outstanding option to purchase
Shares (in each case, an "Option") granted under the Company's stock option
plans, including, The Spelling Entertainment Group Inc. 1987 Stock Option Plan
and The Spelling Entertainment Group Inc. 1994 Stock Option Plan (the "Option
Plans"), whether or not then exercisable, shall be canceled by the Company. The
Merger Agreement provides that immediately after the Tender Offer Acceptance
Date, each holder of a canceled Option shall be entitled to receive from
Purchaser in consideration for the cancellation of such Option, an amount in
cash equal to the product of (i) the number of Shares previously subject to such
Option and (ii) the excess, if any, of the Per Share Amount over the exercise
price per Share previously subject to such Option. The Merger Agreement provides
that all applicable withholding taxes attributable to the payments made
thereunder or to distributions contemplated thereby shall be deducted from the
amounts payable thereunder and all such taxes attributable to the exercise or
deemed exercise of Options on or after the Effective Time shall be withheld from
the Merger Consideration. The term "Tender Offer Acceptance Date" means the date
on which Purchaser shall have accepted for payment all Shares validly tendered
and not withdrawn prior to the expiration date of the Offer. Except as otherwise
agreed to by the parties to the Merger Agreement and to the extent permitted
under the Option Plans, (i) the Option Plans shall terminate as of the Effective
Time and (ii) the Company shall use all reasonable efforts to ensure that
following the Effective Time no holder of Options shall have any right
thereunder to acquire any equity securities of the Company.
In order to prevent the dilution of its greater than 80% interest in the
Common Stock of the Company that could result from the exercise of Options
during the period between the commencement of the Offer and the earlier of (i)
the Tender Offer Acceptance Date and (ii) the expiration of the Offer prior to
the purchase of any Shares thereunder, Parent, prior to the commencement of the
Offer, entered into agreements (each an "Optionholder Agreement") with various
directors, officers and employees who are holders of Options covering
approximately 2,583,055 Shares, pursuant to which such holders of Options have
agreed not to exercise their Options during such period of time, and Parent has
agreed to cause such holders' Options (consistent with the treatment of all
options under the terms of the Merger Agreement) to be canceled immediately
after the Tender Offer Acceptance Date and to make the payments described in the
paragraph above to the holders of Options.
WITHHOLDING TAXES. The Surviving Corporation or the designated paying agent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to the Merger Agreement to any holder of Shares any amounts
that the Surviving Corporation or such paying agent is required to deduct and
withhold with respect to the making of such payment under the United States
Internal Revenue Code of 1986, as amended, the rules and regulations promulgated
thereunder or any provision of state, local or foreign tax law.
AGREEMENTS OF PARENT, PURCHASER AND THE COMPANY; STOCKHOLDERS' MEETING.
Pursuant to the Merger Agreement, the Company shall, if required by applicable
law in order to consummate the Merger, take all necessary action to duly call,
give notice of, convene and hold a special meeting of its stockholders as soon
as practicable following consummation of the Offer for the purpose of
considering and taking action on the Merger Agreement and the Transactions (the
"Stockholders' Meeting"). At the Stockholders' Meeting, Parent and Purchaser
shall cause all Shares then owned by them to be voted in favor of the approval
and adoption of the Merger Agreement and the Transactions. In the event a
Stockholders' Meeting is called, the Company shall use its reasonable best
efforts to solicit from stockholders of the Company proxies in favor of the
approval and adoption of the Merger Agreement
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and to secure the vote or consent of stockholders required by the DGCL to
approve and adopt the Merger Agreement, unless otherwise required by the
applicable fiduciary duties of the directors of the Company or of the Company's
directors constituting the Special Committee, as determined by such directors in
good faith, and after consultation with independent legal counsel (which may
include the Company's regularly engaged legal counsel).
PROXY STATEMENT. The Merger Agreement provides that Parent, Purchaser and
the Company shall, if required by applicable law, as soon as practicable
following consummation of the Offer, file a proxy statement (the "Proxy
Statement") with respect to the Stockholders' Meeting with the Commission under
the Exchange Act, and use its best efforts to have the Proxy Statement cleared
by the Commission. Parent, Purchaser and the Company shall cooperate with each
other in the preparation of the Proxy Statement, and the Company shall notify
Parent of the receipt of any comments of the Commission with respect to the
Proxy Statement and of any requests by the Commission for any amendment thereof
or supplement thereto or for additional information and shall provide to Parent
promptly copies of all correspondence between the Company or any representative
of the Company and the Commission. The Company shall give Parent and its counsel
the opportunity to review the Proxy Statement prior to its being filed with the
Commission and shall give Parent and its counsel the opportunity to review all
amendments and supplements to the Proxy Statements and all responses to requests
for additional information from the Commission and replies to comments from the
Commission prior to their being filed with, or sent to, the Commission. Each of
the Company, Parent and Purchaser shall use its reasonable efforts after
consultation with the other parties to the Merger Agreement, to respond promptly
to all such comments of and requests by the Commission and to cause the Proxy
Statement and all required amendments thereof and supplements thereto to be
mailed to the holders of Shares entitled to vote at the Stockholders' Meeting at
the earliest practicable time.
CONDUCT OF BUSINESS. Pursuant to the Merger Agreement, prior to the
Effective Time, unless otherwise expressly contemplated by the Merger Agreement
or consented to in writing by Parent, the Company shall and shall cause its
subsidiaries (the "Subsidiaries" and, individually, a "Subsidiary") to (i)
operate its business in the usual and ordinary course consistent with past
practices, (ii) use its reasonable best efforts to preserve substantially intact
its business organization, maintain its rights and franchises, retain the
services of its respective principal officers and key employees and maintain its
relationships with its respective principal customers, suppliers and other
persons with which it or any of its subsidiaries has significant business
relations and (iii) use its reasonable best efforts to maintain and keep its
properties and assets in as good repair and condition as at present, ordinary
wear and tear excepted.
ACCESS TO INFORMATION. Pursuant to the Merger Agreement, from the date of
the Merger Agreement to the Effective Time, the Company shall, and shall cause
the officers, directors, employees, auditors and agents of the Company, to
afford the officers, employees and agents of Parent and Purchaser complete
access at all reasonable times to the officers, employees, agents, properties,
offices, plants and other facilities, books and records of the Company, and
shall furnish Parent and Purchaser with all financial, operating and other data
and information as Parent or Purchaser, through its officers, employees or
agents, may reasonably request.
DIRECTORS AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Merger Agreement
further provides that the By-laws of the Surviving Corporation shall contain
provisions no less favorable with respect to indemnification of the officers and
directors of the Company than those set forth in Article XII of the By-laws of
the Company, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at the Effective
Time were directors or officers, employees, fiduciaries or agents of the Company
in respect of actions or omissions occurring at or prior to the Effective Time,
unless such modification shall be required by law.
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The Merger Agreement also provides that from and after the Effective Time,
Parent and the Surviving Corporation shall, to the fullest extent permitted
under the DGCL, indemnify and hold harmless, each present and former director
and officer of the Company (collectively, the "Indemnified Parties") against all
costs and expenses (including attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and settlement amounts paid in connection with any
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), based on the fact that such person is or was a
director or officer of the Company and arising out of or pertaining to any
action or omission occurring at or before the Effective Time (and shall promptly
pay any expenses in advance of the final disposition of such action or
proceeding to each Indemnified Party to the fullest extent permitted under the
DGCL, upon receipt from the Indemnified Party to whom expenses are to be
advanced of any undertaking to repay such advances as required under the DGCL).
In the event of any such actual or threatened claim, action, suit, proceeding or
investigation, the Merger Agreement provides that (i) the Surviving Corporation
shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to the
Surviving Corporation, promptly after statements therefor are received and shall
pay all other reasonable expenses in advance of the final disposition of such
action, (ii) the Surviving Corporation shall cooperate and use all reasonable
efforts to assist in the vigorous defense of any such matter and (iii) to the
extent any determination is required to be made with respect to whether any
Indemnified Party's conduct complies with the standards set forth under the
DGCL, such determination shall be made by independent legal counsel selected by
the Indemnified Party and reasonably acceptable to the Surviving Corporation;
PROVIDED, HOWEVER, that the Surviving Corporation shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld or delayed); and PROVIDED FURTHER that the Surviving
Corporation shall not be obligated to pay the fees and expenses of more than one
counsel (plus appropriate local counsel) for all Indemnified Parties in any
single action except to the extent, as determined by counsel to the Indemnified
Parties, that two or more of such Indemnified Parties have conflicting interests
in the outcome of such action, in which case such additional counsel (including
local counsel) as may be required to avoid any such conflict or likely conflict
may be retained by the Indemnified Parties at the expense of the Surviving
Corporation.
The Merger Agreement provides that the Surviving Corporation shall use its
reasonable best efforts to maintain in effect for three years from the Effective
Time, if available, the current directors' and officers' liability insurance
policies maintained by the Company (PROVIDED that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not materially less favorable) with respect to matters
occurring prior to the Effective Time; PROVIDED, HOWEVER, that in no event shall
the Surviving Corporation be required to expend more than an amount per year
equal to 150% of the current annual premiums paid by the Company for such
insurance.
The Merger Agreement provides that in the event the Surviving Corporation or
any of its respective successors or assigns (i) consolidates with or merges into
any other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successors and assigns of the
Surviving Corporation, or, at Parent's option, Parent, shall assume the
foregoing indemnity obligations.
The Merger Agreement provides that Parent shall pay all reasonable expenses
incurred by any Indemnified Party in connection with the enforcement of the
provisions of the Merger Agreement relating to directors' and officers'
indemnification and insurance.
NOTIFICATION OF CERTAIN MATTERS. The Merger Agreement provides that the
Company shall give prompt notice to Parent, and Parent shall give prompt notice
to the Company, of (i) the occurrence, or nonoccurrence, of any event the
occurrence, or nonoccurrence, of which would be likely to cause any
representation or warranty contained in the Merger Agreement to be untrue or
inaccurate and (ii) any
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failure of the Company, Parent or Purchaser, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it thereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
the provisions of the Merger Agreement relating to notification of certain
matters shall not limit or otherwise affect the remedies available under the
Merger Agreement to the party receiving such notice.
The Merger Agreement provides that the Company shall give prompt written
notice to Parent of any proposal, offer or other communication from any person
(i) relating to any acquisition or purchase of all or any portion of the capital
stock of the Company or any Subsidiary or assets of the Company or any
Subsidiary, (ii) to enter into any business combination with the Company or any
Subsidiary or (iii) to enter into any other extraordinary business transaction
involving or otherwise relating to the Company or any subsidiary. The Merger
Agreement also provides that the Company shall notify Parent promptly if any
such proposal or offer, or any inquiry or other contact with any person with
respect thereto, is made and shall, in any such notice to Parent, indicate in
reasonable detail the identity of the person making such proposal, offer,
inquiry or contact and the terms and conditions of such proposal, offer, inquiry
or other contact.
PUBLIC ANNOUNCEMENTS. Pursuant to the Merger Agreement, Parent and the
Company shall each obtain the prior consent of each other before issuing any
press release or otherwise making any public statements with respect to the
Merger Agreement or any transaction contemplated thereby and shall not issue any
such press release or make any such public statement without such prior consent,
except as may be required by law or any listing agreement with a national
securities exchange to which Parent or the Company is a party.
FURTHER ACTION. The Merger Agreement provides that, subject to its terms
and conditions, each of the parties thereto covenants and agrees to use all
reasonable best efforts to deliver or cause to be delivered such documents and
other papers and to take or cause to be taken such further actions as may be
necessary, proper or advisable under applicable laws to consummate and make
effective the transactions contemplated by the Merger Agreement, including the
Merger.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company, Parent and Purchaser as to the enforceability of
the Merger Agreement. The Company also has provided, subject to appropriate
materiality standards, representations and warranties as to absence of certain
changes or events concerning the Company's business, compliance with law,
absence of litigation, corporate status, capitalization, the accuracy of
financial statements and filings with the Commission and intellectual property
rights.
CONDITIONS TO THE MERGER. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived, in whole or in part, to the extent permitted by applicable
law: (i) the Merger Agreement and the transactions contemplated thereby shall
have been approved and adopted by the affirmative vote of the stockholders of
the Company to the extent required by the DGCL and the Certificate of
Incorporation and the By-laws of the Company; (ii) no foreign, United States or
state governmental authority or other agency or commission or foreign, United
States or state court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of making the acquisition of Shares
by Purchaser illegal or otherwise restricting, preventing or prohibiting
consummation of the Offer or the Merger; and (iii) Purchaser or its permitted
assignee shall have purchased all Shares validly tendered and not withdrawn
pursuant to the Offer; PROVIDED, HOWEVER, that this condition shall not be
applicable to the obligations of Parent or Purchaser if, in breach of the
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Merger Agreement or the terms of the Offer, Purchaser fails to purchase any
Shares validly tendered and not withdrawn pursuant to the Offer.
TERMINATION; FEES AND EXPENSES. The Merger Agreement may be terminated and
the Merger and the other transactions contemplated thereby may be abandoned at
any time prior to the Effective Time, notwithstanding any requisite approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the stockholders of the Company: (i) by mutual written consent duly authorized
by the Board of Directors of Parent, Purchaser and the Company, if such
termination is also approved by the Special Committee; (ii) by either Parent,
Purchaser or the Company if (a) the Effective Time shall not have occurred on or
before December 31, 1999; PROVIDED, HOWEVER, that such right to terminate shall
not be available to any party whose failure to fulfill any obligation under the
Merger Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date or (b) any court of competent
jurisdiction or other governmental authority shall have issued an order, decree
or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable; (iii) by Parent, if (a) due to an occurrence or
circumstance that would result in a failure to satisfy any condition set forth
in the enclosed Offer to Purchase under the caption "THE TENDER OFFER--Section
12. Certain Conditions of the Offer," Purchaser shall have (1) failed to
commence the Offer within 60 days following the date of the Merger Agreement,
(2) terminated the Offer without having accepted any Shares for payment
thereunder, or (3) failed to pay for the Shares validly tendered pursuant to the
Offer within 90 days following the commencement of the Offer, unless such
termination or failure to pay for Shares shall have been caused by or resulted
from the failure of Parent or Purchaser to perform in any material respect any
covenant or agreement of either of them contained in the Merger Agreement or the
material breach by Parent or Purchaser of any representation or warranty of
either of them contained in the Merger Agreement or (b) prior to the purchase of
any Shares validly tendered pursuant to the Offer, the Special Committee shall
have withdrawn or modified in a manner that is, in the reasonable judgment of
Parent, materially adverse to Parent or Purchaser, its approval or
recommendation of the Merger Agreement, the Offer, the Merger or any other
transaction contemplated by the Merger Agreement or shall have recommended
another merger, consolidation or business combination involving, or acquisition
of, the Company or its assets or another tender offer for Shares, or shall have
resolved to do any of the foregoing; (iv) by the Company, upon approval of the
Special Committee, if due to an occurrence or circumstance that would result in
a failure to satisfy any condition set forth in the enclosed Offer to Purchase
under the caption "THE TENDER OFFER--Section 12. Certain Conditions of the
Offer," Purchaser shall have (a) failed to commence the Offer within 60 days
following the date of the Merger Agreement, (b) terminated the Offer without
having accepted any Shares for payment thereunder, or (c) failed to pay for the
Shares validly tendered pursuant to the Offer within 90 days following the
commencement of the Offer, unless such termination or failure to pay for Shares
shall have been caused by or resulted from the failure of the Company to perform
in any material respect any covenant or agreement of it contained in the Merger
Agreement or the material breach by the Company of any representation or
warranty of it contained in the Merger Agreement or (v) by the Company, upon
approval of the Special Committee, if any representation or warranty of Parent
and Purchaser in the Merger Agreement which is qualified as to materiality shall
not be true and correct in all respects or any such representation or warranty
that is not so qualified shall not be true and correct in any material respect,
in each case as if such representation or warranty was made as of such time on
or after the date of the Merger Agreement, or Parent or Purchaser shall have
failed to perform in any material respect any obligation or to comply in any
material respect with any agreement or covenant of Parent or Purchaser to be
performed or complied with by it under the Merger Agreement; PROVIDED that if
such material breach or failure to perform is curable by Parent or Purchaser
through the exercise of its reasonable efforts and for so long as Parent or
Purchaser continues to exercise such reasonable efforts, the Company may not
terminate the Merger Agreement under Section 8.01(e) thereof.
