AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1994
REGISTRATION NO. 33-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
VIACOM INC.
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 4841 04-2949533
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
200 ELM STREET
DEDHAM, MASSACHUSETTS 02026
(617) 461-1600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
PHILIPPE P. DAUMAN, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL,
CHIEF ADMINISTRATIVE OFFICER AND SECRETARY
VIACOM INTERNATIONAL INC.
1515 BROADWAY
NEW YORK, NEW YORK 10036
(212) 258-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
PHILLIP L. JACKSON, ESQ.
CREIGHTON O'M. CONDON, ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 848-4000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As promptly as practicable after this Registration Statement becomes effective
and all other conditions to the business combination transaction (the "Paramount
Merger"), pursuant to which a wholly owned subsidiary of Viacom Inc., a Delaware
corporation ("Viacom"), will merge with and into Paramount Communications Inc.,
a Delaware corporation ("Paramount"), described in the enclosed Joint Proxy
Statement/Prospectus have been satisfied or waived (but in no event earlier than
the 20th business day following the date on which the enclosed Joint Proxy
Statement/Prospectus has been given or sent to stockholders of Paramount).
------------------------
IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE WITH
GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE><CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED(1) BE REGISTERED PER UNIT PRICE FEE(3)
<S> <C> <C> <C> <C>
Class B Common Stock(4)................................ 105,804,115 | |
| |
Three-Year Warrants ................................... 30,567,739 | |
Five-Year Warrants .................................... 18,340,643 | |
> (2) > (2) $884,093
8% Exchangeable Subordinated Debentures | |
due 2006 ............................................ $1,069,870,865 | |
Contingent Value Rights(6)............................. 56,895,733 | |
Series C Cumulative Exchangeable Redeemable | |
Preferred Stock(5)................................... 21,397,417 | |
5% Subordinated Debentures due 2014.................... $1,069,870,865 | |
</TABLE>
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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(footnotes on following page)
<PAGE>
(footnotes for preceeding page)
(1) This Registration Statement relates to securities of the Registrant issuable
to holders of Common Stock, par value $1.00 per share, of Paramount
("Paramount Common Stock") in the Paramount Merger.
(2) Not applicable.
(3) Pursuant to Rule 457(f) of the Securities Act of 1933, the registration fee
for all the securities registered hereunder, $884,093, has been calculated
as follows: one-twentyninth of one percent of (a) $41 15/16, the average of
the high and low prices of shares of Paramount Common Stock reported on the
New York Stock Exchange Composite Transaction Tape on June 1, 1994,
multiplied by (b) 61,135,478, the maximum number of shares of Paramount
Common Stock to be exchanged in the Paramount Merger. Pursuant to Rule
457(b) of the Securities Act of 1933, the amount of the registration fee
has been reduced by $489,198. This amount was determined by offsetting the
amount of the registration fee payable hereunder by $1,808,667, the amount
paid with respect to this transaction pursuant to Section 14(g) of the
Securities Exchange Act of 1934, of which $1,319,469 has been previously
offset by Viacom Inc.'s Schedule 14D-1 Tender Offer Statement filed in
connection with this transaction. Therefore, $489,198 of the $1,808,667 is
available to offset the Registration Fee payable with respect to this
Registration Statement. (Such amount was also utilized with respect to the
related Rule 13e-3 Transaction Statement of Paramount.) Accordingly,
$394,895 is required to be paid with this filing. On May 27, 1994,
$396,213 was wired to the Securities and Exchange Commission's lockbox.
(4) Of the 105,804,115 shares of Class B Common Stock, par value $.01 per share,
of Viacom being registered hereunder, 30,567,739 and 18,340,643 are issuable
upon conversion, if any, of the Three-Year Warrants and the Five-Year
Warrants being registered hereunder, respectively.
(5) The shares of Series C Cumulative Exchangeable Redeemable Preferred Stock,
par value $.01 per share, of Viacom (the "Series C Preferred Stock") being
registered hereunder would be issued upon any exchange of the 8%
Exchangeable Subordinated Debentures due 2006 of Viacom in accordance with
the terms thereof. No separate consideration will be received for the Series
C Preferred Stock in the event any such exchange occurs. The aggregate
principal amount of 5% Subordinated Debentures of Viacom due 2014 (the "5%
Debentures") being registered hereunder would be issued upon any exchange of
the Series C Preferred Stock in accordance with the terms thereof. No
separate consideration will be received for the 5% Debentures in the event
any such exchange occurs.
(6) Includes such indeterminate number and indeterminate types of securities,
if any, of Viacom as may be issued in exchange for the CVRs registered
hereunder. No additional consideration will be received for such underlying
securities.
<PAGE>
VIACOM INC.
Cross Reference Sheet pursuant to Rule 404(a) of the Securities Act of 1993
and Item 501(b) of Regulation S-K, showing the location or heading in the Joint
Proxy Statement/Prospectus of the information required by Part I of Form S-4.
<TABLE><CAPTION>
LOCATION OR HEADING IN
S-4 ITEM NUMBER AND CAPTION JOINT PROXY STATEMENT/PROSPECTUS
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<S> <C> <C>
A. Information About the Transaction
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus.......................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Available Information; Incorporation of Certain
Documents by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................. Summary
4. Terms of the Transaction............................ Summary; Introduction; The Meetings; Special
Factors; The Paramount Merger; Certain Provisions
of the Paramount Merger Agreement; Financing of
the Offer; Amendments to the Restated Certificate
of Incorporation of Viacom; Amendment to the
Certificate of Incorporation and By-Laws of
Paramount; Management Before and After the Mergers;
Financial Matters After the Mergers; Sale of Viacom
Preferred Stock; Description of Viacom Capital Stock;
Description of Viacom Debentures; Comparison of
Stockholder Rights; Other Matters; Dissenting
Stockholders' Rights of Appraisal
5. Pro Forma Financial Information..................... Summary; Unaudited Pro Forma Combined Condensed
Financial Statements Viacom-Paramount/Combined Company
6. Material Contacts with the Company Being Acquired... Summary; Special Factors; The Paramount Merger;
Certain Provisions of the Paramount Merger
Agreement
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters..... Not Applicable
8. Interests of Named Experts and Counsel.............. Not Applicable
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities.................... Not Applicable
B. Information about the Registrant
10. Information with Respect to S-3 Registrants......... Available Information; Incorporation of Certain
Documents by Reference
11. Incorporation of Certain Information by Reference... Incorporation of Certain Documents by Reference
12. Information with Respect to S-2 or S-3
Registrants....................................... Not Applicable
13. Incorporation of Certain Information by Reference... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
14. Information with Respect to Registrants other than
S-3 or S-2 Registrants............................ Not Applicable
C. Information About the Company Being Acquired
15. Information with Respect to S-3 Companies........... Available Information; Incorporation of Certain
Documents by Reference
16. Information with Respect to S-2 or S-3 Companies.... Not Applicable
17. Information with Respect to Companies Other than S-3
or S-2 Companies.................................... Not Applicable
D. Voting and Management Information
18. Information if Proxies, Consents or Authorizations
are to be Solicited............................... Summary; The Meetings; The Paramount Merger; Certain
Provisions of the Paramount Merger Agreement;
Management Before and After the Mergers; Security
Ownership of Certain Beneficial Owners and
Management; Dissenting Stockholders' Rights of
Appraisal; Incorporation of Certain Documents by
Reference
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer... Not Applicable
</TABLE>
<PAGE>
VIACOM INC.
AND
PARAMOUNT COMMUNICATIONS INC.
JOINT PROXY STATEMENT
------------------------
VIACOM INC.
PROSPECTUS
This Joint Proxy Statement/Prospectus (this "Proxy Statement/Prospectus")
is being furnished to stockholders of Viacom Inc. ("Viacom") and Paramount
Communications Inc. ("Paramount") in connection with the solicitation of proxies
by the respective Boards of Directors of such corporations for use at their
respective Special Meetings of Stockholders (including any adjournments or
postponements thereof) to be held on July 7, 1994 and July 6, 1994,
respectively. This Proxy Statement/Prospectus relates to a business
combination transaction pursuant to which Viacom Sub Inc., a wholly owned
subsidiary of Viacom (the "Merger Subsidiary"), will merge with and into
Paramount (the "Paramount Merger"), pursuant to the Amended and Restated
Agreement and Plan of Merger dated as of February 4, 1994 (the "February 4
Merger Agreement"), as further amended as of May 26, 1994 (the "Paramount
Merger Agreement"), among Viacom, the Merger Subsidiary and Paramount, a
copy of which is attached hereto as Annex I.
This Proxy Statement/Prospectus is also being furnished to stockholders of
Viacom in connection with the solicitation of proxies by the Viacom Board of
Directors for use at the 1994 Annual Meeting of Stockholders of Viacom (the
"Viacom Annual Meeting"), which is to be held immediately following the Special
Meeting of Stockholders of Viacom referred to above. At the Viacom Annual
Meeting, holders of Class A Common Stock, par value $.01 per share, of Viacom
("Viacom Class A Common Stock") will be asked to consider and vote upon (i) the
election of 10 directors, (ii) the approval of the Viacom Senior Executive
Short-Term Incentive Plan (the "Senior Executive STIP"), (iii) the approval of
the Viacom 1994 Long-Term Management Incentive Plan (the "New LTMIP"), (iv) the
approval of the Viacom Stock Option Plan for Outside Directors (the "Outside
Directors' Plan"), (v) the approval of the appointment of independent auditors
for 1994 and (vi) such other business as may properly come before the Viacom
Annual Meeting or any adjournment thereof.
This Proxy Statement/Prospectus also constitutes a prospectus of Viacom
with respect to (i) 56,895,733 shares of the Class B Common Stock, par value
$.01 per share, of Viacom ("Viacom Class B Common Stock" and, together with the
Viacom Class A Common Stock, the "Viacom Common Stock"), (ii) $1,069,870,865
principal amount of 8% exchangeable subordinated debentures due 2006 of Viacom
(the "Viacom Merger Debentures"), (iii) 56,895,733 contingent value rights of
Viacom ("CVRs"), representing the right to receive (under certain
circumstances) cash or securities of Viacom depending on market prices of Viacom
Class B Common Stock during a one-, two-or three-year period following the
Paramount Merger, (iv) 30,567,739 three-year warrants ("Viacom Three-Year
Warrants") to purchase one share of Viacom Class B Common Stock at $60 per
share, and (v) 18,340,643 five-year warrants ("Viacom Five-Year Warrants" and,
together with Viacom Three-Year Warrants, "Viacom Warrants") to purchase one
share of Viacom Class B Common Stock at $70 per share, all issuable to the
holders of the Common Stock, par value $1.00 per share, of Paramount ("Paramount
Common Stock") in the Paramount Merger. On February 1, 1994, the last trading
day before the announcement of the terms of the February 4 Merger Agreement,
on February 14, 1994 (the date on which Paramount's financial advisor, Lazard
Freres & Co. ("Lazard Freres"), reaffirmed its written opinion addressed to the
Paramount Board of Directors, dated February 4, 1994), and on June 3, 1994, the
last trading day before the printing of this Proxy Statement/Prospectus, the
last sales price of a share of Viacom Class B Common Stock as reported on the
American Stock Exchange, Inc. (the "AMEX") was $34-1/8, $29-7/8 and $28-5/8,
respectively. Lazard Freres reaffirmed its February 4, 1994 opinion on
February 14, 1994. Lazard Freres has not been requested to update that
opinion.
The securities to be issued in the Paramount Merger have been approved for
listing on the AMEX, subject to official notice of issuance and stockholder
approval. The shares of Viacom Class B Common Stock are traded on the AMEX
under the symbol "VIA.B" and the Viacom Debentures, CVRs, Viacom Three-Year
Warrants and Viacom Five-Year Warrants will be traded under the symbols
"VIA.D", "VIA.CV", "VIA.WS.C" and "VIA.WS.E", respectively.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT RELATE TO THE PROPOSED MERGER (THE
"BLOCKBUSTER MERGER" AND, TOGETHER WITH THE PARAMOUNT MERGER, THE "MERGERS")
BETWEEN VIACOM AND BLOCKBUSTER ENTERTAINMENT CORPORATION (TOGETHER WITH ITS
CONSOLIDATED SUBSIDIARIES, "BLOCKBUSTER"). A SEPARATE JOINT PROXY
STATEMENT/PROSPECTUS OF VIACOM AND BLOCKBUSTER RELATING TO THE BLOCKBUSTER
MERGER WILL BE SENT TO STOCKHOLDERS OF VIACOM AND BLOCKBUSTER PRIOR TO ANY
CONSIDERATION OF THE BLOCKBUSTER MERGER.
This Proxy Statement/Prospectus and the accompanying forms of proxy are
first being mailed to stockholders of Viacom and Paramount on or about
June 7, 1994.
NEITHER THIS TRANSACTION NOR THE SECURITIES COVERED BY THIS PROXY
STATEMENT/PROSPECTUS HAVE BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR
ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE
FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
------------------------
The date of this Proxy Statement/Prospectus is June 6, 1994.
<PAGE>
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATIONS OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY VIACOM OR PARAMOUNT. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF VIACOM, PARAMOUNT OR BLOCKBUSTER SINCE THE DATE HEREOF OR THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
Viacom has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (together with any amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of Viacom Class B
Common Stock, the Viacom Merger Debentures, the CVRs, and the Viacom Warrants to
be issued pursuant to the Paramount Merger Agreement. Sumner M. Redstone,
National Amusements, Inc., Viacom and Paramount have filed with the Commission a
Rule 13e-3 Transaction Statement (including any amendments thereto, the
"Schedule 13E-3") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to the Paramount Merger. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto and the Schedule 13E-3 and the
exhibits thereto. Statements contained in this Proxy Statement/Prospectus or in
any document incorporated in this Proxy Statement/Prospectus by reference as to
the contents of any contract or other document referred to herein or therein are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in all
respects by such reference. Viacom anticipates that it will also file with the
Commission a separate Registration Statement on Form S-4 (together with any
amendments thereto, the "Blockbuster Registration Statement") under the
Securities Act with respect to the securities that will be issued to holders of
Blockbuster Common Stock in connection with the Blockbuster Merger.
Viacom, Paramount and Blockbuster are subject to the informational
requirements of the Exchange Act and in accordance therewith file reports, proxy
statements and other information with the Commission. The Schedule 13E-3 and the
reports, proxy statements and other information filed by Viacom and Paramount
and the reports, proxy statements and other information filed by Blockbuster
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and should be available at the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10007, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, material filed by Viacom and Paramount
can be inspected at the offices of the AMEX, 86 Trinity Place, New York, New
York 10006 and the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street,
New York, New York 10005, respectively. The Common Stock, par value $.10 per
share, of Blockbuster ("Blockbuster Common Stock") is listed and traded on the
NYSE and the London Stock Exchange (the "LSE"), and certain of Blockbuster's
reports, proxy materials and other information may be available for inspection
at the offices of the NYSE, 20 Broad Street, New York, New York 10005 or the
offices of the LSE, Old Broad Street, London, England EC2N 1HP. After
consummation of the Mergers, Paramount and Blockbuster may no longer file
reports, proxy statements or other information with the Commission. Instead,
such information would be provided, to the extent required, in filings made by
Viacom.
(i)
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Viacom (File No.
1-9553), Paramount (File No. 1-5404) and Blockbuster (File No. 1-12700) pursuant
to the Exchange Act are incorporated by reference in this Proxy
Statement/Prospectus:
1. Viacom's Annual Report on Form 10-K for the year ended December 31,
1993 as amended by Form 10-K/A Amendment No. 1 dated May 2, 1994;
2. Viacom's Quarterly Report on Form 10-Q for the three months ended
March 31, 1994;
3. Viacom's Current Reports on Form 8-K dated January 12, 1994, March
18, 1994 and March 28, 1994;
4. Paramount's Transition Report on Form 10-K for the six-month period
ended April 30, 1993, as amended by Form 10-K/A Amendment No. 1 dated
September 28, 1993, as further amended by Form 10-K/A Amendment No. 2 dated
September 30, 1993, and as further amended by Form 10-K/A Amendment No. 3
dated March 21, 1994;
5. Paramount's Quarterly Reports on Form 10-Q for the three months
ended July 31, 1994, the six months ended October 31, 1994 and the nine
months ended January 31, 1994;
6. Paramount's Current Reports on Form 8-K dated June 22, 1993, June
30, 1993, July 15, 1993, September 15, 1993, January 4, 1994, January 28,
1994, March 17, 1994 and March 18, 1994;
7. Blockbuster's Annual Report on Form 10-K for the year ended
December 31, 1993;
8. Blockbuster's Quarterly Report on Form 10-Q for the three months
ended March 31, 1994; and
9. Blockbuster's Current Reports on Form 8-K dated January 7, 1994
(filed January 12, 1994), February 15, 1994 (filed February 22, 1994),
March 10, 1994 (filed March 11, 1994) and May 5, 1994 (filed May 5, 1994).
All documents and reports filed by Viacom, Paramount and Blockbuster
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Proxy Statement/Prospectus and prior to the date of the special meetings
of stockholders of Paramount and Viacom and the Viacom Annual Meeting, including
any adjournment thereof, shall be deemed to be incorporated by reference in this
Proxy Statement/Prospectus and to be a part hereof from the dates of filing of
such documents or reports. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement/Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
This Proxy Statement/Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Such documents (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference) are available, without charge, to any person, including any
beneficial owner, to whom this Proxy Statement/Prospectus is delivered, on
written or oral request, to Viacom International Inc., 1515 Broadway, New York,
New York 10036 (telephone number (212) 258-6000), Attention: John H. Burke. In
order to ensure delivery of the documents prior to the applicable stockholder
meeting, requests should be received by June 22, 1994.
(ii)
<PAGE>
TABLE OF CONTENTS
<TABLE><CAPTION>
SECTION PAGE
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AVAILABLE INFORMATION...................................................................................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ ii
DEFINITION CROSS-REFERENCE SHEET........................................................................... vi
SUMMARY.................................................................................................... 1
Business................................................................................................. 1
The Meetings............................................................................................. 3
The Paramount Merger..................................................................................... 5
The Blockbuster Merger................................................................................... 12
Certain Considerations................................................................................... 15
Management After the Mergers............................................................................. 15
Financial Matters After the Mergers...................................................................... 15
Trademarks and Trade Names............................................................................... 16
Selected Historical Consolidated Financial Data and Unaudited Pro Forma Financial Data, Unaudited Pro
Forma Combined Financial Data and Other Data........................................................... 17
INTRODUCTION............................................................................................... 30
BUSINESS................................................................................................... 30
THE MEETINGS............................................................................................... 39
Matters To Be Considered at the Meetings................................................................. 39
Votes Required........................................................................................... 39
Voting of Proxies........................................................................................ 40
Revocability of Proxies.................................................................................. 40
Record Date; Stock Entitled To Vote; Quorum.............................................................. 40
Appraisal Rights......................................................................................... 41
Solicitation of Proxies.................................................................................. 41
SPECIAL FACTORS............................................................................................ 42
Background of the Paramount Merger....................................................................... 42
Purpose and Structure of the Paramount Merger............................................................ 50
Reasons for the Paramount Merger; Recommendations of the Board of Directors; Fairness of the
Transaction............................................................................................ 50
Opinions of Financial Advisors........................................................................... 53
Interests of Certain Persons in the Paramount Merger..................................................... 77
Paramount Voting Agreement............................................................................... 77
Certain Federal Income Tax Consequences.................................................................. 78
Real Estate Transfer Taxes............................................................................... 85
Certain Effects of the Paramount Merger; Operations After the Paramount Merger........................... 86
THE PARAMOUNT MERGER....................................................................................... 87
General.................................................................................................. 87
The Offer................................................................................................ 87
Paramount Merger Consideration........................................................................... 87
Paramount Effective Time................................................................................. 89
Stock Exchange Listing................................................................................... 89
Expenses of the Transaction.............................................................................. 90
Ownership of Viacom Common Stock Immediately After the Paramount Merger and the Mergers.................. 90
Effect on Employee Benefit Stock Plans................................................................... 91
FINANCING OF THE OFFER..................................................................................... 93
</TABLE>
(iii)
<PAGE>
<TABLE><CAPTION>
SECTION PAGE
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<S> <C>
SALE OF VIACOM PREFERRED STOCK............................................................................. 95
CERTAIN PROVISIONS OF THE PARAMOUNT MERGER AGREEMENT....................................................... 96
Procedure for Exchange of Paramount Certificates......................................................... 96
Certain Representations and Warranties................................................................... 97
Rights Agreement Amendments.............................................................................. 98
Conduct of Businesses Pending the Paramount Merger....................................................... 99
Conditions to Consummation of the Paramount Merger....................................................... 100
Restrictions On Going Private Transactions............................................................... 101
Blockbuster Merger Agreement............................................................................. 101
Indemnification; Insurance............................................................................... 101
Termination.............................................................................................. 102
Expenses................................................................................................. 102
Amendment and Waiver..................................................................................... 102
EXCHANGE ACT REGISTRATION AND TRADING OF THE PARAMOUNT COMMON STOCK........................................ 103
THE BLOCKBUSTER MERGER..................................................................................... 104
Blockbuster.............................................................................................. 104
Certain Transactions Between Viacom and Blockbuster and With Their Stockholders.......................... 105
Form of the Blockbuster Merger........................................................................... 106
Blockbuster Merger Consideration......................................................................... 106
Certain Federal Income Tax Consequences.................................................................. 107
Appraisal Rights with Respect to the Blockbuster Merger.................................................. 107
Treatment of Blockbuster Warrants and Employee Stock Options............................................. 107
CERTAIN CONSIDERATIONS..................................................................................... 109
AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION OF VIACOM.......................................... 111
AMENDMENT TO THE CERTIFICATE OF INCORPORATION AND BY-LAWS OF PARAMOUNT..................................... 111
MANAGEMENT BEFORE AND AFTER THE MERGERS.................................................................... 111
Executive Officers and Directors of Viacom............................................................... 111
Executive Officers and Directors of Paramount............................................................ 113
Management After the Mergers............................................................................. 115
FINANCIAL MATTERS AFTER THE MERGERS........................................................................ 115
Accounting Treatment..................................................................................... 115
Common Stock Dividend Policy After the Paramount Merger and the Mergers.................................. 115
CAPITALIZATION............................................................................................. 116
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS VIACOM-PARAMOUNT/COMBINED COMPANY.............. 117
PARAMOUNT, MACMILLAN AND OTHER BUSINESSES ACQUIRED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.............................................................................................. 125
BLOCKBUSTER, SUPER CLUB AND SPELLING ENTERTAINMENT UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS............................................................................................... 129
DESCRIPTION OF VIACOM CAPITAL STOCK........................................................................ 133
Viacom Class A Common Stock.............................................................................. 133
Viacom Class B Common Stock.............................................................................. 133
Contingent Value Rights.................................................................................. 133
Viacom Warrants.......................................................................................... 137
Voting and Other Rights of the Viacom Common Stock....................................................... 138
Viacom Preferred Stock................................................................................... 139
Series C Preferred Stock................................................................................. 140
DESCRIPTION OF VIACOM DEBENTURES........................................................................... 144
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COMPARISON OF STOCKHOLDER RIGHTS........................................................................... 153
Stockholder Vote Required for Certain Transactions....................................................... 153
Special Meetings of Stockholders; Stockholder Action by Written Consent.................................. 154
Rights Plans............................................................................................. 155
TRANSACTIONS BY CERTAIN PERSONS IN PARAMOUNT
COMMON STOCK............................................................................................. 157
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 158
Viacom Capital Stock..................................................................................... 158
Paramount Capital Stock.................................................................................. 159
OTHER MATTERS.............................................................................................. 160
Regulatory Approvals Required............................................................................ 160
Antitrust Approvals...................................................................................... 160
Stockholder Litigations.................................................................................. 162
Antitrust Litigation..................................................................................... 163
QVC Litigation........................................................................................... 164
DISSENTING STOCKHOLDERS' RIGHTS OF APPRAISAL............................................................... 166
VIACOM ANNUAL MEETING MATTERS.............................................................................. 169
Election of Directors.................................................................................... 169
Related Transactions..................................................................................... 172
Directors' Compensation.................................................................................. 173
Compensation Committee Interlocks and Insider Participation.............................................. 174
Executive Compensation................................................................................... 174
Compensation Committee Report on Executive Compensation.................................................. 174
Employment Contracts..................................................................................... 185
Approval of the Viacom Inc. Senior Executive Short-Term Incentive Plan................................... 186
Approval of the Viacom Inc. 1994 Long-Term Management Incentive Plan..................................... 187
Approval of the Viacom Inc. Stock Option Plan for Outside Directors...................................... 191
Approval of Appointment of Independent Auditors.......................................................... 193
Other Matters............................................................................................ 193
EXPERTS.................................................................................................... 195
Financial Statements..................................................................................... 195
Legal Opinions........................................................................................... 195
STOCKHOLDER PROPOSALS...................................................................................... 196
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LIST OF ANNEXES AND EXHIBITS
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Annex I Paramount Merger Agreement
Annex II Paramount Voting Agreement
Annex III Opinion of Smith Barney Shearson Inc.
Annex IV Opinion of Lazard Freres & Co.
Annex V Excerpt from the Delaware General Corporation Law Relating to Dissenters' Rights
Annex VI Form of Certificate of Merger for the Paramount Merger
Annex VII Form of Certificate of Amendment to the Restated Certificate of Incorporation of Viacom
Exhibit A Viacom Inc. Senior Executive Short-Term Incentive Plan
Exhibit B Viacom Inc. 1994 Long-Term Management Incentive Plan
Exhibit C Viacom Inc. Stock Option Plan for Outside Directors
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DEFINITION CROSS-REFERENCE SHEET
Set forth below is a list of certain defined terms used in this Proxy
Statement/Prospectus and the page on which each such term is defined:
TERM PAGE
- --------------------------------------------- ---------
AMEX Cover
Amended Stock Option Agreement 46
Bidding Procedures 46
Blockbuster Cover
Blockbuster Common Stock (i)
Blockbuster Credit Agreement 94
Blockbuster Effective Time 12
Blockbuster Merger Cover
Blockbuster Merger Agreement 2
Blockbuster Merger Consideration 14
Blockbuster Option Stockholders 105
Blockbuster Preferred Stock Agreement 95
Blockbuster Proxy Agreement 106
Blockbuster Proxy Shares 106
Blockbuster Proxy Stockholders 106
Blockbuster Registration Statement (i)
Blockbuster Stockholders Stock Option
Agreement 105
Blockbuster Subscription Agreement 2
Blockbuster Voting Agreement 12
CVR Agreement 133
CVRs Cover
Cityvision 24
Class B Value 14
combined company 12
Commission (i)
Communications Act 34
Credit Agreement 93
DGCL 5
Discovery Zone 14
Exchange Act (i)
FCC 33
February 4 Merger Agreement Cover
February 22nd Regulations 34
First Viacom Offer 43
First Viacom Second-Step Merger 43
Fourth Viacom Offer (see also
"Offer") 48
Fourth Viacom Second-Step Merger 48
Going Private Transaction 101
Indenture 144
Independent Financial Expert 137
Macmillan 20
Macmillan Acquisition 20
Major Video 24
May Amendment 8
Merger Subsidiary Cover
Mergers Cover
MFJ 35
MTVN 30
NAI 4
NYSE (i)
NYNEX 2
NYNEX Preferred Stock Agreement 95
New Blockbuster Facility 93
New LTMIP Cover
Nielsen Report 30
November 6 Amendment 45
October 24 Merger Agreement 44
Offer (see also "Fourth Viacom
Offer") 2
Original Merger 43
Original Merger Agreement 42
Original Stock Option Agreement 42
Original Voting Agreement 42
Outside Directors 77
Outside Directors' Plan Cover
Paramount Cover
Paramount Certificates 96
Paramount Common Stock Cover
Paramount Effective Time 5
Paramount Exchange Agent 96
Paramount Merger Cover
Paramount Merger Agreement Cover
Paramount Merger Consideration 6
Paramount Option Shares 91
Paramount Special Meeting 3
Paramount Stock Options 91
Paramount Voting Agreement 4
Parity Stock 141
Philips 104
Plan 77
Pro Forma Events 26
Preferred Stock Investors 95
Proxy Statement/Prospectus Cover
QVC 43
QVC Transaction Consideration 9
Reconstituted Board of Directors of Paramount 2
Registration Statement (i)
Republic Pictures 13
Rights 49
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TERM PAGE
- --------------------------------------------- ---------
Rights Agreement 44
Rights Agreement Amendments 98
SNI 30
Schedule 13E-3 (i)
Second Viacom Offer 45
Second Viacom Second-Step Merger 45
Securities Act (i)
Senior Executive STIP Cover
Series A Preferred Stock 2
Series B Preferred Stock 2
Series C Preferred Stock 6
Significant Stockholder 101
Sound Warehouse 24
Special Meetings 3
Spelling Entertainment 13
Super Club 24
telco 34
Third Viacom Offer 47
Third Viacom Second-Step Merger 47
VCR 14
VCR Conversion Date 14
VCR Valuation Period 14
VSMLP 24
Viacom Cover
Viacom Annual Meeting Cover
TERM PAGE
- --------------------------------------------- ---------
Viacom Annual Meeting Proposals 3
Viacom-Blockbuster 12
Viacom Charter Amendments 3
Viacom Class A Common Stock Cover
Viacom Class B Common Stock Cover
Viacom Common Stock Cover
Viacom Debentures 144
Viacom Exchange Debentures 6
Viacom Five-Year Warrant Agreement 137
Viacom Five-Year Warrants Cover
Viacom International 1
Viacom Merger Debentures Cover
Viacom Preferred Stock 2
Viacom Special Meeting 3
Viacom Three-Year Warrant Agreement 137
Viacom Three-Year Warrants Cover
Viacom Transaction Consideration 9
Viacom Warrant Agreements 137
Viacom Warrants Cover
Virgin 13
WJB 24
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<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained or
incorporated by reference in this Proxy Statement/Prospectus and the Annexes and
Exhibits hereto. Stockholders are urged to read this Proxy Statement/Prospectus
and the Annexes and Exhibits hereto, and in particular the section herein
entitled "Certain Considerations", in their entirety.
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BUSINESS
Viacom Inc. ............................... Viacom's principal asset is its 100% ownership of Viacom
200 Elm Street International ("Viacom International") and its majority ownership
Dedham, Massachusetts 02026 of Paramount. Viacom International is a diversified entertainment
(617) 461-1600 and communications company with operations in four principal
segments: Networks, Entertainment, Cable Television and
Broadcasting.
Networks. Viacom Networks operates three basic cable services in
the U.S.: MTV: MUSIC TELEVISION, VH-1/VIDEO HITS ONE and
NICKELODEON/NICK AT NITE. Viacom Networks also operates three
premium services: SHOWTIME, THE MOVIE CHANNEL and FLIX. Viacom
also participates as a joint venturer in COMEDY CENTRALTM and ALL
NEWS CHANNELTM. Internationally, MTV Networks operates MTV EUROPE
and MTV LATINO and participates as a joint venturer in NICKELODEON
UK.
Entertainment. Viacom Entertainment is comprised principally of
(i) Viacom Enterprises, which distributes off-network programming
and feature films for television exhibition in various markets
throughout the world and also distributes television programs for
initial U.S. television exhibition on a non-network basis and for
international television exhibition; (ii) Viacom Productions,
which produces television series and other television properties
independently and in association with others primarily for initial
exhibition on U.S. prime time network television; and (iii) Viacom
New Media, which develops, produces, distributes and markets
interactive software for the stand-alone and other multimedia
marketplaces.
Cable Television. Viacom Cable owns and operates cable television
systems servicing approximately 1,111,000 customers as of March
31, 1994 in California, the Pacific Northwest and the Midwest.
Among other projects, Viacom Cable has constructed a fiber optic
cable system in Castro Valley, California to accommodate testing
of new interactive services. In connection with this test, Viacom
has entered into an agreement with AT&T to test and further
develop such services.
Broadcasting. Viacom Broadcasting owns and operates five
network-affiliated television stations and 14 radio stations (two
of which are under contract to be sold) in six of the top eight
radio markets, including duopolies (i.e., ownership of two or more
AM or two or more FM stations in the same
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market) in each of Los Angeles, Seattle and Washington, D.C.
Strategic Relationships. Viacom has entered into strategic
relationships with Blockbuster and NYNEX Corporation ("NYNEX")
including (i) a $600 million investment by Blockbuster in the
Series A Cumulative Convertible Preferred Stock, par value $.01
per share, of Viacom (the "Series A Preferred Stock"), (ii) a $1.2
billion investment by NYNEX in the Series B Cumulative Convertible
Preferred Stock, par value $.01 per share, of Viacom (the "Series
B Preferred Stock" and, together with the Series A Preferred
Stock, the "Viacom Preferred Stock") and (iii) an agreement with
each of Blockbuster and NYNEX to explore strategic partnership
opportunities.
In addition, on March 10, 1994 Blockbuster purchased approximately
22.7 million shares of Viacom Class B Common Stock for an
aggregate purchase price of approximately $1.25 billion pursuant
to the Subscription Agreement dated as of January 7, 1994 between
Blockbuster and Viacom (the "Blockbuster Subscription Agreement").
Blockbuster Merger. Viacom and Blockbuster are parties to an
Agreement and Plan of Merger (the "Blockbuster Merger Agreement")
dated as of January 7, 1994, as described under "The Blockbuster
Merger."
Ownership of Paramount Common Stock. On March 11, 1994, pursuant
to the terms of its tender offer for shares of Paramount Common
Stock (sometimes hereinafter referred to as the "Offer" and
sometimes as the "Fourth Viacom Offer"), Viacom completed its
purchase of 61,657,432 of such shares, representing a majority of
the shares of Paramount Common Stock outstanding. On March 11,
1994, 10 members of Paramount's Board of Directors resigned and
their positions were filled by 10 designees of Viacom (the
"Reconstituted Board of Directors of Paramount"). Effective March
15, 1994, Paramount's fiscal year was changed such that its fiscal
year (consisting of eleven calendar months) will end March 31,
1994, following which Paramount's fiscal year will be the nine
month period ending December 31, 1994. Thereafter, Paramount's
fiscal year will be the twelve month period ending on December 31
of each year, conforming to that of Viacom.
Recent Developments. On April 4, 1994, Viacom sold its one-third
partnership interest in LIFETIME(R) to its partners The Hearst
Corporation and Capital Cities/ABC Inc. for approximately $317.6
million.
Paramount Communications Inc. ............. The businesses of Paramount are entertainment and publishing.
15 Columbus Circle Entertainment includes the production, financing and distribution
New York, New York 10023 of motion pictures, television programming and prerecorded
(212) 373-8000 videocassettes and the operation of motion picture theaters,
independent television stations, regional theme parks and Madison
Square Garden.
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Publishing includes the publication and distribution of hardcover
and paperback books for the general public, textbooks for
elementary schools, high schools and colleges, and the provision
of information services for business and professions.
THE MEETINGS
Meetings of Stockholders................... Viacom. A Special Meeting of Stockholders of Viacom will be held
at the Equitable Center, 787 Seventh Avenue (at 51st Street), New
York, New York on Thursday, July 7, 1994, at 10:30 a.m., local
time (the "Viacom Special Meeting"). The Viacom Annual Meeting will
be held immediately following the Viacom Special Meeting at the same
location as the Viacom Special Meeting.
Paramount. A Special Meeting of Stockholders of Paramount will be
held at Hotel du Pont, 11th and Market Streets, Wilmington, Delaware,
on Wednesday, July 6, 1994, at 10:00 a.m., local time (the "Paramount
Special Meeting" and, together with the Viacom Special Meeting, the
"Special Meetings").
Matters to Be Considered at the Meetings... Viacom. At the Viacom Special Meeting, holders of Viacom Class A
Common Stock will consider and vote upon (i) a proposal to approve
and adopt the Paramount Merger Agreement, including the issuance
of the Paramount Merger Consideration (as defined below); (ii)
proposals to amend Viacom's Restated Certificate of Incorporation
to (1) increase the number of shares of Viacom Class B Common
Stock authorized to be issued from 150 million to one billion, (2)
increase the number of shares of Viacom Class A Common Stock
authorized to be issued from 100 million to 200 million, (3)
increase the number of shares of preferred stock of Viacom
authorized to be issued from 100 million to 200 million and (4)
increase the maximum number of directors constituting the Board of
Directors of Viacom from 12 to 20 (the matters described in
clauses (1) through (4) above being hereinafter together referred
to as the "Viacom Charter Amendments") and (iii) such other
proposals as may be properly brought before the Viacom Special
Meeting.
At the Viacom Annual Meeting, holders of Viacom Class A Common
Stock will consider and vote upon (i) the election of 10
directors, (ii) the approval of the Senior Executive STIP, (iii)
the approval of the New LTMIP, (iv) the approval of the Outside
Directors' Plan, (v) the approval of the appointment of
independent auditors for 1994 and (vi) such other business as may
properly come before the Viacom Annual Meeting or any adjournment
thereof (the matters described in clauses (i) through (v) above
being hereinafter together referred to as the "Viacom Annual
Meeting Proposals").
Paramount. At the Paramount Special Meeting, holders of Paramount
Common Stock will consider and vote upon (i) a proposal to approve
and adopt the Paramount Merger
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Agreement and (ii) such other matters as may be properly brought
before the meeting.
Security Ownership of Management and
Certain Affiliates....................... Viacom. As of April 1, 1994, directors and executive officers of
Viacom and their affiliates (other than Sumner M. Redstone,
Chairman of the Board of Viacom) were beneficial owners of less
than 1% of the outstanding shares of Viacom Class A Common Stock
and less than 1% of the outstanding shares of Viacom Class B
Common Stock. National Amusements, Inc. ("NAI"), which is
controlled by Sumner M. Redstone, owned approximately 85% of the
outstanding shares of Viacom Class A Common Stock and 52% of the
outstanding shares of Viacom Class B Common Stock on April 1,
1994.
Paramount. As of March 31, 1994, directors and executive officers
of Paramount were beneficial owners of approximately 1.82% of the
outstanding shares of Paramount Common Stock.
Votes Required............................. Viacom. In order to effect the Viacom Charter Amendments, the
Viacom Charter Amendments must be approved by the affirmative vote
of the holders of a majority of the outstanding shares of Viacom
Class A Common Stock. Abstentions and broker non-votes will have
the same effect as votes against the Viacom Charter Amendments.
The affirmative vote of the holders of a majority of the shares of
Viacom Class A Common Stock present in person or represented by
proxy is required for approval of the Paramount Merger Agreement
(including the issuance of the Paramount Merger Consideration) and
approval of the Annual Meeting Proposals. Abstentions will have
the same effect as a vote against approval of the Paramount Merger
Agreement and approval of Annual Meeting Proposals. Broker
non-votes will have no such effect and will not be counted.
Pursuant to a Voting Agreement dated as of January 21, 1994 (the
"Paramount Voting Agreement") between Paramount and NAI, a copy of
which is attached as Annex II, NAI has agreed to vote all of its
shares of Viacom Class A Common Stock in favor of the Paramount
Merger and related transactions. The vote of NAI in accordance
with the Paramount Voting Agreement would be sufficient to approve
the Paramount Merger Agreement and the related transactions
without any action on the part of any other holder of Viacom Class
A Common Stock.
NAI has advised Viacom that it intends to vote all of its shares
of Viacom Class A Common Stock in favor of the Annual Meeting
Proposals and each of the Viacom Charter Amendments; such action
by NAI is sufficient to approve such proposals without any action
on the part of any other holder of Viacom Class A Common Stock.
Paramount. In order to effect the Paramount Merger, the Paramount
Merger Agreement must be approved by the affirmative vote of the
holders of a majority of the
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outstanding shares of Paramount Common Stock entitled to vote
thereon. Abstentions and broker non-votes will have the same
effect as votes against the Paramount Merger Agreement. As Viacom
has acquired a majority of the outstanding shares of Paramount
Common Stock pursuant to the Offer, Viacom has sufficient voting
power to approve the Paramount Merger Agreement, even if no other
stockholder of Paramount votes in favor of the Paramount Merger
Agreement.
Record Date................................ Viacom. The record date for the Viacom Special Meeting and the
Viacom Annual Meeting is May 31, 1994. Accordingly, holders of
record of Viacom Common Stock as of such date will be entitled to
notice of, and holders of record of Viacom Class A Common Stock
will be entitled to vote at, the Viacom Special Meeting and the
Viacom Annual Meeting.
Paramount. The record date for the Paramount Special Meeting is
May 31, 1994. Accordingly, holders of record of Paramount Common
Stock as of such date will be entitled to notice of, and to vote
at, the Paramount Special Meeting.
THE PARAMOUNT MERGER
The Offer.................................. Pursuant to the Offer, on March 11, 1994, Viacom completed its
purchase of a majority of the shares of Paramount Common Stock
outstanding at a price of $107 per share in cash, or an aggregate
cash consideration of approximately $6.6 billion.
Form of the Paramount Merger............... The Paramount Merger Agreement provides that the Paramount Merger
will be effected by causing the Merger Subsidiary, a wholly owned
subsidiary of Viacom, to merge with and into Paramount. As a
result, Paramount will be the corporation surviving the merger and
will become a wholly owned subsidiary of Viacom after the
effective time of the Paramount Merger (the "Paramount Effective
Time").
At the Paramount Effective Time, the Restated Certificate of
Incorporation (the "Certificate of Incorporation") and By-Laws of
Paramount will be amended in their entirety to read as the
Certificate of Incorporation and By-Laws of the Merger Subsidiary.
Conversion of the Paramount Common Stock... Pursuant to the Paramount Merger Agreement, each share of
Paramount Common Stock not owned by Viacom (other than shares of
Paramount Common Stock held in the treasury of Paramount or owned
by any direct or indirect wholly owned subsidiary of Viacom or of
Paramount and other than shares of Paramount Common Stock held by
stockholders who have demanded and perfected appraisal rights
under the Delaware General Corporation Law ("DGCL")), will be
converted into the right to receive (i) 0.93065 of a share of
Viacom Class B Common Stock, (ii) $17.50 principal amount of the
Viacom Merger Debentures, (iii) 0.93065 of a CVR, (iv) 0.5 of a
Viacom Three-Year Warrant and (v) 0.3 of a Viacom Five-Year
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Warrant (collectively, the "Paramount Merger Consideration").
Paramount Merger Consideration............. Viacom Class B Common Stock has rights, privileges, limitations,
restrictions and qualifications identical to Viacom Class A Common
Stock, except that shares of Viacom Class B Common Stock have no
voting rights other than those required by law.
The Viacom Merger Debentures will bear interest at a rate of 8%
per annum, will have a maturity of 12 years from the Paramount
Effective Time, will be redeemable by Viacom at declining
redemption premiums after the fifth anniversary of the Paramount
Effective Time and will be subordinated in right of payment to all
senior obligations of Viacom.
The Viacom Merger Debentures will be exchangeable, at the option
of Viacom, into the Series C Cumulative Exchangeable Redeemable
Preferred Stock, par value $.01 per share, of Viacom (the "Series
C Preferred Stock"), on or after the earlier of (i) January 1,
1995, but only if the Blockbuster Merger has not been consummated
by such date and (ii) the acquisition by a third party of
beneficial ownership of a majority of the then outstanding voting
securities of Blockbuster, into the Series C Preferred Stock at
the rate of one share of Series C Preferred Stock for each $50 in
principal amount of Viacom Merger Debentures exchanged. At the
time of the exchange of the Series C Preferred Stock for the
Viacom Merger Debentures, all accrued and unpaid interest on the
Viacom Merger Debentures will not be paid and instead the
dividends payable pursuant to subclause (i) of the next sentence
will be payable. The Series C Preferred Stock, if issued, (i)
would accrue dividends from the later of the Paramount Effective
Time and the latest date through which interest has been paid on
the Viacom Merger Debentures at a rate of 5% per annum until the
tenth anniversary of the Paramount Effective Time and 10% per
annum thereafter, (ii) would have a liquidation preference of $50
per share, (iii) would be redeemable at the option of Viacom at
declining redemption premiums after the fifth anniversary of the
Paramount Effective Time and (iv) would be exchangeable at the
option of Viacom into the 5% subordinated debentures due 2014 of
Viacom (the "Viacom Exchange Debentures") after the third
anniversary of the Paramount Effective Time.
Each whole CVR will represent the right, on the first anniversary
of the Paramount Effective Time, to receive, in cash or securities
of Viacom (at the option of Viacom), the amount by which the
average trading value of Viacom Class B Common Stock over a
specified period is less than a minimum price of $48 per share. If
Viacom elects to issue securities in payment for the CVRs, such
securities could take the form of common stock or preferred stock,
options or warrants therefor, other securities convertible into or
exchangeable for common stock or preferred stock, notes,
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debentures, derivative securities or any other security of Viacom
now existing or hereafter created or any combination of the
foregoing. Viacom will have the right, in its sole discretion,
to extend the payment and measurement dates of the CVR by one
year, in which case the minimum price will increase to $51 per
share, and a further one-year extension right which, if exercised
by Viacom, would increase the minimum price to $55 per share. The
average trading value will be based upon market prices during the
60 trading days ending on the last day of the relevant period and
is subject to a floor of (i) $36 per share if Viacom does not
exercise its extension rights, (ii) $37 per share if Viacom
extends the payment and measurement dates of the CVR by one year
or (iii) $38 per share if Viacom exercises its further one-year
extension right. The value of the securities, if any, issued
in exchange for the CVRs will be determined by an Independent
Financial Expert (as defined below). There can be
no assurance, however, that such securities would ultimately
trade in the market at a price at or above such valuation.
If the average trading value of a share of Viacom Class B Common
Stock equals or exceeds $48 on the Maturity Date or $51 on the
First Extended Maturity Date (if the Maturity Date is extended by
Viacom to the First Extended Maturity Date) or $55 on the Second
Extended Maturity Date (if the First Extended Maturity Date is
extended by Viacom to the Second Extended Maturity Date), as the
case may be, no amount will be payable with respect to the CVRs.
Certain corporate reorganizations, in which consideration paid to
holders of shares of Viacom Class B Common Stock exceeds minimum
amounts, may also result in no value being payable with respect to
the CVRs. See "Description of Viacom Capital Stock--Contingent
Value Rights."
Each whole Viacom Three-Year Warrant will entitle the holder
thereof to purchase one share of Viacom Class B Common Stock at
any time prior to the third anniversary of the Paramount Effective
Time at a price of $60, payable in cash.
Each whole Viacom Five-Year Warrant will entitle the holder
thereof to purchase one share of Viacom Class B Common Stock at
any time prior to the fifth anniversary of the Paramount Effective
Time at a price of $70, payable in cash or, if issued, in an
equivalent amount of liquidation preference of Series C Preferred
Stock or principal amount of Viacom Exchange Debentures.
No fractional securities will be issued in connection with the
Paramount Merger. In lieu of any such fractional shares, each
holder of Paramount Common Stock will be paid an amount in cash as
described under "Certain Provisions of the Paramount Merger
Agreement--Procedure for Exchange of Paramount Certificates."
On February 1, 1994, the last trading day before the announcement
of the terms of the February 4 Merger
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Agreement, February 14, 1994 (the date on which Lazard Freres
reaffirmed its written opinion addressed to the Paramount Board
dated February 4, 1994), and on June 3, 1994, the last trading
day before the printing of this Proxy Statement/Prospectus,
the last sales price of a share of Viacom Class B Common
Stock as reported on the AMEX was $34 1/8, $29 7/8 and $28 5/8,
respectively. However, no assurances can be given with respect
to the prices at which the Viacom Class B Common Stock will
trade after the date hereof or after the Paramount Effective
Time or the prices at which the Viacom Merger Debentures
(or, if issued, the Series C Preferred Stock and the
Viacom Exchange Debentures), the CVRs and the Viacom Warrants
will trade after the Paramount Effective Time. There has
been no public trading market for the Viacom Merger Debentures,
CVRs or Viacom Warrants and there can be no assurances that an
active market for such securities will develop or continue after
the Paramount Merger.
Ownership of Viacom Common Stock After the
Mergers.................................. Following the Paramount Merger. NAI will own approximately 85% of
the voting Viacom Class A Common Stock and approximately 46% of
the aggregate Viacom Common Stock immediately following
consummation of the Paramount Merger. Former stockholders of
Paramount will own approximately 28% of the aggregate Viacom
Common Stock immediately following consummation of the Paramount
Merger. (All percentages of ownership of common stock shown above
in this paragraph are calculated assuming that the Blockbuster
Merger has not yet been consummated.)
Following the Mergers. NAI will own approximately 62% of the
voting Viacom Class A Common Stock and approximately 25% of the
aggregate Viacom Common Stock immediately following consummation
of the Mergers. Former stockholders of Paramount will own
approximately 16% of the aggregate Viacom Common Stock immediately
following consummation of the Mergers. Former stockholders of
Blockbuster will own approximately 27% of the voting Viacom Class
A Common Stock and approximately 46% of the aggregate Viacom
Common Stock immediately following consummation of the Mergers.
(All percentages of ownership of common stock shown above in this
section are calculated based on the number of shares of the
relevant class or classes of stock outstanding as of March 31,
1994.)
Recommendations of the Boards of
Directors................................ Viacom. By a unanimous vote (with one director abstaining) of
directors at a special meeting of the Board of Directors of Viacom
held on February 1, 1994, the Viacom Board of Directors determined
that the Offer and the Paramount Merger, taken together, are fair
to, and in the best interests of, Viacom and its stockholders,
approved the Offer and the Paramount Merger and resolved to
recommend that holders of Viacom Class A Common Stock
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vote FOR approval of the February 4 Merger Agreement and related
transactions.
On May 26, 1994, the Board of Directors of Viacom approved an
amendment (the "May Amendment") to the February 4 Merger
Agreement. The principal purposes of the May Amendment were to
(i) add Merger Subsidiary as a party, (ii) provide for the
merger of Merger Subsidiary with and into Paramount (rather
than Paramount into Viacom) and (iii) provide for the
treatment of Paramount Stock Options in the Paramount
Merger as described under "The Paramount Merger--Effect
on Employee Benefit Stock Plans."
The Board of Directors of Viacom also recommends that the
stockholders of Viacom vote FOR the Viacom Charter Amendments and
Annual Meeting Proposals.
Paramount. On February 4, 1994, the Board of Directors of
Paramount (i) approved the terms of the February 4 Merger
Agreement and authorized its execution and delivery, (ii)
determined that the Offer and the Paramount Merger, taken
together, are fair to, and in the best interests of, the holders
of Paramount Common Stock, (iii) recommended approval and adoption
of the February 4 Merger Agreement by the stockholders of
Paramount and (iv) recommended that holders of Paramount Common
Stock tender their shares pursuant to the Offer.
On May 26, 1994, the Reconstituted Board of Directors of Paramount
approved the May Amendment.
Opinions of Financial Advisors............. Viacom. Smith Barney Shearson Inc. ("Smith Barney") has delivered
its opinion to the Board of Directors of Viacom that, as of
February 1, 1994, the financial terms of the Offer and the
Paramount Merger, taken together, are fair, from a financial point
of view, to Viacom and its stockholders whether or not the
Blockbuster Merger is consummated.
Paramount. Lazard Freres, financial advisor to Paramount,
has delivered its opinion to the Board of Directors of
Paramount that, as of February 4, 1994, (i) the
consideration to be received by the holders of Paramount Common
Stock in the Offer and the Paramount Merger, taken together (the
"Viacom Transaction Consideration"), was fair to the holders of
Paramount Common Stock from a financial point of view, (ii) the
consideration proposed to be received in the Fourth QVC Offer and
the Fourth QVC Second-Step Merger (each as defined in "Special
Factors--Opinions of Financial Advisors"), taken together (the
"QVC Transaction Consideration"), was fair to the holders of
Paramount Common Stock from a financial point of view and (iii)
the Viacom Transaction Consideration was marginally superior to
the QVC Transaction Consideration from a financial point of view.
On February 14, 1994, Lazard Freres reaffirmed its February 4,
1994 opinion.
For information on the assumptions made, matters considered and
limits of the reviews by Smith Barney and
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Lazard Freres, stockholders are urged to read in their
entirety the opinions of Smith Barney and Lazard Freres
attached as Annexes III and IV, respectively, to this
Proxy Statement/Prospectus.
Conditions to the Paramount Merger,
Termination.............................. The obligations of Viacom and Paramount to consummate
the Paramount Merger are subject to various conditions,
including obtaining requisite stockholder approvals and approval for
listing on the AMEX, subject to official notice of issuance, of the shares
of Viacom Class B Common Stock, the Viacom Merger Debentures, the
CVRs and the Viacom Warrants to be issued in connection with the
Paramount Merger.
The Paramount Merger Agreement may be terminated at any time prior
to the Paramount Effective Time by mutual consent of Viacom and
Paramount, or by either party if (i) any permanent injunction or
action by any governmental entity preventing consummation of the
Paramount Merger becomes final and nonappealable, (ii) the
Paramount Merger has not been consummated before July 31, 1994;
provided, however, that the Paramount Merger Agreement may be
extended by written notice of either Paramount or Viacom to a date
not later than September 30, 1994 if the Paramount Merger has not
been consummated as a direct result of Viacom or Paramount having
failed by July 31, 1994 to receive all required regulatory
approvals or consents with respect to the Paramount Merger or
(iii) any approval of stockholders of Viacom or Paramount required
for consummation of the Paramount Merger has not been obtained at
the applicable meeting.
Paramount may terminate the Paramount Merger Agreement if Viacom
has breached any representation, warranty, covenant or agreement
in the Paramount Merger Agreement such that the closing conditions
relating to its representations, warranties, covenants and
agreements would be incapable of being satisfied by July 31, 1994.
Stock Exchange Listing..................... It is a condition to the Paramount Merger that the shares of
Viacom Class B Common Stock, the Viacom Merger Debentures, the
CVRs and the Viacom Warrants to be issued in the Paramount Merger
as Paramount Merger Consideration be authorized for listing on the
AMEX, subject to official notice of issuance. Such securities have
been approved for listing on the AMEX, subject to official notice
of issuance and stockholder approval. The shares of Viacom Class B
Common Stock are traded on the AMEX under the symbol "VIA.B" and
the Viacom Debentures, CVRs, Viacom Three-Year Warrants and Viacom
Five-Year Warrants will be traded under the symbols "VIA.D",
"VIA.CV", "VIA.WS.C" and "VIA.WS.E", respectively. Viacom has also
agreed to use its reasonable best efforts to cause the Series C
Preferred Stock and the Viacom Exchange Debentures to be approved
for listing on the AMEX prior to the issuance thereof.
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Dividends.................................. The Paramount Merger Agreement prohibits the declaration, setting
aside, making or payment of dividends until the Paramount
Effective Time, except for (i) Viacom's regularly scheduled
quarterly dividends to be paid on the Viacom Preferred Stock, (ii)
Paramount's regularly scheduled quarterly dividends, not to exceed
$.20 per share, after consultation with Viacom as to the timing
and advisability of declaring any such dividend and (iii) dividends
paid and declared by subsidiaries of Viacom and Paramount
consistent with past practice.
Appraisal Rights........................... In connection with the Paramount Merger, a holder of shares of
Paramount Common Stock who has not voted in favor of the Paramount
Merger will be entitled to demand appraisal rights in respect of
such shares under Section 262 of the DGCL, subject to satisfaction
by such stockholder of the conditions for appraisal rights
established by such Section, which is set forth in full in Annex V
hereto. Holders of Viacom Common Stock will not have appraisal
rights in connection with the Paramount Merger.
Certain Federal Income Tax Consequences.... No ruling has been (or will be) sought from the Internal Revenue
Service as to the anticipated Federal income tax consequences of
the Paramount Merger. A Paramount stockholder will recognize gain
or loss on all Paramount Common Stock exchanged in the Paramount
Merger equal to the difference between such stockholder's basis in
the Paramount Common Stock so exchanged and the amount of cash
and/or the fair market value on the date of the Paramount Merger
of the Viacom Class B Common Stock, the Viacom Merger Debentures,
the CVRs, the Viacom Three-Year Warrants and the Viacom Five-Year
Warrants received. Neither Paramount nor Viacom will recognize any
gain or loss as a result of the Paramount Merger.
Financing of the Offer..................... The total amount of funds required by Viacom to consummate the
Offer and to pay related fees and expenses was approximately $6.7
billion.
The Offer was financed by (i) $1.8 billion from the sale of Viacom
Preferred Stock (see "Sale of Viacom Preferred Stock"), proceeds
of which are reflected as cash and cash equivalents on Viacom's
Balance Sheet as of December 31, 1993, (ii) $1.25 billion from the
sale of Viacom Class B Common Stock to Blockbuster and (iii) $3.7
billion from borrowings under a credit agreement.
During May 1994, Viacom received commitments from a syndicate of
financial institutions for a new long-term $6.8 billion
credit facility. On May 5, 1994, Viacom, Viacom
International and Paramount filed a shelf registration statement
with the Commission registering $3.0 billion of debt securities
and preferred stock, guaranteed by Viacom International and, after
the Paramount Effective Time, Paramount. Although Viacom expects
that it will be able to refinance its indebtedness and meet its
obligations without the need to sell any assets, Viacom is continuing
to review opportunities for the sale of non-strategic assets as such
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opportunities may arise, including the exploration of the sale of
the operations of Madison Square Garden and certain non-core
publishing assets.
Paramount Voting Agreement................. Pursuant to the Paramount Voting Agreement, NAI has agreed to vote
its shares of Viacom Class A Common Stock in favor of the
Paramount Merger and related transactions and against any
competing business combination proposal. Approval of the Paramount
Merger Agreement (including the issuance of the Paramount Merger
Consideration) and related transactions by the stockholders of
Viacom is therefore assured.
THE BLOCKBUSTER MERGER
The Blockbuster Merger
Agreement............................... The Blockbuster Merger Agreement provides that, subject to
stockholder approval, at the effective time of the Blockbuster
Merger (the "Blockbuster Effective Time"), Blockbuster will merge
with and into Viacom, with Viacom being the surviving corporation.
Such surviving corporation is hereinafter referred to in this
Proxy Statement/Prospectus as "Viacom-Blockbuster." Viacom-
Blockbuster, together with its consolidated subsidiaries, and
together with Paramount as its wholly owned subsidiary, is
referred to in this Proxy Statement/Prospectus as the "combined
company."
It is anticipated that the Blockbuster Merger would be considered
at separate meetings of the stockholders of Viacom and
Blockbuster. Pursuant to a Voting Agreement dated as of January 7,
1994 (the "Blockbuster Voting Agreement") between Blockbuster and
NAI, NAI has agreed to vote its shares of Viacom Class A Common
Stock in favor of the Blockbuster Merger and against any competing
business combination proposal. Approval of the Blockbuster Merger
by the stockholders of Viacom is therefore assured. In a letter to
stockholders dated May 4, 1994, H. Wayne Huizenga, the Chairman of
the Board of Blockbuster, stated that, although Blockbuster
continues to believe that the combination of Blockbuster with
Viacom and Paramount represents an excellent strategic
opportunity, given Viacom's stock prices as of the date of his
letter, there could be no assurance that the Blockbuster Board
would be able to recommend the Blockbuster Merger Agreement to the
Blockbuster stockholders at the time of any stockholder meeting
called to vote on the Blockbuster Merger. Mr. Huizenga also
stated, among other things, that Blockbuster was unable to say
whether or not the Blockbuster Merger would go forward or whether
or not any special meeting of Blockbuster stockholders would be
called to vote on the Blockbuster Merger. THIS PROXY
STATEMENT/PROSPECTUS IS NOT A SOLICITATION WITH RESPECT TO, NOR A
PROSPECTUS RELATING TO, THE BLOCKBUSTER MERGER.
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Blockbuster ............................... Blockbuster is an international entertainment company with
businesses operating in the home video, music retailing and filmed
entertainment industries. Blockbuster also has investments in
other entertainment related businesses.
Home Video Retailing. Blockbuster owns, operates and franchises
Blockbuster Video videocassette rental and sales stores.
According to a survey published in the December 1993 issue of
Video Store Magazine, Blockbuster's and its franchise owners'
systemwide revenue from the rental and sale of prerecorded
videocassettes is greater than that of any other video specialty
chain in the United States. As of December 31, 1993, there were
3,593 video stores operating in Blockbuster's system, of which
2,698 were Blockbuster-owned and 895 were franchise-owned.
Blockbuster-owned video stores at December 31, 1993 included 775
stores operating under the "Ritz" trade name in the United Kingdom
and 120 stores operating under the "Video Towne",
"Alfalfa", "Movies at Home" and "Movieland" trade names. The
Blockbuster Video system operates in 49 states and 10 foreign
countries.
Music Retailing. Through music stores operating under various
trade names, including "Blockbuster Music Plus", "Sound
Warehouse", "Music Plus", "Record Bar", "Tracks", "Turtle's" and
"Rhythm and Views", Blockbuster is one of the largest specialty
retailers of prerecorded music in the United States, with 511
stores operating throughout the United States as of December 31,
1993. Blockbuster is also a partner in an international joint
venture with Virgin Retail Group Limited ("Virgin") to develop
music "Megastores" in Continental Europe, Australia and the United
States. The joint venture currently owns interests in and operates
20 "Megastores."
Filmed Entertainment. Blockbuster has interests in the filmed
entertainment industry through its investment in Spelling
Entertainment Group Inc. (together with its subsidiaries,
"Spelling Entertainment"), which operates in a broad range of
filmed entertainment businesses, supported by an extensive library
of television series, feature films, television movies,
mini-series and specials. Blockbuster owned approximately 70.5% of
Spelling Entertainment's outstanding shares of common stock and
approximately 39% of Republic Pictures' outstanding shares of
common stock as of December 31, 1993.
In April 1994, a wholly owned subsidiary of Spelling Entertainment
merged with and into Republic Pictures Corporation ("Republic
Pictures") and Republic Pictures became a wholly owned subsidiary
of Spelling Entertainment.
Other Entertainment. As of December 31, 1993, Blockbuster owned
approximately 19.1% of the outstanding shares of common stock of
Discovery Zone, Inc.
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("Discovery Zone"). Discovery Zone owns, operates and franchises
indoor recreational facilities for children ("Discovery Zone FunCenters").
Blockbuster currently operates 47 Discovery Zone facilities as a franchisee of
Discovery Zone and has rights to develop additional Discovery Zone
facilities, directly and in a joint venture with Discovery Zone.
Conversion of the Blockbuster Common
Stock.................................... At the Blockbuster Effective Time, each outstanding share of
Blockbuster Common Stock (other than shares of Blockbuster Common
Stock owned by Viacom or any direct or indirect wholly owned
subsidiary of Viacom or of Blockbuster and other than shares of
Blockbuster Common Stock held by stockholders who have demanded
and perfected appraisal rights, if available, under the DGCL) will
be converted into the right to receive (i) 0.08 of a share of
Viacom Class A Common Stock, (ii) 0.60615 of a share of Viacom
Class B Common Stock and (iii) up to an additional 0.13829 of a
share of Viacom Class B Common Stock, with such number of shares
depending on market prices of Viacom Class B Common Stock during
the year following the Blockbuster Effective Time, evidenced by
one variable common right (a "VCR" and, collectively, the
"Blockbuster Merger Consideration").
Variable Common Rights..................... The VCRs represent the right to receive shares of Viacom Class B
Common Stock under certain circumstances on the first anniversary
of the Blockbuster Effective Time (the "VCR Conversion Date"). The
number of shares of Viacom Class B Common Stock into which the
VCRs will convert will generally be based upon the value of Viacom
Class B Common Stock (the "Class B Value") determined during the
90 trading day period (the "VCR Valuation Period") immediately
preceding the VCR Conversion Date. The Class B Value will be equal
to the average closing price of a share of Viacom Class B Common
Stock during the 30 consecutive trading days in the VCR Valuation
Period which yields the highest average closing price of a share
of Viacom Class B Common Stock. In the event that the Class B
Value is more than $40 per share but less than $48 per share, each
VCR will convert into 0.05929 of a share of Viacom Class B Common
Stock on the VCR Conversion Date. If the Class B Value is $40 per
share or below, the number of shares of Viacom Class B Common
Stock into which each VCR will convert on the VCR Conversion Date
will increase ratably to the maximum of 0.13829 of a share of
Viacom Class B Common Stock, which will occur if the Class B Value
is $36 per share or below. If the Class B Value is $48 per share
or above, the number of shares of Viacom Class B Common Stock into
which the VCR will convert on the VCR Conversion Date will
decrease ratably to zero, which will occur if the Class B Value is
$52 per share or above.
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Notwithstanding the calculation in the above paragraph, the number
of shares of Viacom Class B Common Stock into which each VCR will
convert on the VCR Conversion Date will not exceed 0.05929 of a
share of Viacom Class B Common Stock if the average of the closing
prices for a share of Viacom Class B Common Stock exceeds $40 per
share during any 30 consecutive trading day period following the
Blockbuster Effective Time and prior to the VCR Conversion Date.
In the event that during any such period such average price
exceeds $52 per share, the VCRs will terminate and have no value
and holders thereof will have no further rights with respect to
the VCRs. The dollar amounts are subject to certain downward
adjustments in connection with substantial declines in the
Standard & Poor's 400 Index. Certain days are not included as
"trading days" if the number of shares of Viacom Class B Common
Stock traded on such days is below specified levels.
CERTAIN CONSIDERATIONS Stockholders of Viacom and Paramount should carefully evaluate the
matters set forth under "Certain Considerations." Factors to be
considered, among other things, include the potential for
fluctuations in the value of the Paramount Merger Consideration.
Paramount stockholders should also consider that, following
consummation of the Paramount Merger and the Mergers, voting
control of the combined company will be held by a single
stockholder (although certain provisions of the Paramount Merger
Agreement and the Blockbuster Merger Agreement restrict the
ability of certain large stockholders from engaging in going
private transactions). Paramount stockholders should also consider
the total indebtedness of Viacom after the Paramount Merger and
the Mergers, including the maturity of such debt. Finally,
stockholders should consider the changing competitive environment
of the entertainment and telecommunications industries and the
consummation of the Blockbuster Merger.
MANAGEMENT AFTER THE MERGERS
Executive Officers......................... Sumner M. Redstone, currently the Chairman of the Board of Viacom
and Paramount, will remain Chairman of the Board of the combined
company. Assuming consummation of the Blockbuster Merger, H. Wayne
Huizenga, currently the Chairman of the Board and Chief Executive
Officer of Blockbuster and a Director of Viacom and Paramount,
will become Vice Chairman of the combined company. Frank J.
Biondi, Jr., currently President, Chief Executive Officer and
Director of Viacom and Paramount, will remain President, Chief
Executive Officer of the combined company.
Directors.................................. At the Viacom Annual Meeting, holders of Viacom Class A Common
Stock will consider and vote upon the election of 10 directors.
FINANCIAL MATTERS AFTER THE MERGERS
Accounting Treatment....................... The Mergers will be accounted for by Viacom under the "purchase"
method of accounting in accordance with generally accepted
accounting principles. Therefore, the
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aggregate consideration paid by Viacom in connection with the
Mergers will be allocated to both Paramount's and Blockbuster's
assets and liabilities based on their fair values, with any excess
being treated as goodwill.
The assets and liabilities and results of operations of Paramount
(adjusted for minority ownership interests from the date of the
purchase of the shares of Paramount Common Stock pursuant to the
Offer through the Paramount Effective Time) were consolidated into
the assets and liabilities and results of operations of Viacom as
of March 1, 1994. The assets and liabilities and results of
operations of Blockbuster will be consolidated into the assets and
liabilities and results of operations of Viacom subsequent to the
Blockbuster Effective Time.
Common Stock Dividend Policy After the
Paramount Merger
and the Mergers......................... It is the current intention of the Viacom Board not to pay cash
dividends on the Viacom Class A Common Stock or Viacom Class B
Common Stock following the Paramount Merger and the Mergers.
Future dividends will be determined by Viacom's Board of Directors
in light of Viacom's alternative opportunities for investment and
the earnings and financial condition of Viacom and its
subsidiaries, among other factors.
TRADEMARKS AND TRADE NAMES Viacom. The following trademarks, trade names and service marks
are used in this Proxy Statement/Prospectus and are proprietary to
Viacom:
Viacom Logo(R); MTV: MUSIC TELEVISION(R); NICKELODEON(R); NICK AT
NITE(R); MTV EUROPETM; MTV LATINOTM; NICKELODEON UKTM; VH-1/VIDEO
HITS ONE(R); SHOWTIME(R); THE MOVIE CHANNELTM; FLIXTM; SHOWTIME
SATELLITE NETWORKSTM; SETTM PAY PER VIEW; THE REN & STIMPY SHOWTM;
RUGRATS(R); NICKTOONS(R); DOUGTM; BEAVIS & BUTT-HEADTM; ROCKO'S
MODERN LIFETM; DRACULA UNLEASHEDTM; and UNPLUGGEDTM.
Paramount. The trademarks and trade names used in this Proxy
Statement/Prospectus in connection with Paramount and its
businesses are proprietary or licensed to Paramount or its
subsidiaries.
Blockbuster. The following trademarks and trade names are used in
this Proxy Statement/Prospectus and are proprietary to
Blockbuster:
BLOCKBUSTER(R); BLOCKBUSTER VIDEO(R); BLOCKBUSTER ENTERTAINMENTTM;
MUSIC PLUS(R) and design; SOUND WAREHOUSE(R); TRACKS
MUSIC-VIDEO(R) and design; TURTLE'S(R); VIDEOTOWNE
ENTERTAINMENT(R) and design; RECORD BAR(R); and RHYTHM AND
VIEWS(R) and design.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
VIACOM
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
The following table sets forth certain selected historical consolidated
financial data of Viacom and has been derived from and should be read in
conjunction with the audited consolidated financial statements of Viacom,
including the notes thereto, and the unaudited interim consolidated financial
statements of Viacom, including the notes thereto, which are incorporated by
reference in this Proxy Statement/Prospectus. See "Incorporation of Certain
Documents by Reference." The notes to the audited consolidated financial
statements and unaudited interim consolidated financial statements disclose,
among other matters, certain business acquisitions and dispositions, certain
other transactions, and accounting changes. Unaudited interim data for the three
months ended March 31, 1994 and 1993 reflect, in the opinion of management of
Viacom, all adjustments (consisting only of normal recurring adjustments, except
for the merger-related charges associated with the Paramount Merger) considered
necessary for a fair presentation of such data. Results of operations for the
three months ended March 31, 1994 are not necessarily indicative of results
which may be expected for any other interim or annual period.
<TABLE><CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1994(a) 1993 1993(b) 1992(c) 1991 1990 1989(d)
--------- --------- --------- --------- --------- --------- ---------
RESULTS OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............................... $ 878.4 $ 470.7 $ 2,004.9 $ 1,864.7 $ 1,711.6 $ 1,599.6 $ 1,436.2
Earnings (loss) from operations........ (300.2) 90.2 385.0 347.9 312.2 223.8 144.7
Earnings (loss) before income taxes.... (352.3) 102.1 301.8 155.6 8.3 (70.4) 144.9
Net earnings (loss) before
extraordinary items and cumulative
effect of change in accounting
principle.............................. (431.6) 70.6 169.5 66.1 (46.6) (89.8) 131.1
Net earnings (loss).................... (431.6) 81.0 171.0 49.0 (49.7) (89.8) 131.1
Net earnings (loss) attributable to
common stock......................... $ (454.1) $ 81.0 $ 158.2 $ 49.0 $ (49.7) $ (89.8) $ 113.6
Net earnings (loss) per common share:
Net earnings (loss) before
extraordinary items and cumulative
effect of change in accounting
principle.......................... $ (3.59) $ .59 $ 1.30 $ .55 $ (.41) $ (.84) $ 1.06
Extraordinary items.................. -- -- (.07) (.14) (.03) -- --
Cumulative effect of change in
accounting principle............... -- .08 .08 -- -- -- --
Net earnings (loss).................. $ (3.59) $ .67 $ 1.31 $ .41 $ (.44) $ (.84) $ 1.06
RATIO OF EARNINGS TO FIXED CHARGES..... (e) 3.2x 2.8x 1.8x 1.0x (e) 1.4x
</TABLE>
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AT MARCH
31, AT DECEMBER 31,
----------- -----------------------------------------------------
1994 1993 1992 1991 1990 1989
----------- --------- --------- --------- --------- ---------
BALANCE SHEET DATA:
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Total assets................................. $16,336.2 $ 6,416.9 $ 4,317.1 $ 4,188.4 $ 4,027.9 $ 3,753.0
Total debt, including current
maturities................................. 7,267.1 2,433.3 2,397.0 2,321.0 2,537.3 2,283.2
Stockholders' equity......................... 3,510.4 2,718.1 756.5 699.5 366.2 455.9
Book value per common share.................. $ 11.92 $ 7.60 $ 6.28 $ 5.82 $ 3.43 $ 4.27
</TABLE>
See notes to selected historical consolidated financial data of Viacom.
17
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NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF VIACOM
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(a) Results of operations for the first quarter of 1994 reflect the results of Paramount for the month of March
and merger-related charges of $332.1 million which principally relate to adjustments of programming assets
based upon new management strategies and additional programming sources resulting from the merger with
Paramount.
(b) During the first quarter of 1993, Viacom adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," on a prospective basis and recognized a cumulative benefit from a change in
accounting principle of $10.3 million.
As part of the settlement of the Time Warner antitrust lawsuit, Viacom sold the stock of Viacom Cablevision
of Wisconsin, Inc. to Warner Communications Inc., effective January 1, 1993, resulting in a pre-tax gain of
approximately $55 million.
During the third quarter of 1993, Viacom International recognized an after-tax extraordinary loss from the
early extinguishment of debt of $8.9 million (net of a tax benefit of approximately $6.1 million) related to
the redemption, on July 15, 1993, of the $298 million principal amount outstanding of the 11.8% Senior
Subordinated Notes.
(c) Results of operations for the year ended December 31, 1992 reflect a reserve for litigation of approximately
$33 million related to a summary judgment against Viacom in a dispute with CBS Inc. Additionally, a gain of
approximately $35 million related to the Time Warner antitrust lawsuit was recognized in the third quarter of
1992.
Results of operations for the year ended December 31, 1992 also include an after-tax extraordinary loss of
$17.1 million (net of a tax benefit of $11.3 million) from the early extinguishment of the 11.5% Senior
Subordinated Reset Notes and 14.75% Senior Subordinated Discount Debentures.
(d) The results of operations for the year ended December 31, 1989 reflect a pre-tax gain of $313.1 million on
the sale of the Long Island and Cleveland cable systems.
(e) Earnings of Viacom were insufficient to cover fixed charges. Additional earnings required to cover fixed
charges of Viacom were $343.6 million and $66.2 million for the three months ended March 31, 1994 and the
year ended December 31, 1990, respectively.
Certain Acquisitions and Dispositions
In April 1994, Viacom sold its one-third partnership interest in LIFETIME for approximately $317.6 million.
Pursuant to the Offer, on March 11, 1994, Viacom completed its purchase of 61,657,432 shares of Paramount
Common Stock, constituting a majority of the shares outstanding, at a price of $107 per share in cash.
On August 30, 1991, Viacom increased its interest in MTV Europe to 100% through the purchase of the 50.01%
interest held by an affiliate of Mirror Group Newspapers. As consideration for the purchase, which was valued
at approximately $65 million, Viacom issued 2,210,884 shares of Viacom Class B Common Stock.
During 1990, Viacom purchased five radio stations for approximately $121.3 million in the aggregate. These
stations included: KOFY-FM (now KSRY-FM), San Francisco, California; KLRS-FM (now KSRI-FM), Santa Cruz/San
Jose, California; KJOI-FM (now KYSR-FM), Los Angeles, California; and KHOW-AM and KSYY-FM (now KHOW-FM),
Denver, Colorado (which were exchanged for KNDD-FM, Seattle, Washington during 1992).
Cash Dividends
Viacom has not declared cash dividends with respect to the Viacom Common Stock for any of the periods
presented.
Viacom Class B Common Stock
Pursuant to the Blockbuster Subscription Agreement, on March 10, 1994, Viacom sold 22,727,273 shares of
Viacom Class B Common Stock to Blockbuster at a price of $55.00 per share.
Cancellation of Series A Preferred Stock and Viacom Class B Common Stock Owned by Blockbuster
If the Blockbuster Merger is consummated, the Series A Preferred Stock and Viacom Class B Common Stock then
owned by Blockbuster will be cancelled and will no longer be outstanding.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
PARAMOUNT
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following table sets forth certain selected historical consolidated
financial data of Paramount and has been derived from and should be read in
conjunction with the audited consolidated financial statements of Paramount,
including the notes thereto, and the unaudited interim consolidated financial
statements of Paramount, including the notes thereto, which are incorporated by
reference in this Proxy Statement/Prospectus. See "Incorporation of Certain
Documents by Reference." The notes to the audited consolidated financial
statements and unaudited interim consolidated financial statements disclose,
among other matters, certain business acquisitions and dispositions, certain
other transactions and accounting changes. Unaudited interim data for the nine
months ended January 31, 1994 and 1993 and for the six months ended April 30,
1992 reflect, in the opinion of management of Paramount, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of such data. Results of operations for the six months ended
April 30, 1993 and the interim nine months ended January 31, 1994 are not
necessarily indicative of results which may be expected for any other interim or
annual period. In 1993, Paramount changed its fiscal year end from October 31 to
April 30. In 1994, Paramount caused its fiscal period to be the eleven month
period ended March 31, 1994. Subsequently, Paramount's fiscal year end will be
December 31 to conform with that of Viacom.
<TABLE><CAPTION>
NINE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, APRIL 30, YEAR ENDED OCTOBER 31,
-------------------- -------------------- ------------------------------------------
1994(a) 1993 1993(b) 1992 1992 1991(c) 1990 1989(d)
--------- --------- --------- --------- --------- --------- --------- ---------
RESULTS OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.............................. $ 3,757.0 $ 3,210.1 $ 1,898.1 $ 1,998.5 $ 4,264.9 $ 3,895.4 $ 3,869.0 $ 3,391.6
Earnings (loss) from operations....... 298.0 320.1 (10.1) 77.8 396.1 157.8 304.2 192.9
Earnings (loss) from continuing
operations before income taxes...... 277.8 327.4 (16.8) 68.7 397.3 179.7 381.0 19.1
Net earnings (loss) from continuing
operations before extraordinary item
and cumulative effect of changes in
accounting principles................. 180.6 225.6 (9.1) 48.7 274.2 127.6 264.4 17.3
Net earnings (loss)................... $ 180.6 $ 149.9 $ (76.0) $ 48.7 $ 265.4 $ 127.6 $ 264.4 $ 1,414.7
Net earnings (loss) per share:
Net earnings (loss) from continuing
operations before extraordinary
item and cumulative effect of
changes in accounting
principles........................ $ 1.50 $ 1.90 $ (.08) $ .41 $ 2.31 $ 1.08 $ 2.20 $ .14
Discontinued operations............. -- -- -- -- -- -- -- 12.12
Extraordinary item.................. -- (.07) -- -- (.08) -- -- --
Cumulative effect of changes in
accounting principles............. -- (.57) (.57) -- -- -- -- (.48)
Net earnings (loss)................. $ 1.50 $ 1.26 $ (.65) $ .41 $ 2.23 $ 1.08 $ 2.20 $ 11.78
Cash dividends declared per common
share............................... $ .60 $ .60 $ .40 $ .375 $ .775 $ .70 $ .70 $ .70
<CAPTION>
1988
---------
<S> <C>
RESULTS OF OPERATIONS DATA:
Revenues.............................. $ 3,055.9
Earnings (loss) from operations....... 375.5
Earnings (loss) from continuing
operations before income taxes...... 268.7
Net earnings (loss) from continuing
operations before extraordinary item
and cumulative effect of changes in
accounting principles................. 152.8
Net earnings (loss)................... $ 384.7
Net earnings (loss) per share:
Net earnings (loss) from continuing
operations before extraordinary
item and cumulative effect of
changes in accounting
principles........................ $ 1.27
Discontinued operations............. 1.94
Extraordinary item.................. --
Cumulative effect of changes in
accounting principles................. --
Net earnings (loss)................. $ 3.21
Cash dividends declared per common
share................................. $ .675
</TABLE>
<TABLE><CAPTION>
AT JANUARY AT APRIL
31, 30, AT OCTOBER 31,
------------ ----------- -----------------------------------------------------
1994 1993 1992 1991 1990 1989 1988
------------ ----------- --------- --------- --------- --------- ---------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets............... $ 7,416.8 $ 6,874.8 $ 7,057.0 $ 6,654.7 $ 6,541.0 $ 7,060.0 $ 5,378.1
Long-term debt, including
current maturities....... 1,010.7 817.1 822.1 718.2 733.8 744.4 1,507.5
Stockholders' equity....... 4,186.8 3,902.1 4,015.5 3,854.8 3,783.8 3,666.8 2,266.2
Book value per common
share.................... $ 34.35 $ 33.01 $ 34.19 $ 32.73 $ 32.24 $ 30.56 $ 19.50
</TABLE>
See notes to selected historical consolidated financial data of Paramount.
19
<PAGE>
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PARAMOUNT
Effective May 1, 1993, Paramount adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes," by restating its
prior period financial statements beginning November 1, 1988. The cumulative
effect of this accounting change was a charge of $56.5 million, which is
included in net earnings for the year ended October 31, 1989.
<TABLE>
<S> <C>
(a) Reflects operating losses at USA Networks, Paramount's 50%-owned cable networks, due largely to a $78 million
pre-tax charge, the majority of which was recorded in December 1993, to adjust the carrying value of certain
broadcast rights to net realizable value because of the under performance of certain series programming of
which Paramount recorded its share.
</TABLE>
<TABLE>
<S> <C>
(b) Includes an after-tax charge of $26.0 million, related to the write-down to net realizable value of certain
Publishing operations real estate, expected to be sold, and a provision for relocation costs in connection
with Paramount's planned move of its Publishing operations and Paramount's corporate headquarters.
</TABLE>
<TABLE>
<S> <C>
Effective November 1, 1992, Paramount adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." Paramount has elected to record the cumulative effect of the accounting change
as a charge against income as of November 1, 1992, resulting in a one-time charge of $66.9 million, net of
income taxes of $34.5 million.
</TABLE>
<TABLE>
<S> <C>
(c) Net earnings for the year ended October 31, 1991 includes a $35.4 million after-tax charge, the majority of
which was related to a provision for write-downs of certain motion picture and television development
commitments and entertainment reorganization costs.
</TABLE>
<TABLE>
<S> <C>
(d) During the year ended October 31, 1989, Paramount completed a major reevaluation of its Publishing business
and, as a result, recorded an $84.3 million after-tax charge, a portion of which was related to the
write-down of obsolete inventory and the carrying value of pre-publication costs to reflect a more
conservative estimate of the life cycle of various publishing products. Further, this charge included
provisions related to certain royalty advances, book returns and capitalized database costs, as well as a
charge related to a restructuring plan to modify certain publishing systems and other adjustments to the
carrying value of certain assets and liabilities on Publishing's balance sheet.
</TABLE>
<TABLE>
<S> <C>
Includes an after-tax gain of approximately $1.2 billion on the sale of Associates First Capital Corporation,
Paramount's former consumer/commercial finance business. In addition, Paramount recorded an after-tax charge
of $30.8 million to provide for additional costs applicable to certain operations previously discontinued.
Earnings for fiscal 1989 also include an after-tax charge of $48.3 million for costs incurred in Paramount's
bid to acquire Time Incorporated. In addition, in fiscal 1989 Paramount sold Prentice Hall Information
Services and Prentice Hall Information Network, two units of its Publishing operations, resulting in an
after-tax gain of $7.4 million.
</TABLE>
<TABLE>
<S> <C>
In December 1988, Paramount completed the sale of a 50% interest in its domestic motion picture theater
operations for approximately half of Paramount's purchase price. The results for fiscal 1989 reflect the gain
on this sale of $5.6 million, net of income taxes of $3.3 million.
</TABLE>
Certain Acquisitions and Dispositions
<TABLE>
<S> <C>
In February 1994, Paramount acquired Macmillan Publishing Company and certain other publishing assets of
Macmillan, Inc. (together, "Macmillan") for approximately $553 million (the "Macmillan Acquisition").
</TABLE>
<TABLE>
<S> <C>
In September 1993, Paramount purchased television station WKBD-TV in Detroit from Cox Enterprises Inc. for
approximately $105 million.
</TABLE>
<TABLE>
<S> <C>
In May 1993, Paramount purchased the remaining 80% it did not own of Canada's Wonderland, Inc., later renamed
Paramount Canada's Wonderland, Inc., a Canadian theme park, for approximately $52 million.
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
In August and October 1992, Paramount acquired Kings Entertainment Company and Kings Island Company,
respectively, later renamed Paramount Parks, which own and operate regional theme parks, for a total of
approximately $400 million.
</TABLE>
<TABLE>
<S> <C>
In November 1991, Paramount acquired Macmillan Computer Publishing, later renamed Prentice Hall Computer
Publishing, a leading publisher of personal computer and related technical books, for approximately $158
million.
</TABLE>
<TABLE>
<S> <C>
In March 1990, Paramount acquired Computer Curriculum Corporation, which develops and markets computer-based
learning systems, for approximately $75 million.
</TABLE>
<TABLE>
<S> <C>
In December 1989, Paramount acquired a preferred and common stock equity interest in Paramount Stations Group
("PSG"), formerly TVX Broadcast Group Inc., which owns and operates independent television stations, for
approximately $110 million. Paramount also acquired PSG debt obligations for approximately $34 million. In
April 1990, Paramount was granted the right by the FCC to assume control of PSG. Paramount did so by
converting preferred stock into common stock and, consequently, began reflecting its operations on a
consolidated basis. In July and October 1990, Paramount purchased additional shares of PSG stock for $3.5
million and $4.3 million, respectively. In February 1991, Paramount, through a merger, acquired the remaining
outstanding shares of PSG for approximately $62 million.
</TABLE>
<TABLE>
<S> <C>
In October 1989, Paramount sold Associates First Capital Corporation, its former consumer/commercial finance
business, for $3.35 billion. Paramount realized net proceeds of approximately $2.6 billion and reported a
gain of approximately $1.2 billion, net of income taxes of $763.4 million. In addition, in fiscal 1989
Paramount sold Prentice Hall Information Services and Prentice Hall Information Network, two units of its
Publishing operations, resulting in an after-tax gain of $7.4 million.
</TABLE>
21
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA OF PARAMOUNT
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following selected unaudited pro forma financial data of Paramount for
the two months ended February 28, 1994 and the twelve months ended January 31,
1994 gives effect to, on a purchase accounting basis, (i) the Macmillan
Acquisition, (ii) the acquisition of television station WKBD-TV in Detroit
("WKBD") in September 1993 and (iii) the acquisition of the remaining 80%
interest in Paramount Canada's Wonderland ("PCW") theme park in May 1993. The
unaudited pro forma results of operations data for the two months ended February
28, 1994 was prepared based upon historical consolidated statements of
operations of Paramount and Macmillan for the two months ended February 28,
1994. The unaudited pro forma Paramount results of operations data for the
twelve months ended January 31, 1994 was prepared based upon the historical
consolidated statements of operations of (i) Paramount for the nine months ended
January 31, 1994 and three months ended April 30, 1993 combined, (ii) Macmillan
for the twelve months ended December 31, 1993, (iii) WKBD for the seven months
ended August 31, 1993 and (iv) PCW for the three months ended April 30, 1993.
Financial information of WKBD and PCW subsequent to their acquisition is
included in the Paramount historical financial information. The unaudited pro
forma results of operations data present the transactions as if they had
occurred at the beginning of each period presented. The selected unaudited pro
forma financial data was derived from, and should be read in conjunction with,
the Unaudited Pro Forma Condensed Consolidated Financial Statements and the
notes thereto appearing elsewhere in this Proxy Statement/Prospectus. See
"Paramount, Macmillan and Other Businesses Acquired Unaudited Pro Forma
Condensed Consolidated Financial Statements." The unaudited pro forma data are
not necessarily indicative of the results of operations that would have occurred
if the aforementioned transactions had been in effect at the beginning of each
of the periods presented nor are they necessarily indicative of future operating
results.
<TABLE><CAPTION>
TWO MONTHS TWELVE MONTHS
ENDED FEBRUARY 28, ENDED JANUARY 31,
1994 1994
------------------- ------------------
<S> <C> <C>
Revenues................................................................. $ 717.2 $ 5,024.0
Earnings (loss) from operations.......................................... (54.3) 299.5
Net earnings (loss) before cumulative effect of change in accounting
principle................................................................ (55.7) 153.1
Net earnings (loss) per common share before cumulative effect of change
in accounting principle.................................................. $ (.46) $ 1.28
</TABLE>
22
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
BLOCKBUSTER
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following table sets forth certain selected historical consolidated
financial data of Blockbuster and has been derived from and should be read in
conjunction with the audited consolidated financial statements of Blockbuster,
including the notes thereto, and the unaudited interim consolidated financial
statements of Blockbuster, including the notes thereto, which are incorporated
by reference in this Proxy Statement/Prospectus. See "Incorporation of Certain
Documents by Reference." The notes to the audited consolidated financial
statements and unaudited interim consolidated financial statements disclose,
among other matters, certain business acquisitions and certain other
transactions. Unaudited interim data for the three months ended March 31, 1994
and 1993 reflect, in the opinion of management of Blockbuster, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of such data. Results of operations for the three months ended
March 31, 1994 are not necessarily indicative of results which may be expected
for any other interim or annual period.
<TABLE><CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------------------
1994 1993 1993(a) 1992(b) 1991(c) 1990 1989(d)
--------- --------- ---------- --------- --------- --------- ---------
RESULTS OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues......................................... $ 696.5 $ 433.4 $ 2,227.0 $ 1,315.8 $ 961.6 $ 699.7 $ 421.9
Earnings from operations......................... 119.6 76.9 423.0 242.9 161.1 122.1 76.9
Earnings before income taxes..................... 115.2 70.4 389.8 231.2 141.0 103.7 67.5
Net earnings..................................... $ 72.6 $ 44.7 $ 243.6 $ 148.3 $ 89.1 $ 65.9 $ 42.7
Net earnings per share--assuming full
dilution(e)...................................... $ .29 $ .22 $ 1.10 $ .76 $ .51 $ .39 $ .26
Cash dividends declared per common share......... $ .025 $ .02 $ .095 $ .06 -- -- --
</TABLE>
<TABLE><CAPTION>
AT DECEMBER 31,
------------------------------------------------------
AT MARCH 31,
1994 1993 1992 1991 1990 1989
-------------- ---------- --------- --------- --------- ---------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C>
Total assets.................................... $ 4,466.7 $ 3,521.0 $ 1,540.7 $ 893.3 $ 702.1 $ 468.9
Total debt, including current maturities........ 1,997.0 612.6 373.5 214.2 253.9 178.0
Stockholders' equity............................ 1,854.3 2,123.4 787.3 480.5 319.4 210.2
Book value per common share..................... $ 7.45 $ 8.58 $ 3.98 $ 2.84 $ 2.04 $ 1.39
</TABLE>
SEE NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BLOCKBUSTER.
23
<PAGE>
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF
BLOCKBUSTER
Financial data for all periods presented is restated to reflect
Blockbuster's merger with WJB Video Limited Partnership and certain of its
affiliates ("WJB") in August 1993, which was accounted for under the pooling of
interests method of accounting.
<TABLE>
<S> <C>
(a) In April 1993, Blockbuster acquired a majority of Spelling Entertainment's outstanding common stock. In
November 1993, Blockbuster acquired all of the outstanding capital stock of Super Club Retail Entertainment
Corporation and subsidiaries ("Super Club"). These transactions were accounted for under the purchase method
of accounting and, accordingly, the results of operations of Spelling Entertainment and Super Club subsequent
to their acquisition are included in Blockbuster's consolidated financial statements. At December 31, 1993,
Blockbuster owned 45,658,640 shares of common stock of Spelling Entertainment, representing approximately
70.5% of its outstanding shares.
(b) In February 1992, Blockbuster acquired substantially all of the outstanding ordinary shares of Cityvision plc
("Cityvision"). The transaction was accounted for under the purchase method of accounting and, accordingly,
the results of operations of Cityvision subsequent to that time are included in Blockbuster's consolidated
financial statements. In November 1992, Blockbuster acquired all of the outstanding common stock of Sound
Warehouse, Inc. (together with its subsidiary, "Sound Warehouse") and Show Industries, Inc. ("Show
Industries"). These transactions were accounted for under the purchase method of accounting and, accordingly,
the results of operations of Sound Warehouse and Show Industries subsequent to that time are included in
Blockbuster's consolidated financial statements.
(c) Effective April 1991, Blockbuster acquired all of the outstanding shares of capital stock of Erol's Inc.
("Erol's"). The transaction was accounted for under the purchase method of accounting and, accordingly, the
results of operations of Erol's subsequent to that time are included in Blockbuster's consolidated financial
statements.
(d) In January 1989, a wholly owned subsidiary of Blockbuster was merged into Major Video Corp. ("Major Video").
In August 1989, Blockbuster acquired Video Superstore Master Limited Partnership ("VSMLP"), then its largest
franchise owner. These transactions were accounted for under the pooling of interests method of accounting.
Accordingly, financial data has been restated as if Blockbuster, Major Video and VSMLP had operated as one
entity since inception.
(e) Net earnings per share has been adjusted to reflect two-for-one splits of Blockbuster Common Stock in May
1989 and March 1991.
</TABLE>
24
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA OF
BLOCKBUSTER
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following selected unaudited pro forma financial data of Blockbuster for
the three months ended March 31, 1994 gives effect to the $1.25 billion
investment in Viacom and related interest expense incurred on borrowings used
to finance such investment. The following selected financial data of Blockbuster
for the year ended December 31, 1993, gives effect to (i) the acquisition of
Super Club, (ii) the acquisition of a majority of the outstanding common stock
of Spelling Entertainment, (iii) a $600 million and a $1.25 billion investment
in Viacom and related borrowings to finance such investments and (iv) the sale
of 14.6 million shares of Blockbuster common stock. All of the aforementioned
acquisitions were accounted for under the purchase method of accounting. The
unaudited pro forma statement of operations data for the three months ended
March 31, 1994 was prepared based upon the statement of operations of
Blockbuster for the three months ended March 31, 1994. The unaudited pro forma
statement of operations data for the year ended December 31, 1993 was prepared
based upon the results of operations of Blockbuster for the year ended December
31, 1993, Super Club for the eleven months ended November 20, 1993 and
Spelling Entertainment for the three months ended March 31, 1993. Financial
information subsequent to the acquisition of the majority of the outstanding
common stock of Spelling Entertainment and the acquisition of Super Club is
included in the Blockbuster historical financial information. The unaudited pro
forma statements of operations data present the pro forma transactions listed
above as if they had occurred at the beginning of the period presented. The
balance sheet of Blockbuster at March 31, 1994 reflects the pro forma
transactions listed above. The selected unaudited pro forma financial data was
derived from, and should be read in conjunction with, the Unaudited Pro Forma
Condensed Consolidated Statements of Operations of Blockbuster and the notes
thereto appearing elsewhere in this Proxy Statement/Prospectus. See
"Blockbuster, Super Club and Spelling Entertainment Unaudited Pro Forma
Condensed Consolidated Statement of Operations." The unaudited pro forma
financial data is not necessarily indicative of the results of operations that
would have occurred if the aforementioned transactions had been in effect at the
beginning of the periods indicated nor are they necessarily indicative of future
operating results or financial position.
<TABLE><CAPTION>
THREE
MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1994 1993
----------- -------------
RESULTS OF OPERATIONS DATA:
<S> <C> <C>
Revenues.............................................................................. $ 696.5 $ 2,595.2
Earnings from operations.............................................................. 119.6 435.6
Net earnings from continuing operations............................................... 66.0 225.3
Net earnings per share from continuing operations--assuming full dilution............. $ 0.26 $ 0.92
</TABLE>
25
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF
VIACOM-PARAMOUNT/THE COMBINED COMPANY
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
The following selected unaudited pro forma combined financial data gives
effect to (i) the Paramount Merger, which will be accounted for under the
purchase method of accounting, (ii) the elimination of all of the outstanding
Paramount Common Stock, (iii) the issuance of the Paramount Merger
Consideration, (iv) the acquisitions by Paramount described under "Selected
Unaudited Pro Forma Financial Data of Paramount," (v) the Blockbuster Merger,
which will be accounted for under the purchase method of accounting, (vi) the
elimination of all of the outstanding Blockbuster Common Stock, (vii) the
elimination of all the Series A Preferred Stock and Viacom Class B Common Stock
held by Blockbuster, (viii) the issuance of the Blockbuster Merger
Consideration, (ix) the pro forma events of Blockbuster described under
"Selected Unaudited Pro Forma Financial Data of Blockbuster" and (x) the sale of
Viacom's one-third partnership interest in LIFETIME (items (i) through (iv)
being, collectively, the "Paramount Pro Forma Events," items (v) through (ix)
being, collectively, the "Blockbuster Pro Forma Events," and, together with the
Paramount Pro Forma Events and item (x), the "Pro Forma Events"), as if such
events occurred at the beginning of the period presented for results of
operations data. The unaudited pro forma statement of operations data for the
three months ended March 31, 1994 was prepared based upon the statements of
operations of Viacom and Blockbuster for the three months ended March 31, 1994
and of Paramount for the two months ended February 28, 1994. The unaudited pro
forma statements of operations data for the year ended December 31, 1993 was
prepared based upon Viacom and Blockbuster for the year ended December 31, 1993
and of Paramount for the nine months ended January 31, 1994 combined with the
three months ended April 30, 1993. The following selected unaudited pro forma
combined balance sheet data was prepared based upon the balance sheet data of
Viacom and Blockbuster at March 31, 1994. Financial information for Paramount
subsequent to the Offer is included in Viacom's historical information. Such
unaudited pro forma balance sheet data give effect to the Pro Forma Events as if
they occurred on March 31, 1994. The selected unaudited pro forma combined
financial data was derived from, and should be read in conjunction with, the
unaudited pro forma combined condensed financial statements and the notes
thereto appearing elsewhere in this Proxy Statement/Prospectus. See "Unaudited
Pro Forma Combined Condensed Financial Statements." The unaudited pro forma data
are not necessarily indicative of the combined results of operations or
financial position that would have occurred if the Paramount Pro Forma Events or
the Pro Forma Events, as the case may be, had been in effect at the beginning of
the period or on the date indicated nor are they necessarily indicative of
future operating results or financial position of Viacom-Paramount or the
combined company.
<TABLE><CAPTION>
VIACOM-PARAMOUNT* COMBINED COMPANY**
----------------------------------- -----------------------------------
THREE MONTHS THREE MONTHS
ENDED OR AT YEAR ENDED ENDED OR AT YEAR ENDED
MARCH 31, 1994 DECEMBER 31, 1993 MARCH 31, 1994 DECEMBER 31, 1993
--------------- ------------------ ---------------
RESULTS OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
Revenues............................. $ 1,595.6 $ 7,028.9 $ 2,292.1 $ 9,624.1
Earnings (loss) from operations...... (48.5) 535.5 47.2 875.7
Earnings (loss) before extraordinary
item, cumulative effect of change
in accounting principle and
preferred stock dividend
requirements....................... (337.7) 4.5 (300.4) 116.0
Earnings (loss) attributable to
common stock before extraordinary
item and cumulative effect of
change in accounting principle..... (360.2) (85.5) (315.4) 56.0
Primary earnings (loss) per common
share before extraordinary item
and cumulative effect of change in
accounting principle............... $ (1.79) $ (0.43) $ (0.89) $ 0.14
Ratio of earnings to fixed charges... (a) 1.3x (a) 1.5x
Ratio of earnings to combined fixed
charges and preferred stock
dividends.......................... (b) (b) (b) 1.4x
BALANCE SHEET DATA:
Total assets......................... $ 17,888.1 NA $ 24,663.2 NA
Long-term debt, including current
maturities........................... 8,132.0 NA 10,129.0 NA
Stockholders' equity:
Preferred.......................... 1,800.0 NA 1,200.0 NA
Common............................. 3,708.3 NA 8,471.0 NA
Book value per common share.......... $ 18.50 NA $ 22.81 NA
</TABLE>
- ---------------
(a) For the three months ended March 31, 1994, pro forma earnings of
Viacom-Paramount and the combined company were insufficient to cover
pro forma fixed charges. The additional pro forma earnings required
to cover pro forma fixed charges would have been $165.1 million for
Viacom-Paramount and $91.7 million for the combined company.
(b) Pro forma earnings of Viacom-Paramount and the combined company
were insufficient to cover pro forma combined fixed charges and
preferred stock dividends. The additional pro forma earnings required
to cover pro forma combined fixed charges and preferred stock dividends
would have been $182.7 million for Viacom-Paramount for the three months
ended March 31, 1994, $6.3 million for Viacom-Paramount for the year
ended December 31, 1993 and $103.4 million for the combined company
for the three months ended March 31, 1994.
* Gives effect only to the Paramount Pro Forma Events and item (x) described
above.
** Gives effect to all of the Pro Forma Events. See "Certain
Considerations--Consummation of the Blockbuster Merger."
26
<PAGE>
COMPARATIVE STOCK PRICES
Viacom Common Stock is listed on the AMEX. Paramount Common Stock and
Blockbuster Common Stock are listed on the NYSE. The following tables set forth,
for the periods indicated, the high and low sales prices per share of Viacom
Common Stock, Paramount Common Stock and Blockbuster Common Stock as reported on
the AMEX or the NYSE Composite Transaction Tape, as the case may be.
<TABLE><CAPTION>
VIACOM VIACOM
CLASS A CLASS B BLOCKBUSTER PARAMOUNT
COMMON STOCK(a) COMMON STOCK(a) COMMON STOCK COMMON STOCK(b)
-------------------- -------------------- -------------------- --------------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW QUARTER ENDED HIGH LOW
- -------------------- --------- --------- --------- --------- --------- --------- -------------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 1992
March 31.......... $ 37 1/4 $ 32 1/8 $ 36 1/2 $ 31 1/4 $ 15 $ 11 7/8 January 31.......... $ 43 3/8 $ 36 1/2
June 30........... 38 1/2 32 3/8 36 7/8 30 1/2 15 7/8 12 1/8 April 30............ 48 3/4 42 1/2
September 30...... 34 7/8 30 7/8 32 7/8 29 13 3/4 11 1/8 July 31............. 48 43 1/4
December 31....... 44 28 1/8 41 7/8 27 19 1/2 12 3/8 October 31.......... 46 3/8 41 1/4
1993 1993
March 31.......... $ 46 1/2 $ 37 1/2 $ 44 1/8 $ 35 1/4 $ 20 1/8 $ 15 3/4 January 31.......... $ 47 3/8 $ 41 7/8
June 30........... 52 5/8 37 1/8 49 1/2 36 21 7/8 16 3/4 April 30............ 52 5/8 45 5/8
September 30...... 67 1/2 50 1/2 61 1/4 45 3/4 30 1/8 21 3/8 July 31............. 56 5/8 49 1/2
December 31....... 66 1/2 47 60 1/2 40 3/8 34 1/4 24 1/2 October 31.......... 81 51
1994 1994
March 31.......... $ 49 3/4 $ 28 1/8 $ 45 $ 23 3/4 $ 31 3/8 $ 23 3/8 January 31.......... $ 83 1/2 $ 73 1/2
through April 30.......... 80 1/4 36 5/8
June 3, 1994...... $ 31 $ 24 1/2 $ 29 1/2 $ 21 3/4 $ 29 $ 23 7/8 through
June 3, 1994...... $ 43 3/8 $ 37 3/8
</TABLE>
- ---------------
(a) For the first through fourth quarters of 1992, NAI purchased 40,500, 19,000,
35,900 and 76,200 shares of Viacom Class A Common Stock, and 35,700, 32,100,
44,100 and 139,900 shares of Viacom Class B Common Stock, in each case
respectively. For the first through third quarters of 1993, NAI purchased
55,300, 121,800 and 113,100 shares of Viacom Class A Common Stock, and
47,600, 135,100 and 413,600 shares of Viacom Class B Common Stock, in each
case respectively. Since the end of the third quarter of 1993, NAI has not
purchased any shares of Viacom Common Stock. All purchases were made
pursuant to a publicly reported buying program initiated by NAI in August
1987 which has been designed to comply with applicable securities
regulations.
(b) Paramount purchased 1,119,500 shares of Paramount Common Stock in the open
market between August 13 and October 30, 1992 at an average price of $42.86
and with a range of $42 1/8 to $43 3/4 per share, and it also purchased
479,600 shares of Paramount Common Stock in the open market between November
2, 1992 and January 21, 1993 at an average price of $42.34 and with a range
of $41 7/8 to $43 per share. None of Viacom, NAI or Sumner M. Redstone have
made any purchases of Paramount Common Stock in the last two fiscal years of
Paramount.
On February 1, 1994, the last trading day before the announcement of the
terms of the February 4 Merger Agreement, the last sales prices of Viacom Class
A Common Stock and Viacom Class B Common Stock and Paramount Common Stock, as
reported on the AMEX and the NYSE Composite Transactions Tape, were $39 per
share, $34 1/8 per share and $79 7/8 per share, respectively.
On January 6, 1994, the last trading day before the announcement of the
Blockbuster Merger Agreement, the last sales prices of Viacom Class A Common
Stock and Viacom Class B Common Stock, Blockbuster Common Stock and Paramount
Common Stock, as reported on the AMEX and the NYSE Composite Transactions Tape,
were $47 per share, $42 3/4 per share, $29 7/8 per share and $78 1/2 per share,
respectively.
On June 3, 1994, the last trading day before the printing of this
Proxy Statement/Prospectus, the last sales prices of Viacom Class A Common Stock
and Viacom Class B Common Stock, Paramount Common Stock and Blockbuster Common
Stock, as reported on the AMEX and the NYSE Composite Transactions Tape, were
$30 5/8 per share, $28 5/8 per share, $42 5/8 per share and $28 7/8 per
share, respectively.
The market prices of Viacom Class A Common Stock, Viacom Class B Common
Stock, Paramount Common Stock and Blockbuster Common Stock are subject to
fluctuation. As a result, Viacom and Paramount stockholders are urged to obtain
current market quotations.
On March 30, 1994, there were approximately 6,912 holders of record of
Viacom Class A Common Stock and approximately 6,861 holders of record of Viacom
Class B Common Stock. On April 29, 1994, there were approximately 21,997 holders
of record of Paramount Common Stock. On February 3, 1994, there were
approximately 12,747 holders of record of Blockbuster Common Stock.
27
<PAGE>
COMPARATIVE PER SHARE DATA
Set forth below are historical earnings (loss) before extraordinary item
and cumulative effect of change in accounting principle, cash dividends declared
and book value per common share data of Viacom, Paramount and Blockbuster,
individually, and the respective unaudited pro forma per common share data for
Viacom/Paramount and the combined company. Pro forma equivalent per share
information of Paramount and Blockbuster is also presented below.
Viacom-Paramount and the combined company unaudited pro forma data gives effect
to the Paramount Pro Forma Events and Pro Forma Events, respectively, as if such
events occurred for balance sheet purposes at the balance sheet dates and for
statement of operations purposes at the beginning of the period presented.
Unaudited pro forma data for Viacom-Paramount and the combined company was
prepared based upon (i) Viacom's and Blockbuster's statement of operations and
balance sheet data for the three months ended or at March 31, 1994 and the
respective statement of operations data for the twelve months ended December 31,
1993, and (ii) Paramount's statements of operations data for the two months
ended February 28, 1994, and for the nine months ended or at January 31, 1994
and the three months ended April 30, 1993. The information set forth below
should be read in conjunction with the respective audited and unaudited
consolidated financial statements of Viacom, Paramount and Blockbuster,
including the notes thereto, and the Combined Company Unaudited Pro Forma
Combined Condensed Financial Statements appearing elsewhere in this Proxy
Statement/Prospectus.
<TABLE><CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
OR AT JANUARY 31, OR AT APRIL 30,
1994 1993
--------------------- -------------------
PARAMOUNT--HISTORICAL:
<S> <C> <C>
Earnings (loss) per share before extraordinary item and cumulative
effect of change in accounting principle.............................. $ 1.50 $ (0.08)
Cash dividends declared per common share.............................. $ 0.60 $ 0.20
Book value per common share........................................... $ 34.35 $ 33.01
</TABLE>
<TABLE><CAPTION>
THREE MONTHS
ENDED OR AT YEAR ENDED OR AT
MARCH 31, 1994 DECEMBER 31, 1993
--------------- -----------------
BLOCKBUSTER--HISTORICAL:
<S> <C> <C>
Earnings per share before extraordinary item and cumulative effect of change
in accounting principle--assuming full dilution............................... $ 0.29 $ 1.10
Cash dividends declared per common share...................................... $ 0.025 $ 0.095
Book value per common share................................................... $ 7.45 $ 8.58
VIACOM--HISTORICAL:
Earnings (loss) per share before extraordinary item and cumulative effect of
change in accounting principle................................................ $ (3.59) $ 1.30
Cash dividends declared per common share(a)................................... -- --
Book value per common share................................................... $ 11.92 $ 7.60
</TABLE>
<TABLE><CAPTION>
VIACOM-PARAMOUNT COMBINED COMPANY(f)
---------------------------------- ----------------------------------
THREE MONTHS THREE MONTHS
ENDED OR AT YEAR ENDED OR AT ENDED OR AT YEAR ENDED OR AT
MARCH 31, 1994 DECEMBER 31, 1993 MARCH 31, 1994 DECEMBER 31, 1993
--------------- ----------------- --------------- -----------------
PRO FORMA:
<S> <C> <C> <C> <C>
Earnings (loss) per share attributable to
common stock before extraordinary item and
cumulative effect of change in accounting
principle...................................... $ (1.79) $ (0.43) $ (.89) $ 0.14
Cash dividends declared per common share(a).... -- -- -- --
Book value per common share.................... $ 18.50 NA $ 22.81 NA
PARAMOUNT--PRO FORMA EQUIVALENT PER SHARE
INFORMATION:
Earnings (loss) per share attributable to
common stock before extraordinary item and
cumulative effect of change in accounting
principle(b)................................... $ (0.83) $ (0.20) $ (0.41) $ 0.06
Cash dividends declared per common share....... -- -- -- --
Book value per common share(b)................. $ 8.57 NA $ 10.57 NA
Equivalent market value(c)..................... $ 79.96 $ 79.96 $ 79.96 $ 79.96
(Footnotes on following page)
</TABLE>
28
<PAGE>
<TABLE><CAPTION>
VIACOM-PARAMOUNT COMBINED COMPANY(f)
---------------------------------- ----------------------------------
THREE MONTHS THREE MONTHS
ENDED OR AT YEAR ENDED OR AT ENDED OR AT YEAR ENDED OR AT
MARCH 31, 1994 DECEMBER 31, 1993 MARCH 31, 1994 DECEMBER 31, 1993
--------------- ----------------- --------------- -----------------
BLOCKBUSTER--PRO FORMA EQUIVALENT PER SHARE
INFORMATION:
<S> <C> <C> <C> <C>
Earnings (loss) per share attributable to common
stock before extraordinary item and cumulative
effect of change in accounting
principle(d)................................. NA NA $ (0.61) $ 0.09
Cash dividends declared per common share....... NA NA -- --
Book value per common share(d)................. NA NA $ 15.65 NA
Equivalent market value(e)..................... NA NA $ 22.20 $ 22.20
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Cash dividends declared per common share does not reflect Viacom Preferred Stock dividends paid.
(b) Paramount pro forma per share amounts were calculated assuming the issuance of 0.93065 of a share of Viacom
Class B Common Stock in exchange for each of the remaining 61.1 million shares of Paramount Common Stock
outstanding (other than shares held in the treasury of Paramount or owned by Viacom or any direct or indirect
wholly owned subsidiary of Paramount or Viacom) after consummation of the Offer. This results in stockholders
of Paramount receiving approximately 0.46 of a share in exchange for each share of Paramount Common Stock.
This factor of 0.46 is applied to the pro forma earnings and book value per common share amounts.
(c) Paramount equivalent market value was calculated by (i) applying the approximate 0.46 exchange ratio to the
closing price of the Viacom Class B Common Stock reported on the AMEX Composite Transaction Tape on March 4,
1994 and (ii) adding to such amount (x) cash paid pursuant to the Offer and (y) $17.50 principal amount of
Viacom Merger Debentures, 0.93065 of a CVR, 0.5 of a Viacom Three-Year Warrant and 0.3 of a Viacom Five-Year
Warrant to be issued by Viacom as part of the Paramount Merger Consideration for each share remaining of
Paramount Common Stock outstanding at the Paramount Effective Time. The consideration described in the
foregoing clauses (x) and (y) represents $67.68 of the equivalent market value. The estimated trading values
as of March 31, 1994 ascribed for illustrative purposes only, and based upon various assumptions and
projections, per CVR, Viacom Three-Year Warrant and Viacom Five-Year Warrant by Viacom's financial advisor,
were approximately $10, $1 and $2, respectively.
(d) Blockbuster pro forma per share amounts were calculated assuming the issuance of 0.08 of a share of Viacom
Class A Common Stock and 0.60615 of a share of Viacom Class B Common Stock in exchange for each of the
approximately 249.1 million shares of Blockbuster Common Stock outstanding as of March 31, 1994 (other than
shares owned by Viacom or any direct or indirect wholly owned subsidiary of Blockbuster or Viacom) in
accordance with the Blockbuster Merger Agreement. This exchange results in stockholders of Blockbuster
receiving approximately 0.69 of a share of the combined company in exchange for each share of Blockbuster
Common Stock. This factor of 0.69 is applied to the combined company pro forma earnings and book value per
common share amounts.
(e) Blockbuster equivalent market value was calculated by (i) applying the 0.08 and 0.60615 share exchange ratios
to the closing prices of the Viacom Class A Common Stock and Viacom Class B Common Stock, respectively and
(ii) applying the assumed exchange ratio of 0.13829 of a share of Viacom Class B Common Stock per VCR to the
closing price of Viacom Class B Common Stock. The VCR market value described in the foregoing clause (ii)
represents $3.66 of the equivalent market value. Closing prices of Viacom Class A Common Stock and Viacom
Class B Common Stock were based on closing sales prices on the AMEX Composite Transactions Tape on March 31,
1994.
(f) See "Certain Considerations--Consummation of the Blockbuster Merger."
</TABLE>
29
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to stockholders of
Viacom in connection with the solicitation of proxies by the Board of Directors
of Viacom for use at the Viacom Special Meeting to be held at the Equitable
Center, 787 Seventh Avenue (at 51st Street), New York, New York, on July 7,
1994, at 10:30 a.m., New York time, and at any adjournment or postponement
thereof.
This Proxy Statement/Prospectus is also being furnished to stockholders of
Viacom in connection with the solicitation of proxies by the Board of Directors
of Viacom for use at the Viacom Annual Meeting which is to be held immediately
following the Viacom Special Meeting at the same location.
This Proxy Statement/Prospectus is also being furnished to stockholders of
Paramount in connection with the solicitation of proxies by the Board of
Directors of Paramount for use at the Paramount Special Meeting to be held at
Hotel du Pont, 11th and Market Streets, Wilmington, Delaware, on July 6, 1994,
at 10:00 a.m., local time, and at any adjournment or postponement thereof.
This Proxy Statement/Prospectus also constitutes a prospectus of Viacom
with respect to 56,895,733 shares of Viacom Class B Common Stock, $1,069,870,865
principal amount of Viacom Merger Debentures, 56,895,733 CVRs, 30,567,739 Viacom
Three-Year Warrants and 18,340,643 Viacom Five-Year Warrants, issuable to the
holders of Paramount Common Stock in the Paramount Merger.
THIS PROXY STATEMENT/PROSPECTUS IS NOT A SOLICITATION OF PROXIES WITH
RESPECT TO, NOR A PROSPECTUS RELATING TO, THE BLOCKBUSTER MERGER. A SEPARATE
JOINT PROXY STATEMENT/PROSPECTUS OF VIACOM AND BLOCKBUSTER RELATING TO THE
BLOCKBUSTER MERGER WILL BE SENT TO STOCKHOLDERS OF VIACOM AND BLOCKBUSTER PRIOR
TO ANY CONSIDERATION OF THE BLOCKBUSTER MERGER.
BUSINESS
Viacom's principal assets are its 100% ownership of Viacom International
and its majority ownership of Paramount. Viacom International is a diversified
entertainment and communications company with operations in four principal
segments: Networks, Entertainment, Cable Television and Broadcasting. The
principal executive offices of Viacom are located at 200 Elm Street, Dedham,
Massachusetts 02026.
VIACOM NETWORKS. Viacom Networks is comprised of MTV Networks ("MTVN") and
Showtime Networks Inc. ("SNI").
MTV Networks. MTVN operates three 24-hours-a-day, advertiser-supported,
------------
basic cable services in the U.S.: MTV: MUSIC TELEVISION, VH-1/VIDEO HITS ONE,
and NICKELODEON/NICK AT NITE. Internationally, MTVN operates MTV EUROPE and MTV
LATINO. In September 1993, MTVN launched Nickelodeon UK, a joint venture with a
subsidiary of British Sky Broadcasting Limited. MTVN has licensing arrangements
covering the distribution of regionally specific program services called MTV:
MUSIC TELEVISION in Asia, Japan and Brazil.
MTV. At December 31, 1993, MTV was licensed to approximately 52.2 million
domestic cable subscribers (based on subscriber counts provided by each cable
system). According to the December 1993 sample reports issued by the A.C.
Nielsen Company (the "Nielsen Report"), MTV reached approximately 59 million
subscriber households. In addition to music videos, MTV offers regularly
scheduled youth-oriented programming such as the animated BEAVIS & BUTT-HEAD
SHOW and specials such as the Annual MTV Video Music Awards and the MTV Movie
Awards, public affairs campaigns and series such as UNPLUGGED. MTV successfully
merchandised BEAVIS & BUTT-HEAD in 1993 featuring an album released by Geffen
Records and a book published by a division of Simon & Schuster. MTV's CHOOSE OR
LOSE political awareness campaign, which included studio interviews with
candidates Bill Clinton and Al Gore, extensively promoted the registration of
hundreds of thousands of new young voters. MTV's UNPLUGGED features live
acoustical performances by artists such as Eric Clapton, Rod Stewart and 10,000
Maniacs. MTV licenses the distribution of UNPLUGGED home video versions of these
performances. MTV Productions was formed in 1993 to
30
<PAGE>
develop and produce theatrical motion pictures and television programs,
including the joint development of a theatrical motion picture based on JOE'S
APARTMENT with Geffen Pictures for distribution by Warner Bros.
Nickelodeon. At December 31, 1993, NICKELODEON was licensed to
approximately 53.4 million cable subscribers and NICK AT NITE was licensed to
approximately 53.1 million cable subscribers (based on subscriber counts
provided by each cable system). According to the Nielsen Report, NICKELODEON and
NICK AT NITE each reached approximately 60.9 million subscriber households. In
1993, NICKELODEON, the first network for kids, expanded its successful
NICKTOONS, NICKELODEON's original animated programming, with the introduction of
ROCKO'S MODERN LIFE in addition to THE REN & STIMPY SHOW, DOUG and RUGRATS.
NICKELODEON also exhibits, on Saturday nights, SNICK, its first prime-time block
of original NICKELODEON programming. MTVN, in cooperation with MCA Inc. ("MCA"),
operates NICKELODEON STUDIOS FLORIDA at Universal Studios in Orlando, Florida,
which combines state-of-the-art television production facilities with
interactive features that demonstrate the operation of NICKELODEON's studios
from a kid's perspective. In June 1993, NICKELODEON launched NICKELODEON
MAGAZINE, a bi-monthly children's magazine. In April 1993, NICKELODEON and Sony
Music entered into an agreement for Sony to manufacture and distribute
NICKELODEON audio and video products in the U.S. and Canada through its Sony
Wonder Children's label.
VH-1. At December 31, 1993, VH-1 was licensed to approximately 45.5 million
cable subscribers (based on subscriber counts provided by each cable system).
According to the Nielsen Report, VH-1 reached approximately 49.5 million
subscriber households. Created in 1985 to reach viewers aged 25 to 49, VH-1
provides music and lifestyle programming. VH-1 offers programs such as original
and acquired comedy programming including STAND-UP SPOTLIGHT and Gallagher
specials; FT: FASHION TELEVISION; and the ONE-TO-ONE series which profiles pop
artists.
MTVN has agreements with some U.S. record companies which, in exchange for
cash and advertising time, license the availability of such companies' music
videos for exhibition on MTV and on MTVN's other basic cable networks; a number
of other record companies provide MTVN with music videos in exchange for
promotional consideration only. The agreements generally provide that the videos
are available for debut by MTVN and, in some cases, that videos are subject to
exclusive periods on MTV. These record companies provide a substantial portion
of the music videos exhibited on MTV and VH-1. MTVN is currently in negotiations
for the renewal and extension of certain of its record company agreements.
Although MTVN believes that these agreements will be renewed, there can be no
assurance that the terms of such renewals will be as favorable as existing
arrangements.
A number of record companies have announced plans to launch music-based
program services in the U.S. and internationally. For example,
Telecommunications, Inc. and Bertelsman AG announced plans for a music
video/home shopping channel and Sony Corp.'s Sony Music and Time Warner Inc.'s
Time Warner Music Group are discussing the formation of a world wide music video
program service with such other major record companies as EMI Music, a unit of
Thorn EMI PLC, and Polygram.
Viacom International participates as a joint venturer in COMEDY CENTRAL.
Comedy Central. Viacom International and HBO, through a 50-50 joint
venture, operate COMEDY CENTRAL, a 24-hours-a-day, seven-days-a-week program
service targeted to audiences ranging from the ages of 18 to 34. The format
consists primarily of comedy programming, including movies, series, situation
comedies, stand-up and sketch comedy, commentary, promotions, specials, game
shows, talk shows and other original and acquired comedy programming. According
to the Nielsen Report, COMEDY CENTRAL reached approximately 30.3 million
subscriber households.
Showtime Networks. SNI operates three 24-hours-a-day, commercial-free,
-----------------
premium subscription services offered to cable television operators and other
distributors: SHOWTIME, offering theatrically released feature films, comedy
specials, dramatic series, boxing events, family programs and original movies;
THE MOVIE CHANNEL, offering feature films and related programming including film
31
<PAGE>
festivals; and FLIX, an added-value premium subscription service featuring
movies primarily from the 1960s, '70s and '80s which was launched on August 1,
1992. As of December 31, 1993, SHOWTIME, THE MOVIE CHANNEL and FLIX in the
aggregate had approximately 11.9 million subscribers.
SNI also provides special events, such as sports events, and feature films
to licensees on a pay-per-view basis through its operation of SET PAY PER VIEW,
a division of Viacom International.
Showtime Satellite Networks Inc. ("SSN"), a subsidiary of SNI, packages for
distribution to home satellite dish owners (on a direct retail basis) SHOWTIME,
THE MOVIE CHANNEL, FLIX, Viacom Networks' basic cable program services, ALL NEWS
CHANNEL, a 24-hour satellite-delivered news service which is a joint venture
between Viacom Satellite News Inc., a subsidiary of Viacom International, and
Conus Communications Company Limited Partnership, a limited partnership whose
managing general partner is Hubbard Broadcasting, Inc., and certain third-party
program services. Also, SNI offers SHOWTIME, THE MOVIE CHANNEL and FLIX to
third-party licensees for subdistribution to home satellite dish owners.
In addition to SNI's other motion picture licensing agreements, SNI and
Sony Pictures Entertainment Inc. recently entered into a five-year agreement
under which SNI has agreed to acquire the exclusive premium television rights to
TriStar Pictures feature films. A continuation of SNI's previous three-year
arrangement with TriStar, this new agreement includes all qualifying TriStar
films theatrically released from 1994 through 1998, up to a maximum of 75
pictures.
SNI has also recently entered into a seven-year agreement with
Metro-Goldwyn-Mayer Inc. ("MGM") under which SNI has agreed to acquire the
exclusive premium television rights to MGM and United Artists feature films. The
agreement includes all qualifying pictures theatrically released from September
1, 1994 through August 31, 2001, up to a maximum of 150 pictures. The agreement
also calls for SNI and MGM to co-finance the production of certain exclusive
original movies to be produced for a U.S. premiere on SNI's program services.
The cost of acquiring premium television rights to programming, including
exclusive rights, is the principal expense of SNI. At December 31, 1993, in
addition to such commitments reflected in Viacom's financial statements, SNI had
commitments to acquire such rights at a cost of approximately $1.8 billion. Most
of the $1.8 billion is payable within the next seven years as part of normal
programming expenditures of SNI. These commitments are contingent upon delivery
of motion pictures which are not yet available for premium television exhibition
and, in many cases, have not yet been produced.
SNI also arranges for the development and production of original programs
and motion pictures that premiere on SHOWTIME through its operation of the
Showtime Entertainment Group. The Showtime Entertainment Group's activities also
now include operating Viacom Pictures, a division of Viacom International, which
arranges for the development and production of motion pictures that are
exhibited theatrically in foreign markets and premiere domestically on SHOWTIME.
In addition to exhibiting the Showtime Entertainment Group's original
programs and motion pictures on SNI's premium subscription services, SNI
distributes certain Showtime Entertainment Group programming for foreign
theatrical exhibition and exploitation in various other media worldwide.
Viacom Networks has entered into an agreement as of August 27, 1992 with
United States Satellite Broadcasting, Inc., a subsidiary of Hubbard
Broadcasting, Inc., for the direct broadcast high-powered Ku-band satellite
distribution ("DBS") of each of Viacom Networks' wholly owned basic cable and
premium networks, expected to be offered beginning in 1994.
ENTERTAINMENT. Viacom Entertainment is comprised of (i) Viacom Enterprises,
which distributes television series such as ROSEANNE, THE COSBY SHOW, A
DIFFERENT WORLD and various classic CBS network series such as I LOVE LUCY,
feature films, made-for-television movies, mini-series and specials for
television exhibition in various markets throughout the world, and also
distributes television programs such as THE MONTEL WILLIAMS SHOW and NICK NEWS
for initial United
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States television exhibition on a non-network ("first run") basis and for
international television exhibition; (ii) Viacom Productions, which produces
television series such as MATLOCK, starring Andy Griffith, and DIAGNOSIS MURDER,
starring Dick Van Dyke, and other television properties both independently and
in association with others primarily for initial exhibition on United States
prime time network television; (iii) Viacom New Media, which develops, produces,
distributes and markets interactive software for the stand-alone and other
multimedia marketplaces, and includes ICOM Simulations, Inc. (predecessor to
VNM, Inc.) an interactive software development company acquired by Viacom in May
1993. Viacom New Media released an interactive horror movie on CD-ROM entitled
DRACULA UNLEASHED in the fourth quarter 1993 and is in the process of developing
cartridge video games based on certain MTV Networks programs, such as BEAVIS &
BUTT-HEAD and ROCKO'S MODERN LIFE, as well as original CD-ROM products and
expects to participate in the development of interactive programming for the
Viacom/AT&T Castro Valley cable system project (described below); and (iv)
Viacom World Wide, which explores and develops business opportunities in
international markets primarily in cable and premium television. Viacom
Enterprises and Viacom Productions are expected to be consolidated with
Paramount's television operations during 1994.
CABLE TELEVISION. Viacom Cable owns and operates cable television systems
serving approximately 1,111,000 customers as of March 31, 1994 in three regions
of the United States: California, the Pacific Northwest and the Midwest. Viacom
Cable has constructed a fiber optic cable system in Castro Valley, California to
provide more channels with significantly better picture quality, and to
accommodate testing of new services including an interactive on-screen
programming guide known as StarSight (in which a consolidated affiliate of
Viacom International currently has a 21.4% equity interest and has the right to
increase its equity interest to 35% and in which Spelling Entertainment has a
5.8% equity interest), other interactive programs with Viacom New Media,
video-on-demand premium services, multiplexed premium services, and advanced
interactive video and data services. Viacom has entered into an agreement with
AT&T to test and further develop such services. As part of Viacom's strategic
relationship with NYNEX, Viacom has granted NYNEX a right of first refusal with
respect to providing telephony service upgrade expertise to Viacom Cable.
BROADCASTING. Viacom Broadcasting owns and operates five network affiliated
television stations. Viacom Broadcasting also operates 14 radio stations in six
of the top eight radio markets, with duopolies in Los Angeles, Seattle and
Washington, D.C. Viacom Broadcasting owns and operates the following five
television properties: KMOV-TV (CBS), St. Louis, MO; WVIT-TV (NBC), Hartford-New
Haven, CT; WNYT-TV (NBC), Albany, NY; KSLA-TV (CBS), Shreveport, LA; WHEC-TV
(NBC), Rochester, NY and the following 14 radio stations: WLTW-FM, New York, NY;
KXEZ-FM and KYSR-FM, Los Angeles, CA; WLIT-FM, Chicago, IL; WLTI-FM, Detroit,
MI; WMZQ-AM/FM, WCXR-FM and WCPT-AM, Washington, D.C.; KBSG-AM/FM and KNDD-FM,
Seattle, WA; KSOL-FM, San Francisco, CA; and KYLZ-FM, Santa Cruz/San Jose, CA.
On November 1, 1993 Viacom Broadcasting exchanged KIKK-AM/FM, Houston, TX, for
Westinghouse Broadcasting Company, Inc.'s WCXR-FM and WCPT-AM, Washington, D.C.,
and cash. Pursuant to the consent granted by the Federal Communications
Commission ("FCC") to the transfer of control of the broadcast licenses of
Paramount to Viacom, Viacom has undertaken to dispose of one of its two AM
stations and one of its two FM stations serving Washington, D.C. See "--Viacom
Recent Developments" below.
STRATEGIC RELATIONSHIPS. Viacom has entered into strategic relationships
with Blockbuster and NYNEX including (i) a $600 million investment by
Blockbuster in the Series A Preferred Stock, (ii) a $1.2 billion investment by
NYNEX in the Series B Preferred Stock and (iii) an agreement with each of
Blockbuster and NYNEX to explore strategic partnership opportunities. See "Sale
of Viacom Preferred Stock." In addition, on March 10, 1994 Blockbuster purchased
approximately 22.7 million shares of Viacom Class B Common Stock for an
aggregate purchase price of approximately $1.25 billion pursuant to the
Blockbuster Subscription Agreement.
REGULATORY MATTERS. The 1992 Cable Act amended the Communications Act of
1934. Rate regulations adopted in April 1993 by the FCC govern rates charged to
subscribers for regulated tiers of
33
<PAGE>
cable service and became effective on September 1, 1993. On February 22, 1994,
the FCC adopted additional rules (the "February 22nd Regulations") which were
published by the FCC on March 30, 1994. The "benchmark" formula adopted as part
of the regulations establishes an "initial permitted rate" which may be charged
by cable operators for specified tiers of cable service. The regulations also
establish the prices which may be charged for equipment used to receive these
services. Based upon Viacom's preliminary review of the recently published
February 22nd Regulations, the new formula may require up to approximately a 17%
reduction of rates from those charged on September 30, 1992, rather than the 10%
reduction required by the April 1993 regulations. The February 22nd Regulations
also adopted interim standards governing "cost-of-service" proceedings pursuant
to which a cable operator would be permitted to charge rates in excess of rates
which it would otherwise be permitted to charge under such regulations, provided
that the operator substantiates that its costs in providing services justify
such rates.
Based on its implementation of the April 1993 regulations, Viacom estimates
that it will recognize a reduction to revenue ranging from $27 million to $32
million on an annualized basis substantially all of which will be reflected as a
reduction in earnings from operations of its cable television division. Viacom's
estimated reduction does not reflect further reductions to revenue which would
result from the lowering of the initial permitted rates pursuant to the February
22nd Regulations. These new and reduced initial permitted rates will apply
prospectively either from May 15, 1994 or July 14, 1994, pursuant to some
conditions. Until the February 22nd Regulations are more fully analyzed, it is
not possible to accurately predict the effects of the interim standards
governing cost-of-service proceedings; however, based on a preliminary analysis,
Viacom believes it is unlikely that it will be able to utilize such proceedings
so as to charge rates in excess of rates which it would otherwise be permitted
to charge under the regulations. Viacom's ability to mitigate the effects of
these new rate regulations by employing techniques such as the pricing and
repricing of new or currently offered unregulated program services and ancillary
services are uncertain. No such potential mitigating factors are reflected in
the estimated reductions to revenues. The stated reduction to revenues has been
mitigated to a small extent by higher customer growth due to lower primary
service rates. Any required further reduction in rates could be similarly
mitigated. Viacom also cannot predict the effect, if any, of cable system rate
regulation on license fee rates payable by cable systems to program services
such as those owned by Viacom.