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The right of any party hereto to terminate the Merger Agreement pursuant to
the provisions of the Merger Agreement relating to termination will remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any party thereto, any person controlling any such party or any
of their respective officers or directors, whether prior to or after the
execution of the Merger Agreement.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall forthwith become void, except for certain provisions of the
Merger Agreement (including those related to fees and expenses described below)
which survive termination. The Merger Agreement also provides that no party
shall be relieved from liability for any wilful breach thereof.
All fees and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby shall be paid by Parent.
CERTAIN TRANSACTIONS
Parent owns more than 80% of the outstanding Common Stock. Viacom owns 100%
of the outstanding common stock of Parent. The Company is an indirect, more than
80%-owned subsidiary of Viacom.
The Company and Viacom entered into a number of agreements to define the
ongoing relationship between the two companies. Because of Viacom's control over
the Company's operations, these agreements were not the result of negotiations
between independent parties, however, the Company and Viacom believe that terms
of such agreements are as favorable to the Company as could be obtained from an
unaffiliated party. The following is a summary of certain agreements between the
Company and Viacom (or their respective subsidiaries):
LINE OF CREDIT. On September 30, 1996, the Company and Viacom executed a
credit agreement (the "Viacom Credit Agreement"), which provides for (i) a term
loan of $200,000,000 and (ii) a revolving credit facility of $155,000,000 to
fund the Company's working capital and other requirements. All outstanding
borrowings under the Viacom Credit Agreement, as amended, mature on December 31,
2000. As of March 31, 1999 there were borrowings in the amount $231,000,000
outstanding under the Viacom Credit Agreement. Under the Viacom Credit
Agreement, the Company pays an annual fee (currently 0.2375%) based on the
unused portion of the facility, as well as certain facility and administration
fees. Effective January 1, 1999, interest on all outstanding borrowings is
payable, at the Company's option, at LIBOR plus a spread (currently 2.50%) or at
Citibank N.A.'s base rate. The spread is based on a sliding scale with regard to
the Company's leverage ratio, as defined. Borrowings under the Viacom Credit
Agreement are secured by all of the assets of the Company and its domestic
subsidiaries, and the entire amount outstanding under the Viacom Credit
Agreement may be accelerated if Viacom's borrowings under its separate credit
facilities were to be accelerated. Borrowings under the Viacom Credit Agreement
may be accelerated in the event of a change in control of the Company, as
defined in the Viacom Credit Agreement. Parent intends to terminate and
capitalize the Viacom Credit Agreement after the Effective Time.
TAX AGREEMENT. Viacom owns approximately 80% of the outstanding shares of
the Company's Common Stock and, therefore, the Company is required to be
included in the consolidated federal income tax return of Viacom. The Directors
of the Company approved an agreement dated November 12, 1997 between the Company
and Viacom that provides for the administration of federal, state and foreign
tax matters (the "Tax Agreement"). Under the Tax Agreement, the Company will
remain in the same tax position as it would have if it were continuing to file
its tax returns separate and apart from Viacom; as a result, the Company does
not anticipate any material impact to its financial condition or results of
operations.
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ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE COMPANY
GENERAL. In considering the recommendation of the Special Committee and of
the Board with respect to the Offer and the Merger and the fairness of the
consideration to be received in the Offer and the Merger, Public Stockholders
should be aware that members of the Company's management and the Board have the
interests and relationships summarized below that may present them with
potential conflicts of interest in connection with the Offer and the Merger. The
Special Committee and the Board recognized such interests and determined that
such interests neither supported nor detracted from the fairness of the Offer
and the Merger to the Public Stockholders.
COMPENSATION OF MEMBERS OF THE SPECIAL COMMITTEE. Mr. William M. Haber has
been compensated in the amount of $20,000 for serving as a member of the Special
Committee. Mr. John L. Muething has been compensated in the amount of $25,000
for serving as the chairman of the Special Committee. This compensation was
authorized by the Board in order to compensate the members thereof for the
significant additional time commitment that was required of them in connection
with fulfilling their duties and responsibilities as members of the Special
Committee and was paid without regard to whether the Special Committee approved
the Offer and the Merger or whether the Merger was consummated.
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The officers of the
Company immediately prior to the Effective Time will be the officers of the
Surviving Corporation until their respective successors are duly elected or
appointed and qualified. Mr. Spelling, the Vice Chairman of the Board of the
Company, will be the Chairman as well as a director of the Surviving
Corporation.
OWNERSHIP OF COMMON STOCK. As of April 30, 1999, the directors and
executive officers of the Company, as a group, beneficially owned an aggregate
of 50,500 Shares (representing approximately .05% of the then outstanding
Shares), excluding shares subject to Options. As of April 30, 1999, the members
of the Special Committee, as a group, beneficially owned an aggregate of 2,000
Shares. All such Shares held by such directors and executive officers and by the
members of the Special Committee will be treated in the Merger in the same
manner as Shares held by the other stockholders. See "--The Offer" and "--The
Merger." In the aggregate, the directors and executive officers of the Company
will be entitled to receive approximately $492,375 for their Shares upon
consummation of the Offer and the Merger (based upon the number of Shares owned
as of April 30, 1999 and the members of the Special Committee will be entitled
to receive approximately $19,500 for their Shares upon consummation of the Offer
and the Merger (based upon the number of Shares owned as of April 30, 1999).
OPTIONS. As of April 30, 1999, the directors and executive officers of the
Company had Options to acquire an aggregate of 2,172,500 Shares. Immediately
after the Tender Offer Acceptance Date, pursuant to the Merger Agreement, each
outstanding Option, including those held by such directors and executive
officers, whether or not then vested and exercisable will, in accordance with
procedures that apply to all holders of Options, be canceled and each holder of
an Option shall be entitled to receive from Purchaser in consideration for the
cancellation of such Option, an amount in cash, net of applicable withholding
taxes, equal to the product of (i) the number of Shares previously subject to
such Option and (ii) the excess, if any, of the Merger Consideration over the
exercise price per Share previously subject to such Option. The directors and
executive officers of the Company, as a group, will receive total consideration
of $5,342,500 (before applicable taxes) in exchange for the cancellation of
their Options based on the number of Options as of April 30, 1999. See
"--Treatment of Options; Optionholder Agreements."
INDEMNIFICATION AND INSURANCE. For a discussion of certain agreements by
Parent with respect to indemnification of, and insurance for, directors and
officers of the Company, see "--Directors and Officers' Indemnification and
Insurance."
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RELATIONSHIPS OF DIRECTORS WITH VIACOM. Mr. Sumner Redstone, the Chairman
of the Board of the Company, is the Chairman of the Board and Chief Executive
Officer of Viacom. Mr. Redstone is also President, Chief Executive Officer and
Chairman of the Board of National Amusements, Inc. ("NAI"). As of April 8, 1999,
NAI owned approximately 67% of the Class A Common Stock and approximately 28% of
the Class A Common Stock and the Class B Common Stock of Viacom on a combined
basis. Mr. Philippe P. Dauman, a director of the Company, is Deputy Chairman of
the Board and Executive Vice President and Secretary of Viacom. Mr. Dauman is
also a director of NAI. Mr. Thomas E. Dooley, a director of the Company, is
Deputy Chairman and Executive Vice President Finance.
EMPLOYMENT CONTRACTS AND ARRANGEMENTS. Pursuant to an Employment Agreement
dated as of March 1, 1998 (the "Employment Agreement"), Mr. Spelling is employed
as Vice Chairman of the Board of the Company and as Chairman of the Board and
Chief Executive Officer of Spelling Television Inc. and is entitled to serve as
Executive Producer or Producer of substantially all television programs and
films (as he may elect) produced by the Company or its production subsidiaries.
Mr. Spelling's Employment Agreement extends through April 30, 2000. As
compensation for the performance of his obligations under the agreement, Mr.
Spelling received a salary of $129,167 per month for the first two months of the
agreement, and an annual base salary of $1,700,000 for the period May 1, 1998 to
April 30, 1999 ("first term year") and will receive an annual base salary of
$1,850,000 for the period May 1, 1999 to April 30, 2000 ("second term year").
Mr. Spelling is also entitled to receive a year-end bonus of $175,000 for the
first term year and $200,000 for the second term year. As compensation for
serving as an Executive Producer or Producer, Mr. Spelling receives certain
producer fees and other compensation.
Mr. Spelling has the right to terminate the Employment Agreement effective
upon seven (7) days' written notice in the event that the Company materially
breaches its obligations under the Employment Agreement or upon certain
circumstances involving a change of control of the Company. If the agreement is
terminated for any reason, Mr. Spelling may elect to continue to provide
Executive Producer services on the Company's product as set forth in the
agreement and the Company will pay him producer fees and other compensation as
set forth therein. If Mr. Spelling terminates the Employment Agreement based on
a material breach by the Company, Mr. Spelling has the right to cease providing
services and receive a lump sum payment equal to the present value of his base
salary for the remainder of the term, as well as Executive Producer fees and
other compensation payable in accordance with a formula provided in his
Employment Agreement, and the year-end bonuses. In addition, Mr. Spelling was
also granted 75,000 Options pursuant to his employment agreement. In connection
with the Merger Agreement, all outstanding vested and unvested Options Mr.
Spelling holds as of the date on which Purchaser shall have accepted for payment
all Shares validly tendered and not withdrawn prior to the expiration date with
respect to the Offer, will be canceled and Mr. Spelling will become entitled to
receive, in consideration of the cancellation of each such Option, an amount of
cash equal to the product of (a) the number of shares of Common Stock covered by
such Option as of such date and (b) the excess, if any, of the Merger
Consideration over the exercise price per share previously subject to such
Option. Mr. Spelling will receive an aggregate of $3,190,625 (before applicable
taxes) in connection with the cancellation of his 1,075,000 Options pursuant to
the Merger Agreement.
The Company has a three-year employment agreement with Peter H. Bachmann,
dated as of January 1, 1997, wherein he is employed as President of the Company
and received an annual salary of $675,000 during the first year of the term.
Pursuant thereto, his salary increased to $725,000 on January 1, 1998 and
increased to $795,000 on January 1, 1999. Further, he is entitled to receive
target incentive compensation of 50% of his salary based on the Company's
performance and his individual performance. Mr. Bachmann is also entitled to
receive an annual grant of not less than 125,000 Options. Under certain
circumstances, including a change of control, sale, liquidation or other
disposition of the Company or if the Company engages in a "going private"
transaction (as defined in
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his agreement), Mr. Bachmann's outstanding Options will become vested and fully
exercisable. In the event Mr. Bachmann is terminated without cause or he
terminates the agreement for good reason, he is entitled to receive his base
salary, bonus and certain other compensation for the balance of the employment
term, subject to mitigation after the first 18 months, and all outstanding
vested and unvested Options as of the end of the employment term shall remain
exercisable for six months following the date of termination (but not beyond the
expiration date of such Options). In connection with the Merger Agreement, all
outstanding vested and unvested Options Mr. Bachmann holds as of the date on
which Purchaser shall have accepted for payment all Shares validly tendered and
not withdrawn prior to the expiration date with respect to the Offer, will be
canceled and Mr. Bachmann will become entitled to receive, in consideration of
the cancellation of each such Option, an amount of cash equal to the product of
(a) the number of shares of Common Stock covered by such Option immediately
prior to such date and (b) the excess, if any, of the Merger Consideration over
the exercise price per share previously subject to such Option. Mr. Bachmann
will receive an aggregate of $1,466,875 (before applicable taxes) in connection
with the cancellation of his 780,000 Options pursuant to the Merger Agreement.
The Company has a two-year employment agreement with Ross G. Landsbaum,
dated as of July 20, 1998. Pursuant to such agreement, Mr. Landsbaum is employed
as Senior Vice President-- Chief Financial Officer of the Company at an annual
salary of $265,000 during the first year of the agreement and $285,000 during
the second year of the agreement. Further, he is entitled to receive target
incentive compensation of 40% of his base salary. In connection with the Merger
Agreement, all outstanding vested and unvested Options Mr. Landsbaum holds as of
the date on which Purchaser shall have accepted for payment all Shares validly
tendered and not withdrawn prior to the expiration date with respect to the
Offer, will be canceled and Mr. Landsbaum will become entitled to receive, in
consideration of the cancellation of each such Option, an amount of cash equal
to the product of (a) the number of shares of Common Stock covered by such
Option immediately prior to such date and (b) the excess, if any, of the Merger
Consideration over the exercise price per share previously subject to such
Option. Mr. Landsbaum will receive an aggregate of $312,500 (before applicable
taxes) in connection with the cancellation of his 137,500 Options pursuant to
the Merger Agreement.
The Company has an agreement with James Miller, dated as of January 6, 1997,
as amended as of June 30, 1998, which terminates on September 30, 2000. Pursuant
to such agreement, Mr. Miller is employed as Vice President and Controller of
the Company at an annual salary of $200,000 from October 1, 1998 to September
30, 1999 and $215,000 from October 1, 1999 to September 30, 2000. Mr. Miller is
also entitled to receive a bonus at the Company's discretion. Pursuant to Mr.
Miller's employment agreement, he was granted 20,000 Options vesting 25% each
year. In connection with the Merger Agreement, all outstanding vested and
unvested Options Mr. Miller holds as of the date on which Purchaser shall have
accepted for payment all Shares validly tendered and not withdrawn prior to the
expiration date with respect to the Offer, will be canceled and Mr. Miller will
become entitled to receive, in consideration of the cancellation of each such
Option, an amount of cash equal to the product of (a) the number of shares of
Common Stock covered by such Option immediately prior to such date and (b) the
excess, if any, of the Merger Consideration over the exercise price per share
previously subject to such Option. Mr. Miller will receive an aggregate of
$125,625 (before applicable taxes) in connection with the cancellation of his
50,000 Options pursuant to the Merger Agreement.
The Company has an agreement with Sally Suchil which terminates on January
4, 2000. Pursuant to such agreement, Ms. Suchil is employed as Senior Vice
President--General Counsel, Secretary and Administration of the Company at an
annual salary of $305,000 during the first year of the agreement, which
increased to $325,000 on January 1, 1999. Ms. Suchil is also entitled to receive
target incentive compensation of 30% of her base annual salary. In connection
with the Merger Agreement, all outstanding vested and unvested Options Ms.
Suchil holds as of the date on which Purchaser shall have accepted for payment
all Shares validly tendered and not withdrawn prior to the expiration date with
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respect to the Offer, will be canceled and Ms. Suchil will become entitled to
receive, in consideration of the cancellation of each such Option, an amount of
cash equal to the product of (a) the number of shares of Common Stock covered by
such Option immediately prior to such date and (b) the excess, if any, of the
Merger Consideration over the exercise price per share previously subject to
such Option. Ms. Suchil will receive an aggregate of $246,875 (before applicable
taxes) in connection with the cancellation of her 130,000 Options pursuant to
the Merger Agreement.
OTHER AGREEMENTS. Spelling Television has an agreement with Tori Spelling,
Mr. Spelling's daughter, wherein Spelling Television is granted the exclusive
right and property in and to Ms. Spelling's television series services as an
actress in regard to the production of "Beverly Hills, 90210" for a period
dating from September 26, 1990. Spelling Television has recently extended the
term of the agreement for Ms. Spelling's services for a tenth season of the
series. Ms. Spelling is compensated: per program; for television re-runs,
theatrical re-runs, foreign telecasting and supplemental markets; for a portion
of the net profits derived from certain merchandising activities; and if Ms.
Spelling renders services for commercial announcements. Spelling Television
guarantees to employ and compensate or compensate Ms. Spelling for all episodes
produced in a season, but in no event for less than 26 episodes for the
1998/1999 season and no less than 26 episodes for the 1999/2000 season. Ms.
Spelling received $896,279 for the quarter ended March 31, 1999, $3,111,000 for
the years ended December 31, 1998 and 1997, respectively.
Spelling Television has an agreement dated as of September 24, 1996 with
Randy Spelling, Mr. Spelling's son, wherein Spelling Television is granted the
exclusive right to Randy Spelling's services as an actor in regard to the
production of "Sunset Beach," with options to extend the agreement. Pursuant to
such agreement, Randy Spelling is compensated: per episode (with a minimum
number of episodes per week); for a portion of the net profits derived from
certain merchandising activities; as well as for certain other required
payments. Spelling Television guarantees to employ and compensate or compensate
Randy Spelling for any episode for which Spelling Television has guaranteed him
compensation. Randy Spelling received $54,084 for the quarter ended March 31,
1999, $260,000 and $401,902 for the years ended December 31, 1998 and 1997,
respectively.
Spelling Television has an agreement with Mr. Spelling whereby he is
entitled to receive producer fees and other compensation on a per episode or per
hour basis on the product produced by Spelling Television, including series,
mini-series and movies for television, and for certain theatrical films.
Pursuant to such agreement, in fiscal year 1998, Mr. Spelling was paid
$7,207,000 in producers fees and other compensation by Spelling Television. The
Company believes that the amount of fees paid to Mr. Spelling are equal to or
less than fees paid to unaffiliated producers of comparable stature.
DIRECTOR COMPENSATION. Each member of the Board (excluding Messrs. Dauman,
Dooley and Redstone) are entitled to receive an annual fee of $15,000 plus $750
for each Board and Committee meeting attended. In addition, the directors
serving on the Special Committee have received additional compensation in
connection with such service. See "--Compensation of Members of the Special
Committee."
Stockholders also should be aware that Parent and Purchaser have certain
interests that present actual or potential conflicts of interest in connection
with the Offer and the Merger. As a result of Parent's current ownership of more
than 80% of the Shares and its affiliates' officers, constituting three of the
Company's six directors, Parent may be deemed to control the Company.
The Special Committee and the Board were aware of these actual and potential
conflicts of interest and considered them along with the other matters described
under "Item 4(b)--Background; Reasons for the Company Board's Recommendation."
To the best knowledge of, Parent and Purchaser, all of the executive
officers and directors of the Company currently intend to tender Shares owned by
them pursuant to the Offer. Several of the
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officers of the Company have entered into Optionholder Agreements with Parent
pursuant to which they have agreed not to exercise their Options prior to the
earlier of the Tender Offer Acceptance Date and the date upon which the Offer
shall have expired without any Shares being purchased thereunder. See
"--Treatment of Options; Optionholder Agreements."
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE COMPANY BOARD
The Board, by unanimous vote of all directors present and voting, based
upon, among other things, the unanimous recommendation and approval of the
Special Committee, has determined that the Merger Agreement and the transactions
contemplated thereby, including each of the Offer and the Merger (collectively,
the "Transactions"), are fair to, and in the best interests of, the Company,
approved the Merger Agreement, the Offer and the Merger, declared the Merger
Agreement to be advisable and resolved to recommend that stockholders accept the
Offer and tender their Shares pursuant to the Offer.
A letter to the Company's stockholders communicating the Company Board's
recommendation and a press release announcing the execution of the Merger
Agreement are filed herewith as Exhibits 3 and 4, respectively, and are
incorporated herein by reference.
(B) BACKGROUND; REASONS FOR THE COMPANY BOARD'S RECOMMENDATION
Viacom acquired Paramount Communications Inc. ("Paramount") in July 1994 and
Blockbuster Entertainment Corporation ("Blockbuster") in September 1994. Viacom
acquired an indirect controlling interest in the Company through its acquisition
of Blockbuster, which at that time owned approximately 75% of the Shares.
Viacom incurred significant indebtedness in connection with its acquisition
of Paramount. As a consequence, following the acquisition of Blockbuster, Viacom
undertook an asset disposition program, which included the non-interactive
entertainment assets of the Company, in order to reduce its level of
indebtedness. As part of this process, Viacom retained Bear Stearns & Co. Inc.
("Bear Stearns") in the summer of 1995 to determine the level of interest among
possible buyers for the Company's non-interactive entertainment assets. Bear
Stearns contacted approximately 100 parties, of which approximately 25 parties
requested and were provided with an offering memorandum containing detailed
information concerning the Company. The sale process yielded no firm proposals
for the acquisition of the Company.
Accordingly, in May of 1996, Viacom announced that it was terminating its
efforts to sell the Company. Viacom based its decision to do so on the lack of
interest among potential buyers, and the disruption to the Company caused by the
sale process.
In April of 1997, Viacom announced its intention to acquire additional
Shares to increase its ownership interest in the Company to over 80%, and
thereby enable Viacom to include the Company in Viacom's consolidated tax group.
This was achieved in November of 1997, and Viacom has owned more than 80% of the
Shares since that time.
In 1997 and 1998, the Company began to reposition itself through the sale
and discontinuation of certain of its businesses. In August of 1997, the Company
licensed the distribution rights to its 1997 home video rental titles to
Paramount Home Video, which allowed the Company to eliminate certain costs
associated with the distribution of home video titles to the rental market. In
February 1998, the Company announced its decision to exit the theatrical feature
film business and closed Spelling Films.
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In April 1998, the Company sold TeleUNO, its Latin American entertainment
channel. The Company disposed of its Virgin Interactive Entertainment Limited
("VIEL") business which produced and distributed interactive games for the
Company through two transactions. In September 1998, the Company entered into a
seven-year licensing agreement with Artisan Home Entertainment Inc. covering the
domestic and Canadian home video and digital video disc ("DVD") distribution
rights to approximately 3,000 titles remaining in the Company's library, and in
connection therewith, the Company closed its domestic home video distribution
business. On September 4, 1998, the Company sold the stock of Westwood Studios,
Inc., a subsidiary of VIEL, and certain development assets of VIEL to Electronic
Arts Inc. On November 10, 1998, the Company completed the sale of all non-US
operations of VIEL, effectively completing the disposal of its interactive game
business.
At various times after termination of the sale process in 1996 through 1998,
Viacom held exploratory discussions with two parties in the entertainment
business concerning their potential interest in acquiring the Company. Neither
of these companies made any specific proposals to acquire the Company.
In late 1998, Viacom had preliminary discussions with an additional
entertainment company with significant television production assets. Such
company outlined a proposal to acquire part of Viacom's interest in the Company
for cash and to exchange such Company's television production assets for newly
issued shares of Common Stock that, together with the shares of Common Stock to
be acquired from Viacom, would constitute a controlling interest in the Company.
Viacom rejected the proposal because the proposed transaction did not include
the acquisition of Shares from the Company's public stockholders and included an
acquisition of only a portion of Viacom's shares, and because the parties did
not agree on the valuation of the assets to be transferred.
In early 1999, Viacom reviewed its strategy relative to its investment in
the Company. Viacom concluded that if it purchased the remaining stock of the
Company which it did not currently own, it could significantly reduce overhead
expense, by combining administrative functions and television sales force with
that of Paramount Television's, thereby reducing the Company's employment and
other costs of the Company. In addition, Viacom expects to be able to generate
increased revenues from the Company's current television production and its
television and film libraries. Viacom believed that unless it were to acquire
the remaining Shares and obtain the benefit of cost reductions, it was unlikely
to recover its investment in the Company and the Company would continue to
require financial support from Viacom. Based on this analysis, on March 18,
1999, the Board of Directors of Viacom approved the making of a proposal to the
Board of Directors of the Company to acquire the remaining publicly held Shares.
At a meeting of the Board held on March 19, 1999, Viacom presented its
proposal to acquire the remaining publicly held Shares in a merger transaction
for $9.00 per Share in cash (the "Proposal"). In response to the Proposal, the
Board formed the Special Committee, comprised of Messrs. John Muething and
William Haber. The Board authorized the Special Committee to review, evaluate
and negotiate the terms of the Proposal on behalf of the Company with a view
toward making a recommendation to the Board with respect to the Proposal. In
addition, the Board authorized the Special Committee, among other things, to
retain independent legal counsel and financial advisors. The Board authorized
the Company to pay $25,000 to Mr. Muething to serve as Chairman of the Special
Committee and $20,000 to Mr. Haber to serve as a member thereof and to indemnify
each member of the Special Committee to the fullest extent permitted by law from
all losses incurred by him in connection with his services as a member of the
Special Committee.
On March 19, 1999, the Special Committee retained Skadden, Arps, Slate,
Meagher & Flom LLP ("Skadden Arps") as special counsel to represent the Special
Committee. Later that day members of the Special Committee met with
representatives of Skadden Arps, who briefed the Special Committee
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on the process and the scope of the Special Committee's duties and discussed the
fiduciary duties of the members of the Special Committee under applicable state
law. At that meeting, the Special Committee also discussed retaining independent
financial advisors and determined to interview investment banking firms in order
to select a financial advisor to the Special Committee.
On March 26 and 31, 1999, the Special Committee and representatives of
Skadden Arps met with four investment banking firms to discuss their credentials
and suitability to act as financial advisor to the Special Committee. Following
those meetings, the Special Committee determined to retain Lazard Freres as
financial advisor to the Special Committee based on its reputation, expertise in
the industry, advisory experience in similar transactions and the conclusion
that Lazard Freres would not have a conflict with the Company, Viacom or any of
their respective affiliates in relation to this assignment. On April 5, 1999,
the Special Committee finalized an engagement letter with Lazard Freres. See
"Item 5--Persons Retained, Employed or to be Compensated."
During the next three weeks, Lazard Freres commenced its due diligence
investigation of the Company and held ongoing discussions with the Company. On
April 9th, 10th, 21st and 22nd, representatives of Lazard Freres met with
members of the Company's management for due diligence sessions and to discuss
the Company's long range plans and objectives. During this period,
representatives of Lazard Freres also reviewed with Viacom the previous efforts
undertaken to sell the Company.
On April 23, 1999, the Special Committee met with representatives of Lazard
Freres and Skadden Arps. At that meeting, representatives of Lazard Freres
advised the Special Committee of the progress of its due diligence investigation
of the Company and presented the Special Committee with its preliminary views on
the Proposal. Representatives of Skadden Arps also discussed the possibility of
requesting that Viacom revise the structure of the Proposal to provide for a
first step cash tender offer for all Shares followed by a second step merger in
an effort to obtain payment to stockholders on a more accelerated basis than
contemplated by the Proposal. On April 27, 1999, the Special Committee held a
conference call with representatives of Lazard Freres and Skadden Arps to
discuss the Proposal. Following such discussions, the Special Committee
authorized representatives of Lazard Freres to meet with representatives of
Viacom to advise them that the Special Committee was not willing to recommend
the Proposal.
On April 28, 1999, representatives of Lazard Freres met with representatives
of Viacom and informed them that the Special Committee was not willing to
recommend the Proposal. Representatives of Viacom expressed their view that the
$9.00 per Share to be paid pursuant to the Proposal represented full and fair
value for the Shares. Representatives of Viacom informed Lazard Freres that
Viacom would consider the Special Committee's views and respond accordingly.
On May 10, 1999, representatives of Skadden Arps and Lazard Freres met with
counsel representing certain plaintiffs in litigation brought against the
Company, its directors and Viacom in connection with the Proposal and the
financial advisor to such plaintiffs. See the disclosure in the enclosed Offer
to Purchase under the caption "THE TENDER OFFER--Section 13. Certain Legal
Matters and Regulatory Approvals." At that meeting, such counsel expressed their
view that the consideration to be paid pursuant to the Proposal was inadequate.
Following that meeting, representatives of Lazard Freres informed the Special
Committee members and representatives of Viacom of the results of the meeting.
On May 11, 1999, representatives of Viacom informed representatives of
Lazard Freres that Viacom had considered the views of the Special Committee and
the plaintiffs, but continued to believe that the $9.00 per Share to be paid
pursuant to the Proposal was at the high end of the range of fairness and
represented a significant premium to any price that the Shares had traded in
recent times.
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Nevertheless, Viacom was willing to offer $9.25 per Share in an effort to
satisfy the members of the Special Committee.
During a conference call later that morning, representatives of Lazard
Freres advised Mr. Muething and representatives of Skadden Arps of Viacom's
offer. After lengthy discussion, Mr. Muething authorized representatives of
Lazard Freres to inform Viacom that he did not believe that $9.25 per Share was
adequate and that he was prepared to recommend to Mr. Haber that the Special
Committee recommend a transaction with Viacom where stockholders were paid
$10.75 per Share in cash.
By telephone call later that day, representatives of Lazard Freres informed
representatives of Viacom of Mr. Muething's position. Representatives of Viacom
said that Viacom was not willing to pay $10.75 per Share to acquire the minority
interest in the Company and that they believed that $9.25 per Share exceeded
fair value for the Shares. Nevertheless, representatives of Viacom said they
were willing to recommend that Viacom offer $9.75 per Share (the "Revised
Proposal") only if the members of the Special Committee would be willing to
recommend a transaction at that price.
Subsequent to that call, representatives of Lazard Freres informed Mr.
Muething and representatives of Skadden Arps of Viacom's position. After a
discussion of the appropriate response thereto, Mr. Muething authorized
representatives of Skadden Arps to send their proposed changes on the draft
merger agreement to Shearman & Sterling, Viacom's counsel.
Later that evening, Mr. Muething advised Mr. Haber of Viacom's position.
After discussions on the various aspects of the revised proposal, Messrs.
Muething and Haber determined that they would be willing to recommend the
Revised Proposal, so long as Viacom was willing to accept their proposed changes
on the draft merger agreement. On May 12, 1999, representatives of Lazard Freres
advised representatives of Viacom of the Special Committee's response.
During the period between May 11 and May 16, 1999, representatives of
Skadden Arps and the Special Committee negotiated the terms of the Merger
Agreement with representatives of Shearman & Sterling and Viacom. Viacom was
willing to accept the Special Committee's proposed changes, including revising
the structure of the transaction to provide for the Offer. During that same
period, representatives of Shearman & Sterling and counsel representing certain
plaintiffs in litigation brought against the Company, its directors and Viacom
conducted negotiations regarding the possible settlement of such litigation. See
the disclosure in the enclosed Offer to Purchase under the caption "THE TENDER
OFFER--Section 13. Certain Legal Matters and Regulatory Approvals."
On May 14, 1999, the Special Committee met with representatives of Lazard
Freres and Skadden Arps by telephone conference. At that meeting,
representatives of Lazard Freres orally advised the Special Committee that the
Per Share Amount and the Merger Consideration proposed to be received by the
Public Stockholders in the Offer and Merger was fair to such stockholders from a
financial point of view, which opinion was subsequently confirmed in writing. A
copy of such opinion is attached hereto as Exhibit 2. The Special Committee then
unanimously recommended that the Board approve and recommend to the Company's
stockholders the revised $9.75 per Share proposal, subject to negotiation and
execution of a mutually acceptable merger agreement.
After the Special Committee completed its meeting, the Board convened a
telephonic meeting. The Special Committee presented to the Board its
determination that the Merger Agreement was fair to the Public Stockholders, and
Lazard Freres confirmed that it had delivered its opinion to the Special
Committee that the Merger Consideration of $9.75 was fair to the Public
Stockholders, from a financial point of view. After the directors were given an
opportunity to discuss their questions and concerns relating to the Merger
Agreement, the Board, by unanimous vote of all Directors present and voting,
approved and declared to be advisable the Merger Agreement and the Merger, and
voted to
16
<PAGE>
recommend to the stockholders of the Company that they tender their Shares
pursuant to the Offer. On May 16, 1999, the Special Committee and
representatives of Skadden Arps completed their negotiations of the terms of the
Merger Agreement with Viacom and its advisors and the Merger Agreement was
executed the next day.
RECOMMENDATION OF THE COMPANY'S BOARD; FAIRNESS OF THE OFFER AND THE MERGER
ON MAY 14, 1999, THE SPECIAL COMMITTEE UNANIMOUSLY DETERMINED THAT THE
MERGER WAS FAIR TO, AND IN THE BEST INTERESTS OF, THE PUBLIC STOCKHOLDERS AND
UNANIMOUSLY VOTED TO RECOMMEND AND APPROVE THE MERGER AGREEMENT.