In a recent decision by the U.S. District Court for the Eastern District of
Virginia, the Court declared the restrictions contained in the Communications
Act of 1934, as amended (the "Communications Act") on the provision of video
programming by a telephone company in its local service area to be
unconstitutional and has enjoined enforcement of those restrictions. The Court
has held that this decision does not apply to geographic areas outside of its
jurisdiction. An appeal of the Court's holding of the unconstitutionality of
such restrictions has been filed. Several similar suits have recently been filed
in different jurisdictions by regional Bell Operating Companies (including
NYNEX) ("BOCs") challenging the very same restrictions. In an interpretation of
the current restrictions contained in the Communications Act, the FCC in 1992
established its "Video Dial Tone" policy. The Video Dial Tone policy is being
challenged in court by cable interests as violating the Communications Act. It
is also being challenged by telephone interests as not being liberal enough. The
policy permits in-service-area delivery of video programming by a telephone
company (a "telco", as further defined below) and exempts telcos from the
Communications Act's franchising requirements so long as their facilities are
capable of two-way video and are used for transmission of video programming on a
common carrier basis, i.e., use of the facilities must be available to all
programmers and program packagers on a non-discriminatory, first-come
first-served basis. Telcos are also permitted to provide to facilities users
additional "enhanced" services such as video gateways, video processing
services, customer premises equipment and billing and collection. These can be
provided on a non-common carrier basis. There are currently pending in Congress
four principal bills (in the Senate, S. 1086, the Telecommunications
Infrastructure Act of 1993, and S. 1822, the Communications Act of 1994 (which
is expected to supersede S. 1086) and in the House, H.R. 3626, the Antitrust
Reform Act 1993, and H.R. 3636, the
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National Communications Competition and Information Infrastructure Act of 1993)
which would, among other things, permit a BOC or a Regional Holding Company
("RHC", a BOC or RHC, a "telco") to offer cable service under certain stated
conditions including providing safeguards and transition rules designed to
protect against anti-competitive activity by the telcos and cross-subsidization
of a telco's cable business by the telco's charges to its telephone customers.
These bills also generally eliminate state and local entry barriers which
currently either prohibit or restrict an entity's (including a cable operator's)
capacity to offer telecommunications services (including telephone exchange
service) in competition with telcos and to interconnect on a non-discriminatory
basis with telcos and utilize certain telco facilities in order to provide
service in competition with a telco. The Clinton Administration has indicated
its intention to propose reform of federal telecommunications legislation,
although such proposal has not been finalized.
The Modification of Final Judgment (the "MFJ") is the consent decree
pursuant to which AT&T was reorganized and was required to divest its local
telephone service monopolies. As a result, seven regional holding companies were
formed (including NYNEX) comprised of operating companies within their regions.
In addition, all territory in the continental United States served by the BOCs
was divided into geographical areas termed Local Access and Transport Areas
("LATAs"). The MFJ restricts the RHCs, the BOCs and their affiliates from
engaging in inter-LATA telecommunications services and from manufacturing
telecommunications products. As a result of NYNEX's investment in Viacom, Viacom
arguably could be considered an affiliate of an RHC for MFJ purposes. As a
result, Viacom transferred certain of its operations and properties to an
affiliated entity which will be consolidated into Viacom for financial reporting
purposes. Neither the transfer nor the operations of the affiliate as an entity
separate from Viacom will have a material effect on the financial condition or
the results of operations of Viacom. However, should the MFJ restrictions be
modified or waived, Viacom intends to retransfer the assets and operations and
any future appreciation in the value of such assets after such retransfer will
be for the benefit of the holders of Viacom Common Stock.
OWNERSHIP OF PARAMOUNT COMMON STOCK. On March 11, 1994, Viacom, pursuant to
the terms of the Offer, completed its purchase of 61,657,432 shares of Paramount
Common Stock, representing a majority of the shares of Paramount Common Stock
outstanding. Pursuant to the Paramount Merger Agreement, a wholly owned
subsidiary of Viacom will be merged with and into Paramount and, as a result,
Paramount will become a wholly owned subsidiary of Viacom. On March 11, 1994, 10
members of Paramount's Board of Directors resigned and their positions were
filled by 10 designees of Viacom. See "Management Before and After the
Mergers--Executive Officers and Directors of Paramount." Effective March 15,
1994, Paramount's fiscal year was changed such that its fiscal year (consisting
of eleven calendar months) will end March 31, 1994, following which Paramount's
fiscal year will be the nine month period ending December 31, 1994. Thereafter,
Paramount's fiscal year will be the twelve month period ending on December 31 of
each year, conforming to that of Viacom. Effective March 14, 1994, the Paramount
Board replaced Ernst & Young with Price Waterhouse as its independent public
accountants. Price Waterhouse are the independent public accountants of Viacom.
BLOCKBUSTER MERGER. Viacom and Blockbuster are parties to the Blockbuster
Merger Agreement. See "The Blockbuster Merger." Upon consummation of the
Blockbuster Merger, the Series A Preferred Stock and the Viacom Class B Common
Stock owned by Blockbuster will cease to be outstanding.
VIACOM RECENT DEVELOPMENTS. On April 4, 1994, Viacom sold its one-third
partnership interest in LIFETIME to its partners The Hearst Corporation and
Capital Cities/ABC Inc. for approximately $317.6 million.
On March 29, 1994 Viacom entered into an agreement to sell its California
radio stations, KSOL-FM and KYLZ-FM.
PARAMOUNT. The businesses of Paramount are entertainment and publishing.
Entertainment includes the production, financing and distribution of motion
pictures, television programming and prerecorded videocassettes and the
operation of motion picture theaters, independent television stations,
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regional theme parks and Madison Square Garden. Publishing includes the
publication and distribution of hardcover and paperback books for the general
public, textbooks for elementary schools, high schools and colleges, and the
provision of information services for business and professions.
Entertainment. Theatrical Motion Pictures. Paramount Pictures produces
-------------
and/or finances feature motion pictures for exhibition in theaters and on
television and for distribution by videocassettes and video discs. Motion
pictures are produced by Paramount Pictures, produced by independent producers
and financed in whole or in part by Paramount Pictures, or produced by others
and acquired by Paramount Pictures. Each picture is, in effect, a separate and
distinct product with its financial success dependent upon many factors, among
which cost and public response are of fundamental importance. In the
twelve-month period ended January 31, 1994, Paramount Pictures released fifteen
feature motion pictures. Paramount Pictures distributes its motion pictures for
theatrical release outside the United States and Canada through United
International Pictures, a company owned by Paramount Pictures, MCA and
Metro-Goldwyn-Mayer Inc.
Most motion pictures are also licensed for exhibition on television, with
fees generally collected in installments. License fees are recorded as revenue
in the year that the films are available for telecast, which, among other
reasons, may cause substantial fluctuation in Paramount's operating results. At
January 31, 1994, unrecognized revenues attributable to licensing of completed
films from Paramount Pictures' license agreements were $575 million.
Paramount Pictures has an exclusive pay television license agreement with
HBO which includes new Paramount Pictures' motion pictures released theatrically
through December 1997. Paramount Pictures also licenses its motion pictures to
home and hotel/motel pay-per-view, airlines, schools and universities. Paramount
Pictures also distributes its motion pictures for pay television release outside
the United States and Canada through United International Pictures. In 1993,
Paramount acquired a joint venture interest in HBO Pacific Partners, C.V. and
granted to it a license to carry Paramount Pictures' motion pictures on pay
television in Singapore, Thailand, the Philippines and other territories through
1999. Paramount Pictures has approximately 900 motion pictures in its library.
United International Pictures and United Cinemas International (as described
below) are the subject of various governmental inquiries by the Commission of
the European Community and the Monopolies and Mergers Commission of the United
Kingdom. Such inquiries are not expected to have a material effect on the
business of Paramount.
Television Programs. Paramount Pictures is engaged in the production and
distribution of series, mini-series, specials and made-for-television movies for
network television, first-run syndication, pay and basic cable, videocassettes
and video discs, and live television programming. The receipt and recognition of
revenues for license fees for completed television programming in syndication is
similar to that of feature films exhibited on television and, consequently,
operating results are subject to substantial fluctuation. At January 31, 1994,
the unrecognized revenues from such television license agreements were $198
million. Certain programs are licensed in exchange for cash and/or advertising
time which Paramount Pictures retains and sells through its wholly owned
affiliate, Premier Advertiser Sales. Premier Advertiser Sales also sells
advertising time in programming distributed by third parties. Paramount
Pictures' foreign television revenues include the licensing of series,
mini-series and specials made for U.S. television and theatrical and
made-for-television movies that are part of its television library. In addition,
foreign television revenues also include revenues derived from distribution of
television product acquired from independent producers.
Home Video. Paramount Pictures sells videocassettes for the home video
market, featuring its motion picture and television program library,
acquisitions from third parties and programs made originally for the home video
market. It also licenses this product for distribution on video disc. Paramount
Pictures distributes its home video products outside the United States and
Canada through Cinema International B.V., a joint venture with MCA.
Theatrical Exhibition. Famous Players operates 462 screens in 114 theaters
throughout Canada. Cinamerica, a joint venture with Time Warner Inc. ("Time
Warner"), includes Mann and Festival
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Theaters and operates 341 screens in 66 theaters in California, Colorado,
Arizona and Alaska. United Cinemas International, a joint venture with MCA,
operates 235 screens in 25 theaters in the United Kingdom and Ireland, 42
screens in three theaters in Germany and 76 screens in 25 theaters in Spain.
United Cinemas International plans to construct and operate additional theaters
in the United Kingdom, Germany, Austria and Spain. It also manages, in six
countries, 31 screens in 17 theaters which are owned by Cinema International
Corporation, a joint venture with MCA.
Television Broadcasting and Cable Television Networks. PSG owns and
operates seven television stations: WTXF(TV), Philadelphia; KRRT(TV), San
Antonio; WLFL(TV), Raleigh/Durham; WDCA-TV, Washington, D.C.; KTXA(TV), Dallas;
KTXH(TV), Houston; and WKBD(TV), Detroit. Paramount and MCA jointly own USA
Networks, which operates two national advertiser-supported basic cable
television networks, USA Network and the Sci-Fi Channel. USA Network is one of
the largest of its kind in the United States, reaching approximately 62.5
million households.
Theme Parks. Paramount Parks owns and operates five regional theme parks:
Paramount's Carowinds, in Charlotte, North Carolina; Paramount's Great America,
in Santa Clara, California; Paramount's Kings Dominion, located near Richmond,
Virginia; Paramount's Kings Island, located near Cincinnati, Ohio; and Paramount
Canada's Wonderland, located near Toronto, Ontario. In May 1993, Paramount Parks
acquired the 80% interest in Paramount Canada's Wonderland which it did not
previously own. The majority of the theme parks' operating income is generated
from May through September.
Madison Square Garden. Madison Square Garden's activities include the
operation of the Madison Square Garden Arena, which seats approximately 20,000
people, and The Paramount, a theater which seats approximately 5,600 people, the
New York Knickerbockers Basketball Club of the National Basketball Association
and the New York Rangers Hockey Club of the National Hockey League. It also
supplies and distributes television programming for cable systems principally in
New York, New Jersey and Connecticut through the Madison Square Garden Network.
Its programming includes its own sporting events and rights to the New York
Yankees baseball games through the year 2000. In addition, Madison Square Garden
produces, promotes and/or presents live entertainment, which includes television
event production of the Miss Universe, Miss USA and Miss Teen USA pageants and
auto thrill shows through SRO Motorsports. See "Special Factors--Certain Effects
of the Paramount Merger; Operations After the Paramount Merger."
Publishing. Paramount Publishing includes well-known imprints such as
----------
Simon & Schuster, Pocket Books, Prentice Hall, Silver Burdett Ginn and Computer
Curriculum Corporation, among others.
Educational Publishing. Paramount Publishing's Elementary, Secondary and
Higher Education groups publish elementary, secondary and college textbooks and
related materials, computer-based educational products, audiovisual products and
vocational and technical materials under such imprints as "Prentice Hall,"
"Silver Burdett Ginn," "Allyn & Bacon," "Globe Fearon," "Modern Curriculum
Press," "Coronet/MTI Film & Video," "Computer Curriculum Corporation," "Simon &
Schuster Workplace Resources," "Academic Reference," "Regents/PH," "American
Teaching Aids," "Judy/Instructo," "Ginn Press," "Alemany" and "Cambridge."
Consumer Publishing. Paramount Publishing's Consumer group publishes and
distributes hardcover, trade paperback and mass market books and audio tapes. It
publishes its hardcover trade books principally under the "Simon & Schuster,"
"Pocket Books," "Poseidon Press," "Little Simon," "Simon & Schuster Books for
Young Readers," "Green Tiger" and "Julian Messner" imprints; its trade paperback
books under the "Fireside" and "Touchstone" imprints; and its mass market
paperbacks under the "Pocket Books," "Pocket Star," "Archway," "Washington
Square Press" and "Minstrel" imprints. Audio cassettes are sold under the
imprints "Audio Works" and "Sound Ideas." Books of other publishing companies,
including "Harlequin" and "Silhouette" romance novels, books published under the
imprints of "Baen," "Meadowbrook," "Picture Book Studios" and "Rabbit Ears," and
audio cassettes under the "Nightingale Conant Audio" imprint are also
distributed.
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The Consumer group also publishes or distributes consumer information and
special-interest books, including "Prentice Hall" reference books; "Arco"
college entrance and civil service test preparation material; "J.K. Lasser" tax
guides; "Webster's New World" and "Harrap's" bilingual dictionaries; travel
books under the "Frommer's," "American Express," "Baedeker" and "Mobil"
imprints; cookbooks under the "Betty Crocker" imprint; gardening books under the
"Burpee" and "Horticulture" imprints; maps under the "Gousha" imprint; and
"Monarch Notes" study guides.
Business, Technical and Professional. Paramount Publishing's Business,
Technical and Professional group publishes books, newsletters and software for a
variety of professional groups, including lawyers, accountants, tax
professionals, business executives and the medical community. These materials
are published under the "Prentice Hall," "Bureau of Business Practice,"
"Parker," "Appleton & Lange" and "New York Institute of Finance" imprints. It
publishes Prentice Hall Computer Publishing computer reference books under the
"Que," "Brady," "Sams," "New Riders," "Alpha Books" and "Hayden" imprints. It
also provides information and services to corporate attorneys and lending
institutions, provides professional tax preparation and practice management
software to accounting firms and law firms, licenses software designed to
manage and maintain trademark and patent registrations to law firms and large
corporations and provides business training programs to corporations.
International. The international operations include publishing in Canada,
the United Kingdom, Australia, Brazil, Mexico, Singapore, Japan and India
primarily under the "Prentice Hall" and "Simon & Schuster" imprints as well as
distribution of Paramount Publishing's products worldwide. Paramount Publishing
also publishes German language computer books and software in Germany under the
"Markt & Technik" imprint.
Paramount Recent Developments. In February 1994, Paramount completed the
-----------------------------
acquisition of Macmillan Publishing Company and certain other publishing assets
of Macmillan, Inc. for approximately $553 million. Macmillan Publishing, which
includes such imprints as "Macmillan" and "Scribner's", publishes books and
materials through five divisions--College, Children's Books, Adult Trade,
Reference and The Free Press, a publisher of scholarly and professional
materials--as well as Jossey-Bass, a publisher of books and periodicals for
select professionals.
Provisions in certain consent decrees entered into by the television
networks which prohibited the networks from acquiring financial interests and
syndication rights in television programming by non-network suppliers such as
Paramount Pictures were recently vacated by a federal district court.
Accordingly, subject to certain restrictions imposed by the FCC, the networks
will be able to negotiate with program suppliers to acquire financial interests
and syndication rights in television programs that air on the networks.
Paramount and BHC Communications, Inc., which is majority owned by
Chris-Craft Industries, Inc., are forming a joint venture to be known as the
Paramount Television Network which will provide prime-time television
programming primarily to broadcast affiliates nationwide in competition with the
three major networks and the Fox Broadcasting Network. The network is expected
to begin operations in January 1995.
Under the joint venture agreement for USA Networks between subsidiaries of
Paramount and MCA, such subsidiaries and certain of their affiliates are
restricted, subject to certain exceptions and unless the other party consents,
from engaging outside of USA Networks in the business of providing to cable
television systems national, video, advertiser-supported, basic cable
entertainment networks or providing national video entertainment programming
services to cable television systems and/or other entities on a pay-per-view
basis. Although Viacom and Paramount do not believe that these restrictions were
violated by the consummation of the Offer, there can be no assurance that MCA
might not seek damages or other relief in connection with the consummation of
the Offer or the Paramount Merger or the business activities that may be engaged
in thereafter.
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THE MEETINGS
MATTERS TO BE CONSIDERED AT THE MEETINGS
Viacom. At the Viacom Special Meeting, holders of Viacom Class A Common
Stock will consider and vote upon approval of the Paramount Merger Agreement
(including the issuance of the Paramount Merger Consideration) and the Viacom
Charter Amendments. Such stockholders will also consider and vote upon such
other matters as may properly be brought before the Viacom Special Meeting.
ON FEBRUARY 1, 1994, THE BOARD OF DIRECTORS OF VIACOM UNANIMOUSLY (WITH
ONE DIRECTOR ABSTAINING) APPROVED THE FEBRUARY 4 MERGER AGREEMENT AND
RECOMMENDED A VOTE FOR APPROVAL OF THE FEBRUARY 4 MERGER AGREEMENT (INCLUDING
THE ISSUANCE OF THE PARAMOUNT MERGER CONSIDERATION) AND THE VIACOM CHARTER
AMENDMENTS. ON MAY 26, 1994, THE BOARD OF DIRECTORS OF VIACOM APPROVED THE MAY
AMENDMENT.
At the Viacom Annual Meeting, holders of Viacom Class A Common Stock will
consider and vote upon the Viacom Annual Meeting Proposals. Such stockholders
will also consider and vote upon such other matters as may properly be brought
before the Viacom Annual Meeting.
THE BOARD OF DIRECTORS OF VIACOM RECOMMENDS A VOTE FOR APPROVAL OF THE
VIACOM ANNUAL MEETING PROPOSALS, INCLUDING THE SLATE OF DIRECTORS NOMINATED BY
THE VIACOM BOARD OF DIRECTORS.
Paramount. At the Paramount Special Meeting, holders of Paramount Common
Stock will consider and vote upon a proposal to approve and adopt the Paramount
Merger Agreement and such other matters as may properly be brought before the
meeting.
ON FEBRUARY 4, 1994, THE BOARD OF DIRECTORS OF PARAMOUNT UNANIMOUSLY
APPROVED THE FEBRUARY 4 MERGER AGREEMENT AND RECOMMENDED A VOTE FOR APPROVAL AND
ADOPTION OF THE FEBRUARY 4 MERGER AGREEMENT. ON MAY 26, 1994, THE RECONSTITUTED
BOARD OF DIRECTORS OF PARAMOUNT APPROVED THE MAY AMENDMENT.
THIS PROXY STATEMENT/PROSPECTUS IS NOT A SOLICITATION OF PROXIES WITH
RESPECT TO, NOR A PROSPECTUS RELATING TO, THE BLOCKBUSTER MERGER. A SEPARATE
JOINT PROXY STATEMENT/PROSPECTUS OF VIACOM AND BLOCKBUSTER RELATING TO THE
BLOCKBUSTER MERGER WILL BE SENT TO STOCKHOLDERS OF VIACOM AND BLOCKBUSTER PRIOR
TO ANY CONSIDERATION OF THE BLOCKBUSTER MERGER.
VOTES REQUIRED
Viacom. Each share of Viacom Class A Common Stock is entitled to one vote.
Except as required by Delaware law, holders of Viacom Class B Common Stock are
not entitled to vote on any matter.
The affirmative vote of the holders of a majority of the outstanding shares
of Viacom Class A Common Stock is required to approve the Viacom Charter
Amendments. Because approval of the Viacom Charter Amendments requires the
affirmative vote of such holders, abstentions and broker non-votes will have the
same effect as votes against the Viacom Charter Amendments.
The affirmative vote of the holders of a majority of the shares of Viacom
Class A Common Stock present in person or represented by proxy is required for
approval of the Paramount Merger Agreement and the Viacom Annual Meeting
Proposals. Abstentions will have the same effect as a vote against such
proposals. Broker non-votes will have no such effect and will not be counted.
NAI, which is controlled by Sumner M. Redstone, owned approximately 85% of
the Viacom Class A Common Stock and 52% of the Viacom Class B Common Stock as of
April 1, 1994. NAI has agreed to vote all of its shares of Viacom Class A Common
Stock in favor of the Paramount Merger Agreement pursuant to the terms of the
Paramount Voting Agreement, a copy of which is attached as Annex II. See
"Special Factors--Paramount Voting Agreement." Such action by NAI in accordance
with the Paramount Voting Agreement would be sufficient to approve the Paramount
Merger Agreement and related transactions without any action on the part of any
other holder of Viacom Class A Common Stock.
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NAI has advised Viacom that it intends to vote all of its shares in favor
of the Viacom Annual Meeting Proposals (including the slate of directors
nominated by the Viacom Board of Directors) and in favor of each of the Viacom
Charter Amendments; such action by NAI is sufficient to approve such proposals
without any action on the part of any other holder of Viacom Class A Common
Stock.
Paramount. The affirmative vote of the holders of a majority of the
outstanding shares of Paramount Common Stock entitled to vote thereon is
required to approve and adopt the Paramount Merger Agreement. Each share of
Paramount Common Stock is entitled to one vote. Because approval of the
Paramount Merger Agreement requires the vote of a majority of the outstanding
shares of Paramount Common Stock, abstentions and broker non-votes will have the
same effect as votes against the Paramount Merger Agreement. As Viacom has
acquired a majority of the outstanding shares of Paramount Common Stock pursuant
to the Offer, Viacom has sufficient voting power to approve the Paramount Merger
Agreement, even if no other stockholder of Paramount votes in favor of the
Paramount Merger Agreement.
At March 31, 1994, Paramount's current directors and executive officers may
be deemed to be beneficial owners of approximately 2,238,531 shares of Paramount
Common Stock, or approximately 1.82% of the then outstanding shares of Paramount
Common Stock. See "Security Ownership of Certain Beneficial Owners and
Management."
VOTING OF PROXIES
Shares represented by properly executed proxies received in time for the
Special Meetings and the Viacom Annual Meeting, as the case may be, will be
voted at such meetings in the manner specified by the holders thereof. Proxies
which are properly executed but which do not contain voting instructions will be
voted (i) in the case of proxies for Viacom Class A Common Stock, in favor of
the Paramount Merger Agreement (including the issuance of the Paramount Merger
Consideration) and the Viacom Charter Amendments, at the Viacom Special Meeting,
and in favor of the Viacom Annual Meeting Proposals (including the slate of
directors nominated by the Viacom Board of Directors), at the Viacom Annual
Meeting, or (ii) in the case of proxies for Paramount Common Stock, in favor of
approval and adoption of the Paramount Merger Agreement.
It is not expected that any matter other than those referred to herein will
be brought before either of the Special Meetings or the Viacom Annual Meeting.
If, however, other matters are properly presented, the persons named as proxies
will vote in accordance with their judgment with respect to such matters.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed Viacom or Paramount forms does not
preclude a stockholder from voting in person. A stockholder may revoke a proxy
at any time prior to its exercise by submitting a new proxy at a later date, by
filing with the Secretary of Viacom (in the case of a Viacom stockholder) or the
Secretary of Paramount (in the case of a Paramount stockholder) a duly executed
revocation of proxy bearing a later date or by voting in person at the meeting.
Attendance at the relevant Special Meeting or the Viacom Annual Meeting will not
of itself constitute revocation of a proxy.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Viacom. Only holders of record of Viacom Class A Common Stock and Viacom
Class B Common Stock at the close of business on May 31, 1994 will be entitled
to receive notice of the Viacom Special Meeting and the Viacom Annual Meeting,
and only holders of record of Viacom Class A Common Stock on the close of
business on May 31, 1994 will be entitled to vote on the matters to be voted on
at such meetings. As of this record date, Viacom had outstanding 53,449,525
shares of Viacom Class A Common Stock and 90,083,779 shares of Viacom Class B
Common Stock.
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Shares representing a majority of the voting power of the outstanding
shares of Viacom Class A Common Stock entitled to vote must be represented in
person or by proxy at the Viacom Special Meeting and the Viacom Annual Meeting
in order for a quorum to be present with respect to the Viacom Class A Common
Stock for purposes of approving the matters to be voted on at such meetings.
Abstentions and broker non-votes are counted for the purposes of establishing a
quorum. As NAI has agreed to vote its shares of Viacom Class A Common Stock in
favor of the Paramount Merger and related transactions pursuant to the Paramount
Voting Agreement and, as NAI has announced its intention to vote at the Viacom
Annual Meeting, the presence of the requisite quorums at the Viacom Special
Meeting and the Viacom Annual Meeting is assured. Holders of Viacom Class B
Common Stock are not entitled to vote on any of the matters to be voted on at
the Viacom Special Meeting or the Viacom Annual Meeting.
Paramount. Only stockholders of record of Paramount at the close of
business on May 31, 1994 will be entitled to receive notice of the Paramount
Special Meeting, and only holders of record of Paramount Common Stock at that
time will be entitled to vote at the Paramount Special Meeting. As of this
record date, Paramount had outstanding 122,792,910 shares of Paramount Common
Stock, exclusive of shares held in its treasury. A majority of the outstanding
shares of Paramount Common Stock must be represented in person or by proxy at
the Paramount Special Meeting in order for a quorum to be present. Abstentions
and broker non-votes are counted for the purposes of establishing a quorum.
APPRAISAL RIGHTS
Paramount. In the event the Paramount Merger is consummated, record holders
of Paramount Common Stock will be entitled to appraisal rights under Section 262
of the DGCL because such persons hold stock of a constituent corporation in the
Paramount Merger and such holders are required by the terms of the Paramount
Merger Agreement to accept for such stock consideration other than shares of the
corporation resulting from the Paramount Merger. Stockholders who have not voted
in favor of the Paramount Merger will have the right to obtain a cash payment
for the "fair value" of their shares (excluding any element of value arising
from the accomplishment or expectation of the Paramount Merger). Such "fair
value" would be determined in judicial proceedings, the result of which cannot
be predicted. In order to exercise appraisal rights, dissenting stockholders
must comply with the procedural requirements of Section 262 of the DGCL, a
description of which is provided in "Dissenting Stockholders' Rights of
Appraisal" and the full text of which is attached to this Proxy
Statement/Prospectus as Annex V. Failure to take any of the steps required under
Section 262 of the DGCL on a timely basis may result in the loss of appraisal
rights. Except as set forth above, stockholders of Paramount will have no
appraisal rights in connection with the Paramount Merger. See "Certain
Considerations."
Viacom. Stockholders of Viacom will have no appraisal rights in connection
with the Paramount Merger.
SOLICITATION OF PROXIES
Each of Viacom and Paramount will bear the cost of the solicitation of
proxies from its own stockholders, except that Viacom and Paramount will share
equally the cost of printing this Proxy Statement/Prospectus. In addition to
solicitation by mail, the directors, officers and employees of each company and
its subsidiaries may solicit proxies from stockholders of such company by
telephone or telegram or in person. Arrangements will also be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and Viacom and Paramount will reimburse such custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses in
connection therewith.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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SPECIAL FACTORS
BACKGROUND OF THE PARAMOUNT MERGER
For several years, Sumner M. Redstone, Chairman of the Board of Directors
of Viacom, and Martin S. Davis, Chairman of the Board and Chief Executive
Officer of Paramount, held discussions from time to time concerning the
possibility of a business combination. These discussions were preliminary and
inconclusive.
On April 20, 1993, at the invitation of Robert Greenhill (the Chief
Executive Officer of Smith Barney), Messrs. Redstone and Davis met with Mr.
Greenhill and agreed to explore once again the possibility of combining the two
companies.
From April to late June 1993, the two companies engaged in preliminary
discussions concerning certain possible terms of a business combination, the
discussions involving at various times Messrs. Redstone, Davis and Greenhill,
Philippe P. Dauman, Senior Vice President and General Counsel of Viacom, and
Donald Oresman, Executive Vice President and General Counsel of Paramount. These
discussions were also inconclusive.
During the week of June 28, Messrs. Redstone and Davis decided to renew
discussions. On July 1, 1993, Viacom and Paramount executed and exchanged
confidentiality agreements in anticipation of exchanging confidential
information and conducting due diligence (however, no such information was
exchanged until the week of September 6, 1993). Discussions between the parties
continued, and on July 6, 1993, a meeting was held, including Messrs. Dauman,
Oresman and Greenhill and Felix Rohatyn of Lazard Freres. Viacom's
representatives expressed a willingness to negotiate a transaction based upon
consideration payable to Paramount's stockholders valued at $63 per share,
conditioned upon Paramount's willingness to grant to Viacom an option to acquire
from Paramount shares, representing up to 20% of Paramount's then outstanding
shares, at an exercise price of the then current market price of Paramount's
Common Stock, and pay to Viacom a fee in an amount to be negotiated, plus
expenses, in the event the transaction did not close. In addition, Viacom
proposed that the parties should explore entering into other business
transactions, including possible joint venture arrangements, simultaneously with
entering into a merger agreement. Discussions were terminated on July 7, 1993,
due to the parties' belief that they would be unable to reach agreement on
certain significant terms, including the consideration to be received by
Paramount stockholders, the consideration which would be payable to Viacom if
the transaction did not close and the proposed joint venture arrangements
between the parties, as outlined above.
On August 20, 1993, Mr. Greenhill arranged for Messrs. Davis and Redstone
to meet later that day. At the end of this meeting they agreed to authorize
their respective senior managements and advisors to again explore terms upon
which the parties might reach agreement on a business combination. However,
discussions terminated on August 25, 1993, primarily due to disagreement over
the consideration to be offered to Paramount stockholders in the combination and
Viacom's insistence on an option on 20% of Paramount's stock at market and a
termination fee in the amount of $150 million, plus expenses.
A series of discussions began again in early September. On September 7,
1993, Messrs. Dauman and Oresman and the companies' respective financial and
legal advisors met, and following that meeting Messrs. Redstone and Davis met to
review the status of the discussions between the companies. On the basis of that
review, Messrs. Redstone and Davis agreed to direct their respective senior
managements and advisors to conduct due diligence, exchange and negotiate
transaction documentation, and otherwise seek to reach agreement on all terms.
From September 8 through September 11, 1993, senior management of Viacom
and Paramount, assisted by their legal and financial advisors, exchanged
financial and legal due diligence materials, conducted due diligence, and
negotiated a merger agreement (the "Original Merger Agreement") and a stock
option agreement (the "Original Stock Option Agreement") between Paramount and
Viacom and a voting agreement (the "Original Voting Agreement") between
Paramount and NAI.
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On September 9, 1993, at a regularly scheduled meeting, the Paramount Board
of Directors met and reviewed the status of negotiations and received an
analysis of the businesses of Viacom and Paramount and an analysis of certain
other merger transactions.
The negotiations over the principal issues in the agreements were concluded
during a meeting between Messrs. Dauman and Oresman and their respective legal
advisors in New York on September 11, 1993.
On September 12, 1993, the Viacom Board and the Paramount Board each met
and approved the proposed transactions. Paramount and Viacom entered into
certain related agreements and announced a merger of Paramount with and into
Viacom (the "Original Merger"). In the Original Merger, each share of Paramount
Common Stock was to be converted into the right to receive (i) 0.1 shares of
Viacom Class A Common Stock, (ii) 0.9 shares of Viacom Class B Common Stock and
(iii) $9.10 in cash. At the meeting of the Paramount Board, Lazard Freres
delivered a written opinion to the effect that as of September 12, 1993 the
consideration to be received by Paramount's stockholders in the Original Merger
was fair to the stockholders of Paramount from a financial point of view.
By a letter to Paramount dated September 20, 1993, QVC Network, Inc.
("QVC") proposed a business combination of Paramount and QVC under which each
outstanding share of Paramount Common Stock would be converted into the right to
receive 0.893 of a share of QVC Common Stock and $30 in cash. Under the terms of
the Original Merger Agreement, Paramount was not permitted to hold discussions
with QVC until the Paramount Board could establish that (i) the proposal was not
subject to any material financing contingency and (ii) that such discussions
were required for the Paramount Board to comply with its fiduciary duties to the
Paramount stockholders. Having made such findings, Paramount, by letter dated
October 13, 1993, requested that QVC produce, as a prelude to discussions,
information regarding QVC and the feasibility of its proposal. On October 20,
QVC delivered to Paramount certain materials. On October 21, the day after QVC
delivered these materials, QVC publicly announced that it would commence a
tender offer for 51% of the shares of Paramount Common Stock at $80 per share
(the "First QVC Offer") and, if successful, would propose a second-step merger
(the "First QVC Second-Step Merger") in which the remaining shares would be
converted into the right to receive 1.42857 shares of QVC Common Stock.
On October 21, 1993, QVC commenced an action in the Delaware Chancery Court
naming as defendants Paramount, certain of its directors and Viacom. QVC alleged
causes of action for breaches of fiduciary duty against Paramount and its Board,
and alleged that Viacom aided and abetted those breaches of duty. The action
sought to enjoin the proposed merger between Paramount and Viacom on the ground
that certain provisions of the Original Merger Agreement and the Original Stock
Option Agreement were unlawful and had been entered into in breach of the
Paramount directors' fiduciary duties. QVC's action was subsequently
consolidated with a number of class actions brought by certain Paramount
stockholders in the Delaware Chancery Court.
After QVC's October 21 announcement, Viacom proposed to modify the Original
Merger Agreement and the related agreements to increase the value of the merger
consideration to $80 per share of Paramount Common Stock (based on Viacom's
closing stock prices as of October 22, 1993) and to provide for the commencement
by Viacom of a tender offer for 51% of the Paramount Common Stock outstanding at
a price of $80 per share (the "First Viacom Offer") following which, in a
second-step merger (the "First Viacom Second-Step Merger"), holders of shares of
Paramount Common Stock not acquired in the First Viacom Offer would receive (i)
0.20408 shares of Viacom Class A Common Stock, (ii) 1.08317 shares of Viacom
Class B Common Stock and (iii) 0.20408 shares of a new series of cumulative
convertible exchangeable preferred stock of Viacom (the "Viacom Merger Preferred
Stock").
Following discussions between Paramount and Viacom, at a meeting of the
Paramount Board held on October 24, 1993, the Paramount Board considered (i) the
events that had transpired since Paramount and Viacom entered into the Original
Merger Agreement, including the First QVC Offer
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and the First QVC Second-Step Merger to the extent of available information, and
(ii) presentations from the Paramount Board's legal and financial advisors with
respect to the proposed revisions to the Original Merger Agreement, and with
respect to the First QVC Offer and the First QVC Second-Step Merger to the
extent of available information. The Paramount Board also received the oral
opinion of Lazard Freres to the effect that as of October 24, 1993 the
consideration to be received by Paramount's stockholders in the First Viacom
Offer and the First Viacom Second-Step Merger, taken together, was fair to the
stockholders of Paramount from a financial point of view.
The Paramount Board, by unanimous vote, (i) approved the Amended and
Restated Agreement and Plan of Merger dated as of October 24, 1993 between
Viacom and Paramount (the "October 24 Merger Agreement") (to provide for the
revised acquisition structure and expanded termination rights in favor of
Paramount), (ii) determined that the First Viacom Offer and the First Viacom
Second-Step Merger were consistent with and in furtherance of the long-term
business strategy of Paramount and, taken together, were fair to, and in the
best interests of, Paramount's stockholders, (iii) recommended approval and
adoption of the October 24 Merger Agreement and (iv) agreed to recommend that
holders of Paramount Common Stock tender their shares pursuant to the First
Viacom Offer.
Late the same day, Viacom's Board of Directors, by unanimous vote, (i)
determined that the October 24 Merger Agreement was fair to, and in the best
interests of, the stockholders of Viacom, (ii) approved the October 24 Merger
Agreement and (iii) authorized the commencement of the First Viacom Offer.
After the meetings, Viacom and Paramount executed the October 24 Merger
Agreement.
The October 24 Merger Agreement provided that the Paramount Board would
amend the Rights Agreement dated as of September 7, 1988 between Paramount and
Chemical Bank, as amended (the "Rights Agreement") to permit Viacom to
consummate its tender offer unless there existed a tender offer or exchange
offer to acquire Paramount or a written, bona fide proposal to acquire Paramount
pursuant to a merger, consolidation, share exchange, business combination,
tender or exchange offer or other similar transaction and that amending the
Rights Agreement would be inconsistent with the Paramount Board's satisfaction
of its fiduciary duties to stockholders under applicable law.
On October 25, 1993, Viacom commenced the First Viacom Offer. On October
27, 1993, QVC (together with its co-bidders, Comcast Corporation ("Comcast") and
Liberty Media Corporation ("Liberty Media")) commenced the First QVC Offer.
On October 28, 1993, QVC sent a letter to Paramount requesting that
Paramount negotiate with QVC regarding a merger proposal. By letter dated
October 29, 1993, Paramount indicated that it was prepared, as it was prior to
the commencement of the First QVC Offer, to meet with QVC to discuss its
proposal. On November 1, 1993, representatives of Paramount met with
representatives of QVC to discuss QVC's proposal. At the meeting, QVC's
representatives indicated that Paramount should not assume that there would be
no further increase in the value of the consideration proposed to be paid by QVC
with respect to the First QVC Offer and First QVC Second-Step Merger. However,
QVC's representatives stated that any further increase in QVC's bid would be, in
part, a function of the adoption by Paramount of certain auction bidding
procedures requested by QVC. QVC also presented to Paramount an informational
request and a form of merger agreement. In a letter to QVC dated November 1,
1993, Paramount stated that the requested auction bidding procedures were
inappropriate and, in addition, their adoption by Paramount would be
inconsistent with Paramount's contractual obligations under the October 24
Merger Agreement. Paramount's letter also referred to the provisions in the
October 24 Merger Agreement (i) allowing the Paramount Board to keep the Rights
Agreement in place with respect to the First Viacom Offer "if, in its view, the
existence of a better alternative would make an amendment to the Rights
Agreement inconsistent with its fiduciary duties" and (ii) permitting Paramount
to terminate the October 24 Merger Agreement "if the Paramount Board determines
to recommend to its stockholders another transaction in the exercise of its
fiduciary duties." By letter to Paramount dated November 2, 1993, counsel for
QVC expressed its displeasure at Paramount's failure
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to adopt QVC's requested auction bidding procedures but was silent as to whether
any alternative proposal would be made by QVC.
On November 5, 1993, Viacom proposed an amendment (the "November 6
Amendment") to the October 24 Merger Agreement which provided that the per share
consideration in the First Viacom Offer be increased from $80 to $85 (the
"Second Viacom Offer"). In addition, the proposed amendment provided that the
consideration in the First Viacom Second-Step Merger be revised by increasing
the amount of the Viacom Merger Preferred Stock from 0.20408 to 0.30408 shares
per share of Paramount Common Stock (the "Second Viacom Second-Step Merger"),
representing an increase of $5 in the value of the liquidation preference of the
Viacom Merger Preferred Stock to be paid.
Following discussions between Paramount and Viacom with regard to the terms
of this proposal, at a meeting held on November 6, 1993, the Paramount Board
considered the terms of the proposed amendments and received the oral opinion of
Lazard Freres that as of November 6, 1993 the consideration to be received by
Paramount's stockholders in the amended Second Viacom Offer and Second Viacom
Second-Step Merger, taken together, was fair to the stockholders of Paramount
from a financial point of view.
The Paramount Board, by unanimous vote, (i) approved the November 6
Amendment, (ii) determined that the amended Second Viacom Offer and Second
Viacom Second-Step Merger were consistent with and in the furtherance of the
long-term business strategy of Paramount and, taken together, were fair to, and
in the best interests of, Paramount's stockholders, (iii) recommended approval
and adoption of the October 24 Merger Agreement, as amended by the November 6
Amendment, by Paramount's stockholders and (iv) agreed to recommend that holders
of Paramount Common Stock tender their shares pursuant to the Second Viacom
Offer.
The Board of Directors of Viacom also met on November 6, 1993. At such
meeting, the Viacom Board of Directors, by unanimous vote, (i) determined that
the October 24 Merger Agreement, as amended by the November 6 Amendment, was
fair to, and in the best interests of, the stockholders of Viacom, (ii) approved
the October 24 Merger Agreement, as amended by the November 6 Amendment, and
(iii) authorized the increase in the per share consideration to be paid in the
Second Viacom Offer.
After the meetings, the November 6 Amendment was executed, and Viacom
publicly announced the Second Viacom Offer and Second Viacom Second-Step Merger.
On November 12, 1993, QVC amended the First QVC Offer to provide for the
purchase of 51% of the shares of Paramount Common Stock at a price of $90 per
share (the "Second QVC Offer"). QVC also stated its intention, if it acquired
51% of the shares of Paramount Common Stock pursuant to the Second QVC Offer, to
effect a second-step merger on revised terms (the "Second QVC Second-Step
Merger"). The revised terms of the Second QVC Second-Step Merger provided that
each share of Paramount Common Stock remaining after the consummation of the
Second QVC Offer would be exchanged for (i) 1.43 shares of QVC Common Stock and
(ii) 0.32 shares of a new series of cumulative convertible exchangeable
preferred stock of QVC (the "QVC Merger Preferred Stock"). In addition, at this
time Liberty Media terminated its participation as a co-bidder in the Second QVC
Offer and BellSouth Corporation ("BellSouth") joined QVC as a co-bidder.
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At a meeting held on November 15, 1993, the Paramount Board considered the
terms of the Second QVC Offer and Second QVC Second-Step Merger, and the Second
Viacom Offer and Second Viacom Second-Step Merger, with its legal and financial
advisors. The Paramount Board considered, among other factors, the highly
conditional nature of the Second QVC Offer and the financing and other
uncertainties (including the then non-binding nature of BellSouth's commitments)
with respect to QVC's ability to consummate such offer. The Paramount Board also
received the written opinion of Lazard Freres that as of November 15, 1993 the
consideration to be received by Paramount's stockholders in the Second Viacom
Offer and the Second Viacom Second-Step Merger, taken together, were fair to the
stockholders of Paramount from a financial point of view.
The Paramount Board unanimously determined that the Second QVC Offer was
not in the best interests of Paramount and its stockholders and recommended that
stockholders reject the Second QVC Offer and not tender any of their shares
pursuant to the Second QVC Offer.
On November 24, 1993, the Delaware Chancery Court issued a preliminary
injunction (the "Preliminary Injuction") in connection with the Delaware
litigation commenced by QVC and certain stockholders of Paramount prohibiting
Paramount from amending the Rights Agreement to permit completion of the pending
Second Viacom Offer, and denying Viacom the ability to exercise its rights
pursuant to the amended stock option agreement of Viacom and Paramount (as
amended, the "Amended Stock Option Agreement"). However, the Chancery Court
upheld the validity of the $100 million termination fee payable to Viacom.
The Preliminary Injunction was appealed by Viacom and Paramount to the
Delaware Supreme Court. On December 9, 1993, the Delaware Supreme Court issued
an order (the "Order") which (i) affirmed the Preliminary Injunction and (ii)
remanded the proceeding to the Delaware Chancery Court for proceedings
consistent with the Order. By letter dated December 10, 1993, Paramount's
attorneys advised the Delaware Chancery Court that the Paramount Board was to
meet on December 13, 1993 to consider how to comply with the Order and the prior
order and opinion of the Delaware Chancery Court.
At a meeting held on December 13, 1993, the Paramount Board determined that
it was unable to take a position with respect to whether stockholders should
accept or reject either the Second QVC Offer or the Second Viacom Offer and
requested that Paramount stockholders take no action until they had been further
advised of the Paramount Board's positions. The Paramount Board also adopted
procedures (the "Bidding Procedures") for the purpose of considering proposals
to acquire Paramount. From December 14-17, 1993, a number of letters pertaining
to the Bidding Procedures, including proposals for their modification, were
exchanged between Paramount's financial and legal advisors and the legal
advisors of Viacom and QVC.
The Board of Directors of Viacom held a meeting on December 20, 1993. At
such meeting, the Viacom Board, by unanimous vote, approved a proposed exemption
agreement (the "Viacom Exemption Agreement") setting forth the Bidding
Procedures to be followed by Viacom in connection with the Second Viacom Offer.
Pursuant to the Bidding Procedures, on December 20, 1993, Viacom and QVC
each submitted acquisition proposals to the Paramount Board. Viacom's proposal
consisted of a continuation of the Second Viacom Offer and Second Viacom
Second-Step Merger. QVC's proposal consisted of a revision of the Second QVC
Offer to provide for the purchase of 50.1% of the outstanding Paramount shares,
on a fully diluted basis, at $92 per share (the "Third QVC Offer") to be
followed by a revised second-step merger (the "Third QVC Second-Step Merger") in
which each remaining share would be converted into the right to receive (i) 1.43
shares of QVC Common Stock, (ii) 0.32 shares of a new series of 6% cumulative
non-convertible exchangeable preferred stock (the "New QVC Merger Preferred
Stock") and (iii) 0.32 ten-year warrants to purchase QVC Common Stock.
At a meeting held on December 21 and 22, 1993, the Paramount Board
considered (i) the events that had transpired since the Paramount Board's last
meeting on December 13, 1993 and (ii) presentations from the Paramount Board's
legal and financial advisors with respect to each of the
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proposals. The Paramount Board also received the written opinion of Lazard
Freres, dated December 21, 1993, stating that as of such date the aggregate
consideration payable to Paramount stockholders in the Third QVC Offer and Third
QVC Second-Step Merger, taken together, (a) was fair to Paramount stockholders
from a financial point of view and (b) was superior from a financial point of
view to the aggregate consideration payable in the Second Viacom Offer and the
Second Viacom Second-Step Merger, taken together.
The Paramount Board thereupon unanimously (i) approved the terms of a
merger agreement (which included a form of exemption agreement; the "QVC Merger
Agreement") and a voting agreement between QVC and its principal stockholders,
(ii) determined that the Third QVC Offer and Third QVC Second-Step Merger, taken
together, were fair to and in the best interests of Paramount's stockholders,
(iii) recommended approval and adoption of the QVC Merger Agreement by
Paramount's stockholders and (iv) recommended that holders of Paramount Common
Stock tender such shares pursuant to the Third QVC Offer. The Paramount Board
also (a) recommended that stockholders reject the Second Viacom Offer and not
tender any of their shares pursuant to the Second Viacom Offer, (b) authorized
the termination of the October 24 Merger Agreement, as amended by the November 6
Amendment, and (c) approved the terms of the Viacom Exemption Agreement (which
included a form of merger agreement).
The QVC Merger Agreement and the Viacom Exemption Agreement incorporated
the Bidding Procedures previously adopted by the Paramount Board. In addition,
the QVC Merger Agreement (as well as the form of merger agreement annexed to the
Viacom Exemption Agreement) (i) permitted Paramount to terminate such agreement
in order to accept a transaction that offered better value and (ii) contained no
stock option, asset lock-up, termination fee, expense reimbursements or other
provisions that could deter a higher offer for Paramount.
After the meeting on December 22, Paramount terminated the October 24
Merger Agreement, as amended by the November 6 Amendment, and the QVC Merger
Agreement and the Viacom Exemption Agreement were executed by the respective
parties.
On January 6, 1994, the Viacom Board of Directors met to consider a
proposal to amend and supplement the Second Viacom Offer. At such meeting, the
Viacom Board of Directors (i) determined that the Second Viacom Offer, as
amended as described below, was fair to and in the best interests of the
stockholders of Viacom and (ii) authorized the proposed amendment and supplement
to the Second Viacom Offer.
Pursuant to the Bidding Procedures, on January 7, 1994, Viacom amended the
terms of the Second Viacom Offer to provide for the purchase of 50.1% of the
outstanding shares of Paramount Common Stock, on a fully diluted basis, at $105
per share (the "Third Viacom Offer") and amended the terms of the Second Viacom
Second-Step Merger to provide for the exchange of (i) 0.93065 shares of Viacom
Class B Common Stock and (ii) 0.30408 shares of Viacom Merger Preferred Stock
for each share remaining after consummation of the Third Viacom Offer (the
"Third Viacom Second-Step Merger").
At a meeting held on January 12, 1994, the Paramount Board considered
presentations from its legal and financial advisors with respect to the Third
Viacom Offer and Third Viacom Second-Step Merger, as well as the Third QVC Offer
and Third QVC Second-Step Merger. The Paramount Board also received the written
opinion of Lazard Freres, dated January 12, 1994, stating that as of such date
the aggregate consideration payable to Paramount stockholders in the Third QVC
Offer and Third QVC Second-Step Merger, taken together, (i) was fair to
Paramount stockholders from a financial point of view and (ii) was superior from
a financial point of view to the aggregate consideration payable to Paramount
stockholders in the Third Viacom Offer and Third Viacom Second-Step Merger,
taken together.
The Paramount Board unanimously (a) recommended that stockholders reject
the Third Viacom Offer and not tender any of their shares pursuant to the Third
Viacom Offer and (b) reaffirmed (1) its determination that the Third QVC Offer
and Third QVC Second-Step Merger, taken together, were
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fair to and in the best interests of Paramount's stockholders and (2) its
recommendation that holders of Paramount shares tender such shares pursuant to
the Third QVC Offer.
On January 17, 1994, the Viacom Board of Directors met to consider a
proposed amendment and supplement to the Third Viacom Offer. The Viacom Board of
Directors, at such meeting, by unanimous vote, (i) determined that the Third
Viacom Offer, as amended and supplemented as described below, was fair to, and
in the best interests of, the stockholders of Viacom and (ii) authorized the
proposed amendment and supplement to the Third Viacom Offer.
Pursuant to the Bidding Procedures, on January 18, 1994, Viacom increased
the per share purchase price in the Third Viacom Offer to $107 (sometimes
hereinafter referred to as the "Offer" and sometimes as the "Fourth Viacom
Offer") and amended the terms of the Third Viacom Second-Step Merger to provide
for the exchange of (i) 0.93065 shares of Viacom Class B Common Stock, (ii)
0.30408 shares of Viacom Merger Preferred Stock, (iii) 0.93065 CVRs and (iv) 0.5
Viacom Three-Year Warrants for each Paramount share remaining after consummation
of the Fourth Viacom Offer (the "Fourth Viacom Second-Step Merger").
At a meeting held on January 21, 1994, the Paramount Board considered
presentations from its legal and financial advisors with respect to the Fourth
Viacom Offer and Fourth Viacom Second-Step Merger, as well as the Third QVC
Offer and Third QVC Second-Step Merger. The Paramount Board also received the
written opinion of Lazard Freres dated January 21, 1994 stating that as of such
date (i) the aggregate consideration payable to Paramount stockholders in the
Fourth Viacom Offer and Fourth Viacom Second-Step Merger, taken together, was
fair to Paramount stockholders from a financial point of view, (ii) the
aggregate consideration payable to Paramount stockholders in the Third QVC Offer
and Third QVC Second-Step Merger, taken together, was fair to Paramount
stockholders from a financial point of view and (iii) the aggregate
consideration payable to Paramount stockholders in the Fourth Viacom Offer and
Fourth Viacom Second-Step Merger, taken together, was marginally superior from a
financial point of view to the aggregate consideration payable to Paramount
stockholders in the Third QVC Offer and Third QVC Second-Step Merger, taken
together.
The Paramount Board unanimously (i) approved the terms of a new merger
agreement with Viacom (the "January 21 Merger Agreement") and the Paramount
Voting Agreement, (ii) determined that the Fourth Viacom Offer and Fourth Viacom
Second-Step Merger, taken together, were fair to and in the best interests of
Paramount's stockholders, (iii) recommended approval and adoption of the January
21 Merger Agreement by Paramount's stockholders and (iv) recommended that
holders of Paramount shares tender such shares pursuant to the Fourth Viacom
Offer. The Paramount Board also unanimously (a) recommended that stockholders
reject the Third QVC Offer and not tender any of their shares pursuant to such
offer and (b) authorized the termination of the QVC Merger Agreement.
After the meeting on January 21, 1994, Paramount terminated the QVC Merger
Agreement and entered into the January 21 Merger Agreement, the Paramount Voting
Agreement and an exemption agreement with QVC (the "QVC Exemption Agreement"),
all in substantially the form previously agreed to by the respective parties on
December 22, 1993.
On February 1, 1994, in anticipation of the submission on such date of
final bids under the Bidding Procedures, the Board of Directors of Viacom
considered a proposed amendment and supplement to the Fourth Viacom Offer
pursuant to which Viacom would revise the package of securities to be issued in
the Fourth Viacom Second-Step Merger. The Viacom Board of Directors received
presentations from the management of Viacom, Smith Barney and its legal advisors
with respect to the Fourth Viacom Offer and Fourth Viacom Second-Step Merger and
the proposed amendments thereto. The Viacom Board of Directors also received the
written opinion of Smith Barney that the Offer and the Paramount Merger, as
revised by the proposed amendment and supplement, taken together were fair, from
a financial point of view, to Viacom and its stockholders. The opinion of Smith
Barney is set forth in full as Annex III of this Proxy Statement/Prospectus. See
"--Opinions of Financial Advisors." The Viacom Board of Directors, by unanimous
vote (with Mr. H. Wayne Huizenga abstaining) (i) determined that the Offer, as
amended and supplemented, was fair to, and in the best interests of, the
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stockholders of Viacom and (ii) authorized the Offer. Mr. Huizenga did not
disclose to the Viacom Board the reason for his abstention.
Pursuant to the Bidding Procedures, on February 1, 1994, both Viacom and
QVC submitted their final proposals for the acquisition of Paramount. Viacom, in
proposing the Offer and the Paramount Merger, did not alter the terms of the
Fourth Viacom Offer but revised the Fourth Viacom Second-Step Merger to provide
for the exchange of (i) 0.93065 shares of Viacom Class B Common Stock, (ii)
0.93065 CVRs, (iii) 0.5 Viacom Three-Year Warrants, (iv) 0.3 Viacom Five-Year
Warrants and (v) $17.50 in principal amount of Viacom Merger Debentures for each
Paramount share remaining after consummation of the Offer. QVC increased the per
share purchase price in the Third QVC Offer to $104 (the "Fourth QVC Offer") and
amended the terms of the Third QVC Second-Step Merger to provide for the
exchange of (a) 1.2361 shares of QVC Common Stock, (b) 0.2386 shares of New QVC
Merger Preferred Stock and (c) 0.32 ten-year warrants for each Paramount share
remaining after consummation of the Fourth QVC Offer (the "Fourth QVC
Second-Step Merger"). Both the Offer and the Fourth QVC Offer were scheduled to
expire at midnight on February 14, 1994.
At a meeting held on February 4, 1994, the Paramount Board considered
presentations from its legal and financial advisors with respect to the Offer
and the Paramount Merger, as well as the Fourth QVC Offer and Fourth QVC
Second-Step Merger. The Paramount Board also received the written opinion of
Lazard Freres dated February 4, 1994 stating that as of such date (i) the Viacom
Transaction Consideration was fair to Paramount stockholders from a financial
point of view, (ii) the QVC Transaction Consideration was fair to Paramount
stockholders from a financial point of view and (iii) the Viacom Transaction
Consideration was marginally superior from a financial point of view to the QVC
Transaction Consideration.
The Paramount Board unanimously (i) approved the terms of the February 4
Merger Agreement (which amended and restated the January 21 Merger Agreement to
provide for the terms of the Offer and the Paramount Merger), (ii) determined
that the Offer and the Paramount Merger, taken together, were fair to, and in
the best interests of, Paramount's stockholders, (iii) recommended approval and
adoption of the February 4 Merger Agreement and (iv) recommended that holders of
shares of Paramount Common Stock tender such shares pursuant to the Offer. The
Paramount Board also unanimously recommended that stockholders reject the Fourth
QVC Offer and not tender any of their shares pursuant to such offer. After the
meeting on February 4, 1994, Paramount entered into the February 4 Merger
Agreement.
At the request of Mr. Donald Oresman of Paramount on February 14, 1994,
Lazard Freres delivered a letter, dated February 14, 1994, to Mr. Oresman
advising him that, as of February 14, 1994, Lazard Freres reaffirmed its written
opinion addressed to the Paramount Board, dated February 4, 1994.
As of midnight on February 14, 1994, approximately 74.6% of the outstanding
Paramount shares had been tendered pursuant to the Offer and not withdrawn while
approximately 8.5% of the outstanding Paramount shares were validly tendered
pursuant to the Fourth QVC Offer and not withdrawn. As a result, pursuant to the
Bidding Procedures, on February 15, 1994 Viacom waived certain conditions to the
Offer and extended the offer until March 1, 1994 and QVC terminated the Fourth
QVC Offer.
By unanimous written consent, effective March 1,1994 the Paramount Board
approved an amendment to the Rights Agreement providing that the consummation of
the Offer would not cause the rights under the Rights Agreement (the "Rights")
to become exercisable. Immediately after midnight on March 1, 1994, all
conditions to the Offer were deemed to have been satisfied and Viacom accepted
for payment 61,657,432 of the shares of Paramount Common Stock validly tendered
and not withdrawn pursuant to the Offer.
On May 26, 1994, the Reconstituted Board of Directors of Paramount and the
Viacom Board each approved the May Amendment. The principal purposes of the May
Amendment were to (i) add Merger Subsidiary as a party, (ii) provide for the
merger of Merger Subsidiary with and into Paramount
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(rather than Paramount into Viacom) and (iii) provide for the treatment of
Paramount Stock Options in the Paramount Merger as described under "The
Paramount Merger--Effect on Employee Benefit Stock Plans."
PURPOSE AND STRUCTURE OF THE PARAMOUNT MERGER
Viacom and NAI's purpose for the Paramount Merger is to acquire beneficial
ownership of 100% of the equity of Paramount for the reasons described in
"--Background of the Paramount Merger" and "--Reasons for the Paramount Merger;
Recommendation of the Board of Directors; Fairness of the Transaction." The
Paramount Merger is structured as a merger because it ensures that Viacom will
acquire beneficial ownership of 100% of the equity of Paramount in a single
transaction. Viacom's acquisition of the shares of Paramount Common Stock owned
by the holders of Paramount Common Stock other than Viacom and its subsidiaries
will enable Viacom to realize the benefits and bear the risks of complete
ownership of Paramount including the opportunity to (i) facilitate inter-company
activity between Viacom and Paramount, (ii) permit combinations of management
and other resources of Viacom and Paramount, including, among other things, the
consolidation and rationalization of Paramount's business and operating
structure with a view to improving operations and reducing expenses of Viacom
and Paramount (see "--Certain Effects of the Paramount Merger; Operations After
the Paramount Merger"), (iii) enable Paramount's management (or any successors
thereto) to devote itself to building long-term values for Paramount without
concern that such efforts may adversely affect short-term results and the market
price for Paramount Common Stock, and (iv) eliminate the need for Paramount to
comply with the reporting requirements of the Exchange Act, to maintain
separately audited financial statements and to maintain its current listing on
the NYSE. In addition, Viacom believes that if Paramount were to continue to
have public stockholders, Paramount would require more management time and
attention than it would as a wholly owned subsidiary of Viacom.
The Paramount Merger will be effected by causing a wholly owned subsidiary
of Viacom to merge with and into Paramount. As a result, Paramount will be the
corporation surviving the Paramount Merger and will become a wholly owned
subsidiary of Viacom after the Paramount Effective Time.
REASONS FOR THE PARAMOUNT MERGER; RECOMMENDATIONS OF THE BOARD OF DIRECTORS;
FAIRNESS OF THE TRANSACTION
Viacom. At the meetings of the Viacom Board of Directors described above in
"--Background of the Paramount Merger," the Viacom Board received presentations
from Viacom's management regarding the business and prospects of Paramount. The
Viacom Board also received further presentations regarding, and reviewed the
terms of, the February 4 Merger Agreement and the Offer, as amended and
supplemented, with members of Viacom's management and its financial and legal
advisors. In making its determination set forth below, the Viacom Board reviewed
with Smith Barney its financial analyses, with a view to understanding the bases
of its analyses and opinions, and reviewed and discussed with management the
results of management's due diligence investigations, the business opportunities
created by a combined Viacom-Paramount and risks associated with the
transactions. By a unanimous vote (with one director abstaining) of directors at
a special meeting of the Board of Directors of Viacom held on February 1, 1994,
the Viacom Board of Directors determined that the Offer and the Paramount
Merger, taken together, are fair to and in the best interests of Viacom and its
stockholders, approved the Offer and the Paramount Merger and resolved to
recommend that the stockholders of Viacom vote FOR approval of the February 4
Merger Agreement and related transactions.
In reaching its conclusion to enter into the February 4 Merger Agreement,
the Viacom Board of Directors considered the following material factors:
1. The fact that Paramount and Viacom have businesses that are highly
complementary to each other and the fact that such businesses consist of
many well-known entertainment and media franchises; in particular, that:
. the combination of Paramount and Viacom will bring together the
creative talent, intellectual property, managerial resources and
trademarks of Paramount and Viacom;
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. each company would add enhanced and complementary distribution
capabilities;
. the combination of Paramount with Viacom would be able to
penetrate markets and achieve business goals that would otherwise be
more difficult to achieve; and
. as a result of all of the foregoing, combining Paramount with
Viacom would create a company better positioned than each of the
companies would be separately to adapt and benefit from technological
and other developments in the distribution and form of entertainment
programming and to successfully meet competitive challenges;
2. The terms of the proposed transaction including the terms of the
securities to be issued in the Paramount Merger, and the fact that the
Viacom Board believes that for the reasons discussed in paragraphs 1, 3, 4
and 5, the prospects for earnings before interest, taxes, depreciation and
amortization and earnings per share will be enhanced by the Paramount
Merger;
3. The financial condition of a combined Viacom and Paramount, the
impact of the Paramount Merger on the ability of the resultant entity to
pursue further growth through acquisition or the development of new or
complementary businesses and the anticipated ability of a combined Viacom
and Paramount to meet its financial obligations;
4. The fact that Viacom and Paramount are each pursuing international
business strategies and that the combination is expected to result in a
strongly enhanced international presence and to enable the sharing of
knowledge of international markets;
5. The fact that the combination of Paramount and Viacom is expected
to result in significant opportunities for increased revenues from (i)
cross-promotion and utilization of Viacom's and Paramount's well-known
brand names, such as using Viacom's Showtime, MTV and Nickelodeon brands to
enhance Paramount's live entertainment businesses, (ii) the utilization of
distribution capabilities of each company to distribute products of the
other (for example, the distribution of Paramount's theatrical motion
picture library on an existing or new cable network of Viacom or the
development of a broadcast network) and (iii) the development of new
businesses based upon the management and creative skills of a combined
Viacom and Paramount (for example, the development of retail stores based
on the combined characters and trademarks of Viacom and Paramount); and the
fact that Viacom and Paramount could achieve cost reductions through the
combination of similar businesses and economies of scale;
6. Smith Barney's opinion to the effect that, as of February 1, 1994,
the proposed financial terms of the Offer and the Paramount Merger, taken
together, were fair, from a financial point of view, to Viacom and its
stockholders, whether or not the Blockbuster Merger is consummated (in this
respect, while the Viacom Board of Directors did not explicitly adopt Smith
Barney's financial analyses, the Viacom Board of Directors took such
analyses into account in its overall evaluation of the Offer and Paramount
Merger);
7. The fact that NAI is the owner of approximately 85% of the
outstanding voting stock of Viacom; the fact that, as a result of the
proposed Paramount Merger, NAI would continue to hold approximately 85% of
the outstanding voting stock of Viacom and as a result of the proposed
Mergers, NAI would continue to hold approximately 61% of the outstanding
voting stock of the combined company; and the fact that the Paramount
Merger Consideration consists of no shares of Viacom Class A Common Stock.
In this regard, the Viacom Board of Directors also noted that the economic
interests of NAI and Viacom's public stockholders are aligned in connection
with the Offer and the Paramount Merger; and
8. Certain risks associated with the proposed transaction, as set
forth under "Certain Considerations."
The Viacom Board considered that the combination of Viacom and Paramount
with Blockbuster would provide additional business opportunities of the kind
specified above. However, the Viacom Board concluded that, even without
Blockbuster, the combination of Viacom with Paramount could be financed on a
reasonable basis and would result in all of the benefits described above.
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In view of the wide variety of factors considered by the Viacom Board, the
Viacom Board did not find it practicable to quantify or otherwise attempt to
assign relative weights to the specific factors considered in making its
determination. However, as a general matter, the Viacom Board believed that the
factors discussed in paragraphs 1, 2, 4, 5 and 6 supported its decision to
approve the Offer and the Paramount Merger and outweighed the risks associated
therewith referred to in paragraph 8.
Viacom believes that the consideration paid in the Offer and the Paramount
Merger, taken together, is fair to the stockholders of Paramount. Viacom's
belief is based upon the fact that the terms of the Offer and the February 4
Merger Agreement were the product of arm's-length negotiations between Viacom,
Paramount and their respective financial and legal advisors and were approved by
the Paramount Board at a time when none of Viacom, NAI or Sumner M. Redstone (or
any of their affiliates) was a member of the Paramount Board; that the Paramount
Board received a fairness opinion from Lazard Freres, which was reaffirmed on
February 14, 1994; and that the terms of the Offer and Paramount Merger were
agreed to following an extensive public bidding process. While the Paramount
Merger does not require the approval of a majority of the unaffiliated
stockholders of Paramount, Viacom believes that the Paramount Merger is
procedurally fair to Paramount stockholders for the reasons set forth above. In
addition, as the terms of the Paramount Merger were disclosed to Paramount
stockholders at the time they made their decision to tender their shares, the
Paramount unaffiliated stockholders in effect selected the Paramount Merger by
virtue of tendering into the Offer. Each of NAI and Mr. Redstone, in his
individual capacity, have determined that the consideration paid in the
Offer and the Paramount Merger, taken together, is fair to the unaffiliated
stockholders of Paramount and in making such determination each has adopted
the reasons of the Viacom Board set forth above.
On May 26, 1994, the Viacom Board approved the May Amendment.
THE BOARD OF DIRECTORS OF VIACOM RECOMMENDS THAT HOLDERS OF VIACOM CLASS A
COMMON STOCK VOTE FOR APPROVAL OF THE PARAMOUNT MERGER AGREEMENT AND RELATED
TRANSACTIONS.
Paramount. At its February 4, 1994 meeting, the Paramount Board considered
presentations from its legal and financial advisors with respect to the Offer
and the Paramount Merger, as well as the Fourth QVC Offer and the Fourth QVC
Second-Step Merger. It unanimously (i) approved the terms of the February 4
Merger Agreement and authorized its execution and delivery, (ii) determined that
the Offer and the Paramount Merger, taken together, were fair to, and in the
best interests of, Paramount's stockholders, (iii) recommended approval and
adoption of the February 4 Merger Agreement by Paramount's stockholders and (iv)
recommended that holders of shares of Paramount Common Stock tender their shares
pursuant to the Offer. The Paramount Board also unanimously recommended that
stockholders reject the Fourth QVC Offer and not tender any of their shares
pursuant to the Fourth QVC Offer.
The Paramount Board, in reaching its conclusions, gave consideration to the
following material factors:
(i) The presentation by Lazard Freres to the Paramount Board and its
written opinion dated February 4, 1994 stating that as of such date (a) the
Viacom Transaction Consideration was fair to Paramount stockholders from a
financial point of view, (b) the QVC Transaction Consideration was fair to
Paramount stockholders from a financial point of view and (c) the Viacom
Transaction Consideration was marginally superior to the QVC Transaction
Consideration from a financial point of view;
(ii) The Paramount Board's determination, taking into account Lazard
Freres' presentation and written opinion, that the Offer and the Paramount
Merger, taken together, represented the best value available under the
circumstances to Paramount stockholders. This determination was also based
upon the Paramount Board's view that the Viacom Transaction Consideration
has a more certain value than the QVC Transaction Consideration because (a)
the Viacom Transaction Consideration contains a larger percentage of cash
and securities readily susceptible to valuation than the QVC Transaction
Consideration and (b) the CVRs to be issued in the Paramount Merger would
afford a degree of value assurance protection to Paramount stockholders
with respect to the Viacom Class B Common Stock to be issued in the
Paramount Merger;
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(iii) The terms and provisions of the February 4 Merger Agreement,
including the following:
(a) The bidding procedures incorporated in the February 4 Merger
Agreement (and in the QVC Exemption Agreement) that were designed to
remove the coercive element from any offer by QVC or Viacom and to
provide stockholders with a meaningful choice between a tender offer
from QVC or Viacom;
(b) Paramount's right to terminate the February 4 Merger Agreement
in order to accept a transaction that offers better value; and
(c) The absence of any stock option, asset lock-up, termination
fee, expense reimbursements or other provisions that could deter a
higher offer for Paramount; and
(iv) The conditions to the Offer and the Paramount Board's
determination that all such conditions had been satisfied or could
reasonably be expected to be satisfied by the expiration date of the Offer.
Each of the Viacom Board and the Paramount Board asked extensive questions
of its respective financial advisor concerning all aspects of the Offer and the
Paramount Merger and, in the context of the Paramount Board, the QVC Merger,
including questions concerning valuation techniques and comparative results.
On May 26, 1994, the Reconstituted Paramount Board of Directors approved
the May Amendment.
In the context of the auction of Paramount, the Paramount Board was faced
with competing offers from Viacom and QVC, each of which contemplated a first
step cash tender offer for a majority of Paramount stock which would thereby
permit consummation of a specified second step merger without any vote of the
unaffiliated shareholders of Paramount. The Paramount Board approved the
Paramount Merger as part of its recommendation to the stockholders of Paramount
that they tender their shares to Viacom pursuant to the Offer. Since the terms
of the second step merger were disclosed to the Paramount stockholders at the
time they made their decision to tender their shares, the Paramount unaffiliated
stockholders in effect selected the Paramount Merger by virtue of tendering into
the Offer. Tendering into the Offer and approval of the Paramount Merger do not
prevent stockholders of Paramount who have not voted in favor of the Paramount
Merger from exercising their rights to appraisal. See "Dissenting Stockholders'
Rights of Appraisal."
OPINIONS OF FINANCIAL ADVISORS
Smith Barney has delivered its written opinion to the Viacom Board that as
of February 1, 1994, the financial terms of the Offer and the Paramount Merger,
taken together, were fair, from a financial point of view, to Viacom and its
stockholders, whether or not the Blockbuster Merger is consummated. VIACOM
STOCKHOLDERS ARE URGED TO READ THIS OPINION IN ITS ENTIRETY FOR ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITS OF REVIEW BY SMITH BARNEY. Smith Barney did
not make or seek to obtain an appraisal of Viacom's, Paramount's or
Blockbuster's assets in rendering its opinion. No limitations were imposed by
the Viacom Board upon Smith Barney with respect to the investigations made or
procedures followed by it in rendering its opinion. Smith Barney has not been
requested to update its opinion to the date of this Proxy Statement/Prospectus.
Copies of the February 1, 1994 opinion of Smith Barney and related written
presentation to the Viacom Board have been filed as exhibits to the Schedule
13E-3 filed with the Commission with respect to the Paramount Merger and may be
inspected and copied, and obtained by mail, from the Commission as set forth in
"Available Information" and will be made available for inspection and copying at
the principal executive offices of Viacom International at 1515 Broadway, New
York, New York 10036 during regular business hours by any interested public
stockholder of Paramount or his or her representative who has been so designated
in writing.
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THE FULL TEXT OF THE OPINION OF SMITH BARNEY, WHICH SETS FORTH ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN BY SMITH BARNEY, IS
ALSO ATTACHED HERETO AS ANNEX III TO THIS PROXY STATEMENT/PROSPECTUS. SMITH
BARNEY'S OPINION IS DIRECTED ONLY TO THE FINANCIAL TERMS OF THE OFFER AND
PARAMOUNT MERGER TAKEN TOGETHER AND DOES NOT (I) ADDRESS THE FINANCIAL TERMS OF
THE OFFER OR THE PARAMOUNT MERGER INDEPENDENT OF THE OTHER OR (II) CONSTITUTE A
RECOMMENDATION TO ANY VIACOM STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE
AT THE VIACOM SPECIAL MEETING. THE SUMMARY OF THE OPINION OF SMITH BARNEY SET
FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Smith Barney (i) reviewed the Offer; (ii)
reviewed the January 21 Merger Agreement in the form presented to the Viacom
Board; (iii) met with certain senior officers of Viacom, Blockbuster and
Paramount to discuss the business, operations, assets, financial condition and
prospects of their respective companies; (iv) examined certain publicly
available business and financial information relating to Viacom, Blockbuster and
Paramount, and certain financial forecasts and other data for Viacom,
Blockbuster and Paramount which were provided to Smith Barney by the senior
management of Viacom, Blockbuster and Paramount, respectively, which are not
publicly available; (v) took into account certain long-term strategic benefits
of the Paramount Merger and the Blockbuster Merger, both operational and
financial, that were described to Smith Barney by Viacom, Blockbuster and
Paramount senior management; and (vi) reviewed the financial terms of the Offer
and the Paramount Merger as set forth in the revised Offer to Purchase of Viacom
used in connection with the Offer and of the Blockbuster Merger as set forth in
the Blockbuster Merger Agreement, in relation to, among other things, current
and historical market prices and trading volumes of Viacom Common Stock,
Paramount Common Stock and Blockbuster Common Stock; the earnings and book value
per share of each of Viacom, Paramount and Blockbuster; and the capitalization
and financial condition of each of Viacom, Paramount and Blockbuster. Smith
Barney also considered, to the extent publicly available, the financial terms of
certain other business combination transactions which Smith Barney considered
relevant in evaluating the Offer and Paramount Merger and the Blockbuster Merger
and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies that they considered
relevant in evaluating Viacom, Blockbuster and Paramount. Smith Barney also
evaluated the pro forma financial impact of the Offer and Paramount Merger and
of the Blockbuster Merger on Viacom. In addition to the foregoing, Smith Barney
conducted such other analyses and examinations and considered such other
financial, economic and market criteria as it deemed necessary in arriving at
its opinion.
In arriving at its opinion, Smith Barney relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise discussed with it,
including certain financial forecasts and other information prepared by Viacom
management and set forth in the February 1, 1994 Viacom Board Presentation filed
as an exhibit to the Schedule 13E-3 filed with the Commission with respect to
the Paramount Merger. With respect to financial forecasts and other information
provided to or otherwise discussed with it, Smith Barney assumed that such
forecasts and other information were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the respective senior
managements of Viacom, Blockbuster and Paramount as to the expected future
financial performance of Viacom, Blockbuster and Paramount. Smith Barney also
relied upon the views of the management of Viacom, Paramount and Blockbuster in
assuming that certain long-term strategic benefits, both operational and
financial, will result from each of the Offer, the Paramount Merger and the
Blockbuster Merger. Smith Barney expressed no opinion as to what the value of
the Paramount Merger Consideration will be when issued to Paramount stockholders
pursuant to the Paramount Merger or the price at which the Paramount Merger
Consideration will trade subsequent to the Paramount Merger. Smith Barney has
not made or been provided with an independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of Viacom, Blockbuster or
Paramount nor have they made any physical inspection of the properties or assets
of Viacom, Blockbuster or Paramount. Smith Barney's opinion was based upon
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financial, stock market and other conditions and circumstances existing and
disclosed to it as of the date of its opinion.
February 1, 1994 Viacom Board Presentation
At the February 1, 1994 meeting of the Viacom Board of Directors, Smith
Barney presented information and materials relating to the following matters:
(i) the proposed Offer and Paramount Merger, (ii) the pro forma impact to Viacom
of two different business combination scenarios (a combined Viacom and Paramount
and a combined Viacom, Paramount and Blockbuster), and (iii) quantitative
analysis relating to the foregoing matters.
THE OFFER AND THE PARAMOUNT MERGER
Transaction Overview
Smith Barney presented to the Viacom Board a summary of the Offer and
Paramount Merger, including the following:
. An overview of the key elements of the Offer and the Paramount Merger.
. A comparison of the per share consideration at face value ($86.28
compared to $83.46) and trading value ($84.17 compared to $80.30) of the Fourth
Viacom Offer and the Third Viacom Offer.
. An overview of the aggregate consideration at face value (approximately
$10.53 billion) and trading value (approximately $10.27 billion) of the Offer.
. A summary of the sources of financing for the Paramount Merger.
Viacom Merger Debentures
. A summary list of the terms of the Viacom Merger Debentures and the
advantages of their use in the Paramount Merger.
The advantages and disadvantages of the Viacom Merger Debentures, as
compared to the use of the Viacom Merger Preferred Stock included in the Third
Viacom Second-Step Merger, were discussed by Smith Barney as follows:
. Lower after-tax cost equivalent Viacom Merger Debentures than Viacom
Merger Preferred Stock for the first three years.
. Issuing Viacom Merger Debentures would allow Viacom to take advantage of
greater leverage capability if Blockbuster Merger is consummated.
. Viacom Merger Debentures estimated to trade at par value versus 20%
discount for the Viacom Merger Preferred Stock under then existing market
conditions.
The advantages and disadvantages of the Viacom Exchange Debentures were not
discussed with the Viacom Board by Smith Barney.
Valuation Analyses
Smith Barney also reviewed with the Viacom Board the analyses discussed
below relating to the valuation of Paramount which reflected the significant
changes that occurred in the valuation being placed on the entertainment
companies since Viacom and Paramount announced the Original Merger in September
1993.
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Public and Precedent Private Market Breakdown
Smith Barney reviewed with the Viacom Board the public and private market
breakdown analysis of Paramount. Based on the comparable company and selected
transaction analyses discussed below, Smith Barney explained to the Viacom Board
that this analysis consisted of the valuation of each of Paramount's significant
component business segments, which valuation consists of an analysis of the
multiples at which companies in lines of businesses comparable to such Paramount
business segments trade in the public market. The two industries Smith Barney
analyzed were the entertainment and publishing industries, however, such
analyses were extended into more specific segments of these industries. The
entertainment industry was divided into the film/entertainment, movie theaters,
cable programming and broadcasting segments. The publishing industry was
segmented into educational, consumer and professional publishing. The
combination of the selected comparable company and selected comparable
transactions analyses generated an equity value range of approximately $6.5
billion to $11.2 billion in the aggregate, or approximately $53.13 to $90.95 per
share.
Analysis of Public Trading Valuation of Selected Comparable Companies
Smith Barney presented to the Viacom Board an analysis of the public
trading valuation of selected comparable companies, including share price,
market value, adjusted market value, multiples of market value and multiples of
adjusted market value. Smith Barney also discussed a five-year estimated
earnings per share growth for such selected comparable companies. All earnings
per share figures for the Comparable Companies were based on the consensus net
income estimates of selected investment banking firms and all earnings per share
estimates for Viacom and Paramount were based on internal estimates.
Such comparable companies that Smith Barney examined included A.H. Belo
Corporation, Ackerly Communications, Inc., Capital Cities/ABC, Inc., Carmike
Cinemas, Inc., CBS Inc., Cineplex Odeon Corporation, Clear Channel
Communications, Inc., Gaylord Entertainment Co., Granite Broadcasting
Corporation, Harcourt General, Inc., Heritage Media Corporation, Houghton
Mifflin Company, International Family Entertainment, Inc., John Wiley & Sons,
Inc., King World Productions, Inc., Liberty Media Corporation, Marvel
Entertainment Group, Inc., McGraw Hill, Inc., Multimedia, Inc., New Line Cinema
Corporation, News Corporation Limited, Outlet Communications, Inc., Park
Communications Inc., Plenum Publishing Corporation, Reader's Digest Association,
Inc., Scholastic Corporations, Scripps Howard Broadcasting Co., The Walt Disney
Company, Thomas Nelson, Inc., Time Warner, Inc., Turner Broadcasting System,
Inc., United Television, Inc., Waverly, Inc. and Western Publishing Group, Inc.
Smith Barney compared market values as multiples to, among other things,
latest 12 months after-tax cash flow, book value, and estimated calendar 1993
and 1994 net income for both the entertainment and publishing industries. The
respective multiples of the entertainment comparable companies were between the
following ranges: (i) latest 12 months after tax cash flow: 5.6x to 67.6x (with
a mean of 16.0x and a median of 13.7x); (ii) book value: 1.0x to 12.7x (with a
mean of 5.3x and a median of 3.9x); (iii) estimated 1993 calendar net income:
14.7x to 74.5x (with a mean of 26.0x and a median of 22.4x); and (iv) estimated
calendar 1994 net income: 13.5x to 46.4x (with a mean of 20.9x and a median of
19.1x). The respective multiples of the publishing comparable companies were
between the following ranges: (i) latest 12 months after tax cash flow: 6.3x to
44.6x (with a mean of 17.0x and a median of 11.4x); (ii) book value: 1.8x to
21.3x (with a mean of 5.1x and median of 3.4x); (iii) estimated 1993 calendar
net income: 16.1x to 44.0x (with a mean of 23.3x and a median of 20.6x); and
(iv) estimated calendar 1994 net income: 11.7x to 32.7x (with a mean of 19.2x
and a median of 17.5x).
Smith Barney compared adjusted market capitalization to, among other
things, historical net revenues; EBITDA and EBIT of the comparable companies.
The entertainment comparable companies for the respective multiples were between
the following ranges: (i) latest 12 months net revenue: 1.0x to 5.4x (with a
mean of 2.8x and a median of 2.4x); (ii) latest 12 months EBITDA: 6.9x to 31.6x
(with a
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mean of 12.1x and a median of 9.9x); and (iii) latest 12 months EBIT: 7.4x to
41.4x (with a mean of 18.2x and a median of 15.2x). The publishing comparable
companies for the respective multiples were between the following ranges: (i)
latest 12 months net revenue: 0.6x to 20.0x (with a mean of 3.6x and a median of
1.5x); (ii) latest 12 months EBITDA: 5.3x to 25.1x (with a mean of 12.2x and a
median of 10.7x); and (iii) latest 12 months EBIT: 6.7x to 34.4x (with a mean of
18.3x and a median of 16.1x).
Smith Barney also presented an analysis of operating statistics of the
comparable companies including, among other things, operating margins (in
relation to EBITDA, EBIT and after tax cash flow), three year historical revenue
growth, three year average EBITDA and EBIT margins, and debt to capitalization
ratios, in each case as compared to Paramount.
Analysis of Selected Transactions
Smith Barney analyzed, among other things, the purchase prices as multiples
of net income and book value of the selected mergers and acquisitions and
transaction value as a multiple of revenues, EBITDA and total assets of the
selected mergers and acquisitions and compared these multiples with the
multiples of Paramount's performance implied by the Paramount merger
consideration. As set forth above under "Analysis of Public Trading Valuation of
Selected Comparable Companies," the analysis consisted of the valuation of each
of Paramount's significant component segments business, including the
entertainment and publishing industries.
Such comparable transactions that Smith Barney reviewed included the
acquisition by Turner Broadcasting System, Inc. of New Line Cinema Corporation,
the acquisition by Turner Broadcasting System, Inc. of Castle Rock
Entertainment, the acquisition by Matsushita Acquisition Corporation of MCA
Inc., the acquisition by Sony USA Inc. of Columbia Pictures Entertainment Inc.,
the acquisition by Time Inc. of Warner Communications Inc., the acquisition by
McGraw Hill, Inc. of Macmillan-McGraw Hill School Publishing Co. and the
acquisition by General Cinema Corp. of Harcourt Brace Jovanovich, Inc.
The multiples of net income and book value for the entertainment selected
transactions were between the following ranges: (i) latest 12 months net income:
27.3x to 49.9x (with a mean of 43.1x and a median of 28.4x); and (ii) book
value: 1.7x to 11.2x (with a mean of 7.8x and a median of 4.3x). The multiples
of revenues, EBITDA and total assets for the entertainment selected transactions
were between the following ranges: (i) revenues: 0.9x to 9.9x (with a mean of
2.9x and a median of 1.9x); (ii) EBITDA: 9.3x to 21.1x (with a mean of 14.5x and
a median of 13.3x); and (iii) total assets: 0.7x to 3.3x (with a mean of 1.6x
and a median of 1.1x). The multiples of net income and book value for the
publishing selected transactions were between the following ranges: (i) latest
12 months net income: 13.8x to 56.9x (with a mean of 31.2x and a median of
29.4x); and (ii) book value: 5.0x to 11.2x (with a mean of 7.3x and a median of
7.0x). The multiples of revenues, EBITDA and total assets for the publishing
selected transactions were between the following ranges: (i) revenues: 1.1x to
2.7x (with a mean and a median of 2.0x); (ii) EBITDA: 6.2x to 14.8x (with a
mean of 10.3x and a median of 10.0x); and (iii) total assets: 0.5x to 6.6x
(with a mean of 2.7x and a median of 2.1x).
No company, transaction or business used in the comparable company and
selected merger and acquisition transactions analyses as a comparison is
identical to Viacom or Paramount or the Viacom/Paramount merger. Accordingly, an
analysis of the results of the foregoing is not entirely mathematical; rather,
it involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that can affect the
acquisition or public trading value of the comparable companies or the business
segment or company to which they are being compared.
Discounted Cash Flow Analysis
Smith Barney discussed with the Viacom Board its updated DCF analysis of
Paramount, identifying the difficulty of preparing long term forecasts with
respect to Paramount's business due to the "hit
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driven" nature of the business. Smith Barney also reviewed with the Viacom Board
certain projections contained in the DCF analysis and the assumptions underlying
such projections. In its DCF analysis, Smith Barney applied discount rates
ranging between 10% and 12%, and applied terminal value multiples ranging
between 14.0x and 16.0x EBITDA. This analysis generated an equity value range of
approximately $9.0 billion to $11.0 billion in the aggregate, or approximately
$73.22 to $89.53 per share.
Smith Barney noted that each of the foregoing analyses may be subject to
change depending upon the availability of new information which may have the
effect of changing the ascribed valuation per share.
PRO FORMA IMPACT
Smith Barney presented to the Viacom Board information concerning the pro
forma impact of the Paramount Merger, including the following:
No CVR Liability
. A pro forma summary of the impact of the Paramount Merger, assuming no
payment under the CVRs (with and without giving effect to the Blockbuster
Merger), on Viacom's pro forma stock price and cash flow per share, estimated
for the years 1994 to 1996, and the ratios of debt to EBITDA and EBITDA to net
interest and preferred dividend requirements, estimated for the years 1993 to
1996.
CVR Liability
. A pro forma summary of the impact of the Fourth Viacom Offer, assuming a
$10 per share CVR payment and of the impact of the Paramount Merger to Viacom
(with and without giving effect to the Blockbuster Merger) and assuming $12 and
$7 per share CVR payments on Viacom's pro forma stock price and cash flow per
share for the years 1994 to 1996, and the ratios of debt to EBITDA and EBITDA to
net interest and preferred dividends for the years 1993 to 1996.
The pro forma impact summaries were based upon the detailed quantitative
analysis discussed below.
Quantitative Analysis
Combined Company
Smith Barney presented to the Viacom Board an analysis of the Paramount
Merger (assuming consummation of the Blockbuster Merger (assuming the exercise
of VCRs resulting in a weighted average Class B exchange ratio of 0.66544), the
expiration of the CVRs without liability and the exercise of the Viacom
Warrants), that included:
. A transaction structure and an analysis of the Paramount Merger setting
forth the kind and amount of securities to be issued in the Paramount Merger,
the source and use of funds and the per share consideration to be paid to
Paramount stockholders in the Paramount Merger. Smith Barney also discussed the
impact of the use of convertible preferred stock and convertible debt as part of
the consideration in the Paramount Merger.
. An analysis of the pro forma impact of the Paramount Merger to Viacom
(with and without giving effect to the impact on Viacom of the sale of
convertible preferred stock to NYNEX and Blockbuster if the Offer and Paramount
Merger were not consummated), Paramount and Blockbuster on stand-alone bases,
including with respect to estimated 1994 revenue, cash flow and net income,
estimated 1993 and 1994 leverage and estimated earnings per share, cash flow per
share and EBITDA for 1993, 1994 and 1995. Smith Barney noted that the 1993 pro
forma EBITDA for the Paramount
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Merger and the Blockbuster Merger was $1,471 million (assuming no impact of
potential synergies, which are considered to be substantial in subsequent
years), the 1993 pro forma combined total debt was $9,763 million (includes
Viacom Merger Debentures issued to Paramount stockholders as part of the
Paramount Merger Consideration but does not include Viacom Preferred Stock
issued to NYNEX), and the 1993 pro forma combined total cash was $784 million
(includes estimated deductions for merger transaction fees). The
accretive/(dilutive) impact of the Paramount Merger (assuming consummation of
the Blockbuster Merger and expiration of the CVRs without liability) for 1994
and 1995 when compared against Viacom on a stand-alone basis (assuming sale of
convertible preferred to NYNEX) was as follows: (i) estimated earnings per
share: 2.7% and 18.8%, respectively; (ii) cash flow per share: 19.2% and 21.6%,
respectively; and (iii) EBITDA (Viacom's EBITDA on a stand-alone basis as
compared to the relative "ownership" of total pro forma EBITDA): 8.7% and 13.0%,
respectively. The pro forma analysis assumed a certain level of long-term
strategic benefits which were based upon the views of Viacom management.
. An analysis of the combined company's compliance with certain bank
covenants and an analysis of relative ratios of debt to EBITDA, debt and
preferred stock to EBITDA, EBITDA to net interest and EBITDA to net interest and
preferred dividends.
. An analysis of the share ownership of Viacom by Viacom's management,
Paramount stockholders, and Blockbuster stockholders and NYNEX, both on
stand-alone bases and pro forma giving effect to the Paramount Merger.
. An analysis of the estimated 1993 through 2003 Viacom implied pro forma
stock prices, assuming consummation of the Blockbuster Merger and the Offer and
the Paramount Merger.
. A summary of refinancings of existing debt and new borrowings by Viacom,
Paramount and Blockbuster, on stand-alone bases and pro forma giving effect to
the Offer and the Paramount Merger, both actual and estimated.
. An estimated 1993 and 1994 pro forma combined income statement comparison
of Viacom both on stand-alone bases with and without giving effect to the
conversion of Viacom Preferred Stock, and pro forma giving effect to the
Blockbuster Merger and the Offer and the Paramount Merger, as well as a pro
forma combined income statement of the combined company for the years 1994 to
2003.
. A comparison of estimated 1993 and 1994 earnings per share of Viacom both
on stand-alone bases with and without giving effect to the conversion of Viacom
Preferred Stock, and with pro forma earnings per share giving effect to the
Blockbuster Merger and the Paramount Merger, as well as an earnings per share
dilution analysis for the combined company for the years 1994 to 2003.
. A comparison of estimated 1993 and 1994 cash flow of Viacom both on
stand-alone bases with and without giving effect to the conversion of Viacom
Preferred Stock, and with pro forma cash flow giving effect to the Blockbuster
Merger and the Offer and the Paramount Merger, as well as a cash flow
dilution/accretion analysis for the combined company for the years 1994 to 2003.
. A pro forma EBITDA analysis (including projected synergies), income tax
calculation and pro forma combined cash flow statement and a debt amortization
schedule, all estimated for the years 1993 to 2003.
. A pro forma interest expense table of the estimated combined company,
estimated for the years 1994 to 2003, and a pro forma balance sheet for the
combined company.
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Viacom/Paramount
Smith Barney presented to the Viacom Board an analysis of the Paramount
Merger (assuming the expiration of the CVRs without liability and the exercise
of the Viacom Warrants), that included:
. A transaction structure and an analysis of the Paramount Merger setting
forth the kind and amount of securities to be issued in the Paramount Merger,
the source and use of funds and the per share consideration to be paid to
Paramount stockholders in the Paramount Merger. Smith Barney also discussed the
impact of the use of convertible preferred stock and convertible debt as part of
the consideration in the Paramount Merger.
. An analysis of the pro forma impact of the Paramount Merger to Viacom
(with and without giving effect to the impact on Viacom of the sale of Viacom
Preferred Stock to NYNEX and Blockbuster if the Offer and Paramount Merger were
not consummated), Paramount and Blockbuster on stand-alone bases, including with
respect to estimated 1994 revenue, cash flow and net income, estimated 1993 and
1994 leverage and estimated earnings per share, cash flow per share and EBITDA
for 1993, 1994 and 1995. Smith Barney noted that the 1993 pro forma EBITDA for
the Paramount Merger was $1,015 million (assuming no impact of potential
synergies, which are considered to be substantial in subsequent years), the 1993
pro forma combined total debt was $6,949 million (does not include Series C
Preferred Stock potentially issued to Paramount stockholders as part of the
Paramount Merger Consideration and Viacom Preferred Stock issued to NYNEX and
Blockbuster), and the 1993 pro forma combined total cash was $494 million
(includes estimated deductions for merger transaction fees). The
accretive/(dilutive) impact of the Paramount Merger (assuming no consummation of
the Blockbuster Merger and expiration of the CVRs without liability) for 1994
and 1995 when compared against Viacom on a stand-alone basis (assuming sale of
convertible preferred to NYNEX and Blockbuster) was as follows: (i) estimated
earnings per share: (38.3)% and (25.4)%, respectively; (ii) cash flow per share:
21.5% and 14.3%, respectively; and (iii) EBITDA (Viacom's EBITDA on a
stand-alone basis as compared to the relative "ownership" of total pro forma
EBITDA): (3.0)% and (6.6)%, respectively. The pro forma analysis assumed a
certain level of long-term strategic benefits which were based upon the views of
Viacom management.
. An analysis of the Viacom/Paramount entity's compliance with certain bank
covenants and an analysis of relative ratios of debt to EBITDA, debt and
preferred stock to EBITDA, EBITDA to net interest and EBITDA to net interest and
preferred dividends.
. An analysis of the share ownership of Viacom by Viacom's management,
Paramount stockholders, and Blockbuster stockholders and NYNEX, both on
stand-alone bases and pro forma giving effect to the Paramount Merger.
. An analysis of the estimated 1993 through 2003 Viacom implied pro forma
stock prices, assuming the use of Viacom Warrants in the Paramount Merger.
. A summary of refinancings of existing debt and new borrowings by Viacom
and Paramount, on stand-alone bases and pro forma giving effect to the Paramount
Merger both actual and estimated.
. An estimated 1993 and 1994 pro forma combined income statement comparison
of Viacom both on stand-alone bases with and without giving effect to the
conversion of the Viacom Preferred Stock, and pro forma giving effect to the
Paramount Merger, as well as a pro forma combined income statement of the
Viacom/Paramount entity for the years 1994 to 2003.
. A comparison of estimated 1993 and 1994 earnings per share of Viacom both
on stand-alone bases with and without giving effect to the conversion of the
Viacom Preferred Stock, and with pro forma earnings per share giving effect to
the Paramount Merger, as well as an earnings per share dilution analysis for the
Viacom/Paramount entity for the years 1994 to 2003.
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. A comparison of estimated 1993 and 1994 cash flow of Viacom both on
stand-alone bases with and without giving effect to the conversion of the Viacom
Preferred Stock, and with pro forma cash flow giving effect to the Paramount
Merger, as well as a cash flow dilution/accretion analysis for the
Viacom/Paramount entity for the years 1994 to 2003.
. A pro forma EBITDA analysis (including projected synergies), income tax
calculation and pro forma combined cash flow statement and a debt amortization
schedule, all estimated for the years 1993 to 2003.
. A pro forma interest expense table of the estimated Viacom/Paramount
entity, estimated for the years 1994 to 2003, and a pro forma balance sheet for
the Viacom/Paramount entity.
Combined Company
Smith Barney presented to the Viacom Board an analysis of the Paramount
Merger assuming consummation of the Blockbuster Merger (assuming the exercise of
VCRs resulting in a weighted average Class B exchange ratio of 0.66544),
liability per CVR of $12 per share and the exercise of the Viacom Warrants
(although the occurrence of the exercise of the Viacom Warrants as well as
liability under the CVRs and the exercise of VCRs resulting in an increased
overall Class B exchange ratio would take place only under limited
circumstances, these assumptions were utilized to provide a conservative
analysis to the Viacom Board). The Smith Barney presentation included:
. A transaction structure and an analysis of the Paramount Merger setting
forth the kind and amount of securities to be issued in the Paramount Merger,
the source and use of funds in the per share consideration to be paid to
Paramount stockholders and the Paramount Merger. Smith Barney also discussed the
impact of the use of convertible preferred stock, convertible debt and
contingent value rights as part of the consideration in the Paramount Merger.
. An analysis of the pro forma impact of the Paramount Merger to Viacom
(with and without giving effect to the impact on Viacom of the sale of Viacom
Preferred Stock to NYNEX and Blockbuster if the Offer and Paramount Merger were
not consummated), Paramount and Blockbuster on stand-alone bases, including with
respect to estimated 1994 revenue, cash flow and net income, estimated 1993 and
1994 leverage and estimated earnings per share, cash flow per share and EBITDA
for 1993, 1994 and 1995. Smith Barney noted that the 1993 pro forma EBITDA for
the Paramount Merger and the Blockbuster Merger was $1,471 million (assuming no
impact of potential synergies, which are considered to be substantial in
subsequent years), the 1993 pro forma combined total debt was $10,448 million
(includes Viacom Merger Debentures issued to Paramount stockholders as part of
the Paramount Merger Consideration but does not include Viacom Preferred Stock
issued to NYNEX), and the 1993 pro forma combined total cash was $784 million
(includes estimated deductions for merger transaction fees). The
accretive/(dilutive) impact of the Paramount Merger (assuming consummation of
the Blockbuster Merger and expiration of the CVRs with liability) for 1994 and
1995 when compared against Viacom on a stand-alone basis (assuming sale of
convertible preferred to NYNEX) was as follows: (i) estimated earnings per
share: 1.0% and 11.8%, respectively; (ii) cash flow per share: 19.2% and 19.2%,
respectively; and (iii) EBITDA (Viacom's EBITDA on a stand-alone basis as
compared to the relative "ownership" of total pro forma EBITDA): 5.6% and 9.8%,
respectively. The pro forma analysis assumed a certain level of long-term
strategic benefits which were based upon the views of Viacom management.
. An analysis of the combined company's compliance with certain bank
covenants and an analysis of relative ratios debt to EBITDA, debt and preferred
stock to EBITDA, EBITDA to net interest and EBITDA to net interest and preferred
dividends.
. An analysis of the share ownership of Viacom by Viacom's management,
Paramount stockholders, and Blockbuster stockholders and NYNEX, both on
stand-alone bases and pro forma giving effect to the Paramount Merger.
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. An analysis of the estimated 1993 through 2003 Viacom implied pro forma
stock prices, assuming consummation of the Blockbuster Merger and the Paramount
Merger.
. A summary of refinancings of existing debt and new borrowings by Viacom,
Paramount and Blockbuster, on stand-alone bases and pro forma giving effect to
the Paramount Merger, both actual and estimated.
. An estimated 1993 and 1994 pro forma combined income statement comparison
of Viacom both on stand-alone bases with and without giving effect to the
conversion of Viacom Preferred Stock, and pro forma giving effect to the
Blockbuster Merger and the Paramount Merger, as well as a pro forma combined
income statement of the combined company for the years 1994 to 2003.
. A comparison of estimated 1993 and 1994 earnings per share of Viacom both
on stand-alone bases with and without giving effect to the conversion of the
Viacom Preferred Stock, and with pro forma earnings per share giving effect to
the Blockbuster Merger and the Paramount Merger, as well as an earnings per
share dilution analysis for the combined company for the years 1994 to 2003.
. A comparison of estimated 1993 and 1994 cash flow of Viacom both on
stand-alone bases with and without giving effect to the conversion of Viacom
Preferred Stock, and with pro forma cash flow giving effect to the Blockbuster
Merger and the Paramount Merger, as well as a cash flow dilution/accretion
analysis for the combined company for the years 1994 to 2003.
. A pro forma EBITDA analysis (including projected synergies), income tax
calculation and pro forma combined cash flow statement and a debt amortization
schedule, all estimated for the years 1993 to 2003.
. A pro forma interest expense table of the estimated combined company,
estimated for the years 1994 to 2003, and a pro forma balance sheet for the
combined company.
Viacom/Paramount
Smith Barney presented to the Viacom Board an analysis of the Paramount
Merger, assuming liability per CVR of $12 per share and the exercise of the
Viacom Warrants (although the occurrence of both the exercise of the Viacom
Warrants and payment under the CVRs would take place only under limited
circumstances, these assumptions were utilized to provide a conservative
analysis to the Viacom Board). The Smith Barney presentation included:
. A transaction structure and an analysis of the Paramount Merger setting
forth the kind and amount of securities to be issued in the Paramount Merger,
the source and use of funds and the per share consideration to be paid to
Paramount Stockholders in the Paramount Merger. Smith Barney also discussed the
impact of the use of contingent value rights, convertible debt and convertible
preferred stock as part of the consideration in the Paramount Merger.
. An analysis of the pro forma impact of the Paramount Merger to Viacom
(with and without giving effect to the impact on Viacom of the sale of
convertible preferred stock to NYNEX and Blockbuster if the Offer and Paramount
Merger were not consummated), Paramount and Blockbuster on stand-alone bases,
including with respect to 1994 revenue, cash flow and net income, estimated 1993
and 1994 leverage and estimated earnings per share, cash flow per share and
EBITDA for 1993, 1994 and 1995. Smith Barney noted that the 1993 pro forma
EBITDA for the Paramount Merger was $1,015 million (assuming no impact of
potential synergies, which are considered to be substantial in subsequent
years), the 1993 pro forma combined total debt was $7,634 million (does not
include Series C Preferred Stock potentially issued to Paramount stockholders as
part of the Paramount Merger Consideration or Viacom Preferred Stock issued to
NYNEX and Blockbuster), and the 1993 pro forma combined total cash was $494
million (includes estimated deductions for merger transaction fees). The
accretive/(dilutive) impact of the Paramount Merger (assuming no consummation of
the Blockbuster
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Merger and expiration of the CVRs with liability) for 1994 and 1995 when
compared against Viacom on a stand-alone basis (assuming sale of convertible
preferred to NYNEX and Blockbuster) was as follows: (i) estimated earnings per
share: (41.4)% and (38.1)%, respectively; (ii) cash flow per share: 21.5% and
10.5%, respectively; and (iii) EBITDA (Viacom's EBITDA on a stand-alone basis as
compared to the relative "ownership" of total pro forma EBITDA): (6.7)% and
(10.2)%, respectively. The pro forma analysis assumed a certain level of
long-term strategic benefits which were based upon the views of Viacom
management.
. An analysis of the Viacom/Paramount entity's compliance with certain bank
covenants an analysis of relative ratios of debt to EBITDA, debt and preferred
stock to EBITDA, EBITDA to net interest and EBITDA to net interest and preferred
dividends.
. An analysis of the share ownership of Viacom by Viacom's management,
Paramount stockholders, and Blockbuster stockholders and NYNEX, both on
stand-alone bases and pro forma giving effect to the Paramount Merger.
. An analysis of the estimated 1993 through 2003 Viacom implied pro forma
stock prices, assuming the use of warrants in the Paramount Merger.
. A summary of refinancings of existing debt in new borrowings by Viacom
and Paramount, on stand-alone bases and pro forma giving effect to the Paramount
Merger both actual and estimated.
. An estimated 1993 and 1994 pro forma combined income statement comparison
of Viacom both on stand-alone bases with and without giving effect to the
conversion of Viacom Preferred Stock, and pro forma giving effect to the
Paramount Merger, as well as a pro forma combined income statement of the
Viacom/Paramount entity for the years 1994 to 2003.
. A comparison of estimated 1993 and 1994 earnings per share of Viacom both
on stand-alone bases with and without giving effect to the conversion of Viacom
Preferred Stock, and with pro forma earnings per share giving effect to the
Paramount Merger, as well as an earnings per share dilution analysis for the
Viacom/Paramount entity for the years 1994 to 2003.
. A comparison of estimated 1993 and 1994 cash flow of Viacom both on
stand-alone bases with and without giving effect to the conversion of Viacom
Preferred Stock, and with pro forma cash flow giving effect to the Paramount
Merger, as well as a cash flow dilution/accretion analysis for the
Viacom/Paramount entity for the years 1994 to 2003.
. A pro forma EBITDA analysis (including projected synergies), income tax
calculation and pro forma combined cash flow statement and a debt amortization
schedule, all estimated for the years 1993 to 2003.
. A pro forma interest expense table of the estimated Viacom/Paramount
entity, estimated for the years 1993 to 2003, and a pro forma balance sheet for
the Viacom/Paramount entity.
QVC/Paramount
Smith Barney presented to the Viacom Board an analysis of a QVC/Paramount
Merger that included:
. A transaction structure and an analysis of a QVC/Paramount Merger setting
forth the kind and amount of securities to be issued in a QVC/Paramount Merger,
the source and use of funds and the per share consideration to be paid to
Paramount stockholders in a QVC/Paramount Merger. Smith Barney also discussed
the impact of the use of preferred stock with warrants as part of the
consideration in the proposed QVC/Paramount Merger.
. An analysis of the debt structure of QVC and its additional borrowing
capacity.
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. A pro forma combined income statement of the combined QVC and Paramount
for the years 1993 to 1999 and relative leverage ratios.
. An earnings per share and cash flow dilution/accretion analysis of QVC
both on stand-alone bases and pro forma giving effect to a QVC/Paramount Merger
for the years 1993 to 1999.
. An income tax calculation and pro forma combined cash flow statement
estimated for the years 1993 to 1999.
. A debt paydown and interest expense table of the combined company,
estimated for the years 1994 to 1999, and a pro forma balance sheet for the
combined QVC and Paramount.
. An analysis of the economic and voting ownership of QVC assuming the
consummation of the QVC/Paramount Merger and the conversion of the QVC
convertible preferred stock.
. An analysis of the economic and voting ownership of Liberty Media.
. An analysis of the QVC implied estimated pro forma stock price from 1993
through 1998, both with and without attendant synergies.
Viacom used this analysis in developing its own, superior bid.
In arriving at its opinions, Smith Barney performed a variety of financial
analyses, the material portions of which are summarized above. The summary set
forth above does not purport to be a complete description of the analyses
performed by Smith Barney. In addition, Smith Barney believes that its analyses
must be considered as a whole and that selecting portions of its analyses and of
the factors considered by it, without considering all such factors and analyses,
could create a misleading view of the process underlying its analyses set forth
in its opinion. The matters considered by Smith Barney in arriving at its
opinion are based on numerous macroeconomic, operating and financial assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond Viacom's or Paramount's control. Any
estimates incorporated in the analyses performed by Smith Barney are not
necessarily indicative of actual past or future results or values, which may be
significantly more or less favorable than such estimates. Estimated values do
not purport to be appraisals and do not necessarily reflect the prices at which
businesses or companies may be sold in the future, and such estimates are
inherently subject to uncertainty. Arriving at a fairness opinion is a complex
process, not necessarily susceptible to partial or summary description. No
company utilized as a comparison is identical to Viacom, Paramount or the
business segment for which a comparison is being made. Accordingly, an analysis
of comparable companies and comparable business combinations resulting from the
transactions is not mathematical; rather, it involves complex considerations and
judgements concerning differences in financial and operating characteristics of
the comparable companies and other factors that could affect the value of the
comparable companies or company to which they are being compared.
The Viacom Board selected Smith Barney as its financial advisor because it
is a nationally recognized investment banking firm and the members of senior
management of Smith Barney have substantial experience in transactions similar
to the Paramount Merger and are familiar with Viacom and its business. Smith
Barney is an investment banking firm engaged, among other things, in the
valuation of businesses and their securities in connection with mergers and
acquisitions. Smith Barney has rendered from time to time various investment
banking services to Viacom, including acting as an underwriter of public
offerings of certain securities of Viacom and StarSight Telecast, Inc., a
company in which Viacom holds a significant interest, for which it received
customary compensation.
Pursuant to the terms of an engagement letter dated September 12, 1993,
Viacom has paid Smith Barney a fee of $3.0 million for acting as financial
advisor in connection with the Paramount Merger, including rendering its
opinion. In addition, Viacom has agreed to pay Smith Barney an additional fee
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of $9.5 million in connection with consummation of the transaction. Whether or
not the Paramount Merger is consummated, Viacom has also agreed to reimburse
Smith Barney for its reasonable out-of-pocket expenses, including all reasonable
fees and disbursements of counsel, and to indemnify Smith Barney and certain
related persons against certain liabilities relating to or arising out of its
engagement, including certain liabilities under the Federal securities laws.
Bear, Stearns & Co. Inc. ("Bear Stearns") and Goldman, Sachs & Co. have
also been engaged by Viacom as financial advisors in connection with the Offer
and the Paramount Merger.
Paramount. Paramount has retained Lazard Freres to act as its financial
advisor in connection with the Offer and the Paramount Merger. At the meeting of
the Board of Directors of Paramount held on February 4, 1994, Lazard Freres
delivered its written opinion to the Board of Directors of Paramount that, as of
February 4, 1994, (i) the Viacom Transaction Consideration was fair to the
holders of Paramount Common Stock from a financial point of view, (ii) the QVC
Transaction Consideration was fair to the holders of Paramount Common Stock from
a financial point of view, and (iii) the Viacom Transaction Consideration was
marginally superior to the QVC Transaction Consideration from a financial point
of view. PARAMOUNT STOCKHOLDERS ARE URGED TO READ THE TEXT OF THE LAZARD FRERES
OPINION IN ITS ENTIRETY FOR ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF
REVIEW BY LAZARD FRERES. Lazard Freres has not been requested to update its
opinion to the date of this Proxy Statement/Prospectus.
Copies of the February 4, 1994 opinion of Lazard Freres, the written
presentation of Lazard Freres to the Board of Directors of Paramount on February
4, 1994 and the February 14, 1994 Letter (as defined below) have been filed as
exhibits to the Schedule 13E-3 filed with the Commission with respect to the
Paramount Merger and may be inspected and copied, and obtained by mail, from the
Commission as set forth in "Available Information" and will be made available
for inspection and copying at the principal executive offices of Paramount at 15
Columbus Circle, New York, New York 10023 during regular business hours by any
interested public stockholder of Paramount or his or her representative who has
been so designated in writing.
A COPY OF THE FULL TEXT OF THE LAZARD FRERES OPINION WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS OF THE REVIEW UNDERTAKEN,
IS ATTACHED AS ANNEX IV HERETO. THE SUMMARY DISCUSSION OF THE OPINION OF LAZARD
FRERES SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. LAZARD FRERES' OPINION IS
DIRECTED ONLY TO LAZARD FRERES' CONCLUSIONS FROM A FINANCIAL POINT OF VIEW AS OF
FEBRUARY 4, 1994 OF THE ITEMS REFERRED TO IN SUCH OPINION, AND, AS EXPRESSLY
SET FORTH IN ITS OPINION, LAZARD FRERES' CONCLUSIONS ARE DIRECTED ONLY TO THE
CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF PARAMOUNT COMMON STOCK IN THE
OFFER AND THE PARAMOUNT MERGER, TAKEN TOGETHER, AND ARE NOT DIRECTED TO THE
CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF PARAMOUNT COMMON STOCK EITHER
IN THE OFFER OR IN THE PARAMOUNT MERGER INDEPENDENT OF THE OTHER. LAZARD
FRERES OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO
HOW SUCH STOCKHOLDER SHOULD VOTE AT THE PARAMOUNT SPECIAL MEETING.
In connection with rendering its opinion to the Board of Directors of
Paramount on February 4, 1994 and its delivery of the February 14, 1994 Letter,
Lazard Freres, among other things: (i) reviewed the terms and conditions of (a)
the amended proposal by QVC (the "Amended QVC Proposal") to acquire Paramount as
set forth in Amendment Number 34 to the Tender Offer Statement on Schedule 14D-1
filed by QVC, Comcast and BellSouth with the Commission on February 1, 1994 and
the QVC Exemption Agreement, including the form Agreement and Plan of Merger
between QVC and Paramount attached thereto (the "Form QVC Merger Agreement"),
and (b) the written proposal submitted to Paramount by Viacom on February 1,
1994 and Amendment Number 35 to the Tender Offer Statement on Schedule 14D-1
filed by Viacom, NAI, Mr. Sumner M. Redstone and Blockbuster with the Commission
on February 1, 1994 (collectively, the "Amended Viacom Proposal"), and the
Agreement and Plan of Merger, dated as of January 21, 1994, as amended on
January 27, 1994 and as proposed as of February 4, 1994 to be amended to reflect
the Amended Viacom Proposal (the
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"Amended Viacom Merger Agreement"), including the Form Exemption Agreement
between Viacom and Paramount attached thereto; (ii) reviewed the terms and
conditions of the Blockbuster Merger Agreement and the Blockbuster Subscription
Agreement, analyzed the Amended Viacom Proposal, both with and without giving
effect to the proposed Blockbuster Merger contemplated by the Blockbuster
Merger Agreement, and observed that the proposed Blockbuster Merger is subject
to the approval of the stockholders of Blockbuster; (iii) analyzed certain
historical business and financial information relating to Paramount, Viacom,
QVC and Blockbuster; (iv) reviewed certain financial forecasts and other data
provided by Paramount, Viacom, QVC and Blockbuster relating to their respective
businesses (except in the case of Paramount, financial forecasts for the then
current fiscal year only, having been advised that Paramount did not prepare
projections beyond the then current fiscal year); (v) reviewed public
information with respect to certain public companies in lines of businesses
that Lazard Freres believed to be comparable to the businesses of Paramount,
Viacom, QVC and Blockbuster; (vi) reviewed the financial terms of certain
recent business combinations involving companies in lines of business that
Lazard Freres believed to be comparable to the businesses of Paramount,
Viacom, QVC and Blockbuster, and in other industries generally; (vii) reviewed
the historical stock prices and trading volumes of Paramount Common Stock,
Viacom Class B Common Stock, the QVC Common Stock and Blockbuster Common
Stock; and (viii) reviewed the procedures for bidding set forth in the
Amended Viacom Merger Agreement and the QVC Exemption Agreement, in particular
noting the respective provisions therein providing for extensions of the Fourth
QVC Offer or the Offer, as applicable, for 10 business days upon delivery of a
Completion Certificate (referred to in the Amended Viacom Merger Agreement or
the QVC Exemption Agreement, as applicable) by Viacom or QVC, as applicable. In
addition, Lazard Freres conducted discussions with members of the senior
management of Paramount, Viacom, QVC and Blockbuster with respect to the
business and prospects of Paramount, Viacom, QVC and Blockbuster and the
strategic objectives of each, and Lazard Freres conducted such other financial
studies, analyses and investigations as Lazard Freres deemed appropriate.
In preparing its written opinion to the Board of Directors of Paramount on
February 4, 1994, its presentation to the Board of Directors of Paramount on
February 4, 1994 and the February 14, 1994 Letter, Lazard Freres assumed and
relied upon the accuracy and completeness of the financial and other information
that was provided by Paramount, Viacom, QVC and Blockbuster, and on the
representations and warranties contained in the Amended Viacom Merger Agreement
and the Form QVC Merger Agreement. Lazard Freres did not independently verify
such information and did not undertake an independent valuation or appraisal of
any of the assets of Paramount, Viacom, QVC or Blockbuster. In addition, Lazard
Freres assumed that the financial forecasts furnished to it by Paramount,
Viacom, QVC and Blockbuster were reasonably prepared on a basis reflecting, as
of the date of its opinion, its presentation to the Board of Directors of
Paramount and the February 14, 1994 Letter, the best currently available
judgments of the management of each of Paramount, Viacom, QVC and Blockbuster as
to the future financial performance of Paramount, Viacom, QVC and Blockbuster,
respectively. Lazard Freres also assumed that the Amended Viacom Proposal and
the Amended QVC Proposal were made in compliance with the terms and conditions
of the Amended Viacom Merger Agreement and the QVC Exemption Agreement,
respectively. Lazard Freres' opinion as of February 4, 1994, its presentation to
the Board of Directors of Paramount and the February 14, 1994 Letter were also
based on economic, monetary and market conditions existing on the date of the
opinion. In accordance with the Bidding Procedures established by Paramount's
Board of Directors on December 13, 1993, Paramount's Board of Directors had
authorized Lazard Freres to respond to inquiries with respect to Paramount from
prospective bidders (in addition to QVC and Viacom) and to receive proposals
from additional bidders, if any. Lazard Freres did not, however, solicit third
party indications of interest in acquiring all or any part of Paramount.
As part of Lazard Freres' analyses in connection with rendering its opinion
on February 4, 1994 and the February 14, 1994 Letter, Lazard Freres continued to
evaluate the proposed Viacom and QVC transactions, as it had done in the past,
not only on the basis of their then current market values but also applying
other financial valuation methodologies generally applicable to transactions of
this type.
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Lazard Freres noted that these financial valuation methodologies, which are
subject to certain limitations as applied to the prospective combinations,
including the lack of projections for Paramount beyond the then current fiscal
year and the difficulties in quantifying synergies and revenue enhancements
resulting from the combinations, generally favored in varying degrees the Viacom
Transaction Consideration from a financial point of view. On the basis of recent
market values on the date of its opinion and the February 14, 1994 Letter,
Lazard Freres observed that the QVC Transaction Consideration had a somewhat
higher market valuation than the Viacom Transaction Consideration. In this
connection, Lazard Freres observed the high volatility of Viacom Class B Common
Stock and QVC Common Stock and that the market prices of the stocks seemed to be
impacted by the perception of the marketplace as to whether QVC or Viacom would
be the ultimate acquiror of Paramount.
In connection with rendering its opinion and the conclusion set forth in
the February 14, 1994 Letter, Lazard Freres also observed the express preference
of Paramount's Board of Directors in the Bidding Procedures for cash and
securities readily susceptible to valuation, such as securities with a fixed
income stream, with a liquidation preference, or in the case of equity
securities, securities which enjoy the benefits of a wide collar or other value
assurance mechanism. In this regard, Lazard Freres noted that there was a
greater percentage of cash and fixed income securities as components of the
Viacom Transaction Consideration than the QVC Transaction Consideration,
although the magnitude of the difference in the respective percentages between
the two then current bids had decreased in comparison to the then most recent
previous bids submitted by Viacom and QVC. Lazard Freres further noted the
offering of the CVRs in the Amended Viacom Proposal. In this connection, as
noted below, Lazard Freres continued to view the offering of the CVRs in the
Amended Viacom Proposal as a favorable factor because the CVRs were a security
that provided, in part, an opportunity for the holders of the CVRs to be
compensated if the market price of Viacom Class B Common Stock failed to
appreciate satisfactorily.
In reaching its opinion on February 4, 1994 and the conclusion set forth in
the February 14, 1994 Letter, Lazard Freres also noted that it took into account
various factors, including its assessment of the probability of consummation of
the proposed Blockbuster Merger contemplated by the Blockbuster Merger Agreement
under the circumstances existing on February 4, 1994 and February 14, 1994, as
applicable, and that, given the terms and conditions of the proposed Fourth QVC
Offer and the Fourth QVC Second-Step Merger and the proposed Offer and the
Paramount Merger and the limitations of the financial valuation methodologies
referred to above, Lazard Freres had continued to view as a favorable factor an
offer that contains a greater percentage of cash and securities readily
susceptible to valuation.
In connection with the Amended Viacom Proposal and the Amended QVC
Proposal, at the meeting of the Board of Directors of Paramount held on February
4, 1994, Lazard Freres delivered its written opinion to the Board of Directors
of Paramount that, as of the date of the opinion, (i) the Viacom Transaction
Consideration was fair to the holders of Paramount Common Stock from a financial
point of view, (ii) the QVC Transaction Consideration was fair to the holders of
Paramount Common Stock from a financial point of view, and (iii) the Viacom
Transaction Consideration was marginally superior to the QVC Transaction
Consideration from a financial point of view.
FEBRUARY 4, 1994 BOARD PRESENTATION
Prior to delivering its written opinion to the Board of Directors of
Paramount, Lazard Freres reviewed certain information with the Board of
Directors of Paramount relating to Paramount, Viacom, Blockbuster and QVC and
the financial terms of the Amended Viacom Proposal, after giving effect to the
proposed Blockbuster Merger (the "Viacom-Blockbuster Proposal"), the Amended
Viacom Proposal, without giving effect to the proposed Blockbuster Merger (the
"Viacom Alone Proposal") and the Amended QVC Proposal (the foregoing are
sometimes individually referred to herein as a "Proposal" and collectively as
the "Proposals").
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SUMMARY
. Lazard Freres described their recent contacts with QVC, Viacom and
Blockbuster and their respective advisors and a chronology of events since the
then most recent meeting of the Board of Directors of Paramount on January 21,
1994.
. Lazard Freres reviewed the financial terms of the Proposals and noted
that Viacom's agreements with Blockbuster (including the Blockbuster Merger
Agreement and the Blockbuster Subscription Agreement) had remained unchanged.
. Lazard Freres described the changes to the respective Proposals by QVC
and Viacom from their then most recent previous bids. Lazard Freres noted that
QVC had increased the cash portion of its bid by approximately $750 million,
while reducing the value of securities offered in the proposed Fourth QVC
Second-Step Merger by a substantially equivalent amount. With respect to the
Amended Viacom Proposal, Lazard Freres observed that the cash portion of its
offer had remained unchanged, but the value of the securities offered in the
proposed Paramount Merger had been improved. Lazard Freres described in detail
the changes to, and the terms of, the various securities offered by Viacom that
produced this improvement.
. Lazard Freres reviewed graphic representations that compared the Amended
QVC Proposal, the Viacom Alone Proposal and the Viacom-Blockbuster Proposal with
QVC's and Viacom's then most recent previous bids and showed the value of the
respective bids at various per share prices for QVC Common Stock and Viacom
Class B Common Stock. The comparison of the two QVC bids showed that at stock
prices for QVC Common Stock below approximately $48 per share, the then current
QVC bid was slightly higher than the then most recent previous bid by QVC, while
at stock prices higher than approximately $48 per share, the then most recent
previous bid by QVC had a slightly higher value. However, with respect to the
Amended Viacom Proposal, at all stock prices for Viacom Class B Common Stock,
the then current Viacom Alone Proposal and the Viacom-Blockbuster Proposal had
higher values than the then most recent previous Viacom bid, and with respect to
the analysis of the Viacom-Blockbuster Proposal only, the difference was even
greater, given the different securities being offered by Viacom depending upon
whether the Blockbuster Merger would be consummated.
. Lazard Freres further noted that the three-way combination of
Viacom-Blockbuster/Paramount would have the strongest credit ratios of the three
possible combinations, while the credit ratios for the Viacom/Paramount
combination would have the weakest, given Blockbuster's substantial cash flow
and relatively low level of debt and the fact that Viacom would be acquiring
Blockbuster for all stock.
. Lazard Freres noted that QVC's financing package for the Amended QVC
Proposal had been altered to provide for more cash and was less favorable from
QVC's standpoint compared to the financing package for the then most recent
previous QVC bid, while the Viacom financing package for the Amended Viacom
Proposal had remained essentially unchanged compared to the financing package
for the then most recent previous Viacom bid.
. Lazard Freres also presented an overview of its valuation of the Amended
QVC Proposal, the Viacom Alone Proposal and the Viacom-Blockbuster Proposal.
Lazard Freres expressly noted that its views of value were provided within a
framework of Bidding Procedures adopted by Paramount (and agreed to by the
bidders) that allowed the holders of Paramount Common Stock to choose between
the competing Proposals. Lazard Freres discussed with the Board of Directors of
Paramount that, based on the closing market prices of QVC Common Stock and
Viacom Class B Common Stock for February 3, 1994, and its valuation of the
non-common securities that were offered in each of the bids (which was also
based on those February 3, 1994 closing prices), the Amended QVC Proposal had a
value (on a per share of Paramount Common Stock basis) that was higher than the
Viacom-Blockbuster Proposal and
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the Viacom Alone Proposal by $5.21 and $3.40 per share, respectively. Lazard
Freres also noted that the total consideration offered in the Amended Viacom
Proposal contained a greater percentage of cash and fixed income securities than
the Amended QVC Proposal. As described in more detail below, Lazard Freres also
analyzed the respective values of the Amended QVC Proposal, the Viacom Alone
Proposal and the Viacom-Blockbuster Proposal at recent market prices for QVC
Common Stock and Viacom Class B Common Stock (ranging from a one week average to
a six month average prior to February 3, 1994).
. Lazard Freres noted that by using various financial valuation
methodologies (other than current and recent market values) to analyze the
respective Proposals (as described in more detail below), (i) both the Amended
QVC Proposal and the Amended Viacom Proposal had implied values that were lower
than the values obtained by using current market value methodology to value the
Proposals, and (ii) the Viacom Alone Proposal and the Viacom-Blockbuster
Proposal each had a higher implied value by varying amounts than the Amended QVC
Proposal (with the differences being greater for the Viacom-Blockbuster
Proposal). Lazard Freres specifically noted that it believed that these
financial valuation methodologies were useful but subject to various
limitations, including: the absence of precise and reliable quantification of
potential cost savings or revenue enhancement opportunities; the difficulty of
deriving appropriate multiples for each combination; the unavailability of
internal long-term projections for Paramount; and the difficulty of projecting
financial results of any of the combinations, in each case, particularly in
light of each bidder's strategic/merger partners.
. Lazard Freres discussed with the Board of Directors of Paramount that the
then current market prices of QVC Common Stock and Viacom Class B Common Stock
may have reflected the market's perception of cost savings, revenue enhancement
opportunities and the potential impact of the bidders' respective
strategic/merger partners, but, reiterating what Lazard Freres had indicated
previously to the Paramount Board, these current market prices may also have
been influenced by the market's views as to which bidder would likely acquire
Paramount, with Viacom having appeared to have been the leader on February 4,
1994, and, as Lazard Freres noted, this influence on these current market prices
may have been even greater at that time given the fact that the Amended Viacom
Proposal and the Amended QVC Proposal were presumably each bidder's "last and
final bid."
. Lazard Freres also reviewed its comparisons of the Amended QVC Proposal,
the Viacom Alone Proposal and the Viacom-Blockbuster Proposal using both 1993
estimated EBITDA and 1994 estimated EBITDA for each of the companies on the
basis of comparable company trading multiples, discounted cash flow analysis and
weighted average unaffected multiples. As noted above, each of these financial
valuation methodologies produced in varying degrees, in the cases of both 1993
and 1994 estimated EBITDA, higher implied total bid values for the Viacom Alone
Proposal and the Viacom-Blockbuster Proposal in comparison to the Amended QVC
Proposal. This difference was greater in the case of the Viacom-Blockbuster
Proposal.
. Lazard Freres noted that in connection with its comparable company
trading analysis, if the various proposed combined companies were to trade at
the same multiple of EBITDA, each of the Viacom Alone Proposal and the
Viacom-Blockbuster Proposal would have implied bid values higher than the
Amended QVC Proposal; however, if the QVC/Paramount combined company were to
trade at a higher multiple than the Viacom/Paramount or
Viacom-Blockbuster/Paramount combined companies, the implied value of the
Amended QVC Proposal could equal or exceed the implied values of either the
Viacom Alone Proposal or the Viacom-Blockbuster Proposal.
. As reviewed below, Lazard Freres discussed with the Board of Directors of
Paramount that although there were arguments to support (and refute) a higher
multiple for either of the proposed QVC or Viacom combinations, Lazard Freres
had no reason to conclude from a financial point of view that
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either of the proposed combinations should be assigned a higher multiple, and
thus in most instances, Lazard Freres' analysis compared the Amended QVC
Proposal, the Viacom Alone Proposal and the Viacom-Blockbuster Proposal at the
same EBITDA multiples.
. Lazard Freres also reviewed its various observations regarding the
trading activity of QVC Common Stock and Viacom Class B Common Stock noting
that, since September 13, 1993 (the date of the first public announcement of the
Original Merger), QVC Common Stock had fallen 27% and Viacom Class B Common
Stock had fallen 43%. In addition, Lazard Freres explained that it was likely
that the stock price of the apparent leader for Paramount would drop and that of
the apparent trailing bidder would rise, as the ultimate resolution of the
bidding approached, and this phenomenon may have explained the then recent
trading activity of QVC Common Stock and Viacom Class B Common Stock, with the
price of QVC Common Stock rising, and the price of Viacom Class B Common Stock
falling, amid various reports that the market favored Viacom's bid. Lazard
Freres also noted that this phenomenon could affect the outcome of the
shareholder vote of the Blockbuster stockholders on the proposed Blockbuster
Merger. However, Lazard Freres commented that, rather than comparing the implied
bid values on the basis of a "winning" and "losing" bid, the more relevant
comparison would be to compare the implied bid values of each bid assuming that
bid were the winning bid, and most importantly, Lazard Freres explained that
given the bidding process, the holders of Paramount Common Stock would have the
ability to choose between the Amended QVC Proposal and the Amended Viacom
Proposal based on their own views of value.
. Lazard Freres advised the Board of Directors of Paramount of the status
of the proposed Blockbuster Merger, including noting that it had again confirmed
with Merrill Lynch, Pierce, Fenner & Smith Incorporated, Blockbuster's financial
advisor, that Blockbuster had not received any expressions of interest from
third parties and summarizing the anticipated timetable for the Blockbuster
Merger provided to Lazard Freres by Viacom and Blockbuster.
. In addition, Lazard Freres reviewed a graphic representation of the stock
price performance of QVC Common Stock, Viacom Class B Common Stock, Blockbuster
Common Stock and Paramount Common Stock during the period from September 13,
1993 through February 3, 1994 and the stock performance of QVC Common Stock and
Viacom Class B Common Stock during the period from December 20, 1993 through
February 3, 1994.
PRO FORMA FINANCIAL AND CREDIT ANALYSIS
Lazard Freres reviewed its analysis of the pro forma financial statements
for each of the proposed QVC/Paramount combination, proposed Viacom/Paramount
combination and proposed Viacom-Blockbuster/Paramount combination using each
company's estimated fiscal year 1993 data. Lazard Freres noted that pro forma
1993 EBITDA was estimated to be $756 million (12.2% margin) for the
QVC/Paramount combination, $1,126 million (16.2% margin) for the
Viacom/Paramount combination and $1,594 million (17.3% margin) for the
Viacom-Blockbuster/Paramount combination, and due to large goodwill
amortization, interest expense and preferred dividend charges, no combination
would be expected to have a meaningful level of net earnings. As noted above, of
the three possible combinations, Lazard Freres explained that the proposed
Viacom-Blockbuster/Paramount combined company would produce the strongest credit
ratios while the proposed Viacom/Paramount combined company would have the
weakest. Lazard Freres explained that the Blockbuster Merger would significantly
improve Viacom's credit ratios because Blockbuster has substantial cash flow and
a relatively low level of debt, and Viacom would be acquiring Blockbuster in the
Blockbuster Merger for all stock. Lazard Freres further commented that while
there was no assurance that the Blockbuster Merger would be consummated, the
parties involved had informed Lazard Freres that they expected the
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proposed Blockbuster Merger to close in April 1994. In addition, Lazard Freres
noted that Viacom had attempted to reduce the credit risk by adding the exchange
feature to the Viacom Merger Debentures. Finally, Lazard Freres noted that with
respect to the potential obligation of Viacom as a result of the CVRs: the
maximum obligation for Viacom could be as much as approximately $1.0 billion if
the CVRs were not extinguished until the third anniversary of the Paramount
Merger; under the terms of the CVRs, Viacom could delay the payment of its
potential obligation for up to three years; and while Viacom could satisfy its
obligation under the CVRs by issuing shares of Viacom Class B Common Stock, such
an issuance would dilute the then existing shareholders and, hence, could put
downward pressure on Viacom's stock price.
Lazard Freres also reviewed the pro forma income statements and balance
sheets for each of the three possible combinations and selected credit ratios
for each of them.
VALUATION ANALYSIS OF AMENDED VIACOM PROPOSAL AND AMENDED QVC PROPOSAL
Lazard Freres reviewed various analyses with respect to the valuation of
the Amended Viacom Proposal and the Amended QVC Proposal and expressly noted
that Lazard Freres did not factor into its analysis any combination benefits
such as cost savings or revenue enhancement and expressly cautioned that given
the uncertainties involved in these valuation analyses, the volatility of the
stock prices of QVC and Viacom, the dynamic market conditions and the possible
changes in the complexion of any of the potential combinations, none of these
valuation analyses should be viewed as a reliable predictor of stock prices.
Current Market Analysis
Lazard Freres first reviewed its current market analysis of the equity
portion (and resulting implied total consideration) of each of the Amended QVC
Proposal, the Viacom Alone Proposal and the Viacom-Blockbuster Proposal pursuant
to which Lazard Freres calculated these values by applying the exchange ratio of
each Proposal to the then current market prices of the securities being offered.
Based on the closing price of QVC Common Stock and Viacom Class B Common Stock
on February 3, 1994, Lazard Freres analysis showed that the implied value of the
total consideration offered in (i) the Amended QVC Proposal was $86.71 per share
of Paramount Common Stock, comprised of $52.10 of cash (60.1% of total), $3.76
of New QVC Merger Preferred Stock (4.3% of total), $2.55 of the ten-year
warrants to purchase QVC Common Stock (2.9% of total) and $28.30 of QVC Common
Stock (32.6% of total); (ii) the Viacom Alone Proposal was $81.49 per share of
Paramount Common Stock, comprised of $53.61 of cash (65.8% of total), $6.01 of
Series C Preferred Stock (7.4% of total), $1.41 of Viacom Three-Year Warrants
(1.7% of total), $0.84 of Viacom Five-Year Warrants (1.0% of total), $3.84 of
CVR (4.7% of total) and $15.79 of Viacom Class B Common Stock (19.4% of total);
and (iii) the Viacom-Blockbuster Proposal was $83.31 per share of Paramount
Common Stock, comprised of $53.61 of cash (64.3% of total), $8.41 of Viacom
Merger Debentures (10.1% of total), $0.82 of Viacom Three-Year Warrants (1.0% of
total), $0.82 of Viacom Five-Year Warrants (1.0% of total), $3.87 of CVR (4.6%
of total) and $15.79 of Viacom Class B Common Stock (19.0% of total).