FAIRNESS OF THE MERGER. In reaching its determination, the Special
Committee considered:
- the historical market prices of the Shares, including the fact that the
$9.75 per Share represented a premium of approximately 44.4% over the
$6.75 per Share closing price on March 18, 1999, the last full trading day
prior to the March 19, 1999 announcement of the Proposal, and represented
a premium of approximately 52.9% over the closing price for the Shares on
the NYSE on the date 30 days prior to the announcement of the Proposal;
- the fact that the $9.75 per Share to be paid to the Public Stockholders in
the Offer and the Merger exceeded the highest price at which the Shares
have traded on the NYSE since May 3, 1996;
- the fact that the $9.75 per Share to be paid to Public Stockholders in the
Offer and the Merger represented a 228% premium over the net book value
per Share of $2.97 as of March 30, 1999;
- the opinion of Lazard Freres that, based upon and subject to the
assumptions and qualifications stated in its opinion, the $9.75 per Share
to be paid to the Public Stockholders in the Offer and the Merger is fair
to the Public Stockholders from a financial point of view, and the report
and analysis presented to the Special Committee in connection with the
Lazard Freres opinion (See the disclosure in the enclosed Offer to
Purchase under the caption "SPECIAL FACTORS-- Opinion of Lazard Freres.");
- that the terms of the Merger Agreement were determined through
arm's-length negotiations between the Special Committee and its legal and
financial advisors, on one hand, and representatives of Viacom, on the
other, and provide for the Offer in order to allow Public Stockholders to
receive payment for their Shares on an accelerated basis;
- that Viacom has sufficient stock ownership to control a disposition of the
Company and informed the Special Committee that it would not be interested
in a third-party sale of the Company; the Special Committee and Lazard
were not authorized to, and did not, solicit third-party indications of
interest for the acquisition of the Company, nor were any offers from
third parties received;
- the ability of Public Stockholders who object to the Merger to obtain
"fair value" for their Shares if they exercise and perfect their appraisal
rights under the DGCL;
- the results of the prior efforts by Viacom to sell the Company; and
- the fact that the Offer provides the Public Stockholders with liquidity to
dispose of their Shares which may not be available in the public market
due to the low level of trading volume of the Shares on the New York Stock
Exchange ("NYSE") prior to the announcement of the Proposal (an average
daily trading volume of 22,834 shares since December 31, 1998).
17
<PAGE>
In order to determine the fairness of the terms of the Offer and the Merger
and to approve the Merger Agreement and the Transactions, including the Offer
and the Merger, the Board concurred with and adopted the analysis of the Special
Committee with respect to the financial evaluation of the Company and of the
Offer and the Merger Consideration.
On May 14, 1999, the Board of Directors, by unanimous vote of all directors
present and voting, based upon, among other things, the unanimous recommendation
and approval of the Special Committee, determined that the Merger Agreement and
the Transactions are fair to, and in the best interests of, the Company,
approved the Merger Agreement, the Offer and the Merger, declared the Merger
Agreement to be advisable and recommended that stockholders accept the Offer and
tender their Shares pursuant to the Offer.
Neither the Board of Directors nor the Special Committee considered a
liquidation analysis because liquidation of the Company was not an alternative
presented in the Proposal.
In evaluating the Offer and the Merger, the members of the Board of
Directors, including the members of the Special Committee, considered their
knowledge of the business, financial condition and prospects of the Company, and
the advice of financial and legal advisors. In light of the number and variety
of factors that the Company's Board and the Special Committee considered in
connection with their evaluation of the Offer and the Merger, neither the
Company's Board nor the Special Committee found it practicable to assign
relative weights to the foregoing factors, and, accordingly, neither the
Company's Board nor the Special Committee did so.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated April 5, 1999, the Special Committee
retained Lazard Freres services as investment banker in connection with the
Transactions, including its delivery of an opinion as to the fairness to the
Company's stockholders (other than Parent), from a financial point of view, of
the consideration to be received in a transaction with Parent. Pursuant to the
letter agreement, the Company has paid Lazard Freres fees totaling $875,000. The
Company also has agreed to reimburse Lazard Freres for its reasonable
out-of-pocket expenses (including reasonable fees and expenses of its legal
counsel). In the ordinary course of its business, Lazard Freres and its
affiliates may actively trade in the securities of the Company for its own
account and for the account of its customers and, accordingly, may at any time
hold a long or short position.
Except as disclosed herein, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to the Company's stockholders with respect to the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
a. Since March 22, 1999, 60 days prior to the date of this Schedule 14D-9,
through May 20, 1999, none of the Company, Viacom, Parent, Purchaser, any
majority-owned subsidiary thereof, any director or executive officer thereof and
no pension, profit-sharing or similar plan of the Company, Viacom, Parent or
Purchaser has effected any purchases or sales of Common Stock, except that
Parent has purchased Shares in private sales in the following amounts on the
following dates:
<TABLE>
<CAPTION>
DATE NO. OF SHARES PRICE PER SHARE HOW AND WHERE EXECUTED
- ------------------------------------- ------------- ----------------- -------------------------------------------
<S> <C> <C> <C>
3/22/99.............................. 27,000 $ 9.00 Private Purchase, New York, New York
3/23/99.............................. 8,125 $ 9.00 Private Purchase, New York, New York
4/13/99.............................. 44,847 $ 9.00 Private Purchase, New York, New York
4/23/99.............................. 87,500 $ 9.00 Private Purchase, New York, New York
</TABLE>
18
<PAGE>
b. To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by them (other than
Shares issuable upon exercise of stock options and Shares, if any, which if
tendered could cause such persons to incur liability under the provisions of
Section 16(b) of the Exchange Act).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
a. Except as set forth in this Schedule 14D-9, the Company is not engaged in
any negotiation in response to the Offer which relates to or would result in (i)
an extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other acquisition of securities by or of the Company; or
(iv) any material change in the present capitalization or dividend policy of the
Company.
b. Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
LITIGATION. In March 1999, following the announcement of the Proposal, a
number of lawsuits were filed in Delaware by various individual shareholders of
the Company against the Company and certain of its officers and directors with
respect to the Proposal and the Merger Agreement. The Delaware lawsuits were
consolidated by court order under the caption In re Spelling Entertainment Group
Inc. Shareholders Litigation, Consolidated C.A. No. 17024 NC (the "Delaware
Action"). Additionally, a similar lawsuit was filed in the Superior Court of the
State of California.
The lawsuits purport to be class actions on behalf of all persons who hold
securities of the Company (except the defendants and their affiliates). The
lawsuits make allegations as to various violations of fiduciary duty by the
Company, its directors and Viacom including, among other things, that the
consideration to be offered to the Public Stockholders pursuant to the Offer and
Merger is inadequate and that the Company failed to take adequate steps to
determine and disclose the fair value of the publicly held Shares. Plaintiffs
seek injunctive relief, recission, damages, costs (including attorneys' and
experts' fees) and other equitable relief. As a result of settlement
negotiations between counsel for plaintiffs in the Consolidated Action and
counsel for defendants, the parties have reached an agreement in principle to
settle the Consolidated Action based upon the increase in the consideration from
$9.00 to $9.75 in cash per Share which Viacom has agreed, pursuant to the Merger
Agreement, to pay to acquire the publicly owned Shares. The settlement in
principle is subject to the execution of an appropriate Stipulation of
Settlement and such other documentation as may be required in order to obtain
final Court approval of the settlement and the dismissal of the Delaware Action
and the California action.
<TABLE>
<S> <C>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Agreement and Plan of Merger, dated as of May 17, 1999, by and among Viacom
International Inc., VSEG Acquisition Inc. and Spelling Entertainment Group
Inc. (incorporated by reference to Exhibit 99.1 to the Company's Current
Report on Form 8-K reporting events occurring on May 17, 1999).
Exhibit 2 Opinion of Lazard Freres & Co. Inc., dated as of May 14, 1999.*
Exhibit 3 Letter to Stockholders of Spelling Entertainment Group Inc., dated May 21,
1999.*
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
Exhibit 4 Press Release issued by the Company on May 17, 1999 (incorporated by reference
to Exhibit 99.2 to the Company's Current Report on Form 8-K reporting events
occurring on May 17, 1999).
Exhibit 5 Credit Agreement, dated as of September 30, 1996, by and among the Company,
certain subsidiaries of the Company and Viacom Inc. (incorporated by reference
to Exhibit 10.1 to the Company's Form 10-Q for quarterly period ended
September 30, 1996).
Exhibit 6 Pledge and Security Agreement, dated as of September 30, 1996, by and among
the Company, certain subsidiaries of the Company and Viacom Inc. (incorporated
by reference to Exhibit 10.2 to the Company's Form 10-Q for quarterly period
ended September 30, 1996).
Exhibit 7 Copyright Mortgage and Assignment; Power of Attorney dated as of September 30,
1996, by the Company and certain subsidiaries of the Company in favor of
Viacom Inc. (incorporated by reference to Exhibit 10.3 to the Company's Form
10-Q for quarterly period ended September 30, 1996).
Exhibit 8 Guaranty, dated as of September 30, 1996, by the Company and certain
subsidiaries of the Company in favor of Viacom Inc. (incorporated by reference
to Exhibit 10.4 to the Company's Form 10-Q for quarterly period ended
September 30, 1996).
Exhibit 9 Amendment No. 1 to the Credit Agreement, dated as of December 31, 1996, by and
among the Company, certain subsidiaries of the Company and Viacom Inc.
(incorporated by reference to Exhibit 10.5 to the Company's Form 10-K for
fiscal year ended December 31, 1996).
Exhibit 10 Amendment No. 2 to the Credit Agreement, dated as of December 31, 1997, by and
among the Company, certain subsidiaries of the Company and Viacom Inc.
(incorporated by reference to Exhibit 10. 6 to the Company's Form 10-K for
fiscal year ended December 31, 1997).
Exhibit 11 Amendment No. 3 to the Credit Agreement, dated as of December 31, 1998, by and
among the Company, certain subsidiaries of the Company and Viacom Inc.
(incorporated by reference to Exhibit 10.7 to the Company's Form 10-K for
fiscal year ended December 31, 1998).
Exhibit 12 Tax Agreement, dated November 12, 1997, by and among the Company and Viacom
Inc. (incorporated by reference to Exhibit 10.26 to the Company's Form 10-K
for fiscal year ended December 31, 1997).
Exhibit 13 Spelling Entertainment Group, Inc. Stock Option Plan and Amendment Nos. One
through Five thereto (incorporated by reference to Exhibit 4.03 to the
Company's Registration Statement No. 33-61914 on Form S-8).
Exhibit 14 Spelling Entertainment Group Inc. 1987 Stock Option Plan, as amended and
restated (incorporated by reference to Exhibit 99. 1 to the Company's
Post-Effective Amendment No. 1 to the Registration Statement No. 33-61914 on
Form S-8 dated February 26, 1998).
Exhibit 15 Spelling Entertainment Group Inc. 1994 Stock Option Plan (incorporated by
reference to Annex A to the Company's Notice of Annual Meeting and Proxy
Statement dated April 27, 1994).
Exhibit 16 Spelling Entertainment Group Inc. 1994 Stock Option Plan, as amended and
restated (incorporated by reference to Exhibit 99.1 to the Company's
Post-Effective Amendment No. 1 to the Registration Statement No. 33-53951 on
Form S-8 dated February 26, 1998).
Exhibit 17 Amended and Restated Employment Agreement, dated March 1, 1998, between the
Company and Aaron Spelling (incorporated by reference to Exhibit 10.31 to the
Company's Form 10-K for fiscal year ended December 31, 1997).
Exhibit 18 Employment Agreement, dated as of January 1, 1997, between the Company and
Peter H. Bachmann (incorporated by reference to Exhibit 10.1 to the Company's
Form 10-Q for quarterly period ended September 30, 1997).
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
Exhibit 19 Employment Agreement, dated as of January 1, 1995, between the Company and
Sally Suchil (incorporated by reference to Exhibit 10.25 to the Company's Form
10-K for fiscal year ended December 31, 1995) and Amendment to Employment
Agreement dated as of December 12, 1997 (incorporated by reference to Exhibit
10.34 to the Company's Form 10-K for fiscal year ended December 31, 1997).
Exhibit 20 Employment Agreement, dated as of January 6, 1997, between the Company and
James Miller (incorporated by reference to Exhibit 10.27 to the Company's Form
10-K for fiscal year ended December 31, 1996) and Amendment to Employment
Agreement dated as of June 30, 1998.
Exhibit 21 Employment Agreement dated as of July 20, 1998, between the Company and Ross
G. Landsbaum (incorporated by reference to Exhibit 10.1 to the Company's Form
10-Q for the quarterly period ended September 20, 1998).
</TABLE>
- ------------------------
* Included in copies of Schedule 14D-9 mailed to stockholders.
21
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
<TABLE>
<S> <C> <C>
Dated: May 21, 1999 SPELLING ENTERTAINMENT GROUP INC.
By: /s/ SUMNER M. REDSTONE
-----------------------------------------
Name: Sumner M. Redstone
Title: Chairman of the Board
</TABLE>
22
<PAGE>
Exhibit (c)(1)
----------------------------------------------------------
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Among
VIACOM INTERNATIONAL INC.,
VSEG ACQUISITION INC.
and
SPELLING ENTERTAINMENT GROUP INC.
Dated as of May 17, 1999
----------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE OFFER
SECTION 1.01. The Offer 2
SECTION 1.02. Company Action 3
ARTICLE II
THE MERGER
SECTION 2.01. The Merger 4
SECTION 2.02. Closing 4
SECTION 2.03. Effective Time 4
SECTION 2.04. Effect of the Merger 4
SECTION 2.05. Certificate of Incorporation; By-laws 4
SECTION 2.06. Directors and Officers 5
SECTION 2.07. Conversion of Securities 5
SECTION 2.08. Stock Options 5
SECTION 2.09. Dissenting Shares 6
SECTION 2.10. Surrender of Shares; Stock Transfer Books 6
SECTION 2.11. Withholding Rights 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification 8
SECTION 3.02. Certificate of Incorporation and By-laws 8
SECTION 3.03. Capitalization 9
SECTION 3.04. Authority Relative to This Agreement 9
SECTION 3.05. No Conflict; Required Filings and Consents 10
SECTION 3.06. SEC Filings; Financial Statements 10
SECTION 3.07. Absence of Litigation 11
SECTION 3.08. Compliance 11
SECTION 3.09. Intellectual Property Rights 11
SECTION 3.10. Offer Documents; Schedule 14D-9; Proxy Statement 12
SECTION 3.11. Brokers 12
SECTION 3.12. Opinion of Financial Advisor 12
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 4.01. Corporate Organization 13
SECTION 4.02. Authority Relative to This Agreement 13
SECTION 4.03. No Conflict; Required Filings and Consents 13
SECTION 4.04. Financing 14
SECTION 4.05. Offer Documents; Proxy Statement 14
SECTION 4.06. Brokers 14
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants of the Company 14
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting 15
SECTION 6.02. Proxy Statement 15
SECTION 6.03. Access to Information 15
SECTION 6.04. Directors' and Officers' Indemnification and Insurance 16
SECTION 6.05. Notification of Certain Matters 17
SECTION 6.06. Public Announcements 17
SECTION 6.07. Further Action 18
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger 18
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination 18
SECTION 8.02. Effect of Termination 20
SECTION 8.03. Amendment 20
SECTION 8.04. Waiver 20
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements 21
SECTION 9.02. Notices 21
SECTION 9.03. Certain Definitions 22
SECTION 9.04. Severability 22
SECTION 9.05. Entire Agreement; Assignment 22
SECTION 9.06. Parties in Interest 23
SECTION 9.07. Specific Performance 23
SECTION 9.08. Governing Law 23
SECTION 9.09. Headings 23
SECTION 9.10. Counterparts 23
SECTION 9.11. Fees and Expenses 23
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
ANNEX A - CONDITIONS TO THE OFFER
EXHIBIT A - CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION
<PAGE>
Glossary of Defined Terms
(Not Part of This Agreement)
----------------------------
Location
of
Defined Term Definition
- ------------ ----------
affiliate ss.9.03
Agreement Preamble
Blue Sky Laws ss.3.05(b)
business day ss.9.03
Certificate of Merger ss.2.03
Certificates ss.2.10(b)
Code ss.2.11
Company Preamble
Company Material Adverse Effect 3.01(a)
Delaware Law Recitals
Disclosure Schedule Art. III
Dissenting Shares ss.2.09(a)
Effective Time ss.2.03
Encumbrance ss.9.03
Exchange Act Recitals
Exchange Fund ss.2.10
Indemnified Parties ss.6.04(b)
Intellectual Property ss. 3.09
Lazard Freres Recitals
Merger Recitals
Merger Consideration ss.2.07(a)
1999 Balance Sheet ss.3.06(c)
Offer Recitals
Offer Documents ss. 1.01(b)
Offer to Purchase ss. 1.01(b)
Option ss. 2.08
Option Plans ss.2.08
Parent Preamble
Paying Agent ss.2.10(a)
Per Share Amount Recitals
person ss.9.03
Preferred Stock ss.3.03
Proxy Statement ss. 3.10
Purchaser Preamble
Purchaser Shares Recitals
Schedule 13E-3 ss.1.01(b)
Schedule 14D-1 ss.1.01(b)
Schedule 14D-9 ss.1.02(a)
SEC ss.1.01(a)
SEC Reports ss.3.06(a)
Securities Act ss.3.06(a)
Shares Recitals
Special Committee Recitals
Stockholders' Meeting ss.6.01
Subsidiary ss.9.03
Surviving Corporation ss.2.01
Tender Offer Acceptance Date ss.2.08(a)
Transactions ss.1.01(b)
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of May 17, 1999 (this
"AGREEMENT"), among VIACOM INTERNATIONAL INC., a Delaware corporation
("PARENT"), VSEG ACQUISITION INC., a Delaware corporation and a wholly owned
subsidiary of Parent ("PURCHASER"), and SPELLING ENTERTAINMENT GROUP INC., a
Delaware corporation (the "COMPANY").