Lazard Freres also reviewed the implied value of the total consideration
offered in the Amended QVC Proposal, the Viacom Alone Proposal and the
Viacom-Blockbuster Proposal based on the closing market price of QVC Common
Stock and Viacom Class B Common Stock of February 1, 1994 (which was reflective
of the market immediately prior to the public announcement of the Proposals):
$85.91 per share for the Amended QVC Proposal, $81.61 per share for the Viacom
Alone Proposal and $83.35 per share for the Viacom-Blockbuster Proposal. The
relative percentages of the components of each bid were essentially identical to
the percentages for the February 3, 1994 market prices. Lazard Freres observed
that, using the respective closing market prices of QVC Common Stock and Viacom
Class B
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Common Stock on February 3, 1994, if the price of the Viacom Class B Common
Stock had remained unchanged, the price of QVC Common Stock would have to
decline by 19% for the respective implied market values of the total
consideration offered in the Amended QVC Proposal and the Viacom Alone Proposal
to be equivalent and by 12% for the respective implied market values of the
total consideration offered in the Amended QVC Proposal and the
Viacom-Blockbuster Proposal to be equivalent, and, conversely, if the price of
QVC Common Stock had remained unchanged, the price of Viacom Class B Common
Stock would have to rise by 33% for the respective implied market values of the
total consideration offered in the Amended QVC Proposal and the Viacom Alone
Proposal to be equivalent and by 21% for the respective implied market values of
the total consideration offered in the Amended QVC Proposal and the
Viacom-Blockbuster Proposal to be equivalent.
Recent Market Value Analysis
Lazard Freres next reviewed with the Board of Directors of Paramount its
recent market analysis of each Proposal by applying the exchange ratio of each
Proposal to the average prices of QVC Common Stock and Viacom Class B Common
Stock over various time periods from one week prior to February 4, 1994 up to
six months prior to February 4, 1994. Lazard Freres noted that the implied value
of the total consideration offered in the Amended QVC Proposal was higher than
the value of the Viacom Alone Proposal during each period other than one, but
lower than the Viacom-Blockbuster Proposal during each period other than with
the one and two week averages and the six month average.
Comparable Public Company Trading Analysis
Lazard Freres also discussed with the Board of Directors of Paramount that
it performed comparable public company trading multiple analysis of each of the
Proposals in which Lazard Freres applied the multiples of comparable public
companies to the estimated pro forma 1993 and 1994 EBITDA for each of the three
possible combinations to arrive at an implied value of the total consideration
offered in each Proposal. In connection with its analysis, Lazard Freres noted
that each of the pro forma QVC/Paramount, Viacom/Paramount and
Viacom-Blockbuster/Paramount combinations may be perceived in the market to be a
"diversified entertainment and intellectual property company" rather than a
"pure-play home shopping network company" (in the case of the pro forma QVC
combination) or a "pure-play cable network/programming company" (in the case of
either of the pro forma Viacom combinations). Lazard Freres further noted that
while there were no public companies with precisely the same mix of businesses
as the pro forma combined companies, perhaps the most relevant comparable
companies were Time Warner Inc. ("Time Warner"), The Walt Disney Company
("Disney") and Turner Broadcasting Systems, Inc. ("Turner"), and when Lazard
Freres applied the multiples for these companies to the estimated pro forma 1993
and 1994 EBITDA for each of three possible pro forma combinations, the implied
bid values of the total consideration offered in the Amended QVC Proposal, the
Viacom Alone Proposal and the Viacom-Blockbuster Proposal were below the then
current market values of the Proposals (based on the closing prices of QVC
Common Stock and Viacom Class B Common Stock on February 3, 1994). In addition,
Lazard Freres commented to the Board of Directors of Paramount that the
estimated 1993 and 1994 EBITDA multiples for Time Warner, Disney and Turner that
were used in its analysis were based on estimates set forth in various research
analyst reports.
Lazard Freres' analysis showed that applying Time Warner's multiples of
11.2 times 1993 estimated EBITDA and 10.4 times 1994 estimated EBITDA to the pro
forma estimated 1993 and 1994 EBITDA for each of the three possible
combinations, the implied common equity prices for the pro forma combined
QVC/Paramount company were $18.11 per share and $19.23 per share, respectively,
and the implied values of the total consideration offered in the Amended QVC
Proposal were $69.58 per share and $70.27 per share, respectively; the implied
common equity (i.e., Viacom Class B Common
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Stock) prices for the pro forma combined Viacom/Paramount company were $14.05
per share and $16.28 per share, respectively, and the implied values of the
total consideration offered in the Viacom Alone Proposal were $72.23 per share
and $73.26 per share, respectively; and the implied common equity values for the
pro forma combined Viacom-Blockbuster/Paramount company were $18.35 and $24.18
per share, respectively, and the implied values of the total consideration
offered in the Viacom-Blockbuster Proposal were $76.04 per share and $78.75 per
share, respectively. In addition, Lazard Freres reviewed its analysis that
showed that by applying Disney's multiples of 13.3 times 1993 EBITDA and 12.2
times 1994 estimated EBITDA to the pro forma estimated 1993 and 1994 EBITDA for
each of the three possible combinations, the implied common equity prices for
the pro forma combined QVC/Paramount company were $27.04 per share and $27.67
per share, respectively, and the implied values of the total consideration
offered in the Amended QVC Proposal were $75.09 per share and $75.48 per share,
respectively; the implied common equity prices for the pro forma combined
Viacom/Paramount company were $25.22 per share and $26.99 per share,
respectively, and the implied values of the total consideration offered in the
Viacom Alone Proposal were $77.41 per share and $78.24 per share, respectively;
and the implied common equity prices for the pro forma combined Viacom-
Blockbuster/Paramount company were $26.59 per share and $32.88 per share,
respectively, and the implied values of the total consideration offered in the
Viacom-Blockbuster Proposal were $79.87 per share and $82.79 per share. Finally,
Lazard Freres discussed its analysis of Turner's multiples that revealed that by
applying Turner's multiples of 14.8 times 1993 estimated EBITDA and 11.9 times
1994 estimated EBITDA to the pro forma estimated 1993 and 1994 EBITDA for each
of the three possible combinations, the implied common equity prices for the pro
forma combined QVC/Paramount company were $33.15 per share and $26.17 per share,
respectively, and the implied values of the total consideration offered in the
Amended QVC Proposal were $78.86 per share and $74.55 per share, respectively;
the implied common equity price for the pro forma combined Viacom/Paramount
company were $32.86 per share and $25.08 per share, respectively, and the
implied values of the total consideration offered in the Viacom Alone Proposal
were $80.96 per share and $77.35 per share, respectively, and the implied common
equity prices for the pro forma combined Viacom-Blockbuster/Paramount company
were $32.23 per share and $31.33 per share, respectively, and the implied values
of the total consideration offered in the Viacom-Blockbuster Proposal were
$82.49 per share and $82.07 per share, respectively.
In connection with its comparable public company trading multiple analysis,
Lazard Freres reviewed with the Board of Directors of Paramount various
historical and projected financial information regarding Time Warner, Disney and
Turner.
Discounted Cash Flow ("DCF") Analysis
Lazard Freres discussed with the Board of Directors of Paramount its DCF
analysis of each of the Proposals. In connection with preparing its DCF
analysis, Lazard Freres was provided with projections, on a stand-alone basis,
for each of QVC (covering six years), Viacom (covering three years) and
Blockbuster (covering four years). Lazard Freres noted that it had conducted due
diligence reviews of each of QVC, Viacom and Blockbuster and found that these
projections appeared to be based on reasonable assumptions, and thus Lazard
Freres did not alter the operating assumptions in performing its DCF analysis.
Lazard Freres explained that by using these projections, it generated a
hypothetical, debt-free "long-term investment value" of each of the companies
and these values were based on assumed discount rates ranging between 9% and 12%
and assumed terminal value multiples ranging between 10 times and 16 times
EBITDA for the final projected year of each of QVC and Viacom and assumed
terminal value multiples ranging between 8 times and 14 times EBITDA for the
final projected year of Blockbuster. In preparing its DCF analysis, Lazard
Freres used the third projected year for each company as the final projected
year. Since Paramount did not prepare projections beyond the then
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current fiscal year, Lazard Freres noted that it added the "unaffected" market
capitalization of Paramount (i.e., the aggregate unaffected equity market value,
plus the aggregate outstanding debt, less cash) to these discounted cash flow
values for each of the three companies in order to derive an implied pro forma
combined asset value for each of the three possible combinations. In order to
derive an implied value for the total consideration offered in each of the
Proposals, Lazard Freres explained that it used these implied pro forma combined
asset values to determine the hypothetical pro forma combined equity values of
each of the proposed combinations. Lazard Freres reviewed the results of its DCF
analysis which showed that with a terminal value multiple of 12 times EBITDA
(except in the case of Blockbuster, in which 10 times EBITDA was used) and a
discount rate of 11%, the Amended QVC Proposal had an implied value of $73.68
per share, the Viacom Alone Proposal had an implied value of $76.66 per share
and the Viacom-Blockbuster Proposal had an implied value of $81.84 per share and
that with a terminal value multiple of 14 times EBITDA (except in the case of
Blockbuster, in which 12 times EBITDA was used) and a discount rate of 10%, the
Amended QVC Proposal had an implied value of $75.52 per share, the Viacom Alone
Proposal had an implied value of $79.84 per share and the Viacom-Blockbuster
Proposal had an implied value of $85.45 per share.
Weighted Average Multiple Analysis
Finally, Lazard Freres presented its weighted average multiple analysis of
the Proposals. Lazard Freres explained that this analysis produced an implied
valuation of the total consideration offered in each Proposal by first adding
the "unaffected" EBITDA multiples of each bidder, including Blockbuster in the
proposed three-way combination (i.e., the EBITDA multiple one month prior to the
first public announcement of the proposed Paramount transactions for each
company), to that of Paramount to arrive at a weighted average multiple for each
pro forma combined company, and by then applying that multiple to the estimated
pro forma 1993 EBITDA for each of the three proposed combined companies. With
Paramount's multiple of 11.9 times estimated EBITDA, Lazard Freres noted that
the combined weighted average multiple for the proposed QVC/Paramount combined
company was 13.2 times estimated 1993 EBITDA, for the proposed Viacom/Paramount
combined company was 14.6 times estimated 1993 EBITDA and for the proposed
Viacom-Blockbuster/Paramount combined company was 14.5 times estimated 1993
EBITDA. Lazard Freres indicated that the QVC/Paramount combined multiple was
lower because Paramount's EBITDA (which on an unaffected basis commanded a lower
multiple) accounts for a greater proportion (about three-quarters) of the total
than in the Viacom/Paramount combined company (about half) or in the
Viacom-Blockbuster/Paramount combined company (about one-third). Lazard Freres
explained to the Board of Directors of Paramount that the actual stock prices
and trading multiples for any of the proposed combined companies may reflect the
market's perception of such factors as cost savings opportunities, revenue
growth opportunities, the impact of a change in management, difference in the
leverage of each combination and the loss of "pure play" investment opportunity,
and these possible factors were not taken into account in its analysis. Lazard
Freres further noted that weighted average multiple analysis was a useful tool
for further analysis because it generates pro forma stock values for each of the
possible combined companies based upon pre-transaction trading multiples;
however, Lazard Freres pointed out that neither the QVC Common Stock nor the
Viacom Class B Common Stock had been trading at the price implied by the
weighted average multiple analysis, and, in fact, both stocks were, and had
been, above these theoretical levels since the proposed transactions were
publicly announced. Lazard Freres presented to the Board of Directors of
Paramount the results of its weighted average multiple analysis that showed that
the implied value of the consideration offered for (i) the Amended QVC Proposal
was $74.51 per share (with a weighted average EBITDA multiple of 13.2 times),
(ii) the Viacom Alone Proposal was $79.36 per share (with a weighted average
EBITDA multiple of 14.6 times), and (iii) the Viacom-Blockbuster proposal was
$81.44 per share (with a weighted average EBITDA multiple of 14.5 times).
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TRADING MULTIPLE ANALYSIS
Lazard Freres also discussed with the Board of Directors of Paramount that
its analysis indicated that if each of the three proposed combined companies
traded at the same multiple of EBITDA, the total implied value of the
consideration offered in either the Viacom Alone Proposal or the Viacom-
Blockbuster Proposal would be in excess of the total implied value of the
consideration offered in the Amended QVC Proposal; however, if the proposed
QVC/Paramount combined company were to trade at a higher multiple, the total
implied value of the consideration offered in the Amended QVC Proposal would
have equaled or exceeded the total implied value of the consideration offered in
either the Viacom Alone Proposal or the Viacom-Blockbuster Proposal. Lazard
Freres reviewed various arguments that would have supported a higher multiple
for one Proposal over another Proposal, but concluded that its analysis did not
provide a reasonable basis to conclude from a financial point of view whether
any of the three proposed combined companies would in fact trade at a higher
multiple than any of the others.
In the course of its presentation at the meeting of the Board of Directors
of Paramount on February 4, 1994, Lazard Freres referred to summary materials
prepared by Lazard Freres that covered various items that Lazard Freres had
reviewed with the Paramount Board at earlier meetings at which prior bids by QVC
and Viacom were discussed. These items included a detailed overview of the
proposed Blockbuster Merger (including a description of the VCRs), the terms and
conditions of Blockbuster's commitment to purchase $1.25 billion of Viacom Class
B Common Stock pursuant to the Blockbuster Subscription Agreement, and the
"make-whole" rights offered by Viacom to Blockbuster under the Blockbuster
Subscription Agreement. In addition, Lazard Freres reviewed the pro forma
ownership profile of the surviving companies for each of three proposed combined
companies under the Proposals.
These summary materials prepared by Lazard Freres also presented an
overview of Blockbuster's business (including a summary of Blockbuster's
operations by business segment), a financial summary, a comparative analysis of
Blockbuster's multiples to comparable companies, a discussion of the risk of
obsolescence of Blockbuster's core video rental business and a stock ownership
profile of Blockbuster.
Lazard Freres had also summarized terms and conditions of the sources of
bank and strategic investor equity financing for each of the Amended QVC
Proposal and the Amended Viacom Proposal. Moreover, these materials included a
graphic representation of the stock price performance of QVC Common Stock,
Viacom Class B Common Stock, Paramount Common Stock and Blockbuster Common
Stock, as well as the S&P 400 Index over approximately 18-month and five-year
time periods and an analysis using 1993 estimated EBITDA for each of Paramount,
QVC, Blockbuster and Viacom that set forth the contribution that each company
would provide to total pro forma 1993 estimated EBITDA for each of the three
combined companies. This analysis showed that Paramount's business would
contribute approximately 75% of the EBITDA in a merger with QVC, whereas the
contribution by Viacom in the pro forma Viacom/Paramount combined company would
be approximately 50% and the contributions by each of Viacom and Blockbuster
would be approximately one-third in the pro forma Viacom-Blockbuster/Paramount
combined company. Lazard Freres also summarized each bidder's views regarding
the potential benefits that could be achieved by combining Paramount with each
of them and the views of Paramount's management regarding these possible
combination benefits. Finally, Lazard Freres described the results of various
sensitivity analyses that it performed on the implied value of the total
consideration offered in each of the Proposals that revealed that the implied
values of each of the Proposals were sensitive to changes in assumed EBITDA or
the assumed multiple at which the assumed EBITDA is capitalized.
At the request of Mr. Donald Oresman of Paramount on February 14, 1994,
Lazard Freres delivered a letter, dated February 14, 1994 (the "February 14,
1994 Letter"), to Mr. Oresman advising
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him that, as of February 14, 1994, Lazard Freres reaffirmed its written opinion
addressed to the Paramount Board, dated February 4, 1994.
THE OPINION OF LAZARD FRERES DATED FEBRUARY 4, 1994 (AND ANNEXED HERETO)
SHOULD BE READ IN ITS ENTIRETY. THE SUMMARY OF THE FINANCIAL AND COMPARATIVE
ANALYSES SET FORTH ABOVE CONTAINS INFORMATION WITH RESPECT TO ALL MATERIAL
ANALYSES EMPLOYED BY LAZARD FRERES IN REACHING ITS OPINION ON FEBRUARY 4, 1994
AND ITS CONCLUSION IN THE FEBRUARY 14, 1994 LETTER BUT DOES NOT PURPORT TO BE A
COMPLETE DESCRIPTION OF THE PRESENTATION OF LAZARD FRERES TO THE BOARD OF
DIRECTORS OF PARAMOUNT ON FEBRUARY 4, 1994 OR THE ANALYSES CONDUCTED BY LAZARD
FRERES. LAZARD FRERES BELIEVES THAT ITS ANALYSES MUST BE CONSIDERED AS A WHOLE
AND THAT SELECTING PORTIONS OF ITS ANALYSES AND THE FACTORS CONSIDERED BY IT,
WITHOUT CONSIDERING ALL FACTORS AND ANALYSES, COULD CREATE AN INCOMPLETE AND/OR
MISLEADING VIEW OF THE PROCESS UNDERLYING ITS OPINION. THE PREPARATION OF AN
OPINION IS A COMPLEX PROCESS AND IS NOT NECESSARILY SUSCEPTIBLE TO PARTIAL
ANALYSIS OR SUMMARY DESCRIPTION. IN PERFORMING ITS ANALYSES, LAZARD FRERES MADE
NUMEROUS ASSUMPTIONS WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS AND
ECONOMIC CONDITIONS AND OTHER MATTERS, MANY OF WHICH ARE BEYOND THE CONTROL OF
PARAMOUNT, VIACOM, QVC OR BLOCKBUSTER. ANY ESTIMATE CONTAINED IN THE ANALYSES
PERFORMED BY LAZARD FRERES IS NOT NECESSARILY INDICATIVE OF ACTUAL VALUES OR
ACTUAL FUTURE RESULTS, WHICH MAY BE SIGNIFICANTLY MORE OR LESS FAVORABLE THAN AS
SET FORTH THEREIN. ANALYSES RELATING TO THE VALUE OF ANY BUSINESS DO NOT PURPORT
TO BE APPRAISALS OR TO REFLECT THE PRICES AT WHICH ANY SUCH BUSINESS MAY
ACTUALLY BE SOLD. BECAUSE SUCH ESTIMATES ARE INHERENTLY SUBJECT TO UNCERTAINTY,
NONE OF PARAMOUNT, LAZARD FRERES OR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR
THEIR ACCURACY.
Lazard Freres is a nationally recognized investment banking firm and is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts, and valuations for estate, corporate and other purposes. Lazard Freres
was selected to act as financial advisor to the Board of Directors of Paramount
because of its expertise and its reputation in investment banking and mergers
and acquisitions.
Pursuant to an engagement letter, dated September 12, 1993, with Lazard
Freres (the "Lazard Engagement Letter"), Paramount paid Lazard Freres for its
financial advisory services in connection with the Offer and the Paramount
Merger (i) a fee of $3.0 million upon execution of the Viacom Merger Agreement
on September 12, 1993, and (ii) an additional fee of $9.5 million upon
consummation of the Offer. In addition, the Lazard Engagement Letter provides
that Paramount will reimburse Lazard Freres for its reasonable out-of-pocket
expenses (including fees and expenses of its legal counsel) and will indemnify
Lazard Freres and certain related parties against certain liabilities arising
out of the Offer and the Paramount Merger and its engagement.
Lazard Freres has from time to time in the past provided, and is currently
providing, in matters unrelated to Paramount, financial advisory or financing
services to one or more of the respective equity investors in Viacom and QVC, or
persons engaged in pending transactions with one or more of such investors and
has received, or expects to receive, fees for the rendering of such services.
From 1985 to March 1994, Lester Pollack, a General Partner of Lazard Freres
served as a director of Paramount. As of June 2, 1994, Lazard Freres and its
affiliates held 5,990 shares of Paramount Common Stock (including 965 shares of
Paramount Common Stock held by Mr. Pollack), 1,450 shares of Viacom Class A
Common Stock, 5,260 shares of Viacom Class B Common Stock and 520 shares of
Blockbuster Common Stock in customer trading and other accounts. In the ordinary
course of its business, Lazard Freres and its affiliates may also actively trade
in securities of Paramount, Viacom or Blockbuster for its own account and for
the account of its customers and, accordingly, may at any time hold a long or
short position in such securities.
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INTERESTS OF CERTAIN PERSONS IN THE PARAMOUNT MERGER
On May 25, 1993, Viacom established a Stock Option Plan (the "Plan") for
Outside Directors (defined below). Pursuant to the Plan, members of the Viacom
Board of Directors who are not officers or employees of Viacom or NAI or members
of their immediate family ("Outside Directors") (as of May 25, 1993, George
Abrams, Ken Miller and William Schwartz) received a one-time grant of stock
options for 5,000 shares of Viacom Class B Common Stock with an exercise price
of $45.25, the closing price of the Viacom Class B Common Stock on the AMEX on
the date of grant. In addition, under the terms of the Plan, each new Outside
Director, including Outside Directors of the combined company, receive a
one-time grant of stock options for 5,000 shares of Viacom Class B Common Stock
with an exercise price equal to the closing price of the Viacom Class B Common
Stock on the AMEX on the date of such Outside Director's election or appointment
to the Board. Each grant of stock options under this Plan will vest on the first
anniversary of the date of grant. H. Wayne Huizenga (who holds such options for
the benefit of Blockbuster), William C. Ferguson (who holds such options for the
benefit of NYNEX) and Frederic V. Salerno (who holds such options for the
benefit of NYNEX) each received a one-time grant of stock options for 5,000
shares of Viacom Class B Common Stock with an exercise price set at the closing
price of the Viacom Class B Common Stock on the date of the grant as set out
below. The Plan and all outstanding grants are subject to stockholder approval
at the next annual stockholder meeting of Viacom or the combined company.
<TABLE><CAPTION>
NAME DATE OF GRANT EXERCISE PRICE
- ------------------------------------------------------------------------- ----------------------- --------------
<S> <C> <C>
H. Wayne Huizenga,
for the benefit of Blockbuster......................................... October 22, 1993 $ 53.25
William C. Ferguson,
for the benefit of NYNEX............................................... November 19, 1993 $ 42.50
Frederic V. Salerno,
for the benefit of NYNEX............................................... January 27, 1994 $ 36.75
</TABLE>
PARAMOUNT VOTING AGREEMENT
The following is a summary of the material provisions of the Paramount
Voting Agreement, which is attached as Annex II to this Proxy
Statement/Prospectus and is incorporated herein by reference. The following
summary does not purport to be complete and is qualified in its entirety by
reference to the Paramount Voting Agreement.
Pursuant to the Paramount Voting Agreement, NAI agreed to vote the shares
of Viacom Class A Common Stock held by it (a) in favor of the Paramount Merger,
the Paramount Merger Agreement and the transactions contemplated by the
Paramount Merger Agreement and (b) against any proposal for any
recapitalization, merger, sale of assets or other business combination involving
Viacom (other than the Paramount Merger) or any other action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of Viacom under the Paramount Merger Agreement or
which could result in any of the conditions to Viacom's obligations under the
Paramount Merger Agreement not being fulfilled.
As of the date of this Proxy Statement/Prospectus, NAI owns 45,547,214
shares of Viacom Class A Common Stock, representing approximately 85% of the
outstanding voting shares of capital stock of Viacom.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary, based upon current law, is a general discussion of
certain Federal income tax consequences of the Paramount Merger to Viacom,
Paramount and Paramount stockholders assuming the Paramount Merger is
consummated as contemplated herein. This summary is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations
thereunder and administrative rulings and judicial authority as of the date
hereof, all of which are subject to change, possibly with retroactive effect.
Any such change could affect the continuing validity of this summary. This
summary applies to Paramount stockholders who hold their shares of Paramount
Common Stock as capital assets. This summary does not discuss all aspects of
income taxation that may be relevant to a particular Paramount stockholder in
light of such stockholder's specific circumstances or to certain types of
stockholders subject to special treatment under the Federal income tax laws (for
example, foreign persons, dealers in securities, banks and other financial
institutions, insurance companies, tax-exempt organizations and stockholders who
acquired shares of Paramount Common Stock pursuant to the exercise of options or
otherwise as compensation or through a tax-qualified retirement plan), and it
does not discuss any aspect of state, local, foreign or other tax laws. Because
of the unique nature of certain instruments to be received by Paramount
stockholders in the Paramount Merger, the Internal Revenue Service may take the
position that the Federal income tax consequences of holding such instruments
are different from those described below. No ruling has been (or will be) sought
from the Internal Revenue Service as to the anticipated tax consequences of the
Paramount Merger. Simpson Thacher & Bartlett, a partnership which includes
professional corporations, counsel to Paramount, has advised Paramount and
Shearman & Sterling, counsel to Viacom, has advised Viacom that, in their
opinions, the following discussion, insofar as it relates to matters of
Federal income tax law, is a fair and accurate summary of such matters.
PARAMOUNT STOCKHOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE TAX
CONSEQUENCES TO THEM OF THE PARAMOUNT MERGER, INCLUDING THE APPLICABILITY AND
EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
The Paramount Merger. Exchanges of Paramount Common Stock pursuant to the
Paramount Merger will be taxable transactions for Federal income tax purposes. A
Paramount stockholder who exchanges Paramount Common Stock for Viacom Class B
Common Stock, Viacom Merger Debentures, CVRs, Viacom Three-Year Warrants and
Viacom Five-Year Warrants in the Paramount Merger will recognize capital gain or
loss for Federal income tax purposes equal to the difference between such
stockholder's basis in the Paramount Common Stock so exchanged and the fair
market value on the date of the Paramount Merger of the Viacom Class B Common
Stock, the Viacom Merger Debentures, the CVRs, the Viacom Three-Year Warrants
and the Viacom Five-Year Warrants received. Such gain or loss will be long-term
gain or loss if, at the time of the Paramount Merger, the Paramount Common Stock
exchanged had been held for more than one year. Under current law, long-term
capital gains of individuals are, under certain circumstances, taxed at lower
rates than items of ordinary income (including short-term capital gains).
Such Paramount stockholder will have a tax basis in the Viacom Class B
Common Stock, the Viacom Merger Debentures, the CVRs, the Viacom Three-Year
Warrants and the Viacom Five-Year Warrants received equal to their respective
fair market values on the date of the Paramount Merger. The holding period of
such stockholder in the Viacom Merger Debentures will begin on the day following
the date of the Paramount Merger. The holding period of such stockholder for
long-term capital gains purposes in the Viacom Class B Common Stock, the CVRs,
the Viacom Three-Year Warrants and the Viacom Five-Year Warrants received could
depend, in part, on the characterization of the CVRs for Federal income tax
purposes, as discussed below under "Ownership of CVRs--Straddle Rules."
Neither Paramount nor Viacom will recognize any gain or loss as a result of
the Paramount Merger.
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Backup Withholding. To prevent "backup withholding" of Federal income tax
on payments of cash in lieu of a fractional share of Viacom Class B Common
Stock, a fractional Viacom Merger Debenture, a fractional CVR, a fractional
Viacom Three-Year Warrant, and a fractional Viacom Five-Year Warrant to a
Paramount stockholder in the Paramount Merger, a Paramount stockholder must,
unless an exception applies under the applicable law and regulations, provide
the payor of such cash with such stockholder's correct taxpayer identification
number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury
that such number is correct and that such stockholder is not subject to backup
withholding. A Substitute Form W-9 will be provided to each Paramount
stockholder in the letter of transmittal to be mailed to each stockholder after
the Paramount Effective Time. If the correct TIN and certifications are not
provided, a $50 penalty may be imposed on a Paramount stockholder by the
Internal Revenue Service, and cash received by such stockholder in the Paramount
Merger may be subject to backup withholding at a rate of 31%.
Tax Considerations Regarding the Ownership of Viacom Merger Debentures,
Series C Preferred Stock, Viacom Exchange Debentures, the CVRs, the Viacom
Three-Year Warrants and the Viacom Five-Year Warrants. The following is a
discussion of certain Federal income tax considerations regarding the ownership
of the Viacom Merger Debentures, the Series C Preferred Stock, the Viacom
Exchange Debentures, the CVRs, the Viacom Three-Year Warrants and the Viacom
Five-Year Warrants.
(a) Ownership of Viacom Merger Debentures. Although the proper
characterization of the Viacom Merger Debentures for Federal income tax purposes
is not free from doubt, Viacom intends to treat the Viacom Merger Debentures as
debt instruments for such purposes, and the following discussion assumes that
the Viacom Merger Debentures will be so treated. If the Viacom Merger Debentures
were treated as equity for Federal income tax purposes, then the discussion of
Federal income tax considerations under "Ownership of Series C Preferred Stock"
generally would apply to the Viacom Merger Debentures.
A holder of a Viacom Merger Debenture will be required to report as income
for Federal income tax purposes stated interest earned on the Viacom Merger
Debenture in accordance with the holder's method of tax accounting. A holder of
a Viacom Merger Debenture using the accrual method of accounting for tax
purposes is required to include stated interest in ordinary income as such
interest accrues, while a cash-basis holder must include stated interest in
income when payments are received (or made available for receipt) by such
holder.
If at the time the Viacom Merger Debentures are issued the issue price of
the Viacom Merger Debentures (i.e., the fair market value of the Viacom Merger
Debentures as of the issue date) is less than the "stated redemption price at
maturity" of the Viacom Merger Debentures, the Viacom Merger Debentures will
bear "original issue discount" equal to the amount of such difference, subject
to a de minimis exception. If the Viacom Merger Debentures bear "original issue
discount," such discount will be includible in the income of the holder on a
"yield to maturity" basis pursuant to section 1272 of the Code. Thus, the holder
will be required to report income in advance of the receipt of cash in respect
of such "original issue discount."
If at the time the Viacom Merger Debentures are issued or subsequently
acquired the holder's basis in the Viacom Merger Debentures exceeds the amount
payable at maturity with respect to such Viacom Merger Debentures, such
difference may be deducted as interest, on an economic accrual basis, over the
term of the Viacom Merger Debentures by the holder of such Viacom Merger
Debentures, at such holder's election, pursuant to section 171 of the Code. In
addition, a holder of a Viacom Merger Debenture who pays an "acquisition
premium" for a Viacom Merger Debenture bearing original issue discount will be
entitled to a reduction in the amount of original issue discount includible in
such holder's income. Furthermore, the Code provides generally that, in the case
of a holder of a Viacom Merger Debenture who purchases such Viacom Merger
Debenture at a "market discount" and thereafter recognizes a gain upon a
disposition of such Viacom Merger Debenture, the lesser of such
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gain or the portion of the market discount which accrued while the Viacom Merger
Debenture was held by the holder will generally be treated as interest income at
the time of disposition. In addition, a holder of a Viacom Merger Debenture
acquired at a market discount may be required to defer the deduction of a
portion of the interest paid or accrued on indebtedness incurred to purchase or
carry the Viacom Merger Debenture until it is disposed of in a taxable
transaction.
If the Viacom Merger Debentures are exchanged for Series C Preferred Stock,
such exchange will not be a taxable transaction. Such holder will have an
aggregate tax basis in the Series C Preferred Stock received in the exchange
equal to the aggregate basis in the Viacom Merger Debentures exchanged therefor.
The holding period of such holder in the Series C Preferred Stock received will
include the holding period of such holder in the Viacom Merger Debentures
exchanged therefor.
(b) Ownership of Series C Preferred Stock. Distributions paid on Series C
Preferred Stock will, to the extent of Viacom's current and accumulated earnings
and profits, be taxed as dividends. If the amount of a distribution on the
Series C Preferred Stock exceeds the current and accumulated earnings and
profits of Viacom, such excess first will be applied to reduce a holder's tax
basis in such holder's Series C Preferred Stock to the extent thereof. The
amount of such distribution in excess of such holder's tax basis will be treated
as gain from the sale or exchange of the Series C Preferred Stock.
In addition, generally under section 305 of the Code and the Treasury
regulations promulgated thereunder, if the redemption price of a preferred stock
exceeds its issue price (i.e., its fair market value on the date of issuance)
and such excess constitutes an unreasonable redemption premium, then such excess
would be considered a constructive distribution taxable as a dividend (to the
extent of current and accumulated earnings and profits) included in income over
the period during which such preferred stock cannot be redeemed. Accordingly, if
the Series C Preferred Stock were deemed to be issued with an unreasonable
redemption premium, a holder of Series C Preferred Stock would realize taxable
income without the receipt of cash over the period during which the Series C
Preferred Stock cannot be called for redemption.
A corporate holder of Series C Preferred Stock generally will be entitled
to the 70% corporate dividends-received deduction with respect to taxable
dividends paid on such stock, provided that such corporate holder has met the
requirements imposed by section 246 of the Code regarding the holding period for
the Series C Preferred Stock (see the discussion regarding the possible impact
of the ownership of CVRs on this requirement under "Ownership of CVRs--Corporate
Dividends-Received Deduction"), is not affected by the limit on aggregate
deductions under that section and is not subject to the limitation imposed by
section 246A of the Code with respect to debt-financed portfolio stock, all of
which conditions depend upon the particular holder's own circumstances. If a
corporate holder of Series C Preferred Stock is required to include in income
constructive dividends under section 305 of the Code (as described above), it is
possible that such dividends, together with any cash dividends, would qualify as
"extraordinary dividends" within the meaning of section 1059 of the Code.
Moreover, it should be noted that, under section 1059 of the Code, a corporate
holder of Series C Preferred Stock may be required to reduce its basis in such
stock if it receives an "extraordinary dividend" with respect to such stock.
Under the terms of the Series C Preferred Stock, Viacom may, at its option
beginning on the third anniversary of the Paramount Effective Time, issue Viacom
Exchange Debentures in exchange for all or part of the Series C Preferred Stock.
Also, unless previously exchanged, Viacom may redeem all or part of the Series C
Preferred Stock at any time after the fifth anniversary of the Paramount
Effective Time. Such an exchange for Viacom Exchange Debentures or redemption of
the Series C Preferred Stock will constitute a taxable transaction.
Whether any such exchange or redemption of Series C Preferred Stock will be
taxable to holders as a capital gain or loss or be treated as a dividend
distribution to the extent of current and accumulated earnings and profits will
be determined by applying the tests of section 302 of the Code to a holder's
particular circumstances. Capital gain or loss treatment will apply if the
exchange or redemption
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completely terminates the holder's actual and constructive stock interest in
Viacom or if the exchange or redemption is not essentially equivalent to a
dividend with respect to such holder. A holder whose relative actual and
constructive stock interest is minimal and who exercises no control over
corporate affairs generally will be entitled to capital gain or loss treatment
if an exchange or redemption results in a reduction in such holder's actual and
constructive stock interest. Corporate holders of Series C Preferred Stock
should note that, if the exchange or redemption is not pro rata as to all
holders and is taxable as a dividend, such dividend will be an "extraordinary
dividend" for purposes of section 1059 of the Code (see the second immediately
preceding paragraph).
(c) Ownership of Viacom Exchange Debentures. A holder of a Viacom Exchange
Debenture will be required to report as income for Federal income tax purposes
stated interest earned on the Viacom Exchange Debenture in accordance with the
holder's method of tax accounting. A holder of a Viacom Exchange Debenture using
the accrual method of accounting for tax purposes is required to include stated
interest in ordinary income as such interest accrues, while a cash-basis holder
must include stated interest in income when payments are received (or made
available for receipt) by such holder.
If at the time the Series C Preferred Stock is exchanged for Viacom
Exchange Debentures the issue price of the Viacom Exchange Debentures (i.e., the
fair market value of the Viacom Exchange Debentures if they are publicly traded
upon their issuance, or otherwise of the Series C Preferred Stock, as of the
issue date) is less than the "stated redemption price at maturity" of the Viacom
Exchange Debentures, the Viacom Exchange Debentures will bear "original issue
discount" equal to the amount of such difference, subject to a de minimis
exception. If the Viacom Exchange Debentures bear "original issue discount,"
such discount will be includible in the income of the holder on a "yield to
maturity" basis pursuant to section 1272 of the Code. Thus, the holder will be
required to report income in advance of the receipt of cash in respect of such
"original issue discount."
If at the time the Viacom Exchange Debentures are issued or subsequently
acquired the holder's basis in the Viacom Exchange Debentures exceeds the amount
payable at maturity with respect to such Viacom Exchange Debentures, such
difference may be deducted as interest, on an economic accrual basis, over the
term of the Viacom Exchange Debentures by the holder of such Viacom Exchange
Debentures, at such holder's election, pursuant to section 171 of the Code. In
addition, a holder of a Viacom Exchange Debenture who pays an "acquisition
premium" for a Viacom Exchange Debenture bearing original issue discount will be
entitled to a reduction in the amount of original issue discount includible in
such holder's income. Furthermore, the Code provides generally that, in the case
of a holder of a Viacom Exchange Debenture who purchases such Viacom Exchange
Debenture at a "market discount" and thereafter recognizes a gain upon a
disposition of such Viacom Debenture, the lesser of such gain or the portion of
the market discount which accrued while the Viacom Exchange Debenture was held
by the holder will generally be treated as interest income at the time of
disposition. In addition, a holder of a Viacom Exchange Debenture acquired at a
market discount may be required to defer the deduction of a portion of the
interest paid or accrued on indebtedness incurred to purchase or carry the
Viacom Exchange Debenture until it is disposed of in a taxable transaction.
(d) Ownership of the CVRs. The Federal income tax consequences resulting
from the maturity, lapse, or disposition of the CVRs received by a Paramount
stockholder in the Paramount Merger (an "Initial CVR Holder") will depend upon
how the CVRs are characterized for Federal income tax purposes. Although no
court has addressed the proper characterization of the CVRs for Federal income
tax purposes, the Internal Revenue Service has taken the position that rights
which were in many respects similar to the CVRs should be treated as cash
settlement put options for Federal income tax purposes. It also is possible that
the CVRs might be treated as debt instruments for Federal income tax purposes.
The following discussion examines the Federal income tax consequences if the
CVRs were treated as cash settlement put options or as debt instruments. It
should be noted, however, that the CVRs might be treated in some other manner,
and that subsequent legislation, regulations, court decisions and revenue
rulings could affect the Federal income tax treatment of the CVRs.
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Treatment of the CVRs as Cash Settlement Put Options. If the CVRs were
treated as cash settlement put options, an Initial CVR Holder would realize
capital gain or loss upon the lapse, payment at maturity or sale or exchange of
such holder's CVRs in an amount equal to the difference between the amount
realized, if any, and such holder's tax basis for CVRs. Upon payment at
maturity, the amount realized would be the cash or the fair market value of the
Viacom securities received in satisfaction of the CVRs. However, some or all of
any loss so realized might be deferred, or an Initial CVR Holder's holding
period might be adjusted, under the straddle rules described below.
Straddle Rules. Section 1092 of the Code provides special rules concerning
the recognition of losses and the determination of holding periods with respect
to positions that are part of a "straddle." The term "straddle" means offsetting
positions with respect to personal property. The term "position" means an
interest (including an option) in personal property. For this purpose, "personal
property" includes stock only if such stock is part of a straddle where one of
the offsetting positions is either an option with respect to such stock or
substantially identical stock or securities or, under regulations which have
been proposed but have not yet been finalized, a position with respect to
substantially similar or related property (other than stock) (for example, a
debt instrument). Positions are treated as "offsetting" where the risk of loss
from holding one position is substantially diminished by reason of holding
another position.
It is possible that the holding of CVRs and the Viacom Class A Common
Stock, the Viacom Class B Common Stock or another security of Viacom (e.g., the
Viacom Three-Year Warrants, the Viacom Five-Year Warrants or another class of
Viacom security) by an Initial CVR Holder (regardless of whether the holder
acquired any such shares of Viacom Common Stock or other security of Viacom in
the Paramount Merger or otherwise) would be a straddle if the CVRs were treated
as cash settlement put options. It should be noted that the Code directs the
Secretary of the Treasury to issue regulations prescribing the method for
determining the portion of a position that is subject to the straddle rules when
the size of the position exceeds the size of the offsetting position. No such
regulations have been issued to date.
If holding the CVRs and Viacom Common Stock or another security of Viacom
were treated as a straddle, then any loss realized in a taxable year by an
Initial CVR Holder upon a sale or other disposition (including retirement) of
either the CVRs or Viacom Common Stock or another security of Viacom would be
recognized only to the extent it exceeds the unrecognized gain (as of the end of
such year) with respect to the retained position. The unrecognized portion of
such loss would be deferred and would be treated as a loss incurred in a later
taxable year, the recognition of which would continue to be subject to the
straddle rules.
In addition, if the CVRs and Viacom Common Stock or another security of
Viacom were treated as a straddle, special rules would apply to determine
whether capital gain or loss upon the disposition of such stock or security and
the CVRs would be treated as long term or short term. If an Initial CVR Holder
would not have a long-term holding period (i.e., a holding period of more than
one year) for Viacom Common Stock or another security of Viacom when such holder
receives a CVR that is part of a straddle including such stock or security, then
such holder's holding period for any such stock or security before the
acquisition of the CVR would be disregarded, and instead his holding period for
any such stock or security and the CVR would begin only upon the disposition, if
any, of the other. As a result of this rule, any capital gain or loss recognized
upon the disposition of any such share or the disposition of the CVR, whichever
occurred first, would be short term, and any capital gain or loss recognized
upon the disposition of the second position would be long term or short term,
depending on whether a long-term holding period would have been acquired
commencing with the disposition of the first position.
If an Initial CVR Holder were treated as having held Viacom Common Stock or
another security of Viacom for more than one year when such holder receives a
CVR that is part of a straddle including such stock or security, then such
holder would retain the long-term holding period for such stock or
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security. Thus, any capital gain or loss recognized by the Initial CVR Holder on
the disposition of such stock or security would be long term. The Initial CVR
Holder's holding period for the CVR for purposes of determining the term of any
capital gain will begin only when (if ever) such holder disposes of such stock
or security. However, any capital loss recognized by the Initial CVR Holder upon
maturity, or upon an earlier termination or disposition of the CVR, would be
treated as long term, regardless of the holder's holding period for the CVR.
Section 263(g) of the Code disallows a deduction for interest and carrying
charges allocable to a position that is a part of a straddle and requires such
amounts to be added to the tax basis of such position.
Treatment of the CVRs as Debt Instruments. The following discussion of the
treatment of the CVRs as debt instruments is based principally on sections 1271
through 1275 of the Code and certain proposed Treasury regulations regarding
contingent-payment obligations (the "Proposed Regulations") under the original
issue discount provisions of the Code. The application of these Code provisions
and the Proposed Regulations to the CVRs cannot be predicted with certainty
without further guidance from the Internal Revenue Service, because they do not
specifically contemplate a debt instrument as to which all of the payments are
contingent, such as the CVRs would be if they were treated as debt. Further,
there can be no assurance that the ultimate Federal income tax treatment under
final Treasury regulations would not differ materially from the discussion
below. For example, the Internal Revenue Service issued revised proposed
Treasury regulations in January 1993, which were withdrawn shortly thereafter,
that would have provided for different Federal income tax treatment of the CVRs
as debt instruments from that discussed below.
If the CVRs are treated as debt obligations, no interest income (including
in the form of original issue discount) should accrue to an Initial CVR Holder
prior to maturity. At maturity, the amount of cash or the portion of the fair
market value of the Viacom security, if any, received by an Initial CVR Holder
pursuant to a CVR equal to the "issue price" of the CVR (i.e., the holder's tax
basis in the CVR) should be treated as a payment of principal, and any excess
amount of cash or fair market value should be treated as ordinary interest
income. If the amount of cash or the fair market value of the Viacom security
received by an Initial CVR Holder pursuant to a CVR was less than the issue
price, or if no cash or Viacom security was received at maturity, the Initial
CVR Holder should recognize a capital loss equal to the amount by which the
holder's tax basis in the CVR exceeded the amount of cash or the fair market
value of the Viacom security, if any, received by the holder.
If an Initial CVR Holder sold or otherwise disposed of a CVR prior to
maturity, the holder should recognize ordinary income to the extent that the
amount realized on such sale or disposition exceeded the holder's tax basis in
the CVR. If the amount realized was less than the tax basis, the holder should
recognize a short-term capital loss equal to the difference.
Corporate Dividends-Received Deduction. If the CVRs were treated as cash
settlement put options, it appears that a corporate Initial CVR Holder's holding
period for Viacom Class B Common Stock for purposes of the dividends-received
deduction under section 243 to 246 of the Code would not include any days on
which it holds a CVR. This treatment might render such Initial CVR Holder
ineligible for the dividends-received deduction in respect of dividend income on
Viacom Class B Common Stock. If the CVRs were treated as debt instruments,
proposed Treasury regulations also would treat the CVRs as having the same
effect on the dividends-received deduction with respect to Viacom Class B Common
Stock. In addition, the CVRs also might have the same effect on the
dividends-received deduction with respect to Viacom Class A Common Stock or
another class of Viacom stock held by an Initial CVR Holder if any such stock
and Viacom Class B Common Stock are "substantially identical stock" for this
purpose or, if they are not, if the holding of CVRs and Viacom Class A Common
Stock or another class of Viacom stock would be treated as diminishing such
holder's risk of loss under proposed Treasury regulations.
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Treatment of Capital Losses. For Federal income tax purposes, capital
losses of individuals may be offset against capital gains and, to the extent
such losses exceed capital gains, against up to $3,000 of ordinary income
($1,500 for a married individual filing a separate return). Capital losses of
corporations may only be offset against capital gains. Capital losses not used
in the year recognized may, within certain limitations, be carried over to other
taxable years.
An Initial CVR Holder should note that, if the CVRs were treated as cash
settlement put options, any gain on the CVRs would be treated as capital gain
which could be offset by any corresponding capital loss on the Initial CVR
Holder's Viacom Class A Common Stock, Viacom Class B Common Stock or another
Viacom security if such stock or security was sold and such loss was realized.
However, the ordinary income that the CVRs may generate if they were treated as
debt instruments could not be offset for Federal income tax purposes by any such
capital loss (except to the extent discussed in the preceding paragraph with
respect to individuals). An initial CVR Holder should be aware that, if the
value of CVRs decrease, this issue will not arise since any loss on the CVRs
will be treated as capital loss regardless of whether the CVRs are treated as
cash settlement put options or debt obligations.
As the use of capital losses by an Initial CVR Holder will depend upon
multiple factors, including such holder's particular circumstances, and upon the
issue of whether the CVRs are treated as cash settlement put options or debt
instruments for Federal income tax purposes, Initial CVR Holders should consult
their tax advisors regarding the use of capital losses.
(e) Ownership of the Viacom Three-Year and Five-Year Warrants. If a holder
exercises a Viacom Three-Year Warrant or Viacom Five-Year Warrant solely by the
delivery of cash, the holder will not recognize gain or loss on the exercise,
except with respect to cash, if any, received in lieu of a fractional share of
Viacom Class B Common Stock. The tax basis of the Viacom Class B Common Stock
acquired (including a fractional share deemed acquired) as a result of such
exercise of a Viacom Three-Year Warrant or Viacom Five-Year Warrant will equal
the sum of (i) the holder's tax basis in the Viacom Three-Year Warrant or Viacom
Five-Year Warrant exercised and (ii) the exercise price. The holding period for
such Viacom Class B Common Stock will commence upon the date of exercise.
It is not clear whether the delivery of Series C Preferred Stock or Viacom
Exchange Debentures to pay the exercise price on the exercise of a Viacom
Five-Year Warrant will be considered a taxable disposition of such Series C
Preferred Stock or Viacom Exchange Debentures or will qualify generally as a
tax-free exchange. If the delivery by a holder qualifies as a taxable
disposition of Series C Preferred Stock or Viacom Exchange Debentures, the
holder will recognize (1) gain or loss equal to the difference, if any, between
(i) the exercise price, which will equal the liquidation preference of the
Series C Preferred Stock or the principal amount of the Viacom Exchange
Debentures so delivered and (ii) the holder's tax basis in them, plus (2) gain
or loss with respect to cash, if any, received in lieu of a fractional share of
Viacom Class B Common Stock. The tax basis of the Viacom Class B Common Stock
acquired (including a fractional share deemed acquired) as a result of such
exercise of a Viacom Five-Year Warrant will equal the sum of (i) the holder's
tax basis in the Viacom Five-Year Warrant exercised and (ii) the exercise price.
The holding period for such Viacom Class B Common Stock will commence upon the
date of exercise.
If the delivery of Series C Preferred Stock or Viacom Exchange Debentures
by a holder qualifies generally as a tax-free exchange, no gain or loss will be
recognized by the holder, except (1) with respect to cash, if any, received in
lieu of a fractional share of Viacom Class B Common Stock, and (2) as to a
cash-basis holder, ordinary income equal to the lesser of (i) the amount of
accrued interest not previously includible in income by the holder on Viacom
Exchange Debentures so delivered or (ii) the excess of the fair market value of
the Viacom Class B Common Stock acquired (including a fractional share deemed
acquired) by the holder over the principal amount of such Viacom Exchange
Debentures. Except as discussed in the following sentence, the tax basis for the
Viacom Class B Common Stock acquired (including a fractional share deemed
acquired) as a result of such exercise of a Viacom Five-Year Warrant should
equal the sum of (i) the holder's tax basis for the Series C Preferred Stock or
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Viacom Exchange Debentures so delivered (less the tax basis, if any, for such
Viacom Exchange Debentures attributable to any original issue discount thereon
previously includible in income by the holder) and (ii) the holder's tax basis
for the Warrant, and the holding period for such Viacom Class B Common Stock
will include the holding period of such Series C Preferred Stock or Viacom
Exchange Debentures. The tax basis for the Viacom Class B Common Stock, if any,
deemed acquired by the holder in exchange for any original issue discount or
accrued interest previously or then includible in income by the holder on Viacom
Exchange Debentures so delivered should equal the fair market value of such
Viacom Class B Common Stock at the time of the exchange, and the holding period
for such Viacom Class B Common Stock should commence on the day after the
exchange.
A holder's receipt of cash lieu of a fractional share of Viacom Class B
Common Stock upon an exercise of a Viacom Three-Year Warrant or Viacom Five-Year
Warrant generally will result in the recognition of capital gain or loss equal
to the difference, if any, between the cash received and the holder's tax basis
in the Viacom Class B Common Stock acquired upon such exercise allocable to such
fractional share.
In general, the sale or exchange of a Viacom Three-Year or Five-Year
Warrant will result in a capital gain or loss, if any, equal to the difference
between the amount realized from such sale or exchange and the holder's tax
basis in the Viacom Three-Year or Five-Year Warrant. The expiration of a Viacom
Three-Year or Five-Year Warrant will result in a capital loss to the holder
thereof equal to the holder's tax basis therein.
Under the terms of each of the Viacom Three-Year and Five-Year Warrants,
the number of shares of Viacom Class B Common Stock that may be acquired upon
exercise of a Viacom Three-Year or Five-Year Warrant will be adjusted upon the
happening of certain events. Section 305(c) of the Code and the Treasury
regulations thereunder provide that, if such adjustments result in a
constructive increase in a holder's proportionate interest in Viacom's earnings
and profits or assets, such increase will be treated as a deemed distribution to
the holder taxable under the dividend provisions of section 301 of the Code.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE BASED UPON PRESENT
LAW, ARE FOR GENERAL INFORMATION ONLY AND DO NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS WHICH MAY APPLY TO A PARAMOUNT
STOCKHOLDER. THE TAX EFFECTS AS APPLICABLE TO A PARTICULAR PARAMOUNT STOCKHOLDER
MAY BE DIFFERENT FROM THE TAX EFFECTS AS APPLICABLE TO OTHER PARAMOUNT
STOCKHOLDERS, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX
LAWS, AND THUS PARAMOUNT STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS.
REAL ESTATE TRANSFER TAXES
The New York State Real Property Transfer Gains Tax, the New York State
Real Estate Transfer Tax, and the New York City Real Property Transfer Tax
(collectively, the "Real Estate Transfer Taxes") apply to the transfer or
acquisition, directly or indirectly, of controlling interests in an entity which
owns interests in real property located in New York State or New York City, as
the case may be. The Offer and the Paramount Merger will result in the transfer
of controlling interests in entities which own New York State or New York City
real property for purposes of the Real Estate Transfer Taxes. Although any Real
Estate Transfer Taxes could be imposed directly on the Paramount stockholders,
Viacom and Paramount will complete and file any necessary tax returns and will
pay all Real Estate Transfer Taxes that are imposed as a result of the Offer and
the Paramount Merger. Upon receipt of the consideration for either the Offer or
the Paramount Merger, each Paramount stockholder will be deemed to have agreed
to be bound by the Real Estate Transfer Tax returns filed by Viacom and
Paramount.
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CERTAIN EFFECTS OF THE PARAMOUNT MERGER; OPERATIONS AFTER THE PARAMOUNT MERGER
As a result of the Paramount Merger, there will be no public market for
Paramount Common Stock. Upon consummation of the Paramount Merger, the Paramount
Common Stock will cease to be quoted on the NYSE, the registration of the
Paramount Common Stock under the Exchange Act will be terminated and such stock
will no longer constitute "margin securities" under the rules of the Board of
Governors of the Federal Reserve System. See "Exchange Act Registration and
Trading of the Paramount Common Stock."
Viacom currently owns 61,657,432 shares of Paramount Common Stock acquired
pursuant to the Offer, representing a majority of the shares of Paramount Common
Stock outstanding. As a result of the Paramount Merger, the existing
stockholders of Paramount will share in Paramount's, Viacom's, and, if the
Blockbuster Merger is consummated, Blockbuster's earnings and assets with the
existing stockholders of Viacom and, if the Blockbuster Merger is consummated,
the existing stockholders of Blockbuster. Accordingly, to the extent Paramount's
performance on a stand-alone basis would exceed the performance of Viacom (or
Viacom and Blockbuster) on a consolidated basis, existing Paramount stockholders
will be disadvantaged by having to share Paramount's earnings and assets with
Viacom's (or Viacom's and Blockbuster's) existing stockholders. Conversely,
Paramount's existing stockholders will be advantaged to the extent
Viacom-Paramount (or the combined company) would outperform Paramount on a
stand-alone basis. Following completion of the Paramount Merger, Viacom will own
the entire equity interest in Paramount and will thereby own a 100% interest in
Paramount's net assets and earnings. Accordingly, after the Paramount Merger,
unaffiliated stockholders of Paramount will no longer have a direct equity
interest in Paramount and instead will own approximately 28.4% of the
outstanding shares of Viacom Common Stock and thereby have an approximately
28.4% interest in Viacom-Paramount's net assets and earnings. After the Mergers,
unaffiliated stockholders of Paramount will own approximately 15.3% of the
outstanding shares of Viacom Common Stock and thereby have an approximately
15.3% interest in the net assets and earnings of the combined company. See "The
Paramount Merger--Ownership of Viacom Common Stock Immediately After the
Paramount Merger and the Mergers." Accordingly, based on year-end 1993 pro forma
financial results for Viacom-Paramount and year-end 1993 historical results for
Paramount, as a result of the Paramount Merger the interest of Paramount's
unaffiliated stockholders in earnings from operations and stockholders' equity
will increase to $154 million from $151 million and will decline to $1.8 billion
from $2.1 billion, respectively. In the case of pro forma financial results for
the combined company, the interest of Paramount's unaffiliated stockholders in
earnings from operations and stockholders' equity will decline to $135 million
and $1.6 billion, respectively.
Viacom is considering various plans to restructure Paramount and its
subsidiaries following the Paramount Merger in order to, among other things,
simplify Paramount's corporate structure, improve operating efficiencies, save
expenses and make cash flow from operating subsidiaries more available to
Viacom. While engaged in this process, Viacom has identified substantial amounts
of redundancies in corporate overhead and is currently in the process of
implementing overhead reductions, including personnel reductions. Viacom expects
to take additional steps in this regard prior to and following the Paramount
Merger.
Viacom has also announced that it is in the process of seeking indications
of interest for the possible sale of Paramount's Madison Square Garden
operations and certain publishing assets, which Viacom has determined are not
core strategic assets.
Except for the Mergers and except as otherwise described in this Proxy
Statement/Prospectus, none of Sumner M. Redstone, NAI, Viacom or Paramount have
any present plans or proposals which relate to or would result in (i) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving Paramount or any of its subsidiaries, (ii) a sale or
transfer of a material amount of assets of Paramount or any of its subsidiaries,
(iii) any material change in the present dividend rate or policy or indebtedness
or capitalization of Paramount or (iv) any other material change in Paramount's
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corporate structure or business. See "Financing of the Offer," "Certain
Considerations" and "Financial Matters After the Mergers."
THE PARAMOUNT MERGER
GENERAL
The discussion in this Proxy Statement/Prospectus of the Paramount Merger
and the description of the Paramount Merger's principal terms are subject to and
qualified in their entirety by reference to the Paramount Merger Agreement, a
copy of which is attached to this Proxy Statement/Prospectus as Annex I and
which is incorporated herein by reference.
THE OFFER
Pursuant to the Offer, on March 11, 1994 Viacom completed its purchase of a
majority of the shares of Paramount Common Stock at a price of $107 per share
net to the seller in cash, or aggregate cash consideration of approximately $6.6
billion.
PARAMOUNT MERGER CONSIDERATION
At the Paramount Effective Time, each outstanding share of Paramount Common
Stock issued and outstanding immediately prior to the Paramount Effective Time
(other than shares of Paramount Common Stock held by Paramount, Viacom or any
direct or indirect wholly owned subsidiary of Viacom or of Paramount and by
holders who shall have demanded and perfected appraisal rights under the DGCL)
will be converted into the right to receive (i) 0.93065 of a share of Viacom
Class B Common Stock, (ii) $17.50 principal amount of the Viacom Merger
Debentures, (iii) 0.93065 of a CVR, (iv) 0.5 of a Viacom Three-Year Warrant and
(v) 0.3 of a Viacom Five-Year Warrant. On February 1, 1994, the last trading day
before the announcement of the terms of the February 4 Merger Agreement, on
February 14, 1994 (the date on which Lazard Freres reaffirmed its written
opinion addressed to the Paramount Board dated February 4, 1994), and on June 3,
1994, the last trading day before the printing of this Proxy Statement/
Prospectus, the last sales price of a share of Viacom Class B Common Stock as
reported on the AMEX was $34 1/8, $29 7/8 and $28 5/8, respectively. However,
no assurances can be given with respect to the prices at which the Viacom Class
B Common Stock will trade after the date hereof or after the Paramount Effective
Time or the prices at which the Viacom Merger Debentures (or, if issued, the
Series C Preferred Stock and the Viacom Exchange Debentures), the CVRs and the
Viacom Warrants will trade after the Paramount Effective Time. There has been
no public trading market for the Viacom Merger Debentures, CVRs or Viacom
Warrants and there can be no assurances that an active market for such
securities will develop or continue after the Paramount Merger.
The Viacom Merger Debentures will bear interest (unless exchanged for
Series C Preferred Stock as described below) at a rate of 8% per annum from the
Paramount Effective Time, payable semi-annually beginning January 1, 1995, will
have a maturity of 12 years from the Paramount Effective Time, will be
redeemable, at the option of Viacom, in whole or in part, at declining
redemption premiums after the fifth anniversary of the Paramount Effective Time
and will be subordinated in right of payment to all senior obligations of
Viacom.
The Viacom Merger Debentures will be exchangeable, at the option of Viacom,
in whole but not in part, on or after the earlier of (i) January 1, 1995, but
only if the Blockbuster Merger has not been consummated by such date and (ii)
the acquisition by a third party of beneficial ownership of a majority of the
then outstanding voting securities of Blockbuster, into the Series C Preferred
Stock at the rate of one share of Series C Preferred Stock for each $50 in
principal amount of Viacom Merger Debentures exchanged. At the time of exchange
of the Series C Preferred Stock for the Viacom Merger Debentures, all accrued
and unpaid interest on the Viacom Merger Debentures will not be paid and instead
the dividends payable pursuant to subclause (i) of the next sentence will be
payable. The Series C Preferred Stock, if issued, (i) would accrue dividends
from the later of the Paramount Effective Time and the
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latest date through which interest has been paid on the Viacom Merger Debentures
at a rate of 5% per annum until the tenth anniversary of the Paramount Effective
Time and 10% per annum thereafter, (ii) would have a liquidation preference of
$50 per share, (iii) would be redeemable at the option of Viacom in whole or in
part at declining redemption premiums after the fifth anniversary of the
Paramount Effective Time and (iv) would be exchangeable in whole or in part at
the option of Viacom into the Viacom Exchange Debentures after the third
anniversary of the Paramount Effective Time. The Viacom Exchange Debentures
would be subordinated obligations of Viacom, would bear interest at the rate of
5% per annum until the tenth anniversary of the Paramount Effective Time and 10%
per annum thereafter, would be redeemable at the option of Viacom, in whole or
in part, at declining redemption premiums after the fifth anniversary of the
Paramount Effective Time, and would mature on the twentieth anniversary of the
Paramount Effective Time.
Each whole CVR will represent the right, on the first anniversary of the
Paramount Effective Time, to receive, in cash or securities (at the option of
Viacom), the amount by which the average trading value of Viacom Class B Common
Stock is less than a minimum price of $48 per share. Viacom will have the right,
in its sole discretion, to extend the payment and measurement dates of the CVR
by one year, in which case the minimum price will increase to $51 per share, and
a further one-year extension right which, if exercised by Viacom, would increase
the minimum price to $55 per share. The average trading value will be based upon
market prices during the 60 trading days ending on the last day of the relevant
period and is subject to a floor of (i) $36 per share if Viacom does not
exercise its extension rights, (ii) $37 per share if Viacom extends the payment
and measurement dates of the CVR by one year or (iii) $38 per share if Viacom
exercises its further one-year extension right. If Viacom elects to issue
securities in payment for the CVRs, such securities could take the form of
common stock or preferred stock, options or warrants therefor, other securities
convertible into or exchangeable for common stock or preferred stock, notes,
debentures, derivative securities or any other security of Viacom now
existing or hereafter created or any combination of the foregoing.
The value of the securities, if any, issued in exchange for the CVRs will be
determined by an Independent Financial Expert (as defined below). There can be
no assurance, however, that such securities would ultimately trade in the
market at a price at or above such valuation. Such securities, if issued,
would be registered under the Securities Act of 1933 prior to the issuance
thereof and a prospectus in connection with such issuance would be delivered
to holders of record of CVRs at that time.
If the Average Trading Value of a share of Viacom Class B Common Stock
equals or exceeds $48 on the Maturity Date or $51 on the First Extended Maturity
Date (if the Maturity Date is extended by Viacom to the First Extended Maturity
Date) or $55 on the Second Extended Maturity Date (if the First Extended
Maturity Date is extended by Viacom to the Second Extended Maturity Date), as
the case may be, no amount will be payable with respect to the CVRs. Certain
corporate reorganizations, in which consideration paid to holders of shares of
Viacom Class B Common Stock exceeds minimum amounts may also result in no value
being payable with respect to the CVRs.
Each whole Viacom Three-Year Warrant will entitle the holder thereof to
purchase one share of Viacom Class B Common Stock at any time prior to the third
anniversary of the Paramount Effective Time at a price of $60, payable in cash.
Each whole Viacom Five-Year Warrant will entitle the holder thereof to purchase
one share of Viacom Class B Common Stock at any time prior to the fifth
anniversary of the Paramount Effective Time at a price of $70, payable in cash
or by exchanging, if issued, either Series C Preferred Stock with an equivalent
liquidation preference or an equivalent principal amount of Viacom Exchange
Debentures. The terms of the Viacom Warrants will include customary
anti-dilution (with respect to stock splits, stock dividends, reverse stock
splits or other similar subdivisions or combinations of stock) and other
provisions.
Due to a lack of an existing market for the CVRs and Viacom Warrants, it is
impracticable to determine an actual value for the CVRs and Viacom Warrants at
this time. While the CVRs and Viacom Warrants will be listed for trading on the
AMEX, there are no assurances that a liquid public market reflecting the
fundamental value of the CVRs and Viacom Warrants will develop.
For a more detailed description of the Paramount Merger Consideration, see
"Description of Viacom Capital Stock" and "Description of Viacom Debentures."
For a description of the provisions with respect to fractional shares see
"Certain Provisions of the Paramount Merger Agreement-- Procedure for Exchange
of Paramount Certificates." Any shares of Paramount Common Stock held by
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Paramount, Viacom or any direct or indirect wholly owned subsidiary of Paramount
or Viacom will be cancelled.
The financial terms of the Paramount Merger were determined through
negotiations between Viacom and Paramount, each of which was advised with
respect to such negotiations by its respective legal and financial advisors.
Any shares of Viacom Class B Common Stock, Viacom Merger Debentures, CVRs,
Viacom Three-Year Warrants, or Viacom Five-Year Warrants issued in connection
with the Paramount Merger, or shares of Series C Preferred Stock issued upon the
exchange (if any) of Viacom Merger Debentures, Viacom Exchange Debentures issued
upon the exchange (if any) of shares of Series C Preferred Stock, securities
issued pursuant to the CVRs, or shares of Viacom Class B Common Stock issued
upon exercise of the Viacom Three-Year Warrants or Viacom Five-Year Warrants, to
residents of Canada may be subject to certain resale restrictions, including
that they may be required to be resold outside of Canada or pursuant to an
available exemption under applicable Canadian securities laws.
No fractional securities will be issued in connection with the Paramount
Merger. In lieu of any such fractional shares each holder of Paramount Common
Stock will be paid an amount in cash as described under "Certain Provisions of
the Paramount Merger Agreement--Procedure for Exchange of Paramount
Certificates."
PARAMOUNT EFFECTIVE TIME
The Paramount Merger will become effective upon the filing of a Certificate
of Merger with the Secretary of State of the State of Delaware or such later
time as is specified in such certificate a form of which is attached as Annex
VI. Such filing will be made as promptly as practicable after satisfaction or
waiver of the conditions to the Paramount Merger unless another date is agreed
to by Paramount and Viacom. The Paramount Merger Agreement may be terminated by
either party if, among other reasons, the Paramount Merger shall not have been
consummated on or before July 31, 1994; provided, however, that the Paramount
Merger Agreement may be extended by written notice of either Viacom or Paramount
to a date not later than September 30, 1994, if the Paramount Merger shall not
have been consummated as a direct result of Viacom or Paramount having failed by
July 31, 1994, to receive all required regulatory approvals or consents with
respect to the Paramount Merger. See "Certain Provisions of the Paramount Merger
Agreement--Termination" and "Certain Provisions of the Paramount Merger
Agreement--Conditions to Consummation of the Paramount Merger."
STOCK EXCHANGE LISTING
The shares of Viacom Class B Common Stock, the Viacom Merger Debentures,
the CVRs and the Viacom Warrants to be issued in the Paramount Merger as
Paramount Merger Consideration have been approved for listing on the AMEX,
subject to official notice of issuance and stockholder approval. The
shares of Viacom Class B Common Stock are traded on the AMEX under the
symbol "VIA.B" and the Viacom Debentures, CVRs, Viacom Three-Year Warrants
and Viacom Five-Year Warrants will be traded under the symbols "VIA.D",
"VIA.CV", "VIA.WS.C" and "VIA.WS.E", respectively.
Viacom has also agreed to use its reasonable best efforts to cause the
Series C Preferred Stock and the Viacom Exchange Debentures to be approved for
listing on the AMEX prior to the issuance thereof.
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EXPENSES OF THE TRANSACTION
It is estimated that, if the Paramount Merger is consummated, expenses
incurred in connection with the Offer and the Paramount Merger will be
approximately as follows (in thousands):
<TABLE>
<S> <C>
Financial advisory fees and expenses......................................... $ 28,600
Commission filing fees....................................................... 2,200
Legal fees and expenses...................................................... 17,100
Accounting fees.............................................................. 700
Printing costs............................................................... 3,500
Proxy solicitation, distribution and Paying Agent fees....................... 645
Blue Sky fees................................................................ 30
Miscellaneous................................................................ 9,225
-------------
Total........................................................... $ 62,000
-------------
-------------
</TABLE>
All costs and expenses incurred in connection with the Paramount Merger
Agreement and the transactions contemplated thereby will be paid by the party
incurring such expenses, except that expenses incurred in connection with
printing, filing and mailing this Proxy Statement/Prospectus and all Commission
and other regulatory filing fees in connection therewith will be shared equally
by Viacom and Paramount.
OWNERSHIP OF VIACOM COMMON STOCK IMMEDIATELY AFTER THE PARAMOUNT MERGER AND THE
MERGERS
PERCENTAGE OWNERSHIP OF VIACOM COMMON STOCK*
<TABLE><CAPTION>
FOLLOWING CONSUMMATION OF FOLLOWING CONSUMMATION OF
THE PARAMOUNT MERGER** THE MERGERS
------------------------------------ ------------------------------------
VIACOM CLASS A VIACOM VIACOM CLASS A VIACOM
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
NAI............................................... 85.2% 46.0% 62.1% 24.8%
Pre-Merger(s) stockholders of Viacom (other than
NAI).............................................. 14.8% 25.6% 10.8% 13.9%
Former stockholders of Blockbuster................ --% --% 27.1% 46.0%
Former stockholders of Paramount.................. -- 28.4 -- 15.3%
</TABLE>
- ---------------
* All percentages of ownership of common stock shown above in this section are
calculated based on the number of shares of the relevant class or classes of
stock outstanding as of March 31, 1994. Percentages of ownership do not give
effect to potential dilution related to employee or director stock options or
warrants, Viacom Preferred Stock, VCRs, CVRs and Viacom Warrants.
** All percentages of ownership of common stock shown in this column are
calculated assuming the Blockbuster Merger has not yet been consummated.
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EFFECT ON EMPLOYEE BENEFIT STOCK PLANS
Assumption of Paramount Stock Options. The May Amendment amended
the February 4 Merger Agreement to modify the treatment of outstanding
options to purchase shares of Paramount Common Stock granted under Paramount's
employee stock option plans ("Paramount Stock Options"). In general, the
principal effect of such amendment was to adjust the terms of the Paramount
Stock Options outstanding at the Paramount Effective Time so that the holders of
such options receive additional value, based upon the price per share paid in
the Offer, with respect to one half of the Paramount Common Stock subject to
such options. Pursuant to the Paramount Merger Agreement, at the Paramount
Effective Time, Paramount's obligations with respect to Paramount Stock Options
will be assumed by Viacom. The Paramount Stock Options will continue to have the
same terms and conditions as in effect immediately prior to the Paramount
Effective Time, except that such Paramount Stock Options will be exercisable for
(i) that number of whole shares of Viacom Class B Common Stock equal to the
product of the number of shares of Paramount Common Stock covered by such
Paramount Stock Option immediately prior to the Effective Time (the "Paramount
Option Shares") multiplied by 0.5 and multiplied further by 0.93065, rounded up
to the nearest whole number of shares of Viacom Class B Common Stock, (ii) that
number of whole CVRs equal to the product of the number of Paramount Option
Shares multiplied by 0.5 and multiplied further by 0.93065, rounded up to the
nearest whole number of CVRs, provided that, if the option holder has not
exercised his or her Paramount Stock Option prior to the maturity of the CVRs,
then the CVRs described above shall be replaced by that number of shares of
Viacom Class B Common Stock equal in value to the amount by which the "Target
Price" exceeds the greater of the "Current Market Value" and the "Minimum Price"
all as defined in "Description of Viacom Capital Stocks--CVRs," on the
applicable maturity date multiplied by the number of such CVRs, rounded up to
the nearest whole number of shares, (iii) that number of whole Viacom Three-Year
Warrants equal to the product of the number of Paramount Option Shares
multiplied by 0.5 and multiplied further by 0.5 and rounded up to the nearest
whole number of Viacom Three-Year Warrants, provided that, if the option holder
has not exercised his or her Paramount Stock Option prior to the third
anniversary of the Paramount Effective Time, then the Viacom Three-Year Warrants
described above shall be replaced by that number of shares of Viacom Class B
Common Stock equal in value to the fair market value of such Viacom Three-Year
Warrants (as determined by reference to the average trading price for the
five-day trading period immediately prior to the third anniversary of the
Paramount Effective Time, if available, or, if not available, in the reasonable
judgment of the Viacom Board), rounded up to the nearest whole number of shares,
(iv) that number of whole Viacom Five-Year Warrants equal to the product of the
number of Paramount Option Shares multiplied by 0.5 and multiplied further by
0.3 and rounded up to the nearest whole number of Viacom Five-Year Warrants,
provided that, if the option holder has not exercised his or her Paramount Stock
Option prior to the fifth anniversary of the Paramount Effective Time, then the
Viacom Five-Year Warrants described above shall be replaced by that number of
shares of Viacom Class B Common Stock equal in value to the fair market value of
such Viacom Five-Year Warrants (as determined by reference to the average
trading price for the five-day trading period immediately prior to the fifth
anniversary of the Paramount Effective Time, if available, or if not available,
in the reasonable judgment of the Viacom Board), rounded up to the nearest whole
number of shares, (v) that (A) principal amount of whole Viacom Merger
Debentures equal to the product of the number of shares of Paramount Common
Stock covered by such Paramount Stock Option immediately prior to the Paramount
Effective Time multiplied by 0.5 and multiplied further by $17.50 plus an amount
in cash (without interest), rounded to the nearest cent, determined by
multiplying (x) the fair market value of one Viacom Merger Debenture, as
determined by reference to a five-day average trading price, if available, or if
not available, in the reasonable judgment of the Viacom Board by (y) the
fractional interest in a Viacom Merger Debenture to which such option holder
would otherwise be entitled or (B) if issued, that number of whole shares of
Series C Preferred Stock equal to the product of the number of shares of
Paramount Common Stock covered by such Paramount Stock Option immediately prior
to the Paramount Effective Time multiplied by 0.5 and multiplied further by 0.35
and rounded up to the nearest whole number of
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shares of Series C Preferred Stock or (C) if issued, that principal amount of
whole Viacom Exchange Debentures equal to the product of the number of shares of
Paramount Common Stock covered by such Paramount Stock Option immediately prior
to the Paramount Effective Time multiplied by 0.5 and multiplied further by
$17.50 plus an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (x) the fair market value of one Viacom Exchange
Debenture, as determined by reference to a five-day average trading price, if
available, or if not available, in the reasonable judgment of the Viacom Board
by (y) the fractional interest in a Viacom Exchange Debenture to which such
option holder would otherwise be entitled, and (vi) that number of whole shares
of Viacom Class B Common Stock equal to the result of the number of Paramount
Option Shares multiplied by 0.5 and multiplied further by $107, with such
product being divided by the First Year Anniversary Average Trading Price (as
defined below) and rounded up to the nearest whole number, provided that, if the
option holder exercises his or her Paramount Stock Options prior to the first
anniversary of the Paramount Effective Time, then the whole shares of Viacom
Class B Common Stock shall be replaced by a right to receive such shares on the
first anniversary of the Paramount Effective Time. In addition, pursuant to the
Paramount Merger Agreement, Viacom agrees to provide each holder of a Paramount
Stock Option not less than ten days' advance notice of any involuntary
termination of employment (other than by reason of death or disability) in order
to permit such holder to exercise his or her then exercisable Paramount Stock
Options during such ten-day period. As used above, the "First Year Anniversary
Average Trading Price" means the average closing price on the AMEX (or such
other exchange on which such shares are then listed) for a share of Viacom Class
B Common Stock during the 30 consecutive trading days immediately preceding the
first anniversary of the Paramount Effective Time. The Paramount Merger
Agreement requires Viacom to reserve for issuance the securities underlying such
assumed Paramount Stock Options and to promptly issue to each holder of such
Paramount Stock Options evidence of the assumption thereof.
Other Effects of the Paramount Merger. Where permitted under the terms of
any Paramount benefit plan or employment agreement, the Paramount Merger
Agreement requires that the Paramount Board approve the transactions
contemplated by the Paramount Merger Agreement prior to the Paramount Effective
Time so that the transactions contemplated by the Paramount Merger Agreement do
not accelerate or trigger changes to benefits or the terms of any such plan or
agreement. The Paramount Merger Agreement also provides that Paramount will not
terminate its annual or long-term performance plans prior to the Paramount
Effective Time, and will delay the establishment of future performance targets
under its annual plan and the implementation of a new performance cycle under
its long-term plan until Paramount and Viacom review the terms of such plans
after the Paramount Effective Time. Pursuant to the Paramount Merger Agreement
and where permitted under the terms of any Viacom benefit plan or employment
agreement, Viacom also will insure that the transactions contemplated by the
Paramount Merger Agreement will not accelerate or trigger changes to benefits or
the terms of any such plan or agreement.
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FINANCING OF THE OFFER
The total amount of funds required by Viacom to consummate the Offer and to
pay related fees and expenses was approximately $6.7 billion. The Offer was
financed by (i) $1.8 billion from the sale of Viacom Preferred Stock (see "Sale
of Viacom Preferred Stock"), proceeds of which are reflected as cash and cash
equivalents on Viacom's balance sheet as of December 31, 1993, (ii) $1.25
billion from the sale of Viacom Class B Common Stock to Blockbuster and (iii)
$3.7 billion from the Credit Agreement dated as of November 19, 1993, as amended
as of January 4, 1994 and as further amended as of February 15, 1994, among
Viacom, the Banks named therein (the "Banks"), and The Bank of New York,
Citibank, N.A. and Morgan Guaranty Trust Company of New York, as Managing Agents
(as so amended, the "Credit Agreement"). After the Blockbuster Merger, the
Series A Preferred Stock and the Viacom Class B Common Stock owned by
Blockbuster will cease to be outstanding and bank facilities used by Viacom and
Blockbuster will be repaid or refinanced as described below. The following is a
summary of the principal terms of the bank agreements of Viacom and Blockbuster
which have been filed with the Commission under the Exchange Act and are
incorporated by reference herein. Such summary does not purport to be complete
and is subject to and qualified in its entirety by reference to such bank
agreements.
The Credit Agreement provides that, in order to pay for the Offer and
related expenses, up to $3.7 billion may be borrowed, repaid and reborrowed
until November 18, 1994, at which time all amounts outstanding will become due
and payable.
The Credit Agreement provides that Viacom may elect to borrow at either the
Base Rate or the Eurodollar Rate, subject to certain limitations. The "Base
Rate" will be the higher of (i) Citibank, N.A.'s Base Rate and (ii) the Federal
Funds Rate plus 0.50%. The "Eurodollar Rate" will be the London Interbank
Offered Rate plus (i) 0.9375%, until Viacom's senior unsecured long-term debt is
rated by Standard & Poor's Corporation ("S&P") or Moody's Investors Service,
Inc. ("Moody's"), and (ii) thereafter, a variable rate ranging from 0.2500% to
0.9375% dependent on the senior unsecured long-term debt ratings assigned to
Viacom. The Eurodollar Rate is available for one, two, three or six month
borrowings. Interest on Base Rate borrowings will be payable quarterly in
arrears. Interest on Eurodollar Rate borrowings will be payable in arrears (i)
at the end of each applicable interest period and (ii) in the case of a period
longer than three months, every three months.
The Credit Agreement provides that Viacom will pay each of the Banks a
facility fee on such Bank's commitment in effect from time to time (whether or
not utilized) from November 19, 1993 until November 18, 1994 payable quarterly
in arrears, at the rate of (i) 0.3750% per annum, until Viacom's senior
unsecured long-term debt is rated by S&P or Moody's and (ii) thereafter, a
variable rate ranging from 0.1000% to 0.3750% dependent on the senior unsecured
long-term debt ratings assigned to Viacom.
The Credit Agreement contains representations, warranties and covenants
customary in facilities of this type. The Credit Agreement requires, among other
things, that Viacom maintain certain financial ratios and comply with certain
financial covenants.
Under the Credit Agreement, Viacom has agreed to indemnify each of the
Banks and certain related persons against certain liabilities.
Blockbuster obtained a portion of the funds necessary to purchase the
shares of Viacom Class B Common Stock under the Blockbuster Subscription
Agreement pursuant to a credit agreement dated as of February 15, 1994 (the "New
Blockbuster Facility"), with certain banks named therein, Bank of America, as
Agent, and BA Securities Inc., as Arranger, for the aggregate amount of $1
billion. The New Blockbuster Facility has a 364-day term and bears interest at
Blockbuster's option at the Reference Rate or at LIBOR plus a margin ranging
from 0.50% up to 1.0% (based upon Blockbuster's public debt rating) for the
first six months after the initial borrowing and plus 1.25% thereafter. Under
the New Blockbuster Facility, the Reference Rate is generally defined as the
higher of (i) the rate of
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interest publicly announced from time to time by the Bank of America in San
Francisco, California as its reference rate, or (ii) 0.5% per annum above the
latest Federal Funds Rate in effect on such day. LIBOR is generally defined as
the average London interbank offered rate for 1-, 2-, 3-or 6-month Eurodollar
deposits.
Blockbuster obtained the remainder of such funds from its Amended and
Restated Credit Agreement dated as of December 22, 1993 (the "Blockbuster Credit
Agreement"), with certain banks named therein and Bank of America, for itself
and as agent, pursuant to which such banks have agreed to advance Blockbuster on
an unsecured basis an aggregate of $1 billion for a term of 40 months.
Outstanding advances, if any, become due at the expiration of the 40-month term.
The Blockbuster Credit Agreement and the New Blockbuster Facility require, among
other things, that Blockbuster maintain certain financial ratios and comply with
certain financial covenants. Borrowings under the Blockbuster Credit Agreement
shall bear interest at either the Reference Rate, the Offshore Rate, the CD Rate
or a rate submitted by any Bank presenting a Competitive Bid Offer to
Blockbuster. The "Reference Rate" will be the higher of (i) the rate of interest
publicly announced from time to time by the Bank of America in San Francisco,
California as its Reference Rate, and (ii) 0.5% per annum above the Federal
Funds Rate. The "Offshore Rate" will be the London Interbank Offered Rate plus a
variable rate ranging from 0.3125% to 0.6500% depending on Blockbuster's public
debt rating and outstanding borrowings under the Blockbuster Credit Agreement.
The "CD Rate" will be based upon a formula of the interest rates chargeable on
certificates of deposit plus a variable rate ranging from 0.4375% to 0.7750%
depending on Blockbuster's public debt rating and outstandings under the
Blockbuster Credit Agreement.
The Blockbuster Credit Agreement and the New Blockbuster Facility contain
certain covenants and events of default, including a change of control default,
which will require either a waiver in connection with the Blockbuster Merger or
the refinancing of the indebtedness under such facilities prior to the
Blockbuster Merger.
Accordingly, assuming consummation of the Blockbuster Merger, the foregoing
facilities, together with other current maturities, may require Viacom to
refinance up to $5.7 billion ($4.0 billion if the Blockbuster Merger is not
consummated) within the next six months. During May 1994, Viacom received
commitments from a syndicate of financial institutions for a new long-term $6.8
billion credit facility. The new facility will have scheduled maturities
commencing December 1996 and a final maturity of July 2002. The new Viacom
facility will refinance existing bank indebtedness at Viacom, Viacom
International and Paramount and will be available for general corporate
purposes.
On May 5, 1994, Viacom, Viacom International and Paramount filed a shelf
registration statement with the Commission registering $3.0 billion of debt
securities and preferred stock, guaranteed by Viacom International and, after
the Paramount Effective Time, Paramount. Some or all of the securities may be
issued in one or more offerings.
Although Viacom expects that it will be able to refinance its indebtedness
and meet its obligations without the need to sell any assets, Viacom is
continuing to review opportunities for the sale of non-strategic assets as such
opportunities may arise, including the exploration of the sale of the operations
of Madison Square Garden and certain non-core publishing assets. Viacom
cannot predict what obligations, if any, it will have in connection with the
exercise of appraisal rights by Paramount stockholders nor has it determined
the method(s) it may use to finance any such cash obligations. See
"Dissenting Stockholders' Rights of Appraisal."
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SALE OF VIACOM PREFERRED STOCK
On October 22, 1993, Blockbuster purchased $600 million of Series A
Preferred Stock pursuant to an amended and restated subscription agreement (the
"Blockbuster Preferred Stock Agreement") dated October 21, 1993 between Viacom
and Blockbuster. On November 19, 1993, NYNEX (NYNEX and Blockbuster are
hereinafter collectively referred to as the "Preferred Stock Investors")
purchased $1.2 billion of Series B Preferred Stock pursuant to a subscription
agreement (the "NYNEX Preferred Stock Agreement") dated October 4, 1993, as
amended as of November 19, 1993, between Viacom and NYNEX. Additional terms of
the Viacom Preferred Stock are described under "Description of Viacom Capital
Stock--Viacom Preferred Stock."
The following description and that set forth under "Description of Viacom
Capital Stock--Viacom Preferred Stock" is qualified in its entirety by reference
to the respective Certificate of Designations of the Series A Preferred Stock
and the Series B Preferred Stock.
Each of the Blockbuster Preferred Stock Agreement and the NYNEX Preferred
Stock Agreement provides that for so long as the Preferred Stock Investor and
its affiliates beneficially own at least $300 million, based on liquidation
preference, of the Viacom Preferred Stock initially purchased or the equivalent
in number of shares of Viacom Preferred Stock and shares of Viacom Class B
Common Stock issued on conversion of Viacom Preferred Stock, the Preferred Stock
Investor will be entitled to designate one representative to the Board of
Directors of Viacom. The Director designated by Blockbuster is H. Wayne
Huizenga, Chairman and Chief Executive Officer of Blockbuster, and the Director
designated by NYNEX is William C. Ferguson, Chairman of the Board of NYNEX. See
"Management Before and After the Mergers."
Each of the Blockbuster Preferred Stock Agreement and the NYNEX Preferred
Stock Agreement provides the Preferred Stock Investors with registration rights
with respect to the Viacom Preferred Stock and the Viacom Class B Common Stock
issued upon conversion thereof and, for so long as the Preferred Stock Investor
beneficially owns all of the series of Viacom Preferred Stock initially
purchased by it, the right to participate in certain extraordinary dividends or
distributions by Viacom on the same basis as if such Preferred Stock Investor
had converted the Viacom Preferred Stock into Viacom Class B Common Stock,
subject to certain adjustments being made to the terms of the Viacom Preferred
Stock. The NYNEX Preferred Stock Agreement also provides for Viacom to
repurchase from NYNEX the Series B Preferred Stock and Viacom Class B Common
Stock issued upon conversion thereof in the event that continued beneficial
ownership by NYNEX would be in violation of the MFJ. Under the MFJ, neither
NYNEX nor any "affiliated enterprise," which, as of and after the purchase of
the Series B Preferred Stock by NYNEX, may include Viacom and certain of its
affiliates, may provide interexchange telecommunications service, interexchange
access and information access services and certain other activities. See
"Business."
In their agreements with Viacom, Blockbuster and NYNEX each agreed to
pursue appropriate strategic partnership opportunities in the domestic and
international media, entertainment, video transport and telecommunications
sectors. The foregoing summaries of the material provisions of the Blockbuster
Preferred Stock Agreement and the NYNEX Preferred Stock Agreement do not purport
to be complete and are qualified in their entirety by reference to the
Blockbuster Preferred Stock Agreement and the NYNEX Preferred Stock Agreement,
respectively. The Blockbuster Preferred Stock Agreement and the NYNEX Preferred
Stock Agreement have been filed with the Commission under the Exchange Act by
each of Viacom and Blockbuster or NYNEX, as the case may be, and are
incorporated herein by reference.
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CERTAIN PROVISIONS OF THE PARAMOUNT MERGER AGREEMENT
The following is a summary of the material provisions of the Paramount
Merger Agreement not summarized elsewhere in this Proxy Statement/Prospectus.
The Paramount Merger Agreement is attached as Annex I to this Proxy
Statement/Prospectus and is incorporated herein by reference. The following
summary does not purport to be complete and is qualified in its entirety by
reference to the Paramount Merger Agreement.
PROCEDURE FOR EXCHANGE OF PARAMOUNT CERTIFICATES
As soon as reasonably practicable after the Paramount Effective Time,
Viacom will instruct Paramount's transfer agent, Chemical Bank, to mail to each
holder of record of a certificate or certificates which immediately prior to the
Paramount Effective Time evidenced outstanding shares of Paramount Common Stock
(other than Dissenting Shares) (the "Paramount Certificates") (i) a letter of
transmittal and (ii) instructions to effect the surrender of the Paramount
Certificates in exchange for the certificates evidencing shares of Viacom Class
B Common Stock, the Viacom Merger Debentures, CVRs, Viacom Warrants and cash in
lieu of fractional shares. Upon surrender of a Paramount Certificate for
cancellation to the bank or trust company designated in its capacity as Exchange
Agent (the "Paramount Exchange Agent") together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Paramount Certificate shall be entitled to
receive in exchange therefor (i) certificates evidencing that number of whole
shares of Viacom Class B Common Stock and that number of whole CVRs, Viacom
Merger Debentures and Viacom Warrants which such holder has the right to receive
in respect of the shares of Paramount Common Stock formerly evidenced by such
Paramount Certificate, (ii) any dividends or other distributions to which such
holder is entitled as described below and (iii) cash in lieu of fractional
shares of Viacom Class B Common Stock and fractional CVRs, Viacom Merger
Debentures and Viacom Warrants, and the Paramount Certificate so surrendered
shall forthwith be cancelled. In the event of a transfer of ownership of shares
of Paramount Common Stock which is not registered in the transfer records of
Paramount, shares of Viacom Class B Common Stock, CVRs, Viacom Merger
Debentures, Viacom Warrants and cash in lieu of fractional shares may be issued
and paid to a transferee if the Paramount Certificate evidencing such shares of
Paramount Common Stock is presented to the Paramount Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered, each
Paramount Certificate shall be deemed at any time after the Paramount Effective
Time to evidence only the right to receive upon such surrender the certificates
evidencing Viacom Class B Common Stock, CVRs, Viacom Merger Debentures, Viacom
Warrants, cash in lieu of fractional shares, any dividends and other
distributions to which such holder is entitled and cash in lieu of fractional
shares as described above.
PARAMOUNT STOCKHOLDERS SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO THE
PARAMOUNT EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL AND SHOULD NOT RETURN
THEIR STOCK CERTIFICATES WITH THE ENCLOSED PROXY OR FORM OF ELECTION.
No dividends or other distributions declared or made after the Paramount
Effective Time with respect to shares of Viacom Class B Common Stock and the
CVRs, Viacom Merger Debentures and Viacom Warrants with a record date after the
Paramount Effective Time shall be paid to the holder of any unsurrendered
Paramount Certificate with respect to the shares of Viacom Class B Common Stock
and the CVRs, Viacom Merger Debentures or Viacom Warrants they are entitled to
receive until the holder of such Paramount Certificate shall surrender such
Paramount Certificate.
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No fraction of a share of Viacom Class B Common Stock or fraction of a CVR,
Viacom Merger Debenture or Viacom Warrant will be issued in the Paramount
Merger. In lieu of any such fractional shares or fractional CVRs, Viacom Merger
Debentures or Viacom Warrants, each holder of Paramount Common Stock upon
surrender of a Paramount Certificate for exchange will be paid (1) an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(x) the per share closing price on the AMEX of Viacom Class B Common Stock on
the date of the Paramount Effective Time by (y) the fractional interest to which
such holder would otherwise be entitled (after taking into account all shares of
Paramount Common Stock then held of record by such holder) plus (2) an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(x) the fair market value of one CVR, as determined by reference to a five-day
average trading price, if available, or if not available, in the reasonable
judgment of the Viacom Board by (y) the fractional interest in a CVR to which
such holder would otherwise be entitled (after taking into account all shares of
Paramount Common Stock then held of record by such holder) plus (3) an amount in
cash (without interest) rounded to the nearest cent, determined by multiplying
(x) the fair market value of one Viacom Three-Year Warrant, as determined by
reference to a five-day average trading price, if available, or if not
available, in the reasonable judgment of the Viacom Board by (y) the fractional
interest in a Viacom Three-Year Warrant to which such holder would otherwise be
entitled (after taking into account all shares of Paramount Common Stock then
held of record by such holder) plus (4) an amount in cash (without interest)
determined as described below in respect of the fractional interest in a Viacom
Merger Debenture to which such holder would otherwise be entitled (after taking
into account all shares of Paramount Common Stock then held of record by such
holder) plus (5) an amount in cash (without interest) rounded to the nearest
cent, determined by multiplying (x) the fair market value of one Viacom
Five-Year Warrant, as determined by reference to a five-day average trading
price, if available, or if not available, in the reasonable judgment of the
Viacom Board by (y) the fractional interest in a Viacom Five-Year Warrant to
which such holder would otherwise be entitled (after taking into account all
shares of Paramount Common Stock then held of record by such holder).
The Viacom Merger Debentures will be issued in the Paramount Merger only in
principal amounts of $1,000 or integral multiples thereof. Holders of shares of
Paramount Common Stock otherwise entitled to fractional amounts of Viacom Merger
Debentures will be entitled to receive promptly from the Exchange Agent a cash
payment in an amount equal to such holder's proportionate interest (after taking
into account all shares of Paramount Common Stock then held of record by such
holder) in the proceeds from the sale or sales in the open market by the
Exchange Agent, on behalf of all such holders, of the aggregate fractional
principal amount of Viacom Merger Debentures.
Neither Viacom nor Paramount will be liable to any holder of shares of
Paramount Common Stock for any such shares of Viacom Class B Common Stock, CVRs,
Viacom Merger Debentures, Viacom Warrants (or dividends or distributions with
respect thereto) or cash in respect of shares of Paramount Common Stock or cash
in lieu of fractional shares of Viacom Class B Common Stock, CVRs, Viacom Merger
Debentures or Viacom Warrants delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
After the Paramount Effective Time, there will be no transfers on the stock
transfer books of Paramount of shares of Paramount Common Stock.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Paramount Merger Agreement contains various representations and
warranties of Viacom and Paramount relating to, among other things, the
following matters (which representations and warranties are subject, in certain
cases, to specified exceptions): (i) the due organization, existence and good
standing of, and similar corporate matters with respect to, each of Viacom,
Paramount, the Viacom Material Subsidiaries, and the Paramount Material
Subsidiaries (as such terms are defined in the
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Paramount Merger Agreement); (ii) each of Viacom's and Paramount's
organizational documents; (iii) each of Viacom's and Paramount's capital
structure; (iv) the authorization, execution, delivery, performance by and
enforceability of the Paramount Merger Agreement against Viacom and Paramount;
(v) the absence of any governmental or regulatory authorization, consent or
approval required to consummate the Paramount Merger, other than as disclosed;
(vi) the absence of any conflict with such party's Certificate of Incorporation
or By-laws, or with applicable law, or with certain contracts, other than as
disclosed; (vii) required filings, permits and consents to effectuate the
Paramount Merger; (viii) compliance with applicable laws; (ix) reports and other
documents filed with the Commission and other regulatory authorities and the
accuracy of the information contained therein; (x) the absence of certain
changes or events prior to the date of the Paramount Merger Agreement having a
material adverse effect on the financial condition, business or operations of
Viacom and its subsidiaries or Paramount and its subsidiaries, as the case may
be, except for any actions taken by Viacom in connection with the Blockbuster
Merger or the Blockbuster Subscription Agreement; (xi) the absence of material
pending or threatened litigation; (xii) the qualification, operation and
liability under certain employee benefit plans of Viacom and its subsidiaries
and Paramount and its subsidiaries, as the case may be; (xiii) the right to use
all material patents, trademarks or copyrights for use in connection with the
business of Viacom and its subsidiaries or Paramount and its subsidiaries, as
the case may be; (xiv) certain tax matters and payment of taxes; (xv) the
opinion of the respective financial advisors of Viacom and Paramount as to the
fairness of the financial terms of the Offer and the Paramount Merger to their
respective stockholders; (xvi) the absence of any brokerage, finder's or other
fee due in connection with the Paramount Merger (except, in the case of Viacom,
to Smith Barney and, in the case of Paramount, to Lazard Freres); and (xvii) the
votes required by the stockholders of Viacom and Paramount to approve the
transaction. In addition, Paramount represented and warranted to Viacom that all
necessary action was taken to amend the Rights Agreement, so that (a) none of
the transactions contemplated by the Paramount Merger Agreement will lead to (1)
the exercise of the Rights, (2) Viacom or a Viacom subsidiary being deemed an
"Acquiring Person" (as defined in the Rights Agreement) or (3) the "Stock
Acquisition Date" (as defined in the Rights Agreement) occurring upon any such
event and (b) the "Expiration Date" (as defined in the Rights Agreement) of the
Rights will occur immediately prior to the Paramount Effective Time. Viacom has
represented and warranted (i) that as of the date of the Paramount Merger
Agreement and based on the number of issued and outstanding shares of Paramount
Common Stock as of September 3, 1993 set forth in the Merger Agreement, Viacom
and its affiliates beneficially owned, in the aggregate, less than 5% of the
issued and outstanding shares of Paramount Common Stock, (ii) that, since
September 12, 1993, neither Viacom nor, to Viacom's knowledge, its affiliates
have purchased or sold shares of Viacom Class A Common Stock or Viacom Class B
Common Stock and neither Viacom nor, to Viacom's knowledge, its affiliates have
any knowledge of any such trading and (iii) that the representations and
warranties of Viacom contained in the Blockbuster Merger Agreement are true and
correct as of the date of the Paramount Merger Agreement and the date of
consummation of the Offer, except as would not have a material adverse effect on
the financial condition of the combined company.
RIGHTS AGREEMENT AMENDMENTS
Pursuant to the Paramount Merger Agreement, on March 1, 1994, Paramount
amended the Rights Agreement so that the acquisition of Paramount Common Stock
pursuant to the Offer or the Paramount Merger does not cause the Rights issued
thereunder to become exercisable, and on January 21, 1994, Paramount amended the
Rights Agreement so that the Rights will expire immediately prior to the
Paramount Effective Time (the "Rights Agreement Amendments"). For a complete
description of the Rights Agreement, as amended, see "Comparison of Stockholder
Rights--Rights Plans."
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CONDUCT OF BUSINESSES PENDING THE PARAMOUNT MERGER
Each of Viacom and Paramount has agreed that prior to the Paramount
Effective Time, unless otherwise consented to in writing by the other party and
except, in the case of Viacom, for actions taken by Viacom in order to
consummate the Blockbuster Merger, the businesses of each of Paramount and
Viacom and their respective subsidiaries will in all material respects be
conducted in, and each of Paramount and Viacom and their respective subsidiaries
will not take any material action except in, the ordinary course of business,
consistent with past practice. In addition, each of Paramount and Viacom will
use its reasonable best efforts to preserve substantially intact its business
organization, to keep available the services of its and its subsidiaries'
current officers, employees and consultants and to preserve its and its
subsidiaries' relationships with customers, suppliers and other persons with
which it or any of its subsidiaries has significant business relations. By way
of amplification and not limitation, Viacom and Paramount have agreed that,
except as contemplated by the Paramount Merger Agreement and for any actions
taken by Viacom in order to consummate the Blockbuster Merger, neither Viacom
nor Paramount nor any of their respective subsidiaries will, prior to the
Paramount Effective Time, directly or indirectly do, or propose or agree to do,
any of the following without the prior written consent of the other (provided
that the following restrictions do not apply to any subsidiaries which Paramount
or Viacom, as the case may be, do not control): (i) amend the Certificate of
Incorporation or By-laws of Viacom or Paramount (except, with respect to Viacom,
any amendments to its Restated Certificate of Incorporation contemplated by the
Paramount Merger Agreement and the filing of the Certificate of Designation for
the Series C Preferred Stock); (ii) issue, sell, pledge, dispose of, grant,
encumber or authorize the issuance, sale, pledge, disposition, grant or
encumbrance of (a) any shares of capital stock of any class of it or any of its
subsidiaries, or any options (other than the grant of options in the ordinary
course of business consistent with past practice to employees who are not
executive officers of Paramount or Viacom), warrants, convertible securities or
other rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom interest),
of it or any of its subsidiaries (other than the issuance of shares of capital
stock in connection with any dividend reinvestment plan or by any Paramount
benefit plan with an employee stock fund or employee stock ownership plan
feature, consistent with applicable securities laws or the exercise of options,
warrants or other similar rights or conversion of convertible preferred stock
outstanding as of the date of the Paramount Merger Agreement and in accordance
with the terms of such options, warrants or rights in effect on the date of the
Paramount Merger Agreement or otherwise permitted to be granted pursuant to the
Paramount Merger Agreement) or (b) any assets of it or any of its subsidiaries,
except for sales in the ordinary course of business or which, individually, do
not exceed $10 million or which, in the aggregate, do not exceed $25 million;
(iii) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, except (a) in the case of Viacom, with respect to the Viacom
Preferred Stock, (b) in the case of Paramount, regular quarterly dividends in
amounts not in excess of $.20 per share of Paramount Common Stock, per quarter
and payable consistent with past practice; provided that, prior to the
declaration of any such dividend, Paramount shall consult with Viacom as to the
timing and advisability of declaring any such dividend, and (c) dividends
declared and paid by a subsidiary of either Paramount or Viacom, each such
dividend to be declared and paid in the ordinary course of business consistent
with past practice; (iv) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock
other than acquisitions by a dividend reinvestment plan or by any Paramount
benefit plan with an employee stock fund or employee stock ownership plan
feature, consistent with applicable securities laws; (v) (a) acquire (including,
without limitation, by merger, consolidation, or acquisition of stock or assets)
any corporation, partnership, other business organization or any division
thereof or any assets, except for such acquisitions which, individually, do not
exceed $10 million or which, in the aggregate, do not exceed $25 million; (b)
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans or advances,
except (1) for any such indebtedness incurred by Viacom in connection with the
Paramount Merger or the Offer, (2) the
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refinancing of existing indebtedness, (3) borrowings under commercial paper
programs in the ordinary course of business, (4) borrowings under existing bank
lines of credit in the ordinary course of business, or (5) which, in the
aggregate, do not exceed $25 million; or (c) enter into or amend any contract,
agreement, commitment or arrangement with respect to any matter described in
this clause (v); (vi) increase the compensation payable or to become payable to
its executive officers or employees, except for increases in the ordinary course
of business in accordance with past practices, or grant any severance or
termination pay to, or enter into any employment or severance agreement with any
director or executive officer of it or any of its subsidiaries, or establish,
adopt, enter into or amend in any material respect or take action to accelerate
any rights or benefits under any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any director,
executive officer or employee; or (vii) take any action, other than reasonable
and usual actions in the ordinary course of business and consistent with past
practice, with respect to accounting policies or procedures.
CONDITIONS TO CONSUMMATION OF THE PARAMOUNT MERGER
The obligations of Viacom and Paramount to consummate the Paramount Merger
are subject to the satisfaction or, where legally permissible, waiver of various
conditions, including (i) the effectiveness of the Registration Statement and
the absence of any stop order suspending the effectiveness thereof and any
proceedings for that purpose initiated by the Commission; (ii) the approval of
the Paramount Merger Agreement by the requisite holders of Paramount Common
Stock and the approval of the Paramount Merger Agreement and related
transactions by the requisite holders of Viacom Class A Common Stock; (iii) no
governmental entity having enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and which
materially restricts, prevents or prohibits consummation of the Paramount Merger
or any transaction contemplated by the Paramount Merger Agreement; provided,
however, that the parties have agreed to use their reasonable best efforts to
cause any such decree, judgment, injunction or other order to be vacated or
lifted; and (iv) the shares of Viacom Class B Common Stock and the Viacom
Warrants, Viacom Merger Debentures and CVRs issuable to stockholders of
Paramount in accordance with the terms of the Paramount Merger Agreement being
authorized for listing on AMEX upon official notice of issuance.
The obligations of Paramount to effect the Paramount Merger and the other
transactions contemplated by the Paramount Merger Agreement are also subject to
the following conditions: (i) each of the representations and warranties of
Viacom contained in the Paramount Merger Agreement being true and correct as of
the Paramount Effective Time, as though made on and as of the Paramount
Effective Time, except (a) for changes specifically permitted by the Paramount
Merger Agreement and (b) that those representations and warranties which address
matters only as of a particular date are required to remain true and correct as
of such date, except in any case for such failures to be true and correct which
would not, individually or in the aggregate, have a material adverse effect on
Viacom and its subsidiaries, taken as a whole; (ii) Viacom having performed or
complied in all material respects with all agreements and covenants required by
the Paramount Merger Agreement to be performed or complied with by it on or
prior to the Paramount Effective Time; (iii) since the date of the Paramount
Merger Agreement, there being no change, occurrence or circumstance in the
business, results of operations or financial condition of Viacom or any of its
subsidiaries having or reasonably likely to have, individually or in the
aggregate, a material adverse effect on the business, results of operations or
financial condition of Viacom and its subsidiaries, taken as a whole; and (iv)
Viacom having filed with the Secretary of State of the State of Delaware a
certificate of amendment to Viacom's Restated Certificate of Incorporation
pursuant to which certain amendments required by the Paramount Merger Agreement
became effective (to the extent not previously voted upon and approved by the
holders of Viacom Class A Common Stock).
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RESTRICTIONS ON GOING PRIVATE TRANSACTIONS
From and after the Paramount Effective Time and until the tenth anniversary
of the Paramount Effective Time, Viacom shall not enter into any agreement with
any stockholder (a "Significant Stockholder") who beneficially owns more than
35% of the then outstanding securities entitled to vote at a meeting of the
stockholders of Viacom that would constitute a Rule 13e-3 transaction under the
Exchange Act (a "Going Private Transaction"), unless Viacom provides in any
agreement pursuant to which such Going Private Transaction shall be effected
that, as a condition to the consummation of such Going Private Transaction, (a)
the holders of a majority of the shares not beneficially owned by the
Significant Stockholder that are voted and present at the meeting of
stockholders called to vote on such Going Private Transaction shall have voted
in favor thereof and (b) a special committee of independent directors shall have
(i) approved the terms and conditions of the Going Private Transaction and shall
have recommended that the stockholders vote in favor thereof and (ii) received
from its financial advisor a written financial fairness opinion for inclusion in
the proxy statement to be delivered to the stockholders. Such restrictions shall
not apply to any Significant Stockholder if there exists another stockholder who
beneficially owns a greater percentage of outstanding securities entitled to
vote at the meeting than such Significant Stockholder.
BLOCKBUSTER MERGER AGREEMENT
Viacom has agreed that the terms of the Blockbuster Merger Agreement shall
not, without the consent of Paramount, be amended or waived in any manner that
would have a material adverse effect on the value of the Paramount Merger
Consideration and the consideration paid pursuant to the Offer, taken together.
INDEMNIFICATION; INSURANCE
Viacom and Paramount have agreed in the Paramount Merger Agreement that the
Certificate of Incorporation and By-laws of Paramount will contain the
provisions with respect to indemnification set forth in the Restated Certificate
of Incorporation and By-laws of Viacom on the date of the Paramount Merger
Agreement, which provisions will not be amended, repealed or otherwise modified
for a period of six years after the Paramount Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at any time
prior to the Paramount Effective Time were directors or officers of Paramount in
respect of actions or omissions occurring at or prior to the Paramount Effective
Time (including, without limitation, the transactions contemplated by the
Paramount Merger Agreement), unless such modification is required by law. The
parties have also agreed in the Paramount Merger Agreement that after the
Paramount Effective Time, Paramount will indemnify, defend and hold harmless the
present and former officers and directors of Paramount (collectively, the
"Indemnified Parties") against all losses, expenses, claims, damages,
liabilities or amounts that are paid in settlement of, with the approval of the
combined company (which approval shall not unreasonably be withheld), or
otherwise in connection with any claim, action, suit, proceeding or
investigation (a "Claim"), based in whole or in part on the fact that such
person is or was a director or officer of Paramount and arising out of actions
or omissions occurring at or prior to the Paramount Effective Time (including,
without limitation, the transactions contemplated by the Paramount Merger
Agreement), in each case to the full extent permitted under the DGCL. Viacom and
Paramount have agreed in the Paramount Merger Agreement that Paramount will
advance expenses as incurred to the fullest extent permitted by the DGCL,
provided that the recipient thereof provides the undertaking to repay such
advances contemplated by the DGCL. Viacom and Paramount have also agreed in the
Paramount Merger Agreement that if any such claim, action or proceeding is
brought against any indemnified party (whether arising prior to or after the
Paramount Effective Time) after the Paramount Effective Time, Paramount will pay
the reasonable fees and expenses of counsel selected by such indemnified party
and will use its reasonable best efforts to assist in the vigorous defense of
such matter.
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The Paramount Merger Agreement further provides that, with respect to
matters occurring prior to the Paramount Effective Time, Paramount will cause to
be maintained for three years after the Paramount Effective Time the current
policies of directors' and officers' liability insurance maintained by
Paramount, or may substitute therefor policies of at least the same coverage,
containing terms and conditions which are no less advantageous. Paramount will
not be required to pay premiums for such insurance in excess of an amount equal
to 200% of current annual premiums paid by Paramount for such insurance.
TERMINATION
The Paramount Merger Agreement may be terminated at any time prior to the
Paramount Effective Time, whether before or after approval of the Paramount
Merger Agreement by the stockholders of Paramount or the approval of the
issuance of the shares of Viacom Common Stock in accordance with the Paramount
Merger Agreement by the stockholders of Viacom (a) by mutual consent of
Paramount and Viacom; (b) by Paramount, upon a breach by Viacom of any of its
representations, warranties, covenants or agreements set forth in the Paramount
Merger Agreement, or if any representation or warranty of Viacom shall have
become untrue, in either case such that the conditions relating to such other
party's representations, warranties, agreements or covenants would be incapable
of being satisfied by July 31, 1994 (provided that in any case, a wilful breach
will be deemed to cause such conditions to be incapable of being satisfied); (c)
by either Viacom or Paramount, if any permanent injunction or action by any
governmental entity preventing the consummation of the Paramount Merger shall
have become final and nonappealable; (d) by either Viacom or Paramount, if the
Paramount Merger shall not have been consummated before July 31, 1994; provided,
however, that the Paramount Merger Agreement may be extended by written notice
of either Viacom or Paramount to a date not later than September 30, 1994, if
the Paramount Merger shall not have been consummated as a direct result of
Viacom or Paramount having failed by July 31, 1994 to receive all required
regulatory approvals or consents with respect to the Paramount Merger; and (e)
by either Viacom or Paramount, if the Paramount Merger Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders of
Paramount or Viacom at their respective Special Meeting.
In the event of termination of the Paramount Merger Agreement by either
Viacom or Paramount, the Paramount Merger Agreement will become void and there
will be no liability or obligation on the part of Viacom or Paramount other than
under certain provisions of the Paramount Merger Agreement relating to any
breach of the Paramount Merger Agreement or confidential treatment of non-public
information.
EXPENSES
Under the Paramount Merger Agreement all costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred by Viacom and Paramount will be borne solely and entirely
by the party which has incurred such costs and expenses; provided, however, that
all costs and expenses related to printing, filing and mailing the Registration
Statement and this Proxy Statement/Prospectus and all Commission and other
regulatory filing fees incurred in connection with the Registration Statement
and this Proxy Statement/Prospectus will be borne equally by Paramount and
Viacom.
AMENDMENT AND WAIVER
Subject to applicable law, the Paramount Merger Agreement may be amended by
action taken by or on behalf of the respective Boards of Directors of Viacom or
Paramount at any time prior to the Paramount Effective Time. After approval of
the Paramount Merger by the stockholders of Paramount
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or Viacom, no amendment, which under applicable law may not be made without the
approval of the stockholders of Paramount or Viacom, may be made without such
approval.
At any time prior to the Paramount Effective Time, either Paramount or
Viacom may (i) extend the time for the performance of any of the obligations or
other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained in the Paramount
Merger Agreement or in any document delivered pursuant thereto and (iii) waive
compliance by the other party with any of the agreements or conditions contained
therein.
On May 26, 1994, the Viacom Board and the Reconstituted Board of Directors
of Paramount approved the May Amendment, the principal purposes of which were to
(i) add Merger Subsidiary as a party, (ii) provide for the merger of Merger
Subsidiary with and into Paramount (rather than Paramount into Viacom) and (iii)
provide for the treatment of Paramount Stock Options in the Paramount Merger as
described under "The Paramount Merger--Effect on Employee Benefit Stock Plans."
EXCHANGE ACT REGISTRATION AND TRADING
OF THE PARAMOUNT COMMON STOCK
Paramount Common Stock is currently registered under the Exchange Act,
which requires, among other things, that Paramount furnish certain information
to its stockholders and to the Commission and comply with the Commission's proxy
rules in connection with meetings of stockholders. Registration of the Paramount
Common Stock also makes certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b), applicable to Paramount
and its officers and directors. Registration of the Paramount Common Stock under
the Exchange Act may be terminated upon the application of Paramount to the
Commission if the Paramount Common Stock is not quoted through the inter-dealer
quotation system of a registered national securities association and there are
fewer than 300 holders of record of such class, which conditions will be
satisfied upon consummation of the Paramount Merger. Paramount intends to file
with the Commission a notice of termination of registration of Paramount Common
Stock as soon as practicable after the Paramount Effective Time. After
consummation of the Paramount Merger, Paramount may no longer be required to
file annual and quarterly reports with the Commission, comply with the proxy
rules or send annual reports to stockholders. In addition, upon the
effectiveness of the termination of registration, Paramount, its officers and
directors and certain of its stockholders will no longer be required to make any
other filing with the Commission with respect to the Paramount Common Stock. It
is expected that, after the effective date of the Paramount Merger, Paramount
Common Stock will cease to be traded on the NYSE.
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THE BLOCKBUSTER MERGER
BLOCKBUSTER
Blockbuster is an international entertainment company with businesses
operating in the home video, music retailing and filmed entertainment
industries. Blockbuster also has investments in other entertainment related
businesses. The principal executive offices of Blockbuster are located at One
Blockbuster Plaza, Fort Lauderdale, Florida 33301 (telephone: (305) 832-3000).
HOME VIDEO RETAILING. Blockbuster owns, operates and franchises Blockbuster
Video videocassette rental and sales stores. Blockbuster believes that
Blockbuster Video stores, which range in size from approximately 3,800 to 11,500
square feet, are generally larger than most videocassette rental and sales
stores. Blockbuster Video stores generally carry a comprehensive selection of
7,000 to 13,000 prerecorded videocassettes, consisting of more than 5,000
titles. The proprietary computer software used in Blockbuster Video stores has
been designed and developed by Blockbuster and is available only to
Blockbuster-owned and franchise-owned Blockbuster Video stores and to other
video stores which are to be converted to the Blockbuster Video format.
Blockbuster's home video stores do not sell video hardware at retail, although
video hardware is typically included in store equipment sold at wholesale to
franchise owners. Blockbuster Video stores, however, offer customers a limited
number of video hardware units for rental. According to a survey published in
the December 1993 issue of Video Store Magazine, Blockbuster's and its franchise
owners' systemwide revenue from the rental and sale of prerecorded
videocassettes is greater than that of any other video specialty chain in the
United States.
Since February 1992, Blockbuster has operated video stores under the trade
name "Ritz" in the United Kingdom and Austria through Cityvision. These stores
average 1,100 square feet in size with, on average, approximately 3,000
prerecorded videocassettes available for rental and sale.
Since acquiring all of the outstanding capital stock of Super Club from
subsidiaries of Philips Electronics N.V. ("Philips") in November 1993,
Blockbuster has operated video stores under the trade names "Video Towne",
"Alfalfa", "Movies at Home" and "Movieland" in the United States. These stores
average 6,700 square feet in size with, on average, approximately 5,000
prerecorded videocassettes available for rental and sale.
As of December 31, 1993, there were 3,593 video stores operating in
Blockbuster's system, of which 2,698 were Blockbuster-owned and 895 were
franchise-owned. Blockbuster-owned video stores at December 31, 1993 included
775 stores operating under the "Ritz" trade name in the United Kingdom and
120 stores operating under the "Video Towne", "Alfalfa", "Movies at
Home" and "Movieland" trade names. The Blockbuster Video system operates in 49
states and 10 foreign countries.
MUSIC RETAILING. Through music stores operating under various trade names,
including "Blockbuster Music Plus", "Sound Warehouse", "Music Plus", "Record
Bar", "Tracks", "Turtle's" and "Rhythm and Views", Blockbuster is among the
largest specialty retailers of prerecorded music in the United States, with 511
stores operating throughout the country as of December 31, 1993. Blockbuster is
also a partner in an international joint venture with Virgin to develop music
"Megastores" in continental Europe, Australia and the United States. The joint
venture currently owns interests in and operates 20 "Megastores."
FILMED ENTERTAINMENT. Blockbuster has interests in the filmed entertainment
industry through its investment in Spelling Entertainment, which operates in a
broad range of filmed entertainment businesses, supported by an extensive
library of television series, feature films, television movies, mini-series and
specials. Blockbuster owned approximately 70.5% of Spelling Entertainment's
outstanding shares of common stock and approximately 39% of Republic Pictures'
outstanding shares of common stock as of December 31, 1993.
In April 1994, a wholly owned subsidiary of Spelling Entertainment
merged with and into Republic Pictures, and Republic Pictures
became a wholly owned subsidiary of Spelling Entertainment.
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OTHER ENTERTAINMENT. As of December 31, 1993, Blockbuster owned
approximately 19.1%, of the outstanding common stock of Discovery Zone.
Discovery Zone owns, operates and franchises Discovery Zone FunCenters.
Blockbuster currently operates 47 Discovery Zone facilities as a franchisee of
Discovery Zone and has rights to develop additional Discovery Zone facilities
directly and in a joint venture with Discovery Zone.
CERTAIN RECENT DEVELOPMENTS. For a description of Blockbuster's purchase of
Series A Preferred Stock see "Sale of Viacom Preferred Stock." For a description
of Blockbuster's purchase of Viacom Class B Common Stock, see "--Certain
Transactions Between Viacom and Blockbuster and With Their Stockholders." During
the three months ended March 31, 1994, Blockbuster acquired businesses that own
and operate video stores and indoor recreational facilities for children and
invested in a business which develops, publishes and distributes interactive
software. The aggregate purchase price paid by Blockbuster was approximately
$53,040,000 and consisted of cash and 1,358,706 shares of Blockbuster Common
Stock.
In a letter to stockholders dated May 4, 1994, H. Wayne Huizenga, the
Chairman of the Board of Blockbuster, stated that, although Blockbuster
continues to believe that the combination of Blockbuster with Viacom and
Paramount represents an excellent strategic opportunity, given Viacom's stock
prices as of the date of his letter, there could be no assurance that the
Blockbuster Board would be able to recommend the Blockbuster Merger Agreement to
the Blockbuster stockholders at the time of any stockholder meeting called to
vote on the Blockbuster Merger. Mr. Huizenga also stated, among other things,
that Blockbuster was unable to say whether or not the Blockbuster Merger would
go forward or whether or not any special meeting of Blockbuster stockholders
would be called to vote on the Blockbuster Merger.
CERTAIN TRANSACTIONS BETWEEN VIACOM AND BLOCKBUSTER AND WITH THEIR STOCKHOLDERS
Blockbuster Subscription Agreement.
On March 10, 1994 Blockbuster purchased approximately 22.7 million shares
of Viacom Class B Common Stock for an aggregate purchase price of approximately
$1.25 billion, or $55 per share pursuant to the Blockbuster Subscription
Agreement. If the Blockbuster Merger Agreement is terminated, Viacom will be
obligated to make certain payments to Blockbuster or to sell certain assets to
Blockbuster in the event that Viacom Class B Common Stock trades (for a
specified period) at levels below $55 per share during the one year period after
such termination.
Blockbuster Voting Agreement.
Pursuant to the Blockbuster Voting Agreement, NAI has agreed to vote its
shares of Viacom Class A Common Stock in favor of the Blockbuster Merger
Agreement and against any competing business combination proposal. Approval of
the Blockbuster Merger Agreement by the stockholders of Viacom is therefore
assured.
Blockbuster Stockholders Stock Option Agreement.
Pursuant to the Amended and Restated Stockholders Stock Option Agreement
dated as of January 7, 1994 (the "Blockbuster Stockholders Stock Option
Agreement"), among Viacom and certain stockholders of Blockbuster (the
"Blockbuster Option Stockholders"), the Blockbuster Option Stockholders have
granted to Viacom (i) options to purchase an aggregate of approximately 15.6
million shares of Blockbuster Common Stock (representing approximately 6.3% of
the outstanding Blockbuster Common Stock as of January 7, 1994), and shares
subsequently acquired by the Blockbuster Option Stockholders, at a price of
$30.125 per share under certain circumstances in the event the Blockbuster
Merger Agreement is terminated and (ii) proxies to vote such shares in favor
of the Blockbuster Merger and against any competing business combination
proposal.
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Blockbuster Proxy Agreement.
Pursuant to the Amended and Restated Proxy Agreement dated as of January 7,
1994 (the "Blockbuster Proxy Agreement") among Viacom and certain stockholders
of Blockbuster (the "Blockbuster Proxy Stockholders"), the Blockbuster Proxy
Stockholders have granted to Viacom proxies to vote shares of Blockbuster Common
Stock owned by such stockholders in favor of the Blockbuster Merger Agreement
and against any competing business combination proposal, which shares, together
with the shares subject to the Blockbuster Stockholders Stock Option Agreement
(collectively, the "Blockbuster Proxy Shares"), represent approximately 22.3% of
the outstanding shares of Blockbuster Common Stock as of January 7, 1994.
FORM OF THE BLOCKBUSTER MERGER
If all required stockholder approvals are obtained and all other conditions
to the Blockbuster Merger are satisfied or waived, then Blockbuster will be
merged with and into Viacom, with Viacom being the surviving corporation.
BLOCKBUSTER MERGER CONSIDERATION
At the Blockbuster Effective Time, each share of Blockbuster Common Stock
that is issued and outstanding immediately prior to the Blockbuster Effective
Time (other than shares of Blockbuster Common Stock owned by Viacom or any
direct or indirect wholly owned subsidiary of Viacom or of Blockbuster and other
than shares of Blockbuster Common Stock held by stockholders who shall have
demanded and perfected appraisal rights, if available, under the DGCL) will be
automatically converted into the right to receive (i) 0.08 of a share of Viacom
Class A Common Stock, (ii) 0.60615 of a share of Viacom Class B Common Stock and
(iii) up to an additional 0.13829 of a share of Viacom Class B Common Stock,
with such number of shares depending on market prices of Viacom Class B Common
Stock during the year following the Blockbuster Effective Time, evidenced by one
VCR. No fractional securities will be issued in the Blockbuster Merger.
The VCRs represent the right to receive shares of Viacom Class B Common
Stock under certain circumstances on the first anniversary of the Blockbuster
Effective Time (the "VCR Conversion Date"). The number of shares of Viacom Class
B Common Stock into which each VCR will convert on the VCR Conversion Date will
not exceed 0.05929 of a share of Viacom Class B Common Stock if the average of
the closing prices for a share of Viacom Class B Common Stock exceeds $40 per
share during any 30 consecutive trading day period following the Blockbuster
Effective Time and prior to the VCR Conversion Date. In the event that during
any such period such average price exceeds $52 per share, the VCRs will
terminate and have no value and the holders thereof will have no further rights
with respect to the VCRs.
If the calculation in the above paragraph is inapplicable, the number of
shares of Viacom Class B Common Stock into which the VCRs will convert will
generally be based upon the value of Viacom Class B Common Stock (the "Class B
Value") determined during the 90 trading day period (the "VCR Valuation Period")
immediately preceding the VCR Conversion Date. The Class B Value will be equal
to the average closing price of a share of Viacom Class B Common Stock during
the 30 consecutive trading days in the VCR Valuation Period which yields the
highest average closing price of a share of Viacom Class B Common Stock. In the
event that the Class B Value is more than $40 per share but less than $48 per
share, each VCR will convert into 0.05929 of a share of Viacom Class B Common
Stock on the VCR Conversion Date. If the Class B Value is $40 per share or
below, the number of shares of Viacom Class B Common Stock into which each VCR
will convert on the VCR Conversion Date will increase ratably to the maximum
of 0.13829 of a share of Viacom Class B Common Stock, which will occur if the
Class B Value is $36 per share or below. If the Class B Value is $48 per share
or above, the number of shares of Viacom Class B Common Stock into which the
VCR will convert on the VCR
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Conversion Date will decrease ratably to zero, which will occur if the Class B
Value is $52 per share or above.
The dollar amounts will be reduced by a percentage equal to any percentage
decline in excess of 25% in the Standard & Poor's 400 Index from the Blockbuster
Effective Time until the VCR Conversion Date. Certain days are not included as
"trading days" if the number of shares of Viacom Class B Common Stock traded on
such days is below specified levels. See "Description of Viacom Capital
Stock--Viacom Common Stock."
Upon consummation of the Blockbuster Merger, any shares of Blockbuster
Common Stock owned by Viacom or any direct or indirect wholly owned subsidiary
of Blockbuster or Viacom will be cancelled.
The Blockbuster Merger Consideration was determined through negotiations
between Viacom and Blockbuster, each of which was advised with respect to such
negotiations by its respective financial advisor.
Any shares of Viacom Class A Common Stock, shares of Viacom Class B Common
Stock or VCRs issued as part of the Blockbuster Merger Consideration, or shares
of Viacom Class B Common Stock issued upon the maturity of the VCRs, to
residents of Canada may be subject to certain resale restrictions, including
that they may be required to be resold outside of Canada or pursuant to an
available exemption under applicable Canadian securities laws.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Blockbuster Merger will constitute a reorganization within the meaning
of section 368(a)(1)(A) of the Code. Neither Blockbuster nor Viacom will
recognize any gain or loss as a result of the Blockbuster Merger. No ruling has
been (or will be) sought from the Internal Revenue Service as to the tax
consequences of the Blockbuster Merger.
APPRAISAL RIGHTS WITH RESPECT TO THE BLOCKBUSTER MERGER
It is uncertain whether appraisal rights are available to holders of
Blockbuster Common Stock under the DGCL in connection with the Blockbuster
Merger. Although the VCRs evidence only the right to receive shares of Viacom
Class B Common Stock under certain circumstances, the VCRs could be
characterized as consideration other than shares of stock of Viacom. If the VCRs
are considered to be "shares of stock" of Viacom under Section 262(b) of the
DGCL, then the holders of Blockbuster Common Stock will not have appraisal
rights. However, if the VCRs are not considered to be "shares of stock," then
appraisal rights will be available to those stockholders of Blockbuster who meet
and comply with the requirements of Section 262 of the DGCL. Stockholders of
Viacom will have no appraisal rights in connection with the Blockbuster Merger.
TREATMENT OF BLOCKBUSTER WARRANTS AND EMPLOYEE STOCK OPTIONS
The Blockbuster Merger Agreement provides that, at the Blockbuster
Effective Time, Viacom will assume Blockbuster's obligations with respect to
each outstanding stock option to purchase shares of Blockbuster Common Stock,
subject to the following modification. The Blockbuster stock options assumed by
Viacom will have the same terms and conditions as those of the applicable stock
option plans and agreements pursuant to which the Blockbuster stock options were
issued except that each Blockbuster stock option will be exercisable for (A)
that number of whole shares of (i) Viacom Class A Common Stock equal to the
product of the number of shares of Blockbuster Common Stock covered by such
Blockbuster stock option multiplied by 0.08 and (ii) Viacom Class B Common Stock
equal to the product of the number of shares of Blockbuster Common Stock covered
by such Blockbuster stock option multiplied by 0.60615 and (B) that number of
VCRs equal to the number of shares of Blockbuster Common Stock covered by such
Blockbuster stock option (or, on or after the VCR
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Conversion Date, the number of shares of Viacom Class B Common Stock (if any)
into which the VCRs were converted).
At January 31, 1994, an aggregate of 18,163,772 shares of Blockbuster
Common Stock were subject to options granted to employees and directors of
Blockbuster under various stock option plans. Such plans generally provide that
the options granted thereunder become immediately exercisable in the event
Blockbuster participates in a Business Combination with a Substantial
Stockholder (each as defined under the Blockbuster Certificate of
Incorporation). The Blockbuster Merger would constitute a Business Combination
of Blockbuster with a Substantial Stockholder and, accordingly, options granted
under those stock plans will become immediately exercisable upon consummation of
the Blockbuster Merger. However, Viacom and Blockbuster have agreed to use their
best efforts to secure from each executive of Blockbuster who enters into an
employment agreement with Blockbuster an agreement that such executive will
waive such acceleration of exercisability, which waiver will lapse (resulting in
the executive's options becoming immediately exercisable if they have not
already done so in accordance with the applicable vesting schedule) upon a
termination of the executive's employment for any reason.
Under the Blockbuster Merger Agreement, Blockbuster has the right to adopt
one or more additional stock option plans covering up to an additional 4,500,000
shares of Blockbuster Common Stock. On February 7, 1994, the Board of Directors
of Blockbuster adopted, subject to stockholder approval, Blockbuster's 1994
Stock Option Plan and an amendment to Blockbuster's 1991 Non-employee Director
Stock Option Plan.
At March 3, 1994, 3,488,859 shares of Blockbuster Common Stock were subject
to warrants held beneficially by employees or directors of Blockbuster. Warrants
held by employees or directors of Blockbuster will be converted into Viacom
warrants on the same terms and conditions except that each such warrant will be
exercisable for (A) that number of whole shares of (i) Viacom Class A Common
Stock equal to the product of the number of shares of Blockbuster Common Stock
covered by such Blockbuster warrant multiplied by 0.08 and (ii) Viacom Class B
Common Stock equal to the product of the number of shares of Blockbuster Common
Stock covered by such Blockbuster warrant multiplied by 0.60615 and (B) that
number of VCRs equal to the number of shares of Blockbuster Common Stock covered
by such Blockbuster warrant (or, on or after the VCR Conversion Date, the number
of shares of Viacom Class B Common Stock (if any) into which the VCRs were
converted). Warrants of Blockbuster Common Stock which are not held by employees
or directors of Blockbuster will be treated in accordance with their terms.
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CERTAIN CONSIDERATIONS
Stockholders of Viacom and Paramount should consider carefully all of the
information contained in this Proxy Statement/Prospectus and, in particular, the
following:
Financial Terms of the Offer and the Paramount Merger. Smith Barney
has delivered its opinion to the Board of Directors of Viacom that, as of
February 1, 1994, the financial terms of the Offer and the Paramount
Merger, taken together, were fair, from a financial point of view, to
Viacom and its stockholders, whether or not the Blockbuster Merger is
consummated. Lazard Freres has delivered its opinion to the Board of
Directors of Paramount that, as of February 4, 1994 (i) the Viacom
Transaction Consideration was fair to the holders of Paramount Common Stock
from a financial point of view, (ii) the QVC Transaction Consideration was
fair to the holders of Paramount Common Stock from a financial point of
view and (iii) the Viacom Transaction Consideration was marginally superior
to the QVC Transaction Consideration from a financial point of view.
However, no assurances can be given with respect to the prices at which the
Viacom Class B Common Stock will trade after the date hereof or after the
Paramount Effective Time or the prices at which the Viacom Merger
Debentures (or, if issued, the Series C Preferred Stock and the Viacom
Exchange Debentures), the CVRs and the Viacom Warrants will trade after the
Paramount Effective Time. There has been no public trading market for the
Viacom Merger Debentures, CVRs or Viacom Warrants and there can be no
assurances that an active market for such securities will develop or
continue after the Paramount Merger.
Controlling Stockholder. Immediately after completion of the Paramount
Merger and before the completion of the Blockbuster Merger, NAI (which is
controlled by Sumner M. Redstone) will own approximately 85% of the voting
stock and 46% of the total (voting and non-voting) common stock of Viacom.
Immediately after completion of the Mergers, NAI will own approximately 62%
of the voting stock and approximately 25% of the total (voting and
non-voting) common stock of Viacom. As such, Mr. Redstone will be in a
position to control the election of the Board of Directors as well as the
direction and future operations of Viacom (although certain provisions of
the Paramount Merger Agreement and the Blockbuster Merger Agreement
restrict the ability of certain large stockholders from engaging in going
private transactions). See "The Paramount Merger--Ownership of Viacom
Common Stock After the Mergers" and "Certain Provisions of the Paramount
Merger Agreement--Restrictions On Going Private Transactions."
Total Indebtedness and Certain Refinancing. Viacom anticipates that,
following the Mergers, the combined company will have outstanding total
indebtedness of approximately $10.0 billion ($8.0 billion if the
Blockbuster Merger is not consummated) and 5% Viacom Preferred Stock with a
liquidation preference of $1.2 billion ($1.8 billion if the Blockbuster
Merger is not consummated). Of such $10.0 billion, $3.7 billion was
borrowed under Viacom's Credit Agreement and must be repaid by November 18,
1994. In addition, the $1.0 billion borrowed under the New Blockbuster
Facility must be repaid by February 14, 1995 and both the New Blockbuster
Facility and the Blockbuster Credit Agreement contain certain covenants
and events of default, including a change of control default, which will
require either a waiver in connection with the Blockbuster Merger or the
refinancing of the indebtedness incurred under such facilities prior to
the Blockbuster Merger.
Accordingly, assuming consummation of the Blockbuster Merger, the
foregoing facilities, together with other current maturities, may require
Viacom to refinance up to $5.7 billion ($4.0 billion if the Blockbuster
Merger is not consummated) within the next six months. During May 1994,
Viacom received commitments from a syndicate of financial institutions for
a new long-term $6.8 billion credit facility. The new facility will
have scheduled maturities commencing December 1996 and a final maturity
of July 2002. The new Viacom facility will refinance existing bank
indebtedness at Viacom, Viacom International and Paramount and will be
available for general corporate purposes.
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On May 5, 1994, Viacom, Viacom International and Paramount filed a
shelf registration statement with the Commission registering $3 billion of
debt securities and preferred stock, guaranteed by Viacom International
and, after the Paramount Effective Time, Paramount. Some or all of the
securities may be issued in one or more offerings.
Although Viacom expects that it will be able to refinance its
indebtedness and meet its obligations without the need to sell any assets,
Viacom is continuing to review opportunities for the sale of non-strategic
assets as such opportunities may arise, including the exploration of the
sale of the operations of Madison Square Garden and certain non-core
publishing assets. Viacom cannot predict what obligations, if any, it
will have in connection with the exercise of appraisal rights by Paramount
stockholders nor has it determined the method(s) it may use to finance any
such cash obligations. See "Dissenting Stockholders' Rights of Appraisal."
Changing Competitive Environment. The entertainment and
telecommunications industries of which the combined company will be a part
are rapidly changing as a result of evolving distribution technologies,
particularly the advent of digital compression, and related ongoing and
anticipated changes to regulation of the communications industry. The
future success of the combined company will be affected by such changes,
the nature of which cannot be forecast with certainty. Although management
believes that such technological developments are likely to enhance the
value of the combined company's entertainment properties and trademarks,
there can be no assurance that such developments will not limit the
combined company's access to certain distribution channels or create
additional competitive pressures on some or all of the combined company's
businesses.