WHEREAS, Parent beneficially owns an aggregate of 75,216,103 shares (the
"PURCHASER SHARES") of common stock, par value $.001 per share ("SHARES"), of
the Company, constituting approximately 80% of the total outstanding Shares, and
has proposed to the special committee of the Board of Directors of the Company
(the "SPECIAL COMMITTEE"), that Purchaser acquire the remaining Shares;
WHEREAS, immediately prior to the Effective Time (as defined below)
Parent will contribute the Purchaser Shares to Purchaser;
WHEREAS, the Board of Directors of the Company (the "BOARD") and the
Special Committee have determined that it is in the best interests of the
Company to approve Purchaser's proposed acquisition and have voted (i) to
recommend that the stockholders of the Company accept the Offer (as defined
below) and tender their Shares pursuant to the Offer and (ii)to approve and deem
advisable the merger (the "MERGER") of Purchaser with and into the Company, with
the Company being the surviving corporation, in accordance with the General
Corporation Law of the State of Delaware "DELAWARE LAW") following consummation
of the Offer;
WHEREAS, it is proposed that Purchaser will make a cash tender offer
(the "OFFER") in compliance with Section 14(d)(1) of the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"), and the rules and regulations
promulgated thereunder, to acquire all the issued and outstanding Shares (other
than the Purchaser Shares) for $9.75 per Share (such amount, or any greater
amount per Share paid pursuant to the Offer, being hereinafter referred to as
the "PER SHARE AMOUNT"), net to the seller in cash, upon the terms and subject
to the conditions of this Agreement; and that the Offer will be followed by the
Merger, pursuant to which each issued and outstanding Share not owned by
Purchaser will be converted into the right to receive the Per Share Amount, upon
the terms and subject to the conditions provided herein; and
WHEREAS, the Special Committee has received the opinion of Lazard Freres
& Co. LLC ("LAZARD FRERES") that the consideration to be received by the holders
of Shares (other than Parent and its subsidiaries) pursuant to the Offer and the
Merger is fair to such holders from a financial point of view;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. THE OFFER. (a) Provided that this Agreement shall not have
been terminated in accordance with Section 8.01 and none of the events set forth
in Annex A hereto shall have occurred or be existing, Purchaser shall commence,
and Parent shall cause Purchaser to commence, within the meaning of Rule 14d-2
under
1
<PAGE>
the Exchange Act, the Offer as promptly as reasonably practicable after the date
hereof, but in no event later than five business days after the initial public
announcement of Purchaser's intention to commence the Offer. The obligation of
Purchaser to accept for payment and pay for Shares tendered pursuant to the
Offer shall be subject only to the satisfaction of the conditions set forth in
Annex A hereto. Purchaser expressly reserves the right to waive any such
condition, to increase the Per Share Amount and to make any other changes in the
terms and conditions of the Offer; PROVIDED, HOWEVER, that, without the prior
written consent of the Special Committee, Purchaser will not (i) decrease the
Per Share Amount, (ii)reduce the maximum number of Shares to be purchased in the
Offer, (iii) change the form of the consideration payable in the Offer, (iv)add
to, modify or supplement the conditions to the Offer set forth in Annex A
hereto, (v) extend the expiration date of the Offer beyond the twentieth
business day following commencement thereof; PROVIDED, HOWEVER, Purchaser may
extend the expiration date of the Offer, (A) if the conditions to the Offer set
forth in Annex A have not been satisfied, (B) to the extent necessary to respond
to comments on the Offer Documents (as defined below) from the Securities and
Exchange Commission (the "SEC") and (C) on one additional occasion, for a period
not to exceed ten business days or (vi)make any other change in the terms or
conditions of the Offer which is materially adverse to the holders of Shares.
The Per Share Amount shall, subject to any applicable withholding of taxes, be
net to each seller in cash, upon the terms and subject to the conditions of the
Offer. Subject to the terms and conditions of the Offer, Purchaser shall, and
Parent shall cause Purchaser to, accept for payment and pay, as promptly as
practicable after expiration of the Offer, for all Shares validly tendered and
not withdrawn.
(b) On the date of commencement of the Offer, Parent and
Purchaser shall file with the SEC (i) a Tender Offer Statement on Schedule
14D-1, including all exhibits thereto (together with all amendments and
supplements thereto, the "SCHEDULE 14D-1"), with respect to the Offer and (ii) a
Rule 13e-3 Transaction Statement on Schedule 13E-3, including all exhibits
thereto (together with all amendments and supplements thereto, the "SCHEDULE
13E-3"), with respect to the Offer and the other transactions contemplated
hereby (the "TRANSACTIONS"). The Schedule 14D-1 and the Schedule 13E-3 shall
contain or shall incorporate by reference an offer to purchase (the "OFFER TO
PURCHASE") and the related letter of transmittal and any related summary
advertisement (the Schedule 14D-1, the Schedule 13E-3, the Offer to Purchase and
such other documents, together with all supplements and amendments thereto,
being referred to herein collectively as the "OFFER DOCUMENTS"). Parent,
Purchaser and the Company shall correct promptly any information provided by any
of them for use in the Offer Documents which shall become false or misleading,
and Parent and Purchaser shall take all steps necessary to cause the Schedule
14D-1 and the Schedule 13E-3, as so corrected, to be filed with the SEC and the
other Offer Documents, as so corrected, to be disseminated to holders of Shares,
in each case as and to the extent required by applicable Law (as defined below).
The Company, the Special Committee and their respective counsel shall be given
the reasonable opportunity to review and comment on the Offer Documents prior to
the filing thereof with the SEC. Parent and Purchaser shall provide the Company,
the Special Committee and their respective counsel with a copy of any written
comments or telephonic notification of any oral comments Parent or Purchaser may
receive from the SEC or its staff with respect to the Offer Documents promptly
after the receipt thereof. Parent and its counsel shall provide the Company, the
Special Committee and their respective counsel with a reasonable opportunity to
participate in all communications with the SEC and its staff, including any
meetings and
2
<PAGE>
telephone conferences, relating to the Offer Documents, the Transactions or this
Agreement. In the event that the Parent or the Purchaser receives any comments
from the SEC or its staff with respect to the Offer Documents, each shall use
its reasonable best efforts to respond promptly to such comments and take all
other actions necessary to resolve the issues raised therein.
(c) Parent shall provide or cause to be provided to Purchaser
on a timely basis the funds necessary to accept for payment, and pay for, any
Shares that Purchaser becomes obligated to accept for payment, and pay for,
pursuant to the Offer.
SECTION 1.02. COMPANY ACTION. (a) As soon as reasonably
practicable on the date of commencement of the Offer, the Company shall file
with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9,
including all exhibits thereto (together with all amendments and supplements
thereto, the "SCHEDULE 14D-9"), containing the recommendations of the Special
Committee and the Board described in Section 3.04(b), and shall disseminate the
Schedule 14D-9 to the extent required by Rule 14d-9 under the Exchange Act, and
any other applicable Law. The Company, Parent and Purchaser shall correct
promptly any information provided by any of them for use in the Schedule 14D-9
which shall become false or misleading, and the Company shall take all steps
necessary to cause the Schedule 14D-9, as so corrected, to be filed with the SEC
and disseminated to holders of Shares, in each case as and to the extent
required by applicable Law. Parent and its counsel shall be given the
opportunity to review and comment on the Schedule 14D-9 prior to the filing
thereof with the SEC. The Company shall provide Parent and its counsel with a
copy of any written comments or telephonic notification of any oral comments the
Company may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt thereof. The Company and its counsel shall provide
Parent and its counsel with a reasonable opportunity to participate in all
communications with the SEC and its staff, including any meetings and telephone
conferences, relating to the Schedule14D-9, the Transactions or this Agreement.
(b) In connection with the Transactions, the Company shall
furnish, or cause to be furnished, Purchaser promptly with mailing labels
containing the names and addresses of the record holders of Shares as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of shareholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Shares, and shall
furnish to Purchaser such information and assistance (including updated lists of
shareholders, security position listings and computer files) as Parent may
reasonably request in communicating the Offer to the Company's shareholders.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent and Purchaser and their agents shall hold in
confidence the information contained in any such labels, listings and files,
will use such information only in connection with the Offer and the Merger and,
if this Agreement shall be terminated, will deliver, and will use their
reasonable efforts to cause their agents to deliver, to the Company all copies
and any extracts or summaries from such information then in their possession or
control.
ARTICLE II
THE MERGER
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SECTION 2.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with Delaware Law, at
the Effective Time (as hereinafter defined) Purchaser shall be merged with and
into the Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "SURVIVING CORPORATION").
SECTION 2.02. CLOSING. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.01 and subject to the satisfaction or waiver of the
conditions set forth in Article VII, the consummation of the Merger will take
place as promptly as practicable (and in any event within two business days)
after the satisfaction or waiver of the conditions set forth in Article VII at
the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York,
unless another date, time or place is agreed to in writing by the parties
hereto.
SECTION 2.03. EFFECTIVE TIME. As promptly as practicable after
the satisfaction or, if permissible, waiver of the conditions set forth in
ArticleVII, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary
of State of the State of Delaware, in such form as is required by, and executed
in accordance with the relevant provisions of, Delaware Law (the date and time
of such filing being the "EFFECTIVE TIME").
SECTION 2.04. EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Purchaser shall vest in the Surviving Corporation,
and all debts, liabilities, obligations, restrictions, disabilities and duties
of the Company and Purchaser shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 2.05. CERTIFICATE OF INCORPORATION; BY-LAWS. (a) At
the Effective Time, the Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be amended as set forth in
Exhibit A. The Certificate of Incorporation of the Company, as so amended at the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate of
Incorporation.
(b) The By-laws of Purchaser, as in effect immediately prior
to the Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-laws.
SECTION 2.06. DIRECTORS AND OFFICERS. The directors of
Purchaser immediately prior to the Effective Time (which shall include Aaron
Spelling) shall be the initial directors of the Surviving Corporation, each to
hold office in accordance with the Certificate of Incorporation and By-laws of
the Surviving Corporation. Aaron Spelling shall be the Chairman of the Surviving
Corporation and the other officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving
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Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
SECTION 2.07. CONVERSION OF SECURITIES. At the Effective Time, by virtue
of the Merger and without any action on the part of Purchaser, the Company or
the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than any Shares to be cancelled pursuant to Section2.07(b) and any
Dissenting Shares (as hereinafter defined)) shall be cancelled and shall be
converted automatically into the right to receive an amount equal to the Per
Share Amount in cash (the "MERGER CONSIDERATION") payable, without interest, to
the holder of such Share, upon surrender, in the manner provided in Section
2.10, of the certificate that formerly evidenced such Share;
(b) Each Share owned by Purchaser immediately prior to the Effective
Time shall be cancelled without any conversion thereof and no payment or
distribution shall be made with respect thereto; and
(c) Each share of common stock, par value $.01 per share, of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
SECTION 2.08. STOCK OPTIONS. (a) The Company shall take all actions
necessary (including obtaining any and all consents from employees with respect
to matters contemplated by this Section 2.08) such that immediately after the
Tender Offer Acceptance Date, each outstanding option to purchase Shares (in
each case, an "OPTION") granted under the Company's stock option plans,
including, The Charter Company Stock Option Plan, The Spelling Entertainment
Group Inc. 1987 Stock Option Plan and The Spelling Entertainment Group Inc. 1994
Stock Option Plan (the "OPTION PLANS"), whether or not then exercisable, shall
be cancelled by the Company. Immediately after the Tender Offer Acceptance Date,
each holder of a cancelled Option shall be entitled to receive from Purchaser in
consideration for the cancellation of such Option, an amount in cash equal to
the product of (i)the number of Shares previously subject to such Option and
(ii) the excess, if any, of the Per Share Amount over the exercise price per
Share previously subject to such Option. All applicable withholding taxes
attributable to the payments made hereunder or to distributions contemplated
hereby shall be deducted from the amounts payable hereunder and all such taxes
attributable to the exercise of Options on or after the Effective Time shall be
withheld from the Merger Consideration with respect to the Shares issuable on
such exercise or deemed exercise. The term "TENDER OFFER ACCEPTANCE DATE" means
the date on which Purchaser shall have accepted for payment all Shares validly
tendered and not withdrawn prior to the expiration date with respect to the
Offer.
(b) Except as provided herein or as otherwise agreed to by the parties
hereto and to the extent permitted under the Option Plans, (i) the Option Plans
shall terminate as of the Effective Time and (ii) the Company shall use all
reasonable efforts to ensure that following the Effective Time no holder of
Options shall have any right thereunder to acquire any equity securities of the
Company.
SECTION 2.09. DISSENTING SHARES. (a) Notwithstanding any provision of
this Agreement to the contrary, Shares that are outstanding immediately prior to
the Effective Time and which are
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held by stockholders who shall have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in writing
appraisal for such Shares in accordance with Section 262 of Delaware Law
(collectively, the "DISSENTING SHARES") shall not be converted into or represent
the right to receive the Merger Consideration. Such stockholders shall be
entitled to receive payment of the appraised value of such Shares held by them
in accordance with the provisions of such Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
Shares under such Section 262 shall thereupon be deemed to have been converted
into and to have become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration, without any interest thereon, upon surrender,
in the manner provided in Section 2.10, of the certificate or certificates that
formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to Delaware Law and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under Delaware Law. The Company shall not,
except with the prior written consent of Parent, make any payment with respect
to any demands for appraisal or offer to settle or settle any such demands.
SECTION 2.10. SURRENDER OF SHARES; STOCK TRANSFER BOOKS. (a)
Prior to the Effective Time, Parent shall designate a bank or trust company
reasonably satisfactory to the Company to act as agent (the "PAYING AGENT") for
the holders of Shares in connection with the Merger to receive the funds to
which holders of Shares shall become entitled pursuant to Section2.07(a). When
and as needed, Parent shall make available to the Paying Agent sufficient funds
to make the payments pursuant to Section 2.07 hereof to holders (other than
Parent or any of its affiliates) of Shares that are issued and outstanding
immediately prior to the Effective Time (such amounts being hereinafter referred
to as the "EXCHANGE FUND"), and to make the appropriate cash payments, if any,
to holders of Dissenting Shares. The Paying Agent shall, pursuant to irrevocable
instructions, make the payments provided for in the preceding sentence out of
the Exchange Fund. The Exchange Fund shall not be used for any other purpose,
except as provided in this Agreement.
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each person who was, at the Effective
Time, a holder of record of Shares entitled to receive the Merger Consideration
pursuant to Section 2.07(a) a form of letter of transmittal in customary form
(which shall specify that delivery shall be effected, and risk of loss and title
to the certificates evidencing such Shares (the "CERTIFICATES"), shall pass,
only upon proper delivery of the Certificates to the Paying Agent) and
instructions for use in effecting the surrender of the Certificates pursuant to
such letter of transmittal. Upon surrender to the Paying Agent of a Certificate,
together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration for each Share
formerly evidenced by such Certificate, and such Certificate shall then be
canceled. No interest shall accrue or be paid on the Merger Consideration
payable upon the surrender of any Certificate for the benefit of the holder of
such Certificate. If payment of the Merger Consideration is to be made to a
person other than the person in whose name the surrendered Certificate is
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registered on the stock transfer books of the Company, it shall be a condition
of payment that the Certificate so surrendered shall be endorsed properly or
otherwise be in proper form for transfer and that the person requesting such
payment shall have paid all transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such taxes either have been paid or are not
applicable.
(c) At any time following the sixth month after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it), and thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon due surrender of the Certificates held by them.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Share for any Merger Consideration
delivered in respect of such Share to a public official pursuant to any
abandoned property, escheat or other similar law.
(d) At the close of business on the day of the Effective Time,
the stock transfer books of the Company shall be closed and thereafter there
shall be no further registration of transfers of Shares on the records of the
Company. From and after the Effective Time, the holders of Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares except as otherwise provided herein or by applicable law.
SECTION 2.11. WITHHOLDING RIGHTS. The Surviving Corporation or
the Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Shares such
amounts that the Surviving Corporation or the Paying Agent is required to deduct
and withhold with respect to the making of such payment under the United States
Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
the Surviving Corporation or the Paying Agent, such amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the Shares
in respect of which such deduction and withholding was made by the Surviving
Corporation or the Paying Agent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Purchaser that, except as set forth in the Company SEC Reports (as defined
herein) or the disclosure schedule dated the date hereof and attached hereto
(the "DISCLOSURE SCHEDULE"), it being understood that disclosure on the
Disclosure Schedule shall be deemed disclosure respecting all sections of the
Agreement:
SECTION 3.01. ORGANIZATION AND QUALIFICATION. Each of the
Company and its Subsidiaries is a corporation duly organized,
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validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. Each of the Company and its Subsidiaries has all necessary licenses,
permits, authorizations, and governmental approvals to own, lease and operate
its properties and to carry on its business as it is currently being conducted,
except where the failure to have such licenses, permits, authorizations and
governmental approvals would not, individually or in the aggregate, have a
Company Material Adverse Effect (as hereinafter defined). Each of the Company
and its Subsidiaries is duly qualified and in good standing to do business in
each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing would not
have a Company Material Adverse Effect. The term "COMPANY MATERIAL ADVERSE
EFFECT," as used in this Agreement, means any change or effect that,
individually or when taken together with all other such changes or effects, is
or is reasonably likely to be materially adverse to the financial condition,
business, or results of operations of the Company and its Subsidiaries, taken as
a whole.
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BY-LAWS. The
Company has heretofore furnished to Parent a complete and correct copy of the
Certificate of Incorporation and the By-laws, each as amended to date, of the
Company. Such Certificate of Incorporation and By-laws are in full force and
effect. None of the Company and its Subsidiaries is in violation of any
provision of its Certificate of Incorporation or By-laws.
SECTION 3.03. CAPITALIZATION. The authorized capital stock of
the Company consists of 300,000,000 Shares and 20,000,000 shares of preferred
stock, par value $.001 per share ("PREFERRED STOCK"). As of December 31, 1998,
(i) 92,995,735 Shares were issued and outstanding, all of which were validly
issued, fully paid and nonassessable, (ii) no Shares were held in the treasury
of the Company, (iii)7,627,173 Shares were authorized for future issuance (with
respect to which options to acquire 7,627,173 Shares were issued and
outstanding) pursuant to employee stock options or stock incentive rights
granted pursuant to the Company's Option Plans and (iv) no shares of Preferred
Stock are issued and outstanding. Except as set forth in Section3.03 of the
Disclosure Schedule or as otherwise contemplated by this Agreement, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of the Company or
any Subsidiary or obligating the Company or any Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, the Company or any
Subsidiary. All shares of capital stock of the Company and any Subsidiary
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable. There are no
outstanding contractual obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any Subsidiary or to provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, any person.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. (a)The
Company has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by the Company and
the consummation by the
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Company of the Transactions have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger, the approval and adoption
of this Agreement by the affirmative vote of a majority of the then outstanding
Shares, if and to the extent required by applicable law, and the filing and
recordation of appropriate merger documents as required by Delaware Law). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Purchaser,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
(b) The Company hereby represents that (i)the Special
Committee has been duly authorized and constituted, (ii)the Special Committee,
at a meeting thereof duly called and held on May 14, 1999, determined that this
Agreement and the Transactions are fair to and in the best interests of the
stockholders of the Company (other than the Parent and its affiliates), and
(iii)the Board of Directors of the Company, at a meeting thereof duly called and
held on May 14, 1999, (A) determined that this Agreement and the Transactions
are fair to and in the best interests of the stockholders of the Company, (B)
determined that it is advisable for the Company to enter into, and, if and to
the extent required by applicable law, for the stockholders of the Company to
approve and adopt, this Agreement and the Transactions, (C) approved and adopted
this Agreement and the Transactions, including the Offer and the Merger and (D)
recommended that the stockholders of the Company tender their shares Pursuant to
the Offer and, if and to the extent required by applicable law, approve and
adopt this Agreement and the Merger.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a)
The execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i)conflict with or
violate the Certificate of Incorporation or By-laws of the Company or any
Subsidiary, (ii)assuming that all consents, approvals, authorizations, and other
actions described in subsection (b) have been obtained or made, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Company or any Subsidiary or by which any property or asset of the Company or
any Subsidiary is bound or affected or (iii) except as set forth on Section 3.05
of the Disclosure Schedule, result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or require payment under, or result in the creation of any
Encumbrance on any of the properties or assets of the Company or any of its
Subsidiaries pursuant to, or trigger any right of first refusal under, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of their
respective properties is bound, except for any thereof that would not have a
Company Material Adverse Effect. The restrictions on business combinations
contained in Section 203(a) of Delaware Law will not apply to Parent, Purchaser
or their respective affiliates as a result of this Agreement or the
Transactions.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except for applicable requirements,
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if any, of the Exchange Act, state securities or "blue sky" laws ("BLUE SKY
LAWS"), and filing and recordation of appropriate merger documents as required
by Delaware Law.
SECTION 3.06. SEC FILINGS; FINANCIAL STATEMENTS. (a) The
Company has filed all forms, reports and documents required to be filed by it
with the SEC since December 31, 1996, and has heretofore made available to
Parent, in the form filed with the SEC, (i) its Annual Reports on Form 10-K for
the fiscal years ended December31, 1996, 1997 and 1998, respectively, (ii)
allproxy statements relating to the Company's meetings of stockholders (whether
annual or special) held since December 31, 1996, and (iii)all other forms,
reports and other registration statements (other than Quarterly Reports on Form
10-Q) filed by the Company with the SEC since December 31, 1996 (the forms,
reports and other documents referred to in clauses (i), (ii) and (iii) above
being referred to herein, collectively, as the "SEC REPORTS"). The SEC Reports
(i) were prepared in accordance with the requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT"), and the Exchange Act, as the case may
be, and the rules and regulations thereunder,(ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading, and (iii) were filed in a timely manner. No Subsidiary of
the Company was or is required to file any form, report or other document with
the SEC.
(b) Each of the financial statements (including, in each case,
any notes thereto) contained in the SEC Reports (i)was prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presented in all material respects the consolidated
financial position, results of operations and cash flows of the Company and the
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein, except that any unaudited interim
financial statements were or will be subject to normal and recurring year-end
adjustments that did not and are not expected, individually or in the aggregate,
to have a Company Material Adverse Effect.
(c) The Company has no liabilities or obligations of any
nature, except:(i) as and to the extent set forth on the balance sheet of the
Company as at March 31, 1999, including the notes thereto (the "1999 BALANCE
SHEET"), (ii) as would not, individually or in the aggregate, have a Company
Material Adverse Effect and (iii) liabilities and obligations incurred in the
ordinary course of business consistent with past practice since March 31, 1999
and which would not have a Company Material Adverse Effect.
(d) Since March 31, 1999, there has not been any Company
Material Adverse Effect, except for changes that affect the economy in general
or the industry in which the Company operates.
SECTION 3.07. ABSENCE OF LITIGATION. Except as disclosed in
the SEC Reports filed on or before the date hereof, there are no suits,
arbitrations, mediations, complaints, claims, actions, proceedings or
investigations pending or, to the knowledge of the Company, threatened against
the Company or any Subsidiary, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, that
(a)individually or in the aggregate, would have a Company Material Adverse
Effect or (b)seek to delay or prevent the consummation of the Merger. Neither
the Company nor any Subsidiary nor any of their properties is subject to any
order, writ, judgment, injunction,
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decree, determination or award having a Company Material Adverse Effect.
SECTION 3.08. COMPLIANCE. Neither the Company nor any
Subsidiary is in conflict with, or in default or violation of, (a)any law, rule,
regulation, order, judgment or decree applicable to the Company or any
Subsidiary or by which any property or asset of the Company or any Subsidiary is
bound or affected or (b)any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or affected, except for any such conflicts, defaults or
violations that would not, individually or in the aggregate, have a Company
Material Adverse Effect.
SECTION 3.09. INTELLECTUAL PROPERTY RIGHTS. The Company and
its Subsidiaries own or hold adequate licenses or other rights to use all
material trade names, trademarks, brand names, trade secrets, service marks,
copyrights, publicity rights, franchises and other proprietary intellectual
property (collectively, the "INTELLECTUAL PROPERTY"), including all contracts,
agreements and licenses relating thereto, necessary for them to conduct their
respective businesses in all material respects as they are being conducted. No
proceedings have been instituted against or notices received by the Company or
any Subsidiary that are currently unresolved alleging that the Company or any
Subsidiary has infringed or is now infringing on any Intellectual Property
belonging to any other person, firm or corporation, except as would not have a
Company Material Adverse Effect. None of the Company nor any Subsidiary has
received any notice, nor does the Company know of, any conflict or claimed
conflict with respect to the rights of others to the use any of their
Intellectual Property, except as would not have a Company Material Adverse
Effect.
SECTION 3.10. OFFER DOCUMENTS; SCHEDULE 14D-9; PROXY
STATEMENT. The information supplied by the Company for inclusion in the Schedule
14D-9 and the Offer Documents shall, at the respective times the Schedule 14D-9
or the Offer Documents are filed with the SEC or are first published, sent or
given to shareholders of the Company, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading. The
information supplied by the Company for inclusion in the proxy statement to be
sent to the stockholders of the Company in connection with the Stockholders'
Meeting (as defined in Section5.01) or the information statement to be sent to
such stockholders, as appropriate (such proxy statement or information
statement, as amended or supplemented, being referred to herein as the "PROXY
STATEMENT"), shall not, at the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to stockholders of the Company, at the time
of the Stockholders' Meeting and at the Effective Time, be false or misleading
with respect to any material fact, or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they are made, not misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders' Meeting which shall have
become false or misleading. The Schedule 14D-9, Proxy Statement and the Offer
Documents shall comply in all material respects as to form with the requirements
of the Exchange Act and the rules and regulations thereunder except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on
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information supplied by Parent or Purchaser for inclusion or incorporation by
reference therein.
SECTION 3.11. BROKERS. No broker, finder or investment banker (other
than Lazard Freres) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and Lazard
Freres pursuant to which such firm would be entitled to any payment relating to
the Transactions.
SECTION 3.12. OPINION OF FINANCIAL ADVISOR. The Special Committee has
received the opinion of Lazard Freres dated May 14, 1999 that, as of the date of
such opinion, the Per Share Amount to be received by the stockholders of the
Company pursuant to this Agreement is fair to such stockholders of the Company
(other than Parent and its affiliates) from a financial point of view and such
opinion has not been withdrawn. A copy of such opinion has been delivered to the
Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent and
warrant to the Company that:
SECTION 4.01. CORPORATE ORGANIZATION. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization.
SECTION 4.02. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by Parent and Purchaser of the Transactions have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the filing and recordation of appropriate merger
documents as required by Delaware Law). This Agreement has been duly and validly
executed and delivered by Parent and Purchaser and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of Parent and Purchaser enforceable against each
of Parent and Purchaser in accordance with its terms.
SECTION 4.03. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by Parent and Purchaser do not, and the
performance of this Agreement by Parent and Purchaser will not, (i) conflict
with or violate the Certificate of Incorporation or By-laws of either Parent or
Purchaser, or (ii)assuming that all consents, approvals, authorizations, and
other actions described in subsection (b) have been made, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Parent or Purchaser or by which any property or asset of either of them is bound
or affected.
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(b) The execution and delivery of this Agreement by Parent and Purchaser
do not, and the performance of this Agreement by Parent and Purchaser will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Exchange Act, Blue Sky
Laws, and filing and recordation of appropriate merger documents as required by
Delaware Law 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 the Merger, or otherwise prevent Parent or
Purchaser from performing their respective obligations under this Agreement.
SECTION 4.04. FINANCING. Each of Parent and Purchaser has available to
it sufficient funds to acquire all the outstanding Shares in the Merger and the
related fees and expenses.
SECTION 4.05. OFFER DOCUMENTS; PROXY STATEMENT. The information supplied
by Parent and Purchaser for inclusion in the Offer Documents will not, at the
time the Offer Documents are filed with the SEC or are first published, sent or
given to shareholders of the Company, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading. The
information supplied by Parent and Purchaser for inclusion in the Proxy
Statement will not, on the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to stockholders of the Company, at the time
of the Stockholders' Meeting (as defined below) or at the Effective Time,
contain any statement which, at such time and in light of the circumstances
under which it is made, is false or misleading with respect to any material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders' Meeting which shall have
become false or misleading. The Offer Documents shall comply in all material
respects as to form with the requirements of the Exchange Act and the rules and
regulations thereunder.
SECTION 4.06. BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of Parent or
Purchaser
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by Parent,
the Company will and will cause its Subsidiaries to (a)operate its business in
the usual and ordinary course consistent with past practices; (b)use its
reasonable best efforts to preserve substantially intact its business
organization, maintain its rights and franchises, retain the services of its
respective principal officers and key employees and maintain its relationships
with its respective principal customers, suppliers and other persons with which
it or any Subsidiary has significant business relations; and (c)use its
reasonable best efforts to
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maintain and keep its properties and assets in as good repair and condition as
at present, ordinary wear and tear excepted.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. STOCKHOLDERS' MEETING. If required by applicable law in
order to consummate the Merger, the Company, acting through the Board, shall in
accordance with Delaware law and its Certificate of Incorporation and By-laws,
take all necessary action to duly call, give notice of, convene and hold an
annual or special meeting of its stockholders as soon as practicable for the
purpose of considering and taking action on this Agreement and the transactions
contemplated hereby (the "STOCKHOLDERS' MEETING"). At the Stockholders' Meeting,
Parent and Purchaser shall cause all Shares then owned by them and their
subsidiaries to be voted in favor of the approval and adoption of this Agreement
and the transactions contemplated hereby. In the event a Stockholders' Meeting
is called, the Company shall use its reasonable best efforts to solicit from
stockholders of the Company proxies in favor of the approval and adoption of the
Merger Agreement and to secure the vote or consent of stockholders required by
Delaware Law to approve and adopt the Merger Agreement, unless otherwise
required by the applicable fiduciary duties of the directors of the Company or
of the Company's directors constituting the Special Committee, as determined by
such directors in good faith, and after consultation with independent legal
counsel (which may include the Company's regularly engaged legal counsel).