Combining the Companies. Viacom, Paramount and Blockbuster are large,
diversified enterprises, with operations and sales worldwide. Although
management of the companies believe that their respective operations are
complementary and that, assuming approval by the stockholders of
Blockbuster, integration of the companies will be accomplished promptly and
without substantial difficulty, there can be no assurance that future
results will improve as a result of the Mergers. If the Mergers are
consummated, the combined company, on a pro forma basis, will be
substantially more leveraged than any of Paramount, Viacom or Blockbuster
immediately prior to the Mergers. See "Unaudited Pro Forma Combined
Condensed Financial Statements."
Consummation of the Blockbuster Merger. Although Viacom and
Blockbuster have entered into the Blockbuster Merger Agreement and Viacom
has the right to vote the Blockbuster Proxy Shares, representing
approximately 22.3% of the outstanding shares of Blockbuster Common Stock
as of January 7, 1994, the Blockbuster Merger remains subject to
stockholder approval. As such, there can be no assurance that the
Blockbuster Merger will be consummated. In considering the Mergers, the
Viacom Board of Directors concluded that, even without Blockbuster, the
combination of Viacom with Paramount could be financed on a reasonable
basis and would result in all of the benefits described under "Special
Factors--Reasons for the Paramount Merger; Recommendations of the Board of
Directors; Fairness of the Transaction."
In a letter to stockholders dated May 4, 1994, H. Wayne Huizenga, the
Chairman of the Board of Blockbuster, stated that, although Blockbuster
continues to believe that the combination of Blockbuster with Viacom and
Paramount represents an excellent strategic opportunity, given Viacom's
stock prices as of the date of his letter, there could be no assurance that
the Blockbuster Board would be able to recommend the Blockbuster Merger
Agreement to the Blockbuster stockholders at the time of any stockholder
meeting called to vote on the Blockbuster Merger. Mr. Huizenga also stated,
among other things, that Blockbuster was unable to say whether or not the
Blockbuster Merger would go forward or whether or not any special meeting
of Blockbuster stockholders would be called to vote on the Blockbuster
Merger.
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AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION OF VIACOM
Viacom's Board of Directors is proposing to amend Viacom's Restated
Certificate of Incorporation to (i) increase the number of shares of Viacom
Class A Common Stock authorized to be issued from 100 million to 200 million,
(ii) increase the number of shares of Viacom Class B Common Stock authorized to
be issued from 150 million to one billion, (iii) increase the number of shares
of the preferred stock of Viacom authorized to be issued from 100 million to 200
million and (iv) increase the maximum number of directors constituting the Board
of Directors of Viacom from 12 to 20. The form of such amendment to the Viacom
Restated Certificate of Incorporation is included in the Form of Certificate of
Amendment, a copy of which is attached as Annex VII to this Proxy
Statement/Prospectus.
The additional shares of Viacom Class A Common Stock, Viacom Class B Common
Stock and preferred stock of Viacom to be authorized would be available not only
to consummate the Paramount Merger, but also for possible future financing and
acquisition transactions, stock dividends or splits and other corporate
purposes. The additional shares of Viacom Class A Common Stock, Viacom Class B
Common Stock and preferred stock of Viacom would be available for issuance
without further action by the stockholders of Viacom unless such action is
required by applicable law or the rules of the AMEX, on which the issued shares
of Viacom Class A Common Stock and Viacom Class B Common Stock are listed. The
AMEX requires stockholder approval as a prerequisite to listing shares in
certain instances, including in connection with acquisition transactions where
the present or potential issuance of shares could result in an increase in the
number of shares of common stock outstanding by 20% or more.
On May 31, 1994 there were 53,449,525 issued and outstanding shares of
Viacom Class A Common Stock and 90,083,779 issued and outstanding shares of
Viacom Class B Common Stock. As of May 31, 1994, there were 61,135,478 outstand-
ing shares of Paramount Common Stock not owned by Viacom. Based on this number,
56,895,733 shares of Viacom Class B Common Stock will be issued in the Paramount
Merger at the Paramount Effective Time. On May 10, 1994, there were 249,063,868
shares of Blockbuster Common Stock outstanding. Based on this number, 19,925,109
shares of Viacom Class A Common Stock and 150,970,063 shares of Viacom Class B
Common Stock will be issued in connection with the Blockbuster Merger at the
Blockbuster Effective Time. Accordingly, 126,625,372 shares of Viacom Class A
Common Stock and 702,050,425 shares of Viacom Class B Common Stock will be
authorized but unissued immediately following the Mergers. For further
information regarding Viacom Common Stock, see "Description of Viacom Capital
Stock" and "Capitalization."
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
AND BY-LAWS OF PARAMOUNT
Upon consummation of the Paramount Merger, the Certificate of Incorporation
and By-Laws of Paramount shall be amended in their entirety to read as the
Certificate of Incorporation and By-Laws of the Merger Subsidiary. The form of
the proposed amendment to the Certificate of Incorporation of Paramount is
included in the Form of Certificate of Merger for the Paramount Merger, a copy
of which is attached as Annex VI to this Proxy Statement/Prospectus.
MANAGEMENT BEFORE AND AFTER THE MERGERS
EXECUTIVE OFFICERS AND DIRECTORS OF VIACOM
GEORGE S. ABRAMS, see "Viacom Annual Meeting Matters--Election of
Directors."
FRANK J. BIONDI, JR., see "Viacom Annual Meeting Matters--Election of
Directors."
RAYMOND A. BOYCE, Senior Vice President, Corporate Relations of Viacom and
Viacom International, 58. Mr. Boyce assumed his present position in 1988. Prior
to that, he served as Vice President, Public Relations of the Entertainment
Business Sector of The Coca-Cola Company from 1982 to 1987. In 1979, Mr. Boyce
joined Columbia Pictures Industries, Inc. and served first as Director,
Corporate
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Communications and later as Vice President, Corporate Communications until
The Coca-Cola Company's acquisition of Columbia Pictures Industries, Inc.
in 1982.
VAUGHN A. CLARKE, Vice President, Treasurer of Viacom and Viacom
International, 40. Mr. Clarke assumed his present position in April 1993. Prior
to that, he spent 12 years at Gannett Co., Inc., where he held various
management positions, most recently as Assistant Treasurer.
PHILIPPE P. DAUMAN, see "Viacom Annual Meeting Matters--Election of
Directors."
THOMAS E. DOOLEY, Executive Vice President, Finance, Corporate Development
and Communications of Viacom, Viacom International and Paramount, 37. Mr. Dooley
was elected to his present position in March 1994. From July 1992 to March 1994,
he served as Senior Vice President, Corporate Development of Viacom and Viacom
International. From August 1993 to March 1994, he also served as President,
Interactive Television of Viacom International. Prior to that, he served as Vice
President, Treasurer of Viacom and Viacom International since 1987. In December
1990, he was named Vice President, Finance of Viacom and Viacom International.
Mr. Dooley joined Viacom International in 1980 in the corporate finance area and
held various positions in the corporate and divisional finance areas, including
Director of Business Analysis from 1985 to 1986.
WILLIAM C. FERGUSON, see "Viacom Annual Meeting Matters--Election of
Directors."
MICHAEL D. FRICKLAS, Senior Vice President, Deputy General Counsel of
Viacom, Viacom International and Paramount, 34. Mr. Fricklas was elected to his
present position with Viacom and Viacom International in March 1994 and with
Paramount in April 1994. From July 1993 to March 1994, he served as Vice
President, Deputy General Counsel of Viacom and Viacom International. He served
as Vice President, General Counsel and Secretary of Minorco (U.S.A.) Inc. from
1990 to 1993. Prior to that, Mr. Fricklas was an attorney in private practice at
the law firm of Shearman & Sterling.
JOHN W. GODDARD, Senior Vice President of Viacom and Viacom International
and President, Chief Executive Officer of Viacom Cable, 52. Mr. Goddard was
elected Senior Vice President of Viacom in November 1987 and Senior Vice
President of Viacom International and President, Chief Executive Officer of
Viacom Cable Television in September 1983. In August 1980, Mr. Goddard was
appointed President of Viacom Cable and, in September 1980, he was elected Vice
President of Viacom International. From September 1978 through July 1980, Mr.
Goddard was Executive Vice President, Viacom Communications. From June 1971
until September 1978, Mr. Goddard was President and General Manager of Tele-Vue
Systems, a subsidiary of Viacom International.
EDWARD D. HOROWITZ, Senior Vice President, Technology of Viacom and Viacom
International and Chairman, Chief Executive Officer of New Media and Interactive
Television, 46. Mr. Horowitz became Senior Vice President in April 1989 and
served as Chairman, Chief Executive Officer of Viacom Broadcasting from July
1992 to March 1994. He was elected to his present positions in March 1994. From
1974 to April 1989, Mr. Horowitz held various positions with Home Box Office,
most recently as Senior Vice President, Technology and Operations. Prior to
that, he held several other management positions with Home Box Office, including
Senior Vice President, Network Operations and New Business Development and Vice
President, Affiliate Sales.
H. WAYNE HUIZENGA, see "Viacom Annual Meeting Matters--Election of
Directors."
KEVIN C. LAVAN, Vice President, Controller and Chief Accounting Officer of
Viacom and Viacom International, 41. Mr. Lavan was elected Vice President of
Viacom and Viacom International in May 1989. He was elected Controller, Chief
Accounting Officer of Viacom and Viacom International in December 1987. In
December 1990, he assumed the added responsibilities of oversight of tax
matters. From 1991 to 1992, he also served as Senior Vice President, Chief
Financial Officer of Viacom Pictures. Mr. Lavan joined Viacom International in
1984 as Assistant Controller.
HENRY J. LEINGANG, Senior Vice President, Chief Information Officer of
Viacom and Viacom International, 44. Mr. Leingang was elected to his present
position in May 1993. Prior to that, he served
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<PAGE>
as Vice President, Chief Information Officer when he joined Viacom in 1990.
Mr. Leingang was Vice President, Information Services of the Trian Group
(formerly Triangle Industries) from 1984 to 1990. From 1982 to 1984, he served
as Corporate Director, MIS, and Manager, MIS Planning and Control for
Interpace Corporation. Prior to that, he held positions with Touche Ross &
Company, McGraw-Hill Book Company and General Electric Credit Corp.
KEN MILLER, see "Viacom Annual Meeting Matters--Election of Directors."
BRENT D. REDSTONE, see "Viacom Annual Meeting Matters--Election of
Directors."
SUMNER M. REDSTONE, see "Viacom Annual Meeting Matters--Election of
Directors."
WILLIAM A. ROSKIN, Senior Vice President, Human Resources and
Administration of Viacom and Viacom International, 51. Mr. Roskin was elected to
his present position in July 1992. Prior to that, he served as Vice President,
Human Resources and Administration of Viacom and Viacom International from April
1988. From May 1986 to April 1988, he was Senior Vice President, Human Resources
at Coleco Industries, Inc. From 1976 to 1986, he held various executive
positions at Warner Communications, serving most recently as Vice President,
Industrial and Labor Relations.
FREDERIC V. SALERNO, see "Viacom Annual Meeting Matters--Election of
Directors."
WILLIAM SCHWARTZ, see "Viacom Annual Meeting Matters--Election of
Directors."
GEORGE S. SMITH, JR., Senior Vice President, Chief Financial Officer of
Viacom, Viacom International and Paramount, 45. Mr. Smith was elected to his
present position with Viacom and Viacom International in November 1987 and with
Paramount in April 1994. In May 1985, Mr. Smith was elected Vice President,
Controller of Viacom International. From 1983 until May 1985, he served as Vice
President, Finance and Administration of Viacom Broadcasting and from 1981 until
1983, he served as Controller of Viacom Radio. Mr. Smith joined Viacom
International in 1977 in the Corporate Treasurer's office and until 1981 served
in various financial planning capacities.
MARK M. WEINSTEIN, Senior Vice President, Government Affairs of Viacom and
Viacom International, 51. Mr. Weinstein was elected to his present position with
Viacom and Viacom International in February 1993. Prior to that, Mr. Weinstein
served as Senior Vice President, General Counsel and Secretary of Viacom and
Viacom International beginning in the fall of 1987. In January 1986, Mr.
Weinstein was appointed Vice President, General Counsel of Viacom International.
From 1976 through 1985, he was Deputy General Counsel of Warner Communications
and in 1980 became Vice President. Previously, Mr. Weinstein was an attorney in
private practice at the law firm of Paul, Weiss, Rifkind, Wharton & Garrison.
EXECUTIVE OFFICERS AND DIRECTORS OF PARAMOUNT
GEORGE S. ABRAMS, see "Viacom Annual Meeting Matters--Election of
Directors."
FRANK J. BIONDI, JR., see "Viacom Annual Meeting Matters--Election of
Directors."
PHILIPPE P. DAUMAN, see "Viacom Annual Meeting Matters--Election of
Directors."
MARTIN S. DAVIS, Director of Paramount, 67. Mr. Davis was elected a
Director of Paramount in 1967. Mr. Davis is the President of Wellspring
Associates Inc., a private investment company. He assumed this position in April
1994. Mr. Davis, who became a corporate officer of Paramount in 1969, served
as Chairman from 1983 to April 1994 and as Chairman and Chief Executive Officer
of Paramount from 1983 to March 1994. He is a member of the Board of Trustees
of Montefiore Medical Center and is Chairman of the Board of Trustees of the
New York City Chapter of the National Multiple Sclerosis Society. Mr. Davis is
also a member of the FCC's Advisory Committee on Advanced Television Service.
WILLIAM C. FERGUSON, see "Viacom Annual Meeting Matters--Election of
Directors."
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<PAGE>
IRVING R. FISCHER, Director of Paramount, 61. Mr. Fischer was elected a
Director of Paramount in 1984 and is a member of the Audit Committee. Mr.
Fischer is Chairman and Chief Executive Officer of HRH Construction Corporation.
Mr. Fischer joined HRH Construction Corporation in 1956 and assumed his
present position in 1981. Mr. Fischer is Vice Chairman of the New York City
Chapter of the National Multiple Sclerosis Society and a member of the New
York City Holocaust Memorial Commission. He is an Adjunct Professor of Urban
Planning, Columbia University.
H. WAYNE HUIZENGA, see "Viacom Annual Meeting Matters--Election of
Directors."
KEN MILLER, see "Viacom Annual Meeting Matters--Election of Directors."
RONALD L. NELSON, Director of Paramount, 41. Mr. Nelson was elected a
Director of Paramount in 1992. Mr. Nelson served as Executive Vice President and
Chief Financial Officer of Paramount from 1990 to March 1994 after having served
as Senior Vice President and Chief Financial Officer since 1987. From 1979 to
1987, he held various operating and financial positions with Paramount
Communications Entertainment Group and Paramount Pictures. Mr. Nelson is a
member of the New York Chapter of Financial Executives Institute and serves on
its CFO Advisory Board.
DONALD ORESMAN, Director of Paramount, 68. Mr. Oresman was elected a
Director of Paramount in 1976. He is Executive Vice President of Wellspring
Associates Inc. Mr Oresman assumed this position in April 1994. Mr. Oresman
served as Executive Vice President and General Counsel of Paramount from 1983
to March 1994 and as Chief Administrative Officer from 1987 to March 1994. Mr.
Oresman practiced law with Simpson Thacher & Bartlett, attorneys, from 1957
until he joined Paramount in December 1983. He is a Director of North American
Watch Corporation, a Trustee of The New York Landmarks Conservancy, and a
Councilor of the American Antiquarian Society.
JAMES A. PATTISON, Director of Paramount, 65. Mr. Pattison was elected a
Director of Paramount in 1988 and is a member of Paramount's Audit Committee.
Mr. Pattison is Chairman and Chief Executive Officer of The Jim Pattison Group.
The Jim Pattison Group is a diversified company with operations in
communications, automotive services, food products, packaging and financial
services. Mr. Pattison founded the company in 1961 and has been its Chief
Executive Officer since then. In 1986, Mr. Pattison served as President and
Chairman of Expo '86, the World's Fair held in Vancouver, B.C. In 1986, he was
made an officer of the Order of Canada. He is a Director of the Toronto-Dominion
Bank and Canadian Pacific Ltd.
BRENT D. REDSTONE, see "Viacom Annual Meeting Matters--Election of
Directors."
SUMNER M. REDSTONE, see "Viacom Annual Meeting Matters--Election of
Directors."
FREDERIC V. SALERNO, see "Viacom Annual Meeting Matters--Election of
Directors."
WILLIAM SCHWARTZ, see "Viacom Annual Meeting Matters--Election of
Directors."
The names, business experience for the past five years and ages as of May
23, 1994 of all executive officers (who are not Directors) are listed below:
THOMAS E. DOOLEY, see "--Executive Officers and Directors of Viacom."
MICHAEL D. FRICKLAS, see "--Executive Officers and Directors of Viacom."
ROBERT C. GREENBERG, Senior Vice President, Human Resources of Paramount,
36. Mr. Greenberg assumed his present position in 1993. Prior to that, he was a
principal with the consulting firm of Towers Perrin.
RUDOLPH L. HERTLEIN, Senior Vice President and Controller of Paramount, 53.
Mr. Hertlein assumed his present position in 1993. Prior to that, he served as
Senior Vice President, Internal Audit and Special Projects since 1992 and,
before that, as Vice President, Internal Audit and Special Projects.
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<PAGE>
LAWRENCE E. LEVINSON, Senior Vice President, Government Relations of
Paramount, 63.
GEORGE S. SMITH, JR., see "--Executive Officers and Directors of Viacom."
The term of office of all directors is until the next annual meeting and
the term of office of all officers is for one year and until their successors
are chosen and qualify.
MANAGEMENT AFTER THE MERGERS
Upon the completion of the Mergers, Sumner M. Redstone, currently the
Chairman of the Board of Viacom and Paramount, will continue as Chairman of the
Board of the combined company. Assuming consummation of the Blockbuster Merger,
H. Wayne Huizenga, currently the Chairman of the Board and Chief Executive
Officer of Blockbuster and a Director of Viacom and Paramount, will become Vice
Chairman of the combined company. Frank J. Biondi, Jr., currently President,
Chief Executive Officer and Director of Viacom and Paramount, will remain
President, Chief Executive Officer of the combined company. For a discussion of
the Board of Directors of the combined company, see "Viacom Annual Meeting
Matters--Election of Directors."
FINANCIAL MATTERS AFTER THE MERGERS
ACCOUNTING TREATMENT
The Mergers will be accounted for by Viacom under the "purchase" method of
accounting in accordance with generally accepted accounting principles.
Therefore, the aggregate consideration paid by Viacom in connection with the
Mergers will be allocated to Paramount's assets and liabilities or Blockbuster's
assets and liabilities, as the case may be, based on their fair values with any
excess being treated as goodwill. As is the case with all of Viacom's long-term
assets and liabilities, Viacom will perform periodic reviews of the goodwill
arising from the Mergers to ensure that this goodwill is carried at the lower of
cost or market in light of current business conditions.
The assets and liabilities and results of operations of Paramount (adjusted
for minority ownership interests from the date of the purchase of the shares of
Paramount Common Stock pursuant to the Offer through the Paramount Effective
Time) were consolidated into the assets and liabilities and results of
operations of Viacom as of March 1, 1994. The assets and liabilities and results
of operations of Blockbuster will be consolidated into the assets and
liabilities and results of operations of Viacom subsequent to the Blockbuster
Effective Time.
COMMON STOCK DIVIDEND POLICY AFTER THE PARAMOUNT MERGER AND THE MERGERS
It is the current intention of the Viacom Board not to pay cash dividends
on the Viacom Class A Common Stock or Viacom Class B Common Stock following the
Paramount Merger and the Mergers. Future dividends will be determined by
Viacom's Board of Directors in light of Viacom's alternative opportunities for
investment and the earnings and financial condition of Viacom and its
subsidiaries, among other factors.
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<PAGE>
CAPITALIZATION
(DOLLARS IN MILLIONS)
The following table sets forth the historical capitalization of Viacom,
Blockbuster and Paramount and the pro forma capitalization of the combined
company after giving effect to the Pro Forma Events.
<TABLE><CAPTION>
HISTORICAL PRO FORMA
------------------------------ VIACOM- PRO FORMA
VIACOM BLOCKBUSTER PARAMOUNT COMBINED
MARCH 31, 1994 MARCH 31, 1994 MARCH 31, 1994 COMPANY(f)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Total debt:
Current maturities......................... $ 39.1 $ 1,000.0 $ 39.1 $ 39.1
-------------- -------------- -------------- --------------
Due after one year:
Senior................................... 6,597.4 997.0 6,392.4 8,389.4
Senior subordinated...................... 450.0 -- 450.0 450.0
Subordinated............................. 180.6 -- 1,250.5(b) 1,250.5(b)
-------------- -------------- -------------- --------------
Due after one year..................... 7,228.0 997.0 8,092.9 10,089.9
-------------- -------------- -------------- --------------
Total debt, including current
maturities......................... 7,267.1 1,997.0 8,132.0 10,129.0
-------------- -------------- -------------- --------------
Stockholders' equity:
Preferred.................................. 1,800.0 -- 1,800.0 1,200.0(c)
Common..................................... 1,710.4(a) 1,854.3 3,708.3(d) 8,471.0(e)
-------------- -------------- -------------- --------------
Total stockholders' equity........... 3,510.4 1,854.3 5,508.3 9,671.0
-------------- -------------- -------------- --------------
Total capitalization................. $ 10,777.5 $ 3,851.3 $ 13,640.3 $ 19,800.0
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) On March 31, 1994, there were 53,449,525 outstanding shares of Viacom Class A Common Stock (100,000,000 shares
authorized) and 90,078,203 outstanding shares of Viacom Class B Common Stock (150,000,000 shares authorized);
there were approximately 223,460 unissued shares of Viacom Class A Common Stock and 29,408,859 unissued shares
of Viacom Class B Common Stock reserved principally for exercise of stock options granted under the Viacom
Long-Term Incentive Plan and conversion of Viacom Preferred Stock.
(b) The pro forma debt capitalization reflects the issuance of approximately $1.1 billion of Viacom Merger
Debentures in connection with the Paramount Merger.
(c) The pro forma preferred equity capitalization reflects the assumed cancellation of $600 million of Series A
Preferred Stock upon consummation of the Blockbuster Merger. The proceeds of the sale of Viacom Preferred
Stock have been used to finance a portion of the cash paid in the Offer.
(d) The pro forma common equity capitalization reflects the assumed conversion of the Paramount Common Stock not
then owned by Viacom into the Paramount Merger Consideration.
(e) The pro forma common equity capitalization reflects (i) the assumed conversion of Blockbuster Common Stock
into the Blockbuster Merger Consideration and (ii) the assumed cancellation of $1.25 billion of Viacom Class B
Common Stock held by Blockbuster in consolidation as a result of the assumed Blockbuster Merger.
(f) See "Certain Considerations--Consummation of the Blockbuster Merger."
</TABLE>
116
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
VIACOM-PARAMOUNT/COMBINED COMPANY
The following unaudited pro forma combined condensed balance sheet at March
31, 1994 gives effect to the completion of the Paramount Merger and the
Blockbuster Merger as if these events had occurred on such date, and was
prepared based upon the balance sheet of Viacom and Blockbuster at March 31,
1994. Balance sheet information for Paramount at March 31, 1994 is consolidated
in Viacom's historical balance sheet. Viacom's balance sheet also contains pro
forma adjustments for the sale of Viacom's one third partnership interest in
LIFETIME. (See Note 1 herein).
The following unaudited pro forma combined condensed statements of
operations for the three months ended March 31, 1994 and for the year ended
December 31, 1993 give effect to the completion of the Offer, the Paramount
Merger, the Blockbuster Merger, the issuance of Viacom Preferred Stock and the
sale of Viacom's one third partnership interest in LIFETIME as if they had
occurred simultaneously at the beginning of each period presented. The unaudited
pro forma combined condensed statement of operations for the three months ended
March 31, 1994 was prepared based upon the statements of operations of Viacom
and Blockbuster for the three months ended March 31, 1994 and of Paramount
for the two months ended February 28, 1994. The unaudited pro forma combined
condensed statement of operations for the year ended December 31, 1993 was
prepared based upon the statement of operations of Viacom and Blockbuster for
the year ended December 31, 1993 and of Paramount for the nine months ended
January 31, 1994 and three months ended April 30, 1993 combined. Financial
information for Paramount subsequent to the Offer is included in the Viacom
historical information. Paramount's historical results of operations for
January 1994 are included in the unaudited pro forma statements of operations
for the three months ended March 31, 1994 and year ended December 31, 1993.
Revenues and earnings from operations for the month of January 1994 were
$394 million and $38.7 million, respectively. These unaudited pro forma
combined condensed financial statements should be read in conjunction with
the audited financial statements, including the notes thereto, of Viacom and
Blockbuster and the audited financial statements and the unaudited interim
financial statements, including the notes thereto, of Paramount, which are
incorporated by reference in this Proxy Statement/Prospectus. See
"Incorporation of Certain Documents by Reference."
The unaudited pro forma data are not necessarily indicative of the results
of operations or financial position of Viacom-Paramount or the combined company
that would have occurred if the completion of the Offer, the Paramount Merger
and the Blockbuster Merger had occurred at the beginning of the period or the
date indicated, nor are they necessarily indicative of future operating results
or financial position.
The pro forma adjustments are based upon available information and certain
assumptions set forth herein, including the notes to the unaudited pro forma
combined condensed financial statements, which Viacom, Paramount and Blockbuster
believe are reasonable under the circumstances. The pro forma adjustments
reflect the Paramount Merger Consideration and the Blockbuster Merger
Consideration (see "Notes 2 and 3", respectively). The Paramount and Blockbuster
historical information have been adjusted for certain acquisitions, and certain
significant transactions which have occurred or which may occur (see Paramount
and Blockbuster Unaudited Pro Forma Condensed Consolidated Information.)
Both the Paramount Merger and the Blockbuster Merger will be accounted for
by the purchase method of accounting. Accordingly, Viacom's cost to acquire
Paramount and Blockbuster, calculated to be approximately $10.0 billion and $5.7
billion, respectively, as of March 31, 1994, will be allocated to the assets and
liabilities acquired according to their respective fair values with the excess
to goodwill. Viacom's cost to acquire Paramount and Blockbuster pursuant to the
respective merger agreements is subject to change based primarily upon the
market value of Viacom Common Stock at the time of the respective mergers. A
change in the fair market value of Viacom Common Stock will result in a
corresponding change in the excess of unallocated acquisition cost over the net
assets acquired and the
117
<PAGE>
related amortization thereof. The valuations and other studies, which will
provide the basis for such an allocation, have not yet progressed to a stage
where there is sufficient information to make an allocation in the accompanying
unaudited pro forma combined condensed financial statements. Accordingly,
the purchase accounting adjustments made in connection with the development
of the unaudited pro forma combined condensed financial information are
preliminary and have been made solely for the purposes of developing such
unaudited pro forma combined condensed financial information. For the
Paramount Merger, the approximate $6.0 billion pro forma excess of unallocated
acquisition costs as of March 31, 1994 is being amortized over 40 years at a
rate of $149.0 million per year. For the Blockbuster Merger, the approximate
$3.8 billion pro forma excess of unallocated acquisition costs as of
March 31, 1994 is also being amortized over 40 years at a rate of $95.4 million
per year. Such amortization period is based on Viacom's belief that the
combined company has substantial potential for achieving long-term
appreciation as a fully integrated, global entertainment and communications
company. The Mergers will permit the continued expansion of current lines of
business, as well as the development of new businesses, via the cross-promotion
of the well known franchises, trademarks and products of Viacom, Blockbuster
and Paramount. Additionally, the combined company will have enhanced and
complimentary product distribution capabilities which can be used to
strategically exploit its franchise trademarks and products on an accelerated
basis. Viacom believes that the combined company will benefit from the Mergers
for an indeterminable period of time of at least 40 years, and, therefore, a 40
year amortization period is appropriate.
As is the case with all of Viacom's long-term assets and liabilities,
Viacom will perform periodic reviews of the goodwill arising from the Mergers to
ensure that this goodwill is carried at the lower of cost or market in light of
current business conditions.
After the consummation of the Mergers, Viacom will arrange for independent
appraisal of the significant assets, liabilities and business operations of
Paramount and Blockbuster. Using this information, Viacom will make a final
allocation of the excess purchase price, including allocation to intangibles
other than goodwill. Viacom believes that any significant allocation of excess
purchase price to intangibles will be amortized over 40 years, and so any such
allocation would not cause a material difference in pro forma results.
The future results of operations of the combined company will reflect
increased amortization of goodwill (see notes 5b and 6b), increased interest
expense (see note 5c), and increased preferred stock dividend requirements as
described in note 4d. The following unaudited pro forma combined condensed
statement of operations does not reflect potential cost savings attributable
to consolidation of certain operating and administrative functions including
the elimination of duplicate facilities and personnel. The future financial
position of the combined company will reflect increased goodwill as described
above, increased long-term debt as described in notes 2b and 3c, and increased
common stockholders' equity resulting from the issuance of Viacom Common Stock
to stockholders of Paramount and Blockbuster.
See also "Certain Considerations--Consummation of the Blockbuster Merger."
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<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1994
VIACOM-PARAMOUNT/COMBINED COMPANY
(IN MILLIONS)
<TABLE><CAPTION>
VIACOM
--------------------------------- PARAMOUNT VIACOM/ BLOCKBUSTER
PRO FORMA MERGER PARAMOUNT HISTORICAL MERGER COMBINED
HISTORICAL ADJUSTMENTS PRO FORMA ADJUSTMENTS COMBINED BLOCKBUSTER ADJUSTMENTS COMPANY*
--------- ----------- --------- ------------ ------------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash & short term
investments................ $ 446.2 $ 446.2 $ 446.2 $ 77.2 $ (30.0)(3a) $ 493.4
Other current assets....... 3,247.0 3,247.0 $ 61.4(5a) 3,308.4 632.7 3,941.1
--------- ----------- --------- ------------ ------------ ----------- --------- ---------
Total current assets... 3,693.2 3,693.2 61.4 3,754.6 709.9 (30.0) 4,434.5
--------- ----------- --------- ------------ ------------ ----------- --------- ---------
Property and equipment,
net........................ 1,801.8 1,801.8 11.6(5a) 1,813.4 570.7 2,384.1
Intangible assets, at
amortized cost............. 8,057.8 8,057.8 1,295.4(2c) 9,353.2 863.5 3,817.0(3a) 14,033.7
Investments in Viacom,
Inc........................ 1,478.6 (1,478.6)(3b)
Other assets............... 2,783.4 $ (49.9)(1a)2,733.5 233.4(5a) 2,966.9 844.0 3,810.9
--------- ----------- --------- ------------ ------------ ----------- --------- ---------
$16,336.2 $ (49.9) $16,286.3 $ 1,601.8 $ 17,888.1 $ 4,466.7 $ 2,308.4 $24,663.2
--------- ----------- --------- ------------ ------------ ----------- --------- ---------
--------- ----------- --------- ------------ ------------ ----------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities........ $ 3,345.5 $ 3,345.5 $ (22.6)(5a) $ 3,322.9 $ 1,464.1 $(1,000.0)(3c) $ 3,787.0
Long-term debt............. 7,228.0 $ (205.0)(1b) 7,023.0 1,069.9(2b) 8,092.9 997.0 1,000.0(3c) 10,089.9
Other liabilities.......... 967.1 967.1 (3.1)(5a) 964.0 151.3 1,115.3
Minority interest in
Paramount.................. 1,285.2 1,285.2 (1,285.2)
Stockholders' equity:
Preferred................ 1,800.0 1,800.0 1,800.0 (600.0)(3b) 1,200.0
Common................... 1,710.4 155.1(1) 1,865.5 1,842.8(2,5a) 3,708.3 1,854.3 2,908.4(3a,b) 8,471.0
--------- ----------- --------- ------------ ------------ ----------- --------- ---------
Total stockholders'
equity..................... 3,510.4 155.1 3,665.5 1,842.8 5,508.3 1,854.3 2,308.4 9,671.0
--------- ----------- --------- ------------ ------------ ----------- --------- ---------
$16,336.2 $ (49.9) $16,286.3 $ 1,601.8 $ 17,888.1 $ 4,466.7 $ 2,308.4 $24,663.2
========= =========== ========= ============ ============ =========== ========= =========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
- ----------------------------
*See "Certain Considerations--Consummation of the Blockbuster Merger."
119
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1994
VIACOM-PARAMOUNT/COMBINED COMPANY
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
VIACOM
----------------------------------- PARAMOUNT VIACOM/
PRO FORMA PRO FORMA MERGER PARAMOUNT PRO FORMA
VIACOM ADJUSTMENTS PRO FORMA PARAMOUNT* ADJUSTMENTS COMBINED BLOCKBUSTER**
--------- ----------- ----------- ----------- ----------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 878.4 $ 878.4 $ 717.2 $ 1,595.6 $ 696.5
Expenses
Operating.............. 820.3 820.3 562.2 $(297.9)(5a) 1,084.6 513.3
Selling, general and
administrative....... 298.5 298.5 192.6 (34.2)(5a) 456.9 63.6
Depreciation and
amortization......... 59.8 59.8 16.7 26.1(5b) 102.6
--------- ----------- ----------- ----------- ----------- -------- -----------
Total expenses....... 1,178.6 1,178.6 771.5 (306.0) 1,644.1 576.9
--------- ----------- ----------- ----------- ----------- -------- -----------
Earnings (loss) from
operations............ (300.2) (300.2) (54.3) 306.0 (48.5) 119.6
Interest expense....... (47.3) 2.4 (44.9) (17.1) (65.9)(5c) (127.9) (22.0)
Interest and other
investment income.... 8.2 8.2 1.4
Other items, net(7).... (4.8) (4.8) (21.3) 27.2(5a) 1.1 5.8
--------- ----------- ----------- ----------- ----------- -------- -----------
Total other income
(expense).......... (52.1) 2.4 (49.7) (30.2) (38.7) (118.6) (14.8)
--------- ----------- ----------- ----------- ----------- -------- -----------
Earnings (loss) before
income taxes.......... (352.3) 2.4 (349.9) (84.5) 267.3 (167.1) 104.8
Provision for income
taxes................. 95.1 .8 95.9 (28.8) 102.5(5d) 169.6 38.8
Equity in earnings
(loss) of affiliated
companies, net of
tax.................. 3.5 (4.5) (1.0) (1.0)
Minority interest....... 12.3 12.3 (12.3)
--------- ----------- ----------- ----------- ----------- -------- -----------
Earnings (loss) before
extraordinary item,
cumulative effect of
change in accounting
principle and preferred
stock dividend
requirements............ (431.6) (2.9) (434.5) (55.7) 152.5 (337.7) 66.0
Preferred stock dividend
requirements.......... 22.5 22.5 22.5
--------- ----------- ----------- ----------- ----------- -------- -----------
Earnings (loss)
attributable to common
stock before
extraordinary item and
cumulative effect of
change in accounting
principle............... $ (454.1) $ (2.9) $ (457.0) $ (55.7) $ 152.5 $ (360.2) $ 66.0
--------- ----------- ----------- ----------- ----------- -------- -----------
--------- ----------- ----------- ----------- ----------- -------- -----------
Weighted average number
of common shares or
common shares and
common share
equivalents............ 126.4 17.4 56.9 200.7
Earnings (loss) per
common share before
extraordinary item and
cumulative effect of
change in accounting
principle.............. $ (3.59) $ (1.79)
</TABLE>
<PAGE>
<TABLE><CAPTION>
BLOCKBUSTER
MERGER COMBINED
ADJUSTMENTS COMPANY***
----------- -----------
<S> <C> <C>
Revenues................ $ 2,292.1
Expenses
Operating.............. $ (117.5)(6a) 1,480.4
Selling, general and
administrative....... 520.5
Depreciation and
amortization......... 23.9(6b) 244.0
117.5(6a)
----------- -----------
Total expenses....... 23.9 2,244.9
----------- -----------
Earnings (loss) from
operations............ (23.9) 47.2
Interest expense....... (149.9)
Interest and other
investment income.... 9.6
Other items, net(7).... (7.5)(6c) (0.6)
----------- -----------
Total other income
(expense).......... (7.5) (140.9)
----------- -----------
Earnings (loss) before
income taxes.......... (31.4) (93.7)
Provision for income
taxes................. (2.7)(6d) 205.7
Equity in earnings
(loss) of affiliated
companies, net of
tax.................... (1.0)
Minority interest.......
----------- -----------
Earnings (loss) before
extraordinary item,
cumulative effect of
change in accounting
principle and preferred
stock dividend
requirements........... (28.7) (300.4)
Preferred stock dividend
requirements........... (7.5)(6c) 15.0
----------- -----------
Earnings (loss)
attributable to common
stock before
extraordinary item and
cumulative effect of
change in accounting
principle.............. $ (21.2) $ (315.4)
----------- -----------
----------- -----------
Weighted average number
of common shares or
common shares and
common share
equivalents............ 153.4 354.1(9)
Earnings (loss) per
common share before
extraordinary item and
cumulative effect of
change in accounting
principle.............. $ (0.89)
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
- ---------------
* See Unaudited Pro Forma Condensed Consolidated Financial Statements of
Paramount.
** See Unaudited Pro Forma Condensed Consolidated Statements of Operations of
Blockbuster.
*** See "Certain Considerations--Consummation of the Blockbuster Merger."
120
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
VIACOM-PARAMOUNT/COMBINED COMPANY
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
OFFER
VIACOM AND
----------------------------------- PARAMOUNT VIACOM/
PRO FORMA PRO FORMA MERGER PARAMOUNT PRO FORMA
VIACOM ADJUSTMENTS PRO FORMA PARAMOUNT(8)* ADJUSTMENTS COMBINED BLOCKBUSTER**
--------- ----------- ----------- ------------- ----------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............... $$2,004.9 $ 2,004.9 $ 5,024.0 $ 7,028.9 $ 2,595.2
Expenses
Operating............. 877.6 877.6 3,315.7 4,193.3 1,947.6
Selling, general and
administrative......... 589.2 589.2 1,243.7 1,832.9 212.0
Depreciation and
amortization........... 153.1 153.1 165.1 $ 149.0(5b) 467.2
--------- ----------- ----------- ------------- ----------- -------- -----------
Total expenses...... 1,619.9 1,619.9 4,724.5 149.0 6,493.4 2,159.6
--------- ----------- ----------- ------------- ----------- -------- -----------
Earnings from
operations............. 385.0 385.0 299.5 (149.0) 535.5 435.6
Interest expense...... (145.0) $ 8.9(4a) (136.1) (94.3) (250.5)(5c) (480.9) (98.7)
Interest and other
investment income...... 43.9 43.9 7.2
Other items, net(7)... 61.8 61.8 (7.4) 54.4 16.3
--------- ----------- ----------- ------------- ----------- -------- -----------
Total other income
(expense).............. (83.2) 8.9 (74.3) (57.8) (250.5) (382.6) (75.2)
--------- ----------- ----------- ------------- ----------- -------- -----------
Earnings before income
taxes.................. 301.8 8.9 310.7 241.7 (399.5) 152.9 360.4
Provision for income
taxes.................. 129.8 3.1(4b) 132.9 88.6 (88.5)(5d) 133.0 135.1
Equity in loss of
affiliated companies,
net of tax............. (2.5) (12.9)(4c) (15.4) (15.4)
--------- ----------- ----------- ------------- ----------- -------- -----------
Earnings before
extraordinary item,
cumulative effect of
change in accounting
principle and
preferred stock
dividend
requirements.......... 169.5 (7.1) 162.4 153.1 (311.0) 4.5 225.3
Preferred stock
dividend
requirements.......... 12.8 $ 77.2(4d) 90.0 90.0
--------- ----------- ----------- ------------- ----------- -------- -----------
Earnings (loss)
attributable to common
stock before
extraordinary item and
cumulative effect of
change in accounting
principle.............. $ 156.7 $ (84.3) $ 72.4 $ 153.1 $ (311.0) $ (85.5) $ 225.3
--------- ----------- ----------- ------------- ----------- -------- -----------
--------- ----------- ----------- ------------- ----------- -------- -----------
Weighted average number
of common shares or
common shares and
common share
equivalents........... 120.6 22.7 56.9 200.2
Primary earnings (loss)
per common share before
extraordinary item and
cumulative effect of
change in accounting
principle............. $ 1.30 $ (0.43)
<CAPTION>
BLOCKBUSTER
MERGER COMBINED
ADJUSTMENTS COMPANY***
----------- -----------
<S> <C> <C>
Revenues............... $ 9,624.1
Expenses
Operating............. $ (410.7)(6a) 5,730.2
Selling, general and
administrative......... 2,044.9
Depreciation and
amortization........... 95.4(6b) 973.3
410.7(6a)
----------- -----------
Total expenses...... 95.4 8,748.4
----------- -----------
Earnings from
operations............. (95.4) 875.7
Interest expense...... (579.6)
Interest and other
investment income...... 51.1
Other items, net(7)... (30.0)(6c) 40.7
----------- -----------
Total other income
(expense).............. (30.0) (487.8)
----------- -----------
Earnings before income
taxes.................. (125.4) 387.9
Provision for income
taxes.................. (11.6)(6d) 256.5
Equity in loss of
affiliated companies,
net of tax............. (15.4)
----------- -----------
Earnings before
extraordinary item,
cumulative effect of
change in accounting
principle and
preferred stock
dividend
requirements........... (113.8) 116.0
Preferred stock
dividend
requirements........... (30.0)(6c) 60.0
----------- -----------
Earnings (loss)
attributable to common
stock before
extraordinary item and
cumulative effect of
change in accounting
principle.............. $ (83.8) $ 56.0
----------- -----------
----------- -----------
Weighted average number
of common shares or
common shares and
common share
equivalents............ 211.6 411.8(9)
Primary earnings (loss) per
common share before
extraordinary item and
cumulative effect of
change in accounting
principle.............. $ 0.14
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
- ---------------
* See Unaudited Pro Forma Condensed Consolidated Financial Statements of
Paramount.
** See Unaudited Pro Forma Condensed Consolidated Statements of Operations
of Blockbuster.
*** See "Certain Considerations--Consummation of the Blockbuster Merger."
121
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
VIACOM-PARAMOUNT/COMBINED COMPANY
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(1) Pro forma adjustments made to Viacom's historical balance sheet reflect
the following:
(a) The sale of Viacom's one-third partnership interest in LIFETIME.
(b) The repayment of bank debt from the after-tax proceeds from the sale of
the one-third partnership interest in LIFETIME.
(2) The cost to acquire Paramount pursuant to the Offer and the Paramount
Merger, the financing of such cost and the determination of the unallocated
excess of acquisition cost over the net assets acquired are as set forth below.
In furtherance of the Paramount Merger, on March 11, 1994, Viacom, pursuant to
the terms of the Offer, completed its purchase of 61,657,432 shares of Paramount
Common Stock, representing a majority of the shares of Paramount Common Stock
outstanding as of the expiration of the Offer. In the Paramount Merger, each
remaining outstanding share of Paramount Common Stock will be converted into the
right to receive the Paramount Merger Consideration. As of March 31, 1994, the
closing price of shares of Viacom Class B Common Stock on the AMEX was $26 1/2.
As of March 31, 1994 there were 122.8 million shares of Paramount Common Stock
outstanding.
(a) Total acquisition costs:
Cash............................................................. $ 6,597.3
Viacom Merger Debentures......................................... 1,069.9
Viacom Class B Common Stock...................................... 1,507.7
CVRs............................................................. 571.3
Viacom Three-Year Warrants....................................... 31.5
Viacom Five-Year Warrants........................................ 40.5
Paramount Merger costs........................................... 90.0
----------
Acquisition costs financed....................................... 9,908.2
Excess value of exchange ratio over exercise price of Paramount
employee stock options........................................... 54.2
----------
Total acquisition costs.......................................... $ 9,962.4
----------
----------
(b) Financing of the Offer and the Paramount Merger:
Cash............................................................. $ 2,987.3
Credit Agreement................................................. 3,700.0
Viacom Merger Debentures......................................... 1,069.9
Viacom Class B Common Stock...................................... 1,507.7
CVRs............................................................. 571.3
Viacom Three-Year Warrants....................................... 31.5
Viacom Five-Year Warrants........................................ 40.5
----------
Total financing of the Offer and the Paramount Merger............ $ 9,908.2
----------
----------
(c) The unallocated excess of acquisition costs over the net assets
acquired pursuant to the Paramount Merger.
(3) The cost to acquire Blockbuster pursuant to the Blockbuster Merger, the
financing of such cost and the determination of the unallocated excess of
acquisition cost over the net assets acquired are set forth below. Pursuant to
the Blockbuster Merger, holders of shares of Blockbuster Common Stock will be
entitled to receive the Blockbuster Merger Consideration for each of such
holder's shares. As of
122
<PAGE>
March 31, 1994, the closing price of shares of Viacom Class A Common Stock and
Viacom Class B Common Stock on the AMEX was $30 7/8 and $26 1/2, respectively.
As of March 31, 1994, there were 249.1 million shares of Blockbuster Common
Stock outstanding.
(a) Total acquisition costs and financing:
Viacom Class A Common Stock...................................... $ 615.2
Viacom Class B Common Stock...................................... 4,000.7
VCRs............................................................. 912.7
----------
Acquisition costs financed....................................... 5,528.6
Excess value of exchange ratio over exercise price of Blockbuster
stock options and warrants....................................... 112.7
Blockbuster Merger costs......................................... 30.0
----------
Total acquisition costs.......................................... 5,671.3
Blockbuster pro forma net assets as of March 31, 1994............ 1,854.3
----------
Excess of acquisition costs over net assets acquired............. $ 3,817.0
----------
----------
(b) Eliminates Blockbuster's $600 million investment in Series A Preferred
Stock and $1.25 billion investment in Viacom Class B Common Stock, net
of an unrealized holding loss.
(c) Assumes additional borrowings incurred by Blockbuster, which were used
to finance the purchase of Viacom Class B Common Stock, will be
refinanced on a long-term basis as part of an overall refinancing of
indebtedness of the combined company. Viacom believes, based on
discussions with a number of bank lenders and investment banking
institutions and based on the pro forma financial position and results
of operations, that it will have the ability to refinance its
indebtedness on a long-term basis.
(4) Pro forma adjustments made to Viacom's historical results reflect the
following:
(a) A decrease in interest expense of $2.4 million for the three months
ended March 31, 1994 and $8.9 million for the year ended December 31,
1993 resulting from the repayment of bank debt of approximately $205
million.
(b) Pro forma income tax adjustments reflect the income tax effects
calculated at the statutory tax rate in effect during the period
presented.
(c) Eliminates Viacom's equity in earnings, net of tax, of LIFETIME.
(d) The additional 5% cumulative dividend requirement of the $1.8 billion
of Viacom Preferred Stock sold to NYNEX and Blockbuster in the amount
of $77.2 million for the year ended December 31, 1993 as if the
transactions had occurred at the beginning of the year.
(5) Other pro forma adjustments related to the Offer and the Paramount
Merger reflect the following:
(a) A reversal of merger related charges principally relates to adjustments
of programming assets based upon new management strategies and
additional programming sources and other costs incurred related to
the merger with Paramount.
(b) An increase in amortization expense resulting from the increase in
intangibles.
(c) An increase in interest expense resulting from additional debt
financing of approximately $3.7 billion under the Credit Agreement, the
issuance of Viacom Merger Debentures and a decrease of interest income
resulting from the use of cash to finance the Offer. The assumed
interest rate on the debt financing under the Credit Agreement of 4.6%
for the three months ended March 31, 1994 and 4.3% for the year ended
December 31, 1993 was calculated based
123
<PAGE>
on average historical London Interbank Offered Rates. A change in the
assumed interest rate of 1/8% will result in a change in interest
expense of $4.5 million on an annual basis.
(d) Pro forma income tax adjustments reflect the income tax effects
calculated at the statutory tax rate in effect during the period
presented. The effective income tax rate on a pro forma basis is
adversely affected by amortization of excess acquisition costs,
which are assumed to be not deductible for tax purposes.
(e) Intercompany transactions were immaterial in each of the statements
presented.
(6) Other pro forma adjustments related to the Blockbuster Merger reflect
the following:
(a) Reclassification of the historical presentation of depreciation and
amortization to conform the presentations of Viacom and Blockbuster
financial statements.
(b) An increase in amortization expense resulting from the increase in
intangibles.
(c) Eliminates the 5% cumulative annual dividend on the $600 million
intercompany Series A Preferred Stock investment by Blockbuster.
(d) Reflects the income tax effects of certain pro forma adjustments
calculated at the statutory tax rate in effect during the period
presented. The effective income tax rate on a pro forma basis is
adversely affected by amortization of excess acquisition costs, which
are assumed to be not deductible for tax purposes.
(e) Intercompany transactions were immaterial in each of the statements
presented.
(7) Other items, net, of Viacom for the year ended December 31, 1993
reflects a net gain of $61.8 million due to the sale of the Viacom Cablevision
of Wisconsin, Inc. system and other non-recurring transactions.
(8) Reflects operating losses at USA Networks, Paramount's 50%-owned cable
networks, due largely to a $78 million pre-tax charge, the majority of which was
recorded in December 1993, to adjust the carrying value of certain broadcast
rights to net realizable value because of the under performance of certain
series programming of which Paramount recorded its share.
(9) Pro forma primary earnings per common share is calculated based on the
weighted average number of shares of Viacom Common Stock outstanding, the number
of shares of Viacom Common Stock to be issued in connection with the Paramount
Merger and Blockbuster Merger and respective common share equivalents as if
these transactions occurred at the beginning of the period presented. Common
share equivalents would have an antidilutive effect on losses per common share
and therefore are not included in such calculation. Conversion of the Series B
Preferred Stock would have an antidilutive effect on earnings per common share
and therefore fully diluted earnings per common share is not presented.
124
<PAGE>
PARAMOUNT, MACMILLAN AND OTHER BUSINESSES ACQUIRED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma Paramount condensed consolidated statement of
operations for the two months ended February 28, 1994 and twelve months ended
January 31, 1994 give effect, on a purchase accounting basis, to the acquisition
of Macmillan. The unaudited pro forma condensed consolidated statement of
operations for the twelve months ended January 31, 1994 also includes the
acquisitions of television station WKBD-TV in Detroit ("WKBD") in September 1993
and the remaining 80% interest in Paramount Canada's Wonderland ("PCW") theme
park in May 1993. The acquisitions of WKBD and PCW are included in the
applicable unaudited pro forma condensed consolidated statement of operations in
"Other Businesses Acquired and Pro Forma Adjustments."
The unaudited pro forma Paramount condensed consolidated statement of operations
for the two months ended February 28, 1994 and the twelve months ended January
31, 1994 include the unaudited historical consolidated statement of operations
of Paramount for the two months ended February 28, 1994 and the twelve months
ended January 31, 1994 and of Macmillan for the two months ended February 28,
1994 and the twelve months ended December 31, 1993. The unaudited pro forma
condensed consolidated statement of operations for the twelve months ended
January 31, 1994 also includes the historical statement of operations of WKBD
for the seven months ended August 31, 1993; and of PCW for the three months
ended April 30, 1993. Financial information of WKBD and PCW subsequent to their
acquisitions are included in Paramount's historical financial statements.
Macmillan's fiscal year-end was March 31, PCW's fiscal year-end was February 28,
and WKBD's fiscal year-end was December 31; their pro forma periods described
above have been derived by accumulating monthly and quarterly financial
information for the respective entities.
The unaudited pro forma Paramount condensed consolidated statements of
operations are not necessarily indicative of the results which actually would
have occurred if the acquisitions had been in effect since the beginning of each
period presented, nor are they necessarily indicative of future results.
Adjustments have been made to reflect the acquisitions, on a purchase accounting
basis, as if such transactions had taken place at the beginning of each period
presented, for the purpose of presenting the unaudited pro forma Paramount
condensed consolidated statement of operations.
125
<PAGE>
PARAMOUNT AND MACMILLAN
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWO MONTHS ENDED FEBRUARY 28, 1994
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
HISTORICAL
----------------- MACMILLAN
TWO ACQUISITION AND
MONTHS ENDED PRO FORMA
FEBRUARY 28, 1994 ADJUSTMENTS(1) PRO FORMA
----------------- --------------- ---------
<S> <C> <C> <C>
Revenues............................................................ $ 680.6 $ 36.6 $ 717.2
Expenses:
Operating......................................................... 530.8 31.4 562.2
Selling, general and
administrative................................................. 176.6 16.0 192.6
Depreciation and amortization..................................... 14.1 2.6 16.7
-------- --------------- ---------
Total expenses............................................... 721.5 50.0 771.5
-------- --------------- ---------
Earnings (loss) from operations..................................... (40.9) (13.4) (54.3)
-------- --------------- ---------
Other income (expense):
Interest expense.................................................. (17.1) (17.1)
Interest and other investment
income......................................................... 11.1 (2.9) 8.2
Other items, net.................................................. (19.0) (2.3) (21.3)
-------- --------------- ---------
Total other expense.......................................... (25.0) (5.2) (30.2)
-------- --------------- ---------
Earnings (loss) before income taxes................................. (65.9) (18.6) (84.5)
Provision (benefit) for income taxes................................ (23.0) (5.8) (28.8)
-------- --------------- ---------
Net earnings (loss)................................................. $ (42.9) $ (12.8) $ (55.7)
-------- --------------- ---------
-------- --------------- ---------
Weighted average number of
common shares..................................................... 122.1 122.1
Net earnings (loss) per common
share............................................................. $ (.35) $ (.46)
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
126
<PAGE>
PARAMOUNT, MACMILLAN AND OTHER BUSINESSES ACQUIRED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED JANUARY 31, 1994
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
HISTORICAL OTHER
-------------------------------- MACMILLAN BUSINESSES
NINE THREE ACQUISITION ACQUIRED AND
MONTHS ENDED MONTHS ENDED AND PRO FORMA PRO FORMA
JANUARY 31, 1994 APRIL 30, 1993 ADJUSTMENTS(1) ADJUSTMENTS(2) PRO FORMA
---------------- -------------- -------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Revenues...................................... $ 3,757.0 $ 954.4 $ 287.7 $ 24.9 $ 5,024.0
Expenses:
Operating................................... 2,499.1 628.3 167.0 21.3 3,315.7
Selling, general and
administrative........................... 835.4 315.8 92.5 1,243.7
Depreciation and amortization............... 124.5 22.2 16.3 2.1 165.1
---------------- -------------- -------------- ------- ----------
Total expenses......................... 3,459.0 966.3 275.8 23.4 4,724.5
---------------- -------------- -------------- ------- ----------
Earnings (loss) from operations............... 298.0 (11.9) 11.9 1.5 299.5
---------------- -------------- -------------- ------- ----------
Other income (expense):
Interest expense............................ (70.6) (23.7) (94.3)
Interest and other investment
income................................... 53.1 22.2 (26.4) (5.0) 43.9
Other items, net............................ (2.7) (2.2) (2.6) 0.1 (7.4)
---------------- -------------- -------------- ------- ----------
Total other expense.................... (20.2) (3.7) (29.0) (4.9) (57.8)
---------------- -------------- -------------- ------- ----------
Earnings (loss) before income taxes........... 277.8 (15.6) (17.1) (3.4) 241.7
Provision (benefit) for income taxes.......... 97.2 (6.4) (1.5) (0.7) 88.6
---------------- -------------- -------------- ------- ----------
Net earnings (loss)........................... $ 180.6 $ (9.2) $ (15.6) $ (2.7) $ 153.1
---------------- -------------- -------------- ------- ----------
---------------- -------------- -------------- ------- ----------
Weighted average number of
common shares............................... 120.3 118.8 119.9
Net earnings (loss) per common
share....................................... $ 1.50 $ (0.08) $ 1.28
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
127
<PAGE>
PARAMOUNT, MACMILLAN AND OTHER BUSINESSES ACQUIRED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(1) The Macmillan Acquisition includes the following pro forma adjustments:
Estimated amortization of intangible assets of $2.1 million for the two months
ended February 28, 1994 and $12.8 million for the twelve months ended January
31, 1994 over a 40 year life.
Estimated reduction of interest income of $2.9 million for the two months ended
February 28, 1994 and $26.4 million for the twelve months ended January 31, 1994
at Paramount's average interest rates in effect during the respective periods,
due to the use of cash and cash equivalents and short-term investments for the
acquisition.
Estimated income tax benefit of $(5.8) million for the two months ended February
28, 1994 and $(1.5) million for the twelve months ended January 31, 1994, based
upon pro forma adjustments, along with an adjustment to provide for Macmillan
Federal income taxes at the statutory rate.
(2) Other Businesses Acquired include the following pro forma adjustments for
the twelve months ended January 31, 1994:
Decrease estimated combined annual amortization of intangible assets over a 40
year life and depreciation expense, based on a preliminary purchase price
allocation analysis, of $(0.2) million.
Elimination of historical interest expense related to debt not acquired from, or
prepaid upon acquisition of, the Other Businesses.
Estimated reduction to interest income, at Paramount's average interest rates in
effect during the twelve-month period, of $5.0 million due to the use of cash
and cash equivalents and short-term investments for the acquisitions.
Conform the Other Businesses' accounting policies related to the accrual of
certain operating expenses to that of Paramount and to eliminate the effect of
intercompany transactions between the Other Businesses and Paramount. The effect
of these adjustments is to reduce operating expenses by $2.9 million.
Estimated income tax benefit of $(2.4) million, based upon pro forma
adjustments, along with an adjustment to provide for Federal income taxes at the
statutory rate.
128
<PAGE>
BLOCKBUSTER, SUPER CLUB AND
SPELLING ENTERTAINMENT
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The historical financial statements of Blockbuster include the financial
position and results of operations of WJB, with which Blockbuster merged in
August 1993. This transaction has been accounted for under the pooling of
interests method of accounting and, accordingly, all of Blockbuster's historical
financial data has been restated as if the companies had operated as one entity
since inception.
The following unaudited pro forma condensed consolidated statement of
operations for the three months ended March 31, 1994 presents the pro forma
results of operations as if the $1.25 billion investment in Viacom had been
consummated at January 1, 1993 and the related interest expense incurred on
borrowings used to finance such investment had been included from such time.
The unaudited pro forma condensed consolidated statement of operations for the
year ended December 31, 1993 presents the pro forma results of continuing
operations of Blockbuster as if the acquisition of Super Club and the majority
of the outstanding common stock of Spelling Entertainment had been consummated
at January 1, 1993. The aforementioned unaudited pro forma statement of
operations also contains pro forma adjustments for certain significant
transactions which occurred during 1993 or 1994 in connection with the Offer and
the Paramount Merger. These transactions include a $600 million and a $1.25
billion investment in Viacom, additional borrowings of $600 million and $1.25
billion, and the sale of 14,650,000 shares of Blockbuster Common Stock, and are
reflected in the unaudited pro forma condensed consolidated statement of
operations as if these transactions had been consummated as of January 1, 1993.
Income from continuing operations per common and common equivalent share is
based on the combined weighted average number of common shares and common share
equivalents outstanding which include, where appropriate, the assumed exercise
or conversion of warrants and options. In computing income from continuing
operations per common and common equivalent share, Blockbuster utilizes the
treasury stock method.
The unaudited pro forma condensed consolidated statements of operations
were prepared utilizing the accounting policies of the respective entities as
outlined in their historical financial statements except as described in the
accompanying notes. The unaudited pro forma condensed consolidated financial
statements reflect Blockbuster's preliminary allocations of purchase prices
which will be subject to further adjustments as Blockbuster finalizes the
allocations of the purchase prices in accordance with generally accepted
accounting principles. All of the aforementioned acquisitions, excluding WJB,
were accounted for under the purchase method of accounting. The unaudited pro
forma condensed consolidated statements of operations do not necessarily reflect
actual results which would have occurred if the aforementioned acquisitions had
taken place on the assumed dates, nor are they indicative of the results of
future combined operations. These unaudited pro forma condensed consolidated
statements of operations should be read in conjunction with the respective
historical statements of operations and notes thereto of Blockbuster, Super
Club and Spelling Entertainment.
129
<PAGE>
BLOCKBUSTER
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1994
(In millions, except per share data)
<TABLE><CAPTION>
PRO FORMA
ADJUSTMENTS
-------------------- PRO
BLOCKBUSTER DEBIT CREDIT FORMA
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
Rental revenue................................................. $ 392.6 $ 392.6
Product sales.................................................. 205.3 205.3
Other revenue.................................................. 98.6 98.6
----------- --------- --------- ---------
696.5 696.5
Operating Costs and Expenses:
Cost of product sales.......................................... 133.4 133.4
Operating expenses............................................. 379.9 379.9
Selling, general and administrative............................ 63.6 63.6
----------- --------- --------- ---------
Operating income................................................. 119.6 119.6
Interest expense................................................. (11.6) $ 10.4(a) (22.0)
Interest income.................................................. 1.4 1.4
Other income, net................................................ 5.8 5.8
----------- --------- --------- ---------
Income before taxes.............................................. 115.2 10.4 104.8
Provision for income taxes....................................... 42.6 $ 3.8(k) 38.8
----------- --------- --------- ---------
Income from continuing operations................................ $ 72.6 $ 10.4 $ 3.8 $ 66.0
----------- --------- --------- ---------
----------- --------- --------- ---------
Weighted average common and common equivalent shares
outstanding--assuming full dilution............................ 253.8 253.8
----------- ---------
----------- ---------
Income from continuing operations per common and common
equivalent share--assuming full dilution....................... $ 0.29 $ 0.26
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of this statement.
130
<PAGE>
BLOCKBUSTER, SUPER CLUB AND SPELLING ENTERTAINMENT
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(In millions, except per share data)
<TABLE><CAPTION>
SPELLING PRO FORMA
SUPER CLUB ENTERTAINMENT ADJUSTMENTS
ELEVEN MONTHS THREE MONTHS --------------------
BLOCKBUSTER ENDED 11/20/93 ENDED 3/31/93 COMBINED DEBIT CREDIT
----------- --------------- --------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Rental revenue........................... $ 1,285.4 $ 58.7 $ 1,344.1
Product sales............................ 658.1 254.6 912.7
Other revenue............................ 283.5 3.4 $ 51.5 338.4
----------- ------- ------ --------- --------- ---------
2,227.0 316.7 51.5 2,595.2
Operating Costs and Expenses:
Cost of product sales.................... 430.2 185.8 616.0
Operating expenses....................... 1,195.5 119.3 38.0 1,352.8 $ 21.2(c-g)
Selling, general and administrative...... 178.3 26.0 7.7 212.0
----------- ------- ------ --------- --------- ---------
Operating income (loss).................... 423.0 (14.4) 5.8 414.4 21.2
Interest expense........................... (33.8) (2.6) (2.5) (38.9) $ 60.3(a) .5(h)
Interest income............................ 6.8 .2 .2 7.2
Other income (expense), net................ (6.2) .1 (.9) (7.0) .9(b) 24.2(i)
----------- ------- ------ --------- --------- ---------
Income (loss) before taxes................. 389.8 (16.7) 2.6 375.7 61.2 45.9
Provision for income taxes................. 146.2 .1 1.7 148.0 12.9(j)
----------- ------- ------ --------- --------- ---------
Income (loss) from continuing operations... $ 243.6 $ (16.8) $ .9 $ 227.7 $ 61.2 $ 58.8
----------- ------- ------ --------- --------- ---------
----------- ------- ------ --------- --------- ---------
Weighted average common and common
equivalent shares outstanding.............. 220.2
-----------
-----------
Income from continuing operations per
common and common equivalent share......... $ 1.11
-----------
-----------
Weighted average common and common
equivalent shares outstanding-- assuming
full dilution.............................. 221.5
-----------
-----------
Income from continuing operations per
common and common equivalent
share--assuming full dilution.............. $ 1.10
-----------
-----------
<CAPTION>
PRO
FORMA
---------
<S> <C>
Revenue:
Rental revenue........................... $ 1,344.1
Product sales............................ 912.7
Other revenue............................ 338.4
---------
2,595.2
Operating Costs and Expenses:
Cost of product sales.................... 616.0
Operating expenses....................... 1,331.6
Selling, general and administrative...... 212.0
---------
Operating income (loss).................... 435.6
Interest expense........................... (98.7)
Interest income............................ 7.2
Other income (expense), net................ 16.3
---------
Income (loss) before taxes................. 360.4
Provision for income taxes................. 135.1
---------
Income (loss) from continuing operations... $ 225.3
---------
---------
Weighted average common and common
equivalent shares outstanding.............. 242.8
---------
---------
Income from continuing operations per
common and common equivalent share......... $ 0.93
---------
---------
Weighted average common and common
equivalent shares outstanding-- assuming
full dilution.............................. 244.0
---------
---------
Income from continuing operations per
common and common equivalent
share--assuming full dilution.............. $ 0.92
---------
---------
</TABLE>
The accompanying notes are an integral part of this statement.
131
<PAGE>
BLOCKBUSTER, SUPER CLUB AND
SPELLING ENTERTAINMENT
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
<TABLE>
<S> <C>
(a) Represents additional interest expense resulting from Blockbuster's additional borrowings used to fund its
investment in Viacom.
(b) Represents the recording of the minority interest resulting from Blockbuster's purchase of the majority of
the outstanding common stock of Spelling Entertainment.
(c) Represents a net adjustment related to the elimination of the historical amortization of intangible assets
and the recording of amortization, on a straight-line basis, on the intangible assets resulting from the
preliminary purchase price allocations of the acquired entities. Intangible assets resulting from the
purchase of Super Club and Spelling Entertainment are being amortized over a 40 year life which approximates
the useful life.
(d) Represents a reduction to videocassette rental inventory amortization expense due to adjustments to the carrying
value of Super Club's videocassette rental inventory as a result of the preliminary purchase price allocation
and the assignment of remaining useful lives.
(e) Represents a reduction to property and equipment depreciation expense resulting from adjustments to the
carrying value of Super Club's property and equipment as a result of the preliminary purchase price
allocation and the assignment of remaining useful lives.
(f) Represents reductions to occupancy expense resulting from preliminary purchase price allocations which
reflect the fair market value of certain lease liabilities related to Super Club.
(g) Represents reductions to amortization of film costs and program rights, depreciation and rent expenses
resulting from preliminary purchase price allocations which reflect the fair market value of various assets
and liabilities related to Spelling Entertainment.
(h) Represents the reduction in interest expense resulting from the revaluation of outstanding indebtedness of
Spelling Entertainment by Blockbuster at current interest rates.
(i) Represents dividend income related to a portion of Blockbuster's investment in Viacom.
(j) Represents the incremental change in the combined entity's provision for income taxes as a result of the
pretax earnings (loss) of Super Club and Spelling Entertainment and all pro forma adjustments as described
above.
(k) Represents the incremental change in the provision for income taxes as a result of pro forma adjustment (a).
</TABLE>
132
<PAGE>
DESCRIPTION OF VIACOM CAPITAL STOCK
The authorized capital stock of Viacom consists of 100 million shares of
Viacom Class A Common Stock, 150 million shares of Viacom Class B Common Stock
and 100 million shares of preferred stock, par value $0.01 per share, issuable
in series. The following description of Viacom's capital stock does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
the DGCL, Viacom's Restated Certificate of Incorporation, the Certificate of
Designations for the Series A Preferred Stock, the Certificate of Designations
for the Series B Preferred Stock, the VCR Certificate, the Form of Certificate
of Designations for the Series C Preferred Stock, the CVR Agreement (as
described below), and the Viacom Warrant Agreements (as described below).
The following descriptions of the Viacom Common Stock, CVRs and Viacom
Warrants should be read carefully by Paramount stockholders since the Paramount
Merger Consideration includes such securities.
VIACOM CLASS A COMMON STOCK
As of the record date of the Viacom Special Meeting, there were
53,449,525 shares of Viacom Class A Common Stock issued and outstanding. All
outstanding shares of Viacom Class A Common Stock are fully paid and
non-assessable. Shares of Viacom Class A Common Stock do not have conversion
rights and are not redeemable.
VIACOM CLASS B COMMON STOCK
Viacom Class B Common Stock has rights, privileges, limitations,
restrictions and qualifications identical to Viacom Class A Common Stock except
that shares of Viacom Class B Common Stock have no voting rights other than
those required by law. As of the record date of the Viacom Special Meeting,
there were 90,083,779 shares of Viacom Class B Common Stock issued and
outstanding. All outstanding shares of Viacom Class B Common Stock are fully
paid and non-assessable. Shares of Viacom Class B Common Stock do not have
conversion rights and are not redeemable.
CONTINGENT VALUE RIGHTS
GENERAL. The CVRs will be issued under the CVR Agreement (the "CVR
Agreement") between Viacom and Harris Trust and Savings Bank, as Trustee (the
"CVR Trustee"), a form of which is filed as an exhibit to the Registration
Statement of which this Proxy Statement/Prospectus is a part. The following
summaries of certain provisions of the CVR Agreement do not purport to be
complete, and where reference is made to particular provisions of the CVR
Agreement, such provisions, including the definitions of certain terms, are
incorporated by reference as a part of such summaries or terms, which are
qualified in their entirety by such reference. References to sections in the
following summaries are references to sections of the CVR Agreement. The
definitions of certain capitalized terms used in the following summary are set
forth below under "Certain Definitions."
PAYMENT AT MATURITY DATE, FIRST EXTENDED MATURITY DATE OR SECOND EXTENDED
MATURITY DATE. The CVR Agreement provides that, subject to adjustment as
described under "Antidilution" below, Viacom shall pay to each holder of the
CVRs (each such person, a "CVR Holder") on the Maturity Date, unless Viacom
shall, in its sole discretion, extend the Maturity Date to the First Extended
Maturity Date, then on the First Extended Maturity Date, unless Viacom shall, in
its sole discretion, extend the First Maturity Date to the Second Extended
Maturity Date, then on the Second Extended Maturity Date, for each CVR held by
such CVR Holder an amount, if any, as determined by Viacom, by which the Target
Price (as defined below) exceeds the greater of the Current Market Value and the
Minimum Price (each as defined below). Such determination by Viacom absent
manifest error shall be final and binding on Viacom and the CVR Holders.
(Section 301(c)).
Such amount, if any, shall be payable by Viacom, at Viacom's sole
discretion, either (i) in such coin or currency of the United States of America
as at the time is legal tender for the payment of public and private debts;
provided, however, Viacom may pay such amounts by its check payable in such
money or (ii) by delivering the equivalent fair market value (as determined by
an Independent Financial Expert)
133
<PAGE>
of securities of Viacom, including, without limitation, common stock or
preferred stock, options or warrants therefor, other securities convertible into
or exchangeable for common stock or preferred stock, notes, debentures,
derivative securities or any other security or Viacom now existing or hereafter
created or any combination of the foregoing. There can be no assurance,
however, that such securities, if issued, would ultimately trade in the
market at a price at or above the value determined by the Independent
Financial Expert. Such securities, if issued, would be registered under
the Securities Act of 1933 prior to the issuance thereof and a
prospectus in connection with such issuance would be delivered to
holders of record of CVRs at that time. Harris Trust Company of New York
has been appointed as paying agent in the Borough of Manhattan, The City
of New York. (Section 307)
Viacom may at its option extend the Maturity Date to the First Extended
Maturity Date and may at its option extend the First Extended Maturity Date to
the Second Extended Maturity Date. Such options shall be exercised by (i)
publishing notice of an extension in the Authorized Newspaper and (ii)
furnishing notice to the CVR Holders of such extension, in each case, not less
than one business day preceding the Maturity Date or the First Extended Maturity
Date, as the case may be; provided, however, that no defect in any such notice
shall affect the validity of the extension of the Maturity Date to the First
Extended Maturity Date or the extension of the First Extended Maturity Date to
the Second Extended Maturity Date, and that any notice when published and mailed
to a CVR Holder in the aforesaid manner shall be conclusively deemed to have
been received by such CVR Holder whether or not actually received by such CVR
Holder. (Section 301(d))
The CVRs are unsecured obligations of Viacom and will rank equally with all
other unsecured indebtedness of Viacom.
PAYMENT UPON THE OCCURRENCE OF A DISPOSITION. Upon the consummation of a
Disposition (as defined below), Viacom shall pay (in cash or securities of
Viacom) to each CVR Holder for each CVR held by such CVR Holder an amount, if
any, as determined by Viacom, by which the Discounted Target Price exceeds the
greater of (i) the fair market value as determined by an Independent Financial
Expert, of the consideration, if any, received for each share of Viacom Class B
Common Stock by the holder thereof as a result of such Disposition and assuming
that such holder did not exercise any right of appraisal granted under law with
respect to such Disposition and (ii) the Minimum Price. Such determinations by
Viacom and such Independent Financial Expert absent manifest error shall be
final and binding on Viacom and the CVR Holders. Such payment, if any, shall be
made on the Disposition Payment Date established by Viacom, which in no event
shall be more than 30 days after the date on which the Disposition was
consummated. (Section 301(e)) As soon as practicable, Viacom shall give CVR
Holders notice of such Disposition and the Disposition Payment Date. (Section
301(f))
DETERMINATION THAT NO AMOUNT IS PAYABLE WITH RESPECT TO THE CVRS. If the
average trading value of a share of Viacom Class B Common Stock equals or
exceeds $48 on the Maturity Date or $51 on the First Extended Maturity Date (if
the Maturity Date is extended by Viacom to the First Extended Maturity Date) or
$55 on the Second Extended Maturity Date (if the First Extended Maturity Date is
extended by Viacom to the Second Extended Maturity Date), as the case may be, no
amount will be payable with respect to the CVRs. Certain corporate
reorganizations, in which consideration paid to holders of shares of Viacom
Class B Common Stock exceeds minimum amounts may also result in no value being
payable with respect to the CVRs.
In the event that Viacom determines that no amount is payable with respect
to the CVRs to the CVR Holders on the Maturity Date, the First Extended Maturity
Date, the Second Extended Maturity Date or the Disposition Payment Date, as the
case may be, Viacom shall give to the CVR Holders notice of such determination.
Upon making such determination and absent manifest error, the CVRs shall
terminate and become null and void and the CVR Holders shall have no further
rights with respect thereto. The failure to give such notice or any defect
therein shall not affect the validity of such determination. (Section 301(j))
NO INTEREST. Notwithstanding any provision of the CVR Agreement or of the
CVRs to the contrary, other than in the case of interest on the Default Amount,
no interest shall accrue on any amounts payable on the CVRs to the CVR Holders.
(Section 301(i))
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<PAGE>
EVENTS OF DEFAULT. If an Event of Default occurs and is continuing, either
the CVR Trustee or CVR Holders of not less than 25% of the outstanding CVRs, by
notice in writing to Viacom (and to the CVR Trustee if given by CVR Holders),
may declare the CVRs to be due and payable immediately, and upon any such
declaration, Viacom shall pay to the CVR Holders (in cash or securities of
Viacom, at Viacom's option) for each CVR held by the CVR Holders, the Default
Amount with interest at the Default Interest Rate, from the Default Payment Date
through the date payment is made to the CVR Trustee. (Section 801)
If, at any time after the CVRs shall have been so declared due and payable,
and before any judgment or decree for the payment of the amounts due shall have
been obtained or entered, Viacom shall pay or shall deposit with the CVR Trustee
a sum sufficient to pay all amounts which shall have become due otherwise than
by acceleration (with interest upon such overdue amount at the Default Interest
Rate to the date of such payment or deposit) and such amount as shall be
sufficient to cover reasonable compensation to the CVR Trustee, its agents,
attorneys and counsel, and all other expenses and liabilities incurred and all
advances made by the CVR Trustee except as a result of negligence or bad faith,
and if any and all Events of Default, other than the nonpayment of the amounts
which shall have become due by acceleration, shall have been cured, waived or
otherwise remedied, then the CVR Holders holding a majority of all the CVRs then
Outstanding, by written notice to Viacom and to the CVR Trustee, may waive all
defaults with respect to the CVRs and rescind and annul such declaration and its
consequences, but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or shall impair any right consequent
thereof. (Section 801)
CERTAIN PURCHASES AND SALES. Viacom and NAI will not, and Viacom will not
permit any of its subsidiaries or controlled affiliates (including Paramount)
to, purchase any shares of Viacom Class B Common Stock in open market
transactions, in privately negotiated transactions or otherwise, on any day
during the period commencing 10 trading days before the Valuation Period and
ending on the last day of the Valuation Period, except with respect to employee
benefit plans and other incentive compensation arrangements. (Section 704)
ANTIDILUTION. In the event Viacom shall in any manner subdivide (by stock
split, stock dividend or otherwise) or combine (by reverse stock split or
otherwise) the number of outstanding shares of Viacom Class B Common Stock,
Viacom shall similarly subdivide or combine the CVRs and shall appropriately
adjust the Discounted Target Price, the Target Price and the Minimum Price.
Whenever such an adjustment is made, Viacom shall (i) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (ii) promptly file with the CVR Trustee a copy
of such certificate and (iii) mail a brief summary thereof to each CVR Holder.
The CVR Trustee shall be fully protected in relying on any such certificate and
on any adjustment therein contained. Such adjustment absent manifest error shall
be final and binding on Viacom and the CVR Holders. Each outstanding CVR shall
thenceforth represent that number of adjusted CVRs necessary to reflect such
subdivision or combinations, and reflect the adjusted Discounted Target Price,
Target Price and Minimum Price. (Section 301(k))
CONSOLIDATION, MERGER AND SALE OF ASSETS. The CVR Agreement provides that
Viacom may, without the consent of the CVR Holders of any of the Outstanding
CVRs, consolidate with or merge into any other Person or convey, transfer or
lease its properties and assets substantially as an entirety to any corporation,
partnership or trust organized under the laws of the United States of America,
any state thereof or the District of Colombia, provided that (i) the successor
Person assumes Viacom's obligations under the CVRs and the CVR Agreement,
(ii) immediately after giving pro forma effect to the transaction, there
exists no Event of Default and (iii) Viacom delivers to the Trustee an
officer's certificate regarding compliance with the foregoing. Solely for
purposes of this paragraph, "convey, transfer or lease its properties and assets
substantially as an entirety" shall mean properties and assets contributing in
the aggregate at least 80% of Viacom's total revenues as reported in Viacom's
last available periodic financial report (quarterly or annual, as the case may
be) filed with the Commission. (Section 901)
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<PAGE>
CERTAIN DEFINITIONS.
"Authorized Newspaper" means The Wall Street Journal (Eastern Edition), or
if The Wall Street Journal (Eastern Edition) shall cease to be published, or, if
the publication or general circulation of The Wall Street Journal (Eastern
Edition) shall be suspended for whatever reason, such other English language
newspaper as is selected by Viacom with general circulation in The City of New
York, New York.
"Current Market Value" means (i) with respect to the Maturity Date and the
First Extended Maturity Date, the median of the averages of the closing prices
on the AMEX (or such other exchange on which such shares are then listed) of
shares of Viacom Class B Common Stock during each 20 consecutive trading day
period that both begins and ends in the Valuation Period and (ii) with respect
to the Second Extended Maturity Date, the average of the closing prices on the
AMEX (or such other exchange on which such shares are then listed) of the Viacom
Class B Common Stock during the 20 consecutive trading days in the Valuation
Period which yield the highest such average of the closing prices for any such
period within the Valuation Period.
"Default Amount" means the amount, if any, by which the Discounted Target
Price exceeds the Minimum Price.
"Default Interest Rate" means 8% per annum.
"Default Payment Date" means the date upon which the CVRs become due and
payable pursuant to Section 801.
"Discounted Target Price" means (i) if a Disposition or an Event of Default
shall occur prior to the Maturity Date, $48.00 discounted back from the Maturity
Date to the Disposition Payment Date or the Default Payment Date, as the case
may be, at 8% per annum; (ii) if a Disposition or an Event of Default shall
occur after the Maturity Date but prior to the First Extended Maturity Date,
$51.00 discounted back from the First Extended Maturity Date to the Disposition
Payment Date or Default Payment Date, as the case may be, at 8% per annum; or
(iii) if a Disposition or an Event of Default shall occur after the First
Extended Maturity Date but prior to the Second Extended Maturity Date, $55.00
discounted back from the Second Extended Maturity Date to the Disposition
Payment Date or Default Payment Date, as the case may be, at 8% per annum. In
each case, upon each occurrence of an event specified under "Antidilution"
above, such amounts, as they may have been previously adjusted, shall be
adjusted as described under "Antidilution" above.
"Disposition" means (i) a merger, consolidation or other business
combination involving Viacom as a result of which no shares of Viacom Class B
Common Stock shall remain outstanding, (ii) a sale, transfer or other
disposition, in one or a series of transactions, of all or substantially all of
the assets of Viacom or (iii) a reclassification of Viacom Class B Common Stock
as any other capital stock of Viacom or any other Person; provided, however,
that a "Disposition" shall not mean, or occur upon, a merger of Viacom and any
wholly owned subsidiary of Viacom.
"Disposition Payment Date" means the date established by Viacom, which in
no event shall be more than 30 days after the date on which the disposition was
consummated, upon which Viacom shall pay in the manner provided in Section 307
of the CVR Agreement to each CVR Holder for each CVR held by such CVR Holder an
amount, if any, as determined by Viacom.
"Event of Default," with respect to the CVRs, means each of the following
which shall have occurred and be continuing: (a) default in the payment of all
or any part of the amounts payable in respect of any of the CVRs as and when the
same shall become due and payable either at the Maturity Date, the First
Extended Maturity Date, the Second Extended Maturity Date, the Disposition
Payment Date or otherwise; or (b) default in the performance, or breach of any
covenant or warranty of Viacom, and continuance of such default or breach for a
period of 90 days after written notice has been given to Viacom by the CVR
Trustee or to Viacom and the CVR Trustee by CVR Holders holding at least 25% of
the CVRs; or (c) certain events of bankruptcy, insolvency, reorganization, or
other similar events in respect of Viacom.
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<PAGE>
"Independent Financial Expert" means a nationally recognized investment
banking firm.
The "Minimum Price" means (i) at the Maturity Date, $36.00, (ii) at the
First Extended Maturity Date, $37.00 and (iii) at the Second Extended Maturity
Date, $38.00. In each case, upon each occurrence of an event specified under
"Antidilution" above, such amounts, as they may have been previously adjusted,
shall be adjusted as described under "Antidilution" above.
The "Target Price" means (i) at the Maturity Date, $48.00, (ii) at the
First Extended Maturity Date, $51.00 and (iii) at the Second Extended Maturity
Date, $55.00. In each case, upon each occurrence of an event specified under
"Antidilution" above, such amounts, as they may have been previously adjusted,
shall be adjusted as described under "Antidilution" above.
"Valuation Period" means the 60 trading day period immediately preceding
(and including) the Maturity Date, the First Extended Maturity Date or the
Second Extended Maturity Date, as the case may be.
VIACOM WARRANTS
General. Viacom will issue an aggregate of 30,567,739 Viacom Three-Year
Warrants and 18,340,643 Viacom Five-Year Warrants in connection with the
Paramount Merger. The Viacom Three-Year Warrants are being offered pursuant to a
Warrant Agreement (the "Viacom Three-Year Warrant Agreement") that will be
entered into between Viacom and Harris Trust and Savings Bank, as Warrant Agent.
The Viacom Five-Year Warrants are being offered pursuant to a Warrant Agreement
(the "Viacom Five-Year Warrant Agreement" and, together with the Viacom
Three-Year Warrant Agreement, the "Viacom Warrant Agreements") that will be
entered into between Viacom and Harris Trust and Savings Bank, as Warrant Agent.
The following summary of certain provisions of the Viacom Warrant Agreements
does not purport to be complete and is subject to and is qualified in its
entirety by reference to the provisions of the Viacom Warrant Agreements,
including the definitions of certain terms therein. A copy of the form of the
Viacom Warrant Agreements, including the form of Viacom Warrant Certificates (as
defined below), is filed as an exhibit to the Registration Statement, to which
this Proxy Statement/Prospectus forms a part.
Each Viacom Three-Year Warrant is evidenced by a warrant certificate (the
"Viacom Three-Year Warrant Certificate") which entitles the warrantholder, at
any time prior to third anniversary of the Paramount Effective Time (the
"Three-Year Expiration Date"), to purchase one share of Viacom Class B Common
Stock at a price (the "Three-Year Exercise Price") of $60 per share, subject to
certain adjustments. Viacom Three-Year Warrants that are not exercised prior to
the Three-Year Expiration Date will expire and become void.
Each Viacom Five-Year Warrant is evidenced by a warrant certificate (the
"Viacom Five-Year Warrant Certificate" and, together with the Viacom Three-Year
Warrant Certificate, the "Viacom Warrant Certificates") which entitles the
warrantholder at any time prior to the fifth anniversary of the Paramount
Effective Time (the "Five-Year Expiration Date" and, together with the
Three-Year Expiration Date, the "Viacom Warrant Expiration Dates"), to purchase
one share of Viacom Class B Common Stock at a price (the "Five-Year Exercise
Price" and, together with the Three-Year Exercise Price, the "Viacom Warrant
Exercise Prices") of $70 per share, subject to certain adjustments. Viacom
Five-Year Warrants that are not exercised prior to the Five-Year Expiration Date
will expire and become void.
The aggregate number of shares of Viacom Class B Common Stock issuable upon
exercise of the Viacom Warrants is equal to 25% of the Viacom Class B Common
Stock to be outstanding after the Paramount Merger and 14% after the Mergers.
Exercise of Viacom Warrants. To exercise all or any of the Viacom Warrants
represented by a Viacom Warrant Certificate, the warrantholder is required to
surrender to the Warrant Agent the Viacom Warrant Certificate, a duly executed
copy of the subscription form set forth in the Viacom Warrant Certificate, and
payment in full of the Viacom Warrant Exercise Price for each share of Viacom
Class B Common Stock as to which a Viacom Warrant is exercised. In the case of
the Viacom
137
<PAGE>
Three-Year Warrants, such payment may be made in cash or by certified
or official bank or bank cashier's check payable to the order of Viacom.
In the case of Viacom Five-Year Warrants, such payment may be made (i) in
cash or by certified or official bank or bank cashier's check payable to the
order of Viacom or (ii) by exchanging, if issued, either Series C Preferred
Stock with a liquidation preference equal to the Five-Year Exercise Price, or
Viacom Exchange Debentures with a principal amount equal to the Five-Year
Exercise Price. Upon the exercise of any Viacom Warrants in accordance with the
Viacom Warrant Agreement, the Viacom Warrant Agent will cause Viacom to transfer
promptly to or upon the written order of the Warrantholder appropriate evidence
of ownership of any shares of Viacom Class B Common Stock, registered or
otherwise placed in such name or names as such warrantholder may direct
in writing, and will deliver such evidence of ownership to the person or
persons entitled to receive the same and an amount in cash, in lieu of any
fractional shares, if any. All shares of Viacom Class B Common Stock issuable by
Viacom upon the exercise of the Viacom Warrants must be validly issued, fully
paid and nonassessable.
Antidilution Provisions. The number of shares of Viacom Class B Common
Stock that may be purchased upon the exercise of each Viacom Warrant, and
payment of the Viacom Warrant Exercise Price, are subject to adjustment in the
event of certain transactions, including Viacom's (a) issuing shares of Viacom
Class B Common Stock as a stock dividend to the holders of Viacom Common Stock,
(b) subdividing or combining the outstanding shares of Viacom Class B Common
Stock into a greater or lesser number of shares, (c) issuing any shares of its
capital stock in a reclassification or reorganization of the Viacom Class B
Common Stock, (d) issuing, selling, distributing or otherwise granting rights to
subscribe for or to purchase warrants or options for the purchase of Viacom
Class B Common Stock or any stock or securities convertible into or exchangeable
for Viacom Class B Common Stock, and (e) issuing, selling or otherwise
distributing certain convertible securities. No fractional shares will be issued
upon exercise of Viacom Warrants, but Viacom will pay the cash value of any
fractional shares otherwise issuable. In case of any consolidation, merger or
sale of all or substantially all of the assets of Viacom in a transaction in
which the holders of Viacom Class B Common Stock immediately prior to such
transaction receive securities, cash or other assets of Viacom (or any other
person), the holder of each outstanding Viacom Warrant shall have the right to
the kind and amount of securities, cash or other assets receivable by a holder
of the number of shares of Viacom Class B Common Stock into which such Viacom
Warrants were exercisable immediately prior thereto.
Trading/Listing. The Viacom Warrants have been approved for listing on the
AMEX, subject to official notice of issuance and stockholder approval. The
Viacom Three-Year Warrants and the Viacom Five-Year Warrants will be traded on
the AMEX under the symbols "VIA.WS.C" and "VIA.WS.E", respectively.
VOTING AND OTHER RIGHTS OF THE VIACOM COMMON STOCK
Voting Rights. Under the Viacom Restated Certificate of Incorporation,
except as noted below or otherwise required by the DGCL, the holders of the
outstanding shares of Viacom Class A Common Stock vote together with the holders
of the outstanding shares of all other classes of capital stock of Viacom
entitled to vote, without regard to class. At the present time, however, there
are no outstanding shares of any other class of capital stock of Viacom entitled
to vote. Each holder of an outstanding share of Viacom Class A Common Stock is
entitled to cast one vote for each such share registered in the name of such
holder. The affirmative vote of the holders of a majority of the outstanding
shares of Viacom Class A Common Stock is necessary to approve any consolidation
or merger of Viacom with or into another corporation pursuant to which shares of
Viacom Class A Common Stock would be converted into or exchanged for any
securities or other consideration.
A holder of an outstanding share of Viacom Class B Common Stock is not
entitled, except as may be required by Delaware law, to vote on any question
presented to the stockholders of Viacom, including both the election of
directors and certain amendments to the Restated Certificate of Incorporation
which might affect Viacom Class B Common Stock or the holders thereof. Under
Delaware law and the
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Viacom Restated Certificate of Incorporation, holders of shares of Viacom
Class B Common Stock are entitled to vote, as a class, only with respect to
any proposed amendment to the Viacom Restated Certificate of Incorporation
which would (i) increase or decrease the par value of a share of Viacom
Class B Common Stock or (ii) alter or change the powers, preferences or special
rights of the shares of Viacom Class B Common Stock so as to affect them
adversely. Any future change in the number of authorized shares of Viacom Class
B Common Stock or any consolidation or merger of Viacom with or into another
corporation pursuant to which shares of Viacom Class B Common Stock would be
converted into or exchanged for any securities or other consideration could be
consummated with the approval of the holders of a majority of the outstanding
shares of Viacom Class A Common Stock and without any action by the holders of
shares of Viacom Class B Common Stock.
Dividends. Subject to the rights and preferences of any outstanding
preferred stock, dividends on Viacom Class A Common Stock and Viacom Class B
Common Stock would be payable out of the funds of Viacom legally available
therefor when, as and if declared by the Viacom Board. However, no dividend may
be paid or set aside for payment and no distribution may be made on either class
of Viacom Common Stock unless at the same time and in respect of the same
declaration date and record date a ratable dividend is paid or set aside for
payment or a distribution is made on the other class of Viacom Common Stock.
Rights in Liquidation. In the event Viacom is liquidated, dissolved or
wound up, whether voluntarily or involuntarily, the net assets of Viacom would
be divided ratably among the holders of the then outstanding shares of Viacom
Class A Common Stock and Viacom Class B Common Stock after payment or provision
for payment of the full preferential amounts to which the holders of any series
of preferred stock of Viacom then issued and outstanding would be entitled.
Split, Subdivision or Combination. If Viacom splits, subdivides or combines
the outstanding shares of Viacom Class A Common Stock or Viacom Class B Common
Stock, the outstanding shares of the other class of Viacom Common Stock shall be
proportionally split, subdivided or combined in the same manner and on the same
basis as the outstanding shares of the other class of Viacom Common Stock have
been split, subdivided or combined.
Preemptive Rights. Shares of Viacom Class A Common Stock and shares of
Viacom Class B Common Stock do not entitle a holder to any preemptive rights
enabling a holder to subscribe for or receive shares of stock of any class or
any other securities convertible into shares of stock of any class of Viacom.
The Viacom Board possesses the power to issue shares of authorized but unissued
Viacom Class A Common Stock and Viacom Class B Common Stock without further
stockholder action, subject, so long as shares of Viacom Class A Common Stock
and Viacom Class B Common Stock are listed on the AMEX, to the requirements of
such exchange. The number of authorized shares of Viacom Class A Common Stock
and Viacom Class B Common Stock could be increased with the approval of the
holders of a majority of the outstanding shares of Viacom Class A Common Stock
and without any action by the holders of shares of Viacom Class B Common Stock.
Trading Market. The outstanding shares of Viacom Class A Common Stock and
Viacom Class B Common Stock are listed for trading on the AMEX. The Registrar
and Transfer Agent for Viacom Common Stock is The First Chicago Trust Company of
New York.
Alien Ownership. The Viacom Restated Certificate of Incorporation provides
that Viacom may prohibit the ownership or voting of a percentage of its equity
securities in order to ensure compliance with the requirements of the
Communications Act.
VIACOM PREFERRED STOCK
The Viacom Board, without further action by the stockholders, is authorized
to issue up to 100 million shares of preferred stock in one or more series and
to designate as to any such series the dividend rate, redemption prices and
terms, preferences on liquidation or dissolution, rights in the event of a
merger, consolidation, distribution or sale of assets, conversion rights, voting
rights and any other powers, preferences, and relative, participating, optional
or other special rights and qualifications,
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limitations or restrictions. The rights of the holders of Viacom Common
Stock will be subject to, and may be adversely affected by, the rights of
the holders of Viacom Preferred Stock and any preferred stock of Viacom
that may be issued in the future. The Viacom Preferred Stock will rank senior
to Viacom Common Stock with respect to dividends and distribution of assets
upon liquidation or winding up. Issuance of a new series of preferred stock,
while providing desirable flexibility in connection with possible acquisitions
or other corporate purposes, could have the effect of making it more difficult
for a third party to acquire, or discouraging a third party from acquiring, a
majority of the outstanding voting stock of Viacom.
Viacom has issued 24 million shares of Series A Preferred Stock to
Blockbuster and 24 million shares of Series B Preferred Stock to NYNEX, both of
which classes have indentical rights and restrictions and rank equally as to
dividends and distribution of assets upon liquidation. Upon consummation of the
Blockbuster Merger, the Series A Preferred Stock owned by Blockbuster will cease
to be outstanding. Pursuant to the Paramount Merger, Viacom is reserving for
issuance a new series of preferred stock, the Series C Preferred Stock. See
"--Series C Preferred Stock."
Holders of shares of Viacom Preferred Stock will be entitled to receive
cumulative cash dividends at the rate per annum of $1.25 per share of Series A
Preferred Stock and $2.50 per share of Series B Preferred Stock, payable
quarterly. So long as any shares of Viacom Preferred Stock are outstanding,
Viacom may not (i) declare or pay any dividend or distribution on any junior
stock of Viacom or (ii) redeem or set apart funds for the purchase or redemption
of any junior stock unless all accrued and unpaid dividends with respect to the
Viacom Preferred Stock have been paid or funds have been set apart for payment
through the current dividend period.
Shares of Viacom Preferred Stock may not be redeemed by Viacom prior to
October 1, 1998, after which date such stock will be redeemable at Viacom's
option for an aggregate redemption price of at least $100 million at declining
redemption prices annually until October 1, 2003. In the event of any
liquidation, dissolution or winding up of Viacom, whether voluntary or
involuntary, holders of shares of Viacom Preferred Stock shall receive $25.00
per share of Series A Preferred Stock and $50 per share of Series B Preferred
Stock plus an amount per share equal to all dividends accrued and unpaid thereon
to the date of final distribution to such holders.
The holders of shares of Viacom Preferred Stock will have no voting rights,
unless dividends payable on Series A Preferred Stock or Series B Preferred Stock
fall in arrears for dividend periods totalling at least 360 days, in which case
the number of directors of Viacom will be increased by two in respect of each
such series and the holders of shares of each such series will have the right to
elect two additional directors to the Viacom Board at Viacom's next annual
meeting of stockholders and at each subsequent annual meeting until all such
dividends have been paid in full.
Changes to Viacom's Restated Certificate of Incorporation which adversely
affect the rights of the holders of Series A Preferred Stock or Series B
Preferred Stock require two-thirds approval of the outstanding shares of such
series. The Certificates of Designation of the Series A Preferred Stock and
Series B Preferred Stock may not be amended without the consent of the purchaser
thereof as long as such outstanding shares are owned in full by Blockbuster or
NYNEX, as the case may be.
Shares of Viacom Preferred Stock will be convertible at any time at the
option of the holders thereof into shares of Viacom Class B Common Stock at a
conversion price of $70 per share of Viacom Class B Common Stock (equivalent to
a conversion rate of 0.3571 shares of Viacom Class B Common Stock for each share
of Series A Preferred Stock and 0.7143 for each share of Series B Preferred
Stock), subject to customary adjustments. Holders of Viacom Preferred Stock will
have no preemptive rights with respect to any shares of Viacom Common Stock or
any other Viacom securities convertible into or carrying rights or options to
purchase any such shares.
SERIES C PREFERRED STOCK
Pursuant to the Paramount Merger and the terms of the Viacom Merger
Debentures, Viacom has reserved for issuance a new series of preferred stock,
the Series C Preferred Stock. If issued, the
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Series C Preferred Stock would be fully paid and nonassessable. The holders
of the Series C Preferred Stock would have no preemptive rights with respect
to any shares of Viacom Common Stock or any other securities of Viacom
convertible into or carrying rights or options to purchase any such shares.
Ranking. If issued, the Series C Preferred Stock would rank senior to the
Viacom Common Stock with respect to dividends and upon liquidation or winding
up. If issued, the Series C Preferred Stock would rank equally with the Series A
Preferred Stock and the Series B Preferred Stock as to dividends and the
distribution of assets upon liquidation or winding up.
Dividends. Holders of shares of Series C Preferred Stock, if issued, would
be entitled to receive, when, as and if declared by the Viacom Board, out of
funds legally available for payment, cumulative cash dividends at the rate per
annum of $2.50 per share until the tenth anniversary of the Paramount Effective
Time, and at the rate per annum of $5.00 per share thereafter. Dividends shall
accrue and be cumulative from the later of the Paramount Effective Time and the
latest date through which interest had been paid on the Viacom Merger
Debentures, whether or not in any dividend period or periods there shall be
funds legally available for the payment of such dividends. Dividends on the
Series C Preferred Stock would be payable quarterly on the first business day of
January, April, July and October of each year, commencing on the first such date
following issuance of the Series C Preferred Stock, or at such additional times
and for such interim periods, if any, as determined by the Viacom Board. Each
such dividend will be payable in arrears to holders of record as they appear on
the stock records of Viacom at the close of business on such record dates, not
exceeding 60 days preceding the payment dates thereof, as shall be fixed by the
Viacom Board. Accrued and unpaid dividends shall accrue interest at the Base
Rate as announced from time to time by Citibank, N.A. The amount of dividends
payable on the Series C Preferred Stock for each full dividend period shall be
computed by dividing the annual dividend rate by four. The amount of dividends
payable for the initial dividend period on the Series C Preferred Stock, or any
other period shorter or longer than a full dividend period shall be computed on
the basis of a 360-day year consisting of twelve 30-day months.
So long as any shares of Series C Preferred Stock are outstanding, no
dividends, except as described below, may be declared or paid or set apart for
payment on any class or series of stock of Viacom ranking, as to dividends, on a
parity with the Series C Preferred Stock, nor shall any such shares be redeemed
or purchased by Viacom or any subsidiary, unless full cumulative dividends on
the Series C Preferred Stock have been declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment. When dividends
are not paid in full or a sum sufficient for such payment is not set apart on
the shares of the Series C Preferred Stock and any other class or series of
stock ranking on a parity as to dividends with the Series C Preferred Stock, all
dividends declared on the Series C Preferred Stock and on such other stock shall
be declared pro rata so that the amounts of dividends per share declared on the
Series C Preferred Stock and on such other stock shall in all cases bear to each
other the same ratio that the accrued dividends per share on the shares of
Series C Preferred Stock and such other stock bear to each other.
So long as any shares of Series C Preferred Stock are outstanding, neither
Viacom nor any subsidiary may (i) declare or pay or set apart for payment any
dividend or other distribution with respect to any junior stock of Viacom or
(ii) redeem or set apart funds for the purchase, redemption or other acquisition
of any junior stock, unless (A) all accrued and unpaid dividends with respect to
the Series C Preferred Stock and any of the stock ranking on a parity with such
stock as to dividends or upon liquidation ("Parity Stock") at the time such
dividends are payable have been paid or funds have been set apart for payment of
such dividends and (B) sufficient funds have been set apart for the payment of
the dividend for the current dividend period with respect to the Series C
Preferred Stock and any Parity Stock.
As used herein, (i) the term "dividend" does not include dividends payable
solely in shares of junior stock on junior stock, or options, warrants or rights
to holders of junior stock to subscribe for or purchase any junior stock, and
(ii) the term "junior stock" means the Viacom Common Stock and any
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other class of capital stock of Viacom now or hereafter issued and outstanding
that ranks junior as to dividends and upon liquidation to the Series C
Preferred Stock.
Redemption. Shares of Series C Preferred Stock may not be redeemed by
Viacom prior to the fifth anniversary of the Paramount Effective Time, after
which date the shares of such stock will be redeemable at the option of Viacom,
in whole or in part, at any time or from time to time, out of funds legally
available therefor, at the redemption prices set forth below, plus in each
case an amount equal to accrued and unpaid dividends, if any, to the
redemption date, whether or not earned or declared.
<TABLE><CAPTION>
REDEMPTION PRICE FOR
IF REDEEMED DURING THE 12-MONTH PERIOD BEGINNING ON THE SERIES C PREFERRED
ANNIVERSARY OF THE PARAMOUNT EFFECTIVE TIME INDICATED BELOW STOCK
- ----------------------------------------------------------------------------------------- -----------------------
<S> <C>
Fifth.................................................................................... $ 52.50
Sixth.................................................................................... $ 52.00
Seventh.................................................................................. $ 51.50
Eighth................................................................................... $ 51.00
Ninth.................................................................................... $ 50.50
Tenth and thereafter..................................................................... $ 50.00
</TABLE>
If fewer than all of the shares of Series C Preferred Stock are to be
redeemed, the shares to be redeemed shall be selected by lot or pro rata or in
some other equitable manner determined by Viacom. If fewer than all the shares
represented by any certificate are redeemed, a new certificate will be issued
representing the unredeemed shares without cost to the holder thereof. No
fractional shares will be issued upon redemption, but an adjustment in cash will
be made in respect of any fraction of an unredeemed share which would otherwise
be issuable.
In the event that full cumulative dividends on the Series C Preferred Stock
and any other class or series of stock ranking, as to dividends, on a parity
with the Series C Preferred Stock have not been paid or declared and set apart
for payment, the Series C Preferred Stock may not be redeemed in part and Viacom
may not purchase or acquire shares of Series C Preferred Stock or such other
stock otherwise than pursuant to a purchase or exchange offer made on the same
terms to all holders of shares of Series C Preferred Stock and such other stock.
On and after the date fixed for redemption, provided that the redemption
price (including any accrued and unpaid dividends to the date fixed for
redemption) has been duly paid or provided for, dividends shall cease to accrue
on the Series C Preferred Stock called for redemption, such shares shall no
longer be deemed to be outstanding and all rights of the holders of such shares
as stockholders of Viacom shall cease except the right to receive from Viacom
the redemption price without interest thereon after the redemption date and any
cash adjustment in lieu of fractional unredeemed shares.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of Viacom, whether voluntary or involuntary, before any payment or
distribution of the assets of Viacom (whether capital or surplus) shall be made
to or set apart for the holders of junior stock, upon liquidation, dissolution
or winding up, the holders of the shares of Series C Preferred Stock shall be
entitled to receive $50.00 per share (the "liquidation preference") plus an
amount equal to all dividends (whether or not earned or declared) accrued and
accumulated and unpaid thereon to the date of final distribution to such
holders; but such holders shall not be entitled to any further payment. If, upon
any liquidation, dissolution or winding up of Viacom, the assets of Viacom, or
proceeds thereof, distributable among the holders of the shares of Series C
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid and liquidation payments on any other shares of stock ranking, as to
liquidation, dissolution or winding up, on a parity with the Series C Preferred
Stock, then such assets, or the proceeds thereof, shall be distributed among the
holders of shares of Series C Preferred Stock and any such other stock ratably
in accordance with the respective amounts which would be payable on such shares
of Series C Preferred Stock and any such other stock if all amounts payable
thereon were paid in full. Neither a consolidation or merger of Viacom with
another corporation nor a sale or transfer of all or substantially all of
Viacom's assets nor a statutory share exchange will be considered a liquidation,
dissolution or winding up, voluntary or involuntary, of Viacom.
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Voting Rights. Except as indicated below, or except as otherwise from time
to time required by applicable law, the holders of shares of Series C Preferred
Stock will have no voting rights.
Whenever dividends payable on Series C Preferred Stock shall be in arrears
for such number of dividend periods which shall in the aggregate contain not
less than 360 days, the number of directors of Viacom will be increased by two
and the holders of Series C Preferred Stock, voting together as a class with
the holders of any other class or series of Parity Stock upon which like
voting rights have been conferred and are exercisable, will have the right to
elect two additional directors to the Viacom Board at Viacom's next annual
meeting of stockholders and at each subsequent annual meeting until all such
dividends on such series have been paid in full. At elections of such directors,
each holder of Series C Preferred Stock shall be entitled to one vote per share.
Upon any termination of the right of the holders of such series to vote for
directors as provided above, the term of office of all directors then in office,
elected by such series, shall terminate immediately.
The approval of two-thirds of the outstanding shares of Series C Preferred
Stock shall be required in order to amend the Restated Certificate of
Incorporation of Viacom to affect materially and adversely the rights,
preferences or voting powers of the holders of such series of stock or to
authorize, create, issue or increase the authorized or issued amount of, any
class of stock having rights senior or superior with respect to dividends and
upon liquidation to such series; provided, however, that any increase in the
amount of authorized preferred stock or the creation and issuance of other
series of preferred stock, or any increase in the amount of authorized shares of
such series or of any other series of preferred stock, in each case ranking on a
parity with or junior to the Series C Preferred Stock with respect to the
payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up, shall not be deemed to materially and adversely
affect such rights, preferences or voting powers.
Exchangeability of Series C Preferred Stock. The Series C Preferred Stock
is exchangeable in whole, or in part, at the option of Viacom, for Viacom
Exchange Debentures on any scheduled dividend payment date beginning on or after
the third anniversary of the Paramount Effective Time. Holders of Series C
Preferred Stock so exchanged will be entitled to receive $50.00 principal amount
of Viacom Exchange Debentures for each share of Series C Preferred Stock held by
such holders at the time of exchange plus an amount per share in cash equal to
all accrued and unpaid dividends thereon to the date of exchange (the "Series C
Exchange Date"). The Viacom Exchange Debentures will be issuable only in
registered form and in denominations of $1,000 and integral multiples thereof.
See "Description of Viacom Debentures." An amount in cash will be paid to
holders for any principal amount otherwise issuable which is less than $1,000.
Viacom will mail written notice of its intention to exchange to each holder of
record of the Series C Preferred Stock not less than 10 nor more than 60 days
prior to the date fixed for exchange.
Upon the Series C Exchange Date, the rights of holders of Series C
Preferred Stock as stockholders of Viacom shall cease (except the right to
receive the Viacom Exchange Debentures, any accrued and unpaid dividends to but
not including the Series C Exchange Date, and any cash adjustment in lieu of any
principal amount less than $1,000) and the shares of Series C Preferred Stock so
exchanged no longer will be deemed outstanding. If full cumulative dividends on
the shares of Series C Preferred Stock to be exchanged have not been paid to the
Series C Exchange Date, or funds set aside to provide for payment in full of the
dividends, Viacom may not exchange the Series C Preferred Stock for the Viacom
Exchange Debentures.
Listing. Viacom has agreed to use its reasonable best efforts to cause the
shares of Series C Preferred Stock to be approved for listing on the AMEX prior
to the issuance thereof.
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DESCRIPTION OF VIACOM DEBENTURES
GENERAL. The Viacom Merger Debentures and the Viacom Exchange Debentures
(collectively, the "Viacom Debentures") will be issued under an Indenture (the
"Indenture"), between Viacom and Harris Trust and Savings Bank, as trustee (the
"Trustee"), which will be subject to and governed by the Trust Indenture Act of
1939, as amended (the "TIA"). The Viacom Debentures will be general unsecured
junior subordinated obligations of Viacom and will be issued in registered form
without coupons in denominations of $1,000 and integral multiples thereof.
As indicated under "Subordination" below, the Viacom Debentures will be
subordinated and subject in right of payment to the prior payment in full of all
Senior Obligations of Viacom.
The following summary of certain provisions of the Indenture and the Viacom
Debentures does not purport to be complete and is subject to and qualified in
its entirety by reference to the Indenture and the Viacom Debentures, including
the definitions therein of terms not defined in this Proxy Statement/Prospectus.
The definitions of certain capitalized terms used in the following summary are
set forth below under "Certain Definitions." A copy of the Indenture, including
the form of the Viacom Merger Debentures and the form of the Viacom Exchange
Debentures, is filed as an exhibit to the Registration Statement, of which this
Proxy Statement/Prospectus forms a part. Section references used in this section
of the Proxy Statement/Prospectus refer to sections of the Indenture.
SUBORDINATION. The payment of the principal of and interest on the Viacom
Debentures is subordinated in right of payment, to the extent set forth in the
Indenture, to the prior payment in full of all Senior Obligations of Viacom, as
that term is defined in the Indenture. (Section 101) By reason of such
subordination, in the event of the insolvency of Viacom, creditors of Viacom who
are not holders of Senior Obligations of Viacom may recover less ratably than
holders of Senior Obligations of Viacom and may recover more or less ratably
than Holders of the Viacom Debentures and Viacom may be unable to make all
payments due under the Viacom Debentures. There are no restrictions in the
Indenture on the amount of Senior Obligations or any other indebtedness that may
be issued by Viacom, and the Viacom Debentures will be subordinated to
substantially all future indebtedness of Viacom and effectively subordinated to
all indebtedness and other liabilities of subsidiaries of Viacom. Upon any
distribution of the assets of Viacom upon any dissolution, winding up,
liquidation, or reorganization of Viacom, the holders of Senior Obligations of
Viacom will be entitled to receive payment in full before holders of the Viacom
Debentures are entitled to receive any payment. (Section 1302)
"Senior Obligations" means with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money, including all
obligations of Viacom under its bank credit facilities, or for the deferred
purchase price of property or services, (ii) all indebtedness of such Person
evidenced by bonds, notes, debentures or other instruments of indebtedness,
including, without limitation, all obligations, contingent or otherwise, of
such Person in connection with any letters of credit and acceptances issued
under letter of credit facilities, acceptance facilities or other similar
facilities, and interest rate contracts, (iii) trade credit arising in the
ordinary course of business and all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (iv) all Capitalized Lease Obligations of such
Person, (v) all Senior Obligations referred to in (but not excluded from)
clause (i), (ii), (iii) or (iv) above of other Persons and all dividends of
other Persons, the payment of which is secured by (or for which the holder of
such Senior Obligations has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person
has not assumed or become liable for the payment of such Senior Obligations,
(vi) all liabilities that such Person has guaranteed or that is otherwise its
legal liability, other than endorsements for collection or deposit, in either
case in the ordinary course of business, or any obligation or liability of
such Person in respect of leasehold interests assigned by such Person to any
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other Person, (vii) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred to in clauses (i)
through (vi) above, unless, in the case of any particular indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such indebtedness shall not be senior in
right of payment to the Viacom Debentures. Notwithstanding the foregoing,
"Senior Obligations" shall not include indebtedness evidenced by the Viacom
Debentures. (Section 101)
If (a) in the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior
Obligations of Viacom beyond any applicable grace period with respect thereto,
or in the event that any nonpayment event of default with respect to any Senior
Obligations of Viacom shall have occurred and be continuing and shall have
resulted in such Senior Obligations becoming or being declared due and payable
prior to the date on which it would otherwise have become due and payable, or
(b) in the event that any other nonpayment event of default with respect to any
Senior Obligations of Viacom shall have occurred and be continuing permitting
the holders of such Senior Obligations (or a trustee on behalf of the holders
thereof) to declare such Senior Obligations due and payable prior to the date on
which it would otherwise have become due and payable, then no payment, direct or
indirect (including any payment which may be payable by reason of the payment of
any other indebtedness of Viacom being subordinated to the payment of the Viacom
Debentures), shall be made by Viacom on account of principal of (or premium, if
any) or interest on the Viacom Debentures or on account of the purchase or
redemption or other acquisition of Viacom Debentures (x) in case of any payment
or nonpayment event of default specified in (a), unless and until (A) such event
of default shall have been cured or waived or shall have ceased to exist or such
acceleration shall have been rescinded or annulled or (B) the Senior Obligations
in respect of which such declaration of acceleration has occurred is discharged,
(y) in case of any nonpayment event of default specified in (b), from the
earlier of the dates Viacom and the Trustee receive written notice of such event
of default from an Agent Bank or any other representative of a holder of Senior
Obligations of Viacom until the earlier of (A) 180 days after such date and (B)
the date, if any, on which the Senior Obligations to which such default relates
are discharged or such default is waived by the holders of such Senior
Obligations or otherwise cured (provided that further written notice relating to
the same Senior Obligations received by Viacom or the Trustee within 12 months
after such receipt shall not be effective for purposes of this clause (y)) or
(z) in case of any payment or nonpayment event of default specified in clause
(a) or (b), as long as any judicial proceeding is pending with respect to such
event. (Section 1303)
If Viacom fails to make any payment on the Viacom Debentures when due or
within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Viacom
Debentures to accelerate the maturity thereof. See "--Events of Default."
As a holding company, Viacom is dependent on dividends or other
intercompany transfers of funds from its subsidiaries to meet its debt service
and other obligations. Claims of creditors of Viacom's subsidiaries, including
trade creditors, will generally have priority as to the assets of such
subsidiaries over the claims of Viacom and the holders of Viacom's indebtedness
and other obligations, including the Viacom Debentures. When issued, the Viacom
Debentures will be subordinate in right of payment to all then existing
indebtedness of Viacom, as shown on its consolidated financial statements,
including the notes thereto, which are incorporated by reference in this
Proxy Statement/Prospectus.
The Viacom Debentures will be effectively subordinated to all indebtedness
and other liabilities, including current liabilities and commitments under
leases, if any, of Viacom's subsidiaries. Any right of Viacom to receive assets
of any of its subsidiaries upon liquidation or reorganization of the subsidiary
(and the consequent right of the holders of the Viacom Debentures to participate
in those assets) will be effectively subordinated to the claims of that
subsidiary's creditors (including trade creditors), except to the extent that
Viacom is itself recognized as a creditor of such subsidiary, in which case the
claims of Viacom would still be subordinated to any security interests in the
assets of such subsidiary and any indebtedness of such subsidiary senior to that
held by Viacom.
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COVENANTS. The Indenture contains covenants of Viacom with respect to the
following matters: (i) payment of principal, premium, if any, and interest
(Section 1001); (ii) maintenance of an office or agency (Section 1002); (iii)
arrangements regarding the handling of money for security payments to be held in
trust (Section 1003); (iv) maintenance of corporate existence (Section 1004);
and (v) provision of compliance certificates. (Section 1005)
EVENTS OF DEFAULT. The following are Events of Default under the Indenture:
(i) default in the payment of any interest on any Viacom Debenture
when it becomes due and payable, and continuance of such default for a
period of 30 days whether or not such payment shall be prohibited by the
subordination provisions of the Indenture; or
(ii) default in the payment of the principal of (or premium, if any,
on) any Viacom Debenture at its Maturity, upon acceleration, redemption or
when otherwise due and payable, whether or not such payment shall be
prohibited by the subordination provisions of the Indenture; or
(iii) default in the payment of any redemption payment on any Viacom
Debenture when it becomes due and payable, and continuance of such default
for a period of 30 days whether or not such payment shall be prohibited by
the subordination provisions of the Indenture; or
(iv) default in the performance, or breach, of any covenant or
warranty of Viacom in the Indenture (other than a default in the
performance, or breach, of a covenant or warranty a default which is
specifically dealt with elsewhere in the Indenture), and continuance of
such default or breach for a period of 60 days after there has been given,
by registered or certified mail, to Viacom and the Agent Bank by the
Trustee or to Viacom, the Trustee and the Agent Bank by the Holders of at
least 25% in principal amount of the Outstanding Viacom Debentures a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under the
Indenture; or
(v) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of Viacom or any Subsidiary of Viacom
in an involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or (B) a decree
or order adjudging Viacom or any such Subsidiary a bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of Viacom or any
such Subsidiary under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of Viacom or any such Subsidiary or of any substantial
part of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days; provided that, in the case of any such Subsidiary, the
entry of such a decree or order shall not constitute an Event of Default
under the Indenture unless the claims of such Subsidiary's creditors shall,
in the aggregate, be in excess of $100 million; or
(vi) the commencement by Viacom or any Subsidiary of Viacom of a
voluntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect of
Viacom or any such Subsidiary in an involuntary case or proceeding under
any applicable federal or state bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or insolvency
case or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable federal or
state law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of Viacom or any such
Subsidiary or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due or
the taking of corporate
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action by Viacom or any such Subsidiary in furtherance of any such action;
provided that, in the case of any such Subsidiary, none of the foregoing
actions shall constitute an Event of Default under the Indenture unless
the claims of such Subsidiary's creditors shall, in the aggregate, be in
excess of $100 million. (Section 501)
If an Event of Default (other than an Event of Default specified in (v) or
(vi) above) occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Viacom
Debentures may, and the Trustee at the request of such Holders shall, declare
due and payable immediately the unpaid principal of (and premium, if any) and
accrued interest in respect of each Viacom Debenture then Outstanding (the
"Default Amount"). Upon any such declaration, the Default Amount shall become
due and payable on all Outstanding Viacom Debentures (i) if no Credit Agreement
is in effect, immediately, or (ii) if any Credit Agreement is in effect, upon
the first to occur of (a) an acceleration under such Credit Agreement and (b)
the fifth business day after receipt by Viacom and by the Agent Bank of written
notice of such declaration unless (in the absence of an acceleration under the
Credit Agreement) on or prior to such fifth business day Viacom shall have
discharged the indebtedness, if any, that is the subject of such Event of
Default or otherwise cured the default relating to such Event of Default and
shall have given written notice of such discharge or cure to the Trustee and the
Agent Bank. Notwithstanding any other provision of the Indenture relating to
acceleration of maturity, rescission and annulment, if an Event of Default
specified in (v) or (vi) above occurs, then the Default Amount on the Viacom
Debentures then Outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. (Section 502)
At any time after such a declaration of acceleration, with respect to
Viacom Debentures has been made and before a judgment or decree for payment of
the money due has been obtained by the Trustee, the Holders of a majority in
principal amount of the Outstanding Viacom Debentures may, under certain
circumstances, rescind or annul such declaration and its consequences if Viacom
(without violating the subordination provisions of the Indenture) has paid or
deposited with the Trustee a sum sufficient to pay all overdue interest and
other required amounts and if all Events of Default, other than the nonpayment
of accelerated principal, premium, if any, and interest, have been cured or
waived as provided in the Indenture. (Section 502) The Holders of not less than
a majority in principal amount of the Viacom Debentures then Outstanding also
have the right to waive any past Default under the Indenture, except a Default
(a) in the payment of principal of, premium, if any, or interest on, any Viacom
Debenture or (b) in respect of any other provision of the Indenture that cannot
be modified or amended without the consent of the Holder of each Outstanding
Viacom Debenture affected thereby. (Section 513)
No Holder of any Viacom Debenture shall have any right to institute any
proceeding with respect to such Indenture, or for the appointment of a receiver
or trustee, or for any remedy thereunder, unless (i) such Holder has previously
given to the Trustee written notice of a continuing Event of Default with
respect to the Viacom Debentures, (ii) the Holders of at least 25% in principal
amount of the Outstanding Viacom Debentures have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
Trustee under the Indenture, (iii) the Trustee for 60 days after its receipt
of such notice, request and offer of indemnity has failed to institute any
such proceeding and (iv) the Trustee has not received from the Holders of a
majority in principal amount of the Outstanding Viacom Debentures during such
60-day period a direction inconsistent with such request. (Section 507) Such
limitations do not apply, however, to a suit instituted by a holder of a
Viacom Debenture for the enforcement of payment of the principal of, premium,
if any, or interest on, such Viacom Debenture on or after the respective due
dates expressed in such Viacom Debenture. (Section 508)
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of
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Default shall occur and be continuing, the Trustee is not under any
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders unless such Holders shall have
offered the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with
such request or direction. (Section 602) Subject to certain provisions
concerning the rights of the Trustee, the Holders of a majority in principal
amount of the Outstanding Viacom Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee under the
Indenture. (Section 512)
Viacom is required to furnish to the Trustee annual statements as to the
performance by Viacom of its obligations under the Indenture. Viacom is also
required, so long as any of the Viacom Debentures are Outstanding, to notify the
Trustee of the occurrence of any default. (Section 1005)
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE. Viacom may, at its option
and at any time, elect to defease and have the obligations of Viacom discharged
with respect to the Outstanding Viacom Debentures ("defeasance"). Such
defeasance means that Viacom shall be deemed to have paid and discharged the
entire indebtedness represented by the outstanding Viacom Debentures and to have
satisfied all other obligations under such Viacom Debentures and the Indenture,
except for (i) the rights of Holders of the Outstanding Viacom Debentures to
receive, solely from the trust fund described below, payments of the principal
of, premium, if any, and interest on such Viacom Debentures when such payments
are due, (ii) Viacom's obligations with respect to such Viacom Debentures
concerning issuing temporary Viacom Debentures, registration of Viacom
Debentures, replacement of mutilated, destroyed, lost or stolen Viacom
Debentures and the maintenance of an office or agency for payment and money for
security payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee under the Indenture, and (iv) the defeasance
provisions of the Indenture. (Section 1202) In addition, Viacom may, at its
option and at any time, elect to have its obligations released with respect to
certain covenants that are described in the Indenture with respect to the
Outstanding Viacom Debentures ("covenant defeasance") and any omission to comply
with such obligations shall not constitute a Default or an Event of Default with
respect to the Viacom Debentures. (Section 1203)
In order to exercise either defeasance or covenant defeasance, (i) Viacom
shall irrevocably deposit with the Trustee, as trust funds in trust for the
purpose of making the following payments, specifically pledged as security for
the benefit of and dedicated solely to the Holders of such Viacom Debentures,
money, U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in such amount as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay and
discharge (a) each installment of the principal of (and premium, if any, on) and
interest on the Outstanding Viacom Debentures to Stated Maturity of each such
installment of principal and interest on the day on which such payments are due
and payable in accordance with the terms of the Indenture and (b) any mandatory
sinking fund payments or analogous payments applicable to the Outstanding Viacom
Debentures on the due dates thereof; (ii) Viacom shall have delivered to the
Trustee an opinion of counsel to the effect that the Holders of the Outstanding
Viacom Debentures will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance or covenant defeasance, as the
case may be, and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance, as the case may be, had not occurred; (iii)
no Default or Event of Default shall have occurred and be continuing on the
date of such deposit or insofar as clauses (v) and (vi) under the first
paragraph under "--Events of Default" is concerned, at any time during the
period ending on the 91st day after the date of deposit or, if longer, ending
on the day following the expiration of the longest preference period applicable
to Viacom in respect of such deposit; (iv) such defeasance or covenant
defeasance shall not result in a breach or violation of, or constitute a
default under, the Indenture or any other agreement or instrument to which
Viacom is a party or by which it is bound; (v) such defeasance or covenant
defeasance shall not (a) cause the Trustee to have a conflicting interest as
defined in TIA Section 310(b) or otherwise for purposes of the TIA with
respect to any securities of Viacom or
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(b) result in the trust arising from such deposit to constitute, unless it is
qualified as, a regulated investment company under the Investment Company Act of
1940, as amended, (vi) such defeasance or covenant defeasance shall not cause
any Viacom Debentures then listed on any registered securities exchange under
the Exchange Act to be delisted, and (vii) Viacom shall have delivered to the
Trustee an officer's certificate and an opinion of counsel, each stating that
all conditions precedent and subsequent provided for relating to either the
defeasance or the covenant defeasance, as the case may be, have been complied
with. (Section 1204)
SATISFACTION AND DISCHARGE. The Indenture will be discharged and will cease
to be of further effect (except as to surviving rights of registration of
transfer or exchange of Viacom Debentures, as expressly provided for in the
Indenture) as to all Outstanding Viacom Debentures issued under the Indenture
when either (i) such Viacom Debentures theretofore authenticated and delivered
(except lost, stolen or destroyed Viacom Debentures which have been replaced or
paid and Viacom Debentures for whose payment money has theretofore been
deposited in trust and thereafter repaid or discharged from such trust as
provided in the Indenture) have been delivered to the Trustee for cancellation
or (ii) all such Viacom Debentures not theretofore delivered to the Trustee for
cancellation have become due and payable, or will become due and payable or are
to be called for redemption within one year, and in the case of (ii), Viacom has
irrevocably deposited or caused to be deposited with the Trustee solely for the
benefit of the Holders of Viacom Debentures money or U.S. Government
Obligations, or a combination thereof, in such amounts as will be sufficient to
pay and discharge the entire indebtedness on such Viacom Debentures for
principal (and premium, if any) and interest to the date of such deposit (if
such Viacom Debentures are then due and payable) or to the applicable maturity
or redemption date (as the case may be), and Viacom has paid all sums payable by
it under the Indenture. In addition, Viacom must deliver to the Trustee an
officer's certificate and an opinion of counsel stating that all conditions
precedent to satisfaction and discharge have been complied with. (Section 401)
CONSOLIDATION, MERGER AND SALE OF ASSETS. The Indenture provides that
Viacom may, without the consent of the Holders of any of the Outstanding
Viacom Debentures, consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to
any corporation, partnership or trust organized under the laws of the United
States of America, any state thereof or the District of Colombia, provided that
(i) the successor Person assumes through a supplemental indenture Viacom's
obligations under the Viacom Debentures and the Indenture, (ii) immediately
after giving pro forma effect to the transaction, there exists no Event of
Default and (iii) Viacom delivers to the Trustee an officer's certificate
regarding compliance with the foregoing. Solely for purposes of this paragraph,
"convey, transfer or lease its properties and assets substantially as an
entirety" shall mean properties and assets contributing in the aggregate at
least 80% of Viacom's total revenues as reported in Viacom's last available
periodic financial report (quarterly or annual, as the case may be) filed with
the Commission. (Section 801)
MODIFICATION OR WAIVER. Modification and amendment of the Indenture may be
made by Viacom and the Trustee with the consent of the Holders of not less than
a majority in principal amount of all Outstanding Viacom Debentures, provided
that no such modification or amendment may, without the consent of the Holder
of each Outstanding Viacom Debenture, among other things: (i) change the
Stated Maturity of the principal of or any installment of principal of or
interest on any Viacom Debenture; (ii) reduce the principal amount or the rate
of interest on, or any premium payable upon the redemption of, any Viacom
Debenture; (iii) impair the right to institute suit for the enforcement of any
such payment after the Stated Maturity thereof or any Redemption Date therefor;
(iv) reduce the above-stated percentage of Holders of Outstanding Viacom
Debentures, as the case may be, necessary to modify or amend the Indenture or
to consent to any waiver thereunder or (v) modify any of the provisions of the
Indenture relating to the subordination of the Viacom Debentures in a manner
adverse to the Holders thereof. (Section 902)
Modification and amendment of the Indenture may be made by Viacom and the
Trustee without the consent of any Holder, for any of the following purposes:
(i) to evidence the succession of another
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Person to Viacom as obligor under the Indenture; (ii) to add to the covenants
of Viacom for the benefit of the Holders or to surrender any right or power
conferred upon Viacom in the Indenture; (iii) to add additional Events of
Default; (iv) to provide for the acceptance of appointment by a successor
Trustee; or (v) to cure any ambiguity, defect or inconsistency in the
Indenture, provided such action does not adversely affect the interest of
Holders in any material respect. (Section 901)
CERTAIN DEFINITIONS. Set forth below is a summary of certain defined terms
used in the Indenture. Reference is made to the Indenture for the full
definition of all such terms, as well as any other capitalized terms used herein
for which no definition is provided.
"Agent Bank" means any agent or agents from time to time under the Credit
Agreement, or any successor or successors thereto.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) real or
personal property that is required to be classified and accounted for as a
capital lease obligation under generally accepted accounting principles, and,
for the purposes of the Indenture, the amount of such obligation at any date
shall be the capitalized amount thereof at such date, determined in accordance
with such principles.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock whether or not outstanding or issued after the date of
the Indenture.
"Credit Agreement" means any credit agreement under which Viacom is a
borrower, in the principal amount of at least $100 million.
"Lien" means any pledge, mortgage, lien, encumbrance or other security
interest.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof, or any other entity.
"Redeemable Capital Stock" means any Capital Stock that either by its
terms, by the terms of any security into which it is convertible or exchangeable
or otherwise, (i) is or upon the happening of an event or passage of time would
be required to be redeemed on or prior to the final Stated Maturity of the
Securities or (ii) is redeemable at the option of the holder thereof at any time
prior to such final Stated Maturity, or (iii) is convertible into or
exchangeable for debt securities at any time prior to such final Stated
Maturity.
"Stated Maturity", when used with respect to any Viacom Debenture or any
installment of principal thereof or interest thereon, means the date specified
in such Viacom Debenture as the fixed date on which the principal of such Viacom
Debenture or such installment of principal or interest is due and payable.
TRADING/LISTING. The Viacom Merger Debentures have been approved for
listing on the AMEX, subject to official notice of issuance and stockholder
approval. The Viacom Merger Debentures will be traded on the AMEX under the
symbol VIA.D.
THE TRUSTEE. Harris Trust and Savings Bank will serve as trustee under the
Indenture.
VIACOM MERGER DEBENTURES. The Viacom Merger Debentures will be limited to
the aggregate principal amount set forth in the Indenture and will mature 12
years from the Paramount Effective Time.
Interest. The Viacom Merger Debentures will bear interest from the
Paramount Effective Time or from the most recent Interest Payment Date to which
interest has been paid, at a rate of 8% per annum, payable semi-annually on
January 15 and July 15 (each an "Interest Payment Date") of each year,
commencing on January 1, 1995, to holders of record at the close of business on
the January 1 and
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July 1 next preceding each Interest Payment Date, except that the initial
record date will be December 15, 1994. Interest will be computed on the basis
of a 360-day year of twelve 30-day months. Payment of the principal of (and
premium, if any, on) and interest on Viacom Merger Debentures will be made
at the office or agency of Viacom maintained for that purpose in The City of New
York, or at such other office or agency of Viacom as may be maintained for such
purpose, in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of Viacom (i) by
check mailed to the address of the Person entitled thereto as such address shall
appear on the Security Register or (ii) by transfer to an account maintained by
the payee located in the United States.
Optional Redemption. The Viacom Merger Debentures may not be redeemed prior
to the fifth anniversary of the Paramount Effective Time. On or after that date,
Viacom may, at its option, redeem the Viacom Merger Debentures, in whole or in
part, from time to time, at the redemption prices (expressed as a percentage of
principal amount) set forth below, together with accrued and unpaid interest, if
any, to the redemption date:
<TABLE><CAPTION>
IF REDEEMED DURING THE 12 MONTH PERIOD BEGINNING ON THE
ANNIVERSARY OF THE PARAMOUNT EFFECTIVE DATE INDICATED BELOW PERCENTAGE
- ------------------------------------------------------------------------------ -------------
<S> <C>
Fifth......................................................................... 103%
Sixth......................................................................... 102%
Seventh....................................................................... 101%
Eighth and thereafter......................................................... 100%
</TABLE>
The Viacom Merger Debentures are not subject to any mandatory redemption
and are not entitled to any sinking fund.
Notice of redemption will be mailed at least 30 days, but not more than 60
days, before the redemption date to each Holder of Viacom Merger Debentures to
be redeemed. (Section 1104) If less than all of the Viacom Merger Debentures are
to be redeemed, the Trustee shall select the Viacom Merger Debentures to be
redeemed by such method that the Trustee considers fair and appropriate,
provided such method complies with the rules of any national securities exchange
or quotation system on which the Viacom Merger Debentures are then listed, and
which may provide for the selection for redemption of portions of the principal
of Viacom Merger Debentures; provided, however, that no such partial redemption
shall reduce the portion of the principal amount of a Viacom Merger Debenture
not redeemed to less than $1,000. (Section 1103)
Exchange for Series C Preferred Stock. Viacom may, at its option, on or
after the earlier of (i) January 1, 1995, but only if the Blockbuster Merger has
not been consummated by such date, and (ii) the acquisition by a third party of
beneficial ownership of a majority of the outstanding voting securities of
Blockbuster, exchange the Viacom Merger Debentures, in whole but not in part,
for shares of Viacom's Series C Preferred Stock. Holders of Viacom Merger
Debentures so exchanged will be entitled to receive one fully paid and
nonassessable share of Series C Preferred Stock for each $50 in principal amount
of Viacom Merger Debentures. At the time of the exchange of the Series C
Preferred Stock for the Viacom Merger Debentures, all accrued and unpaid
interest on the Viacom Merger Debentures will not be paid and the dividends
on the Series C Preferred Stock will be deemed to have accrued from the
later of the Paramount Effective Time and the latest date through which
interest has been paid on the Viacom Merger Debentures. (Section 1401)
VIACOM EXCHANGE DEBENTURES. The Viacom Exchange Debentures will be limited
in aggregate principal amount to an amount equal to the aggregate liquidation
preference of the Series C Preferred Stock exchanged and will mature 20 years
from the Paramount Effective Time.
Interest. The Viacom Exchange Debentures will bear interest from the date
on which the Viacom Exchange Debentures are issued in exchange for the
outstanding shares of Series C Preferred Stock (the "Exchange Date"), payable
semi-annually on January 15 and July 15 (each an "Interest Payment Date") of
each year, commencing on the first such date after the Exchange Date, at the
rate of 5% per
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annum until the tenth anniversary of the Paramount Effective Time and,
thereafter, at the rate of 10% per annum, to holders of record at the close
of business on the January 1 and July 1 next preceding each Interest Payment
Date. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Payment of the principal of (and premium, if any, on) and interest on
Viacom Exchange Debentures will be made at the office or agency of Viacom
maintained for that purpose in The City of New York, or at such other office or
agency of Viacom as may be maintained for such purpose, in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of interest
may be made at the option of Viacom (i) by check mailed to the address of the
Person entitled hereto as such address shall appear on the Security Register or
(ii) by transfer to an account maintained by the payee located in the United
States.
Optional Redemption. The Viacom Exchange Debentures may not be redeemed
prior to the fifth anniversary of the Paramount Effective Time. On or after that
date, Viacom may, at its option, redeem the Viacom Exchange Debentures, in whole
or in part, from time to time, at the redemption prices (expressed as a
percentage of principal amount) set forth below, together with accrued and
unpaid interest, if any, to the redemption date:
<TABLE><CAPTION>
IF REDEEMED DURING THE 12 MONTH PERIOD BEGINNING ON THE
ANNIVERSARY OF THE PARAMOUNT EFFECTIVE DATE INDICATED BELOW PERCENTAGE
- ------------------------------------------------------------------------------ -------------
<S> <C>
Fifth......................................................................... 105%
Sixth......................................................................... 104%
Seventh....................................................................... 103%
Eighth........................................................................ 102%
Ninth......................................................................... 101%
Tenth and thereafter.......................................................... 100%
</TABLE>
The Viacom Exchange Debentures are not subject to any mandatory redemption
and are not entitled to any sinking fund.
Notice of redemption will be mailed at least 30 days, but not more than 60
days, before the redemption date to each Holder of Viacom Exchange Debentures to
be redeemed. (Section 1104) If less than all of the Viacom Exchange Debentures
are to be redeemed, the Trustee shall select the Viacom Exchange Debentures to
be redeemed by such method that the Trustee considers fair and appropriate,
provided such method complies with the rules of any national securities exchange
or quotation system on which the Viacom Exchange Debentures are then listed, and
which may provide for the selection for redemption of portions of the principal
of Viacom Exchange Debentures; provided, however, that no such partial
redemption shall reduce the portion of the principal amount of a Viacom Exchange
Debenture not redeemed to less than $1,000. (Section 1103)
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COMPARISON OF STOCKHOLDER RIGHTS
The following is a summary of material differences between the rights of
holders of Viacom Common Stock and the rights of holders of Paramount Common
Stock. As each of Viacom and Paramount is organized under the laws of Delaware,
these differences arise principally from provisions of the charter and by-laws
of each of Viacom and Paramount, as well as the existence of Paramount's Rights
Agreement.
The following summaries do not purport to be complete statements of the
rights of Viacom stockholders under Viacom's Restated Certificate of
Incorporation and By-laws as compared with the rights of Paramount stockholders
under Paramount's Certificate of Incorporation, By-laws and Rights Agreement or
a complete description of the specific provisions referred to herein. The
identification of specific differences is not meant to indicate that other equal
or more significant differences do not exist. These summaries are qualified in
their entirety by reference to the DGCL and governing corporate instruments of
Viacom and Paramount, to which stockholders are referred. The terms of Viacom's
capital stock are described in greater detail under "Description of Viacom
Capital Stock."
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
Powers and Rights of Viacom Class A Common Stock and Viacom Class B Common
Stock. Except as otherwise expressly provided below, all issued and outstanding
shares of Viacom Class A Common Stock and Viacom Class B Common Stock are
identical and entitle the holders to the same rights and privileges. With
respect to all matters upon which stockholders are entitled to vote, holders of
outstanding shares of Viacom Class A Common Stock vote together with the holders
of any other outstanding shares of capital stock of Viacom entitled to vote,
without regard to class, and every holder of outstanding shares of Viacom Class
A Common Stock is entitled to cast one vote in person or by proxy for each share
of Viacom Class A Common Stock outstanding in such stockholder's name. Except as
otherwise required by the DGCL, the holders of outstanding shares of Viacom
Class B Common Stock are not entitled to any votes upon any questions presented
to stockholders of Viacom.
Paramount Common Stock is not divided into classes and entitles holders
thereof to one vote for each share on each matter upon which stockholders have
the right to vote.
Certain Business Combinations. Viacom's Restated Certificate of
Incorporation and By-laws do not contain any supermajority voting provisions or
any other provisions relating to the approval of business combinations and other
transactions by holders of Viacom Class A Common Stock.
Paramount's Certificate of Incorporation requires the affirmative vote of
80% of the voting power of the then outstanding shares of Voting Stock (as
defined therein) to approve any merger or other Business Combination (as defined
therein), which term includes a merger with an Interested Stockholder or an
Affiliate of an Interested Stockholder (as defined therein), the sale, issuance
or transfer of Paramount's assets or securities to an Interested Stockholder or
an Affiliate of an Interested Stockholder in exchange for cash or securities or
other property with a fair market value of $25 million or more, the adoption of
a plan of liquidation and certain similar extraordinary corporate transactions
which would have the effect of increasing the proportionate interest in
Paramount of an Interested Stockholder or an Affiliate of an Interested
Stockholder, unless (a) the transaction has been approved by a majority of the
Disinterested Directors (as defined therein) or (b) the terms of the Business
Combination and parties thereto satisfy certain specified tests and conditions.
Removal of Directors. Both Viacom's and Paramount's By-laws provide that
any director may be removed with or without cause at any time by the affirmative
vote of the holders of record of a majority of all the issued and outstanding
stock entitled to vote for the election of directors at a special meeting of the
stockholders called for that purpose. Viacom's By-laws also provide that any
director may be removed for cause by the affirmative vote of a majority of the
entire board of directors.
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Amendments of Certificate of Incorporation. Viacom's Restated Certificate
of Incorporation does not contain any supermajority voting provisions for the
amendment thereof. Under the DGCL, unless otherwise specified in a corporation's
Certificate of Incorporation, all amendments to such Certificate of
Incorporation must be approved by the affirmative vote of holders of a majority
of the shares of capital stock entitled to vote thereon, unless a class vote is
required under the DGCL.
Paramount's Certificate of Incorporation provides that the affirmative vote
of the holders of at least 80% of the voting power of all the shares of
Paramount entitled to vote generally in the election of directors, voting
together as a single class, is required to alter, amend or repeal Article XI,
regarding business combinations, or Article XII, regarding the requirement that
the holders of Paramount Common Stock can act only at annual or special
meetings. Paramount reserves the right from time to time to alter, amend or
repeal other provisions of the Paramount Certificate of Incorporation in the
manner prescribed by the DGCL.
SPECIAL MEETINGS OF STOCKHOLDERS; STOCKHOLDER ACTION BY WRITTEN CONSENT
Viacom's By-laws provide that a special meeting of stockholders may be
called by the affirmative vote of a majority of its Board of Directors, the
Chairman of the Board, the Vice Chairman of the Board or the President and shall
be called by the Chairman of the Board, the Vice Chairman of the Board, the
President or Secretary at the request in writing of the holders of record of at
least 50.1% of the aggregate voting power of all outstanding shares of capital
stock of Viacom entitled to vote generally in the election of directors, acting
together as a single class.
Article XII of Paramount's Certificate of Incorporation provides that a
special meeting of stockholders may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of Directors
or by the Chief Executive Officer of Paramount. The affirmative vote of 80% of
the voting power of all the shares of Paramount entitled to vote generally in
the election of directors, voting together as a single class, is required to
alter, amend or repeal Article XII or to adopt any provision inconsistent
therewith.
Viacom's Restated Certificate of Incorporation and By-laws do not set forth
procedures regarding stockholder nomination of directors.
Article III, Section 15 of Paramount's By-laws provides that any
stockholder may nominate candidates for election as directors of Paramount;
provided, however, that not less than 60 days prior to the date of the
anniversary of the annual meeting held in the prior year, in the case of an
annual meeting, or, in the case of a special meeting called for the purpose of
electing directors, not more than 10 days following the earlier of the date of
notice of such special meeting or the date on which a public announcement of
such meeting is made, any stockholder who intends to make a nomination at the
meeting delivers written notice to the Secretary of Paramount setting forth (i)
the name and address of the stockholder who intends to make the nomination and
of the person or persons to be nominated; (ii) a representation that the
stockholder is a holder of record of stock of Paramount specified in such
notice, is or will be entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the notice; (iii) a statement that the nominee (or nominees) is willing to be
nominated; and (iv) such other information concerning each such nominee as would
be required under the rules of the Commission in a proxy statement soliciting
proxies for the election of such nominee and in a Schedule 14B (or other
comparable required filing then in effect) under the Exchange Act.
In addition to any other requirements relating to amendments to Paramount's
By-laws, no proposal by any stockholder to repeal or amend Article III, Section
15 of Paramount's By-laws may be brought before any meeting of the stockholders
of Paramount unless written notice is given of (i) such proposed repeal or the
substance of such proposed amendment; (ii) the name and address of the
stockholder who intends to propose such repeal or amendment; and (iii) a
representation that the stockholder is a holder
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of record of stock of Paramount specified in such notice, is or will be entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to make the proposal. Such notice must be given in the manner and at the
time specified in Article III, Section 15 of Paramount's By-laws.
Viacom's By-laws provide that any action required to be taken at any annual
or special meeting of stockholders of Viacom, or any action which may be taken
at any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by stockholders representing
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of such action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Article XII of Paramount's Certificate of Incorporation prohibits the
holders of Paramount Common Stock from acting by written consent in lieu of a
meeting.
RIGHTS PLANS
Viacom. Viacom does not have a stockholder rights plan.
Paramount. The following is a description of the Rights Agreement. By
unanimous written consent effective March 1, 1994, the Paramount Board approved
an amendment to the Rights Agreement providing that the consummation of the
Offer would not cause the Rights to become exerciseable.
On September 7, 1988, the Board of Directors of Paramount declared a
dividend distribution of one Right for each outstanding share of Paramount's
Common Stock. The distribution was paid as of September 19, 1988 to stockholders
of record on that date. Each Right entitles the registered holder to purchase
from Paramount one share of Paramount Common Stock at a purchase price of $200
per share (the "Purchase Price"). The Paramount Board has also authorized the
issuance of one Right (subject to adjustment) with respect to each share of
Paramount Common Stock that becomes outstanding between September 18, 1988 and
the Distribution Date (as defined below). The following is a description of the
Rights Agreement, as amended, and the Rights issued thereunder.
Until the close of business on the Distribution Date (which date shall not
be deemed to have occurred solely by reason of: (x) the approval, execution or
delivery of the Paramount Merger Agreement, (y) the acquisition of shares of
Paramount Common Stock pursuant to the Offer, as defined in the Paramount Merger
Agreement, or (z) the consummation of the Paramount Merger, as defined in the
Paramount Merger Agreement, which will occur on the earlier of (i) the tenth day
following a public announcement that a person or group of affiliated or
associated persons (each, an "Acquiring Person" (which term shall not include
Viacom or any of its affiliates which would otherwise become Acquiring Persons
solely by reason of: (x) the approval, execution or delivery of the Paramount
Merger Agreement, (y) the acquisition of shares of Paramount Common Stock
pursuant to the Offer, as defined in the Paramount Merger Agreement, or (z) the
consummation of the Paramount Merger, as defined in the Paramount Merger
Agreement)) has acquired, or obtained the right to acquire, beneficial ownership
of 15% or more of the outstanding Paramount Common Stock (the "Stock Acquisition
Date" (which date shall not be deemed to have occurred solely by reason of:
(x) the approval, execution or delivery of the Paramount Merger Agreement, (y)
the acquisition of shares of Paramount Common Stock pursuant to the Offer, as
defined in the Paramount Merger Agreement, or (z) the consummation of the
Paramount Merger, as defined in the Paramount Merger Agreement)) or (ii) a date
fixed by the Board of Directors of Paramount after the commencement of a tender
offer or exchange offer which would result in the ownership of 30% or more of
the outstanding Paramount Common Stock, the Rights will be represented by and
transferred with, and only with, the Paramount Common Stock. Until the
Distribution Date, new certificates issued for Paramount Common Stock after
September 19, 1988 will contain a legend incorporating the Rights Agreement by
reference, and the surrender for transfer of any
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of Paramount's Common Stock certificates will also constitute the transfer of
the Rights associated with Paramount Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
Right certificates will be mailed to holders of record of Paramount Common Stock
as of the close of business on the Distribution Date, and thereafter the
separate certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire at the earliest of (i) the close of business on September 30, 1998, (ii)
the time at which the Rights are redeemed by Paramount as described below and
(iii) immediately prior to the Effective Time of the Paramount Merger.
The Purchase Price payable, and the number of shares of Paramount Common
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of the
Paramount Common Stock, (ii) upon the grant to holders of the Paramount Common
Stock of certain rights or warrants to subscribe for Paramount Common Stock or
convertible securities at less than the current market price of the Common Stock
or (iii) upon the distribution to holders of Paramount Common Stock of evidences
of indebtedness or assets (excluding regular cash dividends and dividends
payable in Paramount Common Stock) or of subscription rights or warrants (other
than those referred to above).
Unless the Rights are earlier redeemed, in the event that, after the Stock
Acquisition Date, Paramount was to be acquired in a merger or other business
combination (in which any shares of Paramount's Common Stock are changed into or
exchanged for other securities or assets) or more than 50% of the assets or
earning power of Paramount and its subsidiaries (taken as a whole) were to be
sold or transferred in one or a series of related transactions, the Rights
Agreement provides that proper provision shall be made so that each holder of
record of a Right will from and after such date have the right to receive, upon
payment of the Purchase Price, that number of shares of common stock of the
acquiring company having a market value at the time of such transaction equal to
two times the Purchase Price.
In the event that any person becomes an Acquiring Person, each holder of a
Right, other than the Acquiring Person, will have the right to receive, upon
payment of the Purchase Price, a number of shares of Paramount Common Stock
having a market value equal to twice the Purchase Price. To the extent that
insufficient shares of Paramount Common Stock are available for the exercise in
full of the Rights, holders of Rights will receive upon exercise shares of
Paramount Common Stock to the extent available and then cash, property or other
securities of Paramount (which may be accompanied by a reduction in the Purchase
Price), in proportions determined by Paramount, so that the aggregate value
received is equal to twice the Purchase Price. Rights are not exercisable
following the Stock Acquisition Date until the expiration of the period during
which the Rights may be redeemed as described below. Notwithstanding the
foregoing, following the Stock Acquisition Date, Rights that are (and, under
certain circumstances, Rights that were) beneficially owned by an Acquiring
Person will be null and void.
No fractional shares of Paramount Common Stock or other Paramount
securities will be issued upon exercise of the Rights and, in lieu thereof, a
payment in cash will be made to the holder of such Rights equal to the same
fraction of the current market value of a share of Paramount Common Stock or
other Paramount securities.
At any time until ten days following the Stock Acquisition Date (subject to
extension by the Board of Directors), the Board of Directors may cause Paramount
to redeem the Rights in whole, but not in part, at a price of $.01 per Right,
subject to adjustment (the "Redemption Price"). Immediately upon the action of
the Board of Directors authorizing redemption of the Rights, the right to
exercise the Rights will terminate, and the holders of Rights will only be
entitled to receive the Redemption Price without any interest thereon.
For as long as the Rights are then redeemable, Paramount may, except with
respect to the Redemption Price or the final date of expiration of the Rights,
amend the Rights in any manner,
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including an amendment to extend the time period in which the Rights may be
redeemed. At any time when the Rights are not then redeemable, Paramount may
amend the Rights in any manner that does not adversely affect the interests of
holders of the Rights as such.
Until a Right is exercised, the holder, as such, will have no rights as a
stockholder of Paramount, including, without limitation, the right to vote or to
receive dividends.
TRANSACTIONS BY CERTAIN PERSONS IN PARAMOUNT COMMON STOCK
Since 60 days prior to the initial filing of the Schedule 13E-3, through
May 31, 1994, none of Sumner M. Redstone, NAI, Viacom or Paramount, any
majority-owned subsidiary thereof, any current director or executive officer
thereof and no pension, profit-sharing or similar plan of Sumner M. Redstone,
NAI, Viacom or Paramount has effected any purchases or sales of Paramount Common
Stock except for (i) the sale of 52,000 shares and 22,600 shares of Paramount
Common Stock by Ronald L. Nelson on March 22, 1994 and May 23, 1994,
respectively and (ii) the sale of 38,608 shares of Paramount Common Stock by
James A. Pattison on March 21, 1994. In addition, none of Sumner M. Redstone,
NAI nor Viacom has purchased any shares of Paramount Common Stock since
March 2, 1994, the day such parties became affiliates of Paramount pursuant to
the Offer. See "Summary--Comparative Stock Prices" for a description of
purchases of shares of Paramount Common Stock by Paramount since
October 31, 1991.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
VIACOM CAPITAL STOCK
Set forth below, as of April 1, 1994 (and without giving effect to the
transactions contemplated by the Mergers), is certain information concerning
beneficial ownership of Viacom Common Stock by (i) each director of Viacom, (ii)
each of the executive officers named below, (iii) all executive officers and
directors of Viacom as a group, and (iv) holders of 5% or more of the
outstanding Viacom Common Stock. The following table excludes shares of Viacom
Class B Common Stock issuable upon conversion of the Viacom Preferred Stock.
<TABLE><CAPTION>
SHARES OF VIACOM COMMON STOCK BENEFICIALLY OWNED
TITLE OF CLASS
OF COMMON NUMBER OF OPTION PERCENT OF
NAME STOCK SHARES SHARES(1) CLASS
- ----------------------------------------------------- -------------- -------------------- --------- -----------
<S> <C> <C> <C> <C>
George S. Abrams..................................... Class A --(2) -- --
Class B 200(2) -- (6)
Frank J. Biondi, Jr.................................. Class A 415(3) 24,000 (6)
Class B 178,318(3)(4) 114,000 (6)
Neil S. Braun........................................ Class A 232(3) 10,000 (6)
Class B 236(3) 46,000 (6)
Philippe P. Dauman................................... Class A 1,000 -- (6)
Class B 8,300 -- (6)
William C. Ferguson.................................. -- -- -- --
John W. Goddard...................................... Class A 4,371(3) 15,000 (6)
Class B 4,377(3) 69,000 (6)
H. Wayne Huizenga.................................... -- -- -- --
Ken Miller........................................... Class A --(2) -- --
Class B --(2) -- --
National Amusements, Inc............................. Class A 45,547,214(5) -- 85.2%
Class B 46,565,414(5) -- 51.7%
Brent D. Redstone.................................... -- -- -- --
Sumner M. Redstone................................... Class A 45,547,294(5) -- 85.2%
Class B 46,565,494(5) -- 51.7%
Frederic V. Salerno.................................. -- -- -- --
William Schwartz..................................... Class A --(2) -- --
Class B --(2) -- --
Mark M. Weinstein.................................... Class A 318(3) 7,500 (6)
Class B 324(3) 34,500 (6)
All Directors and executive officers as a group other
than Mr. Sumner Redstone (22 persons).............. Class A 14,363(3) 76,350 (6)
Class B 200,273(3) 385,839 (6)
</TABLE>
- ---------------
(1) Reflects shares of Viacom Class A Common Stock or Viacom Class B Common
Stock subject to options to purchase such shares which on December 31, 1993
were unexercised but were exercisable within a period of 60 days from that
date. These shares are excluded from the column headed "Number of Shares".
(2) Messrs. Abrams, Miller and Schwartz participate in a Deferred Compensation
Plan in which their directors' fees are converted into stock units. Messrs.
Abrams, Miller and Schwartz have been credited with 3,306, 3,021 and 3,052
Viacom Class A Common Stock units, respectively, and 3,477, 3,164 and 3,196
Viacom Class B Common Stock units, respectively.
(3) Includes shares held through Viacom International's 401(k) plan as of
December 31, 1993.
(4) Includes 177,897 shares held as a result of the accelerated valuation and
payment of Mr. Biondi's Long-Term Incentive Plan phantom shares in December
1992.
(5) Except for 80 shares of each class of such Viacom Common Stock owned
directly by Mr. Redstone, all shares are owned of record by NAI. Mr.
Redstone is the Chairman and the controlling stockholder of NAI and,
accordingly, is shown above as the owner of all such shares.
(6) Less than 1%.
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PARAMOUNT CAPITAL STOCK
The following table sets forth, as of March 31, 1994, the aggregate amount
and percentage of Paramount Common Stock beneficially owned by each current
executive officer and director of Paramount, NAI and Viacom and by certain
pension, profit-sharing and similar plans of Paramount. Any such person whose
name does not appear did not beneficially own any Paramount Common Stock as of
March 31, 1994. The table also sets forth, as of March 31, 1994, the aggregate
amount and percentage of Paramount Common Stock beneficially owned by all
current directors and executive officers, as a group, of each of Paramount, NAI
and Viacom. Except as otherwise indicated, no pension, profit-sharing or similar
plan of Paramount, Sumner M. Redstone, NAI or Viacom owns any Paramount Common
Stock.
SHARES OF PARAMOUNT COMMON STOCK BENEFICIALLY OWNED
<TABLE><CAPTION>
NUMBER OF SHARES
OF PARAMOUNT
COMMON STOCK PERCENT
----------------- -----------
<S> <C> <C>
Martin S. Davis(1)................................................................... 824,379 0.67
Irving R. Fischer.................................................................... 2,413 *
Robert C. Greenberg.................................................................. 54 *
Rudolph L. Hertlein.................................................................. 4,502 *
Lawrence E. Levinson................................................................. 6,747 *
Ronald L. Nelson..................................................................... 86,740 0.07
Donald Oresman(2).................................................................... 1,313,696 1.07
Paramount Employee Stock Ownership Plan.............................................. 365,946 .30
Paramount Employees' Savings Plan.................................................... 568,530 .46
Paramount Long-Term Performance Plan................................................. 64,986 .05
Prentice Hall Computer Publishing Division Retirement Plan........................... 4,255 *
Directors and Executive Officers of Paramount as a group............................. 2,238,531 1.82
Directors and Executive Officers of NAI (other than Sumner M. Redstone) as a group...
Directors and Executive Officers of Viacom (other than Sumner M. Redstone) as a
group..............................................................................
</TABLE>
The above individuals have sole voting and investment power, unless otherwise
indicated. Ownership of less than .01% of Paramount Common Stock is shown by an
asterisk. It has been assumed that all stock options that are exercisable were
exercised.
- ---------------
(1) Includes 42,968 shares owned by a charitable foundation of which he is an
officer and director and 103,454 shares owned by a charitable remainder
trust of which he is a beneficiary.
(2) As a co-trustee, Mr. Oresman shares voting and investment power over 977,592
shares owned by a trust.
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STOCKHOLDERS OWNING MORE THAN 5% OF PARAMOUNT COMMON STOCK(a)
As of March 31, 1994, to the best of Paramount's knowledge, no person
beneficially owned more than five percent of the outstanding Paramount Common
Stock.
- ---------------
(a) Excludes 61,657,432 shares of Paramount Common Stock acquired by Viacom
pursuant to the Offer.
OTHER MATTERS
REGULATORY APPROVALS REQUIRED
FCC Approvals. Paramount (through subsidiaries which it controls) owns and
operates seven broadcast television stations: WKBD (TV) (Detroit), WTXF (TV)
(Philadelphia), KRRT (TV) (Kerrville, TX), WLFL (TV) (Raleigh/Durham), WDCA-(TV)
(Washington, D.C.), KTXA (TV) (Arlington, TX) and KTXH (TV) (Houston). These
stations are subject to FCC regulation under which licenses are granted when and
if the FCC finds the public interest, convenience and necessity will be served
thereby. The FCC is also empowered to modify and revoke such licenses.
Additionally, the Communications Act and FCC Regulations prohibit the
transfer of control of any license, or the assignment of any license, or the
transfer or assignment of any rights arising thereunder, without prior FCC
approval and requires that the FCC find that the proposed transfer or assignment
would serve the public interest, convenience and necessity. The FCC will
consider the applicant's legal, financial, technical and other qualifications to
operate the licensed entities for the transfer to be approved.
Consummation of the Offer resulted in the acquisition of control of
Paramount and thus required prior FCC approval. Such approval was granted on
March 8, 1994, pursuant to an application filed in September 1993 (the
"Application")
Paramount has an approximately 6.4% interest in Combined Broadcasting, Inc.
("Combined"), which owns television stations in Chicago, Philadelphia and Miami.
Because of Paramount's interest in Combined, the combined company will have an
interest in more than the 12 television stations allowed by the FCC's rules. The
combined company has taken the steps necessary to achieve compliance with the
FCC's multiple ownership rules by placing Paramount's existing interest in
Combined into an insulated voting trust, which interest, under FCC rules, is not
considered for purposes of determining compliance with the FCC's multiple
ownership requirements.
Pursuant to a transaction consummated on November 1, 1993, Viacom owns two
AM and two FM stations serving the Washington, D.C. area. The combined company
will therefore own four radio stations and a television station in Washington,
D.C. Pursuant to the FCC order granting the Application, the combined company
has a period of eighteen months following consummation of the Paramount Merger,
in which to divest two of the radio stations (one AM and one FM).
ANTITRUST APPROVALS
Under the HSR Act and the rules promulgated thereunder by the FTC, certain
acquisition transactions may not be consummated unless notice has been given and
certain information has been furnished to the Antitrust Division of the United
States Department of Justice (the "Antitrust Division") and the FTC and
specified waiting period requirements have been satisfied. Viacom and Paramount
each filed with the Antitrust Division and the FTC a Notification and Report
Form with respect to the Original Merger Agreement on September 21, 1993.
Accordingly, the waiting period under the HSR Act applicable to the acquisition
of Paramount and the shares of Paramount Common Stock by Viacom expired on
October 21, 1993. The expiration of the HSR Act waiting period does not preclude
the Antitrust Division or the FTC from challenging the Paramount Merger on
antitrust
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grounds. State Attorneys General and private parties may also bring legal
actions under the federal or state antitrust laws under certain circumstances.
Based upon an examination of information available to Viacom and Paramount
relating to the businesses in which Viacom, Paramount and their respective
subsidiaries are engaged, Viacom and Paramount believe that the consummation of
the Paramount Merger will not violate the antitrust laws.
Competition Act of Canada and Investment Canada Act. Subject to certain
thresholds, Canada's Competition Act requires prenotification to the Director of
Investigation and Research (the "Director") of an acquisition of voting shares
of a corporation that directly or through subsidiaries conducts an operating
business in Canada where the parties to the transaction and their affiliates
have assets in Canada, or annual gross revenues from sales in, from or into
Canada, in excess of C$400 million, and where the corporation whose shares are
being acquired or its affiliates own Canadian assets the value of which exceeds
C$35 million, or the gross revenues from sales in or from Canada generated from
such assets exceeds C$35 million in the last fiscal year (a "Notifiable
Transaction").
If a transaction is a Notifiable Transaction, subject to certain
exemptions, a prescribed filing must be made with the Director, and the
transaction may not be completed prior to the expiration or earlier termination
of the applicable waiting period after such filing has been delivered to the
Director. The relevant waiting period is seven or 21 days, depending on the type
of filing that the acquiror makes with the Director. If the Director determines
that the transaction is likely to lessen competition substantially in any
relevant market, he may attempt to obtain an order preventing the completion or
implementation of the transaction.
Even if a transaction is not a Notifiable Transaction, the Director has the
right, prior to and for a period of up to three years after its implementation,
to review the transaction to determine if it is likely to lessen competition
substantially in any market in Canada. Where the Director concludes that such a
substantial lessening of competition is likely to occur, he may take steps to
prevent the completion of the transaction or to seek other relief (including
divestiture) in respect of a completed transaction.
On October 29, 1993, Viacom made the necessary prenotification filing and
the applicable seven-day waiting period has expired. On November 19, 1993,
Viacom was advised by the Director that based on his review of the information
provided by Paramount and Viacom, he did not intend to challenge the completion
of the transaction (although he may re-examine the matter within a period of
three years following implementation of the transaction).
The Investment Canada Act (the "ICA") requires that notice of the
acquisition of "control" by "non-Canadians" (as defined in the ICA) be furnished
to Investment Canada, a Canadian governmental agency (the "Agency"), and that
certain of these investments to acquire control of a Canadian business be
reviewed and approved by the Minister (as defined in the ICA) as investments
that are "likely to be of net benefit" to Canada based upon criteria set forth
in the ICA. Transactions which involve the acquisition of control of "cultural
business" will be subject to review and approval under the ICA. Some of
Paramount's Canadian businesses are engaged primarily in "cultural businesses"
as defined in the ICA so the acquisition is reviewable. An indirect acquisition
of a corporation in Canada carrying on a Canadian business through the purchase
of voting shares of a corporation incorporated outside of Canada may be
implemented without prior approval but the application for review must be filed
not later than 30 days after the acquisition. Where the Minister does not
approve an acquisition, he shall issue to the investor a notice which will have
the effect of precluding the completion of the acquisition or, if the
acquisition has been implemented, requiring divestiture of the acquisition. On
April 11, 1994, Viacom filed an Application for Review with the Agency in
connection with its purchase of the majority of the outstanding shares of
Paramount Common Stock. The Agency's review of Viacom's Application will not
result in any delay in completion of the Paramount Merger.
Foreign Approvals. In connection with the Paramount Merger, Viacom has made
mandatory pre-acquisition notification filings with the German Federal Cartel
Office on October 29, 1993, and with the Irish Department of Enterprise and
Employment on November 4, 1993, and a voluntary pre-acquisition
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notification filing with the Office of Fair Trading in the United Kingdom on
October 28, 1993. Viacom has been informed in writing by the relevant
governmental authority in each of these jurisdictions that such authority will
take no action against the Paramount Merger. Accordingly, with Viacom having
complied with the relevant pre-merger filing requirements in these
jurisdictions, the laws of such jurisdictions do not prohibit the consummation
of the Paramount Merger. Viacom and Paramount conduct operations in a number of
other foreign countries, some of which have voluntary merger notification
systems. It is recognized that certain filings may not be made and certain
approvals may not be obtained prior to the date of the Paramount Special
Meeting, the Viacom Special Meeting or the Paramount Effective Time in those
countries in which filings or approvals are not as a matter of practice required
to be made or obtained prior to the consummation of a merger transaction. The
failure to make any such filings or to obtain any such approvals is not
anticipated to have a material effect on the Paramount Merger or the combined
company.
STOCKHOLDER LITIGATIONS
On September 13, 1993, four putative class actions were filed in the Court
of Chancery in the State of Delaware on behalf of Paramount stockholders
alleging causes of action arising out of the proposed merger of Viacom and
Paramount: Isquith, et al. v. Paramount Communications Inc., et al., Civ. Action
No. 13117; Tuchman v. Paramount Communications Inc., et al., Civ. Action No.
13119; Segesta, et al. v. Paramount Communications Inc., et al., Civ. Action No.
13120; and Goldberg, et al. v. Davis, et al., Civ. Action No. 13121. Also on
September 13, 1993, two putative class action complaints were filed in New York
Supreme Court, New York County: Rubenstein v. Paramount Communications Inc., et
al., Index No. 93123169; and Tuchman, et al. v. Paramount Communications Inc.,
et al., Index No. 93123202 (the "New York Actions"). On September 14, 1993,
three additional putative class actions were filed in Delaware Chancery Court:
Sonem Partners, Ltd. v. Paramount Communications Inc., et al., Civ. Action No.
13123; Schwartz v. Davis, et al., Civ. Action No. 13124; and Soshtain, et al. v.
Paramount Communications Inc., et al., Civ. Action No. 13126. On September 17,
another putative class complaint was filed in Delaware Chancery Court:
Sorrentino, et al. v. Davis, et al., Civ. Action No. 13133. On September 20,
1993, the Isquith, et al. v. Paramount Communications Inc., et al. complaint was
amended and recaptioned Rubenstein, et al. v. Paramount Communications Inc., et
al. On September 22, 1993 and September 23, 1993, respectively, two more
putative class action complaints were filed in the Delaware Chancery Court:
Hagne v. Davis, et al., Civ. Action No. 13141; and Dwyer v. Davis, et al., Civ.
Action No. 13143. Two additional putative class action complaints were filed in
the Delaware Chancery Court on September 27, 1993: Citron v. Davis et al., Civ.
Action No. 13147; and John P. McCarthy Profit Sharing Plan v. Davis et al., Civ.
Action No. 13148. On September 28, 1993, another putative class action complaint
was filed in Delaware Chancery Court: Sonet, et al. v. Paramount Communications
Inc., et al., Civ. Action No. 13152. The defendants in these actions include
Paramount and certain of its directors and, except for the Dwyer action, Viacom,
and in the Segesta and Soshtain actions and the New York Actions, Sumner
Redstone. The New York Actions also named as a defendant Frank J. Biondi, Jr.,
President and Chief Executive Officer of Viacom. The Dwyer and Sonet actions
erroneously identified defendant James A. Nicholas as a current director of
Paramount. In addition, the New York Actions incorrectly identify defendants
Earl H. Doppelt, Rudolph L. Hertlein, Lawrence E. Levinson, Eugene I. Meyers and
Jerry Sherman (executive officers of Paramount) as Paramount directors. The
stockholder lawsuits alleged substantially similar causes of action for breaches
of fiduciary duty against Paramount and the Paramount Board, and alleged that
Viacom (and in the Segesta and Soshtain actions and the New York Actions, Mr.
Redstone) aided and abetted those breaches of duty. The New York Actions also
alleged that defendant Biondi aided and abetted purported breaches of fiduciary
duties by Paramount's directors. The stockholder actions, except for the Sonet
action, sought inter alia to enjoin the proposed merger of Viacom and Paramount
on the ground that the consideration to be paid was inadequate and unfair and
that the Paramount Board has failed to maximize stockholder value. Certain of
the shareholder actions, including the Sonet action, sought to enjoin the
operation of certain provisions of the Original Merger Agreement and the
Original Stock Option Agreement and also sought to enjoin the operation of the
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Rights Agreement. On September 27, 1993, the Delaware Chancery Court entered an
order consolidating Civ. Action Nos. 13117, 13119, 13120, 13121, 13123, 13124,
13126, 13133, 13141, and 13143 as In re Paramount Communications Inc.
Shareholders Litigation, Consolidated Civ. Action No. 13117. Also on September
27, 1993, all plaintiffs, except for plaintiffs in the Citron, John P. McCarthy
Profit Sharing Plan and Sonet actions and plaintiffs in the New York Actions,
filed a motion for preliminary injunctive relief and also filed a motion for
expedited discovery. On October 23, 1993, the Delaware Chancery Court entered a
supplemental order consolidating Citron v. Davis et al., Civ. Action No. 13147,
and John P. McCarthy Profit Sharing Plan v. Davis et al., Civ. Action No. 13148,
with and into In re Paramount Communications Inc. Shareholders Litigation,
Consolidated Civ. Action No. 13117.
On October 26, 1993, an additional putative class action and derivative
complaint was filed in Delaware Chancery Court on behalf of Paramount
stockholders: B.T.Z. Inc. v. Davis, et al., Civ. Action No. 13219. The
defendants in this case included Paramount and certain of its directors. Viacom
was not named as a defendant. Plaintiffs' derivative cause of action alleged,
inter alia, that demand had not been made on the Paramount Board because of the
circumstances of the case, or alternatively, because demand would be futile.
This lawsuit alleged causes of action for breaches of fiduciary duty against
Paramount and the Paramount Board. In addition, this lawsuit alleged a cause of
action for interference with contract and with prospective advantage on the
ground that the director defendants interfered with the plaintiffs' contractual
and common law rights to sell their shares in lawful transactions and interfered
with plaintiffs' prospective advantage in any such transactions. The action
sought, inter alia, to enjoin the operation of certain provisions of the October
24 Merger Agreement and the Amended Stock Option Agreement to enjoin the
operation of the Rights Agreement and to require that Paramount be auctioned to
the highest bidder. This action was consolidated with and into In re Paramount
Communications Inc. Shareholders Litigation, consolidated Civ. Action No. 13117.
On November 5, 1993, plaintiffs in In re Paramount Communications Inc.
Shareholders Litigation, Consolidated Civ. Action No. 13117, filed a
Consolidated and Amended Class Action Complaint (the "Amended Consolidated
Complaint"), which named Paramount, its directors and Viacom as defendants. The
Amended Consolidated Complaint alleged, inter alia, that Paramount's directors
committed various breaches of their fiduciary duties and that Viacom aided and
abetted those purported breaches. Plaintiffs in the consolidated action sought,
inter alia, an injunction against the operation of the October 24 Merger
Agreement and the Amended Stock Option Agreement on the ground that Paramount's
directors failed to maximize shareholder value, and an order preventing
defendants from consummating a merger with Viacom or from withdrawing measures
such as the Rights Agreement unless Paramount conducted an auction for
Paramount.
The request for injunctive relief raised in these stockholder actions was
addressed by the Delaware courts in conjunction with the QVC litigation, as
described below.
ANTITRUST LITIGATION
On September 23, 1993, Viacom International filed an action in the United
States District Court for the Southern District of New York styled Viacom
International Inc. v. Tele-Communications, Inc., et al., Case No. 93 Civ. 6658,
against Tele-Communications, Inc. ("TCI"), Liberty, Satellite Services, Inc.
("SSI"), Encore Media Corp., Netlink USA, and QVC. The complaint alleges
violations of Sections 1 and 2 of the Sherman Act, Section 7 of the Clayton Act,
Section 12 of the Cable Act, and New York's Donnelly Act, and tortious
interference, against all defendants, and a breach of contract claim against
defendants TCI and SSI only. In addition to other relief, Viacom International
seeks injunctive relief against defendants' anticompetitive conduct, including
enjoining the consummation of QVC's proposed acquisition of Paramount, and
damages in an amount to be determined at trial, including trebled damages and
attorneys' fees under the Sherman and Clayton Acts.
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The 19 claims for relief in the complaint are based on allegations that
defendants, controlled by John C. Malone, exert monopoly power in the U.S. cable
industry through their control over approximately one in four of all cable
households in the United States. Among other things, the complaint alleges that
defendants conspired to force SNI to enter into a merger with a
Malone-controlled pay television service; defendants have attempted to eliminate
The Movie Channel from at least 28 of TCI's systems and have plans to eliminate
The Movie Channel from another 27 such systems; defendants have conspired with
General Instrument Corporation ("GI") to entrench GI's monopoly power in the
markets for digital compression and encryption systems and to use such monopoly
power to weaken and eliminate the defendants' competitors; and TCI's
construction of a central authorization center to illegally control the
distribution of programming services through refusals to deal and denial of
direct access. On November 9, 1993, Viacom International amended its complaint
in Viacom International Inc. v. Tele-Communications, Inc., et al., Case No. 93
Civ. 6658, to add Comcast Corporation as an additional defendant and to
incorporate into the allegations additional anticompetitive activities by the
defendants.
On November 23, 1993, defendants answered the amended complaint and
generally denied the material allegations set forth therein. Thereafter, Viacom
International voluntarily dismissed its claims against QVC and Comcast
Corporation. On April 1, 1994, defendants made a motion for partial summary
judgment dismissing all causes of action relating to QVC's proposed acquisition
of Paramount, on the ground that such causes of action are moot and otherwise
fail to state a claim upon which relief can be granted. On May 16, 1994, Viacom
International submitted an opposition to defendants' motion for partial summary
judgment, and the motion is currently sub judice. The parties are currently
engaged in discovery.
QVC LITIGATION
On October 21, 1993, QVC commenced an action in the Court of Chancery for
the State of Delaware styled QVC Network, Inc. v. Paramount Communications Inc.,
et al., Civ. Action No. 13208. This lawsuit alleged causes of action arising out
of the Original Merger Agreement, the QVC proposal made to the Paramount Board
on September 20, 1993, and the announcement of the First QVC Offer. The suit
alleged various breaches of fiduciary duties against Paramount and certain
members of the Paramount Board, and alleged that Viacom aided and abetted those
breaches of duty.
The suit sought to enjoin: (i) various provisions of the Original Merger
Agreement; (ii) consummation of the merger of Viacom and Paramount; (iii) the
payment of any money or issuance of any stock by Paramount pursuant to the
Original Merger Agreement; (iv) any actions by the Paramount Board designed to
impede a bidding contest for Paramount; and (v) any actions by Viacom intended
to cause Paramount to forgo any transaction other than the merger of Viacom and
Paramount. The suit also sought a declaratory judgment that: (i) various
provisions of the Original Merger Agreement were unlawful; (ii) Paramount's
refusal to negotiate a merger with QVC was a breach of the fiduciary duties of
the directors of Paramount; (iii) any rights purportedly acquired by Viacom
pursuant to the Original Merger Agreement were null and void; and (iv)
consummation of the merger of Viacom and Paramount, as contemplated by the
Original Merger Agreement, was unlawful. In addition, the suit sought rescission
of any transaction consummated pursuant to the Original Merger Agreement prior
to a final judgment of the Chancery Court and damages flowing therefrom.
On October 28, 1993, QVC filed a motion in Delaware Chancery Court for
leave to file a First Amended and Supplemental Complaint to amend and supplement
the QVC Network action. On October 29, 1993, defendants consented to the filing
of this amended complaint, and on that date, the First Amended and Supplemented
Complaint was filed with the court. The named defendants in the First Amended
and Supplemental Complaint were identical to the named defendants in the initial
complaint, with the exception that one named defendant in the initial complaint,
Ronald L. Nelson, was no longer a named defendant. QVC alleged causes of action
for breaches of fiduciary duties against Paramount and the Paramount Board and
alleged that Viacom aided and abetted certain of those
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breaches of duty. The amended complaint alleged one additional breach of
fiduciary duty claim against Paramount and the named directors of Paramount. The
action sought, inter alia, to enjoin any steps to carry out the October 24
Merger Agreement on the ground that certain provisions of the October 24 Merger
Agreement and the Amended Stock Option Agreement were allegedly unlawful and
purportedly were entered into in breach of Paramount's directors' fiduciary
duties. QVC also filed a motion for preliminary injunctive relief. Oral argument
on such motion was heard on November 16, 1993.
On November 24, 1993, the Delaware Court of Chancery issued the Preliminary
Injunction Order (the "Preliminary Injunction Order") sought by QVC and certain
stockholders of Paramount pursuant to which:
(1) Paramount was preliminarily enjoined absent further order of the
Court from amending the Rights Agreement, redeeming the rights under
the Rights Agreement or taking any other action under the Rights
Agreement to facilitate the Second Viacom Offer or the merger of
Viacom and Paramount.
(2) Paramount and Viacom were enjoined from (i) taking any action to
exercise, cash out, enforce, effectuate or consummate any term or
provision of the Amended Stock Option Agreement or (ii) causing
Paramount or its subsidiaries or affiliates to pay money, transfer
assets or issue securities of Paramount to Viacom or any of its
affiliates or subsidiaries other than in the ordinary course of
business or pursuant to the termination fee contemplated by the
Amended Stock Option Agreement.
(3) QVC's motion to enjoin payment of the termination fee contemplated
by the Amended Stock Option Agreement was denied.
In addition to the Preliminary Injunction Order, the Delaware Court of
Chancery issued on November 24, 1993 a separate order certifying an appeal from
the Preliminary Injunction Order to the Supreme Court of the State of Delaware.
On the same day, Paramount and Viacom filed a notice of appeal with respect
to the Preliminary Injunction Order. The Supreme Court of the State of Delaware,
pursuant to an Order dated November 29, 1993, accepted the appeal and scheduled
oral argument on the appeal for December 9, 1993.
On December 9, 1993, the Supreme Court of the State of Delaware issued an
order (the "Order") pursuant to which the Court, among other things: (1)
affirmed the order of the Delaware Chancery Court entered November 24, 1993; and
(2) remanded the proceeding to the Delaware Chancery Court for proceedings
consistent with the Order.
These cases are still pending; however, Viacom believes the issues to be
moot. Lead counsel for the consolidated class actions intend, on consent, to
dismiss the consolidated cases as moot. Viacom has agreed, subject to
documentation and court order, to pay an award of attorneys' fees and
reimbursement of expenses of $7.4 million to the class' counsel. The agreement
to pay the attorneys' fee in no way constitutes an admission, express or
implied, by Viacom that any defendant is subject to any liability for any
violation of law, nor does such agreement constitute an admission of wrongdoing
or actionable conduct on the part of any defendant.
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DISSENTING STOCKHOLDERS' RIGHTS OF APPRAISAL
If the Paramount Merger is consummated, holders of shares of Paramount
Common Stock are entitled to appraisal rights under Section 262 of the DGCL
("Section 262"), provided that they comply with the conditions established by
Section 262.
SECTION 262 IS REPRINTED IN ITS ENTIRETY AS ANNEX V TO THIS PROXY
STATEMENT/PROSPECTUS. THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF
THE LAW RELATING TO APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO ANNEX V. THIS DISCUSSION AND ANNEX V SHOULD BE REVIEWED CAREFULLY
BY ANY HOLDER WHO WISHES TO EXERCISE STATUTORY APPRAISAL RIGHTS OR WHO WISHES TO
PRESERVE THE RIGHT TO DO SO, AS FAILURE TO COMPLY WITH THE PROCEDURES SET FORTH
HEREIN OR THEREIN WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS.
A record holder of shares of Paramount Common Stock who makes the demand
described below with respect to such shares, who continuously is the record
holder of such shares through the Paramount Effective Time, who otherwise
complies with the statutory requirements of Section 262 and who neither votes in
favor of the Paramount Merger Agreement nor consents thereto in writing will be
entitled to an appraisal by the Delaware Court of Chancery (the "Delaware
Court") of the fair value of his or her shares of Paramount Common Stock. All
references in this summary of appraisal rights to a "stockholder" or "holders of
shares of Paramount Common Stock" are to the record holder or holders of shares
of Paramount Common Stock. Except as set forth herein, stockholders of Paramount
will not be entitled to appraisal rights in connection with the Paramount
Merger. Stockholders of Viacom will have no appraisal rights in connection with
the Paramount Merger.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the Paramount Special Meeting, not less than 20
days prior to the meeting, a constituent corporation must notify each of the
holders of its stock for which appraisal rights are available that such
appraisal rights are available and include in each such notice a copy of Section
262. This Proxy Statement/Prospectus shall constitute such notice to the record
holders of Paramount Common Stock.
Holders of shares of Paramount Common Stock who desire to exercise their
appraisal rights must not vote in favor of the Paramount Merger Agreement and
must deliver a separate written demand for appraisal to Paramount prior to the
vote by the stockholders of Paramount on the Paramount Merger Agreement. A
stockholder who signs and returns a proxy without expressly directing by
checking the applicable boxes on the reverse side of the proxy card enclosed
herewith that his or her shares of Paramount Common Stock be voted against the
proposal or that an abstention be registered with respect to his or her shares
of Paramount Common Stock in connection with the proposal will effectively have
thereby waived his or her appraisal rights as to those shares of Paramount
Common Stock because, in the absence of express contrary instructions, such
shares of Paramount Common Stock will be voted in favor of the proposal. See
"The Meetings--Voting of Proxies." Accordingly, a stockholder who desires to
perfect appraisal rights with respect to any of his or her shares of Paramount
Common Stock must, as one of the procedural steps involved in such perfection,
either (i) refrain from executing and returning the enclosed proxy card and from
voting in person in favor of the proposal to approve the Paramount Merger
Agreement, or (ii) check either the "Against" or the "Abstain" box next to the
proposal on such card or affirmatively vote in person against the proposal or
register in person an abstention with respect thereto. A demand for appraisal
must be executed by or on behalf of the stockholder of record and must
reasonably inform Paramount of the identity of the stockholder of record and
that such record stockholder intends thereby to demand appraisal of the
Paramount Common Stock. A person having a beneficial interest in shares of
Paramount Common Stock that are held of record in the name of another person,
such as a broker, fiduciary or other nominee, must act promptly to cause the
record holder to follow the steps summarized herein properly and in a timely
manner to perfect whatever appraisal rights are available. If the shares of
Paramount Common Stock are owned of record by a person other than the beneficial
owner, including a broker, fiduciary (such as a trustee, guardian or custodian)
or other nominee, such demand must be executed by or for the record owner. If
the shares of Paramount Common Stock are owned of record by more than one
person, as in a
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joint tenancy or tenancy in common, such demand must be executed by or for all
joint owners. An authorized agent, including an agent for two or more joint
owners, may execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner and expressly disclose the
fact that, in exercising the demand, such person is acting as agent for the
record owner.
A record owner, such as a broker, fiduciary or other nominee, who holds
shares of Paramount Common Stock as a nominee for others, may exercise appraisal
rights with respect to the shares held for all or less than all beneficial
owners of shares as to which such person is the record owner. In such case, the
written demand must set forth the number of shares covered by such demand. Where
the number of shares is not expressly stated, the demand will be presumed to
cover all shares of Paramount Common Stock outstanding in the name of such
record owner.
A stockholder who elects to exercise appraisal rights should mail or
deliver his or her written demand to: Viacom International Inc., 1515 Broadway,
New York, New York 10036, Attention: Philippe P. Dauman, Secretary.
The written demand for appraisal should specify the stockholder's name and
mailing address, the number of shares of Paramount Common Stock owned, and that
the stockholder is thereby demanding appraisal of his or her shares. A proxy or
vote against the Paramount Merger Agreement will not by itself constitute such a
demand. Within ten days after the Paramount Effective Time, the combined company
must provide notice of the Paramount Effective Time to all stockholders who have
complied with Section 262.
Within 120 days after the Paramount Effective Time, either the combined
company or any stockholder who has complied with the required conditions of
Section 262 may file a petition in the Delaware Court, with a copy served on the
combined company in the case of a petition filed by a stockholder, demanding a
determination of the fair value of the shares of all dissenting stockholders.
There is no present intent on the part of Viacom to file an appraisal petition
and stockholders seeking to exercise appraisal rights should not assume that the
combined company will file such a petition or that the combined company will
initiate any negotiations with respect to the fair value of such shares.
Accordingly, Paramount stockholders who desire to have their shares appraised
should initiate any petitions necessary for the perfection of their appraisal
rights within the time periods and in the manner prescribed in Section 262.
Within 120 days after the Paramount Effective Time, any stockholder who has
theretofore complied with the applicable provisions of Section 262 will be
entitled, upon written request, to receive from the combined company a statement
setting forth the aggregate number of shares of Paramount Common Stock not
voting in favor of the Paramount Merger Agreement and with respect to which
demands for appraisal were received by Paramount and the number of holders of
such shares. Such statement must be mailed within 10 days after the written
request therefor has been received by the combined company.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court will determine which stockholders are entitled to
appraisal rights. The Delaware Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Delaware Court may dismiss
the proceedings as to such stockholder. Where proceedings are not dismissed, the
Delaware Court will appraise the shares of Paramount Common Stock owned by such
stockholders, determining the fair value of such shares exclusive of any element
of value arising from the accomplishment or expectation of the Paramount Merger,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. In determining fair value, the Delaware Court
is to take into account all relevant factors. In Weinberger v. UOP Inc., the
Delaware Supreme Court discussed the factors that could be considered in
determining fair value in an appraisal proceeding, stating that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered, and
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that "fair price obviously requires consideration of all relevant factors
involving the value of a company." The Delaware Supreme Court stated that in
making this determination of fair value the court must consider market value,
asset value, dividends, earnings prospects, the nature of the enterprise and any
other facts which could be ascertained as of the date of the merger which throw
light on future prospects of the merged corporation. In Weinberger, the Delaware
Supreme Court stated that "elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the merger
and not the product of speculation, may be considered." Section 262, however,
provides that fair value is to be "exclusive of any element of value arising
from the accomplishment or expectation of the merger."
Holders of shares of Paramount Common Stock considering seeking appraisal
should recognize that the fair value of their shares determined under Section
262 could be more than, the same as or less than the consideration they are
entitled to receive pursuant to the Paramount Merger Agreement if they do not
seek appraisal of their shares. The cost of the appraisal proceeding may be
determined by the Delaware Court and taxed against the parties as the Delaware
Court deems equitable in the circumstances. Upon application of a dissenting
stockholder of Paramount, the Delaware Court may order that all or a portion of
the expenses incurred by any dissenting stockholder in connection with the
appraisal proceeding, including without limitation, reasonable attorney's fees
and the fees and expenses of experts, be charged pro rata against the value of
all shares of stock entitled to appraisal.
Any holder of shares of Paramount Common Stock who has duly demanded
appraisal in compliance with Section 262 will not, after the Paramount Effective
Time, be entitled to vote for any purpose any shares subject to such demand or
to receive payment of dividends or other distributions on such shares, except
for dividends or distributions payable to stockholders of record at a date prior
to the Paramount Effective Time.
At any time within 60 days after the Paramount Effective Time, any
stockholder will have the right to withdraw such demand for appraisal and to
accept the terms offered in the Paramount Merger; after this period, the
stockholder may withdraw such demand for appraisal only with the consent of the
combined company. If no petition for appraisal is filed with the Delaware Court
within 120 days after the Paramount Effective Time, stockholders' rights to
appraisal shall cease, and all holders of shares of Paramount Common Stock will
be entitled to receive the consideration offered pursuant to the Paramount
Merger Agreement. Inasmuch as the combined company has no obligation to file
such a petition, and Viacom has no present intention to do so, any holder of
shares of Paramount Common Stock who desires such a petition to be filed is
advised to file it on a timely basis. Any stockholder may withdraw such
stockholder's demand for appraisal by delivering to the combined company a
written withdrawal of his or her demand for appraisal and acceptance of the
Paramount Merger, except (i) that any such attempt to withdraw made more than 60
days after the Paramount Effective Time will require written approval of the
combined company and (ii) that no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
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VIACOM ANNUAL MEETING MATTERS
ELECTION OF DIRECTORS
The election of ten directors of Viacom is proposed, each to hold office
for one year and until his successor is elected and qualified. The persons named
in the enclosed Viacom Annual Meeting Proxy Card will vote the shares covered by
each such Proxy for the election of the nominees set forth below, unless
instructed to the contrary. Each nominee is now a member of the Board of
Directors of Viacom. If, for any reason, any of said nominees becomes
unavailable for election, the holders of the Viacom Annual Meeting proxies may
exercise discretion to vote for substitutes proposed by the Board. Management
has no reason to believe that the persons named will be unable to serve if
elected or decline to do so.
Information Concerning Directors and Nominees
Set forth below is certain information concerning each nominee for director
of Viacom. All of the nominees are currently directors of Viacom, Viacom
International and Paramount.
<TABLE><CAPTION>
NOMINEE FOR DIRECTOR* CORPORATION OFFICES AND PRINCIPAL OCCUPATION**
- -------------------------------------------------- --------------------------------------------------------------
<S> <C>
George S. Abrams.................................. Associated with Winer & Abrams, a law firm located in Boston,
Age 61 Massachusetts, for more than five years. Mr. Abrams became a
Director since 1987 director of Paramount in 1994 and NAI in 1992. He is the
former General Counsel and Staff Director of the United
States Senate Judiciary Committee on Refugees. Mr. Abrams is
also a member of the Boards of Trustees and Visiting
Committees of a number of art museums, art-related
organizations and educational institutions.
Frank J. Biondi, Jr............................... President, Chief Executive Officer of Viacom and Viacom
Age 49 International since July 1987 and Paramount since March
Director since 1987 1994. Mr. Biondi became a director of Paramount in 1994.
From November 1986 to July 1987, Mr. Biondi was Chairman,
Chief Executive Officer of Coca-Cola Television and, from
1985, Executive Vice President of the Entertainment Business
Sector of The Coca-Cola Company. Mr. Biondi joined Home Box
Office in 1978 and held various positions there until his
appointment as President, Chief Executive Officer in 1983.
In 1984, he was elected to the additional position of
Chairman and continued to serve in such capacities until
October 1984. Mr. Biondi recently became a director of
Maybelline, Inc.
Philippe P. Dauman................................ Executive Vice President, General Counsel, Chief
Age 40 Administrative Officer and Secretary of Viacom, Viacom
Director since 1987 International and Paramount since March 1994. Mr. Dauman
became a director of Paramount in 1994 and NAI in 1992. From
February 1993 to March 1994, Mr. Dauman served as Senior
Vice President, General Counsel and Secretary of Viacom and
Viacom International. Prior to that, Mr. Dauman was a
partner in the law firm of Shearman & Sterling in New York,
which he joined in 1978.
</TABLE>
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<TABLE>
<S> <C>
William C. Ferguson............................... Chairman of the Board and Chief Executive Officer of NYNEX
Age 63 since October 1989. Mr. Ferguson became a director of
Director since 1993 Paramount in 1994. He served as Vice Chairman of the Board
of NYNEX from 1987 to 1989 and as President and Chief
Executive Officer from June to September 1989. He has served
as a director of NYNEX since 1987. He is also a director of
CPC International, Inc. and General Re Corporation.
H. Wayne Huizenga................................. Chairman of the Board and Chief Executive Officer of
Age 56 Blockbuster since April 1987. Mr. Huizenga became a director
Director since 1993 of Paramount in 1994. He served as President of Blockbuster
from April 1987 until June 1988. He is a co-founder of Waste
Management, Inc. (now WMX Technologies, Inc.), a waste
disposal and collection company, where he served in various
capacities, including President, Chief Operating Officer and
a director, until May 1984. From May 1984 to the present,
Mr. Huizenga has been an investor in other businesses and is
the sole stockholder and Chairman of the Board of Huizenga
Holdings, Inc., a holding and management company with
various business interests. In connection with these
business interests, Mr. Huizenga has been actively involved
in strategic planning for, and executive management of,
these businesses. He also has a majority ownership interest
in Florida Marlins Baseball, Ltd., a Major League Baseball
sports franchise, owns the Florida Panthers Hockey Club,
Ltd., a National Hockey League sports franchise, and has a
limited partnership interest in Miami Dolphins, Ltd. ("Miami
Dolphins"), a National Football League sports franchise, and
an ownership interest in Robbie Stadium Corporation and
certain affiliated entities, which own and operate Joe
Robbie Stadium in South Florida. Mr. Huizenga has entered
into an agreement to purchase the remaining ownership
interest in the Miami Dolphins. He is Chairman of the Board
of Directors of Spelling Entertainment Group Inc. He is also
a director of Discovery Zone, Inc.
Ken Miller........................................ President, Chief Executive Officer of The Lodestar Group, an
Age 51 investment firm, since 1988. Mr. Miller became a director of
Director since 1987 Paramount in 1994. He was Vice Chairman of Merrill Lynch
Capital Markets during 1987 and a Managing Director of
Merrill Lynch Capital Markets for more than the preceding
five years. He is Chairman of the Board of Directors of
Kinder-Care Learning Centers, Inc.
Brent D. Redstone................................. Assistant District Attorney for Suffolk County, Massachusetts
Age 43 from 1976 to October 1991, serving from 1988 through 1991 on
Director since 1991 the Homicide Unit responsible for the investigation and
trial of homicide cases. Mr. Redstone became a director of
Paramount in 1994 and NAI in 1992.
</TABLE>
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<TABLE>
<S> <C>
Sumner M. Redstone................................ Chairman of the Board of Viacom and Viacom International since
Age 69 June 1987 and Paramount since April 1994. He has served as
Director since 1986 Chairman of the Board of NAI since 1986 and President, Chief
Executive Officer of NAI since 1967. Mr. Redstone is the
former Chairman of the Board of the National Association of
Theater Owners and is currently a member of its Executive
Committee. During the Carter Administration, Mr. Redstone
was appointed a member of the Presidential Advisory
Committee on the Arts for the John F. Kennedy Center for the
Performing Arts and, in 1984, he was appointed a Director of
the Kennedy Presidential Library Foundation. Mr. Redstone
has recently accepted a visiting professorship at Brandeis
University. Since 1982, Mr. Redstone has been a member of
the faculty of Boston University Law School, where he has
lectured in entertainment law. Mr. Redstone graduated from
Harvard University in 1944 and received an LL.B. from
Harvard University School of Law in 1947. Upon graduation,
Mr. Redstone served as Law Secretary with the United States
Court of Appeals, and then as a Special Assistant to the
United States Attorney General.
Frederic V. Salerno............................... Vice Chairman--Finance and Business Development of NYNEX since
Age 49 March 1, 1994. Mr. Salerno became a director of Paramount in
Director since 1994 1994. He was Vice Chairman of the Board of NYNEX and
President of the Worldwide Services Group from 1991 to 1994
and President and Chief Executive Officer of New York
Telephone Company from 1987 to 1991. He is also a director
of The Bear Stearns Companies Inc. and Avnet, Inc.
William Schwartz.................................. Vice President for Academic Affairs (the chief academic
Age 59 officer) of Yeshiva University since 1992 and University
Director since 1987 Professor of Law at Yeshiva University and the Cardozo
School of Law since 1991. Mr. Schwartz became a director of
Paramount in 1994. He has been of Counsel to Cadwalader,
Wickersham & Taft since 1988. Mr. Schwartz was Dean of the
Boston University School of Law from 1980 to 1988, a
professor of law at Boston University from 1955 to 1991 and
Director of the Feder Center for Estate Planning at Boston
University School of Law from 1988 to 1991. He has served as
Chairman of the Board of Directors of UST Corporation since
1993. He previously served as Vice Chairman of UST
Corporation since 1985 and has been a director of UST
Corporation for more than five years. Mr. Schwartz is a
trustee of several educational and charitable organizations
and an honorary member of the National College of Probate
Judges. He served as Chairman of the Boston Mayor's Special
Commission on Police Procedures and was formerly a member of
the Legal Advisory Board of the NYSE.
</TABLE>
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* Brent Redstone is the son of Sumner Redstone. None of the other nominees for
director is related to any other director or executive officer of Viacom,
Viacom International or Paramount by blood, marriage or adoption.
** NAI, Paramount and Viacom International are affiliates of Viacom. None of the
other corporations or organizations indicated herein is a parent, subsidiary
or other affiliate of Viacom.
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Meetings and Committees of the Viacom Board of Directors
During 1993, the Viacom Board of Directors held nine (9) regular meetings
and seven (7) special meetings.
Set forth below is certain information concerning the standing committees
of the Board of Directors (1).
<TABLE><CAPTION>
NUMBER OF
MEETINGS
COMMITTEE MEMBERS OF COMMITTEE DURING 1993
- ------------------------------------ ------------------------------------------------------------- -------------------
<S> <C> <C>
Audit Committee..................... Messrs. Abrams*, Ferguson,** Huizenga,** Miller, Salerno,** 3
and Schwartz
Compensation Committee.............. Messrs. Abrams, Ferguson,** Huizenga,** Miller, Brent 9
Redstone, Sumner Redstone,* Salerno,** and Schwartz
</TABLE>
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* Chairman of the Committee
** Messrs. Huizenga, Ferguson and Salerno became members of the Audit and
Compensation Committees when they were appointed to the Boards of Directors
of Viacom and Viacom International on October 22, 1993, November 19, 1993
and January 27, 1994, respectively.
NOTE:
(1) Viacom does not currently have a Nominating Committee.
The functions of the Audit Committee include reviewing with the independent
auditors the plans and results of the annual audit, approving the audit and
non-audit services by such auditors, reviewing the scope and results of Viacom's
internal auditing procedures, reviewing the adequacy of Viacom's system of
internal accounting controls and reviewing the annual financial statements
prepared for release to stockholders and the public. The functions of the
Compensation Committee include reviewing the salaries and bonuses of employees
earning over a specified amount. In addition, the Committee reviews and approves
participation in, and administers, the Senior Executive STIP and the long-term
incentive compensation plans.
RELATED TRANSACTIONS
For a description of certain related transactions, see "Special
Factors--Paramount Voting Agreement", "Sale of Viacom Preferred Stock" and "The
Blockbuster Merger--Certain Transactions Between Viacom and Blockbuster and
With Their Stockholders."
Viacom, Viacom International and NAI entered into a tax sharing agreement
governing the filing of consolidated federal tax returns in 1987. This agreement
required that Viacom and/or the Viacom International pay NAI to the extent they
would have paid Federal income taxes on a separate company basis and entitled
them to receive payments from NAI to the extent losses and credits reduced NAI's
federal income taxes. This agreement was in effect for periods ending on or
before June 10, 1991, when NAI's percentage ownership of Viacom Common Stock was
reduced to less than 80% on a combined basis. For periods commencing on or after
June 11, 1991, Viacom and Viacom International have not filed consolidated
federal tax returns with NAI.
Philippe P. Dauman, a director and Executive Vice President, General
Counsel, Chief Administrative Officer and Secretary of Viacom, Viacom
International and Paramount, became an executive officer of Viacom and Viacom
International on February 1, 1993. Prior to that, he was a partner with the law
firm of Shearman & Sterling, which has previously performed and is currently
performing legal services for Viacom and its subsidiaries.
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DIRECTORS' COMPENSATION
Directors of Viacom and Viacom International who are not officers or
employees of Viacom, Viacom International or NAI or members of their immediate
family ("Outside Directors") are entitled to receive the directors' fees and are
eligible to participate in Viacom International's retirement plans described
below. Messrs. Abrams, Miller and Schwartz were Outside Directors for the entire
1993 calendar year. Mr. Dauman was an Outside Director until January 31, 1993.
Messrs. Huizenga, Ferguson and Salerno became Outside Directors on October 22,
1993, November 20, 1993 and January 27, 1994, respectively. In 1993, only
Outside Directors received any compensation for services as a director.
Directors' Fees. Outside Directors received the following fees for the
first quarter of 1993: (i) a combined quarterly fee of $6,000 for membership on
the Boards of Directors of Viacom and Viacom International, and (ii) a per
meeting attendance fee of $1,000 for each Board meeting, $500 for each Audit
Committee meeting and $500 for each Compensation Committee meeting (except that
only one Board attendance fee is payable when both Boards meet on the same day
and only one Audit Committee or Compensation Committee attendance fee is payable
when the corresponding committees of both Boards meet on the same day).
Effective April 1, 1993, the fees for Outside Directors were increased as
follows: (i) a combined quarterly fee of $7,500 for membership on both Boards,
(ii) a per meeting attendance fee of $1,500 for each Board meeting (the $500 per
meeting attendance fee for each Audit or Compensation Committee remained
unchanged), and (iii) a $7,500 annual retainer fee for the Chairman of the Audit
Committee (currently Mr. Abrams). Compensation for Messrs. Huizenga and
Ferguson's services as Outside Directors for 1993 was paid to Blockbuster and
NYNEX, respectively.
Deferred Compensation Plan. In 1989, Viacom International established an
unfunded Deferred Compensation Plan permitting participating Outside Directors
to defer payment of all of their membership and attendance fees. A participant
can elect to have deferred fees credited to an account which shall either accrue
interest or be deemed invested in a number of stock units equal to the number of
shares of Viacom Common Stock the amount of such fees would have purchased at
such time. Since 1989, Messrs. Abrams, Miller and Schwartz have elected to have
their fees credited to their stock unit accounts. The Plan permits participants
to elect to have amounts credited to a participant's account paid in a lump sum
or in three or five annual installments seven months after the director's
retirement, with the value of the stock units determined by reference to the
fair market values of the Viacom Class A Common Stock and Viacom Class B Common
Stock at that time and, if the participant had elected installment payments,
credited with interest until payment had been made in full. For 1993, the stock
unit accounts of Messrs. Abrams, Miller and Schwartz were credited with 607, 516
and 499 Viacom Class A Common Stock units, respectively, and 648, 552 and 534
Viacom Class B Common Stock units, respectively.
Retirement Income Plan. In 1989, Viacom International established an
unfunded, non-qualified Retirement Income Plan pursuant to which each Outside
Director will receive annual payments commencing on such director's retirement
equal to 100% of the amount of the annual Board membership fees at the time of
such retirement, provided he has served on the Boards of both companies for at
least three years. The Plan provides that the director or his estate will
receive such annual payments for the number of years of such director's service
on the Boards (with current Outside Directors receiving credit for their years
of service on the Boards of Viacom and Viacom International prior to 1989). Mr.
Dauman, who ceased to be an Outside Director in February 1993, will receive
payments under this Plan for the period that he was an Outside Director when he
retires from the Board.
Outside Directors' Stock Option Plan. In 1993, the Viacom Board of
Directors (with Outside Directors Messrs. Abrams, Miller and Schwartz
abstaining) adopted the Outside Directors' Plan, subject to the approval of such
Plan by the stockholders of Viacom at the Annual Meeting. For a description of
such Plan and terms of the one-time grants of stock options thereunder to the
Outside Directors, see "Approval of the Viacom Stock Option Plan for Outside
Directors" below.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Abrams, Miller, Sumner Redstone, Brent Redstone and Schwartz were
members of the Compensation Committee for the entire 1993 calendar year. Mr.
Dauman resigned from the Compensation Committee when he became Senior Vice
President, General Counsel and Secretary of Viacom and Viacom International on
February 1, 1993. Prior to that, he was a partner with the law firm of Shearman
& Sterling. Messrs. Huizenga, Ferguson and Salerno became members of the
Compensation Committee when they joined the Boards of Directors of Viacom and
Viacom International on October 22, 1993, November 20, 1993 and January 27,
1994, respectively. Messrs. Korff and Magner resigned from the Compensation
Committee on March 15, 1994 when they resigned from the Boards of Directors of
Viacom and Viacom International and Mr. Korff resigned from his position as a
Viacom Senior Vice President. Mr. Korff's position as an officer had been purely
nominal since he did not have any responsibilities or authority as a Viacom
officer and had never received any compensation for such office since Viacom was
formed. Mr. Korff had never been eligible to participate in any of Viacom's
benefit and incentive plans, including, without limitation, the plans
administered by the Compensation Committee.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
All members of the Compensation Committee are non-employee directors. The
members include Mr. Sumner Redstone, the controlling stockholder of Viacom. The
Committee reviews and, with any changes it believes appropriate, approves
Viacom's executive compensation. Independent compensation consultants have
advised the Committee with respect to the long-term incentive compensation plans
since 1987.
The objectives of the executive compensation package for Viacom's executive
officers are to:
-- Set levels of base salary and annual bonus compensation that will
attract and retain superior executives in the highly competitive
environment of media companies;
-- Provide annual bonus compensation for executive officers that varies
directly with Viacom's financial performance and, in the case of
executive officers with divisional responsibilities, also with the
financial performance of their respective divisions, and, in addition,
reflects the executive officer's individual contribution to that
performance; and
-- Provide long-term incentive compensation that is tied to Viacom's stock
price so as to focus the attention of executives on managing Viacom from
the perspective of an owner with an equity stake.
Viacom has just completed an historic transaction in the acquisition of
Paramount. It is therefore more crucial than ever that Viacom attract and retain
executives with broad media-based experience. The Committee's goal is to develop
a compensation package that enables Viacom to accomplish this.
In that connection, the Committee evaluates the competitiveness of its
executive compensation packages based on information from a variety of sources,
including information supplied by consultants and information obtained from the
media or from Viacom's own experience. The Committee also focuses on executive
compensation offered by the members of the peer group included in the
Performance Graph* set forth below. At times, the Committee also evaluates
compensation at a broader range of companies whether or not included in the peer
group that have particular lines of business comparable to those of Viacom.
- ---------------
* As a result of the Paramount Merger and the anticipated Blockbuster Merger, it
is likely that the composition of the peer group included in the Performance
Graph will be reviewed and adjusted for subsequent years.
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While the Committee evaluates this information and has generally attempted
to peg overall compensation to the median to 75th percentile level (with base
salaries generally being pegged to the median level and annual bonus
compensation to the 75th percentile level), it ultimately determines the
appropriate compensation for each position based on the requirements and
characteristics of that position and the knowledge, skills and abilities of the
executive. For Viacom's executive officers as a whole and for Mr. Biondi
specifically, the Committee believes that it has achieved its goal of providing
overall 1993 compensation, and the base salary and annual bonus components, at
the median to 75th percentile level.
Executive Compensation
Executive compensation is comprised of base salary, annual bonus
compensation and long-term incentive compensation in the form of stock options
and phantom share awards. Long-term incentive compensation for executive
officers with divisional responsibilities has also included performance share
awards tied to divisional performance.
Base Salaries
Base salary levels for executive officers are consistent with competitive
practice and level of responsibility. Base salary levels for the more senior
executive officers are generally set forth in the executives' employment
contracts and increases in their base salary in 1993 were generally made in
accordance with their contracts. Increases in base salary in 1993 for other
senior executives were set consistent with the considerations discussed above
with respect to base salary levels and increases were within the range of
percentages by which the salaries of other senior executives at that level
increased. The employment contracts for Mr. Biondi and the other four named
executive officers are described under "--Employment Contracts".
Incentive Compensation
Limits to Tax Deductibility of Executive Compensation
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code of 1986, as amended, generally limiting to $1,000,000 the
federal tax deductibility of compensation (including stock options) paid to
Viacom's Chief Executive Officer and the four most highly compensated officers,
other than the Chief Executive Officer, starting with the 1994 calendar year.
The tax law change includes an exception to the deduction limitation for
performance-based compensation (including stock-based compensation, such as
stock options), provided such compensation meets certain requirements, including
stockholder approval. The Senior Executive STIP and the New LTMIP have been
designed to comply with this exception. The Senior Executive STIP will provide
objective performance-based annual bonuses for selected executive officers of
Viacom, subject to a maximum limit, starting with the 1994 calendar year.
Long-term incentive compensation for Viacom's executive officers will be
provided under the New LTMIP starting with the 1994 calendar year, primarily
through grants of stock options. The Viacom Board of Directors has adopted, and
is recommending that the stockholders approve, the Senior Executive STIP and the
New LTMIP. Viacom does not expect compensation paid to Viacom's Chief Executive
Officer and the other four most highly compensated officers for 1994 to exceed
the Section 162(m) deductibility limit because of the anticipated stockholder
approval of the Senior Executive STIP and the New LTMIP, the effect of the
"grandfathering" provisions of the tax laws and the deferral of a portion (not
in excess of 15%) of annual cash compensation under Viacom International's
401(k) and excess 401(k) plans. For a description of the Senior Executive STIP
and the New LTMIP, see "--Approval of the Viacom Inc. Senior Executive
Short-Term Incentive Plan" and "--Approval of the Viacom Inc. 1994 Long-Term
Management Incentive Plan" below.
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Annual Bonus Compensation
Annual bonus compensation for Viacom's executive officers from 1989 through
1993 was provided under Viacom International's Short-Term Incentive Plan (the
"STIP"). During each of those calendar years, target levels of annual operating
income and cash flow were established for Viacom as a whole and for each of its
divisions and subsidiaries. Operating income is defined as revenues less
operating expenses (other than depreciation and amortization); cash flow is
defined as operating income (as defined) less cash capital expenditures and
increases or decreases in working capital and in other balance sheet
investments. Historically, the operating income and cash flow goals have
generally been given equal weight. Additional targets have also been established
for specific divisions and subsidiaries. For 1993, operating income and cash
flow goals were given equal weight for Viacom as a whole and were generally
given equal weight for its divisions and subsidiaries.
The level of achievement of the applicable corporate or divisional goals
determined the aggregate amounts available for funding awards for corporate or
divisional executives; the amounts were subject to upward or downward adjustment
pursuant to a mathematical formula based on the level of achievement and could
exceed 100% of targeted amounts. The aggregate amount available for funding
annual bonuses for executive officers with exclusive corporate responsibilities
was based exclusively on achievement of Viacom's annual financial targets. For
executive officers with divisional responsibilities, most (approximately 80%) of
their annual bonuses (including 1993 bonuses) was based on the aggregate amounts
available for annual bonuses for their particular divisions, which was
determined by the level of achievement of the applicable divisional targets; the
remaining 20% was based on the aggregate amount available for annual bonuses for
corporate executives.
The Committee approved a specific target bonus for each executive officer
which was expressed as a percentage of his salary. These targets are included in
the executive officers' employment contracts and for the named executive
officers other than Mr. Biondi are described under "--Employment Contracts".
At the beginning of each calendar year, the executive officers were
assigned individual goals for that year. The goals for executive officers with
divisional responsibilities tended to parallel the applicable divisional goals.
At the end of each calendar year, an assessment was made of each executive
officer's individual performance. If the officer had achieved 100% of his
individual goals, he would receive an award of 100% of his target bonus,
assuming the applicable corporate and/or divisional targets had been fully
achieved. Thus, since the applicable individual and corporate and/or divisional
targets for 1991 and 1992 were both fully met or exceeded, each of the named
executives received at least 100% of their target bonus for those years. The
applicable individual and corporate targets and the targets of each division,
other than the Cable Division, were also fully met or exceeded for 1993 and each
of the named executives, other that Mr. Goddard, received at least 100% of their
target bonus for 1993. In addition, each of such executives also received a
special bonus in recognition of their outstanding personal contributions to such
achievement, as well as their special efforts to effect the Paramount Merger.
Mr. Goddard's 1993 annual bonus reflected the Cable Division's less than 100%
achievement of its targets.
Long-Term Incentive Compensation
The Committee believes that the use of equity-based long-term incentive
plans directly links executive interests to enhancing stockholder value.
Viacom's first long-term incentive program was provided under the Viacom
Inc. Long-Term Incentive Plan ("LTIP"), established in 1987 after Viacom
International was acquired by NAI. The LTIP was developed with the assistance of
Towers Perrin, an independent consultant. Since it was crucial to the success of
Viacom that it attract and retain the services of experienced executives, the
Committee awarded a single substantial grant of phantom shares to Viacom's
executive officers as of August 1987. The size of the grant to each executive
was within the range assigned to the executive's
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relative level of responsibility. Payment for most LTIP phantom shares was
accelerated and made in December 1992. The reasons for the acceleration and the
operation of the LTIP are described in more detail below.
Most subsequent long-term incentive compensation for Viacom's executive
officers has been provided under the five (5) year Viacom Inc. 1989 Long-Term
Management Incentive Plan (the "LTMIP") through annual stock option grants. The
LTMIP was also developed with the assistance of Towers Perrin.
Payments for phantom shares granted under the LTIP was based on the amount
by which the fair market value of the Viacom Common Stock as of certain
valuation dates exceeded the initial value of the phantom shares on the date of
grant, subject to a $31.23 per share payment limit. These phantom shares had an
average initial value of $19.50. In 1990, Viacom issued a share of Viacom Class
B Common Stock for each share of Viacom Class A Common Stock then outstanding.
As adjusted by the Committee for this stock split, the value of each phantom
share was determined by reference to the combined fair market values of a share
of Viacom Class A Common Stock and a share of Viacom Class B Common Stock. The
first valuation date was December 15, 1992 for 25% of the grant, although a
portion of these phantom shares were valued as of December 15, 1990. The second
valuation date was December 15, 1993 for another 25% and the final valuation
date is December 15, 1994 for the remaining 50%. These phantom shares vested
over the three year period from 1987 through 1990.
Subsequent minor grants of LTIP phantom shares were made with initial
values set at the fair market value of the Viacom Common Stock at the time of
grant.
On December 17, 1992, the Committee approved the acceleration of the
valuation and payment to active employees, including Viacom's executive
officers, of the LTIP phantom shares granted as of August 1987 that would
otherwise be valued and paid after the December 15, 1993 and December 15, 1994
valuation dates. Payment for these phantom shares was made in December 1992 at
the same time that payment was made for the LTIP phantom shares with a December
15, 1992 valuation date. The Committee took this action, in part, to preserve
individual and corporate tax benefits which might be lost in the future if
certain announced tax law changes were enacted. The Committee also took this
action because these phantom shares had already reached the $31.23 per share
payment limit, thereby reducing their value as incentives to enhancing
stockholder value, and because the remaining valuation and payment dates (i.e.,
December 15, 1993 and December 15, 1994) were more than six or seven years after
the original grant. For a description of the acceleration of the valuation and
payment of Mr. Biondi's LTIP phantom shares, see "--Chief Executive Officer's
Compensation" below.
Under the LTMIP, the Committee awarded annual grants of stock options for
Viacom Class B Common Stock to Viacom's executive officers for the years 1990,
1991, 1992 and 1993. The Committee also awarded Mr. Dauman a special one-time
grant of 60,000 stock options for Viacom Class B Common Stock as of February 1,
1993 when he became an executive officer of Viacom and Viacom International. The
exercise price of all of these stock options was set at the fair market value of
the Viacom Class B Common Stock at the time of grant. The grant awarded by the
Committee for 1989 consisted of a combination of stock options and phantom
shares. Included in Messrs. Biondi, Braun, Goddard and Weinstein's 1989 grant
were certain stock options conditioned upon their becoming available from
forfeitures by other participants in the LTMIP. After the 1990 stock split, the
Committee adjusted the phantom shares granted in 1989 in the same manner that it
adjusted the LTIP phantom shares and each stock option granted in 1989 became
exercisable for a share of Viacom Class A Common Stock and a share of Viacom
Class B Common Stock. All of the stock options granted under the LTMIP are
ten-year non-qualified options that become fully exercisable four years after
the grant.
The pattern for determining awards to Viacom's executive officers under the
LTMIP was essentially consistent with the pattern developed for the the LTIP
except that (i) each of the five awards to these officers for the 1989 through
1993 period was approximately one-fifth of the size of the 1987 LTIP grants to
executives at their level and (ii) an effort was made to reduce the difference
between the grants
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at the divisional Chairman level and the grants at the divisional President
level. The 1993 LTMIP awards were generally consistent with the pattern
described above. The amounts therefore reflected the amounts of outstanding
awards, as adjusted for promotions. In addition, from time to time, in
determining the amount of the LTMIP awards, special note was taken of either a
unique competitive situation or extraordinary individual contributions which had
already occurred or were expected in the future. Mr. Dauman's initial LTMIP
grant was thus intended in part, to attract him to Viacom and based, in part, in
recognition of his extraordinary services to Viacom before he became an
executive officer of Viacom.
In 1993, the Viacom Inc. Long-Term Incentive Plan (Divisional) (the
"Divisional LTIP") was adopted by the Committee. The Divisional LTIP was
developed with the assistance of Frederic W. Cook & Co., Inc. to provide
long-term compensation for divisional executives based on the performance of
their respective divisions. The Divisional LTIP is designed to provide
divisional executives with annual grants of performance shares that vest after
three years. Long-term financial and strategic goals are established by the
Committee for each division or subsidiary at the time the performance shares are
granted. The amount payable for the performance shares is based on the
achievement during the three years of those goals, with the amounts payable
varying directly with the level of achievement. Amounts are payable if certain,
though not all, of the goals are achieved provided certain minimum levels are
achieved.
The first grant of performance shares under the Divisional LTIP was made in
June 1993 with respect to the three year period that commenced January 1, 1993.
The financial goals included the attainment of specified levels of cumulative
operating income and average return on net assets employed. In addition,
strategic targets were established for specific divisions and subsidiaries. The
Committee established the amounts and terms of these grants. Executive officers
with divisional responsibilities such as Messrs. Braun and Goddard received a
grant under the Divisional LTIP for the three year period that commenced January
1, 1993. The 1992 and 1993 LTMIP grants to these executives were reduced to
reflect their participation in the Divisional Plan. It is expected that long-
term compensation for 1994 and subsequent years for executive officers with
divisional responsibilities will be awarded under the New LTMIP and not under
the Divisional LTIP.
Chief Executive Officer's Compensation
Mr. Biondi's compensation package was negotiated in 1987 when he became
President, Chief Executive Officer of Viacom and Viacom International. It
included his initial base salary and 10% annual rate of increase, his guaranteed
annual bonus compensation and a grant of 240,000 LTIP phantom shares. His
employment contract is more fully described under "--Employment Contracts".
Mr. Biondi's salary increased during 1993 by the stipulated 10%. His 1993
annual bonus reflected full achievement of Viacom's operating income and cash
flow goals for the year. In addition, he received a special bonus in recognition
of his outstanding personal contribution to that achievement, as well as his
special efforts to effect the Paramount Merger. Mr. Biondi's 1993 stock option
award under the LTMIP is consistent with the overall program and is shown in the
Summary Compensation Table.
As part of the Committee's approval of the accelerated valuation and
payment of the LTIP phantom shares discussed above, the Committee approved the
December 1992 payment of Mr. Biondi's LTIP phantom shares with December 15, 1993
and December 15, 1994 valuation dates. Payment was made in shares of Viacom
Class B Common Stock with the number of shares based on the fair market value of
the Viacom Class B Common Stock on December 17, 1992. The Committee determined
that payment to Mr. Biondi in stock, rather than cash, was preferable because
Mr. Biondi's LTIP phantom shares, unlike those of other employees, were not
subject to the $31.23 per share payment limit, and the payment in stock would
allow him to continue to benefit from, and would further link his interests to,
increases in stockholder value. As a result of the foregoing, Mr. Biondi
recognized taxable income and Viacom International recognized a corresponding
deduction, of $10,263,600, of which $3,370,053 was withheld as taxes and the
remainder paid as 177,897 shares of Viacom Class B Common Stock, all of
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which have been retained by Mr. Biondi. Mr. Biondi also received a cash payment
in December 1992 in the amount of $3,421,200 for his LTIP phantom shares with a
December 15, 1992 valuation date.
Sumner M. Redstone, Chairman
George S. Abrams
Philippe P. Dauman*
William C. Ferguson
H. Wayne Huizenga
Ira A. Korff**
Jerome Magner**
Ken Miller
Brent D. Redstone
Frederic V. Salerno***
William Schwartz
Members of the Compensation Committee
- ---------------
* Mr. Dauman resigned from the Compensation Committee on February 1, 1993 when
he became an executive officer of Viacom and Viacom International.
** Messrs. Korff and Magner resigned on March 15, 1994 when they resigned from
the Boards of Directors of Viacom and Viacom International.
*** Mr. Salerno became a member of the Compensation Committee when he became a
director of Viacom and Viacom International on January 27, 1994.
179
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE><CAPTION>
LONG-TERM COMPENSATION
-------------------------
AWARDS
----------
NAME AND PRINCIPAL ANNUAL COMPENSATION(1) SECURITIES PAYOUTS
POSITION AT -------------------------- UNDERLYING ------------- ALL OTHER
END OF FISCAL 1993 YEAR SALARY BONUS OPTIONS(2) LTIP PAYOUTS COMPENSATION(3)
- ---------------------------------- --------- ------------ ------------ ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Frank J. Biondi, Jr. ............. 1993 $ 1,010,904 $ 1,600,000 90,000 0 $ 65,180
President, Chief Executive 1992 922,045 1,000,000 90,000 $ 13,684,800(4) 46,032
Officer of Viacom and Viacom 1991 835,151 900,000 90,000 0 --
International
Neil S. Braun..................... 1993 $ 552,115 $ 450,000 30,000 $ 39,038 $ 24,788
Senior Vice President of Viacom 1992 456,130 375,000 30,000 2,037,485(5) 16,275
and Viacom International; 1991 414,087 320,000 36,000 0 --
Chairman, Chief Executive
Officer of the Viacom
Entertainment Group*
Philippe P. Dauman................ 1993 $ 553,846 $ 900,000 120,000*** 0 0
Senior Vice President, General
Counsel and Secretary of Viacom
and Viacom International**
John W. Goddard................... 1993 $ 562,154 $ 500,000 40,500 0 $ 26,500
Senior Vice President of Viacom 1992 513,923 764,664 40,500 $ 4,028,670(5) 32,362
and Viacom International; 1991 474,228 708,000 54,000 0 --
President, Chief Executive
Officer of the Viacom Cable
Television Division
Mark M. Weinstein................. 1993 $ 493,039 $ 450,000 30,000 0 $ 23,538
Senior Vice President, 1992 368,538 225,000 30,000 $ 2,014,335(5) 15,118
Government Affairs of Viacom and 1991 337,038 300,000 27,000 0 --
Viacom International
</TABLE>
- ---------------
<TABLE>
<S> <C>
* On March 17, 1994, Mr. Braun relinquished his responsibilities as Chairman, Chief Executive Officer of the
Viacom Entertainment Group. Mr. Braun has informed Viacom that he intends to resign as an executive officer
of Viacom and Viacom International effective June 30, 1994.
** On March 15, 1994, Mr. Dauman became Executive Vice President, General Counsel, Chief Administrative Officer
and Secretary of Viacom and Viacom International.
*** Mr. Dauman received two grants in 1993: a special one-time grant of 60,000 options for Viacom Class B Common
Stock as of February 1, 1993 when he joined Viacom and a regular grant of 60,000 options for Viacom Class B
Common Stock as of August 1, 1993. See Option Grant Table below.
</TABLE>
NOTES:
(1) For 1993, salary and bonus includes compensation deferred under Viacom
International's 401(k) and excess 401(k) plans for Mr. Biondi in the amount
of $253,285, for Mr. Braun in the amount of $150,000, for Mr. Goddard in the
amount of $53,000 and for Mr. Weinstein in the amount of $47,044.
(2) In addition, conditions relating to certain options granted in 1989 were met
as follows: for Mr. Biondi for 834 options in 1993, 373 options in 1992 and
1,189 options in 1991; for Mr. Braun for 334 options in 1993, 149 options in
1992 and 475 options in 1991; for Mr. Goddard for 667 options in 1993, 299
options in 1992 and 951 options in 1991; and for Mr. Weinstein for 334
options in 1993, 149 options in 1992 and 475 options in 1991. These options
are more fully described above in the "Compensation Committee Report on
Executive Compensation".
(3) Includes the following: Viacom International's matching contributions under
its 401(k) plan for Mr. Biondi of $4,497 for 1993 and $3,491 for 1992; for
Mr. Braun of $1,375 for 1993 and $1,374 for 1992; and for each of Messrs.
Goddard and Weinstein of $4,497 for 1993 and $4,364 for 1992; and credits
for
(Footnotes continued on following page)
180
<PAGE>
(Footnotes continued from preceding page)
Viacom International's matching contributions under its excess 401(k) plan
for Mr. Biondi of $60,682 for 1993 and $42,541 for 1992; for Mr. Braun of
$23,413 for 1993 and $14,901 for 1992; for Mr. Goddard of $22,003 for 1993
and $27,998 for 1992; and for Mr. Weinstein of $19,041 for 1993 and $10,754
for 1992. Disclosure regarding these items is not required for calendar year
1991.
(4) Consists of: $3,421,200 paid in cash for Mr. Biondi's LTIP phantom shares
with a December 1992 valuation date; and 177,897 shares of Viacom Class B
Common Stock valued on December 17, 1992 and $3,370,053 which was withheld
as taxes for his LTIP phantom shares for which the valuation and payment was
accelerated. Mr. Biondi's LTIP payout is more fully described above in the
"Compensation Committee Report on Executive Compensation".
(5) Represents substantially all amounts payable with respect to the LTIP
phantom shares granted to the named executives. Includes payment for the
LTIP phantom shares with a December 1992 valuation date, as well as the
accelerated payment of the LTIP phantom shares with future valuation dates.
The amount payable for their LTIP phantom shares was the $31.23 per share
payment limit (except for certain minor grants made after 1987). The LTIP
payouts are more fully described above in the "Compensation Committee Report
on Executive Compensation".
OPTION GRANTS IN FISCAL 1993
The following Option Grant Table includes columns designated "Potential
Realizable Gain". The calculations in those columns are based on hypothetical 5%
and 10% growth assumptions proposed by the Securities and Exchange Commission.
There is no way to anticipate what the actual growth rate of the Viacom Class B
Common Stock will be.
<TABLE><CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS GAIN AT ASSUMED ANNUAL
---------------------------------------------------------- RATES OF STOCK PRICE
NUMBER OF SHARES % OF TOTAL APPRECIATION FOR OPTION
OF VIACOM CLASS B OPTIONS TERM COMPOUNDED
COMMON STOCK GRANTED TO EXERCISE ANNUALLY(1)
UNDERLYING EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME OPTIONS FISCAL 1993 ($/SHARE) DATE 5% 10%
- ------------------------------------ ----------------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Frank J. Biondi, Jr. ............... 90,000(2) 10.74% $ 55 1/4 7/31/2003 $ 3,127,180 $ 7,924,885
Neil S. Braun....................... 30,000(2) 3.58% 55 1/4 7/31/2003 1,042,395 2,641,630
Philippe P. Dauman.................. 60,000(3) 7.16% 43 1/4 1/31/2003 2,084,785 5,283,255
60,000(2) 7.16% 55 1/4 7/31/2003 1,631,980 4,135,760
John W. Goddard..................... 40,500(2) 4.83% 55 1/4 7/31/2003 1,407,230 3,566,200
Mark M. Weinstein................... 30,000(2) 3.58% 55 1/4 7/31/2003 1,042,395 2,641,628
</TABLE>
- ---------------
NOTES:
(1) The total potential gain for all five named executives over the ten year
term of the options listed in the table would be 37/100 of one percent of
the total gain in the Viacom Class B Common Stock value. If the Viacom Class
B Common Stock value were to appreciate 5% over the ten year term of the
options, the value of all shares of Viacom Class B Common Stock owned by
Viacom's stockholders would grow from $3.7 billion to $6.1 billion, a gain
of $2.4 billion. If it were to appreciate 10%, the value of all outstanding
shares of Viacom Class B Common Stock would grow from $3.7 billion to $9.7
billion, a gain of $6 billion.
(2) These options, which were granted as of August 1, 1993, will vest in
one-third increments on August 1, 1995, August 1, 1996 and August 1, 1997.
In addition, conditions relating to certain options granted in 1989 were met
in 1993 as follows: for Mr. Biondi for 834 options; for Mr. Braun for 334
options; for Mr. Goddard for 667 options; and for Mr. Weinstein for 334
options. These options are more fully described above in the "Compensation
Committee Report on Executive Compensation".
(3) These options, which were granted to Mr. Dauman as of February 1, 1993 when
he joined Viacom will vest in one-third increments on August 1, 1994, August
1, 1995 and August 1, 1996. These options are more fully described above in
the "Compensation Committee Report on Executive Compensation".
181
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1993
AND VALUE OF OPTIONS AT END OF FISCAL 1993
<TABLE><CAPTION>
NUMBER OF SECURITIES(1)
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT END OF IN-THE-MONEY OPTIONS AT
SHARES FISCAL 1993 END OF FISCAL 1993
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED EXERCISABLE NONEXERCISABLE EXERCISABLE NONEXERCISABLE
- ------------------------------------- ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank J. Biondi, Jr. ................ -0- -0- 138,000 270,000 $ 2,770,500 $ 2,823,750
Neil S. Braun........................ -0- -0- 56,000 96,000 1,122,500 1,051,500
Philippe P. Dauman................... -0- -0- 0 120,000 0 97,500
John W. Goddard...................... -0- -0- 84,000 135,000 1,683,750 1,518,750
Mark M. Weinstein.................... -0- -0- 42,000 87,000 841,875 886,125
</TABLE>
- ---------------
NOTE:
(1) Options listed below are for shares of Viacom Class B Common Stock except
that exercisable options include for Mr. Biondi 24,000 options each for a
share of Viacom Class A Common Stock and a share of Viacom Class B Common
Stock, for Mr. Braun 10,000 of such options, for Mr. Goddard 15,000 of such
options and for Mr. Weinstein 7,500 of such options; the aggregate number of
exercisable options includes two underlying securities for each of these
options.
LONG-TERM INCENTIVE PLANS
AWARDS IN FISCAL 1993
<TABLE><CAPTION>
NUMBER OF ESTIMATED FUTURE PAYOUTS
PERFORMANCE PERFORMANCE PERIOD ------------------------------------------
NAME SHARES UNTIL MATURATION(1) THRESHOLD TARGET(2) MAXIMUM(3)
- --------------------------------------- ------------- -------------------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
Frank J. Biondi, Jr. .................. 0 -- -- -- --
Neil S. Braun.......................... 6,875(4) 1/1/93-12/31/95 $ 24,062.50 -- --
Philippe P. Dauman..................... 0 -- -- -- --
John W. Goddard........................ 5,600(5) 1/1/93-12/31/95 (5) -- --
Mark M. Weinstein...................... 0 -- -- -- --
</TABLE>
- ---------------
NOTES:
(1) These performance shares vest at the end of the three-year performance
period. They are more fully described above in the "Compensation Committee
Report on Executive Compensation".
(2) The value of the performance shares will be determined by reference to the
performance criteria.
(3) There is no maximum since the value of the performance shares can increase
without limit pursuant to the formula established under the performance
criteria.
(4) The performance criteria for determining the value of Mr. Braun's shares was
based 50% on measuring Viacom Entertainment's cumulative operating income
over the three-year period and 50% on the achievement during the three-year
period of certain performance criteria which were targeted as key items in
executing Viacom Entertainment's strategic plan.
(5) The performance criteria applicable to Mr. Goddard's performance shares is
being adjusted by the Compensation Committee to reflect regulatory changes
applicable to the Viacom Cable Division.
182
<PAGE>
PENSION PLAN TABLE
<TABLE><CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------------------------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 50,000....................................... $ 9,546 $ 12,728 $ 15,911 $ 18,297 $ 20,684
100,000......................................... 20,796 27,728 34,661 39,860 45,059
200,000......................................... 43,296 57,728 72,161 82,985 93,809
300,000......................................... 65,796 87,728 109,661 126,110 142,559
400,000......................................... 88,296 117,728 147,161 169,235 191,309
500,000......................................... 110,796 147,728 184,661 212,360 240,059
600,000......................................... 133,296 177,728 222,161 255,485 288,809
700,000......................................... 155,796 207,728 259,661 298,610 337,559
800,000......................................... 178,296 237,728 297,161 341,735 386,309
900,000......................................... 200,796 267,728 334,661 384,860 435,059
1,000,000....................................... 223,296 297,728 372,161 427,985 483,809
1,100,000....................................... 245,796 327,728 409,661 471,110 532,559
1,200,000....................................... 268,296 357,728 447,161 514,235 581,309
1,300,000....................................... 290,796 387,728 484,661 557,360 630,059
</TABLE>
Under the Viacom Pension Plan, and the Viacom Excess Pension Plan for
certain higher compensated employees, an eligible employee will receive a
benefit at retirement that is based upon the employee's number of years of
benefit service and average annual salary (salary as set forth in the Summary
Compensation Table) for the highest 60 consecutive months out of the final 120
months. The benefits under the Viacom Excess Pension Plan are not subject to the
Internal Revenue Code provisions that limit the compensation subject to benefits
under the Viacom Pension Plan. The number of years of benefit service that have
been credited for Messrs. Biondi, Braun, Goddard and Weinstein are approximately
6.6, 5, 27 and 8, respectively. Mr. Dauman has been credited with one year of
service under the Viacom Pension Plan; however, the benefits payable under the
Viacom Excess Pension Plan shall be calculated as though he had ten years of
credited service. The foregoing table illustrates, for representative average
annual pensionable compensation and years of benefit service classifications,
the annual retirement benefit payable to employees under the Plans upon
retirement in 1993 at age 65, based on the straight-life annuity form of benefit
payment and not subject to deduction or offset.
183
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Viacom Class A Common Stock and, as of June 18, 1990, the Viacom Class B Common
Stock with the cumulative total return on the companies listed in the Standard &
Poor's 500 Stock Index and a Peer Group* of companies (identified below). The
total return data was obtained from Standard & Poor's Compustat Services, Inc.,
which first reported trading activity for the Viacom Class B Common Stock on
June 18, 1990.
VIACOM COMMON STOCK
CUMULATIVE TOTAL STOCKHOLDERS RETURN FOR
FIVE-YEAR PERIOD ENDED DECEMBER 31, 1993
December 31... 1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
VIACOM CLASS A 100.00 184.74 166.78 217.61 279.56 310.54
VIACOM CLASS B 159.33 220.80 270.94 290.35
S&P 500 100.00 131.59 127.49 166.17 178.81 196.75
PEER GROUP 100.00 135.32 101.66 131.76 167.40 243.51
Effective June 13, 1990, one share of Viacom Class B Common Stock was
issued for each share of Viacom Class A Common Stock then outstanding. The
Viacom Class B Common Stock has rights, privileges, restrictions and
qualifications identical to the Viacom Class A Common Stock except that shares
of Viacom Class B Common Stock have no voting rights other than those required
by law. As of April 1, 1994, NAI owned 45,547,214 shares or 85.2% of the Viacom
Class A Common Stock and 45,565,414 shares or 51.7% of the Viacom Class B Common
Stock. Sumner M. Redstone, the controlling stockholder of NAI, is the Chairman
of the Board of Viacom, Viacom International and Paramount.
The performance graph assumes $100 invested on December 31, 1988 in each of
the Viacom Class A Common Stock, the S&P 500 Index, and the Peer Group*,
including reinvestment of dividends, through the fiscal year ended December 31,
1993. The cumulative total stockholder return on the Viacom Class B Common Stock
assumes the investment in Viacom Class B Common Stock as of June 18, 1990 (the
first date on which the Viacom Class B Common Stock was publicly traded) of an
amount equal to the cumulative total stockholder return on the Viacom Class A
Common Stock as of that date ($176.31).
- ---------------
* The Peer Group consists of the following companies: BHC Communications, Inc.;
Cablevision Systems Corp.; Capital Cities/ABC, Inc.; CBS Inc.; Comcast;
Gaylord Entertainment Co.; King World Productions Inc.; Liberty Media;
Multimedia, Inc.; Paramount; Spelling Entertainment; Tele-Communications,
Inc.; The News Corp. Ltd. (ADRs); Time Warner Inc.; and Turner Broadcasting
System Inc. As a result of the Paramount Merger and the anticipated
Blockbuster Merger, it is likely that the composition of the peer group
included in the Performance Graph will be reviewed and adjusted for subsequent
years.
184
<PAGE>
EMPLOYMENT CONTRACTS
It is expected that a new employment contract will be entered into shortly
with Mr. Biondi to reflect his new responsibilities as a result of the Paramount
Merger as the President, Chief Executive Officer of Viacom. Mr. Biondi's current
contract provides that he will be employed as President, Chief Executive Officer
of Viacom International until July 31, 1995 at a base salary of $966,000 for the
contract year that ended July 31, 1993 and $1,063,000 for the following contract
year, with an increase for the last annual period of not less that 10%. His
current contract also provides that he would receive guaranteed bonus
compensation for the contract year that ended July 31, 1993 of not less than
$465,850, with 10% annual increases for the two succeeding contract years. Mr.
Biondi's current contract provides that, in the event of a change in control of
Viacom or Viacom International, he can terminate his contract upon the earlier
of one year after the change in control or the last day of the term of his
contract and receive his guaranteed bonus compensation for the contract year in
which termination occurs pro-rated to the date of termination. Viacom
International's obligations under this contract are guaranteed by Viacom.
Mr. Braun's contract currently provides that he will be employed as an
executive of Viacom International until December 31, 1995, at a base salary of
$550,000 for calendar year 1993, with $50,000 annual increases for the two
succeeding calendar years. For the 1993, 1994 and 1995 calendar years, his
target bonus is set at 75% of his base salary at the end of each year and his
STIP bonus compensation shall not be less than 50% of his base salary at that
time. Mr. Braun has informed Viacom that he intends to exercise his contractual
right to resign effective June 30, 1994. He will continue to receive his salary
and target STIP bonus compensation through December 31, 1995.
Mr. Dauman became Executive Vice President, General Counsel, Chief
Administrative Officer and Secretary of Viacom and Viacom International on March
15, 1994. Previously, he had served as Senior Vice President, General Counsel
and Secretary of Viacom and Viacom International since February 1, 1993. It is
expected that his employment contract will be amended shortly to reflect his new
responsibilities. Mr. Dauman's contract currently provides that he will be
employed as an executive of Viacom International until January 31, 1998, at a
salary of $600,000 for the contract year ending January 31, 1994, with annual
increases of not less than 10%. Currently, for the 1993 through 1997 calendar
years, his target bonus is set at 100% of his base salary at the end of each
year and his STIP bonus compensation shall not be less than 75% of his base
salary at that time.
Mr. Goddard's contract provides that he will be employed as an executive of
Viacom International until December 31, 1994 at an annual base salary of
$560,000 for the 1993 calendar year and $610,000 for the 1994 calendar year. Mr.
Goddard's contract provides that his target bonus for each calendar year shall
be 100% of his base salary at the end of each year.
Mr. Weinstein became Senior Vice President, Government Affairs of Viacom
and Viacom International on February 1, 1993. His contract was amended in 1993
to reflect his new responsibilities. As amended, his contract provides that he
will be employed as an executive of Viacom International until December 31,
1997, at a salary of $500,000 for the contract year that began February 1, 1993,
with $50,000 annual increases on each February 1st during the employment term.
For calendar years 1993 through 1997, his target bonus is set at 75% of his base
salary at the end of each year and his STIP bonus compensation shall not be less
than 56.25% of his base salary at that time.
185
<PAGE>
APPROVAL OF THE VIACOM INC. SENIOR EXECUTIVE SHORT-TERM INCENTIVE PLAN
The Viacom Board of Directors adopted the Senior Executive STIP on March
31, 1994, subject to the approval of the Senior Executive STIP by the
affirmative vote of the holders of a majority of the shares of Viacom Class A
Common Stock represented in person or by proxy and entitled to vote at the
Viacom Annual Meeting. The Board recommends that the stockholders approve the
Senior Executive STIP. Viacom has been advised that NAI intends to vote all of
its shares of Viacom Class A Common Stock for the approval of the Senior
Executive STIP. Such vote will be sufficient to approve the Senior Executive
STIP without any action on the part of any other stockholder of Viacom.
STIP Generally
The following description of the material features of the Senior Executive
STIP is qualified in its entirety by the full text of the Senior Executive STIP,
as set forth in Exhibit A to this Proxy Statement/Prospectus. The Senior
Executive STIP will provide objective performance-based annual bonuses for
selected senior executives of Viacom, subject to a maximum limit, starting with
the 1994 calendar year, as described in more detail below. Amounts paid under
the Senior Executive STIP are intended to qualify as "performance-based
compensation" which is excluded from the $1,000,000 limit on deductible
compensation set forth in Section 162(m) of the Code.
Administration
The Senior Executive STIP is administered by the Compensation Committee,
which is authorized to approve awards to selected executive officers (the
"Participants") at the level of Senior Vice President of Viacom or above.
Approximately eight officers are expected to participate in the Senior Executive
STIP annually. The Compensation Committee must be comprised of at least three
directors, each of whom must be an "outside director" within the meaning of
Section 162(m) of the Code.
Awards
Prior to the commencement of each calendar year, the Compensation Committee
will establish performance criteria and target awards for each Participant,
except that, as permitted by Section 162(m) of the Code, the performance
criteria and target awards for 1994 were established on March 31, 1994.
The performance criteria relate to the achievement of annual financial
goals. Those goals are based on the attainment of specified levels of operating
income and/or cash flow for Viacom as a whole. The awards for Participants with
exclusive corporate responsibilities are based on achievement of Viacom's
financial performance criteria. The awards for Participants with
responsibilities for Viacom's divisions and/or subsidiaries is also based on the
achievement of performance criteria established by the Compensation Committee
for such divisions and/or subsidiaries. Such criteria relate to operating income
and/or cash flow levels for such divisions and/or subsidiaries and, in the case
of the Viacom Cable Division, also relate to the attainment of specified levels
of "customer months" and "ancillary revenues". For this purpose, "operating
income" means revenues less operating expenses (other than depreciation and
amortization) and "cash flow" means "operating income" less cash capital
expenditures and increases or decreases in working capital and in other balance
sheet investments. "Customer months" means the number of months for which
customers were billed for services other than premium, pay-per-view and
ancillary services and "net ancillary revenues" means revenues from premium,
pay-per-view and ancillary services less operating costs.
The total of all awards to any Participant for any calendar year shall not
exceed the amount determined by multiplying such Participant's base salary in
effect on March 31, 1994 by a factor of six (6). In the case of a Participant
hired after March 31, 1994, the Participant's salary for this purpose shall be
the Participant's base salary on the date of hire. The base salaries of the
President, Chief Executive Officer and the other four named executive officers
are disclosed under "--Employment Contracts" above.
186
<PAGE>
At the end of each performance year, the Compensation Committee will
certify whether the performance criteria have been achieved; if so, the awards
have been earned, subject to the Compensation Committee's right, in its sole
discretion, to reduce the amount of the award to any Participant to reflect the
Compensation Committee's assessment of the Participant's individual performance
or for any other reason. These awards are payable in cash as soon as practicable
thereafter.
To receive payment of an award, the Participant must have remained in the
continuous employ of Viacom or its subsidiaries through the end of the
applicable performance period. If Viacom or any subsidiary terminates a
Participant's employment other than for "cause" or a Participant becomes
"permanently disabled" or dies during a performance period, such Participant or
his estate shall be awarded, unless his employment contract provides otherwise,
a pro rata portion of the award for such performance period, subject to the
Compensation Committee's right, in its sole discretion, to reduce the amount of
such award to reflect the Compensation Committee's assessment of such
Participant's individual performance prior to the termination of such
Participant's employment, such Participant's becoming permanently disabled or
such Participant's death, as the case may be, or for any other reason.
Adjustments
In the event that, during a performance period, any recapitalization,
reorganization, merger, acquisition, divestiture, consolidation, spin off,
combination, liquidation, dissolution, sale of assets, or other similar
corporate transaction or event, or any extraordinary event, or any other event
which distorts the applicable performance criteria occurs involving Viacom or a
subsidiary or division thereof, the Compensation Committee shall adjust or
modify, as determined by the Compensation Committee in its sole and absolute
discretion, the calculation of operating income and/or cash flow, or the
applicable performance goals, to the extent necessary to prevent reduction or
enlargement of Participants' awards for such performance period attributable to
such transaction or event.
The performance goals established for 1994 relate to the achievement of
specified levels of operating income and cash flow for Viacom and certain
divisions of Viacom International, without giving effect to the Paramount or
Blockbuster Mergers. Pursuant to this authorization, the Compensation Committee
will adjust the 1994 performance criteria to reflect the Paramount and
Blockbuster Mergers.
Transfer Restrictions, Etc.
The rights of a Participant with respect to awards under the Senior
Executive STIP are not transferable by the Participant other than by will or the
laws of descent and distribution. No award under the Senior Executive STIP will
be construed as giving any employee a right to continued employment with Viacom.
STIP Amendment
The Viacom Board of Directors may at any time alter, amend, suspend or
terminate the Senior Executive STIP in whole or in part.
APPROVAL OF THE VIACOM INC. 1994 LONG-TERM MANAGEMENT INCENTIVE PLAN
The Viacom Board of Directors adopted the LTMIP on May 26, 1994, subject to
the approval of the LTMIP by the affirmative vote of the holders of a majority
of the shares of Viacom Class A Common Stock represented in person or by proxy
and entitled to vote at the Viacom Annual Meeting. The Board recommends that the
stockholders approve the LTMIP. Viacom has been advised that NAI intends to vote
all of its shares of Viacom Class A Common Stock for the approval of the LTMIP.
Such vote will be sufficient to approve the LTMIP without any action on the part
of any other stockholder of Viacom.
187
<PAGE>
LTMIP Generally
The following description of the material features of the LTMIP is
qualified in its entirety by the full text of the LTMIP, as set forth in Exhibit
B to this Proxy Statement/Prospectus. The purpose of the LTMIP is to benefit and
advance the interests of Viacom by rewarding certain key employees for their
contributions to the financial success of Viacom and to motivate such employees
to continue to do so in the future. This goal is imperative in light of Viacom's
recent acquisition of Paramount and its anticipated merger with Blockbuster.
The LTMIP provides for grants of stock options to purchase shares of Viacom
Class B Common Stock ("Stock Options"), stock appreciation rights ("SARs"),
restricted shares of Viacom Class B Common Stock ("Restricted Shares") and
phantom shares ("Phantom Shares"), the terms and conditions of which are
described in more detail below. Approximately 750 key employees of Viacom are
eligible for grants under the LTMIP. Compensation relating to awards under the
LTMIP is generally intended to qualify as "performance-based compensation" which
is excluded from the $1,000,000 limit on deductible compensation set forth in
Section 162(m) of the Code.
The maximum aggregate number of shares of Viacom Class B Common Stock that
may be granted under the LTMIP (whether reserved for issuance upon grants of
Stock Options or SARs or granted as Restricted Shares) is 10,000,000. Shares
of Viacom Class B Common Stock covered by expired or terminated Stock Options or
SARs and Restricted Shares that are forfeited under the terms of the LTMIP will
not be counted in applying such limit on grants under the LTMIP. The maximum
aggregate number of (i) shares of Viacom Class B Common Stock that may be
granted under the LTMIP subject to the Stock Options or SARs or granted as
Restricted Shares and (ii) Phantom Shares that may be granted under the LTMIP to
any employee at the level of Senior Vice President of Viacom or above during any
calendar year is 1,000,000. The fair market value of a share of Viacom Class B
Common Stock was $28 5/8 as of June 3, 1994. Grants under the LTMIP are
authorized by the Compensation Committee in its sole discretion. For this reason
it is not possible to determine the benefits or amounts that will be received by
any particular employees or group of employees in the future.
Administration
The LTMIP is administered by the Compensation Committee, which is
authorized to select from among the group of eligible employees, those
individuals (the "Participants") who are to receive grants under the LTMIP. The
Compensation Committee must be comprised of at least three directors, each of
whom must be a disinterested person within the meaning of Rule 16b-3 of the
Exchange Act.
Stock Options
Stock Options granted under the LTMIP will be either incentive stock
options ("Incentive Stock Options") or options that do not qualify as Incentive
Stock Options for federal income tax purposes ("Non-Qualified Stock Options"),
as determined by the Compensation Committee. The LTMIP further empowers the
Compensation Committee, subject to certain limits described below, to determine
the exercise price of Stock Options granted under the LTMIP, the vesting
schedule applicable to such Stock Options and the period during which they can
be exercised. The per share exercise price of Stock Options granted under the
LTMIP cannot be, with respect to Nonqualified Stock Options, less than 50% and,
with respect to Incentive Stock Options, less than 100% of the fair market value
of a share of Viacom Class B Common Stock on the date of grant. No Stock Option
granted under the LTMIP can be exercised less than six months after the date of
grant or more than ten years after the date of grant. Each share of Viacom Class
B Common Stock purchased through the exercise of a Stock Option must be paid in
full at the time of exercise in cash or, in the discretion of the Compensation
Committee, in shares of Viacom Class B Common Stock (or other Viacom securities
designated by the Compensation Committee) or in a combination of cash and shares
(or such other securities).
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If the Participant's employment terminates for any reason other than death
or for "cause", his Stock Options cannot be exercised more than three months
after the date of such termination. In the event of a Participant's death, his
Stock Options may be exercised to the extent exercisable at the date of death by
the person who acquired the right to exercise such Stock Options by will or the
laws of descent and distribution for one year after such death (or such longer
period as may, in a special case, be fixed by the Compensation Committee) but
not beyond the expiration date of such Stock Options. In the event of a
Participant's permanent disability, he may exercise his Stock Options to the
extent exercisable at the onset of such disability for one year after such date
but not beyond the expiration date of such Stock Options. If a Participant's
employment is terminated for "cause", then, unless the Compensation Committee
determines otherwise, all Stock Options (whether or not then vested) will be
forfeited by the Participant effective as of the date of such termination.
SARs
The Compensation Committee may grant SARs only in tandem with Stock
Options, either at the time of grant or by amendment at any time prior to the
exercise, expiration or termination of such Stock Options. Each SAR entitles the
holder to surrender the related Stock Option in lieu of exercise for an amount
equal to the excess of the fair market value of the share of Viacom Class B
Common Stock subject to the Stock Option over the Stock Option exercise price.
This amount will be paid in cash or, in the discretion of the Compensation
Committee, in shares of Viacom Class B Common Stock (or other Viacom securities
designed by the Compensation Committee) or in a combination of cash and shares
(or such other securities). No Stock Appreciation Right can be exercised unless
the related Stock Option is then exercisable.
Restricted Shares
Restricted Shares granted under the LTMIP will be subject to a vesting
schedule established by the Compensation Committee; provided, that no Restricted
Shares shall vest until at least six months after the date of grant. The
Compensation Committee may, in its discretion, accelerate the dates on which
Restricted Shares vest. Stock certificates representing the number of Restricted
Shares granted to a Participant under the LTMIP will be registered in the
registrant's name as of the date of grant but remain held by Viacom. The
Participant will have all rights as a holder of such shares of Viacom Class B
Common Stock except that (i) the Participant will not be entitled to delivery of
such certificates until the shares represented thereby have vested, (ii) the
Restricted Shares cannot be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of until such shares have vested, and (iii) if the
Participant's employment terminates for any reason or, in the event of the
Participant's death, retirement or permanent disability, the Restricted Shares
will be forfeited as of the date of such event (unless, in a special case, the
Compensation Committee determines otherwise with respect to some or all of the
unvested Restricted Shares).
Phantom Shares
The value of the Phantom Shares granted under the LTMIP is determined by
reference to the fair market value of a share of Viacom Class B Common Stock and
cash payments are made with respect to such Phantom Shares based, subject to any
applicable limit on the maximum amount payable, on any increase in value
("appreciation value") determined as of certain valuation dates over their
"initial value". The LTMIP empowers the Compensation Committee to determine the
initial value of the Phantom Shares as of the date of grant; provided, that the
initial value of a Phantom Share shall not be less than 50% of the average fair
market value of a share of Viacom Class B Common Stock over the 30-day period
ending on the date of grant. The LTMIP further empowers the Compensation
Committee to determine the valuation dates (not later than the eighth
anniversary of the date of grant) applicable to a grant of Phantom Shares, the
period (not in excess of five years from the date of grant) during which the
Phantom Shares vest and any limit on the maximum amount of appreciation value
payable for the Phantom Shares granted under the LTMIP.
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If a Participant's employment terminates for any reason other than for
"cause" or, in the event of the Participant's death, retirement or permanent
disability, then, unless the Compensation Committee determines otherwise, the
cash payments for such Participant's Phantom Shares will be the lesser of the
appreciation value determined as of the date of such termination or event or as
of the originally scheduled valuation dates and such payments will be made after
the originally scheduled valuation dates. All rights with respect to Phantom
Shares that are not vested as of the date of such termination or event, as the
case may be, will be relinquished by the Participant. If a Participant's
employment is terminated for "cause" all Phantom Shares (whether or not vested)
will be forfeited by the Participant.
Adjustments
In the event of certain "Reorganization Events" (as defined in the LTMIP)
affecting Viacom, the Compensation Committee will take one of the following
actions (determined in its sole discretion), unless a given Participant agrees
otherwise. With respect to Stock Options, SARs and Restricted Shares, the
Compensation Committee will (1) cause the surviving entity or new owner of
Viacom to adopt the LTMIP and outstanding agreements (subject to equitable
adjustment as specified in the LTMIP), (2) cause the surviving entity or new
owner to grant substitute stock options, stock appreciation rights or restricted
shares with an equivalent value, (3) solely with respect to outstanding Stock
Options, provide for payment upon their termination or cancellation in cash or
securities equal to the excess of the fair market value of the shares of Viacom
Class B Common Stock subject to such Stock Options over the aggregate exercise
price of such Stock Options, or (4) accelerate the vesting dates of outstanding
Stock Options, SARs and Restricted Shares. With respect to Phantom Shares
granted pursuant to the LTMIP, the Compensation Committee will (1) cause the
surviving entity or new owner of Viacom to adopt the LTMIP and outstanding
agreements (subject to certain equitable adjustments specified in the LTMIP), or
(2) determine the appreciation value of Phantom Shares with reference to the
consideration to be paid for the Viacom Class B Common Stock in the
Reorganization Event and modify the LTMIP and outstanding agreements, if
appropriate, to provide that payments will be based on the appreciation value of
the Phantom Shares as so determined. If, however, the Compensation Committee
determines that the previous actions would be a material impediment to the
Reorganization Event, the Compensation Committee is authorized to take such
other action as it deems equitable and appropriate to provide each Participant
with a benefit equivalent to that which he would have received had the
Reorganization Event not occurred. In the event a division or subsidiary of
Viacom is acquired by another entity or Viacom is dissolved, liquidated or
reorganized other than in a Reorganization Event, or the Viacom Board of
Directors proposes any of such transactions or events, the Compensation
Committee is also authorized to make such adjustments, if any, as it determines
are equitable or appropriate to provide each Participant with a benefit
equivalent to that to which he would have been entitled had such transaction or
event not occurred.
In the event of a stock dividend or split or certain other changes in the
capital structure of Viacom which affect the Viacom Class B Common Stock, the
Compensation Committee will, in its discretion, make any of the following
adjustments to provide each Participant with a benefit equivalent to the benefit
to which he would have been entitled had such event not occurred: (i) adjust the
number of shares of Viacom Class B Common Stock subject to Stock Options or SARs
or the number of Restricted Shares or Phantom Shares granted to each
Participant, (ii) adjust the exercise price of shares of Viacom Class B Common
Stock subject to such Stock Options or SARs or the initial value of such Phantom
Shares, and (iii) make any other adjustments, or take such other action, as the
Compensation Committee deems appropriate.
Transfer Restrictions, Etc.
The rights of a Participant with respect to the Stock Options, SARs,
Restricted Shares or Phantom Shares granted under the LTMIP are not transferable
by the Participant other than by will or the laws of descent and distribution.
Except as described above, no grant under the LTMIP entitles a Participant
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to any rights of a holder of shares of Viacom Class B Common Stock, nor will any
grant be construed as giving any employee a right to continued employment with
Viacom.
LTMIP Amendment and Term
The Viacom Board of Directors may at any time alter, amend, suspend or
terminate the LTMIP in whole or in part, except that any amendment which must be
approved by the Viacom stockholders in order to maintain the continued
qualification of the LTMIP under Rule 16b-3 under the Exchange Act will not be
effective unless and until such stockholder approval has been obtained in
compliance with such rule. Unless terminated earlier by action of the Viacom
Board of Directors, the LTMIP will terminate on May 26, 1999, and no
additional grants under the LTMIP will be made after that date.
Tax Consequences
The following is intended as a general summary of the federal income tax
consequences associated with the grant and exercise of Stock Options. This
summary does not purport to be complete and does not address any applicable
state or local tax law.
Nonqualified Stock Options. In general, the grant of a Nonqualified Stock
Option will not result in the recognition of taxable income by the Participant
or in a tax deduction to Viacom or its subsidiaries. Upon exercise of a
Nonqualified Stock Option, a Participant will recognize ordinary income in an
amount equal to the excess of the fair market value of the shares purchased over
the exercise price of the Nonqualified Stock Option. The amount of the income so
recognized is subject to income tax withholding and a tax deduction equal to the
amount of such income is allowable to the employing company. Gain or loss upon a
subsequent sale of the stock received upon exercise of a Nonqualified Stock
Option generally would be taxed as capital gain or loss (long-term or
short-term, depending on the holding period of the stock sold). Certain
additional rules apply where the Participant is subject to the liability
provisions of Section 16(b) of the Exchange Act or if the exercise price for a
Nonqualified Stock Option is paid in shares or other securities previously owned
by the Participant.
Incentive Stock Options. Neither the grant nor the exercise of an Incentive
Stock Option will result in the Participant recognizing income for federal
income tax purposes and neither Viacom nor its subsidiaries will be entitled to
a tax deduction. However, the excess of the fair market value of the shares over
the exercise price on the exercise date will constitute an adjustment to taxable
income for purposes of the alternative minimum tax. If the shares acquired upon
exercise of an Incentive Stock Option are not disposed of within the one-year
period beginning on the date of the transfer of such shares to the Participant,
nor within the two-year period beginning on the date of grant of the Incentive
Stock Option, any profit realized by the Participant upon the disposition of
such shares will be taxed as long-term capital gain and no deduction will be
allowed to the employing company. If the shares acquired upon exercise of the
Incentive Stock Option are disposed of within the one-year period from the date
of transfer of such shares to the Participant or within the two-year period from
the date of grant of the Incentive Stock Option, the excess of the fair market
value of the shares on the date of exercise or, if less, over exercise price
will be taxable as ordinary income of the Participant at the time of
disposition, and a corresponding tax deduction to Viacom will be allowable.
Certain additional rules apply if the exercise price for an Incentive Stock
Option is paid in shares or other securities previously owned by the
Participant.
APPROVAL OF THE VIACOM INC. STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
The Viacom Board of Directors adopted (with Outside Directors Messrs.
Abrams, Miller and Schwartz abstaining) the Outside Directors' Plan on May 25,
1993, subject to the approval of the Outside Directors' Plan by the affirmative
vote of the holders of a majority of the shares of Viacom Class A Common Stock
represented in person or by proxy and entitled to vote at the Viacom Annual
Meeting. The Board recommends the stockholders approve the Outside Directors'
Plan. Viacom has been advised that NAI intends to vote all of its shares of
Viacom Class A Common Stock for the
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approval of the Outside Directors' Plan. Such vote will be sufficient to approve
the Outside Directors' Plan without any action on the part of any other
stockholder of Viacom.
Outside Directors' Plan Generally
The following description of the material features of the Outside
Directors' Plan is qualified in its entirety by the full text of the Outside
Directors' Plan, as set forth in Exhibit C to this Proxy Statement/Prospectus.
The Outside Directors' Plan provides for automatic one-time grants of Non-
Qualified Stock Options to purchase 5,000 shares of Viacom Class B Common Stock
("Outside Directors' Stock Options") to directors who are not employees of
Viacom, Viacom International or NAI ("Outside Directors"). As more fully
described below, the six (6) persons who are Outside Directors have received
such automatic one-time grants, subject to stockholder approval of the Outside
Directors' Plan. The fair market value of a share of Viacom Class B Common Stock
was $28 5/8 as of June 3, 1994.
The total number of shares of Viacom Class B Common Stock reserved for
issuance upon grant of Outside Directors' Stock Options is 100,000. Shares of
Viacom Class B Common Stock covered by expired or terminated Stock Options will
not be counted in applying such limit on grants of Outside Directors' Stock
Options.
Administration
The Outside Directors' Plan is administered by the members of the Viacom
Board of Directors who are not Outside Directors.
Outside Directors' Stock Options
On May 25, 1993, Messrs. Abrams, Miller and Schwartz, who then constituted
the Board's Outside Directors, each received an Outside Directors' Stock Option
grant with a per share exercise price of $45 1/2 which was the closing price of
a share of Viacom Class B Common Stock on the American Stock Exchange on the
date of grant, subject to stockholder approval of the Outside Director's Plan.
The Outside Directors' Plan provides that each person who subsequently
becomes an Outside Director will receive an Outside Directors' Stock Option
grant, effective as of the date of such person's election or appointment to the
Board, with a per share exercise price equal to the closing price on that date
of a share of Viacom Class B Common Stock on the American Stock Exchange or such
other national securities exchange as may be designed by the Viacom Board.
Accordingly, Messrs. Huizenga, Ferguson and Salerno each received an Outside
Directors' Stock Option grant when they were appointed to the Viacom Board,
which grants are subject to stockholder approval of the Outside Directors' Plan.
The per share exercise prices of their grants are $53 1/4, $42 1/2 and $36 3/4,
respectively, which were the closing prices of a share of the Viacom Class B
Common Stock on the American Stock Exchange on the dates of their appointment to
the Viacom Board. Mr. Huizenga holds his Outside Directors' Stock Option grant
for the benefit of Blockbuster. Messrs. Ferguson and Salerno each hold their
Outside Directors' Stock Option grants for the benefit of NYNEX.
Each grant of Outside Directors' Stock Options vests on the first
anniversary of the date of grant. No Outside Directors' Stock Option may be
exercised less than six months after the date of grant or more than ten years
after the date of grant. Each share of Viacom Class B Common Stock purchased
through the exercise of an Outside Directors' Stock Option must be paid in full
at the time of exercise in cash.
An Outside Director may exercise his Stock Options up to one year after the
Outside Director ceases to serve for any reason, including death or permanent
disability, as a member of the Board of Directors; provided, however, that the
Stock Options are exercisable only to the extent exercisable on the date of
termination and in no event after the Stock Options have otherwise expired.
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Adjustments
In the event of certain "Reorganization Events" (which are defined
identically in the LTMIP, the New LTMIP and the Outside Directors' Plan)
affecting Viacom, all of the Outside Director's Stock Options shall be
immediately exercisable as of the date of such event. In the event of a stock
dividend or split or certain other changes in the capital structure of Viacom
which affect the Viacom Class B Common Stock, the Outside Directors' Stock
Options will be adjusted in the same manner as the Stock Options under the LTMIP
and the New LTMIP are adjusted.
Transfer Restrictions, Etc.
The rights of an Outside Director with respect to the Outside Directors'
Stock Options are not transferable by the Outside Director other than by will or
the laws of descent and distribution. No grant of Outside Directors' Stock
Options entitles an Outside Director to any rights of a holder of shares of
Viacom Class B Common Stock, except upon delivery of share certificates upon
exercise of an Outside Directors' Stock Option, nor will any such grant be
construed as giving an Outside Director the right to remain a member of the
Viacom Board.
Amendment and Term
The Viacom Board of Directors may at any time alter, amend, suspend or
terminate the Outside Directors' Plan in whole or in part. The provisions with
respect to eligibility or the time or amount of grants, however, will not be
amended more than once every six months other than to comply with applicable
law. Any amendment which must be approved by the Viacom stockholders under the
requirements of applicable law or in order to maintain the continued
qualification of the Outside Directors' Plan under Rule 16b-3(c)(2)(ii) under
the Exchange Act will not be effective unless and until such stockholder
approval has been obtained in compliance with such rule. Unless terminated
earlier by action of the Viacom Board of Directors, the Outside Directors' Plan
will terminate on May 25, 2003, and no additional grants of Outside Directors'
Stock Options may be made after that date.
Tax Consequences
For a description of the federal income tax consequences associated with
the grant and exercise of the Outside Directors' Stock Options, see the
discussion under the "--Approval of the Viacom Inc. 1994 Long-Term Management
Incentive Plan--Tax Consequences--Non-Qualified Stock Options" above.
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends that the stockholders approve the
appointment of Price Waterhouse as independent auditors to serve until the
Annual Meeting of Stockholders in 1995.
In connection with the audit function for 1993, Price Waterhouse also
reviewed the annual reports on Form 10-K of Viacom and Viacom International and
their filings with the Commission, including the filings in connection with the
Mergers and provided certain other accounting, tax and consulting services.
Representatives of Price Waterhouse are expected to be present at the
Viacom Annual Meeting and will be given an opportunity to make a statement if
they so desire. They will also be available to respond to questions at the
meeting.
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, management of Viacom
does not intend to present and has not been informed that any other person
intends to present any matter for action not specified in this Proxy
Statement/Prospectus. If any other matters properly come before the Viacom
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Annual Meeting, it is intended that the holders of Viacom Annual Meeting proxies
will act in respect thereof in accordance with their best judgment.
VIACOM HAS SENT A COPY OF ITS REPORT ON FORM 10-K/A FOR THE YEAR ENDED
DECEMBER 31, 1993, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, TO EACH
OF ITS STOCKHOLDERS OF RECORD ON MAY 31, 1994 AND EACH BENEFICIAL STOCKHOLDER ON
THAT DATE. IF YOU HAVE NOT RECEIVED YOUR COPY, VIACOM WILL PROVIDE A COPY
WITHOUT CHARGE (A REASONABLE FEE WILL BE CHARGED FOR EXHIBITS), UPON RECEIPT OF
WRITTEN REQUEST THEREFOR MAILED TO VIACOM'S OFFICES, ATTENTION SECRETARY.
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EXPERTS
FINANCIAL STATEMENTS
The financial statements incorporated in this Proxy Statement/Prospectus by
reference to the Annual Report on Form 10-K, as amended by Form 10-K/A Amendment
No. 1, of Viacom for the year ended December 31, 1993 have been so incorporated
in reliance on the reports of Price Waterhouse, independent accountants, given
on the authority of such firm as experts in auditing and accounting.
The consolidated financial statements of Paramount incorporated by
reference in this Proxy Statement/Prospectus and Registration Statement at April
30, 1993 and at October 31, 1992 and 1991, and for the six-month period ended
April 30, 1993, and for each of the three years in the period ended October 31,
1992 included in its Transition Report on Form 10-K for the six months ended
April 30, 1993, as amended by Form 10-K/A Amendments No. 1, 2 and 3 have been
audited by Ernst & Young, independent auditors, as set forth in their reports
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements and schedules of Blockbuster
Entertainment Corporation and subsidiaries as of December 31, 1993 and 1992
and for each of the three years in the period ended December 31, 1993
incorporated by reference in this Proxy Statement/Prospectus have been audited
by Arthur Andersen & Co., independent certified public accountants, as indicated
in their report with respect thereto, and are incorporated by reference herein
in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
LEGAL OPINIONS
The legality of the Viacom Class B Common Stock, the Viacom Merger
Debentures, the CVRs and the Viacom Warrants being offered hereby will be passed
upon for Viacom by Shearman & Sterling, New York, New York.
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STOCKHOLDER PROPOSALS
Any Viacom stockholder who wishes to submit a proposal for presentation to
the 1995 Annual Meeting of Stockholders must submit the proposal to Viacom, 1515
Broadway, New York, New York 10036, Attention: Secretary, not later than
December 30, 1994, for inclusion, if appropriate, in Viacom's proxy statement
and the form of proxy relating to the 1995 Annual Meeting.