SECTION 6.02. PROXY STATEMENT. If required by applicable law, as soon as
practicable following consummation of the Offer, Parent, Purchaser and the
Company shall file the Proxy Statement with the SEC under the Exchange Act, and
shall use its best efforts to have the Proxy Statement cleared by the SEC.
Parent, Purchaser and the Company shall cooperate with each other in the
preparation of the Proxy Statement, and the Company shall notify Parent of the
receipt of any comments of the SEC with respect to the Proxy Statement and of
any requests by the SEC for any amendment or supplement thereto or for
additional information and shall provide to Parent promptly copies of all
correspondence between the Company or any representative of the Company and the
SEC. The Company shall give Parent and its counsel the opportunity to review the
Proxy Statement prior to its being filed with the SEC and shall give Parent and
its counsel the opportunity to review all amendments and supplements to the
Proxy Statement and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC. Each
of the Company, Parent and Purchaser agrees to use its reasonable efforts, after
consultation with the other parties hereto, to respond promptly to all such
comments of and requests by the SEC and to cause the Proxy Statement and all
required amendments and supplements thereto to be mailed to the holders of
Shares entitled to vote at the Stockholders' Meeting at the earliest practicable
time.
SECTION 6.03. ACCESS TO INFORMATION. From the date hereof to the
Effective Time, the Company shall, and shall cause the officers, directors,
employees, auditors and agents of the Company to, afford the officers, employees
and agents of Parent and Purchaser complete access at all reasonable times to
the officers, employees, agents, properties, offices, plants and other
facilities, books and records of the Company, and shall furnish Parent and
Purchaser with all financial, operating and other data and information as Parent
or
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Purchaser, through its officers, employees or agents, may reasonably request.
SECTION 6.04. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND
INSURANCE. (a)The By-laws of the Surviving Corporation shall contain provisions
no less favorable with respect to indemnification than are set forth in
ArticleXII of the By-laws of the Company, which provisions shall not be amended,
repealed or otherwise modified for a period of six years from the Effective Time
in any manner that would affect adversely the rights thereunder of individuals
who at the Effective Time were directors or officers, employees, fiduciaries or
agents of the Company in respect of actions or omissions occurring at or prior
to the Effective Time, unless such modification shall be required by law.
(b) From and after the Effective Time, Parent and the
Surviving Corporation shall, to the fullest extent permitted under Delaware Law,
indemnify and hold harmless, each present and former director and officer of the
Company (collectively, the "INDEMNIFIED PARTIES") against all costs and expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and settlement amounts paid in connection with any claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), based on the fact that such person is or was a director or officer of the
Company and arising out of or pertaining to any action or omission occurring at
or before the Effective Time (and shall promptly pay any expenses in advance of
the final disposition of such action or proceeding to each Indemnified Party to
the fullest extent permitted under Delaware Law, upon receipt from the
Indemnified Party to whom expenses are advanced of any undertaking to repay such
advances required under Delaware Law). In the event of any such actual or
threatened claim, action, suit, proceeding or investigation, (i) the Surviving
Corporation shall pay the reasonable fees and expenses of counsel selected by
the Indemnified Parties, which counsel shall be reasonably satisfactory to the
Surviving Corporation, promptly after statements therefor are received and shall
pay all other reasonable expenses in advance of the final disposition of such
action, (ii) the Surviving Corporation shall cooperate and use all reasonable
efforts to assist in the vigorous defense of any such matter and (iii) to the
extent any determination is required to be made with respect to whether any
Indemnified Party's conduct complies with the standards set forth under Delaware
Law, such determination shall be made by independent legal counsel selected by
the Indemnified Party and reasonably acceptable to the Surviving Corporation;
PROVIDED, HOWEVER, that the Surviving Corporation shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld or delayed); and PROVIDED FURTHER that the Surviving
Corporation shall not be obligated pursuant to this Section 6.04(b) to pay the
fees and expenses of more than one counsel (plus appropriate local counsel) for
all Indemnified Parties in any single action except to the extent, as determined
by counsel to the Indemnified Parties, that two or more of such Indemnified
Parties shall have conflicting interests in the outcome of such action, in which
case such additional counsel (including local counsel) as may be required to
avoid any such conflict or likely conflict may be retained by the Indemnified
Parties at the expense of the Surviving Corporation.
(c) The Surviving Corporation shall use its reasonable efforts
to maintain in effect for three years from the Effective Time, if available, the
current directors' and officers' liability insurance policies maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which are
not
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materially less favorable) with respect to matters occurring prior to the
Effective Time; PROVIDED, HOWEVER, that in no event shall the Surviving
Corporation be required to expend pursuant to this Section 6.04(c) more than an
amount per year equal to 150% of current annual premiums paid by the Company for
such insurance.
(d) In the event the Company or the Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successors and assigns of the Company
or the Surviving Corporation, as the case may be, or at Parent's option, Parent,
shall assume the obligations set forth in this Section 6.04.
(e) Parent shall pay all reasonable expenses incurred by any
Indemnified Party in connection with the enforcement of the provisions of this
Section6.04.
SECTION 6.05. NOTIFICATION OF CERTAIN MATTERS. (a) The Company
shall give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i)the occurrence, or nonoccurrence, of any event the occurrence, or
nonoccurrence, of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii)any failure of
the Company, Parent or Purchaser, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section6.05 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
(b) The Company shall give prompt written notice to Parent of
any proposal, offer or other communication from any person (i) relating to any
acquisition or purchase of all or any portion of the capital stock of the
Company or any Subsidiary or assets of the Company or any Subsidiary, (ii) to
enter into any business combination with the Company or any Subsidiary or (iii)
to enter into any other extraordinary business transaction involving or
otherwise relating to the Company or any subsidiary. The Company shall notify
Parent promptly if any such proposal or offer, or any inquiry or other contact
with any person with respect thereto, is made and shall, in any such notice to
Parent, indicate in reasonable detail the identity of the person making such
proposal, offer, inquiry or contact and the terms and conditions of such
proposal, offer, inquiry or other contact.
SECTION 6.06. PUBLIC ANNOUNCEMENTS. Parent and the Company
shall each obtain the prior consent of each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or any Transaction and shall not issue any such press release or make any such
public statement without such prior consent, except as may be required by law or
any listing agreement with a national securities exchange to which Parent or the
Company is a party.
SECTION 6.07. FURTHER ACTION. Subject to the terms and
conditions herein provided, each of the parties hereto covenants and agrees to
use all reasonable efforts to deliver or cause to be delivered such documents
and other papers and to take or cause to be taken such further actions as may be
necessary, proper or advisable
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under applicable laws to consummate and make effective the Transactions,
including the Merger.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. CONDITIONS TO THE MERGER. The respective obligations of
each party to effect the Merger shall be subject to the satisfaction at or prior
to the Effective Time of the following conditions, any or all of which may be
waived, in whole or in part, to the extent permitted by applicable law:
(a) STOCKHOLDER APPROVAL. This Agreement and the Transactions shall have
been approved and adopted by the affirmative vote of the stockholders of the
Company to the extent required by Delaware Law and the Certificate of
Incorporation and By-laws of the Company; and
(b) NO ORDER. No foreign, United States or state governmental authority
or other agency or commission or foreign, United States or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect and
has the effect of making the acquisition of Shares by Purchaser illegal or
otherwise restricting, preventing or prohibiting consummation of the Offer or
the Merger; and
(c) OFFER. Purchaser or its permitted assignee shall have purchased all
Shares validly tendered and not withdrawn pursuant to the Offer; PROVIDED,
HOWEVER, that this condition shall not be applicable to the obligations of
Parent or Purchaser if, in breach of this Agreement or the terms of the Offer,
Purchaser fails to purchase any Shares validly tendered and not withdrawn
pursuant to the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated and the
Merger and the other transactions contemplated hereby may be abandoned at any
time prior to the Effective Time, notwithstanding any requisite approval and
adoption of this Agreement and the transactions contemplated hereby by the
stockholders of the Company: (a) by mutual written consent duly authorized by
the Boards of Directors of Parent, Purchaser and the Company, if such
termination is also approved by the Special Committee;
(b) by either Parent, Purchaser or the Company if (i) the Effective Time
shall not have occurred on or before December 31, 1999; PROVIDED, HOWEVER, that
the right to terminate this Agreement under this Section 8.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date or (ii) any court of competent jurisdiction
or other governmental authority shall have issued an order, decree, ruling or
taken any other action restraining, enjoining or otherwise
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prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable;
(c) by Parent, if (i) due to an occurrence or circumstance
that would result in a failure to satisfy any condition set forth in Annex A
hereto, Purchaser shall have (A) failed to commence the Offer within 60 days
following the date of this Agreement, (B) terminated the Offer without having
accepted any Shares for payment thereunder, or (C) failed to pay for the Shares
validly tendered pursuant to the Offer within 90 days following the commencement
of the Offer, unless such termination or failure to pay for Shares shall have
been caused by or resulted from the failure of Parent or Purchaser to perform in
any material respect any covenant or agreement of either of them contained in
this Agreement or the material breach by Parent or Purchaser of any
representation or warranty of either of them contained in this Agreement or (ii)
prior to the purchase of any Shares validly tendered pursuant to the Offer, the
Special Committee shall have withdrawn or modified in a manner that is, in the
reasonable judgment of Parent, materially adverse to Parent or Purchaser its
approval or recommendation of this Agreement, the Offer, the Merger or any other
Transaction or shall have recommended another merger, consolidation or business
combination involving, or acquisition of, the Company or its assets or another
tender offer for Shares, or shall have resolved to do any of the foregoing; or
(d) by the Company, upon approval of the Special Committee, if
due to an occurrence or circumstance that would result in a failure to satisfy
any condition set forth in Annex A hereto, Purchaser shall have (i) failed to
commence the Offer within 60 days following the date of this Agreement,
(ii)terminated the Offer without having accepted any Shares for payment
thereunder, or (iii)failed to pay for the Shares validly tendered pursuant to
the Offer within 90 days following the commencement of the Offer, unless such
termination or failure to pay for Shares shall have been caused by or resulted
from the failure of the Company to perform in any material respect any covenant
or agreement of it contained in this Agreement or the material breach by the
Company of any representation or warranty of it contained in this Agreement; or
(e) by the Company, upon approval of the Special Committee, if
any representation or warranty of Parent and Purchaser in this Agreement which
is qualified as to materiality shall not be true and correct in all respects or
any such representation or warranty that is not so qualified shall not be true
and correct in any material respect, in each case as if such representation or
warranty was made as of such time on or after the date of this Agreement, or
Parent or Purchaser shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or covenant
of Parent or Purchaser to be performed or complied with by it under this
Agreement; PROVIDED that if such material breach or failure to perform is
curable by Parent or Purchaser through the exercise of its reasonable efforts
and for so long as Parent or Purchaser continues to exercise such reasonable
efforts, the Company may not terminate this Agreement under this Section
8.01(e).
The right of any party hereto to terminate this Agreement
pursuant to this Section 8.01 shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any party hereto,
any person controlling any such party or any of their respective officers or
directors, whether prior to or after the execution of this Agreement.
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SECTION 8.02. EFFECT OF TERMINATION. In the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void, and there shall be no liability on the part of any party
hereto, except as set forth in Sections9.01 and 9.11; PROVIDED, HOWEVER that
nothing contained herein shall relieve any party from liability for wilful
breach of this Agreement.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; PROVIDED, however, that,
after the approval and adoption of this Agreement and the Transactions
contemplated hereby by the stockholders of the Company, no amendment may be made
which would reduce the amount or change the type of consideration into which
each Share shall be converted upon consummation of the Merger, imposes
conditions to the Merger other than set forth in Article VII or would otherwise
amend or change the terms and conditions of the Merger in a manner materially
adverse to the holders of the Shares, other than Parent and its affiliates; and
PROVIDED FURTHER that such amendment is also approved by the Special Committee.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
SECTION 8.04. WAIVER. At any time prior to the Effective Time,
any party hereto may (i) extend the time for the performance of any obligation
or other act of any other party hereto, (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any agreement or condition
contained herein; PROVIDED, HOWEVER, that, if the Company seeks to make such
extension or waiver as provided in (i), (ii) or (iii) above, it must first
obtain the approval of the Special Committee. Any such extension or waiver shall
be valid if set forth in an instrument in writing signed by the party or parties
to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 9.01, as the case may be, except that the agreements set
forth in ArticlesII and this Article IX and Section6.04 shall survive the
Effective Time indefinitely and those set forth in this Article IX shall survive
termination indefinitely.
SECTION 9.02. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by facsimile (followed by delivery of a
copy via overnight courier service) or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 9.02):
(a) if to the Parent or Purchaser:
Viacom International Inc.
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c/o Viacom Inc.
1515 Broadway
New York, NY 10036
Attention: General Counsel
Telecopier: (212) 258-6099
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Creighton O'M. Condon, Esq.
Telecopier: (212) 848-7179
(b) if to the Company:
Spelling Entertainment Group Inc.
5700 Wilshire Boulevard
Los Angeles, CA 90036
Attention: President
Telecopier: (323) 965-5870
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square, 7th Floor
Wilmington, Delaware 19801
Attention: Robert Pincus, Esq.
Telecopier: (302) 651-3001
SECTION 9.03. CERTAIN DEFINITIONS. For purposes of this
Agreement, the term:
(a) "AFFILIATE" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) "BUSINESS DAY" means any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or, in the
case of determining a date when any payment is due, any day on which banks are
not required or authorized by law or executive order to close in the City of New
York;
(c) "ENCUMBRANCE" means any security interest, pledge,
mortgage, lien, charge, adverse claim of ownership or use, or other encumbrance
of any kind.
(d) "PERSON" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Exchange Act);
(e) "SUBSIDIARY" or "SUBSIDIARIES" means any corporation,
partnership, joint venture or other legal entity of which the Company or any
Subsidiary of the Company, as the case may be (either alone or through or
together with any other Subsidiary), owns, directly or indirectly, 50% or more
of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity; and
SECTION 9.04. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full
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force and effect so long as the economic or legal substance of the Transactions
is not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the Transactions be
consummated as originally contemplated to the fullest extent possible.
SECTION 9.05. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof.
This Agreement shall not be assigned by operation of law or otherwise, except
that Parent and Purchaser may assign all or any of their rights and obligations
hereunder to any affiliate of Parent provided that no such assignment shall
relieve the assigning party of its obligations hereunder if such assignee does
not perform such obligations.
SECTION 9.06. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.04 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 9.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.08. GOVERNING LAW. Except to the extent that Delaware Law
applies to these Transactions, this Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
SECTION 9.09. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.10. 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 9.11. FEES AND EXPENSES. All fees and expenses incurred in
connection with this Agreement and the Transactions contemplated hereby shall be
paid by Parent.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
SPELLING ENTERTAINMENT GROUP INC.
By /s/ PETER H. BACHMANN
----------------------------------------
Name: Peter H. Bachmann
Title: President
VIACOM INTERNATIONAL INC.
By /s/ MICHAEL D. FRICKLAS
----------------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President
and General Counsel
VSEG ACQUISITION INC.