By Order of the Board of Directors
VIACOM INC.
PHILIPPE P. DAUMAN
Secretary
By Order of the Board of Directors
PARAMOUNT COMMUNICATIONS INC.
PHILIPPE P. DAUMAN
Secretary
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ANNEX I
PARAMOUNT MERGER AGREEMENT
<PAGE>
[CONFORMED COPY]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BETWEEN
VIACOM INC.
AND
PARAMOUNT COMMUNICATIONS INC.
DATED AS OF FEBRUARY 4, 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INDEX OF DEFINED TERMS
<TABLE><CAPTION>
SECTION
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<S> <C>
affiliate..................................................................................... SECTION 9.3
Agreement..................................................................................... PREAMBLE
AMEX.......................................................................................... SECTION 1.7
beneficial owner.............................................................................. SECTION 9.3
Blockbuster................................................................................... SECTION 4.3
Blockbuster Merger Agreement.................................................................. SECTION 4.8
Blockbuster Subscription Agreement............................................................ SECTION 4.3
Blue Sky Laws................................................................................. SECTION 3.5
Business Combination.......................................................................... SECTION 8.5
business day.................................................................................. SECTION 9.3
Cash Election................................................................................. SECTION 1.6
Cash Election Number.......................................................................... SECTION 1.6
Cash Election Shares.......................................................................... SECTION 1.6
Cash Fraction................................................................................. SECTION 1.6
Certificate of Merger......................................................................... SECTION 1.3
Certificates.................................................................................. SECTION 1.7
Claim......................................................................................... SECTION 6.3
Class A Exchange Ratio........................................................................ SECTION 1.6
Class B Exchange Ratio........................................................................ SECTION 1.6
Code.......................................................................................... RECITALS
Communications Act............................................................................ SECTION 3.5
Competing Transaction......................................................................... SECTION 8.1
Confidentiality Agreements.................................................................... SECTION 6.1
control....................................................................................... SECTION 9.3
controlled.................................................................................... SECTION 9.3
controlled by................................................................................. SECTION 9.3
CVRs.......................................................................................... SECTION 1.6
CVR Exchange Ratio............................................................................ SECTION 1.6
Debenture Exchange Ratio...................................................................... SECTION 1.6
Delaware Law.................................................................................. RECITALS
Dissenting Shares............................................................................. SECTION 1.10
ERISA......................................................................................... SECTION 3.10
Effective Time................................................................................ SECTION 1.3
Exchange Act.................................................................................. SECTION 2.2
Exchange Agent................................................................................ SECTION 1.7
Exchange Cash Consideration................................................................... SECTION 1.7
Exchange Debenture Trustee.................................................................... SECTION 4.3
Exchange Fund................................................................................. SECTION 1.7
Exchange Ratios............................................................................... SECTION 1.6
Exemption Agreement........................................................................... SECTION 2.1(d)
Expiration Date............................................................................... SECTION 2.1
FCC........................................................................................... SECTION 2.6
Final Expiration Date......................................................................... SECTION 2.1(c)
Financing..................................................................................... SECTION 4.17
Five Year Warrant Exchange Ratio.............................................................. SECTION 1.6
Five Year Warrants............................................................................ SECTION 1.6
Form of Election.............................................................................. SECTION 1.6
Forward Merger................................................................................ RECITALS
fully diluted basis........................................................................... SECTION 9.3
</TABLE>
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<TABLE><CAPTION>
SECTION
------------------
<S> <C>
Gains Tax..................................................................................... SECTION 6.18
Governmental Entity........................................................................... SECTION 3.5
HSR Act....................................................................................... SECTION 4.5
Incentive Stock Option........................................................................ SECTION 1.9
Indemnified Parties........................................................................... SECTION 6.3
Indenture..................................................................................... SECTION 4.3
IRS........................................................................................... SECTION 3.10
Material Paramount Subsidiary................................................................. SECTION 3.1
Material Viacom Subsidiary.................................................................... SECTION 4.1
Merger........................................................................................ RECITALS
Merger Consideration.......................................................................... SECTION 1.7
Merger Debenture Trustee...................................................................... SECTION 4.3
Merger Subsidiary............................................................................. RECITALS
Minimum Condition............................................................................. SECTION 2.1
National...................................................................................... RECITALS
Non-Election.................................................................................. SECTION 1.6
Non-Election Fraction......................................................................... SECTION 1.6
Non-Election Shares........................................................................... SECTION 1.6
Offer......................................................................................... RECITALS
Offer Documents............................................................................... SECTION 2.1(b)
Offer to Purchase............................................................................. SECTION 2.1(b)
Other Offer................................................................................... SECTION 2.1(c)
Other Offeror................................................................................. SECTION 2.1(c)
Other Exemption Agreement..................................................................... SECTION 2.1(d)
Other Expiration Date......................................................................... SECTION 2.1(d)
Paramount..................................................................................... PREAMBLE
Paramount 1992 Balance Sheet.................................................................. SECTION 3.12
Paramount Common Stock........................................................................ RECITALS
Paramount Disclosure Schedule................................................................. SECTION 3.3
Paramount Indentures.......................................................................... SECTION 6.17
Paramount Material Adverse Effect............................................................. SECTION 3.1
Paramount Plans............................................................................... SECTION 3.10
Paramount Preferred Stock..................................................................... SECTION 3.3
Paramount SEC Reports......................................................................... SECTION 3.7
Paramount Subsidiary.......................................................................... SECTION 3.1
Paramount Triggering Event.................................................................... SECTION 6.9
Per Share Amount.............................................................................. RECITALS
Per Share Cash Amount......................................................................... SECTION 1.6
Proxy Statement............................................................................... SECTION 6.6
Registration Statement........................................................................ SECTION 6.6
Representatives............................................................................... SECTION 1.6
Respective Representatives.................................................................... SECTION 6.1
Reverse Merger................................................................................ RECITALS
Rights........................................................................................ SECTION 3.13
Rights Agreement.............................................................................. SECTION 3.13
Rights Condition.............................................................................. SECTION 2.1
Schedule 14D-1................................................................................ SECTION 2.1
Schedule 14D-9................................................................................ SECTION 2.2
SEC........................................................................................... SECTION 2.1
Securities Act................................................................................ SECTION 3.5
Securities Election........................................................................... SECTION 1.6
</TABLE>
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<TABLE><CAPTION>
SECTION
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Securities Election Number.................................................................... SECTION 1.6
Securities Fraction........................................................................... SECTION 1.6
Significant Stockholder....................................................................... SECTION 6.21
Stock Election Shares......................................................................... SECTION 1.6
Stock Option.................................................................................. SECTION 3.3
Stockholders' Meetings........................................................................ SECTION 6.7
subsidiaries.................................................................................. SECTION 9.3
subsidiary.................................................................................... SECTION 9.3
Surviving Corporation......................................................................... SECTION 1.1
Three Year Warrant Exchange Ratio............................................................. SECTION 1.6
Three Year Warrants........................................................................... SECTION 1.6
Transactions.................................................................................. SECTION 3.4
Transfer Tax.................................................................................. SECTION 6.18
under common control with..................................................................... SECTION 9.3
Viacom........................................................................................ PREAMBLE
Viacom Certificate Amendments................................................................. SECTION 4.4
Viacom 1992 Balance Sheet..................................................................... SECTION 4.12
Viacom Class A Common Stock................................................................... RECITALS
Viacom Class B Common Stock................................................................... SECTION 1.6
Viacom Disclosure Schedule.................................................................... SECTION 4.3
Viacom Exchange Debenture Indenture........................................................... SECTION 4.3
Viacom Exchange Debentures.................................................................... ANNEX B
Viacom Exchange Preferred Stock............................................................... ANNEX B
Viacom International.......................................................................... SECTION 4.7
Viacom Material Adverse Effect................................................................ SECTION 4.1
Viacom Merger Debenture Indenture............................................................. SECTION 4.3
Viacom Merger Debentures...................................................................... SECTION 1.6
Viacom Plans.................................................................................. SECTION 4.10
Viacom Preferred Stock........................................................................ SECTION 4.3
Viacom SEC Reports............................................................................ SECTION 4.7
Viacom Series A Preferred..................................................................... SECTION 4.3
Viacom Subsidiary............................................................................. SECTION 4.1
Viacom Triggering Event....................................................................... SECTION 6.9
Viacom Vote Matter............................................................................ SECTION 4.4
Voting Agreement.............................................................................. RECITALS
Warrants...................................................................................... SECTION 1.6
</TABLE>
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TABLE OF CONTENTS
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ARTICLE I
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THE MERGER........................................... 2
SECTION 1.1. The Merger............................................................................ 2
SECTION 1.2. Closing............................................................................... 2
SECTION 1.3. Effective Time........................................................................ 2
SECTION 1.4. Effect of the Merger.................................................................. 2
SECTION 1.5. Certificate of Incorporation; By-Laws................................................. 2
SECTION 1.6. Conversion of Securities.............................................................. 2
SECTION 1.7. Exchange of Certificates and Cash..................................................... 6
SECTION 1.8. Stock Transfer Books.................................................................. 8
SECTION 1.9. Stock Options; Payment Rights......................................................... 9
SECTION 1.10. Dissenting Shares..................................................................... 10
ARTICLE II
THE OFFER............................................ 11
SECTION 2.1. The Offer............................................................................. 11
SECTION 2.2. Action by Paramount................................................................... 13
SECTION 2.3. Receipt of Common Stock............................................................... 13
SECTION 2.4. Completion Certificate................................................................ 14
SECTION 2.5. Termination of the Offer.............................................................. 14
SECTION 2.6. Board of Directors; Section 14(f)..................................................... 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARAMOUNT........................... 15
SECTION 3.1. Organization and Qualification;Subsidiaries........................................... 15
SECTION 3.2. Certificate of Incorporation and By-Laws.............................................. 15
SECTION 3.3. Capitalization........................................................................ 15
SECTION 3.4. Authority Relative to This Agreement.................................................. 16
SECTION 3.5. No Conflict; Required Filings and Consents............................................ 16
SECTION 3.6. Compliance............................................................................ 17
SECTION 3.7. SEC Filings; Financial Statements..................................................... 17
SECTION 3.8. Absence of Certain Changes or Events.................................................. 18
SECTION 3.9. Absence of Litigation................................................................. 18
SECTION 3.10. Employee Benefit Plans................................................................ 18
SECTION 3.11. Trademarks, Patents and Copyrights.................................................... 19
SECTION 3.12. Taxes................................................................................. 19
SECTION 3.13. Amendment to Rights Agreement......................................................... 20
SECTION 3.14. Opinion of Financial Advisor.......................................................... 20
SECTION 3.15. Vote Required......................................................................... 20
SECTION 3.16. Brokers............................................................................... 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VIACOM............................ 21
SECTION 4.1. Organization and Qualification; Subsidiaries.......................................... 21
SECTION 4.2. Certificate of Incorporation and By-Laws.............................................. 21
SECTION 4.3. Capitalization........................................................................ 21
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SECTION 4.4. Authority Relative to This Agreement.................................................. 23
SECTION 4.5. No Conflict; Required Filings and Consents............................................ 23
SECTION 4.6. Compliance............................................................................ 24
SECTION 4.7. SEC Filings; Financial Statements..................................................... 24
SECTION 4.8. Absence of Certain Changes or Events.................................................. 25
SECTION 4.9. Absence of Litigation................................................................. 25
SECTION 4.10. Employee Benefit Plans................................................................ 25
SECTION 4.11. Trademarks, Patents and Copyrights.................................................... 26
SECTION 4.12. Taxes................................................................................. 26
SECTION 4.13. Opinion of Financial Advisor.......................................................... 27
SECTION 4.14. Vote Required......................................................................... 27
SECTION 4.15. Ownership of Paramount Common Stock................................................... 27
SECTION 4.16. Brokers............................................................................... 27
SECTION 4.17. Financing............................................................................. 27
SECTION 4.18. Purchases of Securities............................................................... 27
SECTION 4.19. Representations in Blockbuster Merger Agreement....................................... 27
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER............................ 27
SECTION 5.1. Conduct of Respective Businesses by Paramount and Viacom Pending the Merger........... 27
ARTICLE VI
ADDITIONAL COVENANTS...................................... 29
SECTION 6.1. Access to Information; Confidentiality................................................ 29
SECTION 6.2. Intentionally omitted................................................................. 29
SECTION 6.3. Directors' and Officers' Indemnification and Insurance................................ 29
SECTION 6.4. Notification of Certain Matters....................................................... 30
SECTION 6.5. Tax Treatment......................................................................... 31
SECTION 6.6. Registration Statement; Joint Proxy Statement; Offer Documents and Schedule 14D-9..... 31
SECTION 6.7. Stockholders' Meetings................................................................ 32
SECTION 6.8. Letters of Accountants................................................................ 32
SECTION 6.9. Employee Benefits..................................................................... 32
SECTION 6.10. Further Action; Reasonable Best Efforts............................................... 33
SECTION 6.11. Debt Instruments...................................................................... 33
SECTION 6.12. Public Announcements.................................................................. 33
SECTION 6.13. Listing of Viacom Securities.......................................................... 34
SECTION 6.14. Affiliates of Paramount............................................................... 34
SECTION 6.15. Conveyance Taxes...................................................................... 34
SECTION 6.16. Rights Agreement...................................................................... 34
SECTION 6.17. Assumption of Debt and Leases......................................................... 34
SECTION 6.18. Gains Tax............................................................................. 34
SECTION 6.19. Reverse Merger........................................................................ 35
SECTION 6.20. Post-Offer Agreements................................................................. 35
SECTION 6.21. Transactions With Significant Stockholder After the Effective Time.................... 35
SECTION 6.22. Blockbuster Merger Agreement and Subscription Agreement............................... 35
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ARTICLE VII
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CLOSING CONDITIONS....................................... 36
SECTION 7.1. Conditions to Obligations of Each Party to Effect the Merger.......................... 36
SECTION 7.2. Additional Conditions to Obligations of Viacom........................................ 36
SECTION 7.3. Additional Conditions to Obligations of Paramount..................................... 37
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER................................ 37
SECTION 8.1. Termination........................................................................... 37
SECTION 8.2. Effect of Termination................................................................. 39
SECTION 8.3. Amendment............................................................................. 39
SECTION 8.4. Waiver................................................................................ 39
SECTION 8.5. Fees, Expenses and Other Payments..................................................... 39
ARTICLE IX
GENERAL PROVISIONS....................................... 40
SECTION 9.1. Effectiveness of Representations, Warranties and Agreements........................... 40
SECTION 9.2. Notices............................................................................... 40
SECTION 9.3. Certain Definitions................................................................... 41
SECTION 9.4. Time Period........................................................................... 42
SECTION 9.5. Headings.............................................................................. 42
SECTION 9.6. Severability.......................................................................... 42
SECTION 9.7. Entire Agreement...................................................................... 42
SECTION 9.8. Assignment............................................................................ 42
SECTION 9.9. Parties in Interest................................................................... 42
SECTION 9.10. Specific Performance.................................................................. 42
SECTION 9.11. Governing Law......................................................................... 42
SECTION 9.12. Counterparts.......................................................................... 42
ANNEX A Conditions to the Offer
ANNEX B Principal Terms of Viacom Merger Debentures
ANNEX C Principal Terms of Contingent Value Rights
ANNEX D Principal Terms of Three Year Warrants
ANNEX E Principal Terms of Five Year Warrants
EXHIBIT 6.14 Form of Affiliate Letter
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of February 4,
1994 (this "Agreement"), between VIACOM INC., a Delaware corporation ("Viacom"),
and PARAMOUNT COMMUNICATIONS INC., a Delaware corporation ("Paramount"),
amending and restating the Agreement and Plan of Merger, dated as of January 21,
1994, between Viacom and Paramount, as amended (the "January Merger Agreement").
WITNESSETH:
WHEREAS, on January 21, 1994, Viacom and Paramount entered into the January
Merger Agreement, pursuant to which Viacom and Paramount agreed to enter into a
business combination transaction;
WHEREAS, Viacom and Paramount have determined that it is in the best
interest of their respective shareholders to enter into this Agreement so as to
facilitate the business combination of the two companies through a first-step
cash tender offer and a second-step merger, while preserving the ability to
proceed with a single-step merger in appropriate circumstances, and in
accordance with the General Corporation Law of the State of Delaware ("Delaware
Law"), Paramount and Viacom have agreed to enter into a business combination
transaction pursuant to which Paramount will merge with and into Viacom (the
"Forward Merger") or alternatively, a subsidiary of Viacom ("Merger Subsidiary")
will merge with and into Paramount (the "Reverse Merger" and, together with the
Forward Merger, the "Merger");
WHEREAS, in furtherance of the Merger, Viacom has amended and supplemented
its outstanding tender offer (as amended and supplemented in accordance with
this Agreement, the "Offer") to acquire 61,657,432 shares of common stock, par
value $1.00 per share, of Paramount ("Paramount Common Stock"), or such greater
number of shares as equals 50.1% of the shares of Paramount Common Stock
outstanding on a fully diluted basis (as defined in Section 9.3 herein), for
$107.00 per Paramount share (the consideration per share of Paramount Common
Stock to be paid pursuant to the Offer being referred to as the "Per Share
Amount"), upon the terms and subject to the conditions of this Agreement and the
Offer;
WHEREAS, the Board of Directors of Paramount has determined that the Merger
and the Offer are consistent with and in furtherance of the long-term business
strategy of Paramount and are fair to, and in the best interests of, Paramount
and the holders of Paramount Common Stock and has approved and adopted this
Agreement and has approved the Merger and the other transactions contemplated
hereby (including, without limitation, the Offer) and recommended approval and
adoption of this Agreement and approval of the Merger by the stockholders of
Paramount and agreed to continue to recommend that stockholders of Paramount
tender their shares of Paramount Common Stock pursuant to the Offer;
WHEREAS, the Board of Directors of Viacom has determined that the Merger
and the Offer are consistent with and in furtherance of the long-term business
strategy of Viacom and are fair to, and in the best interests of, Viacom and its
stockholders and has approved and adopted this Agreement and has approved the
Merger and the other transactions contemplated hereby (including, without
limitation, the making of the Offer) and recommended approval and adoption of
this Agreement and approval of the Merger by the holders of the Class A Common
Stock, par value $.01 per share, of Viacom (the "Viacom Class A Common Stock");
WHEREAS, for federal income tax purposes, it is intended that the Forward
Merger qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, concurrently with the execution of the January Merger Agreement
and as an inducement to Paramount to enter into the January Merger Agreement,
National Amusements, Inc., a Maryland corporation and the majority stockholder
of Viacom ("National"), and Paramount entered into a Voting Agreement (the
"Voting Agreement") pursuant to which National shall, among other things, vote
its shares of Viacom Class A Common Stock in favor of the Merger and the other
transactions contemplated by this Agreement, as amended from time to time;
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NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. 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 defined in Section 1.3), Paramount shall be merged with and into
Viacom; provided, however, that if, after consulting with Paramount and its
professional advisors in good faith, Shearman & Sterling, counsel to Viacom, is
unable to deliver an opinion in form and substance reasonably satisfactory to
Viacom (such opinion to be based on customary assumptions and representations)
that the Forward Merger will qualify as a reorganization under Section 368(a) of
the Code, Viacom may elect to cause a subsidiary of Viacom to merge with and
into Paramount. As a result of the Forward Merger, the separate corporate
existence of Paramount (or, in the case of the Reverse Merger, Merger
Subsidiary) shall cease and Viacom (or, in the case of the Reverse Merger,
Paramount) shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
SECTION 1.2. Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1 and subject to the satisfaction or, if permissible, 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 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 1.3. Effective Time. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, 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 required by, and executed in accordance
with the relevant provisions of, Delaware Law (the date and time of such filing,
or such later date or time as set forth therein, being the "Effective Time").
SECTION 1.4. 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, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of Viacom (or, in the case of the Reverse
Merger, Merger Subsidiary) and Paramount shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Viacom (or, in the case of
the Reverse Merger, Merger Subsidiary) and Paramount shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 1.5. Certificate of Incorporation; By-Laws. (a) At the Effective
Time of the Forward Merger, the Certificate of Incorporation and the By-Laws of
Viacom, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation and the By-Laws of the Surviving Corporation.
(b) Alternatively, at the Effective Time of the Reverse Merger, the
Certificate of Incorporation and By-Laws, respectively, of the Surviving
Corporation shall be amended and restated in their entirety to read as the
Certificate of Incorporation and By-Laws of Merger Subsidiary.
SECTION 1.6. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Viacom, Paramount or the
holders of any of the following securities:
(a) In the event that the Offer has been consummated prior to the
Effective Time, each share of Paramount Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Paramount
Common Stock to be canceled pursuant to Section 1.6(c) and any Dissenting
Shares (as defined in Section 1.10)) shall be converted into the right to
receive
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(A) .93065 shares of Class B common stock, par value $0.01 per share
("Viacom Class B Common Stock"), of Viacom, (B) $17.50 principal amount of
8% exchangeable subordinated debentures (the "Viacom Merger Debentures") of
Viacom having the principal terms described in Annex B, (C) .93065
contingent value rights of Viacom (the "CVRs") having the principal terms
described in Annex C, (D) .50 warrants (the "Three Year Warrants") of
Viacom having the principal terms described in Annex D and (E) .30 warrants
(the "Five Year Warrants", and together with the Three Year Warrants, the
"Warrants") of Viacom having the principal terms described in Annex E;
provided, however, that, in any event, if between the date of this
Agreement and the Effective Time the outstanding shares of Viacom Class B
Common Stock or Paramount Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the amounts of Viacom Class B Common
Stock, Viacom Merger Debentures, CVRs and Warrants specified above shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares. All such shares of Paramount Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each certificate previously evidencing any such shares shall
thereafter represent the right to receive, upon the surrender of such
certificate in accordance with the provisions of Section 1.7 certificates
evidencing (a) such number of whole shares of Viacom Class B Common Stock
and (b) such number of whole CVRs, Viacom Merger Debentures and Warrants
into which such Paramount Common Stock was converted in accordance
herewith. The holders of such certificates previously evidencing such
shares of Paramount Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares
of Paramount Common Stock except as otherwise provided herein or by law. No
fractional share of Viacom Class B Common Stock or fractional CVR, Viacom
Merger Debenture or Warrant shall be issued and, in lieu thereof, a cash
payment shall be made pursuant to Section 1.7(d).
(b) In the event that the Offer has not been consummated prior to the
Effective Time:
(i) subject to the further provisions of this Section 1.6, each
share of Paramount Common Stock issued and outstanding immediately prior
to the Effective Time (other than any shares of Paramount Common Stock
to be canceled pursuant to Section 1.6(c) and any Dissenting Shares),
shall be converted, subject to Section 1.7(d), into the right to receive
(A)(i) .93065 of a share of Viacom Class B Common Stock (the "Class B
Exchange Ratio"); (ii) $17.50 principal amount of Viacom Merger
Debentures (the "Debenture Exchange Ratio"); (iii) .93065 CVRs (the "CVR
Exchange Ratio"); (iv) .50 Three Year Warrants (the "Three Year Warrant
Exchange Ratio"); and (v) .30 Five Year Warrants (the "Five Year Warrant
Exchange Ratio", and together with the Class B Exchange Ratio, the
Debenture Exchange Ratio, the CVR Exchange Ratio and Three Year Warrant
Exchange Ratio, the "Exchange Ratios"), (B) $107.00 in cash (the "Per
Share Cash Amount") or (C) a combination of shares of Viacom Class B
Common Stock, CVRs, Viacom Merger Debentures, Warrants and cash
determined in accordance with Sections 1.6(b)(iv), (v) and (vi);
provided, however, that, in any event, if between the date of this
Agreement and the Effective Time the outstanding shares of Viacom Class
B Common Stock, Viacom Merger Debentures or Paramount Common Stock shall
have been changed into a different number of shares or a different
class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Exchange
Ratios and Per Share Cash Amount shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares. All such
shares of Paramount Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist,
and each certificate previously evidencing any such shares shall
thereafter represent the right to receive, upon the surrender of such
certificate in accordance with the provisions of Section 1.7 and in
accordance with the allocation procedures set forth in
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this Section 1.6, (i) certificates evidencing (x) such number of whole
shares of Viacom Class B Common Stock and (y) such number of whole CVRs,
Viacom Merger Debentures and Warrants into which such Paramount Common
Stock was converted in accordance with the Exchange Ratios and/or (ii)
the Per Share Cash Amount multiplied by the number of shares of
Paramount Common Stock previously evidenced by the canceled certificate.
The holders of such certificates previously evidencing such shares of
Paramount Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such shares of
Paramount Common Stock except as otherwise provided herein or by law. No
fractional share of Viacom Class B Common Stock or fractional CVR,
Viacom Merger Debenture or Warrant shall be issued and, in lieu thereof,
a cash payment shall be made pursuant to Section 1.7(d).
(ii) Subject to the election and allocation procedures set forth in
this Section 1.6, each holder of record of shares of Paramount Common
Stock as of the record date for the meeting of stockholders of Paramount
referred to in Section 6.7 will be entitled to (A) elect to receive
certificates evidencing such number of whole shares of Viacom Class B
Common Stock and (y) such number of whole CVRs, Viacom Merger Debentures
and Warrants into which such number of shares of Paramount Common Stock
would be converted in accordance with the Exchange Ratios (a "Securities
Election"), (B) elect to receive the Per Share Cash Amount multiplied by
such number of shares of Paramount Common Stock (a "Cash Election"), or
(C) indicate that such holder has no preference as to the receipt of
cash or shares of Viacom Class B Common Stock and CVRs, Viacom Merger
Debentures and Warrants in exchange for such shares of Paramount Common
Stock (a "Non-Election"). All such elections shall be made on a form
designed for that purpose and mutually acceptable to Viacom and
Paramount (a "Form of Election") and mailed to holders of record of
shares of Paramount Common Stock as of the record date for the meeting
of stockholders of Paramount referred to in Section 6.7. Holders of
record of shares of Paramount Common Stock who hold such shares as
nominees, trustees or in other representative capacities
("Representatives") may submit multiple Forms of Election, provided that
such Representative certifies that each such Form of Election covers all
the shares of Paramount Common Stock held by such Representative for a
particular beneficial owner entitled to so elect pursuant to the first
sentence of this Section 1.6(b)(ii). Elections shall be made by holders
of Paramount Common Stock by mailing to the Exchange Agent (as defined
in Section 1.7) properly completed and signed Forms of Election. In
order to be effective, a Form of Election must be received by the
Exchange Agent no later than the close of business on the last business
day prior to the Effective Time. All elections may be revoked until the
last business day prior to the Effective Time. Viacom shall have the
discretion, which it may delegate in whole or in part to the Exchange
Agent, to determine whether Forms of Election have been properly
completed and signed and properly and timely submitted or revoked and to
disregard immaterial defects in Forms of Election, and any good faith
decision of Viacom or the Exchange Agent in such matters shall be
binding and conclusive. Neither Viacom nor the Exchange Agent shall be
under any obligation to notify any person of any defect in a Form of
Election. Any holder of shares of Paramount Common Stock who fails to
make an election and any holder who fails to submit to the Exchange
Agent a properly completed and signed and properly and timely submitted
Form of Election shall be deemed to have made a Non-Election.
(iii) The aggregate number of shares of Paramount Common Stock to
be converted into the right to receive cash in the Merger (the "Cash
Election Number") shall be equal to 50.1% of the number of shares of
Paramount Common Stock outstanding immediately prior to the Effective
Time, and the aggregate number of shares of Paramount Common Stock to be
converted into the right to receive shares of Viacom Class B Common
Stock, CVRs, Viacom Merger Debentures and Warrants in the Merger (the
"Securities Election Number") shall be
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equal to 49.9% of the number of shares of Paramount Common Stock
outstanding immediately prior to the Effective Time.
(iv) If the aggregate number of shares of Paramount Common Stock
with respect to which Cash Elections have been made plus Dissenting
Shares (the "Cash Election Shares") exceeds the Cash Election Number,
all shares of Paramount Common Stock with respect to which Securities
Elections have been made (the "Securities Election Shares") and all
shares of Paramount Common Stock with respect to which Non-Elections
have been made (the "Non-Election Shares") shall be converted into the
right to receive shares of Viacom Class B Common Stock and CVRs, Viacom
Merger Debentures and Warrants, and the Cash Election Shares (other than
Dissenting Shares) shall be converted into the right to receive shares
of Viacom Class B Common Stock, CVRs, Viacom Merger Debentures, Warrants
and cash in the following manner:
each Cash Election Share (other than Dissenting Shares) shall be
converted into the right to receive (i) an amount in cash, without
interest, equal to the product of (x) the Per Share Cash Amount and
(y) a fraction (the "Cash Fraction"), the numerator of which shall be
the Cash Election Number and the denominator of which shall be the
total number of Cash Election Shares, (ii) a number of shares of
Viacom Class B Common Stock equal to the product of (x) the Class B
Exchange Ratio and (y) a fraction equal to one minus the Cash
Fraction, (iii) a number of CVRs equal to the product of (x) the CVR
Exchange Ratio and (y) a fraction equal to one minus the Cash
Fraction, (iv) a principal amount of Viacom Merger Debentures equal
to the product of (x) the Debenture Exchange Ratio and (y) a fraction
equal to one minus the Cash Fraction, (v) a number of Three Year
Warrants equal to the product of (x) the Three Year Warrant Exchange
Ratio and (y) a fraction equal to one minus the Cash Fraction and
(vi) a number of Five Year Warrants equal to the product of (x) the
Five Year Warrant Exchange Ratio and (y) a fraction equal to one
minus the Cash Fraction.
(v) If the aggregate number of Securities Election Shares exceeds
the Securities Election Number, all Cash Election Shares (other than
Dissenting Shares) and all Non-Election Shares shall be converted into
the right to receive cash, and all Securities Election Shares shall be
converted into the right to receive shares of Viacom Class B Common
Stock, CVRs, Viacom Merger Debentures, Warrants and cash in the
following manner:
each Securities Election Share shall be converted into the right to
receive (i) a number of shares of Viacom Class B Common Stock equal
to the product of (x) the Class B Exchange Ratio and (y) a fraction
(the "Securities Fraction"), the numerator of which shall be the
Securities Election Number and the denominator of which shall be the
total number of Securities Election Shares, (ii) a number of CVRs
equal to the product of (x) the CVR Exchange Ratio and (y) the
Securities Fraction, (iii) the principal amount of Viacom Merger
Debentures equal to the product of (x) the Debenture Exchange Ratio
and (y) the Securities Fraction, (iv) a number of Three Year Warrants
equal to the product of (x) the Three Year Warrant Exchange Ratio and
(y) the Securities Fraction, (v) a number of Five Year Warrants equal
to the product of (x) the Five Year Warrant Exchange Ratio and (y)
the Securities Fraction and (vi) an amount in cash, without interest,
equal to the product of (x) the Per Share Cash Amount and (y) a
fraction equal to one minus the Securities Fraction.
(vi) In the event that neither Section 1.6(b)(iv) nor Section k
1.6(b)(v) above is applicable, all Cash Election shares shall be
converted into the right to receive cash, all Securities Election Shares
shall be converted into the right to receive shares of Viacom Class B
Common Stock, CVRs, Viacom Merger Debentures and Warrants, and the
Non-Election
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Shares, if any, shall be converted into the right to receive shares of
Viacom Class B Common Stock, CVRs, Viacom Merger Debentures, Warrants
and cash in the following manner:
each Non-Election Share shall be converted into the right to receive
(i) an amount in cash, without interest, equal to the product of (x)
the Per Share Cash Amount and (y) a fraction (the "Non-Election
Fraction"), the numerator of which shall be the excess of the Cash
Election Number over the total number of Cash Election Shares and the
denominator of which shall be the excess of (A) the number of shares
of Paramount Common Stock outstanding immediately prior to the
Effective Time over (B) the sum of the total number of Cash Election
Shares and the total number of Securities Election Shares, (ii) a
number of shares of Viacom Class B Common Stock equal to the product
of (x) the Class B Exchange Ratio and (y) a fraction equal to one
minus the Non-Election Fraction, (iii) a number of CVRs equal to the
product of (x) the CVR Exchange Ratio and (y) a fraction equal to one
minus the Non-Election Fraction, (iv) the principal amount of Viacom
Merger Debentures equal to the product of (x) the Debenture Exchange
Ratio and (y) a fraction equal to one minus the Non-Election
Fraction, (v) a number of Three Year Warrants equal to the product of
(x) the Three Year Warrant Exchange Ratio and (y) a fraction equal to
one minus the Non-Election Fraction and (vi) a number of Five Year
Warrants equal to the product of (x) the Five Year Warrant Exchange
Ratio and (y) a fraction equal to one minus the Non-Election
Fraction.
(vii) The Exchange Agent shall make all computations contemplated
by this Section 1.6 and all such computations shall be binding and
conclusive on the holders of Paramount Common Stock.
(c) Each share of Paramount Common Stock held in the treasury of
Paramount and each share of Paramount Common Stock owned by Viacom or any
direct or indirect wholly owned subsidiary of Viacom or of Paramount
immediately prior to the Effective Time shall automatically be canceled and
extinguished without any conversion thereof and no payment shall be made
with respect thereto.
(d) In the Reverse Merger, each share of common stock of Merger
Subsidiary 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 of the Surviving Corporation.
SECTION 1.7. Exchange of Certificates and Cash. (a) Exchange Agent. As of
the Effective Time (in the case of a Merger to which Section 1.6(a) applies) or
promptly after completion of the allocation procedures set forth in Section 1.6
(in the case of a Merger to which Section 1.6(b) applies), Viacom shall deposit,
or shall cause to be deposited, with or for the account of a bank or trust
company designated by Viacom, which shall be reasonably satisfactory to
Paramount (the "Exchange Agent"), for the benefit of the holders of shares of
Paramount Common Stock (other than Dissenting Shares), for exchange in
accordance with this Article I, through the Exchange Agent, (i) certificates
evidencing the shares of Viacom Class B Common Stock, the Viacom Merger
Debentures, the Warrants and the CVRs issuable pursuant to Section 1.6 in
exchange for outstanding shares of Paramount Common Stock and (ii) cash, if any,
in the aggregate amount required to be exchanged for shares of Paramount Common
Stock pursuant to Section 1.6 (the "Exchange Cash Consideration") (such
certificates for shares of Viacom Class B Common Stock, the Viacom Merger
Debentures, the Warrants and the CVRs, together with any dividends or
distributions with respect thereto, and the Exchange Cash Consideration, if any,
being hereafter collectively referred to as the "Exchange Fund"). The Exchange
Agent shall, pursuant to irrevocable instructions, deliver the shares of Viacom
Class B Common Stock, the Viacom Merger Debentures, Warrants, CVRs and cash, if
any, contemplated to be issued pursuant to Section 1.6 out of the Exchange Fund
to holders of shares of Paramount Common Stock. Except as contemplated by
Section 1.7(d) hereof, the Exchange Fund shall not be used for any other
purpose. Any interest, dividends or other income earned on the investment of
cash or other property held in the Exchange Fund shall be for the account of
Viacom.
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(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Viacom will instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of Paramount Common Stock (other
than Dissenting Shares) (the "Certificates"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Viacom may reasonably specify) and (ii) instructions to effect the surrender of
the Certificates in exchange for the certificates evidencing shares of Viacom
Class B Common Stock, the Viacom Merger Debentures, CVRs, Warrants and cash.
Upon surrender of a Certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly executed, and such other customary
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor (A) certificates
evidencing that number of whole shares of Viacom Class B Common Stock and that
number of whole CVRs, Viacom Merger Debentures and Warrants which such holder
has the right to receive in accordance with Section 1.6 in respect of the shares
of Paramount Common Stock formerly evidenced by such Certificate, (B) cash, if
any, which such holder has the right to receive in accordance with Section 1.6,
(C) any dividends or other distributions to which such holder is entitled
pursuant to Section 1.7(c), and (D) cash in lieu of fractional shares of Viacom
Class B Common Stock and fractional CVRs, Viacom Merger Debentures and Warrants
to which such holder is entitled pursuant to Section 1.7(d) (the shares of
Viacom Class B Common Stock, CVRs, Viacom Merger Debentures, Warrants,
dividends, distributions and cash described in clauses (A), (B), (C) and (D)
being, collectively, the "Merger Consideration"), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of Paramount Common Stock which is not registered in the transfer
records of Paramount, shares of Viacom Class B Common Stock, CVRs, Viacom Merger
Debentures, Warrants and cash may be issued and paid in accordance with this
Article I to a transferee if the Certificate evidencing such shares of Paramount
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 1.7, each Certificate shall be deemed at any time
after the Effective Time to evidence only the right to receive upon such
surrender the Merger Consideration.
(c) Distributions With Respect to Unexchanged Shares of Viacom Class B
Common Stock, CVRs, Viacom Merger Debentures and Warrants. No dividends or other
distributions declared or made after the Effective Time with respect to shares
of Viacom Class B Common Stock, CVRs, Viacom Merger Debentures and Warrants with
a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Viacom Class B Common
Stock, CVRs, Viacom Merger Debentures or Warrants they are entitled to receive
until the holder of such Certificate shall surrender such Certificate.
(d) Fractional Shares, CVRs, Viacom Merger Debentures and Warrants. (i) No
fraction of a share of Viacom Class B Common Stock or fraction of a CVR, Viacom
Merger Debenture or Warrant shall be issued in the Merger. In lieu of any such
fractional shares or fractional CVRs, Viacom Merger Debentures or Warrants, each
holder of Paramount Common Stock entitled to receive shares of Viacom Class B
Common Stock, CVRs, Viacom Merger Debentures and Warrants in the Merger, upon
surrender of a Certificate for exchange pursuant to this Section 1.7, shall be
paid (1) an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (x) the per share closing price on the American Stock
Exchange ("AMEX") of Viacom Class B Common Stock on the date of the Effective
Time (or, if shares of Viacom Class B Common Stock do not trade on the AMEX on
such date, the first date of trading of such Viacom Class B Common Stock on the
AMEX after the Effective Time) by (y) the fractional interest in Viacom Class B
Stock to which such holder would otherwise be entitled (after taking into
account all shares of Paramount Common Stock then held of record by such
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holder) plus (2) an amount in cash (without interest), rounded to the nearest
cent, determined by multiplying (x) the fair market value of one CVR, as
determined by reference to a five day average trading price, if available, or if
not available, in the reasonable judgment of the Viacom Board of Directors by
(y) the fractional interest in a CVR to which such holder would otherwise be
entitled (after taking into account all shares of Paramount Common Stock then
held of record by such holder) plus (3) an amount in cash (without interest)
rounded to the nearest cent, determined by multiplying (x) the fair market value
of one Three Year Warrant, as determined by reference to a five day average
trading price, if available, or if not available, in the reasonable judgment of
the Viacom Board of Directors by (y) the fractional interest in a Three Year
Warrant to which such holder would otherwise be entitled (after taking into
account all shares of Paramount Common Stock then held of record by such holder)
plus (4) an amount in cash (without interest) determined in accordance with
clause (ii) of this Section 1.7(d) in respect of the fractional interest in a
Viacom Merger Debenture to which such holder would otherwise be entitled (after
taking into account all shares of Paramount Common Stock then held of record by
such holder) plus (5) an amount in cash (without interest) rounded to the
nearest cent, determined by multiplying (x) the fair market value of one Five
Year Warrant, as determined by reference to a five day average trading price, if
available, or if not available, in the reasonable judgment of the Viacom Board
of Directors by (y) the fractional interest in a Five Year Warrant to which such
holder would otherwise be entitled (after taking into account all shares of
Paramount Common Stock then held of record by such holder). (ii) The Viacom
Merger Debentures shall be issued in the Merger only in principal amounts of
$1,000 or integral multiples thereof. Holders of shares of Paramount Common
Stock otherwise entitled to fractional amounts of Viacom Merger Debentures shall
be entitled to receive promptly from the Exchange Agent a cash payment in an
amount equal to such holder's proportionate interest (after taking into account
all shares of Paramount Common Stock then held of record by such holder) in the
proceeds from the sale or sales in the open market by the Exchange Agent, on
behalf of all such holders, of the aggregate fractional principal amount of
Viacom Merger Debentures.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Paramount Common Stock for six months
after the Effective Time shall be delivered to Viacom, upon demand, and any
holders of Paramount Common Stock who have not theretofore complied with this
Article I shall thereafter look only to Viacom for the Merger Consideration to
which they are entitled pursuant to this Article I.
(f) No Liability. Neither Viacom nor Paramount shall be liable to any
holder of shares of Paramount Common Stock for any such shares of Viacom Class B
Common Stock, CVRs, Viacom Merger Debentures, Warrants (or dividends or
distributions with respect thereto) or cash from the Exchange Fund delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
(g) Withholding Rights. Viacom or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Paramount Common Stock such amounts as
Viacom or the Exchange Agent is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Viacom or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Paramount Common
Stock in respect of which such deduction and withholding was made by Viacom or
the Exchange Agent.
SECTION 1.8. Stock Transfer Books. At the Effective Time, the stock
transfer books of Paramount shall be closed, and there shall be no further
registration of transfers of shares of Paramount Common Stock thereafter on the
records of Paramount. On or after the Effective Time, any Certificates
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presented to the Exchange Agent or Viacom for any reason shall be converted into
the Merger Consideration.
SECTION 1.9. Stock Options; Payment Rights. (a) At the Effective Time,
Paramount's obligations with respect to each outstanding Stock Option (as
defined in Section 3.3) to purchase shares of Paramount Common Stock, as amended
in the manner described in the following sentence, shall be assumed by Viacom.
The Stock Options so assumed by Viacom shall continue to have, and be subject
to, the same terms and conditions as set forth in the stock option plans and
agreements pursuant to which such Stock Options were issued as in effect
immediately prior to the Effective Time, except that each such Stock Option
shall be exercisable for (i) that number of whole shares of Viacom Class B
Common Stock equal to the product of the number of shares of Paramount Common
Stock covered by such Stock Option immediately prior to the Effective Time
multiplied by the Class B Exchange Ratio and rounded up to the nearest whole
number of shares of Viacom Class B Common Stock, (ii) that number of whole CVRs
equal to the product of the number of shares of Paramount Common Stock covered
by such Stock Option immediately prior to the Effective Time multiplied by the
CVR Exchange Ratio and rounded up to the nearest whole number of CVRs; provided,
that, if the option holder has not exercised his or her Stock Option prior to
the maturity of the CVRs, then the CVRs described above shall be replaced by
that number of shares of Viacom Class B Common Stock equal in value to the
amount by which the Target Price (as defined in Annex C hereto) exceeds the
greater of the Current Market Value (as defined in Annex C hereto) and the
Minimum Price (as defined in Annex C hereto) on the applicable maturity date
multiplied by the number of such CVRs, rounded up to the nearest whole number of
shares, (iii) that number of whole Three Year Warrants equal to the product of
the number of shares of Paramount Common Stock covered by such Stock Option
immediately prior to the Effective Time multiplied by the Three Year Warrant
Exchange Ratio and rounded up to the nearest whole number of Three Year
Warrants; provided, that, if the option holder has not exercised his or her
Stock Option prior to the third anniversary of the Effective Time, then the
Three Year Warrants described above shall be replaced by that number of shares
of Viacom Class B Common Stock equal in value to the fair market value of such
Three Year Warrants (as determined by reference to the average trading price for
the five-day trading period immediately prior to the third anniversary of the
Effective Time, if available, or, if not available, in the reasonable judgment
of the Viacom Board of Directors), rounded up to the nearest whole number of
shares; (iv) that number of whole Five Year Warrants equal to the product of the
number of shares of Paramount Common Stock covered by such Stock Option
immediately prior to the Effective Time multiplied by the Five Year Warrant
Exchange Ratio and rounded up to the nearest whole number of Five Year Warrants;
provided, that, if the option holder has not exercised his or her Stock Option
prior to the fifth anniversary of the Effective Time, then the Five Year
Warrants described above shall be replaced by that number of shares of Viacom
Class B Common Stock equal in value to the fair market value of such Five Year
Warrants (as determined by reference to the average trading price for the
five-day trading period immediately prior to the fifth anniversary of the
Effective Time, if available, or if not available, in the reasonable judgment of
the Viacom Board of Directors), rounded up to the nearest whole number of
shares; and (v) that (A) principal amount of whole Viacom Merger Debentures
equal to the product of the number of shares of Paramount Common Stock covered
by such Stock Option immediately prior to the Effective Time multiplied by the
Debenture Exchange Ratio plus an amount in cash (without interest), rounded to
the nearest cent, determined by multiplying (x) the fair market value of one
Viacom Merger Debenture, as determined by reference to a five day average
trading price, if available, or if not available, in the reasonable judgment of
the Viacom Board of Directors by (y) the fractional interest in a Viacom Merger
Debenture to which such option holder would otherwise be entitled or (B) if
issued, that number of whole shares of Viacom Exchange Preferred Stock (as
defined in Annex B) equal to the product of the number of shares of Paramount
Common Stock covered by such Stock Option immediately prior to the Effective
Time multiplied by .35 and rounded up to the nearest whole number of shares of
Viacom Exchange Preferred Stock or (C) if issued, that principal amount of whole
Viacom Exchange Debentures (as defined in Annex B) equal to the
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product of the number of shares of Paramount Common Stock covered by such Stock
Option immediately prior to the Effective Time multiplied by the Debenture
Exchange Ratio plus an amount in cash (without interest), rounded to the nearest
cent, determined by multiplying (x) the fair market value of one Viacom Exchange
Debenture, as determined by reference to a five day average trading price, if
available, or if not available, in the reasonable judgment of the Viacom Board
of Directors by (y) the fractional interest in a Viacom Exchange Debenture to
which such option holder would otherwise be entitled, provided that there shall
be no such rounding up with respect to Incentive Stock Options (as defined
below). Viacom shall (i) reserve for issuance the number of shares of Viacom
Class B Common Stock, CVRs, Viacom Merger Debentures and Warrants that will
become issuable upon the exercise of such Stock Options pursuant to this Section
1.9 and (ii) promptly after the Effective Time, issue to each holder of an
outstanding Stock Option a document evidencing the assumption by Viacom of
Paramount's obligations with respect thereto under this Section 1.9. Nothing in
this Section 1.9 shall affect the schedule of vesting with respect to the Stock
Options to be assumed by Viacom as provided in this Section 1.9. In the case of
any Stock Option to which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code (an "Incentive Stock Option"), the
option price, the number and type of shares purchasable pursuant to such
Incentive Stock Option and the terms and conditions of exercise of such
Incentive Stock Option shall be determined immediately after the Effective Time
in such manner as to comply with Section 424(a) of the Code. To preserve the
qualification of all Incentive Stock Options under Section 422 of the Code, (i)
in addition to the Viacom Class B Common Stock and (ii) in lieu of all CVRs,
Viacom Merger Debentures or Warrants for which an Incentive Stock Option would
otherwise become exercisable pursuant to the foregoing provisions of this
Section 1.9, such Incentive Stock Option shall become exercisable for that
number of shares of Viacom Class B Common Stock equal to the fair market value
of such CVRs, Viacom Merger Debentures or Warrants (determined, at the time of
the Merger, by reference to a five-day average trading price of such securities,
if available, or if not available, in the reasonable judgment of the Viacom
Board of Directors).
SECTION 1.10. Dissenting Shares. (a) Notwithstanding any other provision of
this Agreement to the contrary, shares of Paramount Common Stock that are
outstanding immediately prior to the Effective Time and which are 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 and who shall not
have withdrawn such demand or otherwise have forfeited appraisal rights
(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 of Paramount
Common Stock 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 of Paramount Common Stock under such Section 262 shall
thereupon be deemed to have been converted into and to have become exchangeable,
as of the Effective Time, for the right to receive, without any interest
thereon, the Merger Consideration (as if such Shares were Non-Election Shares in
the case of a Merger to which section 1.6(b) applies), upon surrender, in the
manner provided in Section 1.7, of the certificate or certificates that formerly
evidenced such shares of Paramount Common Stock.
(b) Paramount shall give Viacom (i) prompt notice of any demands for
appraisal received by Paramount, withdrawals of such demands, and any other
instruments served pursuant to Delaware Law and received by Paramount and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under Delaware Law. Paramount shall not, except with the
prior written consent of Viacom, make any payment with respect to any demands
for appraisal, or offer to settle, or settle, any such demands.
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ARTICLE II
THE OFFER
SECTION 2.1. The Offer. (a) Viacom has amended and supplemented the Offer
to (i) provide that the purchase price offered for shares pursuant to the Offer
shall be the Per Share Amount, (ii) provide that the obligation of Viacom to
accept for payment and pay for Shares tendered pursuant to the Offer shall be
subject to the condition (as such condition may be amended in accordance with
the terms hereof, the "Minimum Condition") that at least 61,657,432 shares of
Paramount Common Stock (or such greater number of shares as equals 50.1% of the
shares of Paramount Common Stock then outstanding on a fully diluted basis)
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer, that the Board of Directors of Paramount, in accordance with Section
3.13 of this Agreement, shall have amended the Rights Agreement to make the
Rights (such terms being used as defined in Section 3.13) inapplicable to the
Offer and the Merger as contemplated by Section 3.13 or the Rights shall be
otherwise inapplicable to the Offer and the Merger (the "Rights Condition"), and
also shall be subject to the satisfaction of the other conditions set forth in
Annex A hereto and (iii) extend the expiration date of the Offer until Midnight
on February 14, 1994. Viacom expressly reserves the right to waive any such
condition (other than the Minimum Condition), to increase the aggregate cash
consideration to be paid pursuant to the Offer and to increase the number of
shares of Paramount Common Stock sought in the Offer; provided, however, that no
change may be made without the prior written consent of Paramount which
decreases the number of shares of Paramount Common Stock sought in the Offer
below 50.1% of the outstanding shares of Paramount Common Stock on a fully
diluted basis; which decreases the aggregate cash consideration payable in the
Offer or changes the form of consideration payable in the Offer (except to the
extent the Other Offeror (as defined below) has made such changes with the
consent of Paramount); or which imposes conditions to the Offer in addition to
those set forth in Annex A hereto. Notwithstanding the foregoing sentence, so
long as the Other Offeror is bound by substantially identical restrictions made
for the benefit of Paramount, Viacom shall not amend the Offer in order to
increase by less than $60 million the aggregate cash consideration to be paid
pursuant to the Offer or increase the number of shares of Paramount Common Stock
for which tenders are sought by less than 2% of the outstanding shares of
Paramount Common Stock. The Per Share Amount shall, subject to applicable
withholding of taxes, be net to the seller in cash, upon the terms and subject
to the conditions of the Offer. Subject to the terms and conditions of the Offer
(including, without limitation, the Minimum Condition and the terms of this
Agreement), Viacom shall pay, as promptly as practicable after expiration of the
Offer, for all shares of Paramount Common Stock validly tendered and not
withdrawn at the earliest such time following expiration of the Offer that all
conditions to the Offer shall have been waived or satisfied by Viacom.
(b) Viacom has filed with the Securities and Exchange Commission (the
"SEC") an amendment to its Tender Offer Statement on Schedule 14D-1 (together
with all amendments and supplements thereto, the "Schedule 14D-1") with respect
to the Offer. The Schedule 14D-1 contains or incorporates by reference an
amendment and supplement to the offer to purchase (the "Offer to Purchase") and
forms of the related letter of transmittal and any related summary advertisement
(the Schedule 14D-1, the Offer to Purchase and such other documents, together
with all supplements and amendments thereto, being referred to herein
collectively as the "Offer Documents"). Viacom and Paramount agree to correct
promptly any information provided by any of them for use in the Offer Documents
which shall have become false or misleading, and Viacom further agrees to take
all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with
the SEC and the other Offer Documents as so corrected to be disseminated to
holders of shares of Paramount Common Stock, in each case as and to the extent
required by applicable federal securities laws.
(c) (i) Notwithstanding the amendment of the Offer, Viacom shall be free to
terminate the Offer at any time subject to its continuing obligations to
consummate the Merger, including without limitation pursuant to Sections 6.6 and
6.10, provided that prior to such termination of the Offer,
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Viacom shall have determined in good faith that either (x) terminating the Offer
will facilitate the earlier consummation of the Merger in accordance with the
terms of this Merger Agreement or (y) the conditions to the Offer (other than
the Minimum Condition and the Rights Condition) are unlikely to be satisfied.
Notwithstanding the foregoing, Viacom hereby agrees that, without the written
consent of Paramount, it may not terminate the Offer unless required to
terminate pursuant to Section 2.5 hereof or extend the Expiration Date (as
defined below) except for failure to satisfy a condition at the Expiration Date,
at any time that all of the conditions to the Offer have been satisfied or that
there exists no material risk that the conditions will not be satisfied by such
Expiration Date, provided, Viacom may extend the Expiration Date pursuant to
this Section 2.1(c), Sections 2.1(a), 2.1(d) and 2.3 hereof or any such
extension required by Federal securities laws. (ii) No extension of the
expiration date (such expiration date as extended from time to time shall be
defined herein to mean the "Expiration Date") permitted pursuant to this
Agreement shall be for a period of less than three business days, and the
Expiration Date shall not be extended for any reason beyond 12:00 midnight on
February 14, 1994, or such later date in accordance with the last parenthetical
of Section 2.1(d)(ii), Section 2.3, or as required by law to the extent that the
extension arises due to an event outside the control of Viacom (those events not
deemed to be outside the control of the Offeror shall include, without
limitation, any change in the terms of the Offer or the Merger) (the "Final
Expiration Date"); Viacom agrees that it will not increase the price per share
of Paramount Common Stock payable in the Offer or the Merger or otherwise amend
the Offer or the terms of the Merger primarily to extend the expiration date of
the tender offer by QVC Network, Inc. ("QVC") (the "Other Offeror") to purchase
the outstanding shares of Paramount Common Stock (the "Other Offer"). Any
amendment to the Offer or any change in the consideration offered to the
Paramount stockholders in the Merger that results in an extension of the
Expiration Date shall be publicly announced by 5:00 p.m. on the date of such
amendment or change. Viacom hereby agrees that it shall not (a) seek to amend or
waive any provision of this Agreement that is substantially identical to the
provisions relating to the bidding procedures contained in the Other Exemption
Agreement (the "Bidding Procedures") or (b) publicly announce an intention to
take an action which is not otherwise permitted, or refrain from taking an
action which is required, under the terms of this Agreement relating to the
Bidding Procedures.
(d) In order to cause the Offer and the Other Offer to remain on the same
time schedule, Viacom hereby agrees that if the Other Offeror remains subject to
an agreement (the "Other Exemption Agreement"), containing terms for the benefit
of Paramount substantially similar to the form of exemption agreement between
Viacom and Paramount dated as of December 22, 1993, as amended (the "Exemption
Agreement"), and (i) extends the expiration date of the Other Offer (such
expiration date, as extended from time to time, the "Other Expiration Date") in
accordance with the Other Exemption Agreement, then the Expiration Date shall be
extended (as soon as practicable, but not later than one business day following
the announcement of the extension of the Other Expiration Date) by Viacom to the
Other Expiration Date, or (ii) if upon notification to Paramount by Viacom and
the Other Offeror of the results of their respective offers (which notification
shall be required to be delivered by Viacom and the Other Offeror no later than
promptly following the expiration of their respective offers), Paramount has
notified Viacom and the Other Offeror (which notification shall be required to
be delivered by Paramount promptly) that a number of shares of Paramount Common
Stock that would satisfy the Minimum Condition or the minimum condition defined
in the Other Offer (which under no circumstances may be less than 50.1% of the
outstanding shares of Paramount Common Stock on a fully diluted basis) (the
"Other Minimum Condition") shall not have been validly tendered (and not
withdrawn) pursuant to either the Offer or the Other Offer, respectively, at the
Expiration Date (or a number of shares of Paramount Common Stock that would
satisfy the Minimum Condition and the Other Minimum Condition shall have been
validly tendered and not withdrawn pursuant to both the Offer and the Other
Offer at the Expiration Date), then Viacom shall extend the Expiration Date of
the Offer for a period of 10 business days.
(e) Viacom shall be subject to the obligations of Sections 2.1(c)(ii),
2.1(d) and 2.5 for so long as the Other Offeror remains subject to the
obligations set forth in the Other Exemption Agreement;
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provided, however, that Viacom shall not be subject to Sections 2.1(c)(ii),
2.1(d) and 2.5 in the event that the Other Offeror has not performed or complied
in all material respects with the Other Exemption Agreement.
SECTION 2.2. Action by Paramount. (a) Paramount hereby approves of and
consents to the making of the Offer and represents that (i) the Board of
Directors of Paramount, at a meeting duly called and held on February 4, 1994,
has unanimously (A) determined that the Offer and the Merger, taken together,
are fair to and in the best interests of the holders of shares of Paramount
Common Stock, (B) approved and adopted this Agreement and the transactions
contemplated hereby and (C) recommended that the stockholders of Paramount
approve and adopt this Agreement and the transactions contemplated hereby and
accept the Offer, and (ii) Lazard Freres & Co. has delivered to the Board an
opinion on February 4, 1994, to the effect that, as of such date, the
consideration to be received by the holders of shares of Paramount Common Stock
pursuant to the Offer and the Merger, taken together, is fair to the holders of
shares of Paramount Common Stock from a financial point of view. Subject to the
fiduciary duties of the Board of Directors of Paramount under applicable law as
advised by independent legal counsel (who may be such party's regularly engaged
legal counsel), Paramount hereby consents to the inclusion in the Offer
Documents prepared in connection with the Offer of the recommendation of the
Board of Directors of Paramount described in the immediately preceding sentence.
(b) As soon as reasonably practicable after the date hereof, Paramount
shall file with the SEC an amendment to its Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing, subject to the fiduciary duties of
the Board of Directors of Paramount under applicable law as advised by
independent legal counsel (who may be such party's regularly engaged legal
counsel), the recommendation of the Board of Directors of Paramount described in
Section 2.2(a) and shall disseminate the Schedule 14D-9 to the extent required
by Rule 14e-2 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and any other applicable federal securities laws.
Paramount and Viacom agree to correct promptly any information provided by any
of them for use in the Schedule 14D-9 which shall have become false or
misleading, and Paramount further agrees to 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 of Paramount Common Stock, in each case as and to the extent
required by applicable federal securities laws.
(c) Paramount shall promptly furnish Viacom with mailing labels containing
the names and addresses of all record holders of shares of Paramount Common
Stock and with security position listings of shares of Paramount Common Stock
held in stock depositories, each as of a recent date, together with all other
available listings and computer files containing names, addresses and security
position listings of record holders and beneficial owners of shares of Paramount
Common Stock. Paramount shall furnish Viacom with such additional information,
including, without limitation, updated listings and computer files of
stockholders, mailing labels and security position listings, and such other
assistance as Viacom or its agents may reasonably request. 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 or the Offer, Viacom shall hold in confidence the information
contained in such labels, listings and files, shall use such information only in
connection with the Merger and the Offer, and, if this Agreement shall be
terminated in accordance with Section 8.1, shall deliver to Paramount all copies
of such information then in its possession.
SECTION 2.3. Receipt of Common Stock. Unless the event referred to in the
last parenthetical of Section 2.1(d)(ii) that would satisfy the Minimum
Condition occurs, in the event that a number of shares of Paramount Common Stock
shall have been validly tendered and not withdrawn in the Offer at the
Expiration Date and, as of such Expiration Date, Viacom has waived all
conditions to the Offer (other than the Minimum Condition and the conditions
relating to the Rights Agreement, Article XI of
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the Paramount Certificate of Incorporation, Section 203 of Delaware Law and
judicial or governmental injunction, each as set forth therein), then Viacom
shall extend the Expiration Date to a date 10 business days from the then
scheduled Expiration Date; provided, that such extension shall be for a period
of 5 business days in the event that the Other Offer has been terminated prior
to the foregoing Expiration Date.
SECTION 2.4. Completion Certificate. At such time as Viacom has fulfilled
the terms of Section 2.3 above, Viacom shall deliver to the Board of Directors
of Paramount a certificate (the "Completion Certificate"), executed by an
authorized officer of Viacom, certifying that all the terms of Section 2.3 have
been fulfilled.
SECTION 2.5. Termination of the Offer. Unless the event referred to in the
last parenthetical of Section 2.1(d)(ii) occurs, Viacom hereby agrees to
terminate the Offer at such time as Viacom has been notified pursuant to a
certificate executed by an authorized officer of Paramount that (i) a number of
shares of Paramount Common Stock that would satisfy the Other Minimum Condition
shall have been validly tendered to the Other Offer and not withdrawn at the
Other Expiration Date of the Other Offer, (ii) all conditions to the Other
Offer, except the Other Minimum Condition and the conditions relating to the
Rights Agreement, Article XI of the Paramount Certificate of Incorporation,
Section 203 of the Delaware Law and judicial or governmental injunction, each as
set forth therein, shall have been waived and (iii) a completion certificate
from the Other Offeror has been delivered to Paramount; provided, however, that
Viacom shall not be required to terminate the Offer in the event that the Other
Offeror has not performed or complied in all material respects with the Other
Exemption Agreement.
SECTION 2.6. Board of Directors; Section 14(f). (a) If requested by Viacom,
Paramount shall, promptly following the acceptance for payment of the shares of
Paramount Common Stock to be purchased pursuant to the Offer, and from time to
time thereafter, take all actions necessary to cause a majority of directors
(and of members of each committee of the Board of Directors) of Paramount and of
each subsidiary of Paramount to be comprised of the designees of Viacom
(whether, at the request of Viacom, by means of increasing the size of the Board
of Directors of Paramount or seeking the resignation of directors and causing
Viacom's designees to be elected); provided, that prior to receipt by Viacom of
long-form approval by the Federal Communications Commission (the "FCC")
permitting Viacom to control Paramount, Paramount shall take all actions
necessary to elect the Viacom voting trustee approved by the FCC to the
Paramount Board of Directors and to otherwise act in a manner consistent with
the voting trust agreement approved by the FCC.
(b) Paramount's obligations to cause designees of Viacom to be elected or
appointed to the Board of Directors of Paramount shall be subject to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Paramount shall
promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this Section, and shall include in the
Schedule 14D-9 such information with respect to Viacom and its officers and
directors as is required under Section 14(f) and Rule 14f-1. Viacom will supply
to Paramount any information with respect to it and its nominees, officers,
directors and affiliates required by Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of Viacom's designees pursuant to
this Section and prior to the Effective Time, any amendment or termination of
this Agreement, extension for the performance or waiver of the obligations or
other acts of Viacom or waiver of Paramount's rights hereunder, will require the
concurrence of a majority of directors of Paramount then in office who are
directors on the date hereof or are designated by a majority of the directors of
Paramount who are directors on the date hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARAMOUNT
Paramount hereby represents and warrants to Viacom that:
SECTION 3.1. Organization and Qualification; Subsidiaries. (a) Each of
Paramount and each Material Paramount Subsidiary (as defined below) is a
corporation, partnership or other legal entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
Paramount Material Adverse Effect (as defined below). Paramount and each
Material Paramount Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Paramount Material Adverse Effect. The
term "Paramount Material Adverse Effect" means any change or effect that is or
is reasonably likely to be materially adverse to the business, results of
operations or financial condition of Paramount and the Paramount Subsidiaries,
taken as a whole; provided, however, where such term qualifies a representation
or warranty contained in this Article III during the period beginning after the
date hereof and until the Effective Time, then such term shall mean any change
or effect that is or is reasonably likely to be materially adverse to the
business or financial condition of Paramount and the Paramount Subsidiaries,
taken as a whole.
(b) Each subsidiary of Paramount (a "Paramount Subsidiary") that
constitutes a Significant Subsidiary of Paramount within the meaning of Rule
1-02 of Regulation S-X of the SEC is referred to herein as a "Material Paramount
Subsidiary".
SECTION 3.2. Certificate of Incorporation and By-Laws. Paramount has
heretofore made available to Viacom a complete and correct copy of the
Certificate of Incorporation and the By-Laws or equivalent organizational
documents, each as amended to date, of Paramount and each Material Paramount
Subsidiary. Such Certificates of Incorporation, By-Laws and equivalent
organizational documents are in full force and effect. Neither Paramount nor any
Material Paramount Subsidiary is in violation of any provision of its
Certificate of Incorporation, By-Laws or equivalent organizational documents,
except for such violations that would not, individually or in the aggregate,
have a Paramount Material Adverse Effect.
SECTION 3.3. Capitalization. The authorized capital stock of Paramount
consists of 600,000,000 shares of Paramount Common Stock and 75,000,000 shares
of Preferred Stock, par value $.01 per share ("Paramount Preferred Stock"). As
of February 3, 1994, 121,937,762 shares of Paramount Common Stock were issued
and outstanding, all of which were validly issued, fully paid and nonassessable.
As of February 3, 1994, 25,924,286 shares were held in the treasury of
Paramount. As of January 31, 1994, 9,409,208 shares were reserved for future
issuance pursuant to Paramount's 1992 Stock Option Plan and 1989 Stock Option
Plan (any employee stock option issued under any such plan being a "Stock
Option") and reserved for future issuance under the Long-Term Incentive Plan.
Between August 31, 1993 and the date of this Agreement, awards have been made
under the Long-Term Performance Plan as indicated on Schedule 3.3. As of
February 3, 1994, options to acquire 2,398,060 shares of Paramount Common Stock
were outstanding. As of the date hereof, no shares of Paramount Preferred Stock
are issued and outstanding. Except as set forth in Section 3.3 of the Disclosure
Schedule previously delivered by Paramount to Viacom (the "Paramount Disclosure
Schedule"), or except as set forth in this Section 3.3, and except pursuant to
the Rights Agreement (as defined in Section 3.13), there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating
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to the issued or unissued capital stock of Paramount or any Material Paramount
Subsidiary or obligating Paramount or any Material Paramount Subsidiary to issue
or sell any shares of capital stock of, or other equity interests in, Paramount
or any Material Paramount Subsidiary. All shares of Paramount Common Stock
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. Except as set forth in
Section 3.3 of the Paramount Disclosure Schedule, there are no material
outstanding contractual obligations of Paramount or any Paramount Subsidiary to
repurchase, redeem or otherwise acquire any shares of Paramount Common Stock or
any capital stock of any Material Paramount Subsidiary, or make any material
investment (in the form of a loan, capital contribution or otherwise) in, any
Paramount Subsidiary or any other person. Each outstanding share of capital
stock of each Material Paramount Subsidiary is duly authorized, validly issued,
fully paid and nonassessable and each such share owned by Paramount or another
Paramount Subsidiary is free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on
Paramount's or such other Paramount Subsidiary's voting rights, charges and
other encumbrances of any nature whatsoever. Set forth in Section 3.3 of the
Disclosure Schedule is Paramount's percentage interest in the outstanding
capital stock or partnership interests of USA Networks, United Cinemas
International Multiplex B.V., United International Pictures and Cinamerica
Theatres, L.P.
SECTION 3.4. Authority Relative to This Agreement. Paramount has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions (including, without
limitation, the Offer) contemplated hereby (the "Transactions"). The execution
and delivery of this Agreement by Paramount and the consummation by Paramount of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action and no other corporate proceedings on the part of
Paramount are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority of the then
outstanding shares of Paramount Common Stock, 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 Paramount and, assuming the due
authorization, execution and delivery by Viacom, constitutes a legal, valid and
binding obligation of Paramount, enforceable against Paramount in accordance
with its terms. Paramount has taken all appropriate actions so that the
restrictions on business combinations contained in Section 203 of Delaware Law
and Article XI of Paramount's Certificate of Incorporation will not apply with
respect to or as a result of the Transactions.
SECTION 3.5. No Conflict; Required Filings and Consents. (a) Except as set
forth in Section 3.05 of the Disclosure Schedule, the execution and delivery of
this Agreement by Paramount does not, and the performance by Paramount of its
obligations under this Agreement will not, (i) conflict with or violate the
Certificate of Incorporation or By-Laws or equivalent organizational documents
of Paramount or any Material Paramount Subsidiary, (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Paramount or
any Paramount Subsidiary or by which any property or asset of Paramount or any
Paramount Subsidiary is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material benefit under,
or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Paramount or any Paramount Subsidiary pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Paramount or any Paramount
Subsidiary is a party or by which Paramount or any Paramount Subsidiary or any
property or asset of Paramount or any Paramount Subsidiary is bound or affected,
except, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
delay consummation of the Merger or the Offer in any material respect, or
otherwise prevent Paramount from performing its obligations under this Agreement
in any material respect, and would not, individually or in the aggregate, have a
Paramount Material Adverse Effect.
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(b) The execution and delivery of this Agreement by Paramount does not, and
the performance of this Agreement by Paramount will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign (each a "Governmental
Entity"), except (i) for (A) applicable requirements, if any, of the Exchange
Act, the Securities Act of 1933, as amended (the "Securities Act"), state
securities or "blue sky" laws ("Blue Sky Laws") and state takeover laws, (B)
applicable requirements of the Communications Act of 1934, as amended (the
"Communications Act"), and of state and local governmental authorities,
including state and local authorities granting franchises to operate cable
systems, (C) applicable requirements of the Investment Canada Act of 1985 and
the Competition Act (Canada), (D) filing and recordation of appropriate merger
documents as required by Delaware Law and (E) applicable requirements, if any,
of any non-United States competition, antitrust and investment laws and (ii)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not prevent or delay consummation
of the Merger or the Offer in any material respect, or otherwise prevent
Paramount from performing its obligations under this Agreement in any material
respect, and would not, individually or in the aggregate, have a Paramount
Material Adverse Effect.
SECTION 3.6. Compliance. Except as set forth in Section 3.6 of the
Paramount Disclosure Schedule, neither Paramount nor any Paramount Subsidiary is
in conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to Paramount or any Paramount Subsidiary or
by which any property or asset of Paramount or any Paramount Subsidiary is bound
or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Paramount or any Paramount Subsidiary is a party or by which Paramount or any
Paramount Subsidiary or any property or asset of Paramount or any Paramount
Subsidiary is bound or affected, except for any such conflicts, defaults or
violations that would not, individually or in the aggregate, have a Paramount
Material Adverse Effect.
SECTION 3.7. SEC Filings; Financial Statements. Except as set forth in
Section 3.7 of the Paramount Disclosure Schedule, (a) Paramount has filed all
forms, reports and documents required to be filed by it with the SEC since
October 31, 1990, and has heretofore made available to Viacom, in the form filed
with the SEC (excluding any exhibits thereto), (i) its Annual Reports on Form
10-K for the fiscal years ended October 31, 1990, 1991 and 1992, respectively,
(ii) its Transition Report on Form 10-K for the six months ended April 30, 1993,
as amended, (iii) its Quarterly Reports on Form 10-Q for the periods ended July
31, 1993 and October 31, 1993, (iv) all proxy statements relating to Paramount's
meetings of stockholders (whether annual or special) held since October 31,
1990, and (v) all other forms, reports and other registration statements (other
than Quarterly Reports on Form 10-Q not referred to in clause (iii) above and
preliminary materials) filed by Paramount with the SEC since October 31, 1990
(the forms, reports and other documents referred to in clauses (i), (ii), (iii),
(iv) and (v) above being referred to herein, collectively, as the "Paramount SEC
Reports"). The Paramount SEC Reports and any forms, reports and other documents
filed by Paramount with the SEC after the date of this Agreement (x) were or
will be prepared in accordance with the requirements of the Securities Act and
the Exchange Act, as the case may be, and the rules and regulations thereunder
and (y) did not at the time they were filed, or will not at the time they are
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No Paramount Subsidiary is required to file any form,
report or other document with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Paramount SEC Reports 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 the financial position, results of operations
and cash flows of Paramount and the consolidated Paramount Subsidiaries as at
the respective dates thereof and for the respective periods indicated therein
(subject, in the case of unaudited statements, to normal
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and recurring year-end adjustments which were not and are not expected,
individually or in the aggregate, to be material in amount).
(c) Except as set forth in Section 3.7 of the Paramount Disclosure Schedule
or except as and to the extent set forth in the Paramount SEC Reports filed with
the SEC prior to the date of this Agreement, Paramount and the Paramount
Subsidiaries do not have any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise) other than liabilities and
obligations which would not, individually or in the aggregate, have a Paramount
Material Adverse Effect.
SECTION 3.8. Absence of Certain Changes or Events. Since April 30, 1993,
except as contemplated by this Agreement or as set forth in Section 3.8 of the
Paramount Disclosure Schedule, contemplated by this Agreement or disclosed in
any Paramount SEC Report filed since April 30, 1993 and prior to the date of
this Agreement, Paramount and the Paramount Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since April 30, 1993, there has not been (i) as of the date
hereof, any change, occurrence or circumstance in the business, results of
operations or financial condition of Paramount or any Paramount Subsidiary
having, individually or in the aggregate, a Paramount Material Adverse Effect,
(ii) any damage, destruction or loss (whether or not covered by insurance) with
respect to any property or asset of Paramount or any Paramount Subsidiary and
having, individually or in the aggregate, a Paramount Material Adverse Effect,
(iii) any change by Paramount in its accounting methods, principles or
practices, (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Paramount or any Paramount
Subsidiary or any redemption, purchase or other acquisition of any of their
respective securities other than regular quarterly dividends on the shares of
Paramount Common Stock not in excess of $.20 per share and dividends by a
Paramount Subsidiary to Paramount and other than to fund pre-established
Paramount Plans and dividend reinvestment plans, or (v) other than as set forth
in Section 3.3 and pursuant to the plans, programs or arrangements referred to
in Section 3.10 and other than in the ordinary course of business consistent
with past practice, any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
Paramount or any Paramount Subsidiary.
SECTION 3.9. Absence of Litigation. Except as set forth in Section 3.9 of
the Paramount Disclosure Schedule or except as disclosed in the Paramount SEC
Reports filed with the SEC prior to the date of this Agreement, there is no
claim, action, proceeding or investigation pending or, to the best knowledge of
Paramount, threatened against Paramount or any Paramount Subsidiary, or any
property or asset of Paramount or any Paramount Subsidiary, before any court,
arbitrator or administrative, governmental or regulatory authority or body,
domestic or foreign, which, individually or in the aggregate, is reasonably
likely to have a Paramount Material Adverse Effect. Except as disclosed in the
Paramount SEC Reports filed with the SEC prior to the date of this Agreement,
neither Paramount nor any Paramount Subsidiary nor any property or asset of
Paramount or any Paramount Subsidiary is subject to any order, writ, judgment,
injunction, decree, determination or award having or reasonably likely to have,
individually or in the aggregate, a Paramount Material Adverse Effect.
SECTION 3.10. Employee Benefit Plans. With respect to all the employee
benefit plans, programs and arrangements maintained for the benefit of any
current or former employee, officer or director of Paramount or any Paramount
Subsidiary (the "Paramount Plans"), except as set forth in Section 3.10 of the
Paramount Disclosure Schedule or the Paramount SEC Reports and except as would
not, individually or in the aggregate, have a Paramount Material Adverse Effect:
(i) each Paramount Plan intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the Internal Revenue
Service (the "IRS") that it is so qualified and nothing has occurred since the
date of such letter that could reasonably be expected to affect the qualified
status of such
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Paramount Plan; (ii) each Paramount Plan has been operated in all respects in
accordance with its terms and the requirements of applicable law; (iii) neither
Paramount nor any Paramount Subsidiary has incurred any direct or indirect
liability under, arising out of or by operation of Title IV of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), in connection with
the termination of, or withdrawal from, any Paramount Plan or other retirement
plan or arrangement, and no fact or event exists that could reasonably be
expected to give rise to any such liability; and (iv) Paramount and the
Paramount Subsidiaries have not incurred any liability under, and have complied
in all material respects with, the Worker Adjustment Retraining Notification
Act, and no fact or event exists that could give rise to liability under such
act. Except as set forth in Section 3.10 of the Paramount Disclosure Schedule or
the Paramount SEC Reports, the aggregate accumulated benefit obligations of each
Paramount Plan subject to Title IV of ERISA (as of the date of the most recent
actuarial valuation prepared for such Paramount Plan) do not exceed the fair
market value of the assets of such Paramount Plan (as of the date of such
valuation).
SECTION 3.11. Trademarks, Patents and Copyrights. Paramount and the
Paramount Subsidiaries own or possess adequate licenses or other valid rights to
use all material patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, service marks, trade secrets, applications
for trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of Paramount
and the Paramount Subsidiaries as currently conducted or as contemplated to be
conducted, and Paramount is unaware of any assertion or claim challenging the
validity of any of the foregoing which, individually or in the aggregate, would
have a Paramount Material Adverse Effect. The conduct of the business of
Paramount and the Paramount Subsidiaries as currently conducted does not
conflict in any way with any patent, patent right, license, trademark, trademark
right, trade name, trade name right, service mark or copyright of any third
party that, individually or in the aggregate, would have a Paramount Material
Adverse Effect. To the best knowledge of Paramount, there are no infringements
of any proprietary rights owned by or licensed by or to Paramount or any
Paramount Subsidiary which, individually or in the aggregate, would have a
Paramount Material Adverse Effect.
SECTION 3.12. Taxes. Paramount and the Paramount Subsidiaries have timely
filed all federal, state, local and foreign tax returns and reports required to
be filed by them through the date hereof and shall timely file all returns and
reports required on or before the Effective Time, except for such returns and
reports the failure of which to file timely would not, individually or in the
aggregate, have a Paramount Material Adverse Effect. Such reports and returns
are and will be true, correct and complete, except for such failure to be true,
correct and complete as would not, individually or in the aggregate, have a
Paramount Material Adverse Effect. Paramount and the Paramount Subsidiaries have
paid and discharged all federal, state, local and foreign taxes due from them,
other than such taxes that are being contested in good faith by appropriate
proceedings and are adequately reserved as shown in the audited consolidated
balance sheet of Paramount dated October 31, 1992 (the "Paramount 1992 Balance
Sheet") and its most recent quarterly financial statements, except for such
failures to so pay and discharge which would not, individually or in the
aggregate, have a Paramount Material Adverse Effect. Neither the IRS nor any
other taxing authority or agency, domestic or foreign, is now asserting or, to
the best knowledge of Paramount, threatening to assert against Paramount or any
Paramount Subsidiary any deficiency or material claim for additional taxes or
interest thereon or penalties in connection therewith which, if such
deficiencies or claims were finally resolved against Paramount and the Paramount
Subsidiaries would, individually or in the aggregate, have a Paramount Material
Adverse Effect. The accruals and reserves for taxes (including interest and
penalties, if any, thereon) reflected in the Paramount 1992 Balance Sheet and
the most recent quarterly financial statements are adequate in accordance with
generally accepted accounting principles, except where the failure to be
adequate would not have a Paramount Material Adverse Effect. Paramount and the
Paramount Subsidiaries have withheld or collected and paid over to the
appropriate governmental authorities or are properly holding for such payment
all taxes required by law to be withheld or collected, except for such
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failures to have so withheld or collected and paid over or to be so holding for
payment which would not, individually or in the aggregate, have a Paramount
Material Adverse Effect. There are no material liens for taxes upon the assets
of Paramount or the Paramount Subsidiaries, other than liens for current taxes
not yet due and payable and liens for taxes that are being contested in good
faith by appropriate proceedings. Neither Paramount nor any Paramount Subsidiary
has agreed to or is required to make any adjustment under Section 481(a) of the
Code. Neither Paramount nor any Paramount Subsidiary has made an election under
Section 341(f) of the Code. For purposes of this Section 3.12, where a
determination of whether a failure by Paramount or a Paramount Subsidiary to
comply with the representations herein has a Paramount Material Adverse Effect
is necessary, such determination shall be made on an aggregate basis with all
other failures within this Section 3.12.
SECTION 3.13. Amendment to Rights Agreement. (a) The Board of Directors of
Paramount has taken all necessary action to amend the Rights Agreement, dated as
of September 7, 1988, as amended, between Paramount and Manufacturers Hanover
Trust Company, as Rights Agent (the "Rights Agreement") so that (i) none of the
execution or delivery of this Agreement, the exchange of the shares of Paramount
Common Stock for the shares of Viacom Class B Common Stock and CVRs, Viacom
Merger Debentures, Warrants and cash in accordance with Article II or the making
of the Offer will cause (A) the rights (the "Rights") issued pursuant to the
Rights Agreement to become exercisable under the Rights Agreement, (B) Viacom or
any of the Viacom Subsidiaries to be deemed an "Acquiring Person" (as defined in
the Rights Agreement), or (C) the "Stock Acquisition Date" (as defined in the
Rights Agreement) to occur upon any such event and (ii) the "Expiration Date"
(as defined in the Rights Agreement) of the Rights shall occur immediately prior
to the Effective Time. Paramount agrees to take all necessary action to amend
the Rights Agreement so that the consummation of the Offer, on the terms
permitted hereunder, will not cause any of the effects referred to in Section
3.13 (a)(i)(A), (B) or (C) to occur; provided, however, that Paramount shall not
be required to make such amendments to the Rights Agreement if (i) Viacom has
not performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the consummation of the Offer or (ii) Paramount obtains and there is
in force from the Delaware Court of Chancery an order permanently, preliminarily
or temporarily declaring that the making of such amendments to the Rights
Agreement would be contrary to the fiduciary duties of the Board of Directors of
Paramount. Notwithstanding anything else contained herein, in no event shall the
Board of Directors of Paramount make an amendment of the Rights Agreement in
favor of the Other Offeror or any other person without making such amendments in
favor of Viacom; provided that Paramount will not be obligated to make such
amendments for Viacom if Viacom has become obligated to terminate its Offer
pursuant to Section 2.5 of this Agreement.
(b) The "Distribution Date" (as defined in the Rights Agreement) has not
occurred.
SECTION 3.14. Opinion of Financial Advisor. Paramount has received the
opinion of Lazard Freres & Co., dated February 4, 1994, to the effect that, as
of such date, the consideration to be received by the stockholders of Paramount
pursuant to the offer and the Merger, taken together, is fair to such
stockholders from a financial point of view, a copy of which opinion will be
delivered to Viacom promptly upon receipt.
SECTION 3.15. Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Paramount Common Stock is the only vote of
the holders of any class or series of Paramount capital stock necessary to
approve the Merger.
SECTION 3.16. Brokers. No broker, finder or investment banker (other than
Lazard Freres & Co.) 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 Paramount. Paramount has heretofore furnished to Viacom a
complete and correct copy of all agreements between Paramount and Lazard Freres
& Co. pursuant to which such firm would be entitled to any payment relating to
the Transactions.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VIACOM
Viacom hereby represents and warrants to Paramount that:
SECTION 4.1. Organization and Qualification; Subsidiaries. (a) Each of
Viacom and each Material Viacom Subsidiary (as defined below) is a corporation,
partnership or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has the requisite power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, have a Viacom Material
Adverse Effect (as defined below). Viacom and each Material Viacom Subsidiary is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Viacom Material Adverse Effect. The term "Viacom Material Adverse Effect" means
any change or effect that is or is reasonably likely to be materially adverse to
the business, results of operations or financial condition of Viacom and the
Viacom Subsidiaries, taken as a whole; provided, however, where such term
qualifies a representation or warranty contained in this Article IV during the
period beginning after the date hereof and until the Effective Time, then such
term shall mean any change or effect that is or is reasonably likely to be
materially adverse to the business or financial condition of Viacom and the
Viacom Subsidiaries, taken as a whole.
(b) Each subsidiary of Viacom (a "Viacom Subsidiary") that constitutes a
Significant Subsidiary of Viacom within the meaning of Rule 1-02 of Regulation
S-X of the SEC is referred to herein as a "Material Viacom Subsidiary".
SECTION 4.2. Certificate of Incorporation and By-Laws. Viacom has
heretofore made available to Paramount a complete and correct copy of the
Certificate of Incorporation and the By-Laws or equivalent organizational
documents, each as amended to date, of Viacom and each Material Viacom
Subsidiary. Such Certificates of Incorporation, By-Laws and equivalent
organizational documents are in full force and effect. Neither Viacom nor any
Material Viacom Subsidiary is in violation of any provision of its Certificate
of Incorporation, By-Laws or equivalent organizational documents, except for
such violations that would not, individually or in the aggregate, have a Viacom
Material Adverse Effect.
SECTION 4.3. Capitalization. The authorized capital stock of Viacom
consists of 100,000,000 shares of Viacom Class A Common Stock, (together with
the Viacom Class B Common Stock, the "Viacom Common Stock"), 150,000,000 shares
of Viacom Class B Common Stock and 100,000,000 shares of Preferred Stock, par
value $.01 per share ("Viacom Preferred Stock"), of which 24,000,000 shares have
been designated Viacom Series A Preferred Stock (the "Viacom Series A Preferred
Stock") and 24,000,000 shares have been designated Viacom Series B Preferred
Stock (the "Viacom Series B Preferred Stock"). As of November 30, 1993, (i)
53,449,125 shares of Viacom Class A Common Stock and 67,345,982 shares of Viacom
Class B Common Stock were issued and outstanding, all of which were validly
issued, fully paid and non-assessable, (ii) no shares were held in the treasury
of Viacom, (iii) no shares were held by the Viacom Subsidiaries, and (iv)
224,610 shares of Viacom Class A Common Stock and 3,760,297 shares of Viacom
Class B Common Stock were reserved for future issuance pursuant to employee
stock options or stock incentive rights granted pursuant to Viacom's 1989
Long-Term Management Incentive Plan and the Viacom Inc. Stock Option Plan for
Outside Directors. As of the date hereof, 24,000,000 shares of Viacom Series A
Preferred Stock and 24,000,000 shares of Viacom Series B Preferred Stock are
issued and outstanding. Except as set forth in this Section 4.3 or as
contemplated by this Agreement, there are no options, warrants or other rights,
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agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of Viacom or any Material Viacom Subsidiary or
obligating Viacom or any Material Viacom Subsidiary to issue or sell any shares
of capital stock of, or other equity interests in, Viacom or any Material Viacom
Subsidiary, except for (i) options granted since November 30, 1993 in the
ordinary course consistent with past practice, (ii) the reservation of
17,140,800 shares of Viacom Class B Common Stock for issuance upon conversion of
shares of Viacom Series B Preferred Stock, (iii) the reservation of 8,570,400
shares of Viacom Class B Common Stock for issuance upon conversion of shares of
Viacom Series A Preferred Stock, (iv) the issuance of any securities in
connection with the acquisition of Blockbuster Entertainment Corporation, a
Delaware corporation ("Blockbuster"), and (v) the reservation of 22,727,273
shares of Viacom Class B Common Stock for issuance upon the consummation of the
transactions contemplated by the Subscription Agreement, dated as of January 7,
1994 (the "Blockbuster Subscription Agreement"), between Blockbuster and Viacom.
All shares of Viacom Common Stock and other securities 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 non-assessable. Except as set forth in Section
4.3 of the Disclosure Schedule previously delivered by Viacom to Paramount (the
"Viacom Disclosure Schedule"), there are no material outstanding contractual
obligations of Viacom or any Viacom Subsidiary to repurchase, redeem or
otherwise acquire any shares of Viacom Common Stock or any capital stock of any
Material Viacom Subsidiary, or make any material investment (in the form of a
loan, capital contribution or otherwise) in, any Viacom Subsidiary or any other
person, other than the amended and restated subscription agreement dated as of
October 21, 1993 between Viacom and Blockbuster, the subscription agreement
dated as of October 4, 1993, as amended, between Viacom and NYNEX Corporation
and the Blockbuster Subscription Agreement. Each outstanding share of capital
stock of each Material Viacom Subsidiary is duly authorized, validly issued,
fully paid and nonassessable and each such share owned by Viacom or another
Viacom Subsidiary is free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on Viacom's
or such other Viacom Subsidiary's voting rights, charges and other encumbrances
of any nature whatsoever. If and when the Warrants are exercised for Viacom
Class B Common Stock in accordance with the terms of the Warrants, such shares
of Viacom Class B Common Stock issued upon such exercise will be duly
authorized, validly issued, fully paid and non-assessable, and the holders of
outstanding shares of capital stock of Viacom are not entitled to any preemptive
or other rights with respect to the Warrants or the Viacom Class B Common Stock
issued upon such exercise. The Viacom Merger Debentures will be duly authorized,
and when the Viacom Merger Debentures have been duly executed, authenticated,
issued and delivered in the Merger pursuant to the terms of this Agreement and
the Indenture pursuant to which they are issued (the "Viacom Merger Debenture
Indenture") between Viacom and the trustee thereunder (the "Merger Debenture
Trustee"), such Viacom Merger Debentures will then constitute valid and legal
binding obligations of Viacom entitled to the benefits provided by the Viacom
Merger Debenture Indenture. Prior to the Effective Time, the Viacom Merger
Debenture Indenture will have been duly authorized by Viacom, duly qualified
under the Trust Indenture Act of 1939 and, when duly executed and delivered by
Viacom and the Merger Debenture Trustee, will constitute a valid and binding
instrument of Viacom enforceable in accordance with its terms. The shares of
Viacom Exchange Preferred Stock initially issuable upon the exchange of the
Viacom Merger Debentures will, if issued, be duly authorized, validly issued,
fully paid, non-assessable and free of pre-emptive rights. The Viacom Exchange
Debentures initially issuable upon exchange of the Viacom Exchange Preferred
Stock for such Viacom Exchange Debentures will be duly authorized; and when the
Viacom Exchange Debentures have been duly executed, authenticated, issued and
delivered in exchange for the Viacom Exchange Preferred Stock in accordance with
the terms of the Viacom Exchange Debentures and the Indenture pursuant to which
they are issued (the "Viacom Exchange Debenture Indenture") between Viacom and
the trustee thereunder (the "Exchange Debenture Trustee"), such Viacom Exchange
Debentures will then constitute valid and legal binding obligations of Viacom
entitled to the benefits provided by the Viacom Exchange Debenture Indenture. By
the date of issuance of the Viacom Exchange Preferred Stock, the Viacom Exchange
Debenture Indenture will have been duly authorized
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by Viacom, duly qualified under the Trust Indenture Act of 1939, and, when duly
executed and delivered by Viacom and the Exchange Debenture Trustee, will
constitute a valid and binding instrument of Viacom enforceable in accordance
with its terms. Upon their issuance, the Warrants and the CVRs shall each
constitute legal, valid and binding obligations of Viacom enforceable in
accordance with their terms.
SECTION 4.4. Authority Relative to This Agreement. Viacom has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Viacom and the consummation by
Viacom of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and the Voting Agreement has been
approved by the Viacom Board of Directors for purposes of Section 203 of
Delaware Law and no other corporate proceedings on the part of Viacom are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger (including the
issuance of, to the extent required by law, the Viacom Class B Common Stock, the
Viacom Merger Debentures, the CVRs, the Warrants, the Viacom Exchange Preferred
Stock and the Viacom Exchange Debentures), the approval by the holders of a
majority of the then outstanding shares of Viacom Class A Common Stock of (i)
this Agreement and the Merger and (ii) to the extent such matters have not been
previously voted upon and approved by the holders of the Viacom Class A Common
Stock, the amendment to Viacom's certificate of incorporation necessary to
increase (x) the shares of authorized Class B Viacom Common Stock to a number
not less than the number sufficient to consummate the issuance of shares of
Viacom Common Stock contemplated under this Agreement (including such shares
issuable upon the exercise of the Warrants and, if applicable, in connection
with the CVRs) and (y) the size of the Board of Directors of Viacom to a number
not less than 13 (collectively, the "Viacom Vote Matter"; and the amendments to
Viacom's Restated Certificate of Incorporation described in clauses (ii)(x) and
(y) above being, collectively, the "Viacom Certificate Amendments"), and the
filing and recordation of the foregoing amendment to Viacom's Restated
Certificate of Incorporation and appropriate merger documents as required by
Delaware Law). This Agreement has been duly and validly executed and delivered
by Viacom and, assuming the due authorization, execution and delivery by
Paramount, constitutes a legal, valid and binding obligation of Viacom,
enforceable against Viacom in accordance with its terms.
SECTION 4.5. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by Viacom does not, and the performance of the
transactions contemplated hereby by Viacom will not, (i) conflict with or
violate the Certificate of Incorporation or By-Laws or equivalent organizational
documents of Viacom or any Material Viacom Subsidiary, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Viacom or any Viacom Subsidiary or by which any property or asset of Viacom or
any Viacom Subsidiary is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material benefit under or
give to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of Viacom or any Viacom Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Viacom or any Viacom Subsidiary is a party or
by which Viacom or any Viacom Subsidiary or any property or asset of Viacom or
any Viacom Subsidiary is bound or affected, except in the case of clauses (ii)
and (iii) of this Section 4.5, for any such conflicts, violations, breaches,
defaults or other occurrences which would not prevent or delay consummation of
the Merger in any material respect, or otherwise prevent Viacom from performing
its obligations under this Agreement in any material respect, and would not,
individually or in the aggregate, have a Viacom Material Adverse Effect.
(b) The execution and delivery of this Agreement by Viacom does not, and
the performance of this Agreement by Viacom will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) applicable requirements, if any, of the
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Exchange Act, Securities Act, Trust Indenture Act of 1939, state securities or
Blue Sky Laws and state takeover laws, (B) the pre-merger notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (C)
applicable requirements of the Communications Act, and of state and local
governmental authorities, including state and local authorities granting
franchises to operate cable systems, (D) applicable requirements of the
Investment Canada Act of 1985 and the Competition Act (Canada), (E) filing and
recordation of appropriate merger documents and the Viacom Certificate
Amendments as required by Delaware Law and (F) applicable requirements, if any,
of any non-United States competition, antitrust and investment laws and (ii)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not prevent or delay consummation
of the Merger in any material respect, or otherwise prevent Viacom from
performing its obligations under this Agreement in any material respect, and
would not, individually or in the aggregate, have a Viacom Material Adverse
Effect.
SECTION 4.6. Compliance. Neither Viacom nor any Viacom Subsidiary is in
conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to Viacom or any Viacom Subsidiary or by
which any property or asset of Viacom or any Viacom Subsidiary is bound or
affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Viacom or any Viacom Subsidiary is a party or by which Viacom or any Viacom
Subsidiary or any property or asset of Viacom or any Viacom Subsidiary is bound
or affected, except for any such conflicts, defaults or violations that would
not, individually or in the aggregate, have a Viacom Material Adverse Effect.
SECTION 4.7. SEC Filings; Financial Statements. (a) Viacom has filed all
forms, reports and documents required to be filed by it with the SEC since
December 31, 1990, and has heretofore made available to Paramount, in the form
filed with the SEC (excluding any exhibits thereto), (i) its Annual Reports on
Form 10-K for the fiscal years ended December 31, 1990, 1991 and 1992,
respectively, (ii) its Quarterly Reports on Form 10-Q for the periods ended
March 31, 1993, June 30, 1993 and September 30, 1993, (iii) all proxy statements
relating to Viacom's meetings of stockholders (whether annual or special) held
since January 1, 1991 and (iv) all other forms, reports and other registration
statements (other than Quarterly Reports on Form 10-Q not referred to in clause
(ii) above and preliminary materials) filed by Viacom with the SEC since
December 31, 1990 (the forms, reports and other documents referred to in clauses
(i), (ii), (iii), and (iv) above being referred to herein, collectively, as the
"Viacom SEC Reports"). The Viacom SEC Reports and any other forms, reports and
other documents filed by Viacom with the SEC after the date of this Agreement
(x) were or will be prepared in accordance with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder and (y) did not at the time they were filed, or will not
at the time they are filed, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No Viacom Subsidiary (other than
Viacom International Inc., a Delaware corporation ("Viacom International")) is
required to file any form, report or other document with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Viacom SEC Reports 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 the consolidated financial position, results
of operations and cash flows of Viacom and the consolidated Viacom Subsidiaries
as at the respective dates thereof and for the respective periods indicated
therein (subject, in the case of unaudited statements, to normal and recurring
year-end adjustments which were not and are not expected, individually or in the
aggregate, to be material in amount).
(c) Except as and to the extent set forth in the Viacom SEC Reports filed
with the SEC prior to the date of this Agreement, Viacom and the Viacom
Subsidiaries do not have any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise) other than liabilities and
obligations which would not, individually or in the aggregate, have a Viacom
Material Adverse Effect.
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SECTION 4.8. Absence of Certain Changes or Events. Since December 31, 1992,
except as contemplated by this Agreement, any actions taken by Viacom in order
to consummate the acquisition of Blockbuster, or any actions taken by Viacom in
order to consummate the transactions contemplated by the Blockbuster
Subscription Agreement, as set forth in Section 4.8 of the Viacom Disclosure
Schedule or disclosed in any Viacom SEC Report filed since December 31, 1992 and
prior to the date of this Agreement, Viacom and the Viacom Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since December 31, 1992 there has not been
(i) as of the date hereof, any change, occurrence or circumstance in the
business, results of operations or financial condition of Viacom or any Viacom
Subsidiary having, individually or in the aggregate, a Viacom Material Adverse
Effect, (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to any property or asset of Viacom or any Viacom
Subsidiary and having, individually or in the aggregate, a Viacom Material
Adverse Effect, (iii) any change by Viacom in its accounting methods, principles
or practices, (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Viacom or any Viacom Subsidiary
or any redemption, purchase or other acquisition of any of their respective
securities other than dividends by a Viacom Subsidiary to Viacom or (v) other
than as set forth in Section 4.3 and pursuant to the plans, programs or
arrangements referred to in Section 4.10, other than in the ordinary course of
business consistent with past practice and other than as contemplated by the
Agreement and Plan of Merger, dated as of January 7, 1994 (the "Blockbuster
Merger Agreement"), between Blockbuster and Viacom, any increase in or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers or key employees of Viacom or any Viacom
Subsidiary, except for the establishment of the Viacom Inc. Stock Option Plan
for Outside Directors and the grant of options to purchase an aggregate of 5,000
shares thereunder.
SECTION 4.9. Absence of Litigation. Except as disclosed in the Viacom SEC
Reports filed with the SEC prior to the date of this Agreement there is no
claim, action, proceeding or investigation pending or, to the best knowledge of
Viacom, threatened against Viacom or any Viacom Subsidiary, or any property or
asset of Viacom or any Viacom Subsidiary, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, which individually or in the aggregate, is reasonably likely to have a
Viacom Material Adverse Effect. Except as disclosed in the Viacom SEC Reports
filed with the SEC prior to the date of this Agreement, neither Viacom nor any
Viacom Subsidiary nor any property or asset of Viacom or any Viacom Subsidiary
is subject to any order, writ, judgment, injunction, decree, determination or
award having or reasonably likely to have, individually or in the aggregate, a
Viacom Material Adverse Effect.
SECTION 4.10. Employee Benefit Plans. With respect to all the employee
benefit plans, programs and arrangements maintained for the benefit of any
current or former employee, officer or director of Viacom or any Viacom
Subsidiary (the "Viacom Plans"), except as set forth in Section 4.10 of the
Viacom Disclosure Schedule or the Viacom SEC Reports and except as would not,
individually or in the aggregate, have a Viacom Material Adverse Effect: (i)
none of the Viacom Plans is a multiemployer plan within the meaning of ERISA;
(ii) none of the Viacom Plans promises or provides retiree medical or life
insurance benefits to any person; (iii) each Viacom Plan intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS that it is so qualified and nothing has
occurred since the date of such letter that could reasonably be expected to
affect the qualified status of such Viacom Plan; (iv) each Viacom Plan has been
operated in all respects in accordance with its terms and the requirements of
applicable law; (v) neither Viacom nor any Viacom Subsidiary has incurred any
direct or indirect liability under, arising out of or by operation of Title IV
of ERISA in connection with the termination of, or withdrawal from, any Viacom
Plan or other retirement plan or arrangement, and no fact or event exists that
could reasonably be expected to give
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rise to any such liability; and (vi) Viacom and the Viacom Subsidiaries have not
incurred any liability under, and have complied in all respects with, the Worker
Adjustment Retraining Notification Act, and no fact or event exists that could
give rise to liability under such Act. Except as set forth in Section 4.10 of
the Viacom Disclosure Schedule or the Viacom SEC Reports, the aggregate
accumulated benefit obligations of each Viacom Plan subject to Title IV of ERISA
(as of the date of the most recent actuarial valuation prepared for such Viacom
Plan) do not exceed the fair market value of the assets of such Viacom Plan (as
of the date of such valuation).
SECTION 4.11. Trademarks, Patents and Copyrights. Viacom and the Viacom
Subsidiaries own or possess adequate licenses or other valid rights to use all
material patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, copyrights, service marks, trade secrets, applications for
trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of Viacom and
the Viacom Subsidiaries as currently conducted or as contemplated to be
conducted, and Viacom is unaware of any assertion or claim challenging the
validity of any of the foregoing which, individually or in the aggregate, would
have a Viacom Material Adverse Effect. The conduct of the business of Viacom and
the Viacom Subsidiaries as currently conducted does not conflict in any way with
any patent, patent right, license, trademark, trademark right, trade name, trade
name right, service mark or copyright of any third party that, individually or
in the aggregate, would have a Viacom Material Adverse Effect.
SECTION 4.12. Taxes. Viacom and the Viacom Subsidiaries have timely filed
all federal, state, local and foreign tax returns and reports required to be
filed by them through the date hereof and shall timely file all returns and
reports required on or before the Effective Time, except for such returns and
reports the failure of which to file timely would not, individually or in the
aggregate, have a Viacom Material Adverse Effect. Such reports and returns are
and will be true, correct and complete, except for such failures to be true,
correct and complete as would not, individually or in the aggregate, have a
Viacom Material Adverse Effect. Viacom and the Viacom Subsidiaries have paid and
discharged all federal, state, local and foreign taxes due from them, other than
such taxes that are being contested in good faith by appropriate proceedings and
are adequately reserved as shown in the audited consolidated balance sheet of
Viacom dated December 31, 1992 (the "Viacom 1992 Balance Sheet") and its most
recent quarterly financial statements, except for such failures to so pay and
discharge which would not, individually or in the aggregate, have a Viacom
Material Adverse Effect. Neither the IRS nor any other taxing authority or
agency, domestic or foreign, is now asserting or, to the best knowledge of
Viacom, threatening to assert against Viacom or any Viacom Subsidiary any
deficiency or material claim for additional taxes or interest thereon or
penalties in connection therewith which, if such deficiencies or claims were
finally resolved against Viacom and the Viacom Subsidiaries would, individually
or in the aggregate, have a Viacom Material Adverse Effect. The accruals and
reserves for taxes (including interest and penalties, if any, thereon) reflected
in the Viacom 1992 Balance Sheet and the most recent quarterly financial
statements are adequate in accordance with generally accepted accounting
principles, except where the failure to be adequate would not have a Viacom
Material Adverse Effect. Viacom and the Viacom Subsidiaries have withheld or
collected and paid over to the appropriate governmental authorities or are
properly holding for such payment all taxes required by law to be withheld or
collected, except for such failures to have so withheld or collected and paid
over or to be so holding for payment which would not, individually or in the
aggregate, have a Viacom Material Adverse Effect. There are no material liens
for taxes upon the assets of Viacom or the Viacom Subsidiaries, other than liens
for current taxes not yet due and payable and liens for taxes that are being
contested in good faith by appropriate proceedings. Neither Viacom nor any
Viacom Subsidiary has agreed to or is required to make any adjustment under
Section 481(a) of the Code. Neither Viacom nor any Viacom Subsidiary has made an
election under Section 341(f) of the Code. For purposes of this Section 4.12,
where a determination of whether a failure by Viacom or a Viacom Subsidiary to
comply with the representations herein has a Viacom Material Adverse Effect is
necessary, such determination shall be made on an aggregate basis with all other
failures within this Section 4.12.
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SECTION 4.13. Opinion of Financial Advisor. Viacom has received the opinion
of Smith Barney Shearson Inc., dated February 1, 1994, to the effect that, as of
such date, the financial terms of the proposed acquisition by Viacom of
Paramount are fair from a financial point of view to Viacom and its
stockholders. A copy of such opinion will be delivered to Paramount promptly.
SECTION 4.14. Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Viacom Class A Common Stock is the only
vote of the holders of any class or series of Viacom capital stock necessary to
approve the Viacom Vote Matter.
SECTION 4.15. Ownership of Paramount Common Stock. As of the date of this
Agreement and based on the number of issued and outstanding shares of Paramount
Common Stock as of September 3, 1993 set forth in Section 3.3, Viacom and its
affiliates beneficially own, in the aggregate, less than five percent of the
issued and outstanding shares of Paramount Common Stock.
SECTION 4.16. Brokers. No broker, finder or investment banker (other than
Smith Barney Shearson Inc., Goldman Sachs & Co. and Bear, Stearns & Co. Inc.) 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 Viacom.
Viacom has heretofore furnished to Paramount a complete and correct copy of all
agreements between Viacom and each of Smith Barney Shearson Inc., Goldman Sachs
& Co. and Bear, Stearns & Co. Inc. pursuant to which each such firm would be
entitled to any payment relating to the Transactions.
SECTION 4.17. Financing. Viacom has delivered to Paramount binding
commitments or agreements to obtain the financing in contemplation of the
Transactions (the "Financing") in an amount sufficient, together with the Viacom
Class B Common Stock, the Viacom Merger Preferred Stock, the CVRs and Warrants,
to acquire all the shares of Paramount Common Stock in the Offer and the Merger
and to pay all related contemplated fees and expenses. Viacom knows of no fact
or circumstance (including the obligations of Viacom under this Agreement) that
is reasonably likely to result in the inability of Viacom to receive the
proceeds from such Financing.
SECTION 4.18. Purchases of Securities. Since September 12, 1993, neither
Viacom nor, to Viacom's knowledge, its affiliates have purchased or sold shares
of Viacom Class A Common Stock or Viacom Class B Common Stock and neither Viacom
nor, to Viacom's knowledge, its affiliates have any knowledge of any such
trading.
SECTION 4.19. Representations in Blockbuster Merger Agreement. Viacom
hereby confirms that the representations and warranties contained in Sections
3.07, 3.08 and 3.09 of the Blockbuster Merger Agreement shall be true and
correct as of the date hereof and as of the date of consummation of the Offer,
except as would not have a material adverse effect on the financial condition of
Paramount, Viacom and Blockbuster and their subsidiaries taken as a whole.
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
SECTION 5.1. Conduct of Respective Businesses by Paramount and Viacom
Pending the Merger Each of Paramount and Viacom covenants and agrees that,
between the date of this Agreement and the Effective Time, unless the other
party shall have consented in writing (such consent not to be unreasonably
withheld) and, except, in the case of Viacom, for actions taken by Viacom in
order to consummate (x) the acquisition of Blockbuster and (y) the transactions
contemplated by the Blockbuster Subscription Agreement, the businesses of each
of Paramount and Viacom and their respective subsidiaries shall, in all material
respects, be conducted in, and each of Paramount and Viacom and their respective
subsidiaries shall not take any material action except in, the ordinary course
of business,
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consistent with past practice; and each of Paramount and Viacom shall use its
reasonable best efforts to preserve substantially intact its business
organization, to keep available the services of its and its subsidiaries'
current officers, employees and consultants and to preserve its and its
subsidiaries' relationships with customers, suppliers and other persons with
which it or any of its subsidiaries has significant business relations. By way
of amplification and not limitation, except (i) as contemplated by this
Agreement (including, without limitation, the making of the Offer and Section
6.16), (ii) for any actions taken by Viacom in order to consummate the
acquisition of Blockbuster, (iii) for any actions taken by Viacom in order to
consummate the transactions contemplated by the Blockbuster Subscription
Agreement or (iv) as set forth on Section 5.1 of the Paramount Disclosure
Schedule or Section 5.1 of the Viacom Disclosure Schedule, neither Viacom nor
Paramount nor any of their respective subsidiaries shall, between the date of
this Agreement and the Effective Time, directly or indirectly do, or propose or
agree to do, any of the following without the prior written consent of the other
(provided that the following restrictions shall not apply to any subsidiaries
which Paramount or Viacom, as the case may be, do not control):
(a) amend or otherwise change the Certificate of Incorporation or
By-Laws of Viacom or Paramount (except, with respect to Viacom, the Viacom
Certificate Amendments and the Certificate of Designations to be filed with
the Secretary of State of the State of Delaware in respect of the Viacom
Merger Preferred Stock);
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any
shares of capital stock of any class of it or any of its subsidiaries, or
any options (other than the grant of options in the ordinary course of
business consistent with past practice to employees who are not executive
officers of Paramount or Viacom), warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom
interest), of it or any of its subsidiaries (other than the issuance of
shares of capital stock in connection with any dividend reinvestment plan
or by any Paramount Plan with an employee stock fund or employee stock
ownership plan feature, consistent with applicable securities laws or the
exercise of options, warrants or other similar rights, or conversion of
convertible preferred stock outstanding as of the date of this Agreement
and in accordance with the terms of such options, warrants or rights in
effect on the date of this Agreement or otherwise permitted to be granted
pursuant to this Agreement) or (ii) any assets of it or any of its
subsidiaries, except for sales in the ordinary course of business or which,
individually do not exceed $10,000,000 or which, in the aggregate, do not
exceed $25,000,000;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except (i) in the case of Viacom, with respect
to the Series A Preferred Stock and the Series B Preferred Stock, and in
the case of Paramount, regular quarterly dividends in amounts not in excess
of $.20 per quarter and payable consistent with past practice; provided
that, prior to the declaration of any such dividend, Paramount shall
consult with Viacom as to the timing and advisability of declaring any such
dividend and (ii) dividends declared and paid by a subsidiary of either
Paramount or Viacom, each such dividend to be declared and paid in the
ordinary course of business consistent with past practice;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock other
than acquisitions by a dividend reinvestment plan or by any Paramount Plan
with an employee stock fund or employee stock ownership plan feature,
consistent with applicable securities laws;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof or any
assets, except for such acquisitions which, individually do not exceed
$10,000,000 or which, in
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the aggregate, do not exceed $25,000,000; (ii) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans or advances, except (A) for
any such indebtedness incurred by Viacom in connection with the Merger or
the Offer, (B) the refinancing of existing indebtedness, (C) borrowings
under commercial paper programs in the ordinary course of business, (D)
borrowings under existing bank lines of credit in the ordinary course of
business, (E) which, in the aggregate, do not exceed $25,000,000; or (iii)
enter into or amend any contract, agreement, commitment or arrangement with
respect to any matter set forth in this Section 5.1(e);
(f) increase the compensation payable or to become payable to its
executive officers or employees, except for increases in the ordinary
course of business in accordance with past practices, or grant any
severance or termination pay to, or enter into any employment or severance
agreement with any director or executive officer of it or any of its
subsidiaries, or establish, adopt, enter into or amend in any material
respect or take action to accelerate any rights or benefits under any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, executive officer or
employee; or
(g) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect
to accounting policies or procedures.
ARTICLE VI
ADDITIONAL COVENANTS
SECTION 6.1. Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, each of Paramount and Viacom shall (and shall
cause its subsidiaries and officers, directors, employees, auditors and agents
to) afford the officers, employees and agents of the other party (the
"Respective Representatives") reasonable access at all reasonable times to its
officers, employees, agents, properties, offices, plants and other facilities,
books and records, and shall furnish such Respective Representatives with all
financial, operating and other data and information as may be reasonably
requested.
(b) All information obtained by Paramount or Viacom pursuant to this
Section 6.1 shall be kept confidential in accordance with the confidentiality
agreements, dated July 1, 1993 (the "Confidentiality Agreements"), between
Paramount and Viacom.
(c) No investigation pursuant to this Section 6.1 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.2. Intentionally omitted.
SECTION 6.3. Directors' and Officers' Indemnification and
Insurance. (a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the Certificate of Incorporation and By-Laws of Viacom on the date of
this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at any time
prior to the Effective Time were directors or officers of Paramount in respect
of actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), unless
such modification is required by law.
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(b) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers and
directors of Paramount (collectively, the "Indemnified Parties") against all
losses, expenses, claims, damages, liabilities or amounts that are paid in
settlement of, with the approval of the Surviving Corporation (which approval
shall not unreasonably be withheld), or otherwise in connection with any claim,
action, suit, proceeding or investigation (a "Claim"), based in whole or in part
on the fact that such person is or was a director or officer of Paramount and
arising out of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), in each case to the full extent permitted under Delaware Law (and
shall pay expenses in advance of the final disposition of any 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 the undertaking to repay such advances contemplated by Section
145(e) of Delaware Law).
(c) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the Effective
Time) after the Effective Time (i) the Indemnified Parties may retain
Paramount's regularly engaged independent legal counsel or other independent
legal counsel satisfactory to them, provided that such other counsel shall be
reasonably acceptable to the Surviving Corporation, (ii) the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received and (iii) the
Surviving Corporation will use its reasonable best efforts to assist in the
vigorous defense of any such matter, provided that the Surviving Corporation
shall not be liable for any settlement of any Claim effected without its written
consent, which consent shall not be unreasonably withheld. Any Indemnified Party
wishing to claim indemnification under this Section 6.3 upon learning of any
such Claim, shall notify the Surviving Corporation (although the failure so to
notify the Surviving Corporation shall not relieve the Surviving Corporation
from any liability which the Surviving Corporation may have under this Section
6.3, except to the extent such failure prejudices the Surviving Corporation),
and shall deliver to the Surviving Corporation the undertaking contemplated by
Section 145(e) of Delaware Law. The Indemnified Parties as a group may retain no
more than one law firm (in addition to local counsel) to represent them with
respect to each such matter unless there is, under applicable standards of
professional conduct (as determined by counsel to the Indemnified Parties), a
conflict on any significant issue between the positions of any two or more
Indemnified Parties, in which event such additional counsel as may be required
may be retained by the Indemnified Parties.
(d) For a period of three years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by Paramount (provided
that the Surviving Corporation may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which occurred
before the Effective Time; provided, however, that in no event shall the
Surviving Corporation be required to expend pursuant to this Section 6.3(d) more
than an amount equal to 200% of current annual premiums paid by Paramount for
such insurance (which premiums Paramount represents and warrants to be $850,000
in the aggregate).
(e) This Section 6.3 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on the Surviving Corporation and its
respective successors and assigns.
SECTION 6.4. Notification of Certain Matters. Paramount shall give prompt
notice to Viacom, and Viacom shall give prompt notice to Paramount, of (i) the
occurrence, or nonoccurrence, of any event the occurrence, or nonoccurrence, of
which would be likely to cause (x) any representation or warranty contained in
this Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(ii) any failure of Paramount or Viacom, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.4 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
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SECTION 6.5. Tax Treatment. Each of Paramount and Viacom will use its
reasonable best efforts to cause the Forward Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code and to
deliver, in connection with the legal opinion referred to in Section 1.1,
letters of representation reasonable under the circumstances as to their present
intentions and present knowledge.
SECTION 6.6. Registration Statement; Joint Proxy Statement; Offer Documents
and Schedule 14D-9. (a) As promptly as practicable after the execution of this
Agreement, Viacom and Paramount shall prepare and file with the SEC an amendment
to the joint proxy statement previously filed with the SEC relating to the
meetings of Paramount's stockholders and holders of Viacom Class A Common Stock
to be held in connection with the Merger (together with any amendments thereof
or supplements thereto, the "Proxy Statement") and, as promptly as practicable
following consummation of the Offer (or expiration or termination of the Offer
without any purchase of shares thereunder), Viacom shall prepare and file with
the SEC a registration statement on Form S-4 (together with any amendments
thereto, the "Registration Statement") in which the Proxy Statement shall be
included as a prospectus, in connection with the registration under the
Securities Act of the shares of Viacom Class B Common Stock, the CVRs, the
Viacom Merger Debentures and Warrants to be issued to the stockholders of
Paramount pursuant to the Merger, the Viacom Exchange Preferred Stock into which
such Viacom Merger Debentures are exchangeable, the Viacom Class B Common Stock
issuable upon the exercise of the Warrants and the Viacom Exchange Debentures
for which such Viacom Exchange Preferred Stock is exchangeable. Each of
Paramount and Viacom shall use all reasonable efforts to have or cause the
Registration Statement to become effective as promptly as practicable, and shall
take all or any action required under any applicable federal or state securities
laws in connection with the issuance of shares of Viacom Class B Common Stock,
the CVRs, the Viacom Merger Debentures and Warrants pursuant to the Merger.
Paramount shall furnish all information concerning Paramount as Viacom may
reasonably request in connection with such actions and the preparation of the
Registration Statement and Proxy Statement. As promptly as practicable after the
Registration Statement shall have become effective, each of Viacom and Paramount
shall mail the Proxy Statement to its respective stockholders; provided that no
such mailing shall be required while the Offer remains outstanding. The Proxy
Statement shall include the recommendation of the Board of Directors of each of
Viacom and Paramount in favor of the Merger, unless otherwise necessary due to
the applicable fiduciary duties of the respective directors of Viacom and
Paramount, as determined by such directors in good faith after consultation with
and based upon the advice of independent legal counsel (who may be such party's
regularly engaged independent legal counsel).
(b) The information supplied by Viacom for inclusion in the Registration
Statement and the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
Viacom and Paramount, (iii) the time of each of the Stockholders' Meetings (as
defined in Section 6.7), and (iv) the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. If at any time prior to the Effective Time any event or circumstance
relating to Viacom or any of the Viacom Subsidiaries, or their respective
officers or directors, should be discovered by Viacom which should be set forth
in an amendment or a supplement to the Registration Statement or Proxy
Statement, Viacom shall promptly inform Paramount.
(c) The information supplied by Paramount for inclusion in the Registration
Statement and the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
Paramount and Viacom, (iii) the time of each of the Stockholders' Meetings, and
(iv) the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading. If at any time prior to the
Effective Time any event or circumstance relating to Paramount or any of the
Paramount Subsidiaries, or their respective officers or directors, should be
discovered by Paramount
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which should be set forth in an amendment or a supplement to the Registration
Statement or Proxy Statement, Paramount shall promptly inform Viacom.
(d) Viacom represents and warrants to Paramount that the Offer Documents
will not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to stockholders of Paramount, 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 the light of the circumstances under which they are made, not
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.
(e) Paramount represents and warrants to Viacom that neither the Schedule
14D-9 nor any information supplied by Paramount for inclusion in the Offer
Documents shall, at the respective times the Schedule 14D-9, the Offer Documents
or any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders of Paramount, as the case may be, shall
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 the light of the circumstances under which they are made, not
misleading. The Schedule 14D-9 shall comply in all material respects as to form
with the requirements of the Exchange Act and the rules and regulations
thereunder.
SECTION 6.7. Stockholders' Meetings. Paramount shall call and hold a
meeting of its stockholders and Viacom shall call and hold a meeting of the
holders of the Viacom Class A Common Stock (collectively, the "Stockholders'
Meetings") as promptly as practicable for the purpose of voting upon the
approval, in the case of Paramount, of the Merger and, in the case of Viacom, of
the Viacom Vote Matter (to the extent such matters have not been previously
voted upon and approved by the holders of the Viacom Class A Common Stock), and
Viacom and Paramount shall use their reasonable best efforts to hold the
Stockholders' Meetings on the same day and as soon as practicable after the date
on which the Registration Statement becomes effective; provided that neither
Paramount nor Viacom shall be required to call or hold a stockholders meeting
while the Offer remains outstanding. Paramount shall use its reasonable best
efforts to solicit from its stockholders proxies in favor of the approval of the
Merger, and Viacom shall use its reasonable best efforts to solicit from its
stockholders proxies in favor of the Viacom Vote Matter and each of Paramount
and Viacom shall take all other action necessary or advisable to secure the vote
or consent of stockholders required by Delaware Law to obtain such approvals,
unless otherwise necessary under the applicable fiduciary duties of the
respective directors of Paramount and Viacom, as determined by such directors in
good faith after consultation with and based upon the advice of independent
legal counsel (who may be such party's regularly engaged independent legal
counsel).
SECTION 6.8. Letters of Accountants. (a) Paramount shall use its reasonable
best efforts to cause to be delivered to Viacom "comfort" letters of Ernst &
Young, Paramount's independent public accountants, dated and delivered the date
on which the Registration Statement shall become effective and as of the
Effective Time, and addressed to Viacom, in form and substance reasonably
satisfactory to Viacom and reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
(b) Viacom shall use its reasonable best efforts to cause to be delivered
to Paramount "comfort" letters of Price Waterhouse, Viacom's independent public
accountants, dated the date on which the Registration Statement shall become
effective and as of the Effective Time, and addressed to Paramount, in form and
substance reasonably satisfactory to Paramount and reasonably customary in scope
and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
SECTION 6.9. Employee Benefits. The "Continuing Directors" (as such term is
defined in certain Paramount Plans, including, without limitation, Paramount's
Corporate Annual Performance Plan, Corporate Long-Term Performance Plan,
Supplemental Executive Retirement Plan, Non-Qualified Retirement Plan,
Retirement Plan for Non-Employee Directors, Deferred Compensation Plan for
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Directors and employment agreements with Messrs. Doppelt, Greenberg, Hertlein,
Levinson, Meyers and Sherman) prior to the Effective Time shall approve the
transactions contemplated by this Agreement, and prior to the Effective Time
Paramount and its officers and directors shall take such other actions, or shall
forbear from taking any action, as may be necessary to insure that such
transactions shall not constitute a "Change in Control" (or other similar event
accelerating or triggering changes to benefits or the terms of any Paramount
Plan (a "Paramount Triggering Event")) for purposes of any Paramount Plan under
which a Change in Control (or other Paramount Triggering Event) may be avoided
by action or inaction, as the case may be, by Paramount or any of its officers
or directors. Paramount shall not terminate either Paramount's Corporate Annual
Performance Plan or Paramount's Long-Term Performance Plan prior to the
Effective Time, and shall (a) delay the establishment and announcement of
targets for awards under Paramount's Corporate Annual Performance Plan with
respect to Paramount's 1994 fiscal year until after the Effective Time, and (b)
delay the implementation of a new performance cycle under Paramount's Corporate
Long-Term Performance Plan, in each case, until Paramount and Viacom shall
review the terms of such Plans after the Effective Time and make such changes as
they deem appropriate taking into consideration the effects of the Merger.
Viacom shall take or forbear from taking such action as may be necessary to
insure that the transactions contemplated by this Agreement shall not constitute
a change in ownership or control (or other similar event accelerating or
triggering changes to benefits or the terms of any Viacom Plan (a "Viacom
Triggering Event")) for purposes of any Viacom Plan under which any such change
in ownership or control (or other Viacom Triggering Event) may be avoided by
action or inaction, as the case may be, by Viacom or any of its officers or
directors.
SECTION 6.10. Further Action; Reasonable Best Efforts. (a) Upon the terms
and subject to the conditions hereof, each of the parties hereto shall (i) make
promptly any filings with or applications to the FCC with respect to the
Transactions and (ii) use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transactions, including, without limitation,
using its reasonable best efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Entities
and parties to contracts with Viacom and Paramount and their respective
subsidiaries as are necessary for the consummation of the Transactions. In case
at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall use their reasonable best
efforts to take all such action.
(b) Each party shall use its best efforts to not take any action, or enter
into any transaction, which would cause any of its representations or warranties
contained in this Agreement to be untrue or result in a breach of any covenant
made by it in this Agreement.
SECTION 6.11. Debt Instruments. Prior to or at the Effective Time,
Paramount and each Paramount Subsidiary shall use its reasonable best efforts to
prevent the occurrence, as a result of the Merger, the Offer and the other
transactions contemplated by this Agreement, of a change in control or any event
which constitutes a default (or an event which with notice or lapse of time or
both would become a default) under any debt instrument of Paramount or any
Paramount Subsidiary, including, without limitation, debt securities registered
under the Securities Act.
SECTION 6.12. Public Announcements. Viacom and Paramount shall consult with
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 the prior
consent of the other party, which shall not be unreasonably withheld; provided,
however, that a party may, without the prior consent of the other party, issue
such press release or make such public statement as may be required by law or
any listing agreement with a national securities exchange to which Viacom or
Paramount is a party if it has used all reasonable efforts to consult with the
other party and to obtain such party's consent but has been unable to do so in a
timely manner.
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SECTION 6.13. Listing of Viacom Securities. Viacom shall use its reasonable
best efforts to cause the shares of Viacom Class B Common Stock and the
Warrants, Viacom Merger Debentures and CVRs to be issued in the Merger to be
approved for listing on the AMEX prior to the Effective Time and the Viacom
Exchange Preferred Stock and the Viacom Exchange Debentures to be approved for
listing on the AMEX prior to the issuance thereof.
SECTION 6.14. Affiliates of Paramount. Paramount represents and warrants to
Viacom that Paramount will promptly deliver to Viacom a letter identifying all
persons who may be deemed affiliates of Paramount under Rule 145 of the
Securities Act, including, without limitation, all directors and executive
officers of Paramount, and Paramount represents and warrants to Viacom that
Paramount has advised the persons identified in such letter of the resale
restrictions imposed by applicable securities laws. Paramount shall use its
reasonable best efforts to obtain from each person identified in such letter a
written agreement, substantially in the form of Exhibit 6.14. Paramount shall
use its reasonable best efforts to obtain as soon as practicable from any person
who may be deemed to have become an affiliate of Paramount after Paramount's
delivery of the letter referred to above and prior to the Effective Time, a
written agreement substantially in the form of Exhibit 6.14.
SECTION 6.15. Conveyance Taxes. Viacom and Paramount shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time.
SECTION 6.16. Rights Agreement. Except as contemplated by this Agreement,
the Board of Directors of Paramount shall not amend or modify the Rights
Agreement or redeem the Rights prior to the Effective Time except pursuant to
the Other Exemption Agreement.
SECTION 6.17. Assumption of Debt and Leases. With respect to debt issued by
Paramount under indentures qualified under the Trust Indenture Act of 1939
("Paramount Indentures"), Viacom shall execute and deliver to the trustees under
the respective Paramount Indentures, Supplemental Indentures, in form
satisfactory to the respective trustees, expressly assuming the obligations of
Paramount with respect to the due and punctual payment of the principal of (and
premium, if any) and interest, if any, on all debt securities issued by
Paramount under the respective Indentures and the due and punctual performance
of all the terms, covenants and conditions of the respective Paramount
Indentures to be kept or performed by Paramount and shall deliver such
Supplemental Indentures to the respective trustees under the Paramount
Indenture. Viacom shall similarly deliver instruments of assumption to the
holders of any debt obligations of, and the lessors of any real property to,
Paramount, which debt obligations or leases expressly require such assumption in
order for the Merger to comply with the debt instrument or lease.
SECTION 6.18. Gains Tax. Except as provided in Section 1.7(b), Viacom shall
pay any New York State Tax on Gains Derived from Certain Real Property Transfers
(the "Gains Tax"), New York State Real Estate Transfer Tax and New York City
Real Property Transfer Tax (the "Transfer Taxes") and any similar taxes in any
other jurisdiction (and any penalties and interest with respect to such taxes),
which become payable in connection with the Offer and the Merger, on behalf of
the stockholders of Paramount. Viacom and Paramount shall cooperate in the
preparation, execution and filing of any required returns with respect to such
taxes (including returns on behalf of the stockholders of Paramount) and in the
determination of the portion of the consideration allocable to the real property
of Paramount and the Paramount Subsidiaries in New York State and City (or in
any other jurisdiction, if applicable). The terms of the Offer to Purchase and
of the Proxy Statement shall provide that the stockholders of Paramount shall be
deemed to have agreed to be bound by the allocation established
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pursuant to this Section 6.18 in the preparation of any return with respect to
the Gains Tax and the Transfer Taxes and any similar taxes, if applicable.
SECTION 6.19. Reverse Merger. In the event that a decision is made to
structure the Merger as a Reverse Merger pursuant to Section 1.1, Viacom agrees
to form Merger Subsidiary as promptly as practicable following such decision and
to cause a merger agreement conforming to Section 251 of the Delaware Law and
effecting the terms hereof to be adopted by Merger Subsidiary. Paramount agrees
in such case to enter into such merger agreement.
SECTION 6.20. Post-Offer Agreements. In the event that the Offer is
consummated and subject to any applicable requirements of the FCC: (a) the
affirmative vote of a majority of the directors of Paramount who are directors
on the date hereof and continue as directors on the date of the actions
described below will be required to amend, modify or waive any provisions of
this Agreement, or to approve any other action by Paramount with respect to the
transactions contemplated hereby which adversely affect the interests of the
stockholders of Paramount; (b) Viacom shall not directly or indirectly cause
Paramount to breach its obligations hereunder; and (c) at the Paramount
Stockholders' Meeting, Viacom shall cause all shares of Paramount Common Stock
then owned by it or its subsidiaries to be voted in favor of the approval and
adoption of this Agreement and the transactions contemplated hereby.
SECTION 6.21. Transactions With Significant Stockholder After the Effective
Time. From and after the Effective Time and until the tenth anniversary of the
Effective Time, Viacom shall not enter into any agreement with any stockholder
(the "Significant Stockholder") who beneficially owns more than 35% of the then
outstanding securities entitled to vote at a meeting of the stockholders of
Viacom that would constitute a Rule 13e-3 (as such rule is in effect today)
transaction under the Exchange Act with respect to any class of common stock of
Viacom (any such transaction being a "Going Private Transaction") unless Viacom
provides in any agreement pursuant to which such Going Private Transaction shall
be effected that, as a condition to the consummation of such Going Private
Transaction, (a) the holders of a majority of the shares of each class of common
stock subject to such Going Private Transaction and not beneficially owned by
the Significant Stockholder that are voted and present (whether in person or by
proxy) at the meeting of stockholders called to vote on such Going Private
Transaction shall have voted in favor thereof and (b) a special committee (the
"Special Committee") of the Board of Directors of Viacom comprised solely of the
independent directors of Viacom shall have (i) approved the terms and conditions
of the Going Private Transaction and shall have recommended that the
stockholders vote in favor thereof and (ii) received from its financial advisor
a written opinion addressed to the Special Committee, for inclusion in the proxy
statement to be delivered to the stockholders, and dated the date thereof,
substantially to the effect that the consideration to be received by the
stockholders (other than the Significant Stockholder) in the Going Private
Transaction is fair to them from a financial point of view. Notwithstanding
anything to the contrary in this Section 6.21, the restrictions contained in
this Section 6.21 shall not apply to any Significant Stockholder if there exists
another stockholder who beneficially owns a greater percentage of outstanding
securities entitled to vote at the meeting than the Significant Stockholder.
SECTION 6.22. Blockbuster Merger Agreement and Subscription
Agreement. Viacom hereby agrees that, from and after the date of this Agreement,
the terms of (i) the Blockbuster Merger Agreement and (ii) the Blockbuster
Subscription Agreement shall not, without the consent of Paramount, be amended
or waived in any manner that would have a material adverse effect on the value
of the aggregate consideration to be received by the Paramount stockholders
pursuant to the terms of the Offer and the Merger taken together.
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ARTICLE VII
CLOSING CONDITIONS
SECTION 7.1. Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger and the
other transactions contemplated herein 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) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceedings
for that purpose shall have been initiated or, to the knowledge of Viacom
or Paramount, threatened by the SEC.
(b) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of
Paramount and the Viacom Vote Matter (to the extent not previously voted
upon and approved by the holders of Viacom Class A Common Stock) shall have
been approved and adopted by the requisite vote of the stockholders of
Viacom.
(c) No Order. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is in
effect and which materially restricts, prevents or prohibits consummation
of the Merger or any transaction contemplated by this Agreement; provided,
however, that the parties shall use their reasonable best efforts to cause
any such decree, judgment, injunction or other order to be vacated or
lifted.
(d) AMEX Listing. The shares of Viacom Class B Common Stock and the
Warrants, Viacom Merger Debentures and CVRs issuable to stockholders of
Paramount in accordance with Article II shall have been authorized for
listing on the AMEX upon official notice of issuance.
SECTION 7.2. Additional Conditions to Obligations of Viacom. The
obligations of Viacom to effect the Merger and the transactions contemplated
herein are also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Paramount contained in this Agreement (including, without
limitation, Section 6.06), without giving effect to any notification to
Viacom delivered pursuant to Section 6.4, shall be true and correct as of
the Effective Time as though made on and as of the Effective Time, except
(i) for changes specifically permitted by this Agreement and (ii) that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, except in
any case for such failures to be true and correct which would not,
individually or in the aggregate, have a Paramount Material Adverse Effect.
Viacom shall have received a certificate of the Chief Executive Officer and
Chief Financial Officer of Paramount to such effect.
(b) Agreement and Covenants. Paramount shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time. Viacom shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of Paramount to
that effect.
(c) Material Adverse Change. Since the date of this Agreement, there
shall have been no change, occurrence or circumstance in the business,
results of operations or financial condition of Paramount or any Paramount
Subsidiary having or reasonably likely to have, individually or in the
aggregate, a material adverse effect on the business, results of operations
or financial condition of
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Paramount and the Paramount Subsidiaries, taken as a whole. Viacom shall
have received a certificate of the Chief Executive Officer and Chief
Financial Officer of Paramount to such effect.
Notwithstanding the foregoing, the obligations of Viacom to effect the Merger
and the other transactions contemplated herein following prior consummation of
the Offer shall not be subject to the conditions set forth in Sections 7.2(a),
(b) and (c).
SECTION 7.3. Additional Conditions to Obligations of Paramount. The
obligation of Paramount to effect the Merger and the other transactions
contemplated in this Agreement are also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Viacom contained in this Agreement (including, without
limitation, Section 6.6), without giving effect to any notification made by
Viacom to Paramount pursuant to Section 6.4, shall be true and correct as
of the Effective Time, as though made on and as of the Effective Time,
except (i) for changes specifically permitted by this Agreement and (ii)
that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date, except in
any case for such failures to be true and correct which would not,
individually or in the aggregate, have a Viacom Material Adverse Effect.
Paramount shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of Viacom to such effect.
(b) Agreements and Covenants. Viacom shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time. Paramount shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of Viacom to that effect.
(c) No Material Adverse Change. Since the date of this Agreement,
there shall have been no change, occurrence or circumstance in the
business, results of operations or financial condition of Viacom or any
Viacom Subsidiary having or reasonably likely to have, individually or in
the aggregate, a material adverse effect on the business, results of
operations or financial condition of Viacom and the Viacom Subsidiaries,
taken as a whole. Paramount shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of Viacom to such effect.
(d) Amendments to Viacom's Certificate of Incorporation. Viacom shall
have filed with the Secretary of State of the State of Delaware a
certificate of amendment to Viacom's certificate of incorporation pursuant
to which the Viacom Certificate Amendments shall have become effective.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement
and the Merger by the stockholders of Paramount or the approval by the
stockholders of Viacom of the issuance of the shares of Viacom Common Stock in
accordance with Article II:
(a) by mutual consent of Paramount and Viacom;
(b) by Viacom, prior to consummation of the Offer, upon a breach of
any representation, warranty, covenant or agreement on the part of
Paramount set forth in this Agreement, or if any representation or warranty
of Paramount shall have become untrue, in either case such that the
conditions set forth in Section 7.2(a) or Section 7.2(b), as the case may
be, would be incapable of being satisfied by July 31, 1994 (or as otherwise
extended); provided, that in any case, a wilful breach shall be deemed to
cause such conditions to be incapable of being satisfied for purposes of
this Section 8.1(b);
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(c) by Paramount, upon a breach of any representation, warranty,
covenant or agreement on the part of Viacom set forth in this Agreement, or
if any representation or warranty of Viacom shall have become untrue, in
either case such that the conditions set forth in Section 7.3(a) or Section
7.3(b), as the case may be, would be incapable of being satisfied by July
31, 1994 (or as otherwise extended); provided, that in any case, a wilful
breach shall be deemed to cause such conditions to be incapable of being
satisfied for purposes of this Section 8.1(c);
(d) by either Viacom or Paramount, if any permanent injunction or
action by any Governmental Entity preventing the consummation of the Merger
shall have become final and nonappealable;
(e) by either Viacom or Paramount, if the Merger shall not have been
consummated before July 31, 1994; provided, however, that this Agreement
may be extended by written notice of either Viacom or Paramount to a date
not later than September 30, 1994, if the Merger shall not have been
consummated as a direct result of Viacom or Paramount having failed by July
31, 1994, to receive all required regulatory approvals or consents with
respect to the Merger;
(f) by either Viacom or Paramount, if this Agreement and the Merger
shall fail to receive the requisite vote for approval and adoption by the
stockholders of Paramount or Viacom at the Stockholders' Meetings;
(g) by Viacom, if (i) the Board of Directors of Paramount shall
withdraw, modify or change its recommendation of this Agreement, the Merger
or the Offer in a manner adverse to Viacom or shall have resolved to do any
of the foregoing; provided, that a statement by the Board of Directors of
Paramount that it is neutral or unable to take a position with respect to
the Offer after the commencement or amendment of a tender offer by a third
party shall not be deemed to constitute a withdrawal, modification or
change of its recommendation of this Agreement if the
Solicitation/Recommendation Statement on Schedule 14D-9 relating to such
third party tender offer recommends rejection of such tender offer and the
Board of Directors of Paramount reconfirms its recommendation of the Offer
on the date of the filing thereof; (ii) the Board of Directors of Paramount
shall have recommended to the stockholders of Paramount a Competing
Transaction (as defined below); (iii) Viacom has not consummated the Offer
and a tender offer or exchange offer for 30% or more of the outstanding
shares of capital stock of Paramount is commenced, and the Board of
Directors of Paramount recommends that the stockholders of Paramount tender
their shares in such tender or exchange offer; or (iv) Viacom has not
consummated the Offer and any person shall have acquired beneficial
ownership or the right to acquire beneficial ownership of or any "group"
(as such term is defined under Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder) shall have been formed which
beneficially owns, or has the right to acquire "beneficial ownership" (as
defined in the Rights Plan) of, more than 30% of the then outstanding
shares of capital stock of Paramount;
(h) by Paramount, if the Board of Directors of Paramount (x) fails to
make or withdraws or modifies its recommendation referred to in Section
2.2(a) or Section 6.6(a) if there exists at such time a tender offer or
exchange offer or a proposal by a third party to acquire Paramount pursuant
to a merger, consolidation, share exchange, business combination, tender or
exchange offer or other similar transaction or (y) recommends to
Paramount's stockholders approval or acceptance of any of the foregoing in
each case only if the Board of Directors of Paramount, after consultation
with and based upon the advice of independent legal counsel (who may be
such party's regularly engaged independent legal counsel), determines in
good faith that such action is necessary for the Board of Directors of
Paramount to comply with its fiduciary duties to stockholders under
applicable law; and
(i) by Paramount, if due to the occurrence or circumstance that would
result in a failure to satisfy any of the conditions set forth in Annex A
or otherwise, (A) the Offer shall have expired without the purchase of
shares of Paramount Common Stock thereunder or Viacom shall be
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obligated to terminate the Offer pursuant to Section 2.5 or (B) Viacom
shall have failed to accept for payment shares of Paramount Common Stock
pursuant to the Offer prior to 9:00 a.m. on the first business day
following the Final Expiration Date, unless such failure to accept for
payment shares of Paramount Common Stock shall have been caused by or
resulted from the failure of Paramount to perform in any material respect
its material covenants and agreements contained in this Agreement or
resulted from the termination of the Offer pursuant to Section 2.1(c).
The right of any party hereto to terminate this Agreement pursuant to this
Section 8.1 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. For purposes of this
Agreement, "Competing Transaction" shall mean any of the following involving
Paramount or any Paramount Subsidiaries: (i) any merger, consolidation, share
exchange, business combination, or other similar transaction; (ii) any
disposition of 30% or more of the assets of Paramount and the Paramount
Subsidiaries, taken as a whole in the single transaction or series of
transactions; (iii) any tender offer or exchange offer for 30% or more of the
outstanding shares of capital stock of Paramount or the filing of a registration
statement under the Securities Act in connection therewith; (iv) any person
having acquired beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder) having been
formed which beneficially owns or has the right to acquire beneficial ownership
of, 30% or more of the then outstanding shares of capital stock of Paramount; or
(v) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
SECTION 8.2. Effect of Termination. Except as provided in Section 9.1, in
the event of the termination of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become void, there shall be no liability on the part
of Paramount or Viacom or any of their respective officers or directors to the
other and all rights and obligations of any party hereto shall cease; provided,
however, that (i) nothing herein shall relieve any party from liability for the
wilful breach of any of its representations, warranties, covenants or agreements
set forth in this Agreement and (ii) if Viacom or Paramount shall terminate this
Agreement in accordance with the provisions of Section 8.1, and if Viacom shall
continue the Offer, the exemption agreement between the parties dated as of
December 22, 1993 shall again become effective.
SECTION 8.3. 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, further, that, after approval of the
Merger by the stockholders of Paramount or Viacom, no amendment, which under
applicable law may not be made without the approval of the stockholders of
Paramount or Viacom, may be made without such approval. This Agreement may not
be amended except by an instrument in writing signed by the parties hereto.
SECTION 8.4. Waiver. At any time prior to the Effective Time, either party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby.
SECTION 8.5. Fees, Expenses and Other Payments. All costs and expenses,
including, without limitation, fees and disbursements of counsel, financial
advisors and accountants, incurred by the parties hereto shall be borne solely
and entirely by the party which has incurred such costs and expenses; provided,
however, that all costs and expenses related to printing, filing and mailing the
Registration Statement and the Proxy Statement and all SEC and other regulatory
filing fees incurred in connection with the Registration Statement and the Proxy
Statement shall be borne equally by Paramount and Viacom.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. Effectiveness of Representations, Warranties and
Agreements. (a) Except as set forth in Section 9.1(b), the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect, regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement.
(b) The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VIII, except that the agreements set forth in Articles I, II
and IX and Sections 6.3 and 6.21 shall survive the Effective Time and those set
forth in Sections 2.2(c), 2.3, 6.1(b), 8.2 and 8.5 and Article IX hereof shall
survive termination.
(c) Each of the representations and warranties made in Article III shall be
deemed to be made on September 12, 1993 and not made on the date hereof, except
for representations and warranties which address matters as of a particular
date, provided, that the representations set forth in the last sentence of
Section 3.4, Sections 3.13, 3.14, 4.13 and 4.17 and any representations and
warranties with respect to this Agreement, the Merger and the Offer are made on
the date hereof.
(d) Each of Paramount and Viacom agree that nothing herein shall constitute
a waiver of any rights, claims or defenses of Viacom or Paramount created by or
arising under the Amended and Restated Agreement and Plan of Merger, dated as of
October 24, 1993, as subsequently amended, or the Stock Option Agreement, dated
as of September 12, 1993, between Paramount and Viacom, as amended by Amendment
No. 1 thereto, dated as of October 24, 1993, all of which rights, claims and
defenses are hereby expressly reserved.
SECTION 9.2. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
(a) If to Viacom:
Viacom Inc.
1515 Broadway
New York, NY 10036
Attention: Senior Vice President,
General Counsel
Telecopier No.: (212) 258-6134
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Stephen R. Volk, Esq.
Telecopier No.: (212) 848-7179
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(b) If to Paramount:
Paramount Communications Inc.
15 Columbus Circle
New York, NY 10023
Attention: Executive Vice President and
General Counsel
Telecopier No.: (212) 373-8184
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Joel S. Hoffman
Telecopier No.: (212) 455-2502
SECTION 9.3. 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) "beneficial owner" with respect to any shares of Paramount Common
Stock means, unless otherwise defined herein, a person who shall be deemed
to be the beneficial owner of such shares (i) which such person or any of
its affiliates or associates (as such term is defined in Rule 12b-2
promulgated under the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates
has, directly or indirectly, (A) the right to acquire (whether such right
is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates, or any person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares;
(c) "business day" shall have the meaning set forth in Rule
14d-1(c)(6) as promulgated under the Exchange Act;
(d) "control" (including the terms "controlled", "controlled by" and
"under common control with") means the possession, directly or indirectly
or as trustee or executor, of the power to direct or cause the direction of
the management or policies of a person, whether through the ownership of
stock or as trustee or executor, by contract or credit arrangement or
otherwise;
(e) The parties agree that the term "fully diluted basis" as used
herein, shall mean giving effect to the shares of Paramount Common Stock
then outstanding plus the shares of Paramount Common Stock issuable upon
the exercise of the then exercisable stock options;
(f) The parties agree that the term "Merger", as used herein, may
refer to, consistent with the context of such usage, each of the single
step merger, the second step merger following the Offer, or both. The
parties hereto agree to promptly amend this Agreement subsequent to the
execution and delivery thereof to provide for more precise defined terms
and usage thereof; and
(g) "subsidiary" or "subsidiaries" of Paramount, Viacom, the Surviving
Corporation or any other person means any corporation, partnership, joint
venture or other legal entity of which Paramount, Viacom, the Surviving
Corporation or such other person, as the case may be (either
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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.
SECTION 9.4. Time Period. In computing any time period hereunder, the
computation shall be governed by Rule 14d-1(c)(6) as promulgated under the
Exchange Act.
SECTION 9.5. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.6. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 9.7. Entire Agreement. This Agreement (together with the Exhibits,
the Paramount Disclosure Schedule, the Viacom Disclosure Schedule and the other
documents delivered pursuant hereto) and the Confidentiality Agreements
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof.
SECTION 9.8. Assignment. This Agreement shall not be assigned by operation
of law or otherwise.
SECTION 9.9. 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 (other than the provisions of Section 6.3), is intended to or
shall confer upon any person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, including to confer third party
beneficiary rights; provided, however, nothing in the foregoing shall be deemed
to derogate from any rights of the Other Offeror (other than as a third party
beneficiary) as against Paramount or its Board with respect to any amendment of
this Agreement or failure to enforce the Agreement.
SECTION 9.10. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 9.11. Governing Law. Except to the extent that Delaware Law is
mandatorily applicable to the Merger and the rights of the stockholders of
Paramount and Viacom, this Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law.
SECTION 9.12. 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.
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IN WITNESS WHEREOF, Viacom and Paramount have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
<TABLE>
<S> <C>
ATTEST: VIACOM INC.
By /s/ KATHERINE B. ROSENBERG ............ By /s/ PHILIPPE P. DAUMAN
Assistant Secretary ......................................................
Senior Vice President,
General Counsel and Secretary
ATTEST: PARAMOUNT COMMUNICATIONS INC.
By /s/ EARL H. DOPPELT
</TABLE>
<TABLE>
<S> <C>
Assistant Secretary By /s/ DONALD ORESMAN
......................................................
Executive Vice President
</TABLE>
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ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Viacom shall not be
required to accept for payment or pay for any shares of Paramount Common Stock
tendered pursuant to the Offer, and may terminate or amend the Offer and may
postpone the acceptance for payment of and payment for shares of Paramount
Common Stock tendered, if (i) the Minimum Condition shall not have been
satisfied, (ii) the Rights Condition shall not have been satisfied, or (iii) at
any time on or after the date of this Agreement, and prior to the acceptance for
payment of shares of Paramount Common Stock, any of the following conditions
shall not exist:
(a) No Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in effect and
which materially restricts, prevents or prohibits consummation of the
Offer, the Merger or any transaction contemplated by the Agreement;
provided that Viacom shall have used its reasonable best efforts to cause
any such decree, judgment, injunction or other order to be vacated or
lifted;
(b) Each of the representations and warranties of Paramount contained
in the Agreement (including, without limitation, Section 6.6), without
giving effect to any notification to Viacom delivered pursuant to Section
6.4, shall be true and correct as of the date of consummation of the Offer
as though made on and as of such date, except (i) for changes specifically
permitted by the Agreement and (ii) that those representations and
warranties which address matters only as of a particular date shall remain
true and correct as of such date, except in any case for such failures to
be true and correct which would not, individually or in the aggregate, have
a Paramount Material Adverse Effect;
(c) Paramount shall have performed or complied in all material
respects with all agreements and covenants required by the Agreement to be
performed or complied with by it on or prior to the date of consummation of
the Offer;
(d) Since December 22, 1993, there shall have been no change,
occurrence or circumstance in the business, results of operations or
financial condition of Paramount or any Paramount Subsidiary having or
reasonably likely to have, individually or in the aggregate, a material
adverse effect on the business, results of operations or financial
condition of Paramount and the Paramount Subsidiaries, taken as a whole;
(e) The Agreement shall not have been terminated in accordance with
its terms;
(f) Viacom shall not have terminated the Offer under Sections 2.1(c)
or 2.5 of the Agreement;
(g) Viacom and Paramount shall not have agreed that Viacom shall
terminate the Offer or postpone the acceptance for payment of or payment
for shares of Paramount Common Stock thereunder;
and, in the reasonable judgment of Viacom in any such case, and regardless of
the circumstances (including any action or inaction by Viacom or any of its
affiliates) giving rise to any such condition, it is inadvisable to proceed with
such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Viacom and may be
asserted by Viacom regardless of the circumstances giving rise to any such
condition or may be waived by Viacom in whole or in part at any time and from
time to time in their sole discretion, subject to the terms of this Agreement.
The failure by Viacom 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 other 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.
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ANNEX B
PRINCIPAL TERMS OF VIACOM MERGER DEBENTURES
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VIACOM MERGER DEBENTURES
Issuer................................. Viacom.
Interest............................... 8% per annum, payable semi-annually, provided that the initial interest
payment date shall be January 1, 1995.
Maturity............................... 12 years from the Effective Time.
Optional Redemption.................... Not redeemable prior to the fifth anniversary of the Effective Time. On
and after that date, redeemable, in whole or in part, at the option of
Viacom, initially at a redemption price of 103% of the principal
amount thereof and thereafter at prices declining to 100% of the
principal amount thereof on the eighth anniversary of the Effective
Time, plus, in each case, all accrued and unpaid interest.
Mandatory Redemption................... None.
Denomination........................... Issuable in minimum denominations of $1,000 and integral multiples
thereof.
Exchange for Viacom Exchange Preferred Exchangeable, at the option of Viacom, in whole but not in part, on or
Stock.................................. after the earlier of (i) January 1, 1995, but only if the Blockbuster
Merger has not been consummated by such date, and (ii) the acquisition
by a third party of beneficial ownership of a majority of the
outstanding voting securities of Blockbuster, into shares of Viacom's
5% Cumulative Exchangeable Preferred Stock (the "Viacom Exchange
Preferred Stock") at the rate of one share of Viacom Exchange
Preferred Stock for each $50 in principal amount of Viacom Merger
Debentures exchanged. At the time of the exchange, dividends on the
Viacom Exchange Preferred Stock will be deemed to have accrued from
the date of issuance of the Viacom Merger Debentures, and no accrued
interest will be paid with respect to the Viacom Merger Debentures.
Subordination.......................... Subordinated in right of payment to all Senior Indebtedness of Viacom.
Senior Indebtedness of Viacom will be defined as (a) the principal of,
premium, if any, and accrued and unpaid interest on (i) indebtedness
of Viacom for money borrowed, including all obligations of Viacom
under its bank credit facilities, (ii) guarantees by Viacom of
indebtedness for money borrowed by any other person, including any
guarantees by Viacom of obligations of Viacom International Inc.,
(iii) trade credit of Viacom and indebtedness evidenced by notes,
debentures, bonds or other instruments of indebtedness for payment of
which Viacom is responsible or liable, by guarantees or otherwise, and
(iv) obligations of Viacom under capital leases, and (b)
modifications, renewals, extensions and refunding of any such
indebtedness, obligations or guarantees,
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unless it is provided that such indebtedness, obligations or
guarantees, or such modifications, renewals, extensions or refundings
thereof, are not superior in right of payment to the Viacom Merger
Debentures. No payment on account of principal or interest on the
Viacom Merger Debentures may be made if at the time of such payment
there exists a payment default with respect to any Senior
Indebtedness. Upon any distribution of the assets of Viacom upon any
dissolution, total or partial liquidation or reorganization of or
similar proceeding relating to Viacom, the holders of its Senior
Indebtedness will be entitled to receive payment in full before the
Viacom Merger Debenture holders are entitled to receive any payment.
Events of Default...................... The term "Event of Default" when used in the indenture for the Viacom
Merger Debentures will mean any of the following: (i) failure of
Viacom to pay (whether or not prohibited by the subordination
provisions) interest for thirty days on the principal of or any
redemption payment on any of the Viacom Merger Debentures, (ii)
failure to perform any other covenant contained in the Indenture for
sixty days after notice to Viacom by the trustee (or to Viacom and the
trustee by the holders of at least 25% in aggregate principal amount
of Viacom Merger Debentures then outstanding) and (iii) certain events
of bankruptcy, insolvency or reorganization. Any acceleration of the
Viacom Merger Debentures following an Event of Default shall not be
effective until 5 business days after notice of acceleration to
holders of Senior Indebtedness under Viacom's bank credit facilities.
VIACOM EXCHANGE PREFERRED STOCK
Dividends.............................. Cumulative from the Effective Time at the annual rate of $2.50 per share
of Viacom Exchange Preferred Stock, payable quarterly; provided that,
from and after the tenth anniversary of the Effective Time, the annual
rate shall increase from $2.50 to $5.00 per share of Viacom Exchange
Preferred Stock.
Liquidation Preference................. $50.00 per share of Viacom Exchange Preferred Stock, plus accrued and
unpaid dividends.
Optional Redemption.................... Not redeemable prior to the fifth anniversary of the Effective Time. On
and after that date, redeemable in whole or in part, at the option of
Viacom, initially at a per share redemption price of $52.50 and
thereafter at prices declining to $50.00 on and after the tenth
anniversary of the Effective Time, plus, in each case, all accrued and
unpaid dividends.
Mandatory Redemption................... None.
Exchange for Viacom Exchange Exchangeable in whole or in part, at the option of Viacom, on any
Debentures............................. dividend payment date beginning on and after the third anniversary of
the Effective Time, for Viacom's 5% Subordinated Debentures (the
"Viacom Exchange Debentures") at the rate of $50.00 principal amount
of Viacom Exchange Debentures for each share of Viacom Exchange
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Preferred Stock. Viacom may effect such exchange only if all accrued
and unpaid dividends on the Viacom Exchange Preferred Stock have been
paid.
Voting Rights.......................... No voting rights except (i) as otherwise required by law and (ii) for
the right to elect two additional directors to Viacom's Board of
Directors in the event that Viacom has failed to pay dividends payable
on the shares of Viacom Exchange Preferred Stock for such number of
dividend periods which shall in the aggregate contain not less than
360 days. In any such election, the holders of shares of Viacom
Exchange Preferred Stock will vote separately as a class with the
holders of shares of any one or more other shares of preferred stock
ranking on a parity with the Viacom Exchange Preferred Stock. Such
right to elect two directors will continue until such dividend
arrearages have been paid.
VIACOM EXCHANGE DEBENTURES
Interest............................... 5% per annum; provided that, from and after the tenth anniversary of the
Effective Time, the interest rate shall increase to 10% per annum,
payable semi-annually.
Aggregate Principal Amount............. Equal to aggregate liquidation preference of Viacom Exchange Preferred
Stock exchanged, with the Viacom Exchange Debentures being issued in
minimum denominations of $1,000 and integral multiples thereof.
Maturity............................... 20 years from the Effective Time.
Optional Redemption.................... Not redeemable prior to the fifth anniversary of the Effective Time. On
and after that date, redeemable, in whole or in part, at the option of
Viacom, initially at a redemption price of 105% of the principal
amount thereof and thereafter at prices declining to 100% of the
principal amount thereof on and after the tenth anniversary of the
Effective Time, plus, in each case, all accrued and unpaid interest.
Mandatory Redemption................... None.
Subordination.......................... Same as the Viacom Merger Debentures.
Events of Default...................... Same as the Viacom Merger Debentures.
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ANNEX C
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PRINCIPAL TERMS OF CONTINGENT VALUE RIGHTS ("CVRS")
Issuer................................. Viacom.
Payment at Maturity.................... Following the maturity of a CVR, the holder of such CVR (the "CVR
Holder") shall have the right to receive the amount, if any, by which
the Target Price exceeds the greater of the Current Market Value and
the Minimum Price (each as defined below). The CVRs shall mature on
the Maturity Date unless otherwise extended to the First Extended
Maturity Date or the Second Extended Maturity Date, as the case may be
(each as defined below).
Form of Payment........................ Viacom, at its option, may pay any amount due under the terms of the
CVRs to the CVR Holders in cash or in the equivalent fair market value
(as determined by an independent nationally recognized investment
bank) of registered securities of Viacom, including, without
limitation, common stock, preferred stock, notes or other securities.
Target Price........................... "Target Price" means (i) at the Maturity Date, $48.00, (ii) at the First
Extended Maturity Date, $51.00 and (iii) at the Second Extended
Maturity Date, $55.00. In each case, such Target Prices shall be
adjusted upon the occurrence of any event described in the Section
entitled "Antidilution" set forth below.
Current Market Value................... "Current Market Value" means (i) with respect to the Maturity Date and
the First Extended Maturity Date, the median of the averages of the
closing prices on the American Stock Exchange (or such other exchange
on which such shares are then listed) of shares of Viacom's Class B
Common Stock, par value $.01 per share (the "Class B Common Stock"),
during each 20 consecutive trading day period that both begins and
ends in the Valuation Period and (ii) with respect to the Second
Extended Maturity Date, the average of the closing prices on the
American Stock Exchange (or such other exchange on which such shares
are then listed) of the Class B Common Stock during the 20 consecutive
trading days in the Valuation Period which yield the highest such
average of the closing prices for any such 20 consecutive trading day
period within the Valuation Period. "Valuation Period" means the 60
trading day period immediately preceding (and including) the Maturity
Date, the First Extended Maturity Date or the Second Extended Maturity
Date, as the case may be.
Minimum Price.......................... "Minimum Price" means (i) at the Maturity Date, $36.00, (ii) at the
First Extended Maturity Date, $37.00 and (iii) at the Second Extended
Maturity Date, $38.00. In each case, subject to adjustment upon the
occurrence of any event described in the Section entitled
"Antidilution" set forth below.
Maturity Date; Extensions Thereof...... "Maturity Date" means the first anniversary of the effective time (the
"Effective Time") of the merger between Viacom and Paramount
Communications Inc. (the "Merger"); provided, however, that Viacom, at
its option, may (i) extend the
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Maturity Date to the second anniversary of the Effective Time (the
"First Extended Maturity Date") and (ii) extend the First Extended
Maturity Date to the third anniversary of the Effective Time (the
"Second Extended Maturity Date"). Viacom shall exercise either such
option to extend by publishing notice of such exercise in the Wall
Street Journal (Eastern Edition), or if the Wall Street Journal is not
then published, such other newspaper with general circulation in the
City of New York, New York no later than one business day preceding
the Maturity Date or First Extended Maturity Date, as the case may be.
No Interest............................ Other than in the case of interest on the Default Amount (as defined
below), no interest shall accrue on any amounts payable to the CVR
Holders pursuant to the terms of CVRs.
Disposition Payment.................... Following the consummation of a Disposition (as defined below), Viacom
shall pay to each CVR Holder for each CVR held by such CVR Holder an
amount, if any, by which the Discounted Target Price (as defined
below) exceeds the greater of (a) the fair market value (as determined
by an independent nationally recognized investment banking firm) of
the consideration, if any, received by holders of Class B Common Stock
for each share of Class B Common Stock held by such holder as a result
of such Disposition and (b) the Minimum Price.
Dispositions........................... "Disposition" means (a) a merger, consolidation or other business
combination involving Viacom as a result of which no shares of Class B
Common Stock shall remain outstanding, (b) a sale, transfer or other
disposition, in one or a series of transactions, of all or
substantially all of the assets of Viacom or (c) a reclassification of
Class B Common Stock as any other capital stock of Viacom or any other
person.
Acceleration Upon Event of Default..... If an Event of Default (as defined below) occurs and is continuing,
either the bank or trust company acting as the trustee (the "Trustee")
or CVR Holders holding at least 25% of the outstanding CVRs, by notice
to Viacom (and to the Trustee if given by CVR Holders), may declare
the CVRs to be due and payable, and upon any such declaration, the
Default Amount shall become due and payable and, thereafter, shall
bear interest at an interest rate of 8% per annum until payment is
made to the Trustee. "Default Amount" means the amount, if any, by
which the Discounted Target Price exceeds the Minimum Price.
Discounted Target Price................ "Discounted Target Price" means (a) if a Disposition or an Event of
Default shall occur prior to the Maturity Date, $48.00, discounted to
the Disposition Payment Date (as defined below) or the Default Payment
Date (as defined below), as the case may be, at a per annum rate of
8%; (b) if a Disposition or an Event of Default shall occur after the
Maturity Date but prior to the First Extended Maturity Date, $51.00
discounted to the date of the Disposition Payment Date or Default
Payment Date, as the case may be, at a per annum rate of 8%; or (c) if
a Disposition or an Event of Default shall occur after the First
Extended Maturity Date but prior to the Second Extended Maturity Date,
$55.00 discounted to the Disposition Payment
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Date or Default Payment Date, as the case may be, at a per annum rate
of 8%. In each case, the Discounted Target Price and the Minimum Price
shall be adjusted upon the occurrence of any event described in the
Section entitled "Antidilution" set forth below. "Disposition Payment
Date", with respect to a Disposition, means the date established by
Viacom for payment of the amount due on the CVRs in respect of such
Disposition, which in no event shall be more than 30 days after the
date on which such Disposition was consummated. "Default Payment Date"
means the date on which the CVRs become due and payable upon the
declaration thereof following an Event of Default.
Events of Default...................... "Event of Default", with respect to the CVRs, means any of the following
which shall have occurred and be continuing; (a) default in the
payment of all or any part of the amounts payable in respect of any of
the CVRs as and when the same shall become due and payable following
the Maturity Date, the First Extended Maturity Date or the Second
Extended Maturity Date, the Disposition Payment Date or otherwise; (b)
material default in the performance, or material breach, of any
material covenant or warranty of Viacom, and continuance of such
material default or breach for a period of 90 days after written
notice has been given to Viacom by the Trustee or to Viacom and the
Trustee by CVR Holders holding at least 25% of the outstanding CVRs;
or (c) certain events of bankruptcy, insolvency, reorganization or
other similar events in respect of Viacom.
Antidilution........................... If Viacom shall in any manner subdivide (by stock split, stock dividend
or otherwise) or combine (by reverse stock split or otherwise) the
number of outstanding shares of Class B Common Stock, Viacom shall
correspondingly subdivide or combine the CVRs and shall appropriately
adjust the Target Price, the Minimum Price and the Discounted Target
Price.
Trading................................ None of Viacom, National Amusements, Inc. or any of their affiliates
shall trade in shares of Class B Common Stock during the period
commencing 10 trading days before the Valuation Period and ending on
the last day of the Valuation Period, except with respect to employee
benefit plans and other incentive compensation arrangements.
No Fractional CVRs..................... No fraction of a CVR will be issued in the Merger. In lieu thereof, a
cash payment will be made in an amount equivalent to the fair market
value of the fraction of the CVR.
CVR Agreement.......................... The CVRs will be issued pursuant to a CVR Agreement between Viacom and
the Trustee. Viacom shall use its reasonable best efforts to cause the
CVR Agreement to be qualified under the Trust Indenture Act of 1939,
as amended.
Registration/Listing................... The CVRs will be issued in registered form, and Viacom shall use its
reasonable best efforts to list the CVRs on the American Stock
Exchange (or such other securities exchange on which the shares of
Class B Common Stock are then listed).
Nature and Ranking of CVRs............. The CVRs are unsecured obligations of Viacom and will rank equally with
all other unsecured obligations of Viacom.
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ANNEX D
PRINCIPAL TERMS OF THREE YEAR WARRANTS
Each Three Year Warrant will entitle the holder thereof to purchase one
share of Viacom Class B Common Stock per whole Three Year Warrant at any time
prior to the third anniversary of the Merger at a price of $60.00, payable in
cash. The terms of the Three Year Warrants will include customary anti-dilution
(with respect to stock splits, stock dividends, reverse stock splits or other
similar subdivisions or combinations of stock) and other provisions. No fraction
of a Three Year Warrant will be issued in the Merger. In lieu thereof, a cash
payment will be made in an amount determined in accordance with Section 1.7 of
this Agreement.
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ANNEX E
PRINCIPAL TERMS OF FIVE YEAR WARRANTS
Each Five Year Warrant will entitle the holder thereof to purchase one
share of Viacom Class B Common Stock per whole Five Year Warrant at any time
prior to the fifth anniversary of the Merger at a price of $70.00, exercisable
for cash or by exchanging, if issued, either Viacom Exchange Preferred Stock
with an equivalent liquidation preference or an equivalent principal amount of
Viacom Exchange Debentures. The terms of the Five Year Warrants will include
customary anti-dilution (with respect to stock splits, stock dividends, reverse
stock splits or other similar subdivisions or combinations of stock) and other
provisions. No fraction of a Five Year Warrant will be issued in the Merger. In
lieu thereof, a cash payment will be made in an amount determined in accordance
with Section 1.7 of this Agreement.
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EXHIBIT 6.14
FORM OF AFFILIATE LETTER
Viacom Inc.
1515 Broadway
New York, NY 10036
Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Paramount Communications Inc., a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Amended and Restated Agreement and Plan of Merger dated as of February 4, 1994
(the "Agreement"), between Viacom Inc., a Delaware corporation ("Viacom"), and
the Company, the Company will be merged with and into Viacom or a wholly owned
Subsidiary of Viacom (the "Merger").
As a result of the Merger, I may receive (i) shares of Class B common
stock, par value $.01 per share, of Viacom, (ii) 8% exchangeable subordinated
debentures of Viacom, (iii) CVRs (as defined in the Agreement) and (iv) Warrants
(as defined in the Agreement) (collectively, the "Viacom Securities"). I would
receive such securities in exchange for, respectively, shares (or options for
shares) owned by me of common stock, par value $1.00 per share, of the Company
(the "Company Securities").
I represent, warrant and covenant to Viacom that in the event I receive any
Viacom Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Viacom Securities in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of Viacom Securities to the
extent I felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of Viacom Securities to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement Form S-4. However, I have also been advised
that, because at the time the Merger is submitted for a vote of the
stockholders of the Company, (a) I may be deemed to be an affiliate of the
Company and (b) the distribution by me of the Viacom Securities has not
been registered under the Act, I may not sell, transfer or otherwise
dispose of Viacom Securities issued to me in the Merger unless (i) such
sale, transfer or other disposition is made in conformity with the volume
and other limitations of Rule 145 promulgated by the Commission under the
Act, (ii) such sale, transfer or other disposition has been registered
under the Act or (iii) in the opinion of counsel reasonably acceptable to
Viacom, such sale, transfer or other disposition is otherwise exempt from
registration under the Act.
D. I understand that Viacom is under no obligation to register the
sale, transfer or other disposition of the Viacom Securities by me or on my
behalf under the Act or to take any other
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action necessary in order to make compliance with an exemption from such
registration available solely as a result of the Merger.
E. I also understand that there will be placed on the certificates for
the Viacom Securities issued to me, or any substitutions therefor, a legend
stating in substance:
"THE [SHARES] [RIGHTS] [DEBENTURES] [WARRANTS] REPRESENTED BY THIS
CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE [SHARES] [RIGHTS]
[DEBENTURES] [WARRANTS] REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED BETWEEN
THE REGISTERED HOLDER HEREOF AND VIACOM INC., A COPY OF WHICH AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICES OF VIACOM INC."
F. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement, Viacom reserves the right to put the following legend on the
certificates issued to my transferee:
"THE [SHARES] [RIGHTS] [DEBENTURES] [WARRANTS] REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE [SHARES] [RIGHTS] [DEBENTURES] [WARRANTS] HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to Viacom a copy of a letter from
the staff of the Commission, or an opinion of counsel reasonably satisfactory to
Viacom in form and substance reasonably satisfactory to Viacom, to the effect
that such legend is not required for purposes of the Act.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter, or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Very truly yours,
......................................
Name:
Accepted this day of
, 1994, by
VIACOM INC.
By ...................................
Name:
Title:
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AMENDMENT NO. 1, dated as of May 26, 1994 (this "Amendment"), to the
Amended and Restated Agreement and Plan of Merger, dated as of February 4, 1994,
among PARAMOUNT COMMUNICATIONS INC., a Delaware corporation ("Paramount"),
VIACOM INC., a Delaware corporation ("Viacom"), and VIACOM SUB INC., a Delaware
corporation and a wholly owned subsidiary of Viacom ("Merger Subsidiary").
WITNESSETH:
WHEREAS, Viacom and Paramount have entered into an Amended and Restated
Agreement and Plan of Merger, dated as of February 4, 1994 (the "Merger
Agreement"; capitalized terms not defined herein have the meanings ascribed to
them in the Merger Agreement); and
WHEREAS, Viacom and Paramount desire to amend the Merger Agreement in order
to make Merger Subsidiary a party thereto, to provide that Merger Subsidiary
merge with and into Paramount at the Effective Time and to provide for
alternative treatment of Stock Options.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and understandings hereinafter set forth, the parties hereto agree as
follows:
SECTION 1. Amendments to Merger Agreement. The Merger Agreement is,
effective as of the date hereof, hereby amended as follows:
(a) In the preamble, (i) the word "among" shall be substituted for the
word "between" in the first place at which it appears therein and (ii) the
phrase "VIACOM SUB INC., a Delaware corporation and a wholly owned
subsidiary of Viacom ("Merger Subsidiary")," shall be added immediately
after the phrase "("Viacom")," and immediately before the word "and".
(b) In the second WHEREAS clause, (i) the phrases (A) "while
preserving the ability to proceed with a single-step merger in appropriate
circumstances,"; (B) "Paramount will merge with and into Viacom (the
"Forward Merger") or alternatively, a subsidiary of Viacom ("Merger
Subsidiary")"; and (C) "Reverse Merger" and, together with the Forward
Merger, the" shall each be deleted; and (ii) the phrase "Merger Subsidiary"
shall be added immediately before the phrase "will merge with and into
Paramount".
(c) The word "and" shall be added to the end of the fifth WHEREAS
clause.
(d) The sixth WHEREAS clause shall be deleted in its entirety.
(e) Section 1.1 shall be restated in full to read as follows:
"SECTION 1.1. 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 defined in Section 1.3), Merger
Subsidiary shall be merged with and into Paramount. As a result of the
Merger, the separate corporate existence of Merger Subsidiary shall
cease and Paramount shall continue as the surviving corporation of the
Merger (the "Surviving Corporation").".
(f) In Section 1.4, (i) the phrase "Viacom (or, in the case of the
Reverse Merger," shall be deleted in both places at which it appears and
(ii) the parenthetical that immediately follow the phrase "Merger
Subsidiary" shall be deleted in both places at which such phrase appears.
(g) In Section 1.5, (i) paragraph (a) shall be deleted; (ii) the
phrase "(b) Alternatively,", which appears in paragraph (b), shall be
deleted; (iii) the word "At", which appears in paragraph (b), shall be
substituted for the word "at", which also appears in paragraph (b); and
(iv) the word "Reverse", which appears in paragraph (b), shall be deleted.
(h) The first sentence of Section 1.6(a) shall be restated in full as
follows:
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"(a) Each share of Paramount Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of
Paramount Common Stock to be canceled pursuant to Section 1.6(c) and any
Dissenting Shares (as defined in Section 1.10)) shall be converted into
the right to receive (A) .93065 shares of Class B common stock, par
value $0.01 per share ("Viacom Class B Common Stock"), of Viacom (the
"Class B Exchange Ratio"), (B) $17.50 principal amount of 8%
exchangeable subordinated debentures (the "Viacom Merger Debentures") of
Viacom having the principal terms described in Annex B (the "Debenture
Exchange Ratio"), (C) .93065 contingent value rights of Viacom (the
"CVRs") having the principal terms described in Annex C (the "CVR
Exchange Ratio"), (D) .50 warrants (the "Three Year Warrants") of Viacom
having the principal terms described in Annex D (the "Three Year Warrant
Exchange Ratio") and (E) .30 warrants (the "Five Year Warrants", and
together with the Three Year Warrants, the "Warrants") of Viacom having
the principal terms described in Annex E (the "Five Year Warrant
Exchange Ratio"); provided, however, that, in any event, if between the
date of this Agreement and the Effective Time the outstanding shares of
Viacom Class B Common Stock or Paramount Common Stock shall have been
changed into a different number of shares or a different class, by
reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the amounts
of Viacom Class B Common Stock, Viacom Merger Debentures, CVRs and
Warrants specified above shall be correspondingly adjusted to reflect
such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares.".
(i) The text of Section 1.6(b) shall be deleted in its entirety, and,
in lieu thereof, the phrase "[Intentionally Omitted]" shall be added.
(j) In Section 1.6(d), (i) the phrase "In the Reverse Merger," shall
be deleted, and (ii) the word "Each" shall be substituted for the word
"each", which appears immediately after the deleted phrase and before the
word "share".
(k) Sections 1.7(a) and (b) shall be restated in full to read as
follows:
"SECTION 1.7. Exchange of Certificates and Cash. (a) Exchange Agent. As of
the Effective Time, Viacom shall deposit, or shall cause to be deposited, with
or for the account of a bank or trust company designated by Viacom, which shall
be reasonably satisfactory to Paramount (the "Exchange Agent"), for the benefit
of the holders of shares of Paramount Common Stock (other than Dissenting
Shares), for exchange in accordance with this Article I, through the Exchange
Agent, certificates evidencing the shares of Viacom Class B Common Stock, the
Viacom Merger Debentures, the Warrants and the CVRs issuable pursuant to Section
1.6 in exchange for outstanding shares of Paramount Common Stock (such
certificates for shares of Viacom Class B Common Stock, the Viacom Merger
Debentures, the Warrants and the CVRs, together with any dividends or
distributions with respect thereto, being hereafter collectively referred to as
the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the shares of Viacom Class B Common Stock, the Viacom
Merger Debentures, Warrants and CVRs contemplated to be issued pursuant to
Section 1.6 out of the Exchange Fund to holders of shares of Paramount Common
Stock. Except as contemplated by Section 1.7(d) hereof, the Exchange Fund shall
not be used for any other purpose. Any interest, dividends or other income
earned on the investment of cash or other property held in the Exchange Fund
shall be for the account of Viacom.
(b) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, Viacom will instruct the Exchange Agent to mail to
each holder of record of a certificate or certificates which immediately
prior to the Effective Time evidenced outstanding shares of Paramount
Common Stock (other than Dissenting Shares) (the "Certificates"), (i) a
letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Viacom may
reasonbly specify)
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and (ii) instructions to effect the surrender of the Certificates in
exchange for the certificates evidencing shares of Viacom Class B Common
Stock, the Viacom Merger Debentures, CVRs and Warrants. Upon surrender
of a Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, and such other customary
documents as may be required pursuant to such instructions, the holder
of such Certificate shall be entitled to receive in exchange therefor
(A) certificates evidencing that number of whole shares of Viacom Class
B Common Stock and that number of whole CVRs, Viacom Merger Debentures
and Warrants which such holder has the right to receive in accordance
with Section 1.6 in respect of the shares of Paramount Common Stock
formerly evidenced by such Certificate, (B) any dividends or other
distributions to which such holder is entitled pursuant to Section
1.7(c) and (C) cash in lieu of fractional shares of Viacom Class B
Common Stock and fractional CVRs, Viacom Merger Debentures and Warrants
to which such holder is entitled pursuant to Section 1.7(d) (the shares
of Viacom Class B Common Stock, CVRs, Viacom Merger Debentures,
Warrants, dividends, distributions and cash described in clauses (A),
(B) and (C) being, collectively, the "Merger Consideration"), and the
Certificate so surrendered shall forthwith be cancelled. In the event of
a transfer of ownership of shares of Paramount Common Stock which is not
registered in the transfer records of Paramount, shares of Viacom Class
B Common Stock, CVRs, Viacom Merger Debentures, Warrants and cash may be
issued and paid in accordance with this Article I to a transferee if the
Certificate evidencing such shares of Paramount Common Stock is
presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable
stock transfer taxes have been paid. Until surrendered as contemplated
by this Section 1.7, each Certificate shall be deemed at any time after
the Effective Time to evidence only the right to receive upon such
surrender the Merger Consideration."
(l) Section 1.9 shall be restated in full to read as follows:
"SECTION 1.9. Stock Options; Payment Rights. (a) At the Effective Time,
Paramount's obligations with respect to each outstanding Stock Option (as
defined in Section 3.3) to purchase shares of Paramount Common Stock, as amended
in the manner described in the following sentence, shall be assumed by Viacom.
The Stock Options so assumed by Viacom shall continue to have, and be subject
to, the same terms and conditions as set forth in the stock option plans and
agreements pursuant to which such Stock Options were issued as in effect
immediately prior to the Effective Time, except that:
(A) each such Stock Option shall be exercisable for:
(1) that number of whole shares of Viacom Class B Common Stock
equal to the product of the number of shares of Paramount Common Stock
covered by such Stock Option immediately prior to the Effective Time
multiplied by .5 and further multiplied by the Class B Exchange Ratio
and rounded up to the nearest whole number of shares of Viacom Class B
Common Stock;
(2) that number of whole CVRs equal to the product of the number of
shares of Paramount Common Stock covered by such Stock Option
immediately prior to the Effective Time multiplied by .5 and further
multiplied by the CVR Exchange Ratio and rounded up to the nearest whole
number of CVRs; provided, that, if the option holder has not exercised
his or her Stock Option prior to the maturity of the CVRs, then the CVRs
described above shall be replaced by that number of shares of Viacom
Class B Common Stock equal in value to the amount by which the Target
Price (as defined in Annex C hereto) exceeds the greater of the Current
Market Value (as defined in Annex C hereto) and the Minimum Price (as
defined in Annex C hereto) on the maturity date, multiplied by the
number of such CVRs, rounded up to the nearest whole number of shares;
(3) that number of whole Three Year Warrants equal to the product
of the number of shares of Paramount Common Stock covered by such Stock
Option immediately prior to the
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Effective Time multiplied by .5 and further multiplied by the Three Year
Warrant Exchange Ratio and rounded up to the nearest whole number of
Three Year Warrants; provided, that, if the option holder has not
exercised his or her Stock Option prior to the third anniversary of the
Effective Time, then the Three Year Warrants described above shall be
replaced by that number of shares of Viacom Class B Common Stock equal
in value to the fair market value of such Three Year Warrants (as
determined by reference to the average trading price for the five-day
trading period immediately prior to the third anniversary of the
Effective Time, if available, or, if not available, in the reasonable
judgment of the Viacom Board of Directors), rounded up to the nearest
whole number of shares;
(4) that number of whole Five Year Warrants equal to the product of
the number of shares of Paramount Common Stock covered by such Stock
Option immediately prior to the Effective Time multiplied by .5 and
further multiplied by the Five Year Warrant Exchange Ratio and rounded
up to the nearest whole number of Five Year Warrants; provided, that, if
the option holder has not exercised his or her Stock Option prior to the
fifth anniversary of the Effective Time, then the Five Year Warrants
described above shall be replaced by that number of shares of Viacom
Class B Common Stock equal in value to the fair market value of such
Five Year Warrants (as determined by reference to the average trading
price for the five-day trading period immediately prior to the fifth
anniversary of the Effective Time, if available, or if not available, in
the reasonable judgment of the Viacom Board of Directors), rounded up to
the nearest whole number of shares;
(5) that (A) principal amount of whole Viacom Merger Debentures equal
to the product of the number of shares of Paramount Common Stock covered by
such Stock Option immediately prior to the Effective Time multiplied by .5
and further multiplied by the Debenture Exchange Ratio plus an amount in
cash (without interest), rounded to the nearest cent, determined by
multiplying (x) the fair market value of one Viacom Merger Debenture, as
determined by reference to a five day average trading price, if available,
or if not available, in the reasonable judgment of the Viacom Board of
Directors by (y) the fractional interest in a Viacom Merger Debenture to
which such option holder would otherwise by entitled or (B) if issued, that
number of whole shares of Viacom Exchange Preferred Stock equal to the
product of the number of shares of Paramount Common Stock covered by such
Stock Option immediately prior to the Effective Time multiplied by .5 and
further multiplied by .35 and rounded up to the nearest whole number of
shares of Viacom Exchange Preferred Stock or (C) if issued, that principal
amount of whole Viacom Exchange Debentures equal to the product of the
number of shares of Paramount Common Stock covered by such Stock Option
immediately prior to the Effective Time multiplied by .5 and further
multiplied by the Debenture Exchange Ratio plus an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (x) the
fair market value of one Viacom Exchange Debenture, as determined by
reference to a five day average trading price, if available, or if not
available, in the reasonable judgment of the Viacom Board of Directors by
(y) the fractional interest in a Viacom Exchange Debenture to which such
option holder would otherwise be entitled; and
(6) that number of whole shares of Viacom Class B Common Stock
equal to the result of the number of shares of Paramount Common Stock
covered by such Stock Option immediately prior to the Effective Time
multiplied by .5 and multiplied further by $107, with such product being
divided by the First Year Anniversary Average Trading Price (as defined
in subsection (b) below) and rounded up to the nearest whole number;
provided, that, if the option holder exercises his or her Stock Option
prior to the first anniversary of the Effective Time, then the whole
shares of Viacom Class B Common Stock described above shall be replaced
by a right to receive such shares on the first year anniversary of the
Effective Time;
and
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(B) each holder of a Stock Option outstanding as of the Effective Time
shall be provided with not less than ten days' advance notice of any
involuntary termination of his employment by Viacom (other than by reason
of his death or disability) in order to permit such holder to exercise such
holder's then exercisable Stock Options during such ten-day period.
(b) As used in this Section 1.9, the "First Year Anniversary Average
Trading Price" means the average closing price on the AMEX (or such other
exchange on which such shares are then listed) for a share of Viacom Class B
Common Stock during the 30 consecutive trading days immediately preceding the
first year anniversary of the Effective Time. Viacom shall (A) reserve for
issuance the number of shares of Viacom Class B Common Stock, CVRs, Viacom
Merger Debentures and Warrants that will become issuable upon the exercise of
such Stock Options pursuant to this Section 1.9 and (B) promptly after the
Effective Time, issue to each holder of an outstanding Stock Option a document
evidencing the assumption by Viacom of Paramount's obligations with respect
thereto under this Section 1.9. Nothing in this Section 1.9 shall affect the
schedule of vesting with respect to the Stock Options to be assumed by Viacom as
provided in this Section 1.9.".
(m) In Section 1.10, the phrase "(as if such Shares were Non-Election
Shares in the case of a Merger to which Section 1.6(b) applies)" shall be
deleted.
(n) In Section 3.4, the phrase "and Merger Subsidiary" shall be added in
the third sentence thereof immediately after the phrase "execution and delivery
by Viacom" and before the comma following such phrase.
(o) The heading and preamble to Article IV shall be restated in full to
read as follows:
"ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF VIACOM AND MERGER SUBSIDIARY
Viacom and Merger Subsidiary hereby, jointly and severally, represent and
warrant to Paramount that:".
(p) In the first sentence of Section 4.1(a), the phrase ", Merger
Subsidiary" shall be added immediately after the phrase "Each of Viacom" and
before the phrase "and each Material Viacom Subsidiary".
(q) In the second sentence of Section 4.1(a), the phrase "Each of" shall be
added at the beginning thereof, and the phrase ", Merger Subsidiary" shall be
added immediately after the word "Viacom" and before the phrase "and each
Material Viacom Subsidiary".
(r) In the first sentence of Section 4.2, the phrase ", Merger Subsidiary"
shall be added immediately after the word "Viacom" and before the phrase "and
each Material Viacom Subsidiary".
(s) In the third sentence of Section 4.2, (i) the phrase "None of" shall be
substituted for the word "Neither", which appears at the beginning of such
sentence, and (ii) the phrase ", Merger Subsidiary" shall be added immediately
after the word "Viacom" and before the phrase "nor any Material Viacom
Subsidiary".
(t) At the end of Section 4.3, the following sentences shall be added:
"The authorized capital stock of Merger Subsidiary consists of 200
shares of common stock, no par value ("Merger Subsidiary Common Stock"). As
of May 26, 1994, 100 shares of Merger Subsidiary Common Stock were issued
and outstanding, all of which were validly issued, fully paid and
non-assessable. As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement and except
for this Agreement and any other agreements or
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arrangements contemplated by this Agreement, Merger Subsidiary has not and
will not have incurred, directly or indirectly, through any subsidiary or
affiliate, any obligations or liabilities or engaged in any business
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person.".
(u) In the first sentence of Section 4.4, (i) the phrase "Each of" shall be
added at the beginning thereof, and (ii) the phrase "and Merger Subsidiary"
shall be added immediately after the word "Viacom" and before the phrase "has
all necessary power".
(v) The portion of the second sentence of Section 4.4 immediately preceding
the phrase "are necessary to authorize this Agreement" shall be restated in full
to read as follows:
"The execution and delivery of this Agreement by each of Viacom and
Merger Subsidiary and the consummation by each of Viacom and Merger
Subsidiary of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action and by the sole
stockholder of Merger Subsidiary and the Voting Agreement has been approved
by the Viacom Board of Directors for purposes of Section 203 of Delaware
Law and no other corporate proceedings on the part of either Viacom or
Merger Subsidiary".
(w) The third and final sentence of Section 4.4 shall be restated in full
to read as follows:
"This Agreement has been duly and validly executed and delivered by
each of Viacom and Merger Subsidiary and, assuming the due authorization,
execution and delivery by Paramount, constitutes a legal, valid and binding
obligation of each of Viacom and Merger Subsidiary, enforceable against
each of Viacom and Merger Subsidiary in accordance with its terms.".
(x) The portion of the first and only sentence of Section 4.5(a)
immediately preceding clause (ii) of such sentence shall be restated in full to
read as follows:
"The execution and delivery of this Agreement by each of Viacom and Merger
Subsidiary does not, and the performance of the transactions contemplated hereby
by each of Viacom and Merger Subsidiary will not, (i) conflict with or violate
the Certificate of Incorporation or By-Laws or equivalent organizational
documents of Viacom, Merger Subsidiary or any Material Viacom Subsidiary,".
(y) In Section 4.5(b), the portion of the first and only sentence thereof
immediately preceding the phrase "will not, require any consent," shall be
restated in full to read as follows:
"The execution and delivery of this Agreement by each of Viacom and
Merger Subsidiary does not, and the performance of this Agreement by each
of Viacom and Merger Subsidiary".
(z) In Section 4.5(b), the phrase "each of Viacom and Merger Subsidiary"
shall be substituted for the word "Viacom" which appears immediately prior to
the phrase "from performing its obligations under this Agreement in any material
respect".
(aa) In Section 4.16, the phrase "or Merger Subsidiary" shall be added at
the end of the first sentence thereof.
(bb) In Section 5.1(a), the word "Exchange" shall be substituted for the
word "Merger", which appears immediately before the phrase "Preferred Stock".
(cc) In Section 6.2, the following sentences shall be substituted for the
phrase "Intentionally Omitted.":
"Severance Pay Plan. In the event that the Surviving Corporation
terminates the employment of any Eligible Employee (as defined below), such
Eligible Employee shall receive the benefits provided to employees under
the Viacom International Severance Pay Plan, which became effective on
August 31, 1991 (the "Severance Pay Plan"). An "Eligible Employee" is any
full-time employee of the Surviving Corporation who was a full-time
employee of Paramount immediately
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prior to the Effective Time and who otherwise satisfies the eligibility
requirements set forth in Section 2 of the Severance Pay Plan."
(dd) The following sentence shall be added at the end of Section 6.3(e):
"Viacom agrees to guaranty the obligations of the Surviving Corporation under
this Section 6.3 and shall discharge and perform the obligations of the
Surviving Corporation to the extent the Surviving Corporation fails to do so.".
(ee) In Section 6.4, (i) the phrase "and Merger Subsidiary" shall be added
after the word "Viacom" the first two times such word appears and (ii) in clause
(ii) the phrase "any failure of Paramount, Viacom or Merger Subsidiary," shall
be substituted for the phrase "any failure of Paramount or Viacom,".
(ff) Section 6.5 shall be deleted in its entirety, and, in lieu thereof,
the phrase "[Intentionally Omitted]" shall be added.
(gg) The following sentence shall be added at the end of Section 6.7:
"Viacom agrees to cause the shares of Paramount Common Stock owned by Viacom to
be voted in favor of approval of the Merger.".
(hh) Section 6.19 shall be restated in full to read as follows:
"Section 6.19. Obligations of Merger Subsidiary. Viacom shall take all
action necessary to cause Merger Subsidiary to perform its obligations
under this Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement."
(ii) In the heading of Section 7.2, the phrase "and Merger Subsidiary"
shall be added immediately after the word "Viacom".
(jj) In the introductory clause of Section 7.2, the phrase "and Merger
Subsidiary" shall be added after the word "Viacom" and before the phrase "to
effect the Merger".
(kk) In Section 7.3(a), (i) the phrase "and Merger Subsidiary" shall be
added immediately after the word "Viacom" and before the phrase "contained in
this Agreement", and (ii) the phrase "or Merger Subsidiary" shall be added
immediately after the word "Viacom" and before the phrase "to Paramount pursuant
to Section 6.4".
(ll) In Section 8.1(c), the phrase "and Merger Subsidiary" shall be added
immediately after the word "Viacom" and before the phrase "set forth in this
Agreement,".
(mm) In Section 8.2, the phrase "Paramount, Viacom or Merger Subsidiary"
shall be substituted for the phrase "Paramount or Viacom", which immediately
follows the phrase " there shall be no liability on the part of".
(nn) In the first sentence of Section 8.4, (i) the word "any" shall be
substituted for the word "either", which appears immediately after the phrase
"Effective Time,", and (ii) the word "parties" shall be substituted for the word
"party" in each instance where such word appears in clauses (a), (b) and (c) of
such sentence.
(oo) In Section 9.2(a), the phrase "or Merger Subsidiary" shall be added
immediately after the phrase "If to Viacom" and before the colon immediately
following such phrase.
(pp) The word "and" shall be added at the end of Section 9.3(e).
(qq) The text of Section 9.3(f) shall be deleted, and the phrase
"[Intentionally Omitted]" shall be substituted therefor.
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(rr) The following text shall be added to the end of the Merger Agreement:
"ATTEST: VIACOM SUB INC.
By.................................. By..................................."
(ss) In the Index of Defined Terms, (i) the terms "Cash Election", "Cash
Election Number", "Cash Election Shares", "Cash Fraction", "Form of Election",
"Forward Merger", "Non-Election", "Non-Election Fraction", "Non-Election
Shares", "Reverse Merger", "Securities Election", "Securities Election Number",
"Securities Fraction" and "Stock Election Share" shall each be deleted; and (ii)
the Section reference with respect to the term "Merger Subsidiary" shall be
redesignated as "PREAMBLE".
SECTION 2. Effect of Amendment. Except as and to the extent modified by
this Amendment, the Merger Agreement shall remain in full force and effect in
all respects.
SECTION 3. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
SECTION 4. Counterparts. This Amendment 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.
IN WITNESS WHEREOF, Viacom, Merger Subsidiary and Paramount have caused
this Amendment to be executed as of the date first written above by their
respective officers thereunto duly authorized.
ATTEST:
VIACOM INC.
By /s/ Katherine B. Rosenberg By /s/ Philippe P. Dauman
.................................. ..................................
Name: Katherine B. Rosenberg Name: Philippe P. Dauman
Title: Assistant Secretary Title: Executive Vice President,
General Counsel and Chief
Administrative Officer
ATTEST:
VIACOM SUB INC.
By /s/ Michael D. Fricklas By /s/ Philippe P. Dauman
.................................. ...................................
Name: Michael D. Fricklas Name: Philippe P. Dauman
Title: Vice President and Title: President and Secretary
Assistant Secretary
ATTEST:
PARAMOUNT COMMUNICATIONS INC.
By /s/ Michael D. Fricklas By /s/ Philippe P. Dauman
.................................. ...................................
Name: Michael D. Fricklas Name: Philippe P. Dauman
Title: Senior Vice President, Title: Executive Vice President,
Deputy General Counsel and General Counsel and Chief
Assistant Secretary Administrative Officer
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ANNEX II
PARAMOUNT VOTING AGREEMENT
<PAGE>
[CONFORMED COPY]
VOTING AGREEMENT
VOTING AGREEMENT, dated as of January 21, 1994 (this "Agreement"), between
NATIONAL AMUSEMENTS, INC., a Maryland corporation (the "Stockholder"), and
PARAMOUNT COMMUNICATIONS INC., a Delaware corporation ("Paramount").
WHEREAS, Viacom Inc., a Delaware corporation ("Viacom"), and Paramount
propose to enter into an Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), which provides, among other things, that
Paramount will merge with Viacom pursuant to the merger contemplated by the
Merger Agreement (the "Merger");
WHEREAS, as of the date hereof, the Stockholder owns (i) 45,547,214 shares
of Class A Common Stock, par value $.01 per share, of Viacom ("Viacom Class A
Common Stock") and (ii) 46,565,414 shares of Class B Common Stock, par value
$.01 per share, of Viacom ("Viacom Class B Common Stock"; together with the
Viacom Class A Common Stock, the "Viacom Common Stock"); and
WHEREAS, as a condition to the willingness of Paramount to enter into the
Merger Agreement, Paramount has required that the Stockholder agree, and in
order to induce Paramount to enter into the Merger Agreement, the Stockholder
has agreed, to enter into this Agreement with respect to all the shares of
Viacom Class A Common Stock now owned and which may hereafter be acquired by the
Stockholder (the "Shares").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
VOTING OF SHARES
SECTION 1.01. Voting Agreement. The Stockholder hereby agrees that during
the time this Agreement is in effect, at any meeting of the stockholders of
Viacom, however called, and in any action by consent of the stockholders of
Viacom, the Stockholder shall vote the Shares: (a) in favor of the Merger, the
Merger Agreement (as amended from time to time) and the transactions
contemplated by the Merger Agreement, including, but not limited to, the
amendments to the Certificate of Incorporation of Viacom contemplated thereby,
and (b) against any proposal for any recapitalization, merger, sale of assets or
other business combination between Viacom and any person or entity (other than
the Merger and any merger of Blockbuster Entertainment Corporation, a Delaware
corporation ("Blockbuster"), with Viacom) or any other action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of Viacom under the Merger Agreement or which
could result in any of the conditions to Viacom's obligations under the Merger
Agreement not being fulfilled. The Stockholder acknowledges receipt and review
of a copy of the Merger Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Paramount as follows:
SECTION 2.01. Authority Relative to This Agreement. The Stockholder has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to
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consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Stockholder and the consummation by the Stockholder of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Stockholder, and no other corporate proceedings on the
part of the Stockholder are necessary to authorize this Agreement or to
consummate such transactions. This Agreement has been duly and validly executed
and delivered by the Stockholder and, assuming the due authorization, execution
and delivery by Paramount, constitutes a legal, valid and binding obligation of
the Stockholder, enforceable against the Stockholder in accordance with its
terms.
SECTION 2.02. No Conflict. (a) The execution and delivery of this Agreement
by the Stockholder do not, and the performance of this Agreement by the
Stockholder shall not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws or equivalent organizational documents of the
Stockholder, (ii) conflict with or violate any law, rule, regulation, order,
judgement or decree applicable to the Stockholder or by which the Shares are
bound or affected or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the Shares pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Stockholder is a party or by which the Stockholder or the Shares
are bound or affected, except, in the case of clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences which would
not prevent or delay the performance by the Stockholder of its obligations under
this Agreement.
(b) The execution and delivery of this Agreement by the Stockholder do not,
and the performance of this Agreement by the Stockholder shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity (as such term is defined in the Merger Agreement)
except for applicable requirements, if any, of the Securities Exchange Act of
1934, as amended, and except where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay the performance by the Stockholder of its obligations
under this Agreement.
SECTION 2.03. Title to the Shares. As of the date hereof, the Stockholder
is the record and beneficial owner of 45,547,214 shares of Viacom Class A Common
Stock. Other than 46,565,414 shares of Viacom Class B Common Stock of which the
Stockholder is the record and beneficial owner, such Shares are all the
securities of Viacom owned, either of record or beneficially, by the
Stockholder. The Shares are owned free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Stockholder's voting rights, charges and other encumbrances
of any nature whatsoever (other than a voting agreement entered into in
connection with the merger of Blockbuster and Viacom). The Stockholder has not
appointed or granted any proxy, which appointment or grant is still effective,
with respect to the Shares.
ARTICLE III
COVENANTS OF THE STOCKHOLDERS
SECTION 3.01. No Inconsistent Agreements. The Stockholder hereby covenants
and agrees that, except as contemplated by this Agreement and the Merger
Agreement, the Stockholder shall not enter into any voting agreement or grant a
proxy or power of attorney with respect to the Shares which is inconsistent with
this Agreement (it being agreed that any voting agreement entered into in
connection with a merger of Viacom and Blockbuster shall not be deemed to be
inconsistent with this Agreement).
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<PAGE>
SECTION 3.02. Transfer of Title. The Stockholder hereby covenants and
agrees that the Stockholder shall not transfer record or beneficial ownership of
any of the Shares unless the transferee agrees in writing to be bound by the
terms and conditions of this Agreement.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Termination. This Agreement shall terminate upon the
termination of the Merger Agreement.
SECTION 4.02. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 4.03. Entire Agreement. This Agreement constitutes the entire
agreement between Paramount and the Stockholder with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between Paramount and the Stockholder with respect to the
subject matter hereof.
SECTION 4.04. Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 4.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable or being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in a mutually acceptable manner in order that the terms of this Agreement remain
as originally contemplated to the fullest extent possible.
SECTION 4.06. Governing Law. Except to the extent that the General
Corporation Law of the State of Delaware is mandatorily applicable to the rights
of the stockholders of Viacom, this Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
IN WITNESS WHEREOF, the Stockholder and Paramount have caused this
Agreement to be duly executed on the date hereof.
NATIONAL AMUSEMENTS, INC.
By: /s/ SUMNER M. REDSTONE
..................................
Name: Sumner M. Redstone
Title: Chairman of the Board,
President and
Chief Executive Officer
PARAMOUNT COMMUNICATIONS INC.
By: /s/ DONALD ORESMAN
..................................
Name: Donald Oresman
Title: Executive Vice President,
Chief Administrative
Officer, General Counsel
and Secretary
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<PAGE>
ANNEX III
OPINION OF SMITH BARNEY SHEARSON INC.
<PAGE>
ANNEX III
SMITH BARNEY SHEARSON
February 1, 1994
The Board of Directors
VIACOM INC.
1515 Broadway
New York, NY 10036
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to Viacom Inc. ("Viacom") and its stockholders, of the terms of the
proposed acquisition (the "Acquisition") by Viacom of Paramount Communications
Inc. ("Paramount"). We understand that the Acquisition will be effected pursuant
to the terms and subject to the conditions set forth in Viacom's Offer to
Purchase, dated October 25, 1993, as amended and supplemented by the Supplement
thereto, dated November 8, 1993, the Second Supplement thereto, dated January 7,
1994, the Third Supplement thereto, dated January 18, 1994 and the Fourth
Supplement thereto, to be filed with the Securities and Exchange Commission on
February 1, 1994 (as amended and supplemented, the "Offer to Purchase"). The
terms of the Offer to Purchase provide for the Acquisition pursuant to a tender
offer (the "Offer") by Viacom for 61,607,892 shares of common stock, par value
$1.00 per share, of Paramount ("Paramount Common Stock"), or such greater number
of shares as equals 50.1% of the shares outstanding on a fully diluted basis, as
of the expiration of the Offer, at a price of $107.00 per share in cash, to be
followed by a merger of either Paramount with and into Viacom or a new
subsidiary of Viacom with and into Paramount (the "Merger"). In the event the
Offer is consummated, each share of Paramount Common Stock issued and
outstanding at the Effective Time, subject to adjustment as specified in the
Offer to Purchase, will be converted into the right to receive (a) 0.93065 of a
share of Class B common stock, par value $.01 per share, of Viacom (the "Class B
Common Stock"); (b) $17.50 face amount of 5% exchangeable debentures of $50.00,
of Viacom containing the principal terms described in the Offer to Purchase (the
"Merger Debentures"); (iii) 0.93065 of a contingent value right issued by Viacom
("CVRs") which, as more fully described in the Offer to Purchase, entitles the
holder to consideration in certain circumstances; (iv) 0.500 of a warrant issued
by Viacom each of which, as more fully described in the Offer to Purchase,
entitle the holder to purchase Class B Common Stock at $60.00 per share under
certain circumstances (the "$60.00 Warrants"), and (v) 0.300 of a warrant issued
by Viacom each of which, as more fully described in the Offer to Purchase,
entitle the holder to purchase Class B Common Stock at $70.00 per share under
certain circumstances (the "$70.00 Warrants") (the Merger Debentures, CVRs,
$60.00 Warrants and $70.00 Warrants, together with the Class B Common Stock,
being the "Viacom Securities"). The terms set forth in the preceding two
sentences are referred to in this letter as the "Financial Terms of the
Acquisition."
We understand further that Viacom and Blockbuster Entertainment Corporation
("Blockbuster") have entered into an Agreement and Plan of Merger (the
"Blockbuster Merger Agreement") pursuant to which Blockbuster will merge with
and into Viacom (the "Blockbuster Merger"). As more fully described in the
Blockbuster Merger Agreement, and subject to the terms and conditions set forth
therein, each share of common stock, par value $.10 per share, of Blockbuster,
issued and outstanding as of the effective time of the Blockbuster Merger will
be converted into the right to receive (a) 0.0800 of a share of Class A common
stock, par value $.01 per share, of Viacom, (b) 0.60615 of a share of Class B
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Common Stock and (c) 1.0000 variable contingent right ("VCRs") issued by Viacom
which, as more fully described in the Blockbuster Merger Agreement, provides for
up to a maximum of 0.13829 of a share of Class B Common Stock to be issued
subsequent to the consummation of the Blockbuster Merger for each VCR held.
We further understand that the consummation of the Acquisition will not be
conditioned upon the consummation of the Blockbuster Merger and may occur
whether or not the Blockbuster Merger is consummated.
In arriving at our opinion, we have (i) reviewed the Offer to Purchase;
(ii) reviewed the Exemption Agreement between Viacom and Paramount dated as of
December 22, 1993 and the form of Agreement and Plan of Merger attached thereto;
(iii) reviewed the Blockbuster Merger Agreement; (iv) met with certain senior
officers of Viacom, Paramount and Blockbuster to discuss the business,
operations, assets, financial condition and prospects of their respective
companies; (v) examined certain publicly available business and financial
forecasts and other data for each of Viacom, Paramount and Blockbuster which
were provided to us by the senior management of Viacom, Paramount and
Blockbuster, respectively, which are not publicly available; (vi) taken into
account certain long-term strategic benefits expected to occur from each of the
Acquisition and the Blockbuster Merger, both operational and financial, that
were described to us by Viacom, Paramount and Blockbuster senior management; and
(vii) reviewed the financial terms of the Acquisition as set forth in the Offer
to Purchase and the Blockbuster Merger as set forth in the Blockbuster Merger
Agreement in relation to, among other things, current and historical market
prices and trading volumes of the Class B Common Stock, Paramount Common Stock
and the common stock of Blockbuster; the earnings and book value per share of
each of Viacom, Paramount and Blockbuster; and the capitalization and financial
condition of each of Viacom, Paramount and Blockbuster. We have also considered,
to the extent publicly available, the financial terms of certain other business
combination transactions which we considered relevant in evaluating each of the
Acquisition and the Blockbuster Merger and analyzed certain financial, stock
market and other publicly available information relating to the businesses of
other companies that we considered relevant in evaluating Viacom, Paramount and
Blockbuster. We have also evaluated the pro forma financial impact of each of
the Acquisition and Blockbuster Merger on Viacom. In addition to the foregoing,
we have conducted such other analyses and examinations and considered such other
financial, economic and market criteria as we deemed necessary in arriving at
our opinion.
In arriving at our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise discussed with us.
With respect to financial forecasts and other information provided to or
otherwise discussed with us prepared by the senior managements of Viacom,
Paramount and Blockbuster with respect to the expected future financial
performance of Viacom, Paramount and Blockbuster, we assumed that such forecasts
and other information were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective senior managements
of Viacom, Paramount and Blockbuster. We have also relied upon the views of the
management of Viacom, Paramount and Blockbuster and have assumed, with your
consent, that certain long-term strategic benefits, both operational and
financial, will result from each of the Acquisition and the Blockbuster Merger.
We express no opinion as to what the value of the Viacom Securities will be when
issued to Paramount stockholders pursuant to the Merger or the price at which
the Viacom Securities will trade subsequent to the Acquisition. We have not made
or been provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Viacom, Paramount or Blockbuster nor
have we made any physical inspection of the properties or assets of Viacom,
Paramount or Blockbuster. Our opinion herein is necessarily based upon
financial, stock market and other conditions and circumstances existing and
disclosed to us as of the date hereof.
Smith Barney Shearson Inc. has acted as financial advisor to the Board of
Directors of Viacom in connection with this transaction and will receive a fee
for such services. In the ordinary course of our business, we may actively trade
the equity or debt securities of Viacom, Paramount or Blockbuster for
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<PAGE>
our own account or for the account of our customers and, accordingly, may at any
time hold a long or short position in such securities.
Our advisory services and the opinion expressed herein are provided solely
for the use of Viacom's Board of Directors in evaluating the Acquisition and are
not on behalf of, and are not intended to confer rights or remedies upon,
Paramount, any stockholder of Viacom or Paramount or any person other than
Viacom's Board of Directors. It is understood that this opinion letter is for
the information of the Board of Directors of Viacom only, and without our prior
written consent, is not to be quoted or referred to, in whole or in part, in
connection with the offering or sale of securities, nor shall this letter be
used for any other purpose, other than in connection with the Tender Offer
Statement on Schedule 14D-1 and any amendments thereto to be filed by Viacom
with the Securities and Exchange Commission in connection with the Acquisition
or the Blockbuster Merger or in connection with the respective proxy statements
of Blockbuster and Paramount or the proxy statement/prospectus of Viacom
relating to the Acquisition or any Registration Statement of which any such
proxy statement or proxy statement/prospectus forms a part.
Based upon and subject to the foregoing, our experience as investment
bankers and other factors we deemed relevant, we are of the opinion that, as of
the date hereof, the Financial Terms of the Acquisition are fair, from a
financial point of view, to Viacom and its stockholders, whether or not the
Blockbuster Merger is consummated.
Very truly yours,
/s/ SMITH BARNEY SHEARSON
......................................
Smith Barney Shearson Inc.
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<PAGE>
ANNEX IV
OPINION OF LAZARD FRERES & CO.
<PAGE>
ANNEX IV
LAZARD FRERES & CO.
One Rockefeller Plaza
New York, NY 10020
Telephone (212) 632-6000
Facsimile (212) 632-6060 NEW YORK
February 4, 1994
The Board of Directors
Paramount Communications Inc.
15 Columbus Circle
New York, NY 10023-7780
Dear Members of the Board:
You have requested our opinion, as of this date, as to the
relationship from a financial point of view of the Viacom Transaction
Consideration (as defined below) to the QVC Transaction Consideration (as
defined below).
We understand that, as set forth in Amendment Number 34 to the Tender
Offer Statement on Schedule 14D-1 filed by QVC Network, Inc. ("QVC"),
Comcast Corporation and BellSouth Corporation with the Securities and
Exchange Commission (the "Commission") on February 1, 1994 (the "QVC Tender
Offer Statement"), QVC has amended its proposal (the "Amended QVC
Proposal") to acquire Paramount Communications Inc. ("Paramount") by
amending the terms of the cash tender offer (the "QVC Offer") that QVC
commenced on October 27, 1993 and the terms of the consideration payable to
the holders (the "Stockholders") of common stock of Paramount ("Common
Stock") in the QVC Second-Step Merger (as defined below). Under the
Amended QVC Proposal, (i) QVC is offering in the QVC Offer to purchase
61,657,432 shares of Common Stock, or such greater number as equals 50.1%
of the outstanding shares of Common Stock (on a fully diluted basis), at a
purchase price of $104.00 per share in cash, and (ii) following completion
of the QVC Offer, in accordance with the form of Agreement and Plan of
Merger, between QVC and Paramount (the "Form QVC Merger Agreement") that is
attached to the Exemption Agreement, dated as of January 21, 1994, between
QVC and Paramount, as amended on January 27, 1994 (the "QVC Exemption
Agreement"), Paramount would be merged into QVC in the proposed second-step
merger between QVC and Paramount (the "QVC Second-Step Merger";
collectively with the QVC Offer, the "QVC Two-Step Transaction"), and each
share of Common Stock not purchased in
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<PAGE>
the QVC Offer (other than shares of Common Stock held in the treasury of
Paramount or owned by Paramount or any direct or indirect wholly-owned
subsidiary of Paramount or QVC or shares of Common Stock held by those
Stockholders (as defined below) who exercise and perfect stockholders
appraisal rights under Delaware law) would be converted into the right
to receive (a) 1.2361 shares of common stock of QVC (the "QVC Common
Stock"), (b) 0.2386 shares of a new series of 6% cumulative non-convertible
exchangeable preferred stock of QVC (the "QVC Merger Preferred Stock")
and (c) 0.32 warrants to purchase one share of QVC Common Stock at a
price of $70.34 per share, exercisable at any time by the
holder prior to the tenth anniversary of the QVC Second-Step Merger (the
"QVC Warrants") (the aggregate consideration payable to the Stockholders
pursuant to the QVC Offer set forth in clause (i) and the aggregate
consideration payable to the Stockholders pursuant to the QVC Second-Step
Merger set forth in subclauses (a), (b) and (c) of clause (ii) is
collectively referred to as the "QVC Transaction Consideration"). We also
understand that the Amended QVC Proposal provides that the QVC Merger
Preferred Stock will pay cumulative quarterly dividends at a rate of $3.00
per annum per share, will have a liquidation preference of $50.00 per
share, will be redeemable for cash by QVC at declining redemption premiums
on and after the fifth anniversary of the QVC Second-Step Merger and will
be exchangeable by QVC into QVC's 6% subordinated debentures (the "QVC
Debentures") at an exchange rate of $50.00 principal amount of QVC
Debenture per share of QVC Merger Preferred Stock on and after the third
anniversary of the QVC Second-Step Merger. In addition, we understand that
the QVC Warrants will be exercisable with cash or by using an equivalent
amount of liquidation preference of QVC Merger Preferred Stock or principal
amount of QVC Debentures and will be redeemable for cash by QVC, at its
option, at $15.00 per QVC Warrant on and after the fifth anniversary of the
QVC Second-Step Merger.
In addition, we understand that, as set forth in (i) the written
proposal submitted to Paramount by Viacom Inc. ("Viacom") on February 1,
1994 and (ii) Amendment Number 35 to the Tender Offer Statement on Schedule
14D-1 filed by Viacom, National Amusements, Inc., Mr. Sumner M. Redstone
and Blockbuster Entertainment Corporation ("Blockbuster") with the
Commission on February 1, 1994 (the "Viacom Tender Offer Statement")
(collectively, the "Amended Viacom Proposal"), Viacom did not amend the
terms of the cash tender offer (the "Viacom Offer") that it had commenced
on October 25, 1993, but amended the terms of the consideration payable to the
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<PAGE>
Stockholders in the proposed Viacom Second-Step Merger (as defined
below). Under the Amended Viacom Proposal, (a) Viacom is continuing to
offer in the Viacom Offer to purchase 61,657,432 shares of Common Stock, or
such greater number as equals 50.1% of the outstanding shares of Common
Stock (on a fully diluted basis), at a purchase price of $107.00 per share
in cash, and (b) following completion of the Viacom Offer, in accordance
with the Agreement and Plan of Merger, between Viacom and Paramount, dated
as of January 21, 1994, as amended on January 27, 1994 and as proposed to
be amended to reflect the Amended Viacom Proposal (the "Viacom Merger
Agreement"), Paramount would be merged into Viacom in the proposed second-
step merger between Viacom and Paramount (the "Viacom Second-Step Merger";
collectively with the Viacom Offer, the " Viacom Two-Step Transaction"),
and each share of Common Stock not purchased in the Viacom Offer (other
than shares of Common Stock held in the treasury of Paramount or owned by
Paramount or any direct or indirect wholly-owned subsidiary of Paramount or
Viacom or shares of Common Stock held by those Stockholders who exercise
and perfect stockholders appraisal rights under Delaware law) would be
converted into the right to receive (1) 0.93065 shares of Class B common
stock of Viacom (the "Viacom Class B Common Stock"), (2) $17.50 principal
amount of 8% exchangeable subordinated debentures of Viacom (the "Viacom
Exchangeable Debentures"), (3) 0.5 warrants to purchase one share of Viacom
Class B Common Stock at a price of $60.00 per share, exercisable at any
time by the holder prior to the third anniversary of the Viacom Second-Step
Merger, (4) 0.3 warrants to purchase one share of Viacom Class B Common
Stock at a price of $70.00 per share, exercisable at any time by the holder
prior to the fifth anniversary of the Viacom Second-Step Merger (the
"Viacom Five Year Warrants") and (5) 0.93065 contingent value rights of
Viacom (the "Viacom CVRs") having the terms described below (the aggregate
consideration payable to Stockholders pursuant to the Viacom Offer set
forth in clause (a) and the aggregate consideration payable to Stockholders
pursuant to the Viacom Second- Step Merger set forth in subclauses (1),
(2), (3), (4) and (5) of clause (b) is collectively referred to as the
"Viacom Transaction Consideration"). In addition, we understand that the
Amended Viacom Proposal provides that the Viacom Exchangeable Debentures
will mature on the twelfth anniversary of the Viacom Second-Step Merger,
will pay interest semi-annually beginning on January 1, 1995 and will be
non-callable until the fifth anniversary of the Viacom Second-Step Merger,
and thereafter may be redeemed for cash by Viacom at declining redemption
premiums. The Amended Viacom Proposal also provides that Viacom will have
the option to exchange at par the Viacom
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<PAGE>
Exchangeable Debentures for the equivalent liquidation preference
of a new series of Viacom 5% cumulative exchangeable (non-convertible)
preferred stock (the "Viacom Merger Preferred Stock") if the
proposed merger between Viacom and Blockbuster contemplated by
the Agreement and Plan of Merger, dated as of January 7, 1994, between
Blockbuster and Viacom (the "Blockbuster Merger Agreement") has not
been consummated by January 1, 1995, or earlier, if beneficial
ownership of a majority of the outstanding shares of common stock of
Blockbuster (the "Blockbuster Common Stock") has been acquired by a third
party prior to January 1, 1995. The Amended Viacom Proposal further
provides that the Viacom Merger Preferred Stock will be non-callable until
the fifth anniversary of the Viacom Second-Step Merger, and thereafter, may
be redeemed by Viacom for cash at declining redemption premiums and will
have a liquidation preference of $50.00 per share. In addition, the Viacom
Merger Preferred Stock will be exchangeable into Viacom's 5% subordinated
debentures (the "Viacom Subordinated Debentures") after the third
anniversary of the Viacom Second-Step Merger at an exchange rate of $50.00
principal amount of Viacom Subordinated Debentures for each share of Viacom
Merger Preferred Stock. Moreover, the dividend rate on the Viacom Merger
Preferred Stock and the interest rate on the Viacom Subordinated Debentures
will increase to 10% per annum on the tenth anniversary of the Viacom
Second-Step Merger, if not previously redeemed by Viacom. We further
understand that the Amended Viacom Proposal provides that the Viacom Five
Year Warrants will be exercisable with cash or by using an equivalent
liquidation preference of Viacom Merger Preferred Stock or principal amount
of Viacom Subordinated Debentures. We also understand that the Amended
Viacom Proposal provides that each Viacom CVR will represent the right on
the first anniversary of the Viacom Second-Step Merger to receive in cash
or securities, at Viacom's election, the amount by which the Average
Trading Value (as defined in the Amended Viacom Proposal and as described
below) of Viacom Class B Common Stock is less than a minimum price of
$48.00 per share of Viacom Class B Common Stock, and Viacom will have the
right, in its sole discretion, to extend the payment measurement dates of
the Viacom CVR by one year, in which case the minimum price will increase
to $51.00 per share of Viacom Class B Common Stock, and a further one year
extension right which, if exercised, would increase the minimum price to
$55.00 per share of Viacom Class B Common Stock. As used in the Amended
Viacom Proposal, the "Average Trading Value" will be based upon the market
prices of Viacom Class B Common Stock during the 60 trading days ending on
the last day of the relevant period and is subject to a floor of $36.00 per
share of Viacom Class B Common Stock on the first anniversary of the Viacom
Second-Step Merger, a floor of $37.00 per share of Viacom Class B Common
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Stock on the second anniversary of the Viacom Second-Step Merger and a
floor of $38.00 per share of Viacom Class B Common Stock on the third
anniversary of the Viacom Second-Step Merger.
Lazard Freres & Co. has from time to time acted as financial advisor
to Paramount and has acted as its financial advisor in connection with
proposed QVC Two-Step Transaction and proposed Viacom Two-Step Transaction.
As you know, a General Partner of our firm is a member of Paramount's Board
of Directors. In addition, we have from time to time in the past provided,
and we are currently providing, in matters unrelated to Paramount,
financial advisory or financing services to one or more of the respective
equity investors in Viacom and QVC, or persons engaged in pending
transactions with one or more of such investors, and we have received, or
expect to receive, fees for the rendering of such services. In connection
with our opinions set forth in this letter, we have, among other things:
(i) reviewed the terms and conditions of (a) the Amended QVC
Proposal, the QVC Tender Offer Statement, and the QVC Exemption Agreement
(including the Form QVC Merger Agreement attached thereto) and (b) the
Amended Viacom Proposal, the Viacom Tender Offer Statement and the Viacom
Merger Agreement (including the form Exemption Agreement between Viacom and
Paramount attached thereto);
(ii) reviewed the terms and conditions of the Blockbuster Merger
Agreement and the Subscription Agreement, dated January 7, 1994, between
Viacom and Blockbuster, analyzed the Amended Viacom Proposal both with and
without giving effect to the consummation of the proposed merger between
Viacom and Blockbuster contemplated by the Blockbuster Merger Agreement and
observed that the proposed merger between Viacom and Blockbuster is subject
to the approval of the stockholders of Blockbuster;
(iii) analyzed certain historical business and financial information
relating to Paramount, Viacom, QVC and Blockbuster, including (a) the
Annual Reports to Stockholders and the Annual Reports on Form 10-K of
Paramount for each of the fiscal years ended October 31, 1988 through 1992,
the Transition Report on Form 10-K of Paramount for the period from
November 1, 1992 through April 30, 1993 and Quarterly Reports on Form 10-Q
of Paramount for the quarters ended January 31, April 30, and July 31 for
each of the same fiscal years and for the quarters ended
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January 31, April 30, July 31 and October 31, 1993, (b) the Annual
Reports to Stockholders and the Annual Reports on Form 10-K of Viacom
for each of the fiscal years ended December 31, 1988 through 1992, and
Quarterly Reports on Form 10-Q of Viacom for the quarters ended March 31,
June 30 and September 30 for each of the same fiscal years, and for the
quarters ended March 31, June 30, and September 30, 1993, (c) the Annual
Reports to Stockholders and the Annual Reports on Form 10-K of QVC for
each of the fiscal years ended January 31, 1989 through 1993, and Quarterly
Reports on Form 10-Q of QVC for the quarters ended April 30, July 31 and
October 31 for each of the same fiscal years, and for the quarters ended
April 30, July 31 and October 31, 1993 and (d) the Annual Reports to
Stockholders and the Annual Reports on Form 10-K of Blockbuster for each
of the fiscal years ended December 31, 1988 through 1992, and Quarterly
Reports on Form 10-Q of Blockbuster for the quarters ended March 31, June
30 and September 30 for each of the same fiscal years, and for the quarters
ended March 31, June 30, and September 30, 1993;
(iv) reviewed certain financial forecasts and other data provided to
us by Paramount, Viacom, QVC and Blockbuster relating to their respective
businesses (except in the case of Paramount, financial forecasts for the
current fiscal year only, having been advised that Paramount has not
prepared projections beyond the current fiscal year);
(v) conducted discussions with members of the senior management of
Paramount, Viacom, QVC and Blockbuster with respect to the business and
prospects of Paramount, Viacom, QVC and Blockbuster and the strategic
objectives of each;
(vi) reviewed public information with respect to certain other
companies in lines of businesses we believe to be comparable to the
businesses of Paramount, Viacom, QVC and Blockbuster;
(vii) reviewed the financial terms of certain business combinations
involving companies in lines of business we believe to be comparable to
those of Paramount, Viacom, QVC and Blockbuster, and in other industries
generally;
(viii) reviewed the historical stock prices and trading volumes of the
Common Stock, Viacom Class B
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Common Stock, QVC Common Stock and Blockbuster Common Stock;
(ix) reviewed the procedures for bidding set forth in the Viacom
Merger Agreement and the QVC Exemption Agreement, in particular noting the
respective provisions therein providing for the extension of the QVC Offer
or the Viacom Offer, as applicable, for 10 business days upon delivery of a
Completion Certificate (referred to in the Viacom Merger Agreement or the
QVC Exemption Agreement, as applicable) by Viacom or QVC, as applicable;
and
(x) conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information provided by Paramount, Viacom, QVC and
Blockbuster to us, and on the representations contained in the Viacom
Merger Agreement and the Form QVC Merger Agreement, and we have not
undertaken any independent verification of such information or any
independent valuation or appraisal of any of the assets of Paramount,
Viacom, QVC or Blockbuster. With respect to the financial forecasts
referred to above, we have assumed that they have been reasonably prepared
on a basis reflecting the best currently available judgments of the
managements of Paramount, Viacom, QVC or Blockbuster as to the future
financial performance of Paramount, Viacom, QVC and Blockbuster,
respectively. In addition, we have assumed that the Amended Viacom
Proposal and the Amended QVC Proposal, were made in compliance with the
terms and conditions of the Viacom Merger Agreement and the QVC Exemption
Agreement, respectively. Further, our opinions are based on economic,
monetary and market conditions existing on this date.
We have not reviewed any proxy statement or similar document that may
be prepared for use in connection with the proposed QVC Two-Step
Transaction or the proposed Viacom Two-Step Transaction. In accordance
with the Procedures for Submissions of Proposals (the "Bidding Procedures")
established by Paramount's Board of Directors on December 13, 1993,
Paramount's Board of Directors has authorized us to respond to inquiries
with respect to Paramount from prospective bidders (in addition to QVC and
Viacom) and to receive proposals from additional bidders, if any. We have
not, however, solicited third party indications of interest in acquiring
all or any part of Paramount.
IV-7
<PAGE>
As part of our analysis, we have continued to evaluate the
transactions, as we have in the past, not only on the basis of current
market values but also applying other financial valuation methodologies
generally applicable to transactions of this type. These financial
valuation methodologies, which are subject to certain limitations as
applied to these prospective combinations, including the lack of
projections for Paramount beyond the current fiscal year and the
difficulties in quantifying synergies and revenue enhancements resulting
from the combinations, generally favor in varying degrees the Viacom
Transaction Consideration from a financial point of view. On the basis of
recent market values, the QVC Transaction Consideration has had a somewhat
higher market valuation than the Viacom Transaction Consideration; in this
connection, we observe the high volatility of Viacom Class B Common Stock
and QVC Common Stock and that the market prices of the stocks seem to be
impacted by the perception of the market-place as to whether QVC or Viacom
would be the ultimate acquiror of Paramount.
We observe the express preference of Paramount's Board of Directors in
the Bidding Procedures for cash and securities readily susceptible to
valuation, such as securities with a fixed income stream, with a liquidation
preference, or in the case of equity securities, securities which enjoy the
benefits of a wide collar or other value assurance mechanism. In this
regard, we note that there is a greater percentage of cash and fixed income
securities as components of the Viacom Transaction Consideration than the QVC
Transaction Consideration, although the magnitude of the difference in the
respective percentages between the two current bids has decreased in
comparison to the most recent previous bids submitted by Viacom and QVC.
We further note the offering of the Viacom CVRs in the Amended Viacom
Proposal.
Our engagement and the opinions expressed herein are solely for the
benefit of Paramount's Board of Directors and are not on behalf of, and are not
intended to confer rights or remedies upon, Viacom, QVC, Blockbuster, any
stockholders of Paramount, Viacom, QVC or Blockbuster or any other person
other than Paramount's Board of Directors.
In reaching our opinions expressed herein, we have taken into account
various factors, including our assessment of the probability of
consummation of the proposed merger between Viacom and Blockbuster
contemplated by the Blockbuster Merger Agreement under the circumstances
existing on the date of this letter and that, given the terms and
conditions of the proposed QVC Two-Step Transaction and the proposed Viacom
Two-Step Transaction and the limitations of the financial valuation
IV-8
<PAGE>
methodologies referred to above, we continue to view as a favorable factor
an offer that contains a greater percentage of cash and securities readily
susceptible to valuation. Based on and subject to the foregoing and such
other factors as we deemed relevant, including our assessment of economic,
monetary and market conditions existing on the date of this letter, we are
of the opinion that, as of this date, (i) the QVC Transaction Consideration
is fair to the Stockholders from a financial point of view (ii) the
Viacom Transaction Consideration is fair to the Stockholders from a financial
point of view and (iii) the Viacom Transaction Consideration is marginally
superior to the QVC Transaction Consideration from a financial point of view.
Very truly yours,
/s/ Lazard Freres & Co.
IV-9
<PAGE>
ANNEX V
EXCERPT FROM THE DELAWARE
GENERAL CORPORATION LAW
RELATING TO DISSENTERS' RIGHTS
<PAGE>
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
Sec. 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to the provisions of
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with the provisions of subsection (d) of this Section and
who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to 228 of this Chapter shall be entitled to an
appraisal by the Court of Chancery of the fair value of his shares of stock
under the circumstances described in subsections (b) and (c) of this Section. As
used in this Section, the word "stockholder" means a holder of record of stock
in a stock corporation and also a member of record of a non-stock corporation;
the words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a non-stock
corporation.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Sections 251, 252, 254, 257, 258, 263 or 264 of this
Chapter:
(1) Provided, however, that no appraisal rights under this Section
shall be available for the shares of any class or series of stock which, at
the record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a national
securities exchange or designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc. or (ii) held of record by more than 2,000 stockholders; and
further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger
did not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of Section 251 of this
Chapter.
(2) Notwithstanding the provisions of subsection (b)(1) of this
Section, appraisal rights under this Sectionshall be available for the
shares of any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of merger or
consolidation pursuant to Sections 251, 252, 254, 257, 258, 263 and 264 of
this Chapter to accept for such stock anythingexcept: (i) shares of stock
of the corporation surviving or resulting from such merger or
consolidation; (ii) shares of stock of any other corporation which at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 stockholders;
(iii) cash in lieu of fractional shares of the corporations described in
the foregoing clauses (i) and (ii); or (iv) any combination of the shares
of stock and cash in lieu of fractional shares described in the foregoing
clauses (i), (ii) and (iii) of this subsection.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this Chapter is not owned
by the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this Section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this Section, including those set forth in subsections (d) and
(e), shall apply as nearly as is practicable.
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<PAGE>
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this Section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
Section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with the
provisions of this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation
has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this Chapter, the surviving or resulting corporation,
either before the effective date of the merger or consolidation or within
10 days thereafter, shall notify each of the stockholders entitled to
appraisal rights of the effective date of the merger or consolidation and
that appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
Section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with the provisions of subsections (a) and (d) hereof and who is
otherwise entitled to appraisal rights, may file a petition in the Court of
Chancery demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days after
the effective date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the
V-2
<PAGE>
time and place fixed for the hearing of such petition by registered or certified
mail to the surviving or resulting corporation and to the stockholders shown on
the list at the addresses therein stated. Such notice shall also be given by one
or more publications at least one week before the day of the hearing, in a
newspaper of general circulation published in the City of Wilmington, Delaware
or such publication as the Court deems advisable. The forms of the notices by
mail and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with the provisions of this Section and who have
become entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this Section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this Section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and in the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any other state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all of
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this Section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this Section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this Section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder
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<PAGE>
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation into which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
V-4
<PAGE>
ANNEX VI
FORM OF CERTIFICATE OF MERGER FOR THE PARAMOUNT MERGER
<PAGE>
CERTIFICATE OF MERGER
MERGING
VIACOM SUB INC.
WITH AND INTO
PARAMOUNT COMMUNICATIONS INC.
PURSUANT TO SECTION 251 OF THE
DELAWARE GENERAL CORPORATION LAW
The undersigned, being the [Title] of Paramount Communications Inc., a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware ("Paramount"), DOES HEREBY CERTIFY AS
FOLLOWS:
FIRST: That the name of and the state of incorporation of each of the
constituent corporations in the merger is as follows:
<TABLE><CAPTION>
STATE OF
NAME INCORPORATION
- ---------------------------------------------------------------------- ---------------------
<S> <C>
Viacom Sub Inc. ...................................................... Delaware
Paramount Communications Inc. ........................................ Delaware
</TABLE>
SECOND: That an Amended and Restated Agreement and Plan of Merger dated as
of February 4, 1994, as further amended as of May 26, 1994 (the "Merger
Agreement"), among Paramount, Viacom Sub Inc. (the "Merger Subsidiary") and
Viacom Inc. has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations in accordance with Section 251 of the
General Corporation Law of the State of Delaware.
THIRD: That Paramount shall be the surviving corporation (the "Surviving
Corporation").
FOURTH: The Restated Certificate of Incorporation of Paramount will be
amended in its entirety to read as the Restated Certificate of Incorporation
attached hereto as Exhibit A.
FIFTH: That an executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Corporation at the following
address:
15 Columbus Circle
New York, New York 10023
SIXTH: That a copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request, and without cost, to any stockholder of any
constituent corporation.
IN WITNESS WHEREOF, Paramount has caused this Certificate of Merger to be
signed by , its [Title of Officer], and attested by ,
its [Assistant] Secretary, this day of [ ], 19 .
PARAMOUNT COMMUNICATIONS INC.
By:
..................................
Title:
ATTEST:
.....................................
[Assistant] Secretary
VI-1
<PAGE>
EXHIBIT A
RESTATED
CERTIFICATE OF INCORPORATION
OF
PARAMOUNT COMMUNICATIONS INC.
FIRST: The name of the Corporation (hereinafter called the "Corporation")
is
PARAMOUNT COMMUNICATIONS INC.
SECOND: The address, including street, number, city, and county, of the
registered office of the Corporation in the State of Delaware is
; and the name of the registered agent of
the Corporation in the State of Delaware is .
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which Corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is Two Hundred (200), all of which are without par
value. All such shares are of one class and are shares of Common Stock.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the By-Laws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have
the same meaning, to wit, the total number of directors which the
Corporation would have if there were no vacancies. No election of directors
need be by written ballot.
2. After the original or other By-Laws of the Corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the Corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the By-Laws of the
Corporation may be exercised by the Board of Directors of the Corporation;
provided, however, that any provision for the classification of directors
of the Corporation for staggered terms pursuant to the provisions of
subsection (d) of Section 141 of the General Corporation Law of the State
of Delaware shall be set forth in an initial By-Law or in a By-Law adopted
by the stockholders entitled to vote of the
VI-2
<PAGE>
Corporation unless provisions for such classification shall be set forth in
this certificate of incorporation.
3. Whenever the Corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever
the Corporation shall be authorized to issue more than one class of stock,
no outstanding share of any class of stock which is denied voting power
under the provisions of the certificate of incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of paragraph (2) of subsection (b) of Section 242 of the
General Corporation Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is otherwise denied voting
power shall entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said class.
EIGHTH: 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 Corporation Law of the State
of Delaware, as the same may be amended and supplemented.
NINTH: (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 judgements and amounts paid in settlement and
expenses (including attorneys, fees), actually and reasonably
incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgement, 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 indemnity for such expenses which the court shall
deem proper.
(3) Successful Defense. To the extent that a 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 Ninth,
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 Right to Indemnification in Certain
Circumstances. Any indemnification under Section 1 or 2 of this
Article Ninth (unless ordered by a court) shall be made by the
Corporation
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<PAGE>
only as authorized in the specific case upon a determination that
indemnification of the Director, officer, employee or agent is
proper in the circumstances because he has met the applicable
standard of conduct set forth in this Article. Such determination
shall be made by the Board of Directors by a majority vote of a
quorum consisting of Directors who were not parties to such action,
suit or proceeding, or if such a quorum of disinterested Directors
so directs, by independent legal counsel in a written opinion, or
by the stockholders of the Corporation entitled to vote thereon.
(5) Advance Payment of Expenses. Expenses incurred in
defending a civil or criminal action, suit or proceeding may 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 a 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.
Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
(6) Not Exclusive. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other sections
of this Article Ninth 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, judgements, fines and
amounts paid in settlement that result from any threatened,
pending or completed action, suit, or proceeding, whether civil,
criminal, administrative or investigative, including 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 Ninth.
(8) Certain Definitions. For the purposes of this Article
Ninth, (A) any Director, officer, employee or agent of the
Corporation who shall serve as a director, officer, employee or
agent of any other corporation, joint venture, trust or other
enterprise of which the Corporation, directly or indirectly, is
or was a stockholder or creditor, or in which the Corporation is
or was in any way interested, or (B) any director, officer,
employee or agent of any subsidiary corporation, joint venture,
trust or other enterprise wholly 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 Ninth, 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
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<PAGE>
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 Ninth 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 Ninth, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to this Article Ninth.
(9) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article Ninth 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.
TENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
certificate of incorporation are granted subject to the provisions of this
Article TENTH.
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PRELIMINARY COPIES ANNEX VII
FORM OF CERTIFICATE OF AMENDMENT
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
VIACOM INC.
PURSUANT TO SECTION 242 OF THE
DELAWARE GENERAL CORPORATION LAW
The undersigned, being the [Title] of Viacom Inc., a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware ("Viacom"), DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: At a meeting of the Board of Directors of Viacom duly called and
held on May 26, 1994, resolutions were duly adopted setting forth proposed
amendments (which are set forth herein in Articles SECOND and THIRD) to the
Restated Certificate of Incorporation of Viacom, declaring such amendments to be
advisable and directing that such amendments be submitted to the stockholders of
Viacom for approval at the Special Meeting of Stockholders to be held on
.
SECOND: That Section 1(a) of Article IV of the Restated Certificate of
Incorporation of Viacom be, and the same hereby is, amended in full to read as
follows:
"(a) The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 1,400,000,000. The classes and the
aggregate number of shares of stock of each class which the Corporation shall
have authority to issue are as follows:
(i) 200,000,000 shares of Class A Common Stock, $0.01 par value
("Class A Common Stock").
(ii) 1,000,000,000 shares of Class B Common Stock, $0.01 par value
("Class B Common Stock").
(iii) 200,000,000 shares of Preferred Stock, $0.01 par value
("Preferred Stock")."
THIRD: That the first sentence of Section (2) of Article V of the Restated
Certificate of Incorporation of Viacom be, and the same hereby is, amended by
deleting the number "twelve" and replacing such number with the number "twenty".
FOURTH: That such amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, this Certificate has been executed by , [Title
of Officer] of Viacom, and attested by , [Assistant] Secretary of
Viacom, this day of , 1994.
VIACOM INC.
By:
..................................
Title:
ATTEST:
.....................................
[Assistant] Secretary
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EXHIBIT A
VIACOM INC.
SENIOR EXECUTIVE
SHORT-TERM INCENTIVE PLAN
ARTICLE I
GENERAL
SECTION 1.1 Purpose. The purpose of the Viacom Inc. Senior Executive
Short-Term Incentive Plan (the "Plan") is to benefit and advance the interests
of Viacom Inc., a Delaware corporation (the "Company"), by rewarding selected
senior executive officers of the Company and its subsidiaries for their
contributions to the Company's financial success and thereby motivate them to
continue to make such contributions in the future by granting annual
performance-based awards ("Awards").
SECTION 1.2 Administration of the Plan. The Plan shall be administered by a
committee ("Committee") which shall adopt such rules as it may deem appropriate
in order to carry out the purpose of the Plan. The Committee shall be the
Compensation Committee of the Company's Board of Directors ("Board") (or such
other Committee as may be appointed by the Board) except that (i) the number of
directors on the Committee shall not be less than three (3) and (ii) each member
of the Committee shall be an "outside director" within the meaning of Section
162(m)(4)of the Internal Revenue Code of 1986, as amended (the "Code"). All
questions of interpretation, administration and application of the Plan shall be
determined by a majority of the members of the Committee then in office, except
that the Committee may authorize any one or more of its members, or any officer
of the Company, to execute and deliver documents on behalf of the Committee. The
determination of such majority shall be final and binding in all matters
relating to the Plan. The Committee shall have authority to determine the terms
and conditions of the Awards granted to eligible persons specified in Section
1.3 below ("Participants").
SECTION 1.3 Eligible Persons. Awards may be granted only to employees of
the Company or one of its subsidiaries who are at the level of Senior Vice
President of the Company or at a more senior level. An individual shall not be
deemed an employee for purposes of the Plan unless such individual receives
compensation from either the Company or one of its subsidiaries for services
performed as an employee of the Company or any of its subsidiaries.
ARTICLE II
AWARDS
SECTION 2.1 Awards. The Committee may grant Awards to eligible employees
with respect to each fiscal year of the Company, subject to the terms and
conditions set forth in the Plan.
SECTION 2.2 Terms of Awards. Prior to the commencement of each fiscal year
of the Company (or by March 31, 1994, in the case of the fiscal year ending
December 31, 1994), the Committee shall establish (i) performance goals and
objectives ("Performance Targets") for the Company and the subsidiaries and
divisions thereof for such fiscal year ("Performance Period") and (ii) target
awards ("Target Awards") for each Participant which shall be a percentage of the
Participant's salary (as
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defined in Section 2.3 below). Such Performance Targets shall relate to the
achievement of annual financial goals based on the attainment of specified
levels of Operating Income and/or Cash Flow (as such terms are defined below)
for the Company and the subsidiaries and divisions thereof. With respect to the
Viacom Cable Division, the Performance Targets shall also relate to the
achievement of annual goals based on the attainment of specified levels of
Customer Months and Ancillary Revenues (as such terms are defined below). For
purposes of the Plan, "Operating Income" shall mean revenues less operating
expenses (other than depreciation and amortization) and "Cash Flow" shall mean
Operating Income less cash capital expenditures and increases or decreases in
working capital and in other balance sheet investments. "Customer Months" shall
mean the number of months for which Viacom Cable Division customers were billed
for services other than premium, pay-per-view and ancillary services. "Net
Ancillary Revenues" shall mean revenues from premium, pay-per-view and ancillary
services less operating costs.
SECTION 2.3 Limitation on Awards. The aggregate amount of all Awards to any
Participant for any Performance Period shall not exceed the amount determined by
multiplying such Participant's Salary by a factor of six (6). For purposes of
the Plan, "Salary" shall mean the base salary of the Participant on March 31,
1994 or, in the case of a Participant hired after March 31, 1994, such
Participant's base salary on the date of hire.
SECTION 2.4 Determination of Award. The Committee shall, promptly after the
date on which the necessary financial or other information for a particular
Performance Period becomes available, certify whether the Performance Targets
have been achieved in the manner required by Section 162(m) of the Code. If the
Performance Targets have been achieved, the Awards for such Performance Period
shall have been earned except that the Committee may, in its sole discretion,
reduce the amount of any Award to reflect the Committee's assessment of the
Participant's individual performance or for any other reason. Subject to Section
2.5, such Awards shall become payable in cash as promptly as practicable
thereafter.
SECTION 2.5 Employment Requirement. To be eligible to receive payment of an
Award, the Participant must have remained in the continuous employ of the
Company or its subsidiaries through the end of the applicable Performance
Period. If the Company or any subsidiary terminates a Participant's employment
other than for "cause" or a Participant becomes "permanently disabled" (in each
case, as determined by the Committee in its sole discretion) or a Participant
dies during a Performance Period, such Participant or his estate shall be
awarded, unless his employment contract provides otherwise, a pro rata portion
of the amount of the Award for such Performance Period except that the Committee
may, in its sole discretion, reduce the amount of such Award to reflect the
Committee's assessment of such Participant's individual performance prior to the
termination of such Participant's employment, such Participant's becoming
permanently disabled or such Participant's death, as the case may be, or for any
other reason.
ARTICLE III
ADJUSTMENT OF AWARDS
In the event that, during a Performance Period, any recapitalization,
reorganization, merger, acquisition, divestiture, consolidation, spin off,
combination, liquidation, dissolution, sale of assets, or other similar
corporate transaction or event, or any extraordinary event, or any other event
which distorts the applicable performance criteria occurs involving the Company
or a subsidiary or division thereof, the Committee shall adjust or modify, as
determined by the Committee in its sole and absolute discretion, the calculation
of Operating Income and/or Cash Flow, or the applicable Performance Targets, to
the extent necessary to prevent reduction or enlargement of Participants' Awards
under the Plan for such Performance Period attributable to such transaction or
event. Such adjustments shall be conclusive and binding for all purposes.
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ARTICLE IV
MISCELLANEOUS
SECTION 4.1 No Rights to Awards or Continued Employment. No employee shall
have any claim or right to receive Awards under the Plan. Neither the Plan nor
any action taken hereunder shall be construed as giving any employee any right
to be retained by the Company or any of its subsidiaries.
SECTION 4.2 Restriction on Transfer. The rights of a Participant with
respect to Awards under the Plan shall not be transferable by the Participant to
whom such Award is granted, otherwise than by will or the laws of descent and
distribution.
SECTION 4.3 Tax Withholding. The Company or a subsidiary thereof, as
appropriate, shall have the right to deduct from all payments made under the
Plan to a Participant or to a Participant's beneficiary or beneficiaries any
Federal, state or local taxes required by law to be withheld with respect to
such payments.
SECTION 4.4 No Restriction on Right of Company to Effect Changes. The Plan
shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any recapitalization, reorganization, merger,
acquisition, divestiture, consolidation, spin off, combination, liquidation,
dissolution, sale of assets, or other similar corporate transaction or event
involving the Company or a subsidiary or division thereof or any other event or
series of events, whether of a similar character or otherwise.
SECTION 4.5 Source of Payments. The Company shall not have any obligation
to establish any separate fund or trust or other segregation of assets to
provide for payments under the Plan. To the extent any person acquires any
rights to receive payments hereunder from the Company, such rights shall be no
greater than those of an unsecured creditor.
SECTION 4.6 Amendment and Termination. The Board may at any time and from
time to time alter, amend, suspend or terminate the Plan in whole or in part. No
termination or amendment of the Plan may, without the consent of the Participant
to whom an Award has been made, adversely affect the rights of such Participant
in such Award.
SECTION 4.7 Governmental Regulations. The Plan, and all Awards hereunder,
shall be subject to all applicable rules and regulations of governmental or
other authorities.
SECTION 4.8 Headings. The headings of sections and subsections herein are
included solely for convenience of reference and shall not affect the meaning of
any of the provisions of the Plan.
SECTION 4.9 Governing Law. The Plan and all rights and Awards hereunder
shall be construed in accordance with and governed by the laws of the State of
Delaware.
SECTION 4.10 Effective Date. The Plan shall be effective as of January 1,
1994; provided, however, that it shall be a condition to the effectiveness of
the Plan, and any Awards hereunder, that the shareholders of the Company approve
the adoption of the Plan at the 1994 Annual Meeting of Shareholders. Such
approval shall meet the requirements of Section 162(m) of the Code and the
regulations thereunder. If such approval is not obtained, then the Plan and any
Award hereunder shall be void ab initio.
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<PAGE>
EXHIBIT B
VIACOM INC.
1994 LONG-TERM MANAGEMENT INCENTIVE PLAN
ARTICLE I
GENERAL
SECTION 1.1 Purpose. The purpose of the Viacom Inc. 1994 Long-Term
Incentive Plan (the "Plan") is to benefit and advance the interests of Viacom
Inc., a Delaware corporation (the "Company"), and its subsidiaries by rewarding
certain key employees of the Company and its subsidiaries for their
contributions to the financial success of the Company and thereby motivate them
to continue to make such contributions in the future.
SECTION 1.2 Definitions. As used in the Plan, the following terms shall
have the following meanings:
(a) "Agreement" shall mean the written agreement governing a Grant
under the Plan, in a form approved by the Committee, which shall contain
terms and conditions not inconsistent with the Plan and which shall
incorporate the Plan by reference.
(b) "Appreciation Value" shall mean the excess, if any, of the Value
of a Phantom Share on the applicable Valuation Date or date of termination
of employment or of the Participant's death, retirement or Permanent
Disability (as described in Section 4.5(a) hereof), as the case may be,
over the Initial Value of such Phantom Share.
(c) "Beneficiary" or "Beneficiaries" shall mean the person(s)
designated by the Participant pursuant to the provisions of the Agreement
to receive payments pursuant to such Agreement upon the Participant's
death. If no Beneficiary is so designated by the Participant or if no
Beneficiary is living at the time such a payment is due pursuant to such
Agreement, payments shall be made to the estate of the Participant. The
Agreement shall provide the Participant with the right to change the
designated Beneficiaries from time to time by written instrument executed
by the Participant and filed with the Committee in accordance with such
rules as may be specified by the Committee. No such written designation
shall be effective unless received by the Committee prior to the date of
death of the Participant.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Class B Common Stock" shall mean the shares of Class B Common
Stock, par value $0.01 per share, of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended,
including any successor law thereto.
(g) "Committee" shall mean the Compensation Committee of the Board (or
such other Committee as may be appointed by the Board) except that (i) the
number of directors on the Committee shall be not less than three and (ii)
each member of the Committee shall be a "disinterested person" within the
meaning of Rule 16b-3 under the Exchange Act.
(h) "Date of Grant" shall mean the date of the Grant of the Stock
Options, Stock Appreciation Rights, Restricted Shares and/or Phantom Shares
as set forth in the applicable Agreement.
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(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, including any successor law thereto.
(j) "Fair Market Value" of a share of Class B Common Stock on a given
date shall be the closing price of a share of the Class B Common Stock on
the American Stock Exchange or such other national securities exchange as
may be designated by the Committee, or, in the event that the Class B
Common Stock is not listed for trading on a national securities exchange
but is quoted on an automated quotation system, the average closing bid per
share of the Class B Common Stock on such automated quotation system or, in
the event that the Class B Common Stock is not quoted on any such system,
the average of the closing bid prices per share of the Class B Common Stock
as furnished by a professional marketmaker making a market in the Class B
Common Stock designated by the Committee.
(k) "Grant" shall mean a grant under the Plan which may consist of a
grant of Stock Options, Stock Appreciation Rights, Restricted Shares or
Phantom Shares or a combination of any of the above.
(l) "Initial Value" shall mean the value of a Phantom Share as
specified by the Committee as of the Date of Grant or the Value of a
Phantom Share calculated as of the Date of Grant or such earlier date as
the Committee may determine; provided, however, that in no event shall the
Initial Value be less than 50% of the Value of the relevant Phantom Share
as of the Date of Grant.
(m) "Outstanding Phantom Share" shall mean a Phantom Share granted to
a Participant for which the Valuation Date has not yet occurred.
(n) "Outstanding Stock Option" shall mean a Stock Option granted to a
Participant which has not yet been exercised and which has not yet expired
in accordance with its terms.
(o) "Participant" shall mean any employee who has met the eligibility
requirements set forth in Section 1.4 hereof and to whom an outstanding
Grant has been made under the Plan.
(p) "Permanent Disability" shall have the same meaning as such term or
a similar term has in the long-term disability policy maintained by the
Company or a subsidiary thereof for the Participant and in effect on the
date of the onset of the Participant's Permanent Disability, unless the
Committee determines otherwise, in its discretion, and sets forth an
alternative definition in the applicable Agreement.
(q) "Phantom Share" shall mean a contractual right granted to a
Participant pursuant to Article IV, to receive an amount equal to the
Appreciation Value at such time, and subject to such terms and conditions,
as are set forth in the Plan and the applicable Agreement.
(r) "Restricted Share" shall mean a share of Class B Common Stock
granted to a Participant pursuant to Article III, which is subject to the
restrictions set forth in Section 3.3 hereof, and subject to such other
terms and conditions as are set forth in the Plan and the applicable
Agreement.
(s) "Retirement" shall mean the resignation or termination of
employment after attainment of an age required for payment of an immediate
pension pursuant to the terms of any qualified retirement plan maintained
by the Company or a subsidiary in which the Participant participates;
provided, however, that no resignation or termination prior to a
Participant's 60th birthday shall be deemed a retirement unless the
Committee so determines in its sole discretion.
(t) "Stock Appreciation Right" shall mean a contractual right granted
to a Participant pursuant to Article II, to receive an amount determined in
accordance with Section 2.5 of the Plan.
(u) "Stock Option" shall mean a contractual right granted to a
Participant pursuant to Article II, to purchase Class B Common Stock at
such time and price, and subject to such other terms and conditions, as are
set forth in the Plan and the applicable Agreement. Stock Options may
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be "Incentive Stock Options" within the meaning of Section 422 of the Code
or "Non-Qualified Stock Options" which do not meet the requirements of such
Code section.
(v) "Termination for Cause" shall mean a termination of employment
with the Company or any of its subsidiaries which, as determined by the
Committee, is by reason of (i) "cause" as such term or a similar term is
defined in any employment agreement applicable to the Participant, or (ii)
if there is no such employment agreement or if such employment agreement
contains no such term, (x) a failure or refusal by a Participant to
substantially perform a material duty of such Participant's employment, (y)
the commission by the Participant of a felony or the perpetration by the
Participant of a dishonest act or common law fraud against the Company or
any subsidiary thereof, or (z) any other act or omission which is
materially injurious to the financial condition or business reputation of
the Company or any subsidiary thereof.
(w) "Valuation Date" shall mean the date on which the Appreciation
Value of a Phantom Share shall be measured and fixed in accordance with
Section 4.2(a) hereof.
(x) The "Value" of a Phantom Share shall be determined by reference to
the "average Fair Market Value" of a share of Class B Common Stock. The
"average Fair Market Value" on a given date of a share of Class B Common
Stock shall be determined over the 30-day period ending on such date or
such other period as the Committee may decide shall be applicable to a
Grant of Phantom Shares, determined by dividing (i) by (ii), where (i)
shall equal the sum of the Fair Market Values on each day that the Class B
Common Stock was traded and a closing price was reported on such national
securities exchange or on such automated quotation system or by such
marketmaker, as the case may be, during such period, and (ii) shall equal
the number of days on which the Class B Common Stock was traded and a
closing price was reported on such national securities exchange or on such
automated quotation system or by such marketmaker, as the case may be,
during such period.
(y) To "vest" a Stock Option, Stock Appreciation Right, Restricted
Stock or Phantom Share held by a Participant shall mean to render such
Stock Option, Stock Appreciation Right, Restricted Share or Phantom Share
nonforfeitable, except where, with respect to Stock Options, Stock
Appreciation Rights and Phantom Shares, a Participant's employment ends
because of a Termination for Cause.
SECTION 1.3 Administration of the Plan. The Plan shall be administered by
the Committee which shall adopt such rules as it may deem appropriate in order
to carry out the purpose of the Plan. All questions of interpretation,
administration and application of the Plan shall be determined by a majority of
the members of the Committee then in office, except that the Committee may
authorize any one or more of its members, or any officer of the Company, to
execute and deliver documents on behalf of the Committee. The determination of
such majority shall be final and binding to all matters relating to the Plan.
The Committee shall have authority to select Participants from among the class
of eligible persons specified in Section 1.4 below and to determine the number
of Stock Options, Stock Appreciation Rights, Restricted Shares or Phantom Shares
(or combination thereof) to be granted to each Participant.
SECTION 1.4 Eligible Persons. Grants may be awarded only to key employees
of the Company or one of its subsidiaries. An individual shall not be deemed an
employee for purposes of the Plan unless such individual receives compensation
from either the Company or a subsidiary of the Company for services performed as
an employee of the Company or any of its subsidiaries.
SECTION 1.5 Class B Common Stock Subject to the Plan. The total aggregate
number of shares of Class B Common Stock that may be distributed under the Plan
(whether reserved for issuance upon grant of Stock Options or Stock Appreciation
Rights or granted as Restricted Shares) shall be 10,000,000, subject to
adjustment pursuant to Section 5.2 hereof. The shares of Class B Common Stock
shall be made available from authorized but unissued Class B Common Stock or
from Class B Common
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Stock issued and held in the treasury of the Company. The delivery of shares of
Class B Common Stock upon exercise of a Stock Option or Stock Appreciation Right
in any manner and the vesting of Restricted Shares shall result in a decrease in
the number of shares which thereafter may be issued for purposes of this Section
1.5, by the number of shares as to which the Stock Option or Stock Appreciation
Right is exercised or by the number of Restricted Shares which vest. Shares of
Class B Common Stock with respect to which Stock Options and Stock Appreciation
Rights expire, are cancelled without being exercised or are otherwise terminated
may be regranted under the Plan. Restricted Shares that are forfeited for any
reason shall not be deemed granted for purposes of this Section 1.5 and may
thereafter be regranted under the Plan.
SECTION 1.6 Limit on Annual Grants to Participants. The maximum aggregate
number of (i) shares of Class B Common Stock that may be distributed under the
Plan (whether reserved for issuance upon grant of Stock Options or Stock
Appreciation Rights or granted as Restricted Shares) and (ii) Phantom Shares
that may be granted under the Plan during any calendar year to any Participant
at the level of Senior Vice President of the Company or above is 1,000,000.
SECTION 1.7 Agreements. Each Agreement (i) shall state the Date of Grant
and the name of the Participant, (ii) shall specify the terms of the Grant,
(iii) shall be signed by the Participant and a person designated by the
Committee, (iv) shall incorporate the Plan by reference and (v) shall be
delivered to the Participant. The Agreement shall contain such other terms and
conditions as are required by the Plan and, in addition, such other terms not
inconsistent with the Plan as the Committee may deem advisable.
ARTICLE II
PROVISIONS APPLICABLE TO STOCK OPTIONS
SECTION 2.1 Grants of Stock Options. The Committee may from time to time
grant to eligible employees Stock Options on the terms and conditions set forth
in the Plan and on such other terms and conditions as are not inconsistent with
the purposes and provisions of the Plan, as the Committee, in its discretion,
may from time to time determine. Each Agreement covering a Grant of Stock
Options shall specify the number of Stock Options granted, the exercise price of
such Stock Options, whether such Stock Options are Incentive Stock Options or
Non-Qualified Stock Options and the period during which such Stock Options may
be exercised.
SECTION 2.2 Exercise Price. The Committee shall establish the per share
exercise price at the time any Stock Option is granted at such amount as the
Committee shall determine, except that such exercise price shall not be less
than 50% of the Fair Market Value of a share of Class B Common Stock subject to
the Option on the Date of Grant and that, with respect to an Incentive Stock
Option, such exercise price shall not be less than 100% of the Fair Market Value
of a share of Class B Common Stock on the Date of Grant. The exercise price will
be subject to adjustment in accordance with the provisions of Article 5.2 of the
Plan.
SECTION 2.3 Exercise of Stock Options.
(a) Exercisability. Stock Options shall be exercisable only to the extent
the Participant is vested therein. A Participant shall vest in Stock Options
over such time and in such increments as the Committee shall determine and
specify in a vesting schedule set forth in the applicable Agreement. The
Committee may, however, in its sole discretion, accelerate the time at which a
Participant vests in his Stock Options.
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(b) Option Period. For each Stock Option granted, the Committee shall
specify the period during which the Stock Option may be exercised; provided,
however, that anything in the Plan or in the applicable Agreement to the
contrary notwithstanding:
(i) Earliest Exercise Date. No Stock Option granted under the Plan
shall be exercisable until six months after the Date of Grant thereof.
(ii) Latest Exercise Date. No Stock Option granted under the Plan
shall be exercisable after the tenth anniversary of the Date of Grant
thereof.
(iii) Registration Restrictions. A Stock Option shall not be
exercisable, no transfer of shares of Class B Common Stock shall be made to
any Participant, and any attempt to exercise a Stock Option or to transfer
any such shares shall be void and of no effect, unless and until (A) a
registration statement under the Securities Act of 1933, as amended, has
been duly filed and declared effective pertaining to the shares of Class B
Common Stock subject to such Stock Option, and the shares of Class B Common
Stock subject to such Stock Option have been duly qualified under
applicable Federal or state securities or blue sky laws or (B) the
Committee, in its sole discretion, determines, or the Participant, upon the
request of the Committee, provides an opinion of counsel satisfactory to
the Committee, that such registration or qualification is not required as a
result of the availability of an exemption from registration or
qualification under such laws. Without limiting the foregoing, if at any
time the Committee shall determine, in its sole discretion, that the
listing, registration or qualification of the shares of Class B Common
Stock subject to such Stock Option under any Federal or state law or on any
securities exchange or the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in
connection with, delivery or purchase of such shares pursuant to the
exercise of a Stock Option, such Stock Option shall not be exercised in
whole or in part unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
(c) Exercise in the Event of Termination of Employment, Retirement, Death
or Permanent Disability.
(i) Termination other than for Cause, Retirement, Death or Permanent
Disability. In the event that (A) the Participant ceases to be an employee
of the Company or any of its subsidiaries by reason of the voluntary
termination by the Participant, the termination by the Company or any of
its subsidiaries other than for Cause or the Participant's Retirement, his
Outstanding Stock Options may be exercised to the extent then exercisable
until the earlier of three months after the date of such termination or
Retirement or the expiration of such Stock Options, (B) a Participant dies
during a period during which his Stock Options could have been exercised by
him, his Outstanding Stock Options may be exercised to the extent
exercisable at the date of death by the person who acquired the right to
exercise such Stock Options by will or the laws of descent and distribution
until the earlier of one year after such death (or such longer period as
may be determined by the Committee, in its discretion, prior to the
expiration of such one-year period) or the expiration of such Stock
Options, and (C) the Permanent Disability of the Participant occurs, the
Participant may exercise his Outstanding Stock Options to the extent
exercisable upon date of the onset of such Permanent Disability until the
earlier of one year after such date or the expiration of such Stock
Options. Upon the occurrence of an event described in clauses (A), (B) or
(C) of this Section 2.2(c)(i), all rights with respect to Stock Options
that are not vested as of such event will be relinquished.
(ii) Termination for Cause. If a Participant's employment with the
Company or any of its subsidiaries ends because of a Termination for Cause,
then unless the Committee, in its discretion, determines otherwise, all
Outstanding Stock Options, whether or not then vested, shall terminate
effective as of the date of such termination.
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(iii) Maximum Exercise Period. Anything in this Section 2.3 to the
contrary notwithstanding, no Stock Option shall be exercisable after the
earlier to occur of (A) the expiration of the option period set forth in
the applicable Agreement or (B) the tenth anniversary of the Date of Grant
thereof.
SECTION 2.4 Payment of Purchase Price Upon Exercise. Every share purchased
through the exercise of a Stock Option shall be paid for in full at the time of
exercise in cash or, in the discretion of the Committee, in shares of Class B
Common Stock or other securities of the Company designed by the Committee or in
a combination of cash, shares or such other securities.
SECTION 2.5 Stock Appreciation Rights. The Committee may grant Stock
Appreciation Rights only in tandem with a Stock Option, either at the time of
Grant or by amendment at any time prior to the exercise, expiration or
termination of such Stock Option. Each Stock Appreciation Right shall be subject
to the same terms and conditions as the related Stock Option and shall be
exercisable only at such times and to such extent as the related Stock Option is
exercisable. A Stock Appreciation Right shall entitle the holder to surrender to
the Company the related Stock Option unexercised and receive from the Company in
exchange therefor an amount equal to the excess of the Fair Market Value of the
shares of Class B Common Stock subject to such Stock Option, determined as of
the day preceding the surrender of such Stock Option, over the Stock Option
aggregate exercise price. Such amount shall be paid in cash or, in the
discretion of the Committee, in shares of Class B Common Stock or other
securities of the Company designated by the Committee or in a combination of
cash, shares or such other securities.
ARTICLE III
PROVISIONS APPLICABLE TO RESTRICTED SHARES
SECTION 3.1 Grants of Restricted Shares. The Committee may from time to
time grant to eligible employees Restricted Shares on the terms and conditions
set for in the Plan and on such other terms and conditions as are not
inconsistent with the purposes and provisions of the Plan, as the Committee, in
its discretion, may from time to time determine. Each Agreement covering a Grant
of Restricted Shares shall specify the number of Restricted Shares granted and
the vesting schedule (as provided for in Section 3.2 hereof) for such Restricted
Shares.
SECTION 3.2 Vesting. The Committee shall establish the vesting schedule
applicable to Restricted Shares granted hereunder, which vesting schedule shall
specify the period of time and the increments in which a Participant shall vest
in the Grant of Restricted Shares; provided, however, that no such Restricted
Share shall vest until six months after the Date of Grant thereof.
SECTION 3.3 Rights and Restrictions Governing Restricted Shares. As of the
Date of Grant of Restricted Shares, one or more certificates representing the
appropriate number of shares of Class B Common Stock granted to a Participant
shall be registered in his name but shall be held by the Company for the account
of the Participant. The Participant shall have all rights of a holder as to such
shares of Class B Common Stock (including, to the extent applicable, the right
to receive dividends and to vote), subject to the following restrictions: (a)
the Participant shall not be entitled to delivery of certificates representing
such shares of Class B Common Stock until such shares have vested; (b) none of
the Restricted Shares may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of until such shares have vested; and (c) except as
otherwise provided in Section 3.6 below, all unvested Restricted Shares shall be
immediately forfeited upon a Participant's termination of employment with the
Company for any reason or the Participant's death, Retirement or Permanent
Disability.
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SECTION 3.4 Adjustment with Respect to Restricted Shares. Any other
provision of the Plan to the contrary notwithstanding, the Committee may, in its
discretion, at any time accelerate the date or dates on which Restricted Shares
vest.
SECTION 3.5 Delivery of Restricted Shares. On the date on which Restricted
Shares vest, all restrictions contained in the Agreement covering such
Restricted Shares and in the Plan shall lapse as to such Restricted Shares and
one or more stock certificates for the appropriate number of shares of Common
Stock, free of the restrictions set forth in the Plan and applicable Agreement,
shall be delivered to the Participant or such shares shall be credited to a
brokerage account if the Participant so directs; provided, however, that such
certificates shall bear such legends as the Committee, in its sole discretion,
may determine to be necessary or advisable in order to comply with applicable
Federal or state securities laws.
SECTION 3.6 Termination of Employment, Retirement, Death or Permanent
Disability. In the event that (i) the Participant's employment with the Company
or any of its subsidiaries ends by reason of voluntary termination by the
Participant, termination by the Company or any of its subsidiaries other than
for Cause, termination by the Company or any of its subsidiaries for Cause or
the Participant's retirement, or (ii) the Participant's death or Permanent
Disability, prior to the date or dates on which Restricted Shares vest, the
Participant shall forfeit all unvested Restricted Shares as of the date of such
event, unless, other than in the case of a termination by the Company or its
subsidiaries for Cause, the Committee determines that the circumstances in the
particular case so warrant and provides that some or all of such Participant's
unvested Restricted Shares shall vest as of the date of such event, in which
case certificates representing such shares shall be delivered, in accordance
with Section 3.5 above, to the Participant or in the case of the Participant's
death, to the person or persons who acquired the right to receive such
certificates by will or the laws of descent and distribution.
ARTICLE IV
PROVISIONS APPLICABLE TO PHANTOM SHARES
SECTION 4.1 Grants of Phantom Shares. The Committee may from time to time
grant to eligible employees Phantom Shares, the value of which is determined by
reference to a share of Class B Common Stock, on the terms and conditions set
forth in the Plan and on such other terms and conditions as are not inconsistent
with the purposes and provisions of the Plan as the Committee, in its
discretion, may from time to time determine. Each Agreement covering a Grant of
Phantom Shares shall specify the number of Phantom Shares granted, the Initial
Value of such Phantom Shares, the Valuation Dates, the number of Phantom Shares
whose Appreciation Value shall be determined on each such Valuation Date, any
applicable vesting schedule (as provided for in Section 4.3 hereof) for such
Phantom Shares, and any applicable limitation on payment (as provided for in
Section 4.4 hereof) for such Phantom Shares.
SECTION 4.2 Appreciation Value.
(a) Valuation Dates; Measurement of Appreciation Value. The Committee shall
provide in the Agreement for one or more Valuation Dates on which the
Appreciation Value of the Phantom Shares granted pursuant to the Agreement shall
be measured and fixed, and shall designate in the Agreement the number of such
Phantom Shares whose Appreciation Value is to be calculated on each such
Valuation Date. Unless otherwise determined by the Committee, each Valuation
Date shall be December 15 and no Valuation Date shall occur later than the year
in which the eighth (8th) anniversary of the Date of Grant occurs.
(b) Payment of Appreciation Value. Except as otherwise provided in Section
4.5 hereof, and subject to the limitation contained in Section 4.4 hereof, the
Appreciation Value of a Phantom Share
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shall be paid to a Participant in cash in a lump sum as soon as practicable
following the Valuation Date applicable to such Phantom Share.
SECTION 4.3 Vesting. The Committee may, in its discretion, provide in the
Agreement that Phantom Shares granted thereunder shall vest (subject to such
terms and conditions as the Committee may provide in the Agreement) over such
period of time, not in excess of five years from the Date of Grant, as may be
specified in a vesting schedule contained therein.
SECTION 4.4 Limitation on Payment. The Committee may, in its discretion,
establish and set forth in the Agreement a maximum dollar amount payable under
the Plan for each Phantom Share granted pursuant to such Agreement.
SECTION 4.5 Termination of Employment, Death, Retirement or Permanent
Disability.
(a) Voluntary Termination, Termination by the Company Other Than for Cause,
Death, Retirement or Permanent Disability. If, before the occurrence of one or
more Valuation Dates applicable to the Participant's Outstanding Phantom Shares,
(i) the Participant's employment with the Company or any of its subsidiaries
ends by reason of the voluntary termination by the Participant, the termination
by the Company or any of its subsidiaries other than for Cause or the
Participant's Retirement or (ii) the Participant's death or Permanent Disability
occurs, then, unless the Committee, in its discretion, determines otherwise, the
Appreciation Value of each Outstanding Phantom Share as to which the
Participant's rights are vested as of the date of such event shall be the lesser
of (x) the Appreciation Value of such Phantom Share calculated as of the date of
such event or (y) the Appreciation Value of such Phantom Share calculated as of
the originally scheduled Valuation Date applicable thereto. Unless the
Committee, in its discretion, determines otherwise, the Appreciation Value so
determined for each such vested Outstanding Phantom Share shall then be payable
to the Participant or the Participant or the Participant's Beneficiary following
the originally scheduled Valuation Date applicable thereto in accordance with
Section 4.2(b) hereof. Upon the occurrence of an event described in this Section
4.5(a), all rights with respect to Phantom Shares that are not vested as of such
date will be relinquished.
(b) Termination for Cause. If a Participant's employment with the Company
or any of its subsidiaries ends because of a Termination for Cause, then, unless
the Committee, in its discretion, determines otherwise, all Outstanding Phantom
Shares, whether or not vested, and any and all rights to the payment of
Appreciation Value with respect to such Outstanding Phantom Shares shall be
forfeited effective as of the date of such termination.