By /s/ MICHAEL D. FRICKLAS
----------------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President
and General Counsel
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ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to the applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, pay for
any Shares tendered pursuant to the Offer, and may terminate or amend the Offer
in a manner consistent with the terms of the Merger Agreement and may postpone
the acceptance for payment of or the payment for any Shares tendered in a manner
consistent with the terms of the Merger Agreement, if at any time on or after
the date of this Agreement and prior to the acceptance for payment of any
Shares, any of the following conditions shall exist:
(a) there shall be any statute, rule or regulation, or decree,
order or injunction, promulgated, enacted, entered or enforced by any
United States federal or state government, or other governmental entity
which would (i) make the acquisition by the Purchaser of a material
portion of the Shares illegal, or (ii) otherwise prohibit or restrict
consummation of the Offer or the Merger (each a "GOVERNMENTAL
RESTRICTION"); PROVIDED, HOWEVER, that in order to invoke this
condition, Parent and the Purchaser shall have used their reasonable
best efforts to prevent such Governmental Restriction or ameliorate the
effects thereof; and PROVIDED FURTHER, that if the Governmental
Restriction is not a final and non-appealable decree, order or
injunction of a court of competent jurisdiction, Purchaser may not by
virtue of this condition alone amend or terminate the Offer, but may
only extend the Offer and thereby postpone acceptance for payment or
purchase of Shares;
(b) (i) the Special Committee shall have withdrawn or modified
in a manner that is, in the reasonable judgment of Parent, materially
adverse to Parent or Purchaser (including by way of any amendment to the
Schedule14D-9) its recommendation of the Offer, the Merger or this
Agreement, or (ii)the Special Committee shall have resolved to do any of
the foregoing;
(c) any representation or warranty of the Company in this
Agreement, (i)which is qualified as to Company Material Adverse Effect
shall not be true and correct, subject to such Company Material Adverse
Effect qualifications, in all respects or (ii) any such representation
or warranty that is not so qualified shall not be true and correct
except to the extent that the failure of such representations and
warranties to be true and correct could not reasonably be expected to
have a Company Material Adverse Effect, in each case as if such
representation and warranty was made as of such time on or after the
date of this Agreement and except that those representations and
warranties that address matters only as of a particular date shall not
be true and correct, subject to the qualifications described above, as
of such date;
(d) the Company shall have breached or failed to perform in any
material respect any obligation or to comply in any material respect
with any agreement or covenant of the Company to be performed or
complied with by it under this Agreement;
(e) this Agreement shall have been terminated in accordance with
its terms; or
<PAGE>
(f) Parent, Purchaser and the Company (with the approval of the
Special Committee) shall have agreed that Purchaser shall terminate the
Offer or postpone the acceptance for payment of or the payment for
Shares thereunder;
which, in the reasonable judgment of Purchaser in any such case, and regardless
of the circumstances (excluding for purposes of clauses (c) and (d), any action
or inaction by Parent or any of its affiliates) giving rise to any such
condition, makes it inadvisable to proceed with such acceptance for payment or
payment.
The foregoing conditions are for the sole benefit of Parent and
Purchaser and may be asserted by Parent or Purchaser regardless of the
circumstances giving rise to any such condition or may be waived by Parent or
Purchaser in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent or Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances; and each
such right shall be deemed an ongoing right that may be asserted at any time and
from time to time.
<PAGE>
Exhibit A to the
Merger Agreement
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SPELLING ENTERTAINMENT GROUP INC.
As of the Effective Time, the Certificate of Incorporation of the
Surviving Corporation shall be amended and restated by deleting Articles I
through XII thereof in their entirety and replacing them with the following:
ARTICLE I
The name of the Corporation is: SPELLING ENTERTAINMENT GROUP INC.
ARTICLE II
The address of its registered office in the State of Delaware is 1013 Centre
Road, in the City of Wilmington, County of New Castle, 19805-1297. The name of
its registered agent at such address is Corporation Service Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is: To engage
in any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
ARTICLE IV
The total number of shares of stock which the Corporation shall have authority
to issue is Two Hundred (200). All such shares are to have $.01 par value.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized to make, alter or repeal the By-Laws
of the Corporation.
ARTICLE VII
Meetings of stockholders may be held within or without the State of Delaware, as
the By-Laws may provide. The books of the Corporation may be kept (subject to
any provisions contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of Directors
or in the By-Laws of the Corporation. Elections of Directors need not be by
written ballot unless the By-Laws of the Corporation shall so provide.
ARTICLE VIII
The personal liability of the directors of the corporation is hereby eliminated
to the fullest extent permitted by the provisions of paragraph (7) of subsection
(b) of Section 102 of the General
<PAGE>
Corporation Law of the State of Delaware, as the same may be amended and
supplemented.
ARTICLE IX
(1) ACTION NOT BY OR ON BEHALF OF CORPORATION. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent (including
trustee) of another corporation, partnership, joint venture, trust or other
enterprise, against judgments, fines, amounts paid in settlement and expenses
(including attorneys' fees), actually and reasonably incurred by him in
connection with such action, suit or proceedings if he acted in good faith and
in a manner reasonably believed to be in or not opposed to the best interests of
the Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(2) ACTION BY OR ON BEHALF OF CORPORATION. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability and in view of all of the circumstances of the case, such person is
fairly and reasonably entitled to indemnify for such expenses which the court
shall deem proper.
(3) SUCCESSFUL DEFENSE. To the extent that a present or former Director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in Section
1 or 2 of this Article IX, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
(4) DETERMINATION OF RIGHTS TO INDEMNIFICATION IN CERTAIN CIRCUMSTANCES. Any
indemnification under Section 1 or 2 of this Article IX (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the present or former Director,
officer, employee or agent is proper in the circumstances because he has met the
applicable
<PAGE>
standard of conduct set forth in Section 1 or 2 of this Article IV. Such
determination shall be made, with respect to a person who is a Director or
officer at the time of such determination, (1) by a majority vote of the
Directors who are not parties to such action, suit or proceedings, even though
less than a quorum, or (2) by a committee of such Directors designated by a
majority vote of such Directors, even though less than a quorum, or (3) if there
are no such Directors, or if such Directors so direct, by independent legal
counsel in a written opinion, or (4) by the stockholders of the Corporation
entitled to vote thereon.
(5) ADVANCE PAYMENT OF EXPENSES. (a) Expenses (including attorneys' fees)
incurred by a Director or officer in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Director or
officer, to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation as authorized in this Article.
(b) Expenses (including attorneys' fees) incurred by any other employee or
agent in defending any civil, criminal, administrative or investigative action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon such terms and conditions,
if any, as the Corporation deems appropriate.
(6) NOT EXCLUSIVE. The indemnification and advancement of expenses provided by,
or granted pursuant to, the other sections of this Article IX shall not be
deemed exclusive of any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under any statute, by-law, agreement,
vote of stockholders or disinterested Directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office. Without limiting the foregoing, the Corporation is authorized to enter
into an agreement with any Director, officer, employee or agent of the
Corporation providing indemnification for such person against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement that
result from any threatened pending or completed actions, suit, or proceeding,
whether civil, criminal, administrative or investigative, including any action
by or in the right of the Corporation, that arises by reason of the fact that
such person is or was a Director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, to the full extent allowed by law, except that no such
agreement shall provide for indemnification for any actions that constitute
fraud, actual dishonesty or willful misconduct.
(7) INSURANCE. The Corporation may purchase and maintain insurance on behalf of
any person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article IX.
(8) CERTAIN DEFINITIONS. For the purposes of this Article IX, (A) any Director,
officer, employee or agent of the Corporation who shall serve as a director,
officer, employee or agent of any other corporation, joint venture, trust or
other enterprise of which the Corporation,
<PAGE>
directly or indirectly, is or was a stockholder or creditor, or in which the
Corporation is or was in any way interested, or (B) any director, officer,
employee or agent of any subsidiary corporation, joint venture, trust or other
enterprise wholly owned by the Corporation, shall be deemed to be serving as
such director, officer, employee or agent at the request of the Corporation,
unless the Board of Directors of the Corporation shall determine otherwise. In
all other instances where any person shall serve as a director, officer,
employee or agent of another corporation, joint venture, trust or other
enterprise of which the Corporation is or was a stockholder or creditor, or in
which it is or was otherwise interested, if it is not otherwise established that
such person is or was serving as such director, officer, employee or agent at
the request of the Corporation, the Board of Directors of the Corporation may
determine whether such service is or was at the request of the Corporation, and
it shall not be necessary to show any actual or prior request for such service.
For purposes of this Article IX, references to a corporation include all
constituent corporations absorbed in a consolidation or merger as well as the
resulting or surviving corporation so that any person who is or was a director,
officer, employee or agent of such a constituent corporation or is or was
serving at the request of such constituent corporation as a director, officer,
employee or agent of another corporation, joint venture, trust or other
enterprise shall stand in the same position under the provisions of this Article
IX with respect to the resulting or surviving corporation as he would if he had
served the resulting or surviving corporation in the same capacity. For purposes
of this Article IX, references to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to any employee benefit plan; and references to "serving
at the request of the Corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to this Article IX.
(9) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article IX shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE X
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
<PAGE>
May 14, 1999
Special Committee of the Board of Directors
Spelling Entertainment Group Inc.
5700 Wilshire Boulevard
Los Angeles, California 90036
Dear Members of the Special Committee:
We understand that Spelling Entertainment Group Inc. (the "Company"),
Viacom International, Inc. ("Parent") and VSEG Acquisition Inc., a wholly owned
subsidiary of Parent ("Purchaser"), propose to enter into an Agreement and Plan
of Merger (the "Agreement"), pursuant to which Purchaser will commence a tender
offer (the "Offer") to purchase all the issued and outstanding shares of the
Company's common stock, par value $0.001 per share (the "Common Stock"), for
$9.75 in cash, all as more fully provided in the Agreement. Pursuant to the
Agreement, following consummation of the Offer, Purchaser will merge with and
into the Company (the "Merger"), and each remaining outstanding share of Common
Stock (other than shares of Common Stock held by Purchaser, shares of Common
Stock held in the treasury of the Company and shares of Common Stock held by
stockholders who demand appraisal for such shares in accordance with the
Delaware General Corporation Law (the "DGCL")) will be converted into the right
to receive $9.75 in cash, all as more fully provided in the Agreement. We
understand that immediately prior to the consummation of the Merger, Parent will
contribute all of the shares of Common Stock beneficially owned by it to
Purchaser. References herein to the "Consideration" are to the consideration to
be received by the holders of the Common Stock in the Offer and the Merger and
references herein to the "Transaction" are to the Offer and the Merger as
contemplated by the Agreement.
You have requested our opinion as to the fairness, from a financial
point of view, to the holders of shares of Common Stock (other than Parent and
its affiliates) of the Consideration. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the draft
Agreement dated May 14, 1999;
<PAGE>
(ii) Analyzed certain historical business and financial information
relating to the Company;
(iii) Reviewed various financial forecasts and other data provided
to us by the Company relating to its business;
(iv) Held discussions with members of the senior management of the
Company with respect to the business, prospects, and strategic
objectives of the Company;
(v) Reviewed public information with respect to certain other
companies in lines of business we believe to be generally
comparable to the business of the Company;
(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of business we believe to be
generally comparable to those of the Company;
(vii) Reviewed the historical stock prices and trading volumes of
the Common Stock; and
(viii) Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of the Company, or concerning the solvency of
or issues relating to solvency concerning the Company. With respect to financial
forecasts, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of management of
the Company as to the future financial performance of the Company. We assume no
responsibility for and express no view as to such forecasts or the assumptions
upon which they are based.
Further, our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made available to us
as of, the date hereof. In rendering our opinion, we did not address the
relative merits of the Transaction, any alternative potential transaction or the
Company's underlying decision to effect the Transaction.
2
<PAGE>
In rendering our opinion, we have assumed that the Transaction will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by the Company and that obtaining the necessary
regulatory approvals, if any, for the Transaction will not have an adverse
effect on the Company. We have also assumed that the definitive Agreement will
not differ in any material respect from the draft thereof furnished to us. We
were not requested to solicit third party indications of interest in acquiring
the Company nor have we actively sought any other offers.
Lazard Freres & Co. LLC is acting as investment banker to the Special
Committee of the Company's Board of Directors in connection with the Transaction
and a fee will be payable upon delivery of this opinion.
Our engagement and the opinion expressed herein are for the benefit of
the Special Committee of the Company's Board of Directors and our opinion is
rendered to the Special Committee of the Company's Board of Directors in
connection with its consideration of the Transaction. This opinion is not
intended to and does not constitute a recommendation to any holder of Common
Stock as to whether such stockholder should tender its shares in the Offer or
vote for the Merger. It is understood that this letter may not be disclosed or
otherwise referred to without our prior consent, except as may otherwise be
required by law or by a court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
Consideration is fair to the holders of shares of Common Stock (other than
Parent and its affiliates) from a financial point of view.
Very truly yours,
LAZARD FRERES & CO. LLC
By /s/ ROBERT E. HOUGIE
--------------------------------
Robert E. Hougie
Managing Director
3
<PAGE>
SPELLING ENTERTAINMENT GROUP INC.
May 21, 1999
To the Stockholders Of
Spelling Entertainment Group Inc.:
We are pleased to inform you that on May 17, 1999, Spelling Entertainment
Group Inc. (the "Company") entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Viacom International Inc. ("Parent") and VSEG
Acquisition Inc. ("Purchaser"), a wholly owned subsidiary of Parent, pursuant to
which Purchaser has today commenced a tender offer (the "Offer") to purchase all
issued and outstanding shares (the "Shares") of common stock, par value $0.001
per share (the "Common Stock"), of the Company at a price of $9.75 per Share,
net to the seller in cash (the "Per Share Amount"). As of the date hereof,
Parent owns 75,216,103 Shares (the "Purchaser Shares"), constituting more than
80% of the issued and outstanding Shares. After the purchase of Shares pursuant
to the Offer, Parent will contribute the Purchaser Shares to Purchaser (the
"Contribution"), the Company will thereby become a subsidiary of Purchaser and
Purchaser will be merged with and into the Company (the "Merger"). The Company
will thereby be a direct wholly owned subsidiary of Parent. AS THE HOLDER OF
MORE THAN 80% OF THE COMMON STOCK OF THE COMPANY, PARENT CURRENTLY POSSESSES
SUFFICIENT VOTING POWER TO CAUSE THE COMPANY TO CONSUMMATE THE MERGER WITHOUT
THE VOTE OF ANY OTHER STOCKHOLDER OF THE COMPANY. Subject to dissenters rights,
Shares not tendered in the Offer will be canceled in the Merger and converted
into a right to receive an amount equal to the Per Share Amount. The purpose of
the Offer and the Merger is to facilitate the acquisition of all of the
remaining Shares for cash and thereby enable Parent to own 100% of the Common
Stock.
The board of directors of the Company (the "Board"), by unanimous vote of
all directors present and voting, based upon, among other things, the unanimous
recommendation and approval of a committee of the Board comprised of independent
directors (the "Special Committee"), has determined that the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger
(the "Transactions"), are fair to, and in the best interests of, the Company,
approved the Merger Agreement, the Offer and the Merger, declared the Merger
Agreement to be advisable and resolved to recommend that stockholders accept the
Offer and tender their Shares pursuant to the Offer.
In determining to recommend to the Board that it approve the Merger
Agreement and the Transactions, including the Offer and the Merger, and in
determining the fairness of the terms of the Offer and the Merger, the Special
Committee considered a number of factors, each of which, in the Special
Committee's view, supported the Special Committee's determination to recommend
the Offer and the Merger, including:
- the historical market prices of the Shares, including the fact that the
$9.75 per Share to be paid to the holders of Shares, other than Parent and
its affiliates (the "Public Stockholders"), in the Offer and the Merger
represented a premium of approximately 44.4% over the $6.75 per Share
closing price on March 18, 1999, the last full trading day prior to the
March 19, 1999 announcement of Parent's proposal to acquire the Shares,
and represented a premium of approximately 52.9% over the closing price
for the Shares on the NYSE on the date 30 days prior to the announcement
of such proposal;
- the fact that the $9.75 per Share to be paid to the Public Stockholders in
the Offer and the Merger exceeded the highest price at which the Shares
have traded on the NYSE since May 3, 1996; and
<PAGE>
- the opinion, dated May 14, 1999, of Lazard Freres & Co. Inc., the
financial advisor to the Special Committee, to the effect that, as of the
date of such opinion, the consideration to be received by the Public
Stockholders is fair to such stockholders from a financial point of view.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated May 21, 1999, of Purchaser, together
with related materials, including a Letter of Transmittal to be used in
tendering your Shares. These documents set forth the terms and conditions of the
Offer and the Merger and provide instructions on how to tender your Shares. We
urge you to read the enclosed materials carefully.
Sincerely,
/s/ Sumner M. Redstone
Sumner M. Redstone
Chairman of the Board