ARTICLE V
EFFECT OF CERTAIN CORPORATE CHANGES AND CHANGES IN CONTROL
SECTION 5.1 Effect of Reorganization. In the event that (i) the Company is
merged or consolidated with another corporation, (ii) one person becomes the
beneficial owner of more than fifty percent (50%) of the issued and outstanding
equity securities of the Company (for purposes of this Section 5.1, the terms
"person" and "beneficial owner" shall have the meanings assigned to them in
Section 13(d) of the Exchange Act), (iii) all or substantially all of the assets
of the Company are acquired by another corporation, person or entity (each such
event in (i) or (ii) or any other similar event or series of events which
results in an event described in (i), (ii) or (iii), being hereinafter referred
to as a "Reorganization Event") or (iv) the Board shall propose that the Company
enter into a Reorganization Event, then the following shall apply:
(a) With respect to Stock Options and Stock Appreciation Rights
granted pursuant to Article II hereof and with respect to Restricted Shares
granted pursuant to Article III hereof, the Committee shall take one of the
following actions, the choice of which being in its sole discretion,
unless, in the case of any Participant, the Participant agrees otherwise:
(i) cause the surviving entity or new
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owner, as the case may be, to agree to adopt the Plan and maintain it, with
respect to all Outstanding Stock Options, Stock Appreciation Rights and
Restricted Shares, in accordance with the terms in effect as of the date of
the Reorganization Event, and to agree to adopt the related Agreements and
to continue to effect their respective terms as such terms were in effect
as of the date of the Reorganization Event, except that equitable
adjustments shall be made, if appropriate, to reflect the relative values
of the Class B Common Stock immediately prior to and following the
occurrence of the Reorganization Event; (ii) cause the surviving entity or
new owner, as the case may be, to grant new stock options and stock
appreciation rights, if applicable (the "Substitute Options"), in
substitution for the unexercised Stock Options and Stock Appreciation
Rights as of the date of the Reorganization Event or to award new
restricted shares (the "New Restricted Shares") in substitution for the
unvested Restricted Shares, as of the date of the Reorganization Event;
provided, however, that such Substitute Options or such New Restricted
Shares, as the case may be, shall have a value, as of the date of such
Reorganization Event, equal to the value of such unexercised Stock Options
and Stock Appreciation Rights or such unvested Restricted Shares as of such
date; (iii) solely with respect to Outstanding Stock Options, provide for
the payment upon termination or cancellation of Outstanding Stock Options
of an amount in cash or securities equal to the excess, if any, of the
aggregate Fair Market Value of the Class B Common Stock subject to such
Stock Options at the time of such termination or cancellation over the
aggregate exercise price of such Stock Options; or (iv) advance the dates
upon which all Outstanding Stock Options, Stock Appreciation Rights and
Restricted Shares vest;
(b) With respect to Phantom Shares granted pursuant to Article IV
hereof, the Committee shall take one of the following actions, the choice
of which being in its sole discretion, unless, in the case of any
Participant, the Participant agrees otherwise: (i) cause the surviving
entity or new owner, as the case may be, to agree to adopt the Plan and to
maintain it, with respect to all Outstanding Phantom Shares under the Plan
as of the date of the Reorganization Event, in accordance with the terms in
effect as of the date of the Reorganization Event, and to agree to adopt
the related Agreements and to continue in effect their respective terms as
such terms were in effect as of the date of the Reorganization Event,
except that (A) the Plan and related Agreements may be modified to utilize
the stock of such surviving entity or new owner, in lieu of the Class B
Common Stock, to measure the Value of the Phantom Shares, if equitable
adjustments are made to reflect the relative values of such stock
immediately prior to the occurrence of the Reorganization Event or (B) if
the Class B Common Stock continues to be utilized to measure the Value of
the Phantom Shares, equitable adjustments are to be made to reflect the
relative values of such stock immediately prior to and following the
Reorganization Event, if appropriate; or (ii) determine the Appreciation
Value of the Phantom Shares by reference to the consideration to be paid
for the Class B Common Stock in such Reorganization Event, and modify the
Plan and the related Agreements, if appropriate, to provide that when and
if the Participant is entitled to a payment under the provisions of the
Plan and related Agreement (including, without limitation, the provisions
regarding vesting, payment, limitation on payment and employment
requirements) as they were in effect prior to the proposal of the
Reorganization Event, such payment shall be computed on the basis of such
Appreciation Value as so determined.
Notwithstanding the provisions of Sections 5.1(a) and 5.1(b) above, in the
event that the effect of the provisions contained therein should become a
material impediment, either from a financial point of view or otherwise, to the
consummation of a proposed Reorganization Event, the Committee may take such
action as it deems equitable and appropriate to provide each Participant with a
benefit equivalent to that which he would have been entitled had such event not
occurred. Further, for the purposes of the first sentence of this Section 5.1,
no event or series of events involving National Amusements, Inc., the Company or
any of their respective subsidiaries or affiliates shall be deemed to be a
Reorganization Event unless such event or series of events results in there
being no class of equity securities of the Company which is publicly traded. Any
action taken by the Committee may be made conditional upon the consummation of
the applicable Reorganization Event. Further, in the event that a division or
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subsidiary of the Company is acquired by another corporation, person, or entity,
the Company is reorganized, dissolved or liquidated, an event or series of
events involving a corporate restructuring not described in the first sentence
of this Section occurs, or the Board shall propose that the Company enter into
any such transaction, event or series of events, then the Committee will take
such action, if any, as it, in its sole discretion, deems equitable or
appropriate to provide each Participant with a benefit equivalent to that which
he would have been entitled had such event not occurred.
SECTION 5.2 Dilution and Other Adjustments. In the event of a stock
dividend or split, issuance or repurchase of stock or securities convertible
into or exchangeable for shares of stock, grants of options, warrants or rights
(other than pursuant to the Plan) to purchase stock, recapitalization,
combination, exchange or similar change affecting the Class B Common Stock, the
Committee shall, in its discretion, make any or all of the following adjustments
to provide each Participant with a benefit equivalent to that which he would
have been entitled had such event not occurred: (i) adjust the number of shares
of Class B Common Stock subject to any Stock Options or Stock Appreciation
Rights or the number of Restricted Shares or Phantom Shares granted to each
Participant, (ii) adjust the exercise price of the shares of Class B Common
Stock subject to such Stock Options or Stock Appreciation Rights or the Initial
Value of such Phantom Shares, and (iii) make any other adjustments, or take such
action, as the Committee, in its discretion, deems appropriate. Such adjustments
shall be conclusive and binding for all purposes. In the event of a change in
the Class B Common Stock which is limited to a change in the designation thereof
to "Capital Stock" or other similar designation, or to a change in the par value
thereof, or from par value to no par value, without increase or decrease in the
number of issued shares, the shares resulting from any such change shall be
deemed to be Class B Common Stock within the meaning of the Plan.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 No Rights to Grants or Continued Employment. No employee shall
have any claim or right to receive Grants under the Plan. Neither the Plan nor
any action taken hereunder shall be construed as giving any employee any right
to be retained by the Company or any of its subsidiaries.
SECTION 6.2 Restriction on Transfer. The rights of a Participant with
respect to Stock Options, Stock Appreciation Rights, Restricted Shares or
Phantom Shares shall not be transferable by the Participant to whom such Stock
Options, Stock Appreciation Rights, Restricted Shares or Phantom Shares are
granted, otherwise than by will or the laws of descent and distribution.
SECTION 6.3 Tax Withholding. The Company or a subsidiary thereof, as
appropriate, shall have the right to deduct from all payments made under the
Plan to a Participant or to a Participant's Beneficiary any Federal, state or
local taxes required by law to be withheld with respect to such payments. The
Committee, in its discretion, may require, as a condition to the exercise of any
Stock Option or Stock Appreciation Right, that a Participant pay an additional
amount in cash equal to the amount of any Federal, state or local taxes owed by
the Participant as a result of such exercise.
SECTION 6.4 Stockholder Rights. No Grant under the Plan shall entitle a
Participant or Beneficiary to any rights of a holder of shares of Class B Common
Stock, except as provided in Article III with respect to Restricted Shares or
upon the delivery of share certificates to a Participant upon exercise of a
Stock Option or upon the delivery of share certificates in settlement of a Stock
Appreciation Right.
SECTION 6.5 No Restriction on Right of Company to Effect Corporate
Changes. The Plan shall not affect in any way the right or power of the Company
or its stockholders to make or authorize any or all adjustments,
recapitalization, reorganization or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of stock or of options, warrants
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or rights to purchase stock or of bonds, debentures, preferred or prior
preference stock whose rights are superior to or affect the Class B Common Stock
or the rights thereof or which are convertible into or exchangeable for Class B
Common Stock, or the dissolution or liquidation or the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
SECTION 6.6 Source of Payments. The general funds of the Company shall be
the sole source of cash settlements of Stock Appreciation Rights under the Plan
and payments of Appreciation Value, and the Company shall not have any
obligation to establish any separate fund or trust or other segregation of
assets to provide for payments under the Plan. Nothing contained in this Plan,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between the Company and
a Participant or any other person. To the extent person acquires any rights to
receive payments hereunder from the Company, such rights shall be no greater
than those of an unsecured creditor.
ARTICLE VII
AMENDMENT AND TERMINATION
The Board may at any time and from time to time alter, amend, suspend or
terminate the Plan in whole or in part; provided, however, that any amendment
which must be approved by the shareholders of the Company in order to maintain
the continued qualification of the Plan under Rule 16b-3 under the Exchange Act
shall not be effective unless and until such shareholder approval has been
obtained in compliance with such rule. No termination or amendment of the Plan
may, without the consent of the Participant to whom a grant has been made,
adversely affect the rights of such Participant in the Stock Options, Stock
Appreciation Rights, Restricted Shares or Phantom Shares covered by such Grant.
Unless previously terminated pursuant to this Article VII, the Plan shall
terminate on the fifth anniversary of the Effective Date (as defined below), and
no further Grants may be awarded hereunder after such date.
ARTICLE VIII
INTERPRETATION
SECTION 8.1 Governmental Regulations. The Plan, and all Grants hereunder,
shall be subject to all applicable rules and regulations of governmental or
other authorities.
SECTION 8.2 Headings. The headings of sections and subsections herein are
included solely for convenience of reference and shall not affect the meaning of
any of the provisions of the Plan.
SECTION 8.3 Governing Law. The Plan and all rights hereunder shall be
construed in accordance with and governed by the laws of the State of Delaware.
ARTICLE IX
EFFECTIVE DATE AND STOCKHOLDER APPROVAL
The Plan shall be effective as of May 26, 1994 (the "Effective Date") and
stockholder approval shall be sought at the first annual meeting of stockholders
following such date. In the event that stockholder approval is not obtained on
or before the date of such annual meeting, the Plan and all Grants thereunder
shall be void ab initio and of no effect. No Stock Option or Stock Appreciation
Right shall be exercisable, no Restricted Share shall vest and no Appreciation
Value shall be paid with respect to a Phantom Share until the date of such
stockholder approval.
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EXHIBIT C
VIACOM INC.
STOCK OPTION PLAN
FOR OUTSIDE
DIRECTORS
ARTICLE I
GENERAL
SECTION 1.1 Purpose. The purpose of the Viacom Inc. Stock Option Plan for
Outside Directors (the "Plan") is to benefit and advance the interests of Viacom
Inc., a Delaware corporation (the "Company"), and its subsidiaries by obtaining
and retaining the services of qualified persons who are not employees of the
Company or its subsidiaries to serve as directors and to induce them to make a
maximum contribution to the success of the Company and its subsidiaries.
SECTION 1.2 Definitions. As used in the Plan, the following terms shall
have the following meanings:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Class B Common Stock" shall mean the shares of Class B Common
Stock, par value $0.01 per share, of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended,
including any successor law thereto.
(d) "Date of Grant" shall mean May 25, 1993, for each person who is an
Outside Director on such date, and, for each person who becomes an Outside
Director for the first time after such date, the date of such individual's
election or appointment to the Board.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, including any successor law thereto.
(f) "Effective Date" of the Plan shall be May 25, 1993.
(g) "Fair Market Value" of a share of Class B Common Stock on a given
date shall be the average closing price of a share of Class B Common Stock
on the American Stock Exchange or such other national securities exchange
as may be designated by the Board or, in the event that the Class B Common
Stock is not listed for trading on a national securities exchange but is
quoted on an automated quotation system, the average closing bid price per
share of Class B Common Stock on such automated quotation system or, in the
event that the Class B Common Stock is not quoted on any such system, the
average of the closing bid prices per share of Class B Common Stock as
furnished by a professional marketmaker making a market in the Class B
Common Stock designated by the Board.
(h) "Grant" shall mean a grant of Stock Options under the Plan.
(i) "LTMIP" shall mean the Company's 1989 Long-Term Management
Incentive Plan and/or any successor to such Plan, as applicable.
(j) "Non-Qualified Stock Options" shall mean Stock Options which do
not meet the requirements of Section 422 of the Code.
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(k) "Outside Director" shall mean any member of the Board of Directors
of the Company who is not an employee of the Company, Viacom International
Inc., National Amusements, Inc. or any of their respective subsidiaries. An
individual shall not be deemed an employee for purposes of the Plan unless
such individual receives compensation from either the Company or a
subsidiary of the Company for services performed as an employee of the
Company or any of its subsidiaries.
(l) "Outstanding Stock Option" shall mean a Stock Option granted to an
Outside Director which has not yet been exercised and which has not yet
expired in accordance with its terms.
(m) "Stock Option" shall mean a contractual right granted to an
Outside Director under the Plan to purchase a share of Class B Common Stock
at such time and price, and subject to the terms and conditions, as are set
forth in the Plan.
(n) To "vest" a Stock Option held by an Outside Director shall mean to
render such Stock Option nonforfeitable.
SECTION 1.3 Administration of the Plan. The Plan shall be administered by
the members of the Board who are not Outside Directors. All questions of
interpretation, administration and application of the Plan shall be determined
by the Board. The Board may authorize any officer of the Company to execute and
deliver a stock option certificate on behalf of the Company to an Outside
Director.
SECTION 1.4 Class B Common Stock Subject to the Plan. The total number of
shares of Class B Common Stock that shall be reserved for distribution upon
grant of Stock Options under the Plan shall be 100,000, subject to adjustment
pursuant to Section 4.2 hereof. The shares of Class B Common Stock shall be made
available from authorized but unissued Class B Common Stock or from Class B
Common Stock issued and held in the treasury of the Company, as shall be
determined by the Board. Exercise of Stock Options in any manner shall result in
a decrease in the number of shares of Class B Common Stock which thereafter may
be issued for purposes of this Section 1.4, by the number of shares as to which
the Stock Options are exercised. Shares of Class B Common Stock with respect to
which Stock Options expire, are cancelled without being exercised or are
otherwise terminated, may be regranted under the Plan.
ARTICLE II
GRANTS OF STOCK OPTIONS
On May 25, 1993, each person who is an Outside Director on such date shall
be granted Non-Qualified Stock Options to purchase 5,000 shares of Class B
Common Stock at an option price per share equal to the Fair Market Value of a
share of Class B Common Stock on May 25, 1993 (the "Date of Grant" of such Stock
Options), on the terms and conditions set forth in the Plan. Thereafter, each
person who becomes an Outside Director for the first time after such date shall
be granted Non-Qualified Stock Options to purchase 5,000 shares of Class B
Common Stock, effective as of the date of such individual's election or
appointment to the Board (the "Date of Grant" of such Stock Options), at an
option price per share equal to the Fair Market Value of a share of Class B
Common Stock on the Date of Grant, on the terms and conditions set forth in the
Plan. The exercise price of the Stock Options granted under the Plan shall be
subject to adjustment in accordance with the provisions of Section 4.2 of the
Plan. The terms and conditions of a Grant of Stock Options shall be set forth in
an option certificate which shall be delivered to the Outside Director
reasonably promptly following the Date of Grant of such Stock Options.
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ARTICLE III
TERMS AND CONDITIONS OF STOCK OPTIONS
SECTION 3.1 Exercise of Stock Options.
(a) Exercisability. Stock Options shall be exercisable only to the extent
the Outside Director is vested therein. Each Grant of Stock Options under the
Plan shall vest on the first anniversary of the Date of Grant of such Stock
Options.
(b) Option Period.
(i) Earliest Exercise Date. No Stock Option granted under the Plan
shall be exercisable until six months after the Date of Grant thereof.
(ii) Latest Exercise Date. No Stock Option granted under the Plan
shall be exercisable after the tenth anniversary of the Date of Grant
thereof.
(iii) Registration Restrictions. Any attempt to exercise a Stock
Option or to transfer any share issued upon exercise of a Stock Option by
any Outside Director shall be void and of no effect, unless and until (A) a
registration statement under the Securities Act of 1933, as amended, has
been duly filed and declared effective pertaining to the shares of Class B
Common Stock subject to such Stock Option have been duly qualified under
applicable Federal or state securities or blue sky laws or (B) the Board,
in its sole discretion, determines, or the Outside Director, upon the
request of the Board, provides an opinion of counsel satisfactory to the
Board, that such registration or qualification is not required as a result
of the availability of any exemption from registration or qualification
under such laws. Without limiting the foregoing, if at any time the Board
shall determine, in its sole discretion, that the listing, registration or
qualification of the shares of Class B Common Stock under any Federal or
state law or on any securities exchange or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of,
or in connection with, delivery or purchase of such shares pursuant to the
exercise of a Stock Option, such Stock Option shall not be exercised in
whole or in part unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Board.
(c) Exercise in the Event of Termination of Services.
(i) Termination other than for Death or Disability. If the services of
an Outside Director as a Director of the Company terminate for any reason
other than for death or disability, the Outside Director may exercise any
Outstanding Stock Options only within one year after the termination date,
but only to the extent such Outstanding Stock Options were vested on the
date of such Outside Director's termination. Upon a termination described
in this Section 3.1(c)(i), the Outside Director shall relinquish all rights
with respect to Stock Options that are not vested as of such termination
date.
(ii) Death. If an Outside Director dies within a period during which
his Stock Options could have been exercised by him, his Outstanding Stock
Options may be exercised only within one year after his death, but only to
the extent such Outstanding Stock Options were vested on the date of death,
by any person who acquired the right to exercise such Stock Options by will
or the laws of descent and distribution.
(iii) Permanent Disability. If the services of an Outside Director as
a Director of the Company terminate by reason of permanent disability, he
may exercise his Outstanding Stock Options only within one year after the
termination of his services, but only to the extent such Outstanding Stock
Options were vested when his services terminated.
C-3
<PAGE>
SECTION 3.2 Payment of Purchase Price Upon Exercise. Every share of Class B
Common Stock purchased through the exercise of a Stock Option shall be paid for
in full at the time of exercise in cash (e.g., personal bank check, certified
check or official bank check). In addition, the Outside Director shall make an
arrangement acceptable to the Company to pay to the Company an amount sufficient
to satisfy the combined Federal, state and local withholding tax obligations
which arise in connection with the exercise of such Stock Options.
ARTICLE IV
EFFECT OF CERTAIN CORPORATE CHANGES AND CHANGES IN CONTROL
SECTION 4.1 Effect of Reorganization. In the event that (i) the Company is
merged or consolidated with another corporation, (ii) one person becomes the
beneficial owner of more than fifty percent (50%) of the issued and outstanding
equity securities of the Company (for purposes of this Section 4.1, the terms
"person" and "beneficial owner" shall have the meanings assigned to them in
Section 13(d) of the Exchange Act), (iii) all or substantially all of the assets
of the Company are acquired by another corporation, person or entity (each such
event in (i), (ii) or (iii) or any other similar event or series of events which
results in an event described in (i), (ii) or (iii), being hereinafter referred
to as a "Reorganization Event") or (iv) the Board shall propose that the Company
enter into a Reorganization Event, then all the Outstanding Stock Options under
the Plan shall be immediately exercisable as of the date of such Reorganization
Event. For the purposes of this Section 4.1, no event or series of events
involving National Amusements, Inc., the Company or any of their respective
subsidiaries or affiliates shall be deemed to be a Reorganization Event unless
such event or series of events results in there being no class of equity
securities of the Company which is publicly traded.
SECTION 4.2 Dilution and Other Adjustments. In the event of a stock
dividend or split, issuance or repurchase of stock or securities convertible
into or exchangeable for shares of stock, grants of options, warrants or rights
(other than pursuant to the Plan) to purchase stock, recapitalization,
combination, exchange or similar change affecting the Class B Common Stock, as
the case may be, in order to provide each Outside Director with a benefit
equivalent to that which he would have been entitled had such event not
occurred, the Outstanding Stock Options under the Plan shall be adjusted in the
same manner as the Outstanding Stock Options (as such term is defined in the
LTMIP) under the LTMIP shall be adjusted. Such adjustments shall be conclusive
and binding for all purposes. In the event of a change in the Class B Common
Stock which is limited to a change in the designation thereof to "Capital Stock"
or other similar designation, or to a change in the par value thereof, or from
par value to no par value, without increase or descrease in the number of issued
shares, the shares resulting from any such change shall be deemed to be Class B
Common Stock within the meaning of the Plan.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Restriction on Transfer. The rights of an Outside Director with
respect to Stock Options shall not be transferable by the Outside Director to
whom such Stock Options are granted, otherwise than by will or the laws of
descent and distribution.
SECTION 5.2 Stockholder Rights. No Grant of Stock Options under the Plan
shall entitle an Outside Director to any rights of a holder of shares of Class B
Common Stock, except upon the delivery of share certificates to an Outside
Director upon exercise of a Stock Option.
SECTION 5.3 No Restriction on Right of Company to Effect Corporate
Changes. The Plan shall not affect in any way the right or power of the Company
or its stockholders to make or authorize any or all adjustments,
recapitalization, reorganization or other changes in the Company's capital
structure or
C-4
<PAGE>
its business, or any merger or consolidation of the Company, or any issue of
stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Class B Common Stock or the rights thereof or which are convertible
into or exchangeable for Class B Common Stock, or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
SECTION 5.4 No Right to Reelection. Nothing in the Plan shall be deemed to
create any obligation on the part of the Board to nominate any of its members
for reelection by the Company's stockholders, nor confer upon any Outside
Director the right to remain a member of the Board for any period of time, or at
any particular rate of compensation.
ARTICLE VI
AMENDMENT AND TERMINATION
The Board may at any time and from time to time, alter, amend, suspend or
terminate the Plan in whole or in part; provided, however, that in no event may
the provisions of the Plan respecting eligibility to participate or the timing
or amount of grants be amended more frequently than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or any rules or regulations thereunder; and
provided, further, that any amendment which under the requirements of applicable
law must be approved by the stockholders of the Company shall not be effective
unless and until such stockholder approval has been obtained in compliance with
such law; and provided, further, that any amendment that must be approved by the
stockholders of the Company in order to maintain the continued qualification of
the Plan under Rule 16b-3(c)(2)(ii) under the Exchange Act shall not be
effective unless and until such stockholder approval has been obtained in
compliance with such rule. No termination or amendment of the Plan may, without
the consent of an Outside Director to whom a Grant has been made, adversely
affect the rights of such Director in the Stock Options covered by such Grant.
Unless previously terminated pursuant to this Article VI, the Plan shall
terminate on the tenth anniversary of the Effective Date, and no further Grants
may be awarded hereunder after such date.
ARTICLE VII
INTERPRETATION
SECTION 7.1 Governmental Regulations. The Plan, and all Grants hereunder,
shall be subject to all applicable rules and regulations of governmental or
other authorities.
SECTION 7.2 Headings. The headings of sections and subsections herein are
included solely for the convenience of reference and shall not affect the
meaning of any of the provisions of the Plan.
SECTION 7.3 Governing Law. The Plan and all rights hereunder shall be
construed in accordance with and governed by the laws of the State of Delaware.
ARTICLE VIII
EFFECTIVE DATE AND STOCKHOLDER APPROVAL
The Effective Date of the Plan shall be May 25, 1993 and stockholder
approval shall be sought at the first annual meeting of stockholders following
such date. In the event that stockholder approval is not obtained on or before
the date of such annual meeting, the Plan and all Grants hereunder shall be void
ab initio and of no effect. No Stock Option shall be exercisable until the date
of such stockholder approval.
C-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the DGCL empowers a Delaware corporation to indemnify any
person who was or is, 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 such
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, such person had no reasonable cause to believe
his conduct was unlawful. A Delaware corporation may indemnify such persons
against expenses (including attorneys' fees) in actions brought by or in the
right of the corporation to procure a judgment in its favor under the same
conditions, except that no indemnification is permitted 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 to the extent the Court of Chancery of
the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the Court of Chancery or other such court shall deem proper. To the
extent such person has been successful on the merits or otherwise in defense of
any action referred to above, or in defense of any claim, issue or matter
therein, the corporation must indemnify such person against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith. The indemnification and advancement of expenses provided for in, or
granted pursuant to, Section 145 is not exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise.
Section 145 also provides that a corporation may maintain insurance against
liabilities for which indemnification is not expressly provided by the statute.
Article VI of Viacom's Restated Certificate of Incorporation provides for
indemnification of the directors, officers, employees and agents of Viacom to
the full extent currently permitted by the DGCL.
In addition, Viacom's Restated Certificate of Incorporation, as permitted
by Section 102(b) of the DGCL, limits directors' liability to Viacom and its
stockholders by eliminating liability in damages for breach of fiduciary duty.
Article VII of Viacom's Restated Certificate of Incorporation provides that
neither Viacom nor its stockholders may recover damages from Viacom's directors
for breach of their fiduciary duties in the performance of their duties as
directors of Viacom. As limited by Section 102(b), this provision cannot,
however, have the effect of indemnifying any director of Viacom in the case of
liability (i) for a breach of the director's duty of loyalty, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the DGCL or
(iv) for any transactions for which the director derived an improper personal
benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
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<S> <C>
2.1 --Amended and Restated Agreement and Plan of Merger dated as of February 4, 1994 between Viacom
Inc. and Paramount Communications Inc., as further amended as of May 26, 1994, among Viacom,
Viacom Sub Inc. and Paramount (included as Annex I to the Joint Proxy Statement/Prospectus)
2.2 --Voting Agreement dated as of January 21, 1994 between National Amusements, Inc. and Paramount
Communications Inc. (included as Annex II to the Joint Proxy Statement/Prospectus)
</TABLE>
PART II-1
<PAGE>
<TABLE>
<S> <C>
3.1 --Restated Certificate of Incorporation of Viacom Inc. as filed with the Secretary of State of
the State of Delaware on May 21, 1992 (incorporated by reference to Exhibit 3(a) to the
Annual Report on Form 10-K of Viacom Inc. for the fiscal year ended December 31, 1992, as
amended by Form 10-K/A Amendment No. 1 dated November 29, 1993 and as further amended by Form
10-K/A Amendment No. 2 dated December 9, 1993 (File No. 1-9553))
3.2 --Form of Amendment to Restated Certificate of Incorporation of Viacom Inc. (included as Annex
VII to the Joint Proxy Statement/Prospectus)
3.3 --Form of Certificate of Merger merging Viacom Sub Inc. with and into Paramount Communications
Inc. (included as Annex VI to the Joint Proxy Statement/
Prospectus)
3.4 --By-laws of Viacom Inc. (incorporated by reference to Exhibit 3.3 to the Registration
Statement on Form S-4 filed by Viacom Inc. (File No. 33-13812))
4.1 --Specimen Certificate representing the Viacom Inc. Class B Non-Voting Common Stock
(incorporated by reference to Exhibit 4(a) to the Quarterly Report on Form 10-Q of Viacom
Inc. for the quarter ended June 30, 1990 (File No. 1-9553))
4.2 --Certificate of Designations of Series A Cumulative Convertible Preferred Stock, par value
$.01 per share, of Viacom Inc. (incorporated by reference to Exhibit 4.1 to the Quarterly
Report on Form 10-Q of Viacom Inc. for the quarter ended September 30, 1993 (File No.
1-9553))
4.3 --Certificate of Designations of Series B Cumulative Convertible Preferred Stock, par value
$.01 per share, of Viacom Inc. (incorporated by reference to Exhibit 3(c) to the Annual
Report on Form 10-K of Viacom for the fiscal year ended December 31, 1992, as amended by Form
10-K/A Amendment No. 1 dated November 29, 1993 and as further amended by Form 10-K/A
Amendment No. 2 dated December 9, 1993 (File No. 1-9553))
4.4 --Form of Certificate of Designations of Series C Cumulative Exchangeable Redeemable Preferred
Stock, par value $.01 per share, of Viacom Inc.
4.5 --Form of Indenture between Viacom Inc. and Harris Trust and Savings Bank, as Trustee with
respect to Viacom Inc.'s 8% Exchangeable Subordinated Debentures due 2006 and Viacom Inc.'s
5% Subordinated Debentures due 2014 (including the Form of 8% Debenture and the Form of 5%
Debenture)
4.6 --Form of Contingent Value Rights Agreement between Viacom Inc. and Harris Trust and Savings
Bank, as Trustee (including the Form of Contingent Value Right)
4.7 --Form of Warrant Agreement between Viacom and Harris Trust and Savings Bank, as Warrant Agent
with respect to the Three-Year Warrants of Viacom Inc. (including the Form of Three-Year
Warrant)
4.8 --Form of Warrant Agreement between Viacom and Harris Trust and Savings Bank, as Warrant Agent
with respect to the Five-Year Warrants of Viacom Inc. (including the Form of Five-Year
Warrant)
4.9 --Form of Specimen Certificate representing Series C Cumulative Exchangeable Redeemable
Preferred Stock, par value $.01 per share, of Viacom Inc.
4.10 --Credit Agreement dated as of September 26, 1989 among Viacom International Inc., the banks
listed therein (the "Banks"), and Citibank, N.A., as Agent and the Bank of New York, as
Co-Agent, as amended and restated as of January 17, 1992 among Viacom Inc., as Guarantor,
Viacom International Inc., the Subsidiary Obligors, the Banks, Citibank, N.A., as Agent, and
The Bank of New York, as Co-Agent (incorporated by reference to Exhibits 10(1) and 10(2) to
the Current Report on Form 8-K of Viacom Inc. with a report date of January 22, 1992) as
amended by Letter Agreements dated as of April 7, 1993 and May 13, 1993 (incorporated by
reference to Exhibits 4.1 and 4.2 to the Quarterly Report on Form 10-Q of Viacom Inc. for the
quarter ended June 30, 1993 (File No. 1-9553))
4.11 --Loan Facility Agreement dated as of June 2, 1993 among Viacom Inc. and the banks named
therein and The Bank of New York, as Administrative Managing Agent and The Bank of New York
and Citibank, N.A., as Managing Agents (incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q of Viacom Inc. for the quarter ended June 30, 1993 (File No.
1-9553))
4.12 --Credit Agreement dated as of November 19, 1993, as amended as of January 4, 1994 and as
further amended as of February 15, 1994, among Viacom Inc., the Banks named therein, and The
Bank of New York, Citibank, N.A. and Morgan Guaranty Trust Company of New York, as Managing
Agents (incorporated by reference to Exhibit 99(a)(11) to Viacom Inc. Schedule 14D-1 Tender
Offer Statement (Amendment No. 46) dated March 3, 1994)
</TABLE>
PART II-2
<PAGE>
<TABLE>
<S> <C>
4.13 --The instruments defining the rights of holders of the long-term debt securities of Viacom
Inc. and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of
Regulation S-K. Viacom Inc. hereby agrees to furnish copies of these instruments to the
Securities and Exchange Commission upon request.
5 --Opinion of Shearman & Sterling as to the legality of the securities being registered
10.1 --Stock Purchase Agreement dated as of October 4, 1993 between Viacom Inc. and NYNEX
Corporation, as amended as of November 19, 1993 (incorporated by reference to Exhibit 10(t)
to the Annual Report on Form 10-K of Viacom for the fiscal year ended December 31, 1993, as
amended by Form 10-K/A Amendment No. 1 dated May 2, 1994 (File No. 1-9553))
10.2 --Amended and Restated Stock Purchase Agreement dated October 21, 1993 between Viacom Inc. and
Blockbuster Entertainment Corporation (incorporated by reference to Exhibit 10(u) to the
Annual Report on Form 10-K of Viacom for the fiscal year ended December 31, 1993, as amended
by Form 10-K/A Amendment No. 1 dated May 2, 1994 (File No. 1-9553))
10.3 --Subscription Agreement dated January 7, 1994 between Viacom Inc. and Blockbuster
Entertainment Corporation (incorporated by reference to Exhibit 99(c)(8) to Viacom Inc.
Schedule 14D-1 Tender Offer Statement (Amendment No. 20) dated January 7, 1994)
12.1 --Statement of Computation of Earnings to Fixed Charges of Viacom Inc.
12.2 --Statement of Computation of Earnings to Combined Fixed Charges and Preferred Stock Dividends (contained
in Exhibit 12.1)
23.1 --Consent of Price Waterhouse as to financial statements of Viacom Inc.
23.2 --Consent of Ernst & Young as to financial statements of Paramount Communications Inc.
23.3 --Consent of Arthur Andersen & Co. as to financial statements of Blockbuster Entertainment
Corporation
23.4 --Consent of Shearman & Sterling (contained in Exhibit 5)
23.5 --Consent of Simpson Thacher & Bartlett
23.6 --Consent of Smith Barney Shearson Inc.
23.7 --Consent of Lazard Freres & Co.
24 --Powers of Attorney
25 --Statement of Eligibility of Trustee on Form T-1 of Harris Trust and Savings Bank, as Trustee
99.1 --Opinion of Smith Barney Shearson Inc. dated February 1, 1994 (included as Annex III to the
Joint Proxy Statement/Prospectus)
99.2 --Opinion of Lazard Freres & Co. dated February 4, 1994 (included as Annex IV to the Joint
Proxy Statement/Prospectus)
99.3 --Letter, dated February 14, 1994, from Lazard Freres & Co. to Mr. Donald Oresman of Paramount
Communications Inc. (incorporated by reference to Exhibit (b)(5) of Amendment No. 1 to the
Rule 13e-3 Transaction Statement of Paramount Communications Inc. dated May 25, 1994)
99.4 --Form of Proxy for the Special Meeting of the Stockholders of Viacom Inc.
99.5 --Form of Proxy for the Special Meeting of the Stockholders of Paramount Communications Inc.
99.6 --Form of Proxy for the Annual Meeting of the Stockholders of Viacom Inc.
99.7 --Form of Chairman's Letter to the stockholders of Paramount Communications Inc.
99.8 --Form of Notice of Special Meeting of Stockholders to the stockholders of Paramount
Communications Inc.
99.9 --Form of Chairman's Letter to the stockholders of Viacom Inc.
99.10 --Form of Notice of Special and Annual Meetings of Stockholders to the stockholders of
Viacom Inc.
99.11 --Form of Chairman's Annual Report Letter to the stockholders of Viacom Inc.
</TABLE>
(b) No financial statement schedules are required to be filed herewith
pursuant to Item 21(b) or (c) of this Form.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually
PART II-3
<PAGE>
or in the aggregate, represent a fundamental change in the information
set forth in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and in the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
(d) The undersigned Registrant hereunder undertakes to register
under the Securities Act of 1933, prior to the issuance thereof, all securities,
if any, issued in exchange for the CVRs and to deliver a prospectus in
connection therewith to holders of record of the CVRs at that time.
PART II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on June 6, 1994.
VIACOM INC.
(registrant)
/s/ Philippe P. Dauman
By:. . . . . . . . . . . . . . . . .
Name: Philippe P. Dauman
Title: Executive Vice President,
General Counsel, Chief
Administrative Officer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on June 6,
1994 in the capacities shown:
<TABLE><CAPTION>
SIGNATURE TITLE
- --------------------------------------------------- --------------------------------------
<S> <C>
* Director
...................................................
George S. Abrams
* President, Chief Executive Officer and
................................................... Director (Principal Executive
Frank J. Biondi, Jr. Officer)
Director
/s/ Philippe P. Dauman
...................................................
Philippe P. Dauman
* Director
...................................................
William C. Ferguson
* Director
...................................................
H. Wayne Huizenga
* Director
...................................................
Ken Miller
* Director
...................................................
Brent D. Redstone
* Director
...................................................
Sumner M. Redstone
* Director
...................................................
Frederick V. Salerno
* Director
...................................................
William Schwartz
/s/ George S. Smith, Jr. Senior Vice President and Chief
................................................... Financial Officer (Principal
George S. Smith, Jr. Financial Officer)
/s/ Kevin C. Lavan Vice President, Controller and Chief
................................................... Accounting Officer (Principal
Kevin C. Lavan Accounting Officer)
*By: /s/ Philippe P. Dauman
................................................... June 6, 1994
Philippe P. Dauman
Attorney-in-Fact under Powers of Attorney
filed as Exhibit 24 to this registration statement
</TABLE>
PART II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE><CAPTION>
EXHIBIT DESCRIPTION PAGE
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<S> <C> <C>
2.1 --Amended and Restated Agreement and Plan of Merger dated as of February 4, 1994
between Viacom Inc. and Paramount Communications Inc., as further amended as of May
26, 1994, among Viacom, Viacom Sub Inc. and Paramount (included as Annex I to the
Joint Proxy Statement/Prospectus)
2.2 --Voting Agreement dated as of January 21, 1994 between National Amusements, Inc. and
Paramount Communications Inc. (included as Annex II to the Joint Proxy
Statement/Prospectus)
3.1 --Restated Certificate of Incorporation of Viacom Inc. as filed with the Secretary of
State of the State of Delaware on May 21, 1992 (incorporated by reference to Exhibit
3(a) to the Annual Report on Form 10-K of Viacom Inc. for the fiscal year ended
December 31, 1992, as amended by Form 10-K/A Amendment No. 1 dated November 29, 1993
and as further amended by Form 10-K/A Amendment No. 2 dated December 9, 1993 (File
No. 1-9553))
3.2 --Form of Amendment to Restated Certificate of Incorporation of Viacom Inc. (included
as Annex VII to the Joint Proxy Statement/Prospectus)
3.3 --Form of Certificate of Merger merging Viacom Sub Inc. with and into Paramount
Communications Inc. (included as Annex VI to the Joint Proxy Statement/
Prospectus)
3.4 --By-laws of Viacom Inc. (incorporated by reference to Exhibit 3.3 to the Registration
Statement on Form S-4 filed by Viacom Inc. (File No. 33-13812))
4.1 --Specimen Certificate representing the Viacom Inc. Class B Non-Voting Common Stock
(incorporated by reference to Exhibit 4(a) to the Quarterly Report on Form 10-Q of
Viacom Inc. for the quarter ended June 30, 1990 (File No. 1-9553))
4.2 --Certificate of Designations of Series A Cumulative Convertible Preferred Stock,
par value $.01 per share, of Viacom Inc. (incorporated by reference to Exhibit 4.1 to
the Quarterly Report on Form 10-Q of Viacom Inc. for the quarter ended September 30,
1993 (File No. 1-9553))
4.3 --Certificate of Designations of Series B Cumulative Convertible Preferred Stock,
par value $.01 per share, of Viacom Inc. (incorporated by reference to Exhibit 3(c)
to the Annual Report on Form 10-K of Viacom for the fiscal year ended December 31,
1992, as amended by Form 10-K/A Amendment No. 1 dated November 29, 1993 and as
further amended by Form 10-K/A Amendment No. 2 dated December 9, 1993 (File No. 1-
9553))
4.4 --Form of Certificate of Designations of Series C Cumulative Exchangeable Redeemable
Preferred Stock, par value $.01 per share, of Viacom Inc.
4.5 --Form of Indenture between Viacom Inc. and Harris Trust and Savings Bank, as Trustee
with respect to Viacom Inc.'s 8% Exchangeable Subordinated Debentures due 2006 and
Viacom Inc.'s 5% Subordinated Debentures due 2014 (including the Form of 8% Debenture
and the Form of 5% Debenture)
4.6 --Form of Contingent Value Rights Agreement between Viacom Inc. and Harris Trust and
Savings Bank, as Trustee (including the Form of Contingent Value Right)
4.7 --Form of Warrant Agreement between Viacom and Harris Trust and Savings Bank, as
Warrant Agent with respect to the Three-Year Warrants of Viacom Inc. (including the
Form of Three-Year Warrant)
4.8 --Form of Warrant Agreement between Viacom and Harris Trust and Savings Bank, as
Warrant Agent with respect to the Five-Year Warrants of Viacom Inc. (including the
Form of Five-Year Warrant)
4.9 --Form of Specimen Certificate representing Series C Cumulative Exchangeable Redeemable
Preferred Stock, par value $.01 per share, of Viacom Inc.
</TABLE>
<PAGE>
<TABLE><CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
4.10 --Credit Agreement dated as of September 26, 1989 among Viacom International Inc., the
banks listed therein (the "Banks"), and Citibank, N.A., as Agent and the Bank of New
York, as Co-Agent, as amended and restated as of January 17, 1992 among Viacom Inc.,
as Guarantor, Viacom International Inc., the Subsidiary Obligors, the Banks,
Citibank, N.A., as Agent, and The Bank of New York, as Co-Agent (incorporated by
reference to Exhibits 10(1) and 10(2) to the Current Report on Form 8-K of Viacom
Inc. with a report date of January 22, 1992) as amended by Letter Agreements dated as
of April 7, 1993 and May 13, 1993 (incorporated by reference to Exhibits 4.1 and 4.2
to the Quarterly Report on Form 10-Q of Viacom Inc. for the quarter ended June 30,
1993 (File No. 1-9553))
4.11 --Loan Facility Agreement dated as of June 2, 1993 among Viacom Inc. and the banks
named therein and The Bank of New York, as Administrative Managing Agent and The Bank
of New York and Citibank, N.A., as Managing Agents (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q of Viacom Inc. for the quarter
ended June 30, 1993 (File No. 1-9553))
4.12 --Credit Agreement dated as of November 19, 1993, as amended as of January 4, 1994 and
as further amended as of February 15, 1994, among Viacom Inc., the Banks named
therein, and The Bank of New York, Citibank, N.A. and Morgan Guaranty Trust Company
of New York, as Managing Agents (incorporated by reference to Exhibit 99(a)(11) to
Viacom Inc. Schedule 14D-1 Tender Offer Statement (Amendment No. 46) dated March 3,
1994)
4.13 --The instruments defining the rights of holders of the long-term debt securities of
Viacom Inc. and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of
Item 601 of Regulation S-K. Viacom Inc. hereby agrees to furnish copies of these
instruments to the Securities and Exchange Commission upon request.
5 --Opinion of Shearman & Sterling as to the legality of the securities being registered
10.1 --Stock Purchase Agreement dated as of October 4, 1993 between Viacom Inc. and NYNEX
Corporation, as amended as of November 19, 1993 (incorporated by reference to Exhibit
10(t) to the Annual Report on Form 10-K of Viacom for the fiscal year ended December
31, 1993, as amended by Form 10-K/A Amendment No. 1 dated May 2, 1994 (File No.
1-9553))
10.2 --Amended and Restated Stock Purchase Agreement dated October 21, 1993 between Viacom
Inc. and Blockbuster Entertainment Corporation (incorporated by reference to Exhibit
10(u) to the Annual Report on Form 10-K of Viacom for the fiscal year ended December
31, 1993, as amended by Form 10-K/A Amendment No. 1 dated May 2, 1994 (File No.
1-9553))
10.3 --Subscription Agreement dated January 7, 1994 between Viacom Inc. and Blockbuster
Entertainment Corporation (incorporated by reference to Exhibit 99(c)(8) to Viacom
Inc. Schedule 14D-1 Tender Offer Statement (Amendment No. 20) dated January 7, 1994)
12.1 --Statement of Computation of Earnings to Fixed Charges of Viacom Inc.
12.2 --Statement of Computation of Earnings to Combined Fixed Charges and Preferred Stock
Dividends (contained in Exhibit 12.1)
23.1 --Consent of Price Waterhouse as to financial statements of Viacom Inc.
23.2 --Consent of Ernst & Young as to financial statements of Paramount Communications Inc.
23.3 --Consent of Arthur Andersen & Co. as to financial statements of Blockbuster
Entertainment Corporation
23.4 --Consent of Shearman & Sterling (contained in Exhibit 5)
23.5 --Consent of Simpson Thacher & Bartlett
23.6 --Consent of Smith Barney Shearson Inc.
23.7 --Consent of Lazard Freres & Co.
24 --Powers of Attorney
25 --Statement of Eligibility of Trustee on Form T-1 of Harris Trust and Savings Bank, as
Trustee
99.1 --Opinion of Smith Barney Shearson Inc. dated February 1, 1994 (included as Annex III
to the Joint Proxy Statement/Prospectus)
</TABLE>
<PAGE>
<TABLE><CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
99.2 --Opinion of Lazard Freres & Co. dated February 4, 1994 (included as Annex IV to the
Joint Proxy Statement/Prospectus)
99.3 --Letter, dated February 14, 1994, from Lazard Freres & Co. to Mr. Donald Oresman of
Paramount Communications Inc. (incorporated by reference to Exhibit (b)(5) of
Amendment No. 1 to the Rule 13e-3 Transaction Statement of Paramount Communications
Inc. dated May 25, 1994)
99.4 --Form of Proxy for the Special Meeting of the Stockholders of Viacom Inc.
99.5 --Form of Proxy for the Special Meeting of the Stockholders of Paramount Communications
Inc.
99.6 --Form of Proxy for the Annual Meeting of the Stockholders of Viacom Inc.
99.7 --Form of Chairman's Letter to the stockholders of Paramount Communications Inc.
99.8 --Form of Notice of Special Meeting of Stockholders to the stockholders of Paramount
Communications Inc.
99.9 --Form of Chairman's Letter to the stockholders of Viacom Inc.
99.10 --Form of Notice of Special and Annual Meetings of Stockholders to the
stockholders of Viacom Inc.
99.11 --Form of Chairman's Annual Report Letter to the stockholders of Viacom Inc.
</TABLE>
- DRAFT -
CERTIFICATE OF THE DESIGNATIONS, POWERS, PREFERENCES
AND RELATIVE, PARTICIPATING OR OTHER RIGHTS, AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, OF
SERIES C CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK
($0.01 Par Value Per Share)
OF
VIACOM INC.
-----------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
-----------------
VIACOM INC., a Delaware corporation (the "Corporation"),
does hereby certify that the following resolutions were duly
adopted by the Board of Directors of the Corporation pursuant to
authority conferred upon the Board of Directors by Article IV of
the Restated Certificate of Incorporation of the Corporation,
which authorizes the issuance of up to 200,000,000 shares of
preferred stock, at a meeting of the Board of Directors duly held
on May __, 1994:
RESOLVED, that the issuance of a series of preferred
stock, $0.01 par value per share, of the Corporation is hereby
authorized and the designation, powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, in addition
to those set forth in the Restated Certificate of Incorporation of
the Corporation, are hereby fixed as follows:
(1) Number of Shares and Designation. [ ] shares
--------------------------------
of the preferred stock, $0.01 par value per share, of the
Corporation are hereby constituted as a series of the preferred
stock designated as Series C Cumulative Exchangeable Redeemable
Preferred Stock (the "Series C Preferred Stock"). The authorized
number of shares of Series C Preferred Stock may not be increased
at any time and may not be decreased below the number of then
currently outstanding shares of Series C Preferred Stock.
(2) Definitions. For purposes of the Series C Preferred
-----------
Stock, the following terms shall have the meanings indicated:
<PAGE>
2
"Board of Directors" shall mean the board of directors
of the Corporation or any committee authorized by such Board
of Directors to perform any of its responsibilities with
respect to the Series C Preferred Stock.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of
New York are authorized or obligated by law or executive
order to close.
"Class A Common Stock" shall mean the Class A Common
Stock of the Corporation, par value $0.01 per share.
"Class B Common Stock" shall mean the Class B Common
Stock of the Corporation, par value $0.01 per share.
"Common Stock" shall mean the Class A Common Stock,
Class B Common Stock and any other class of common stock of
the Corporation which is authorized, issued and outstanding.
"Debentures" shall mean the Corporation's 5%
Subordinated Debentures due 2014 issued upon exchange of
shares of the Series C Preferred Stock.
"Dividend Periods" shall mean quarterly dividend periods
commencing on the first day of October, January, April and
July of each year and ending on and including the day
immediately preceding the first day of the next succeeding
Dividend Period (other than the initial Dividend Period which
shall commence on the Issue Date and end on and include the
day immediately preceding the first day of the next
succeeding Dividend Period).
"Effective Time" shall mean the effective time of the
merger of a wholly owned subsidiary of the Corporation with
and into Paramount Communications Inc.
"Exchange Date" shall have the meaning set forth in
paragraph (b) of Section (7) hereof.
"Exchange Notice" shall have the meaning set forth in
paragraph (b) of Section (7) hereof.
"Issue Date" shall mean the first date on which shares
of Series C Preferred Stock are issued.
"Junior Stock" shall mean the Common Stock and any
other class of capital stock of the Corporation now or
hereafter issued and outstanding that ranks junior as
<PAGE>
3
to dividends and upon liquidation, dissolution or winding up
to the Series C Preferred Stock.
"Parity Stock" shall mean any stock of the Corporation
ranking on a parity with the Series C Preferred Stock as to
dividends and upon liquidation, dissolution or winding up.
"Person" shall mean any individual, firm, partnership,
corporation or other entity, and shall include any successor
(by merger or otherwise) of such entity.
"Subsidiary" means any corporation of which at the time
of determination the Corporation, directly or indirectly
through one or more Subsidiaries, owns more than 50% of the
stock of the class or classes having general voting power
under ordinary circumstances to elect at least a majority of
the board of directors, managers or trustees of such
corporation (irrespective of whether or not at the time stock
of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"Trading Day" means a day on which the American Stock
Exchange, or such other exchange or inter-dealer quotation
system on which the Common Stock is principally traded or
authorized to be quoted, is open for the transaction of
business.
"Transfer Agent" means [The First Chicago Trust Company]
of New York or such other agent or agents of the Corporation
as may be designated by the Board of Directors of the
Corporation as the transfer agent for the Series C Preferred
Stock.
(3) Dividends. (a) The holders of shares of the Series C
---------
Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available
therefor, cumulative cash dividends at the rate per annum of $2.50
per share of Series C Preferred Stock through the tenth
anniversary of the Effective Time, and thereafter at the rate per
annum of $5.00 per share. Such dividends shall be cumulative from
the later of the Effective Time and the latest date through which
interest has been paid on Viacom's 8% Exchangeable Subordinated
Debentures due 2006, whether or not in any Dividend Period or
Periods there shall be funds of the Corporation legally available
for the payment of such dividends, and shall be payable quarterly,
when, as and if declared by the Board of Directors, on the first
Business Day of January, April, July and October of each year
during which shares of Series C Preferred Stock are outstanding,
commencing on the first such Business Day after the Issue Date or
at such additional times and for such interim periods, if any, as
determined by the Board of Directors. Each such dividend shall be
payable in arrears to the holders of record of shares of the
Series C Preferred Stock, as they appear on the stock records of
the Corporation at the close of business on such record dates, not
more than 60 days preceding the payment dates thereof, as shall be
fixed by the Board of Directors. Accrued and unpaid dividends for
any past Dividend Periods may be declared and paid at any time,
without reference to any regular
<PAGE>
4
dividend payment date, to holders of record on such date, not
exceeding 45 days preceding the payment date thereof, as may be
fixed by the Board of Directors. Accrued and unpaid dividends for
any past Dividend Periods shall accrue interest at the Base Rate
as announced from time to time by Citibank, N.A., which interest,
until paid, shall be treated for all purposes of this Certificate
of Designation as accrued and unpaid dividends.
(b) The amount of dividends payable for each full Dividend
Period for the Series C Preferred Stock shall be computed by
dividing the annual dividend rate by four. The amount of
dividends payable for the initial Dividend Period on the Series C
Preferred Stock, or any other period shorter or longer than a full
Dividend Period on the Series C Preferred Stock shall be computed
on the basis of a 360-day year consisting of twelve 30-day months.
Except as provided in Section 5(a), holders of shares of Series C
Preferred Stock called for redemption on a redemption date between
a dividend payment record date and the dividend payment date shall
not be entitled to receive the dividend payable on such dividend
payment date. Holders of shares of Series C Preferred Stock shall
not be entitled to any dividends, whether payable in cash,
property or stock, in excess of cumulative dividends, as herein
provided, on the Series C Preferred Stock.
(c) So long as any shares of the Series C Preferred Stock
are outstanding, no dividends, except as described in the next
succeeding sentence, shall be declared or paid or set apart for
payment on any Parity Stock, for any period, nor shall any shares
of Parity Stock be redeemed or purchased by the Corporation or any
Subsidiary, unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on
the Series C Preferred Stock for all Dividend Periods terminating
on or prior to the date of payment of such full cumulative
dividends. When dividends are not paid in full or a sum
sufficient for such payment is not set apart, as aforesaid, upon
the shares of the Series C Preferred Stock and any other class or
series of Parity Stock, all dividends declared upon shares of the
Series C Preferred Stock and all dividends declared upon such
Parity Stock shall be declared pro rata so that the amounts of
dividends per share declared on the Series C Preferred Stock and
such Parity Stock shall in all cases bear to each other the same
ratio that accrued dividends per share on the shares of the Series
C Preferred Stock and such Parity Stock bear to each other.
(d) So long as any shares of the Series C Preferred Stock
are outstanding, no dividends or other distributions (other than
dividends or distributions paid solely in shares of, or options,
warrants or rights to subscribe for or purchase shares of Junior
Stock) shall be declared or paid or set apart for payment with
respect to the Junior Stock, nor shall any Junior Stock be
redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund or
otherwise set apart for the redemption of any shares of any such
Junior Stock) by the Corporation or any Subsidiary (except by
conversion into or exchange for Junior Stock) unless, in each case
(i) the full cumulative dividends on all outstanding shares of the
Series C Preferred Stock and any Parity
<PAGE>
5
Stock, shall have been paid or set apart for payment for all past
Dividend Periods and dividend periods with respect to such Parity
Stock and (ii) sufficient funds shall have been set apart for the
payment of the dividend for the current Dividend Period with
respect to the Series C Preferred Stock and the dividend period
with respect to any Parity Stock.
(4) Liquidation Preference. (a) In the event of any
----------------------
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, before any payment or distribution of
the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of Junior Stock, the
holders of the shares of Series C Preferred Stock shall be
entitled to receive $50.00 per share plus an amount equal to all
dividends (whether or not earned or declared) accrued and
accumulated and unpaid thereon but not including to the date of
final distribution to such holders; but such holders shall not be
entitled to any further payment. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders
of the shares of Series C Preferred Stock shall be insufficient to
pay in full the preferential amount aforesaid and liquidation
payments on any shares of Parity Stock, then such assets, or the
proceeds thereof, shall be distributed among the holders of shares
of Series C Preferred Stock and any such Parity Stock ratably in
accordance with the respective amounts which would be payable on
such shares of Series C Preferred Stock and any such Parity Stock
if all amounts payable thereon were paid in full. For the
purposes of this Section (4), (i) a consolidation or merger of the
Corporation with one or more corporations, (ii) a sale or transfer
of all or substantially all of the Corporation's assets or (iii) a
statutory share exchange shall not be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary of the
Corporation.
(b) Subject to the rights of the holders of shares of any
series or class or classes of Parity Stock, after payment shall
have been made in full to the holders of Series C Preferred Stock,
as provided in this Section (4), any other series or class or
classes of Junior Stock shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any
and all assets remaining to be paid or distributed, and the
holders of Series C Preferred Stock shall not be entitled to share
therein.
(5) Redemption at the Option of the Corporation. (a)
-------------------------------------------
Shares of Series C Preferred Stock may not be redeemed by the
Corporation prior to the fifth anniversary of the Effective Time,
after which, the Corporation, at its option, may redeem the shares
of Series C Preferred Stock, in whole or in part, out of funds
legally available therefor, at any time or from time to time,
subject to the notice provisions and provisions for partial
redemption described below, at the following redemption prices
plus an amount equal to accrued and unpaid dividends, if any, to
the date fixed for redemption, whether or not earned or declared:
<PAGE>
6
If redeemed during the
12 month period beginning
on the anniversary of the
Effective Time indicated below Redemption Price
------------------------------ ----------------
Fifth . . . . . . . . . . . . . . . . $52.50
Sixth . . . . . . . . . . . . . . . $52.00
Seventh . . . . . . . . . . . . . . . $51.50
Eighth . . . . . . . . . . . . . . . $51.00
Ninth . . . . . . . . . . . . . . . $50.50
Tenth and thereafter . . . . . . . . $50.00
(b) In the event that full cumulative dividends on the
Series C Preferred Stock and other class or series, of stock
ranking, as to dividends, on a parity with the Series C Preferred
Stock have not been paid or declared and set apart for payment,
the Series C Preferred Stock may not be redeemed in part and the
Corporation may not purchase or acquire shares of Series C
Preferred Stock or such other stock otherwise than pursuant to a
purchase or exchange offer made on the same terms to all holders
of shares of Series C Preferred Stock and such other stock.
(c) In the event the Corporation shall redeem shares of
Series C Preferred Stock, notice of such redemption shall be given
by first class mail, postage prepaid, mailed not less than 10 nor
more than 60 days prior to the redemption date, to each holder of
record of the shares to be redeemed, at such holder's address as
the same appears on the stock records of the Corporation, which
notice shall be unconditional and irrevocable. Each such notice
shall state: (1) the redemption date; (2) the number of shares of
Series C Preferred Stock to be redeemed and, if less than all the
shares held by such holder are to be redeemed, the number of such
shares to be redeemed from such holder; (3) the redemption price;
(4) the place or places where certificates for such shares are to
be surrendered for payment of the redemption price; and (5) that
dividends on the shares to be redeemed shall cease to accrue on
such redemption date. Notice having been mailed as aforesaid,
from and after the redemption date (unless default shall be made
by the Corporation in providing money for the payment of the
redemption price), (i) dividends on the shares of the Series C
Preferred Stock so called for redemption shall cease to accrue,
(ii) said shares shall no longer be deemed to be outstanding, and
(iii) all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation the
redemption price without interest thereon after the redemption
date and accrued and unpaid dividends, if any, to, but not
including, the redemption date and any cash adjustment in lieu of
fractional unredeemed shares) shall cease. The Corporation's
obligation to provide moneys in accordance with the preceding
sentence shall be deemed fulfilled if, on or before the redemption
date, the Corporation shall deposit with a bank or trust company
(which may be an affiliate of the Corporation) having an office in
the Borough of Manhattan, City of New York, and having a
<PAGE>
7
capital and surplus of at least $50,000,000, funds necessary for
such redemption, in trust, with irrevocable instructions that such
funds after the redemption date be applied to the redemption of
the shares of Series C Preferred Stock so called for redemption.
Any interest accrued on such funds shall be paid to the
Corporation from time to time. Any funds so deposited and
unclaimed at the end of two years from such redemption date shall
be released or repaid to the Corporation, after which, subject to
any applicable laws relating to escheat or unclaimed property, the
holder or holders of such shares of Series C Preferred Stock so
called for redemption shall look only to the Corporation for
payment of the redemption price.
Upon surrender in accordance with said notice of the
certificates for any such shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors shall so require
and the notice shall so state), such shares shall be redeemed by
the Corporation at the applicable redemption price aforesaid. If
fewer than all the outstanding shares of Series C Preferred Stock
are to be redeemed, shares to be redeemed shall be selected by the
Corporation from outstanding shares of Series C Preferred Stock
not previously called for redemption by lot or pro rata (as nearly
as may be) or by any other method determined by the Corporation in
its sole discretion to be equitable. If fewer than all the shares
represented by any certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to
the holder thereof. No fractional shares will be issued upon
redemption, but an adjustment in cash will be made in respect of
any fraction of an unredeemed share which would otherwise be
issuable.
(6) Shares to Be Retired. All shares of Series C Preferred
--------------------
Stock purchased or redeemed by the Corporation or exchanged shall
be retired and cancelled and shall be restored to the status of
authorized but unissued shares of preferred stock, without
designation as to series.
(7) Exchange. (a) The Corporation may, at its option, on
--------
any scheduled dividend payment date occurring on or after the
third anniversary of the Effective Time, exchange the Series C
Preferred Stock, in whole or in part, for Debentures. The
Corporation may effect such exchange only if all accrued and
unpaid dividends on the Series C Preferred Stock have been paid.
Holders of Series C Preferred Stock so exchanged will be entitled
to receive $50 principal amount of Debentures for each share of
Series C Preferred Stock held by such holders at the time of
exchange plus an amount per share in cash equal to all accrued but
unpaid dividends thereon to, but not including, the date of
exchange. The Debentures will be issuable only in registered form
and in denominations of $1,000 and integral multiples thereof. An
amount in cash will be paid to holders for any principal amount
otherwise issuable which is less than $1,000. At the time of
exchange, all dividends will cease to accrue, the rights of the
holders of Series C Preferred Stock as stockholders of the
Corporation shall cease (except the right to receive the
Debentures, all accrued and unpaid dividends, if any, to, but not
including, the date of exchange and any cash adjustment in lieu of
principal amount otherwise issuable which is less than $1,000) and
the person or persons
<PAGE>
8
entitled to receive the Debentures issuable upon exchange shall be
treated as the registered holder or holders of such Debentures.
(b) (i) At least 10 days and not more than 60 days prior to
the date fixed for any exchange of the Series C Preferred Stock,
written notice (the "Exchange Notice") shall be given by first
class mail, postage prepaid, to each holder of record on the
record date fixed for such exchange (the "Exchange Date") of the
Series C Preferred Stock at such holder's address as the same
appears on the stock register of the Corporation; provided,
however, that neither any failure to give such notice nor any
deficiency therein shall affect the validity of the procedure for
the exchange of any shares of Series C Preferred Stock to be
exchanged except as to the holder or holders to whom the
Corporation has failed to give said notice or except as to the
holder or holders whose notice was defective. The Exchange Notice
shall state:
(A) the date fixed for the Exchange Date;
(B) that the holder is to surrender to the Corporation,
in the manner and at the place designated, the certificate or
certificates representing the shares of Series C Preferred Stock
held by such holder; and
(C) that dividends on the shares of the Series C
Preferred Stock to be exchanged will cease to accrue on such
Exchange Date.
(ii) On or before the Exchange Date, each holder shall
surrender the certificate or certificates representing such shares
of Series C Preferred Stock to the Corporation, in the manner and
at the place designated in the Exchange Notice, and on the
Exchange Date the person whose name appears on such certificate or
certificates as the owner of such shares shall receive the amount
of Debentures described in Section 7(a) above, and each
surrendered certificate shall be cancelled and retired.
(iii) If the Corporation has caused the Debentures to
be authenticated on or prior to the Exchange Date and has complied
with the other provisions of this Section 7, then, notwithstanding
that any certificates for shares of Series C Preferred Stock have
not been surrendered for exchange, dividends on the Series C
Preferred Stock called for exchange shall cease to accumulate on
the Exchange Date, and the holders of such exchanged shares shall
cease to be stockholders with respect to the Series C Preferred
Stock and shall have no interest in or other claims against the
Corporation by virtue thereof and shall have no voting or other
rights with respect thereto on the Exchange Date, other than the
right to receive the Debentures, the right to accumulated and
unpaid dividends up to, but not including, the Exchange Date,
without interest thereon, upon surrender (and endorsement, if
required by the Corporation) of their certificates and the right
to receive a cash adjustment, if
<PAGE>
9
any, in lieu of any principal amount otherwise issuable which is
less than $1,000, and the shares evidenced thereby shall no longer
be deemed outstanding for any purpose.
(iv) Prior to the Exchange Date, the Corporation shall
comply with any applicable securities and Blue Sky laws with
respect to the exchange of the Series C Preferred Stock for the
Debentures.
(8) Ranking. Any class or classes of stock of the
-------
Corporation shall be deemed to rank:
(i) prior to the Series C Preferred Stock, as to
dividends or as to distribution of assets upon liquidation,
dissolution or winding up, if the holders of such class shall
be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as
the case may be, in preference or priority to the holders of
Series C Preferred Stock;
(ii) on a parity with the Series C Preferred Stock, as
to dividends or as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the
dividend rates, dividend payment dates or redemption or
liquidation prices per share thereof be different from those
of the Series C Preferred Stock, if the holders of such class
of stock and the Series C Preferred Stock shall be entitled
to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be,
in proportion to their respective amounts of accrued and
unpaid dividends per share or liquidation prices, without
preference or priority one over the other; and
(iii) junior to the Series C Preferred Stock, as to
dividends or as to the distribution of assets upon
liquidation, dissolution or winding up, if such stock shall
be Class A Common Stock or Class B Common Stock or if the
holders of Series C Preferred Stock shall be entitled to
receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of shares of such
stock.
(9) Voting. Except as herein provided or as otherwise from
------
time to time required by applicable law, holders of Series C
Preferred Stock shall have no voting rights whatsoever. Whenever,
dividends payable on the shares of Series C Preferred Stock at any
time outstanding shall be in arrears for such number of Dividend
Periods, which Dividend Periods need not be consecutive, which
shall in the aggregate contain not less than 360 days, the number
of directors of the Corporation shall be increased by two and the
holders of Series C Preferred Stock, voting together as a class
with the holders of shares of any class or series of Parity Stock
upon which like voting rights have been conferred and are
exercisable, will have the right to elect two additional directors
to the Board of Directors at the
<PAGE>
10
Corporation's next annual meeting of stockholders and at each
subsequent annual meeting of stockholders until all such dividends
on such series have been paid in full. At elections for such
directors, each holder of Series C Preferred Stock shall be
entitled to one vote for each share held. Upon any termination of
the right of the holders of such series to vote for directors as
provided above, the term of office of all directors then in
office, elected by such series, shall terminate immediately,
subject to such rights revesting in the event of each and every
subsequent default of the character mentioned above.
If the office of any director elected by the holders of
Series C Preferred Stock, voting together as a class with the
holders of shares any class of series of Parity Stock upon which
like voting rights have been conferred and are exerciseable,
becomes vacant by reason of death, resignation, retirement,
disqualification or removal from office or otherwise, the
remaining director elected by the holders of Series C Preferred
Stock and any such Parity Stock may choose a successor who shall
hold office for the unexpired term in respect of which such
vacancy occurred. Upon any termination of the right of the
holders of Series C Preferred Stock and any such Parity Stock to
vote for directors as herein provided, the term of office of all
directors then in office elected by the holders of Series C
Preferred Stock and any such Parity Stock upon which voting rights
have been conferred and are exercisable shall terminate
immediately. Whenever the term of office of the directors elected
by the holders of Series C Preferred Stock and any such Parity
Stock shall so terminate and the special voting powers vested in
the holders of Series C Preferred Stock and any such Parity Stock
shall have expired, the number of directors shall be such number
as may be provided for in the By-Laws irrespective of any increase
made pursuant to the provisions of this Section 9.
So long as any shares of the Series C Preferred Stock remain
outstanding, the consent of the holders of at least two-thirds of
the shares of Series C Preferred Stock outstanding at the time
given in person or by proxy, either in writing or at any special
or annual meeting, shall be necessary to permit, effect or
validate any one or more of the following:
(a) the authorization, creation or issuance, or any increase
in the authorized or issued amount, of any class or series of
stock ranking prior to Series C Preferred Stock with respect to
dividends or the distribution of assets upon liquidation,
dissolution or winding up, or
(b) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the
Restated Certificate of Incorporation of the Corporation which
would materially and adversely affect any rights, preferences or
voting powers of the holders of Series C Preferred Stock;
provided, however, that any increase in the amount of authorized
preferred stock or the creation and issuance of other series of
preferred stock, or any increase in the amount of authorized
shares of such series or of any other series of preferred stock,
in each case ranking on a parity with or junior to the Series C
Preferred Stock with respect to the payment of dividends and the
distribution of assets upon
<PAGE>
11
liquidation, dissolution or winding up, shall not be deemed to
materially and adversely affect such rights, preferences or voting
powers.
The foregoing voting provisions shall not apply if, at or
prior to the time when the act with respect to which such vote
would otherwise be required shall be effected, all outstanding
shares of Series C Preferred Stock shall have been redeemed or
sufficient funds shall have been deposited in trust to effect such
redemption, scheduled to be consummated within three months after
such time.
(10) Record Holders. The Corporation and the Transfer Agent
--------------
may deem and treat the record holder of any shares of Series C
Preferred Stock as the true and lawful owner
thereof for all purposes, and neither the Corporation nor the
Transfer Agent shall be affected by any notice to the contrary.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be made under the seal of the Corporation and
signed by , its , and
-------------- ------------------------
attested by , its [Assistant] Secretary, this
--------------- ----
day of , 199 .
-------- --
VIACOM INC.
By
------------------------------
[Name]
[Title]
Attest:
By
-----------------------
[Name]
[Assistant] Secretary
21210_1/SSNYL3
==================================================================
VIACOM INC.
TO
HARRIS TRUST AND SAVINGS BANK,
Trustee
__________________________
Indenture
Dated as of __________, 1994
_________________________
8% Exchangeable Subordinated Debentures due 2006
and
5% Subordinated Debentures due 2014
==================================================================
<PAGE>
VIACOM INC.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of , 1994
------------------
------------------------------------------------------------------
Trust Indenture Indenture
Act Section Section
--------------- ---------
Sec. 310(a)(1) . . . . . . . . . . . . . . 607
(a)(2) . . . . . . . . . . . . . . 607
(b) . . . . . . . . . . . . . . 608
Sec. 312(c) . . . . . . . . . . . . . . 701
Sec. 314(a) . . . . . . . . . . . . . . 703
(a)(4) . . . . . . . . . . . . . . 1005(a)
(c)(1) . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . 102
(e) . . . . . . . . . . . . . . 102
Sec. 315(b) . . . . . . . . . . . . . . 601
Sec. 316(a)(last
sentence) . . . . . . . . . . . . . . 101 ("Outstanding")
(a)(1)(A) . . . . . . . . . . . . . . 502, 512
(a)(1)(B) . . . . . . . . . . . . . . 513
(b) . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . 104(d)
Sec. 317(a)(1) . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . 1003
Sec. 318(a) . . . . . . . . . . . . . . 111
<PAGE>
TABLE OF CONTENTS
----------------------------------------
PAGE
----
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101 Definitions . . . . . . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . 2
Agent Bank . . . . . . . . . . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . . . . . . 2
Authorized Newspaper . . . . . . . . . . . . . . 2
Banks . . . . . . . . . . . . . . . . . . . . . 2
Blockbuster Merger . . . . . . . . . . . . . . . 3
Board of Directors . . . . . . . . . . . . . . . 3
Board Resolution . . . . . . . . . . . . . . . . 3
Business Day . . . . . . . . . . . . . . . . . . 3
Capital Stock . . . . . . . . . . . . . . . . . 3
Capitalized Lease Obligation . . . . . . . . . . 3
Cedel S.A. . . . . . . . . . . . . . . . . . . . 3
Certificate of Designations . . . . . . . . . . 3
Commission . . . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . . 4
Company Request or Company Order . . . . . . . . 4
Corporate Trust Office . . . . . . . . . . . . . 4
corporation . . . . . . . . . . . . . . . . . . 4
Credit Agreement . . . . . . . . . . . . . . . . 4
Default . . . . . . . . . . . . . . . . . . . . 4
Default Amount . . . . . . . . . . . . . . . . . 4
Defaulted Interest . . . . . . . . . . . . . . . 4
Note: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
ii
PAGE
----
Effective Time . . . . . . . . . . . . . . . . . 4
Euro-clear . . . . . . . . . . . . . . . . . . . . 4
Event of Default . . . . . . . . . . . . . . . . . 4
Exchange Act . . . . . . . . . . . . . . . . . . 4
Exchange Date . . . . . . . . . . . . . . . . . 4
Exchange Notice . . . . . . . . . . . . . . . . 4
Exchange Securities . . . . . . . . . . . . . . 5
Federal Bankruptcy Code . . . . . . . . . . . . . 5
Holder . . . . . . . . . . . . . . . . . . . . . . 5
Indenture . . . . . . . . . . . . . . . . . . . 5
Initial Exchange Date . . . . . . . . . . . . . 5
Initial Securities . . . . . . . . . . . . . . . 5
Interest Payment Date . . . . . . . . . . . . . 5
Lien . . . . . . . . . . . . . . . . . . . . . . 5
Maturity . . . . . . . . . . . . . . . . . . . . 5
Notice of Default . . . . . . . . . . . . . . . 5
Officer . . . . . . . . . . . . . . . . . . . . . 5
Officer's Certificate . . . . . . . . . . . . . 5
Opinion of Counsel . . . . . . . . . . . . . . . 6
Outstanding . . . . . . . . . . . . . . . . . . 6
Paramount . . . . . . . . . . . . . . . . . . . . 7
Paying Agent . . . . . . . . . . . . . . . . . . 7
Person . . . . . . . . . . . . . . . . . . . . . 7
Place of Payment . . . . . . . . . . . . . . . . 7
Predecessor Security . . . . . . . . . . . . . . 7
Redeemable Capital Stock . . . . . . . . . . . . 7
Redemption Date . . . . . . . . . . . . . . . . 7
Redemption Price . . . . . . . . . . . . . . . . . 7
Registered Security . . . . . . . . . . . . . . 7
Regular Record Date . . . . . . . . . . . . . . 7
Responsible Officer . . . . . . . . . . . . . . . 8
Securities . . . . . . . . . . . . . . . . . . . 8
Security Register and Security Registrar . . . . 8
Senior Obligations . . . . . . . . . . . . . . . . 8
Series C Preferred Stock . . . . . . . . . . . . 9
Special Record Date . . . . . . . . . . . . . . 9
Stated Maturity . . . . . . . . . . . . . . . . . 9
Note: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
iii
PAGE
----
Subsidiary . . . . . . . . . . . . . . . . . . . . 9
Surviving Person . . . . . . . . . . . . . . . . 9
Trust Indenture Act or TIA . . . . . . . . . . . . 9
Trustee . . . . . . . . . . . . . . . . . . . . 9
U.S. Depositary . . . . . . . . . . . . . . . . 10
U.S. Government Obligations . . . . . . . . . . 10
Viacom International . . . . . . . . . . . . . . 10
Vice President . . . . . . . . . . . . . . . . . 10
Voting Stock . . . . . . . . . . . . . . . . . . 10
Section 102. Compliance Certificates and Opinions . . . . 10
Section 103. Form of Documents Delivered to Trustee . . . 10
Section 104. Acts of Holders. . . . . . . . . . . . . . . 11
Section 105. Notices, Etc., to Trustee, Company and
Agent Bank . . . . . . . . . . . . . . . 12
Section 106. Notice to Holders; Waiver. . . . . . . . . . 13
Section 107. Language of Notices, Etc.. . . . . . . . . . 14
Section 108. Trust Indenture Act. . . . . . . . . . . . . 14
Section 109. Effect of Headings and Table of Contents . . 14
Section 110. Successors and Assigns . . . . . . . . . . . 14
Section 111. Separability Clause. . . . . . . . . . . . . 14
Section 112. Benefits of Indenture. . . . . . . . . . . . 14
Section 113. Governing Law. . . . . . . . . . . . . . . . 14
Section 114. Legal Holidays . . . . . . . . . . . . . . . 15
ARTICLE TWO
Security Forms
Section 201. Forms Generally. . . . . . . . . . . . . . . 15
Section 202. Form of Face of Initial Security . . . . . . 16
Section 203. Form of Reverse of Initial Security. . . . . 17
Section 204. Form of Face of Exchange Security. . . . . . 21
Section 205. Form of Reverse of Exchange Security . . . . 22
Section 206. Form of Trustee's Certificate of
Authentication. . . . . . . . . . . . . . . 25
Note: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
iv
PAGE
----
ARTICLE THREE
The Securities
Section 301. Title and Terms. . . . . . . . . . . . . . . 26
Section 302. Denominations. . . . . . . . . . . . . . . . 27
Section 303. Execution, Authentication, Delivery and
Dating . . . . . . . . . . . . . . . . . . 27
Section 304. Temporary Securities . . . . . . . . . . . . 28
Section 305. Registration, Registration of Transfer
and Exchange . . . . . . . . . . . . . . . 29
Section 306. Mutilated, Destroyed, Lost and
Stolen Securities. . . . . . . . . . . . . 30
Section 307. Payment of Interest; Interest
Rights Preserved . . . . . . . . . . . . . 31
Section 308. Persons Deemed Owners. . . . . . . . . . . . 32
Section 309. Cancellation . . . . . . . . . . . . . . . . 32
Section 310. Computation of Interest. . . . . . . . . . . 33
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture. . . 33
Section 402. Application of Trust Money . . . . . . . . . 34
ARTICLE FIVE
Remedies
Section 501. Events of Default. . . . . . . . . . . . . . 35
Section 502. Acceleration of Maturity; Rescission
and Annulment . . . . . . . . . . . . . . 36
Section 503. Collection of Obligations and Suits
for Enforcement by Trustee . . . . . . . . 38
Section 504. Trustee May File Proofs of Claim . . . . . . 39
Section 505. Trustee May Enforce Claims Without
Possession of Securities . . . . . . . . . 39
Section 506. Application of Money Collected . . . . . . . 40
Section 507. Limitation on Suits . . . . . . . . . . . . 40
Section 508. Unconditional Right of Holders to
Receive Principal, Premium and Interest. . 41
Note: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
v
PAGE
----
Section 509. Restoration of Rights and Remedies . . . . . 41
Section 510. Rights and Remedies Cumulative . . . . . . . 41
Section 511. Delay or Omission Not Waiver . . . . . . . . 42
Section 512. Control by Holders . . . . . . . . . . . . . 42
Section 513. Waiver of Past Defaults. . . . . . . . . . . 42
Section 514. Waiver of Stay or Extension Laws . . . . . . 43
ARTICLE SIX
The Trustee
Section 601. Notice of Defaults. . . . . . . . . . . . . . 43
Section 602. Certain Rights of Trustee . . . . . . . . . . 44
Section 603. Trustee Not Responsible for Recitals
or Issuance of Securities . . . . . . . . . 45
Section 604. May Hold Securities . . . . . . . . . . . . . 46
Section 605. Money Held in Trust . . . . . . . . . . . . . 46
Section 606. Compensation, Reimbursement and
Indemnification of Trustee. . . . . . . . . 46
Section 607. Corporate Trustee Required; Eligibility . . . 47
Section 608. Resignation and Removal; Appointment
of Successor. . . . . . . . . . . . . . . . 47
Section 609. Acceptance of Appointment by Successor. . . . 49
Section 610. Merger, Conversion, Consolidation or
Succession to Business. . . . . . . . . . . 49
Section 611. Appointment of Authenticating Agent . . . . . 50
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Disclosure of Names and Addresses of Holders 52
Section 702. Reports by Trustee . . . . . . . . . . . . . 52
Section 703. Reports by Company . . . . . . . . . . . . . 52
Note: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
vi
PAGE
----
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc. . . . . . . . 53
Section 802. Successor Substituted . . . . . . . . . . . 54
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without
Consent of Holders . . . . . . . . . . . 54
Section 902. Supplemental Indentures with
Consent of Holders . . . . . . . . . . . 55
Section 903. Execution of Supplemental Indentures. . . . 56
Section 904. Effect of Supplemental Indentures . . . . . 56
Section 905. Conformity with Trust Indenture Act . . . . 56
Section 906. Reference in Securities to
Supplemental Indentures . . . . . . . . . 56
Section 907. Effect on Senior Obligations. . . . . . . . 57
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium, if
any, and Interest . . . . . . . . . . . . 57
Section 1002. Maintenance of Office or Agency . . . . . . 57
Section 1003. Money for Security Payments to Be
Held in Trust . . . . . . . . . . . . . . 58
Section 1004. Corporate Existence . . . . . . . . . . . . 59
Section 1005. Compliance Certificate. . . . . . . . . . . 59
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article . . . . . . . . . . 60
Note: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
vii
PAGE
----
Section 1102. Election to Redeem; Notice to Trustee. . . . 60
Section 1103. Selection by Trustee of Securities
to Be Redeemed . . . . . . . . . . . . . . 60
Section 1104. Notice of Redemption . . . . . . . . . . . . 61
Section 1105. Deposit of Redemption Price. . . . . . . . . 61
Section 1106. Securities Payable on Redemption Date. . . . 62
Section 1107. Securities Redeemed in Part. . . . . . . . . 62
ARTICLE TWELVE
Defeasance and Covenant Defeasance
Section 1201. Company's Option to Effect Defeasance
or Covenant Defeasance . . . . . . . . . . 62
Section 1202. Defeasance and Discharge . . . . . . . . . . 63
Section 1203. Covenant Defeasance . . . . . . . . . . . . 63
Section 1204. Conditions to Defeasance or
Covenant Defeasance. . . . . . . . . . . . 64
Section 1205. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions . . . . . . 66
Section 1206. Reinstatement. . . . . . . . . . . . . . . . 66
ARTICLE THIRTEEN
Subordination of Securities
Section 1301. Securities Subordinate to Senior
Obligations . . . . . . . . . . . . . . . 67
Section 1302. Payment over of Proceeds upon
Dissolution, Etc. . . . . . . . . . . . . 67
Section 1303. No Payment When Senior Obligations
in Default . . . . . . . . . . . . . . . 68
Section 1304. Payment Permitted if No Default . . . . . . 70
Section 1305. Subrogation to Rights of Holders of
Senior Obligations. . . . . . . . . . . . 70
Section 1306. Provisions Solely to Define Relative Rights 70
Section 1307. Trustee to Effectuate Subordination . . . . 71
Section 1308. No Waiver of Subordination Provisions . . . 71
Section 1309. Notice to Trustee . . . . . . . . . . . . . 71
Section 1310. Reliance on Judicial Order or
Certificate of Liquidating Agent. . . . . 72
Section 1311. Rights of Trustee as a Holder of
Senior Obligations; Preservation of
Trustee's Rights. . . . . . . . . . . . . 73
Note: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
viii
PAGE
----
Section 1312. Article Applicable to Paying Agents. . . . . 73
Section 1313. Trustee Not Fiduciary for Holders of
Senior Obligations . . . . . . . . . . . . 73
Section 1314. No Suspension of Remedies. . . . . . . . . . 73
Section 1315. Article Thirteen Not to Prevent
Events of Default . . . . . . . . . . . . 74
Section 1316. Notices to Agent Bank. . . . . . . . . . . . 74
Section 1317. Restriction on Amendment of Indenture. . . . 74
Section 1318. Inapplicability of This Article Thirteen
to Certain Trustee Monies and
Certain Payments . . . . . . . . . . . . . 75
ARTICLE FOURTEEN
Exchange of Initial Securities
Section 1401. Right to Exchange. . . . . . . . . . . . . . 75
Section 1402. Election to Exchange; Notice to Trustee. . . 75
Section 1403. Notice of Exchange . . . . . . . . . . . . . 76
Section 1404. Procedure for Exchange . . . . . . . . . . . 76
ARTICLE FIFTEEN
Meetings of Holders of Securities
Section 1501. Purposes for Which Meetings May Be Called. . 77
Section 1502. Call, Notice and Place of Meetings . . . . . 77
Section 1503. Persons Entitled to Vote at Meetings . . . . 77
Section 1504. Quorum; Action . . . . . . . . . . . . . . . 78
Section 1505. Determination of Voting Rights;
Conduct and Adjournment of Meetings. . . . 78
Section 1506. Counting Votes and Recording Action
of Meetings . . . . . . . . . . . . . . . 79
Schedule I Notices to Agent Bank(s) . . . . . . . . . S-1
Note: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
INDENTURE, dated as of ,
-------------------------------
1994, between Viacom Inc., a corporation duly organized and
existing under the laws of the State of Delaware (herein called
the "Company"), having its principal office at 200 Elm Street,
Dedham, Massachusetts 02026, and Harris Trust and Savings Bank,
an Illinois banking corporation duly organized and existing under
the laws of the State of Illinois, trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an
issue of 8% Exchangeable Subordinated Debentures due 2006 (herein
called the "Initial Securities") and 5% Subordinated Debentures
due 2014 (the "Exchange Securities", and together with the
Initial Securities, the "Securities"), of the tenor and amounts
hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture.
This Indenture is subject to the provisions of the
Trust Indenture Act of 1939, as amended, that are required to be
part of this Indenture and shall, to the extent applicable, be
governed by such provisions.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the
purchase of the Securities by the Holders thereof, it is mutually
covenanted and agreed, for the equal and proportionate benefit of
all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the
meanings assigned to them in this Article, and include the
plural as well as the singular;
(b) all other terms used herein which are defined in
the Trust Indenture Act, either directly or by reference
therein, have the meanings assigned to them
<PAGE>
2
therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall
have the meanings assigned to them in the rules of the
Commission adopted under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with
generally accepted accounting principles, and, except as
otherwise herein expressly provided, the term "generally
accepted accounting principles" with respect to any
computation required or permitted hereunder shall mean such
accounting principles as are generally accepted at the date
of such computation; and
(d) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other
subdivision.
"Act", when used with respect to any Holder, has the
meaning specified in Section 104.
"Affiliate" of any specified Person means any other
Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified
Person. For the purposes of this definition, "control", when
used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent Bank" means any agent or agents from time to
time under the Credit Agreement, or any successor or successors
thereto.
"Authenticating Agent" means any Person authorized by
the Trustee pursuant to Section 612 to act on behalf of the
Trustee to authenticate Securities.
"Authorized Newspaper" means a newspaper, in the
English language or in an official language of the country of
publication, customarily published on each Business Day, whether
or not published on Saturdays, Sundays or holidays, and of
general circulation in the place in connection with which the
term is used or in the financial community of such place. Where
successive publications are required to be made in Authorized
Newspapers, the successive publications may be made in the same
or in different newspapers in the same city meeting the foregoing
requirements and in each case on any Business Day.
"Banks" means the lenders from time to time who are
parties to any Credit Agreement.
<PAGE>
3
"Blockbuster Merger" means the merger of Blockbuster
Entertainment Corporation with and into the Company, with the
Company being the surviving corporation, pursuant to the
Agreement and Plan of Merger dated as of January 7, 1994, between
the Company and Blockbuster.
"Board of Directors" means either the board of
directors of the Company or any duly authorized committee of that
board.
"Board Resolution" means a copy of a resolution
certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day", when used with respect to any Place of
Payment or other particular location referred to in this
Indenture or in the Securities, means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment or other locations
(including the City of Chicago, Illinois) are authorized or
obligated by law or executive order to close.
"Capital Stock" means, with respect to any Person, any
and all shares, interests, participations or other equivalents
(however designated) of such Person's capital stock whether now
outstanding or issued after the date of this Indenture.
"Capitalized Lease Obligation" means any obligation to
pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real or personal property that is
required to be classified and accounted for as a capital lease
obligation under generally accepted accounting principles, and,
for the purposes of this Indenture, the amount of such obligation
at any date shall be the capitalized amount thereof at such date,
determined in accordance with such principles.
"Cedel S.A." means Centrale de Livraison de Valeurs
Mobilieres, S.A.
"Certificate of Designations" means the Certificate of
the Designations, Powers, Preferences and Relative, Participating
or Other Rights and the Qualifications, Limitations or
Restrictions thereof, of the Company's Series C Preferred Stock.
"Commission" means the Securities and Exchange
Commission, as from time to time constituted, created under the
Exchange Act, or, if at any time after the execution of this
Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
<PAGE>
4
"Company" means the Person named as the "Company" in
the first paragraph of this Indenture, until a successor Person
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Company" shall mean such
successor Person.
"Company Request" or "Company Order" means a written
request or order signed in the name of the Company by one Officer
of the Company, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of
the Trustee in New York, New York or Chicago, Illinois, at which
at any particular time its corporate trust business shall be
administered, which office at the date of execution of this
Indenture is located at 311 West Monroe Street, 12th Floor,
Chicago, Illinois 60606.
"corporation" means a corporation, association,
company, joint-stock company or business trust.
"Credit Agreement" means any credit agreement under
which the Company is a borrower, in the principal amount of at
least $100 million.
"Default" means any event or condition which is, or
after notice or passage of time or both would be, an Event of
Default.
"Default Amount" has the meaning specified in
Section 502.
"Defaulted Interest" has the meaning specified in
Section 307.
"Effective Time" means the "Effective Time" of the
merger of Viacom Sub Inc. with and into Paramount, as defined in
the Amended and Restated Agreement and Plan of Merger dated as of
February 4, 1994, as further amended as of May 26, 1994, among
the Company, Viacom Sub Inc. and Paramount.
"Euro-clear" means Morgan Guaranty Trust Company of New
York, Brussels Office, as the operator of the Euro-clear Systems.
"Event of Default" has the meaning specified in Section
501.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Exchange Date" means the date, if any, on which the
Exchange Securities are issued in exchange for the outstanding
shares of Series C Preferred Stock.
"Exchange Notice" has the meaning specified in Section
1403.
<PAGE>
5
"Exchange Securities" has the meaning stated in the
first recital of this Indenture and refers to any Exchange
Securities, containing terms substantially identical to the
Initial Securities (except for interest rate, Stated Maturity and
redemption price), that are issued and exchanged for the
Company's Series C Preferred Stock pursuant to the Certificate of
Designations and this Indenture.
"Federal Bankruptcy Code" means the Bankruptcy Act of
Title 11 of the United States Code, as amended from time to time.
"Holder" means a Person in whose name a Security is
registered in the Security Register.
"Indenture" means this instrument as originally
executed and as it may from time to time be supplemented or
amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof.
"Initial Exchange Date" means the date on which the
shares of Series C Preferred Stock are issued in exchange for the
outstanding Initial Securities.
"Initial Securities" has the meaning stated in the
first recital of this Indenture.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Lien" means any pledge, mortgage, lien, encumbrance or
other security interest.
"Maturity", when used with respect to any Security,
means the date on which the principal of such Security or an
installment of principal becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration
of acceleration, call for redemption or otherwise.
"Notice of Default" shall have the meaning provided in
Section 501.
"Officer" means the Chairman of the Board, the
President, any Vice President (whether or not designated by a
number or word added before or after the title vice president),
the Treasurer, the Secretary, any Assistant Secretary or the
Controller of the Company.
"Officer's Certificate" means a certificate signed by
any Officer of the Company in his or her capacity as such an
Officer and delivered to the Trustee.
<PAGE>
6
"Opinion of Counsel" means a written opinion of
counsel, who may be General Counsel for the Company, and who
shall be reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Securities,
means, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture,
except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment
or redemption money in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act
as its own Paying Agent) for the Holders of such Securities;
provided that, if such Securities are to be redeemed, notice
of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee
has been made;
(iii) Securities which have been defeased pursuant
to Section 1202 hereof; and
(iv) Securities which have been paid pursuant to
Section 306 or in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to
this Indenture, other than any such Securities in respect of
which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands the Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of Outstanding Securities have given
any request, demand, authorization, direction, consent, notice or
waiver hereunder or whether a quorum is present at a meeting of
Holders of Securities, Securities beneficially owned by the
Company or any other obligor upon the Securities or any Affiliate
of the Company or such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether
the Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, or
upon any such determination as to the presence of a quorum, only
Securities which the Trustee knows to be so beneficially owned
shall be so disregarded. Securities so beneficially owned which
have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor.
<PAGE>
7
"Paramount" means Paramount Communications Inc.
"Paying Agent" means any Person authorized by the
Company to pay the principal of (and premium, if any, on) or
interest on any Securities on behalf of the Company and which
initially shall be Harris Trust Company of New York.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof, or any other entity.
"Place of Payment", when used with respect to the
Securities, means the place or places where, subject to the
provisions of Section 1002, the principal of and any premium and
interest on the Securities are payable.
"Predecessor Security" of any particular Security means
every previous Security evidencing all or a portion of the same
debt as that evidenced by such particular Security; and, for the
purposes of this definition, any Security authenticated and
delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security or shall be deemed
to evidence the same debt as the mutilated, lost, destroyed or
stolen Security.
"Redeemable Capital Stock" means any Capital Stock
that, either by its terms, by the terms of any security into
which it is convertible or exchangeable or otherwise, (i) is or
upon the happening of an event or passage of time would be
required to be redeemed on or prior to the final Stated Maturity
of the Securities, (ii) is redeemable at the option of the holder
thereof at any time prior to such final Stated Maturity or (iii)
is convertible into or exchangeable for debt securities at any
time prior to such final Stated Maturity.
"Redemption Date", when used with respect to any
Security to be redeemed, means the date fixed for such redemption
by or pursuant to this Indenture.
"Redemption Price", when used with respect to any
Security to be redeemed, means the price at which it is to be
redeemed pursuant to this Indenture.
"Registered Security" means any Security in the forms
set forth in Article Two of this Indenture which is registered in
the Security Register.
"Regular Record Date" for the interest payable on any
Interest Payment Date on the Registered Securities means the
January 1 or July 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
<PAGE>
8
"Responsible Officer", when used with respect to the
Trustee, means the chairman or any vice-chairman of the board of
directors, the chairman or any vice-chairman of the executive
committee of the board of directors, the chairman of the trust
committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant
trust officer, the controller or any assistant controller or any
other officer of the Trustee customarily performing functions
similar to those performed by any of the above-designated
officers, and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular
subject.
"Securities" has the meaning stated in the first
recital of this Indenture and more particularly means any
Securities authenticated and delivered under this Indenture.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Senior Obligations" means with respect to any Person,
without duplication, (i) all indebtedness of such Person for
borrowed money, including all obligations of the Company under
its bank credit facilities, or for the deferred purchase price of
property or services, (ii) all indebtedness of such Person
evidenced by bonds, notes, debentures or other instruments of
indebtedness, including, without limitation, all obligations,
contingent or otherwise, of such Person in connection with any
letters of credit and acceptances issued under letter of credit
facilities, acceptance facilities or other similar facilities, and
interest rate contracts, (iii) trade credit arising in the ordinary
course of business and all indebtedness created or arising under
any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and
remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such
property), (iv) all Capitalized Lease Obligations of such Person,
(v) all Senior Obligations referred to in (but not excluded from)
clause (i), (ii), (iii) or (iv) above of other Persons and all
dividends of other Persons, the payment of which is secured by
(or for which the holder of such Senior Obligations has an
existing right, contingent or otherwise, to be secured by) any
Lien upon or in property (including, without limitation, accounts
and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Senior Obligations, (vi) all liabilities that such Person has
guaranteed or that are otherwise its legal liability, other than
endorsements for collection or deposit, in either case in the
ordinary course of business, or any obligation or liability of
such Person in respect of leasehold interests assigned by such
Person to any other Person, (vii) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any
liability of the types referred in clauses (i) through (vi)
above, unless, in the case of any particular indebtedness, the
instrument creating or evidencing the same or pursuant to which
the same is outstanding expressly provides that such indebtedness
shall not be senior in right
<PAGE>
9
of payment to the Securities. Notwithstanding the foregoing,
"Senior Obligations" shall not include indebtedness evidenced
by the Securities.
"Series C Preferred Stock" means the Company's 5%
Series C Cumulative Exchangeable Redeemable Preferred Stock, par
value $.01 per share.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section
307.
"Stated Maturity", when used with respect to any
Security or any installment of principal thereof or interest
thereon, means the date specified in such Security as the fixed
date on which the principal of such Security or such installment
of principal or interest is due and payable.
"Subsidiary" of any Person means (i) a corporation a
majority of the outstanding voting stock of which is at the time,
directly or indirectly, owned by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more
Subsidiaries thereof or (ii) any other Person (other than a
corporation), including, without limitation, a partnership or
joint venture, in which such Person, one or more Subsidiaries
thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, has
at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other
Person performing similar functions).
"Surviving Person" has the meaning specified in
Section 801.
"Trust Indenture Act" or "TIA" means the Trust
Indenture Act of 1939, as amended, as in force at the date as of
which this Indenture was executed, except as provided in Section
905.
"Trustee" means the Person named as the "Trustee" in
the first paragraph of this Indenture until a successor Trustee
shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Trustee" shall mean
or include each Person who is then a Trustee hereunder.
"U.S. Depositary" means, with respect to the Securities
issuable or issued in whole or in part in the form of one or more
permanent global Securities, the Person designated as U.S.
Depositary by the Company, which must be a clearing agency
registered under the Exchange Act.
"U.S. Government Obligations" has the meaning specified
in Section 1704.
<PAGE>
10
"Viacom International" means Viacom International Inc.
"Vice President", when used with respect to the Company
or the Trustee, means any vice president, whether or not
designated by a number or a word or words added before or after
the title "vice president".
"Voting Stock" means stock ordinarily having voting
power for the election of directors.
Section 102. Compliance Certificates and Opinions.
------------------------------------
Except as otherwise expressly provided by this
Indenture, upon any application or request by the Company to the
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Trustee an Officer's Certificate
stating that all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied
with and an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or
request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating
to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture
(other than pursuant to Section 1005) shall include:
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such person,
he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied
with; and
(4) a statement as to whether or not, in the opinion of
each such individual, such condition or covenant has been
complied with.
Section 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or
<PAGE>
11
covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company
may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless
such officer knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with
respect to the matters upon which his certificate or opinion is
based are erroneous. Any such certificate or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect
to such factual matters is in the possession of the Company,
unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates,
statements, opinions or other instruments under this Indenture,
they may, but need not, be consolidated and form one instrument.
Section 104. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this
Indenture to be given or taken by Holders may be embodied in and
evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agents duly
appointed in writing. Except as herein otherwise expressly
provided, such action shall become effective when such instrument
or instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments and so voting at
any such meeting. Proof of execution of any such instrument or
of a writing appointing any such agent or proxy shall be
sufficient for any purpose of this Indenture and conclusive in
favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person
of any such instrument or writing may be proved by the affidavit
of a witness of such execution or by a certificate of a notary
public or other officer authorized by law to take acknowledgments
of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also
constitute sufficient proof of authority. The fact and date of
the execution of any such instrument or writing, or the
<PAGE>
12
authority of the Person executing the same, may also be proved in
any other manner which the Trustee deems sufficient.
(c) The principal amount and serial numbers of
Registered Securities held by any Person, and the date of holding
the same, shall be proved by the Security Register.
(d) If the Company shall solicit from the Holders of
Securities any request, demand, authorization, direction, notice,
consent, waiver or other Act, the Company may, at its option, by
or pursuant to Board Resolution, fix in advance a record date for
the determination of Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or
other Act, but the Company shall have no obligation to do so.
Notwithstanding TIA Section 316(c), such record date shall be the
record date specified in or pursuant to such Board Resolution,
which shall be a date not earlier than the date 30 days prior to
the first solicitation of Holders generally in connection
therewith and not later than the date such solicitation is
completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act
may be given before or after such record date, but only the
Holders of record at the close of business on such record date
shall be deemed to be Holders for the purposes of determining
whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent,
waiver or other Act, and for that purpose the Outstanding
Securities shall be computed as of such record date; provided
that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not
later than eleven months after the record date.
(e) Any request, demand, authorization, direction,
notice, consent, waiver or other Act of the Holder of any
Security shall bind every future Holder of the same Security and
the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not
notation of such action is made upon such Security.
Section 105. Notices, Etc., to Trustee, Company and
--------------------------------------
Agent Bank.
----------
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or
permitted by this Indenture to be made upon, given or furnished
to, or filed with,
(1) the Trustee by any Holder or by the Company shall
be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its
Corporate Trust Office, Attention: Indenture Trust
Division; or
<PAGE>
13
(2) the Company by the Trustee or by any Holder shall
be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and mailed,
first-class postage prepaid, to the Company addressed to it
at the address of its principal office specified in the
first paragraph of this Indenture, to the attention of its
Secretary or at any other address previously furnished in
writing to the Trustee by the Company.
Any notice or communication by the Company or the
Trustee to any Agent Bank shall be given in accordance with
Section 1316.
Section 106. Notice to Holders; Waiver.
-------------------------
Except as otherwise expressly provided herein, where
this Indenture provides for notice to Holders of Securities of
any event, such notice shall be sufficiently given to Holders of
Registered Securities if in writing and mailed, first-class
postage prepaid, to each Holder of a Registered Security, at the
address of such Holder as it appears in the Security Register,
not earlier than the earliest date, and not later than the latest
date, prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice
with respect to other Holders.
In case by reason of the suspension of regular mail
service or by reason of any other cause it shall be impracticable
to give such notice to Holders of Registered Securities by mail,
then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notice to such Holders for
every purpose hereunder; provided that this paragraph shall not
apply to any notice required by the Trust Indenture Act to be
transmitted by mail. In any case where notice to Holders of
Registered Securities is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any
particular Holder of a Registered Security shall affect the
sufficiency of such notice with respect to other Holders of
Registered Securities.
Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice
by Holders of Securities shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
Section 107. Language of Notices, Etc.
------------------------
Any request, demand, authorization, direction, notice,
consent, proxy or waiver required or permitted under this
Indenture shall be in the English language, except that any
published notice may be in an official language of the country of
publication.
<PAGE>
14
Section 108. Trust Indenture Act.
-------------------
The provisions of TIA Sections 310 through 317 that impose
duties on any person (including the provisions deemed by Sec. 318(c)
of the TIA automatically to be included herein unless expressly
excluded by this Indenture, except to the extent so expressly
excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
If any provision of this Indenture limits, qualifies or
conflicts with another provision which is required to be included
in this Indenture by the TIA, the required provision shall
control.
Section 109. Effect of Headings and Table of
-------------------------------
Contents.
--------
The Article and Section headings herein and the Table
of Contents are for convenience only and shall not affect the
construction hereof.
Section 110. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the
Company shall bind its successors and assigns, whether so
expressed or not.
Section 111. Separability Clause.
-------------------
In case any provision in this Indenture or in the
Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
Section 112. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express
or implied, shall give to any Person, other than the parties
hereto, their successors hereunder and the Holders of Securities,
any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 113. Governing Law.
-------------
This Indenture and the Securities shall be governed by
and construed in accordance with the law of the State of New
York.
<PAGE>
15
Section 114. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption
Date or Stated Maturity of any Security shall not be a Business
Day at any Place of Payment, then (notwithstanding any other
provision of this Indenture or of the Securities) payment of
interest or principal (and premium, if any) need not be made at
such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same
force and effect as if made on the Interest Payment Date,
Redemption Date or at the Stated Maturity; provided that no
interest shall accrue on the amount so payable for the period
from and after such Interest Payment Date, Redemption Date or
Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
Section 201. Forms Generally.
---------------
The Securities and the Trustee's certificate of
authentication shall be in substantially the forms set forth in
this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted
by this Indenture, and may have such letters, numbers or other
marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be
determined by the officers executing such Securities, as
evidenced by their execution of the Securities. Any portion of
the text of any Security may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the
Security.
The definitive Securities shall be printed,
lithographed or engraved on steel-engraved borders or may be
produced in any other manner, all as determined by the
officers of the Company executing such Securities, as evidenced
by their execution of such Securities.
<PAGE>
16
Section 202. Form of Face of Initial Security.
--------------------------------
VIACOM INC.
8% Exchangeable Subordinated
Debenture due 2006
No. $
--------------- -----------------------
Viacom Inc., a Delaware corporation (herein called the
"Company", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby
promises to pay to or
-------------------------------------
registered assigns, the principal sum of
Dollars on _________,
----------------------------------------
2006, at the office or agency of the Company referred to below,
and to pay interest thereon initially on January 1, 1995, and
semi-annually thereafter, on January 15 and July 15 in each year,
from the Effective Time, or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, at the
rate of 8% per annum, until the principal hereof is paid or duly
provided for, and (to the extent lawful) to pay on demand
interest on any overdue interest at the rate borne by the
Securities from the date on which such overdue interest becomes
payable to the date payment of such interest has been made or
duly provided for. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date
for such interest, which shall be the January 1 or July 1
(whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date; provided, however, that the
Regular Record Date for the initial Interest Payment Date shall
be December 15, 1994. Any such interest not so punctually paid
or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date, and such defaulted interest,
and (to the extent lawful) interest on such defaulted interest at
the rate borne by the Securities, may be paid to the Person in
whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date, or may
be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any, on) and
interest on this Security will be made at the office or agency of
the Company maintained for that purpose in The City of New York,
or at such other office or agency of the Company as may be
maintained for such purpose, in such coin or currency of the United
States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Company (i) by check
mailed to the address of the Person entitled
<PAGE>
17
thereto as such address shall appear in the Security Register or
(ii) by transfer to an account maintained by the payee with a bank
located in The City of New York (so long as the applicable Paying
Agent has received timely and proper transfer instructions in
writing).
Reference is hereby made to the further provisions of
this Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has
been duly executed by the Trustee referred to on the reverse
hereof by the manual signature of one of its authorized officers,
this Security shall not be entitled to any benefit under the
Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed.
Dated: VIACOM INC.
By
----------------------
Attest:
-------------------------
Authorized Signature
Section 203. Form of Reverse of Initial Security.
-----------------------------------
This Security is one of a duly authorized issue of
securities of the Company designated as its 8% Exchangeable
Subordinated Debentures due 2006 (herein called the
"Securities"), limited in aggregate principal amount as
provided in the Indenture referred to below, which
may be issued under an indenture (herein
called the "Indenture") dated as of , 1994 between
--------------
the Company and Harris Trust and Savings Bank, trustee (herein
called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties, obligations
and immunities thereunder of the Company, the Trustee and the
Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered.
The indebtedness evidenced by the Securities is, to the
extent and in the manner provided in the Indenture, subordinate
and subject in right of payment to the prior payment in full of
all Senior Obligations of the Company as defined in the
Indenture, and
<PAGE>
18
this Security is issued subject to such provisions. Each Holder of
this Security, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c)
appoints the Trustee his attorney-in-fact for such purpose.
The Securities are subject to redemption upon not less
than 30 nor more than 60 days' notice, at any time after the
fifth anniversary of the Effective Time, as a whole or in part,
at the election of the Company, at a Redemption Price equal to
the percentage of the principal amount set forth below if
redeemed during the 12-month period beginning on the anniversary
of the Effective Time indicated:
Anniversary of Redemption
Effective Time Price
--------------- --------------
Fifth . . . . . . . . . . . . 103%
Sixth . . . . . . . . . . . . 102%
Seventh . . . . . . . . . . . 101%
Eighth and thereafter . . . . 100%
together in the case of any such redemption with accrued
interest, if any, to the Redemption Date, all as provided in the
Indenture.
In the case of any redemption of Securities, interest
installments whose Stated Maturity is on or prior to the
Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at
the close of business on the relevant Regular Record Date
referred to on the face hereof. Securities (or portions thereof)
for whose redemption and payment provision is made in accordance
with the Indenture shall cease to bear interest from and after
the Redemption Date.
In the event of redemption of this Security in part
only, a new Security or Securities for the unredeemed portion
hereof shall be issued in the name of the Holder hereof upon the
cancellation hereof.
Subject to the provisions of the Indenture, the Company
has the right, at its option, on or after the earlier of (i)
January 1, 1995, but only if the Blockbuster Merger has not been
consummated by such date, and (ii) the acquisition by a third
party of beneficial ownership of a majority of the outstanding
voting securities of Blockbuster Entertainment Corporation, to
exchange the principal hereof into shares of the Company's Series
C Cumulative Exchangeable Redeemable Preferred Stock, par
value $.01 per share (the "Series
<PAGE>
19
C Preferred Stock"), at the rate of one fully paid and
nonassessable share of Series C Preferred Stock for each $50.00
in principal amount of Securities exchanged. At the time of the
exchange of the Series C Preferred Stock for the Securities, all
accrued and unpaid interest on the Securities will not be paid
and the dividends on the Series C Preferred Stock will be deemed
to have accrued from the later of the Effective Time and the
latest date through which interest has been paid on the
Securities, and the Holders of such exchanged Securities shall
cease to have any further rights with respect thereto, other than
the right to receive the Series C Preferred Stock and the accrued
and unpaid dividends on the Series C Preferred Stock.
If an Event of Default shall occur and be continuing,
the principal of all the Securities may be declared due and
payable in the manner and with the effect provided in the
Indenture.
Except as otherwise provided herein, the Securities are
not subject to any sinking fund and are not subject to redemption
at the option of the Company prior to Maturity.
The Indenture contains provisions for defeasance at any
time of (a) the entire indebtedness of the Company on this
Security and (b) certain restrictive covenants and the related
Defaults and Events of Default, upon compliance by the Company
with certain conditions set forth therein, which provisions apply
to this Security.
The Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the
Holders under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting
the Holders of specified percentages in aggregate principal
amount of the Securities at the time Outstanding, on behalf of
the Holders of all the Securities, to waive compliance by the
Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such
consent or waiver by or on behalf of the Holder of this Security
shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon
the registration of transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent or waiver is
made upon this Security.
As set forth in, and subject to, the provisions of the
Indenture, no Holder of any Security will have any right to
institute any proceeding with respect to the Indenture or for any
remedy thereunder, unless such Holder shall have previously given
to the Trustee written notice of a continuing Event of Default, the
Holders of not less than 25% in principal amount of the Outstanding
Securities shall have made a written request, and offered
<PAGE>
20
reasonable indemnity, to the Trustee to institute such proceeding
as trustee, the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding and the Trustee shall not have received from the
Holders of a majority in principal amount of the Outstanding
Securities during such 60-day period a direction inconsistent
with such request; provided, however, that such limitations do
-------- -------
not apply to a suit instituted by the Holder hereof for the
enforcement of payment of the principal of (and premium, if any) or
interest on this Security on or after the respective due dates
expressed herein.
No reference herein to the Indenture and no provision
of this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of (and premium, if any, on) and interest on
this Security at the times, place, and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is
registerable on the Security Register of the Company, upon
surrender of this Security for registration of transfer at the
office or agency of the Company maintained for such purpose in
The City of New York or Chicago, Illinois, duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.
The Securities are issuable only in registered form
without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Securities are
exchangeable for a like aggregate principal amount of Securities
of a different authorized denomination, as requested by the
Holder surrendering the same.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to the time of due presentment of this Security
for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose
name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any agent shall be affected by
notice to the contrary.
All terms used in this Security which are defined in
the Indenture shall have the meanings assigned to them in the
Indenture.
<PAGE>
21
Section 204. Form of Face of Exchange Security.
---------------------------------
VIACOM INC.
5% Subordinated
Debenture due 2014
No. $
--------------- -----------------------
Viacom Inc., a Delaware corporation (herein called the
"Company", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby
promises to pay to or
-------------------------------------
registered assigns, the principal sum of
Dollars on _________,
----------------------------------------
2014, at the office or agency of the Company referred to below,
and to pay interest thereon, semi-annually on January 15 and
July 15 in each year, commencing on the first such date after the
Exchange Date, at the rate of 5% per annum, until the tenth
anniversary of the Effective Time and from and after the tenth
anniversary of the Effective Time, at the rate of 10% per annum
until the principal hereof is paid or duly provided for, and (to
the extent lawful) to pay on demand interest on any overdue
interest at the rate borne by the Securities from the date on
which such overdue interest becomes payable to the date payment
of such interest has been made or duly provided for. The
interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be
paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest, which shall be the
January 1 or July 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular
Record Date, and such defaulted interest, and (to the extent
lawful) interest on such defaulted interest at the rate borne by
the Securities, may be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at
the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or may be paid at any
time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities
may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture. Payment
of the principal of (and premium, if any, on) and interest on
this Security will be made at the office or agency of the Company
maintained for that purpose in The City of New York, or at such
other office or agency of the Company as may be maintained for
such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that payment of interest
may be made at the option of the Company (i) by check mailed to the
address of the Person entitled thereto as such address shall appear
in the security register or (ii) by transfer to an account
<PAGE>
22
maintained by the payee with a bank located in The City of New York
(so long as the applicable Paying Agent has received timely and
proper transfer instructions in writing).
Reference is hereby made to the further provisions of
this Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has
been duly executed by the Trustee referred to on the reverse
hereof by the manual signature of one of its authorized officers,
this Security shall not be entitled to any benefit under the
Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed.
Dated: VIACOM INC.
By
----------------------
Attest:
-------------------------
Authorized Signature
Section 205. Form of Reverse of Exchange Security.
------------------------------------
This Security is one of a duly authorized issue of
securities of the Company designated as its 5% Subordinated
Debentures due 2014 (herein called the "Securities"), limited
(except as otherwise provided in the Indenture referred to below)
in aggregate principal amount to $________________________, which
may be issued under an indenture (herein called the "Indenture")
dated as of , 1994 between the Company and
-----------------
Harris Trust and Savings Bank, trustee (herein called the
"Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties, obligations and
immunities thereunder of the Company, the Trustee and the Holders
of the Securities, and of the terms upon which the Securities
are, and are to be, authenticated and delivered.
The indebtedness evidenced by the Securities is, to the
extent and in the manner provided in the Indenture, subordinate
and subject in right of payment to the prior payment in full of
all Senior Obligations of the Company as defined in the
Indenture, and
<PAGE>
23
this Security is issued subject to such provisions. Each Holder
of this Security, by accepting the same, (a) agrees to and shall
be bound by such provisions, (b) authorizes and directs the Trustee
on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination as provided in the Indenture and
(c) appoints the Trustee his attorney-in-fact for such purpose.
The Securities are subject to redemption upon not less
than 30 nor more than 60 days' notice, at any time after the
fifth anniversary of the Effective Time, as a whole or in part,
at the election of the Company, at a Redemption Price equal to
the percentage of the principal amount set forth below if
redeemed during the 12-month period beginning on the anniversary
of the Effective Time indicated:
Anniversary of Redemption
Effective Time Price
--------------- --------------
Fifth . . . . . . . . . . . 105%
Sixth . . . . . . . . . . . 104%
Seventh . . . . . . . . . . 103%
Eighth . . . . . . . . . . 102%
Ninth . . . . . . . . . . . 101%
Tenth and thereafter . . . 100%
together in the case of any such redemption with accrued
interest, if any, to the Redemption Date, all as provided in the
Indenture.
In the case of any redemption of Securities, interest
installments whose Stated Maturity is on or prior to the
Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at
the close of business on the relevant Regular Record Date
referred to on the face hereof. Securities (or portions thereof)
for whose redemption and payment provision is made in accordance
with the Indenture shall cease to bear interest from and after
the Redemption Date.
In the event of redemption of this Security in part
only, a new Security or Securities for the unredeemed portion
hereof shall be issued in the name of the Holder hereof upon the
cancellation hereof.
If an Event of Default shall occur and be continuing,
the principal of all the Securities may be declared due and
payable in the manner and with the effect provided in the
Indenture.
<PAGE>
24
Except as otherwise provided herein, the Securities are
not subject to any sinking fund and are not subject to redemption
at the option of the Company prior to maturity.
The Indenture contains provisions for defeasance at any
time of (a) the entire indebtedness of the Company on this
Security and (b) certain restrictive covenants and the related
Defaults and Events of Default, upon compliance by the Company
with certain conditions set forth therein, which provisions apply
to this Security.
The Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the
Holders under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting
the Holders of specified percentages in aggregate principal
amount of the Securities at the time Outstanding, on behalf of
the Holders of all the Securities, to waive compliance by the
Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such
consent or waiver by or on behalf of the Holder of this Security
shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon
the registration of transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent or waiver is
made upon this Security.
As set forth in, and subject to, the provisions of the
Indenture, no Holder of any Security will have any right to
institute any proceeding with respect to the Indenture or for any
remedy thereunder, unless such Holder shall have previously given
to the Trustee written notice of a continuing Event of Default,
the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made a written request, and
offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received
from the Holders of a majority in principal amount of the
Outstanding Securities a direction inconsistent with such request
and shall have failed to institute such proceeding within
60 days; provided, however, that such limitations do not apply to
a suit instituted by the Holder hereof for the enforcement of
payment of the principal of (and premium, if any) or interest on
this Security on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision
of this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to
pay the principal of (and premium, if any, on) and interest on
this Security at the times, place, and rate, and in the coin or
currency, herein prescribed.
<PAGE>
25
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is
registerable on the Security Register of the Company, upon
surrender of this Security for registration of transfer at the
office or agency of the Company maintained for such purpose in
The City of New York or Chicago, Illinois, duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.
The Securities are issuable only in registered form
without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Securities are
exchangeable for a like aggregate principal amount of Securities
of a different authorized denomination, as requested by the
Holder surrendering the same.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to the time of due presentment of this Security
for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose
name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any agent shall be affected by
notice to the contrary.
All terms used in this Security which are defined in
the Indenture shall have the meanings assigned to them in the
Indenture.
Section 206. Form of Trustee's Certificate of
--------------------------------
Authentication.
--------------
Subject to Section 611, the Trustee's certificate of
authentication shall be in substantially the following form:
<PAGE>
26
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By
---------------------------
Authorized Officer
ARTICLE THREE
The Securities
Section 301. Title and Terms.
---------------
The aggregate principal amount of Initial Securities
which may be authenticated and delivered under this Indenture is
limited to $____________, and the aggregate principal amount of
Exchange Securities which may be authenticated and delivered
under this Indenture is limited to the aggregate liquidation
preference of Series C Preferred Stock exchanged, except for
Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 304, 305, 306, 906 or 1108.
The Initial Securities shall be known and designated as
the "8% Exchangeable Subordinated Debentures due 2006" of the
Company. Their Stated Maturity shall be _________, 2006, and
they shall bear interest at the rate of 8% per annum from the
Effective Time, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, payable
initially on January 1, 1995 and semi-annually thereafter on
January 15 and July 15 in each year and at said Stated Maturity,
until the principal thereof is paid or duly provided for.
The Exchange Securities shall be known and designated
as the "5% Subordinated Debentures due 2014" of the Company.
Their Stated Maturity shall be _______, 2014, and they shall bear
interest at the rate of 5% per annum from the Exchange Date, or
from the most recent Interest Payment Date to which interest has
been paid or duly provided for, until the tenth anniversary of
the Effective Time, and at the rate of 10% per annum thereafter,
payable on the first Interest Payment Date after the Exchange
Date and semi-annually thereafter on January 15 and July 15 in
each year and at said Stated Maturity, until the principal
thereof is paid or duly provided for.
<PAGE>
27
The principal of (and premium, if any, on) and interest
on the Securities shall be payable at the office or agency of the
Company maintained for such purpose in The City of New York, or
at such other office or agency of the Company as may be
maintained for such purpose; provided, however, that, at the
option of the Company, interest may be paid by check mailed to
addresses of the Persons entitled thereto as such addresses shall
appear on the Security Register or by transfer to an account
maintained by the payee with a bank located in The City of New
York (so long as the applicable Paying Agent has received timely
and proper transfer instructions in writing).
The Securities shall be redeemable as provided in
Article Eleven.
The Securities shall be subordinated in right of
payment to Senior Obligations of the Company as provided in
Article Thirteen.
Section 302. Denominations.
-------------
The Securities shall be issuable only in registered
form without coupons and only in denominations of $1,000 and any
integral multiple thereof.
Section 303. Execution, Authentication, Delivery and
---------------------------------------
Dating.
------
The Securities shall be executed on behalf of the
Company by any Officer and attested by its Corporate Secretary
(provided that the Corporate Secretary shall not attest his or
her own signature as an Officer) or its Treasurer or one of its
Assistant Corporate Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures
of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution
and delivery of this Indenture, the Company may deliver
Securities executed by the Company to the Trustee for
authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee
in accordance with such Company Order shall authenticate and
deliver such Securities.
Each Registered Security shall be dated the date of its
authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there
appears on such Security a certificate of
<PAGE>
28
authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature, and such certificate
upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and
delivered hereunder. Notwithstanding the foregoing, if any
Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall
deliver such Security to the Trustee for cancellation as provided
in Section 309 together with a written statement (which need not
comply with Section 102 and need not be accompanied by an Opinion
of Counsel) stating that such Security has never been issued and
sold by the Company, for all purposes of this Indenture such
Security shall be deemed never to have been authenticated and
delivered hereunder and shall never be entitled to the benefits
of this Indenture.
In case the Company, pursuant to Article Eight, shall
be consolidated or merged with or into any other Person or shall
convey, transfer, lease or otherwise dispose of its properties
and assets substantially as an entirety (as such term is defined
in Section 801 hereof) to any Person, and the successor Person
resulting from such consolidation, or surviving such merger, or
into which the Company shall have been merged, or the Person
which shall have received a conveyance, transfer, lease or other
disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight,
any of the Securities authenticated or delivered prior to such
consolidation, merger, conveyance, transfer, lease or other
disposition may, from time to time, at the request of the
successor Person, be exchanged for other Securities executed in
the name of the successor Person with such changes in phraseology
and form as may be appropriate, but otherwise in substance of
like tenor as the Securities surrendered for such exchange and of
like principal amount; and the Trustee, upon Company Request of
the successor Person, shall authenticate and deliver Securities
as specified in such request for the purpose of such exchange.
If Securities shall at any time be authenticated and delivered in
any new name of a successor Person pursuant to this Section in
exchange or substitution for or upon registration of transfer of
any Securities, such successor Person, at the option of the
Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities
authenticated and delivered in such new name.
Section 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the
Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in
any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such
Securities.
<PAGE>
29
If temporary Securities are issued, the Company will
cause definitive Securities to be prepared without unreasonable
delay. After the preparation of definitive Securities, the
temporary Securities shall be exchangeable for definitive
Securities upon surrender of the temporary Securities at the
office or agency of the Company designated for such purpose
pursuant to Section 1002, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary
Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like aggregate
principal amount of definitive Securities of authorized
denominations. Until so exchanged, the temporary Securities
shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
Section 305. Registration, Registration of Transfer
--------------------------------------
and Exchange.
------------
The Company shall cause to be kept, at an office or
agency to be maintained by the Company in accordance with Section
1002, a register (the "Security Register") in which, subject to
such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Registered Securities and
the registration of transfers of Registered Securities. The
Trustee is hereby initially appointed "Security Registrar" for
the purpose of registering Registered Securities and transfers of
Registered Securities as herein provided.
Upon due surrender for registration of transfer of any
Registered Security at the office or agency of the Company
maintained for such purpose in the Place of Payment or Chicago,
Illinois, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Registered Securities
of any authorized denomination or denominations of a like
aggregate principal amount.
At the option of the Holder, Registered Securities may
be exchanged for other Registered Securities of any authorized
denominations and of a like aggregate principal amount, upon
surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is
entitled to receive.
Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making
the exchange is entitled to receive.
All Securities issued upon any registration of transfer
or exchange of Securities shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange.
<PAGE>
30
Every Registered Security presented or surrendered for
registration of transfer or for exchange shall (if so required by
the Company or the Trustee or any transfer agent) be duly
endorsed, or be accompanied by a written instrument of transfer,
in form satisfactory to the Company and the Security Registrar or
any transfer agent, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any
transfer.
In the event of any redemption in part, the Company
shall not be required (i) to issue, register the transfer of or
exchange any Security during a period beginning at the opening of
business 15 days before the selection of Securities for
redemption, and ending at the close of business on the earliest
date on which the relevant notice of redemption is deemed to have
been given to all Holders of Securities to be redeemed, or
(ii) to register the transfer of or exchange any Registered
Security so selected for redemption, in whole or in part, except
the unredeemed portion of any Security being redeemed in part.
Section 306. Mutilated, Destroyed, Lost and Stolen
-------------------------------------
Securities.
----------
If any mutilated Security is surrendered to the
Trustee, the Company shall execute, and the Trustee shall
authenticate and deliver in exchange therefor, a new Security of
like tenor and principal amount, bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and the
Trustee (i) evidence to their satisfaction of the destruction,
loss or theft of any Security and (ii) such security or indemnity
as may be required by them to save each of them and any agent of
either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall, subject to the following
paragraph, execute, and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security,
a new Security of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Security,
pay such Security.
Upon the issuance of any new Security under this
Section, the Company may require the payment of a sum sufficient
to cover any tax or other governmental charge that
<PAGE>
31
may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected
therewith.
Every new Security issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute
an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security shall be at
any time enforceable by anyone, and any such new Security shall
be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities duly issued
hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights
------------------------------------
Preserved.
---------
Interest on any Registered Security which is payable,
and is punctually paid or duly provided for, on any Interest
Payment Date shall be paid to the Person in whose name that
Security (or one or more Predecessor Securities) is registered at
the close of business on the Regular Record Date for such
interest.
Any interest on any Registered Security which is
payable, but is not punctually paid or duly provided for, on any
Interest Payment Date (herein called "Defaulted Interest") shall
forthwith cease to be payable to the Holder on the relevant
Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the
Registered Securities (or their respective Predecessor
Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Registered
Security and the date of the proposed payment, and at the
same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this clause
provided. Thereupon the Trustee shall fix a Special Record
Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at
<PAGE>
32
the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first-class postage
prepaid, to each Holder of Registered Securities at the
address of such Holder as it appears in the Security
Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons
in whose names the Registered Securities (or their
respective Predecessor Securities) are registered at the
close of business on such Special Record Date and shall no
longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to
this clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section and
Section 305, each Security delivered under this Indenture upon
registration of transfer of or in exchange for or in lieu of any
other Security shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security.
Section 308. Persons Deemed Owners.
---------------------
Prior to the due presentment of a Security for
registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose name
such Registered Security is registered as the owner of such
Registered Security for the purpose of receiving payment of
principal of (and premium, if any, on) and (subject to Sections
305 and 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and
none of the Company, the Trustee or any agent of the Company or
the Trustee shall be affected by notice to the contrary.
Section 309. Cancellation.
------------
All Securities surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and
shall be promptly cancelled by it. The Company may at any time
deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee
(or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder
which the Company has not issued and sold, and all Securities so
delivered shall be promptly cancelled by the Trustee. No
Securities shall be
<PAGE>
33
authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Securities held by
the Trustee shall be destroyed unless otherwise directed by a
Company Order.
Section 310. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the
basis of a 360-day year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall upon Company Request cease to be
of further effect (except as to any surviving rights of
registration of transfer or exchange of Securities herein
expressly provided for) and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture (including, without
limitation, the provisions of Article Thirteen), when
(1) either
(a) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced
or paid as provided in Section 306 and (ii) Securities
for whose payment money has theretofore been deposited
in trust with the Trustee or any Paying Agent or
segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from
such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(b) all such Securities not theretofore delivered
to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption
within one year under arrangements satisfactory to
the Trustee for the giving of notice of
<PAGE>
34
redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (i), (ii) or (iii)
above, has irrevocably deposited or caused to be
deposited with the Trustee solely for the benefit of
the Holders of Securities an amount sufficient to pay
and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be,
as trust funds in trust for such purpose;
(2) the Company has irrevocably paid or caused to be
irrevocably paid all other sums payable hereunder by the
Company;
(3) the deposit of money in accordance with this
Section 401 shall not be prohibited by the provisions of
Article Thirteen hereof at the time of such deposit; and
(4) the Company has delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each
stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under
Section 606 and to any Authenticating Agent under Section 612
and, if money shall have been deposited with the Trustee pursuant
to subclause (B) of clause (1) of this Section, the obligations
of the Trustee under Section 402 and the last paragraph of
Section 1003, shall survive any termination of this Indenture.
Section 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of
Section 1003, all money deposited with the Trustee pursuant to
Section 401 shall be held in trust and applied by it, in
accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as
the Trustee may determine, to the Persons entitled thereto, of
the principal of (and premium, if any, on), and interest on the
Securities for whose payment such money has been deposited with
the Trustee. Money so held in trust shall not be subject to the
provisions of Article Thirteen.
<PAGE>
35
ARTICLE FIVE
Remedies
Section 501. Events of Default.
-----------------
"Event of Default", wherever used herein with respect
to Securities, means any one of the following events (whatever
the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of any interest on any
Security when it becomes due and payable, and continuance of
such default for a period of 30 days whether or not such
payment shall be prohibited by the provisions of Article
Thirteen hereof; or
(2) default in the payment of the principal of (or
premium, if any, on) any Security at its Maturity, upon
acceleration, redemption or when otherwise due and payable,
whether or not such payment shall be prohibited by the
provisions of Article Thirteen hereof; or
(3) default in the payment of any redemption payment
on any Security when it becomes due and payable, and
continuance of such default for a period of 30 days whether
or not such payment shall be prohibited by the provisions of
Article Thirteen hereof; or
(4) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture (other
than a default in the performance, or breach, of a covenant
or warranty which is specifically dealt with elsewhere in
this Section), and continuance of such default or breach for
a period of 60 days after there has been given, by
registered or certified mail, to the Company and the Agent
Bank by the Trustee or to the Company, the Trustee and the
Agent Bank by the Holders of at least 25% in principal
amount of the Outstanding Securities a written notice
specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of
Default" hereunder; or
(5) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of
the Company or any Subsidiary of the Company in an
involuntary case or proceeding under any applicable Federal
or State bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Company
or any such Subsidiary a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or
<PAGE>
36
in respect of the Company or any such Subsidiary under any
applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or any such Subsidiary
or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a
period of 60 consecutive days; provided that, in the case of
any such Subsidiary, the entry of such a decree or order
shall not constitute an Event of Default under this Section
501(5) unless the claims of such Subsidiary's creditors
shall, in the aggregate, be in excess of $100,000,000; or
(6) the commencement by the Company or any Subsidiary
of the Company of a voluntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief
in respect of the Company or any such Subsidiary in an
involuntary case or proceeding under any applicable Federal
or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by
it of a petition or answer or consent seeking reorganization
or relief under any applicable Federal or State law, or the
consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Company or any such Subsidiary or of
any substantial part of its property, or the making by it of
an assignment for the property, or the making by it of an
assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as
they become due or the taking of corporate action by the
Company or any such Subsidiary in furtherance of any such
action; provided that, in the case of any such Subsidiary,
none of the foregoing actions shall constitute an Event of
Default under this Section 501(6) unless the claims of such
Subsidiary's creditors shall, in the aggregate, be in excess
of $100,000,000.
Section 502. Acceleration of Maturity; Rescission and
----------------------------------------
Annulment.
---------
If an Event of Default with respect to Securities at
the time Outstanding (other than an Event of Default specified
in Section 501(5) or 501(6)) occurs and is continuing, then in
every such case the Trustee or the Holders of not less than 25%
in principal amount of the Securities Outstanding may, and the
Trustee at the request of such Holders shall, declare due and
payable immediately, by a notice in writing to the Company (and
to the Trustee if given by Holders) and, if any Credit Agreement
is in effect, to the Agent Bank, the unpaid principal of (and
premium, if any) and accrued interest in respect of each
Securities then Outstanding (the "Default Amount"). Upon any
such declaration, the Default Amount shall become due and payable
on all Outstanding Securities (i) if no Credit Agreement is in
effect, immediately, or (ii) if any Credit Agreement is in
effect, upon the first to occur of (a) an
<PAGE>
37
acceleration under such Credit Agreement (written notice of which
the Company shall give to the Trustee as promptly as practicable
upon the occurrence thereof, provided, however, that the Trustee
shall not be deemed to have knowledge of such acceleration unless
and until it receives such written notice) or (b) the fifth
Business Day after receipt by the Company and the Agent Bank of
written notice of such declaration unless (in the absence of an
acceleration under the Credit Agreement) on or prior to such
fifth Business Day the Company shall have discharged the
indebtedness, if any, that is the subject of such Event of
Default or otherwise cured the default relating to such Event of
Default and shall have given written notice of such discharge or
cure to the Trustee and the Agent Bank. Notwithstanding any
other provision of Section 502, if an Event of Default specified
in Section 501(5) or 501(6) occurs, then the Default Amount on
the Securities then Outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration
with respect to Securities has been made and before a judgment or
decree for payment of the money due has been obtained by the
Trustee as hereinafter in this Article provided, the Holders of a
majority in principal amount of the Securities Outstanding, by
written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if
(1) the Company (without violating the provisions of
Article Thirteen hereof) has paid or deposited with the
Trustee a sum sufficient to pay,
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on)
any Securities which has become due otherwise than by
such declaration of acceleration and interest thereon
at the rate prescribed therefor in such Securities,
(C) to the extent that payment of such interest
is lawful, interest on overdue interest at the rate
prescribed therefor in such Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents
and counsel; and
(2) all Events of Default with respect to the
Securities, other than the non-payment of the principal of
(or premium, if any, on) or interest on Securities which
have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 513.
<PAGE>
38
No such rescission shall affect any subsequent default or impair
any right consequent thereon.
Section 503. Collection of Obligations and Suits for
---------------------------------------
Enforcement by Trustee.
----------------------
The Company covenants that if
(a) default is made in the payment of any interest on
any Security when such interest becomes due and payable and
such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of
(or premium, if any, on) any Security at the Maturity
thereof,
the Company will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of such Securities, the whole amount then
due and payable on such Securities for principal (and premium, if
any) and interest and, the extent that payment of such interest
shall be legally enforceable, interest on any overdue principal
(and premium, if any) and on any overdue interest, at the rate
prescribed therefor in such Securities, and, in addition thereto,
such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Company fails to pay such amounts forthwith upon
such demand, the Trustee, in its own name as trustee of an
express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such
proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and
collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any
other obligor upon the Securities, wherever situated.
If an Event of Default occurs with respect to
Securities and is continuing, the Trustee may in its discretion
proceed to protect and enforce its rights and the rights of the
Holders of Securities by such appropriate judicial proceedings as
the Trustee shall deem most effectual to protect and enforce any
such rights, whether for the specific enforcement of any covenant
or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
<PAGE>
39
Section 504. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the
property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of
the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment
of overdue principal, premium, if any, or interest) shall be
entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and
unpaid in respect of the Securities and to file such other
papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the
Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other
property payable or deliverable on any such claims and to
distribute the same;
and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder of a Security to
make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 606.
Subject to Article Eight and Section 902, nothing
herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any
Holder of a Security any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights
of any such Holder thereof or to authorize the Trustee to vote in
respect of the claim of any such Holder in any such proceeding.
Section 505. Trustee May Enforce Claims Without
----------------------------------
Possession of Securities.
------------------------
All rights of action and claims under this Indenture or
the Securities may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own
name and as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the
<PAGE>
40
ratable benefit of the Holders of the Securities in respect of
which such judgment has been recovered.
Section 506. Application of Money Collected.
------------------------------
Subject to Article Thirteen, any money collected by the
Trustee pursuant to this Article shall be applied in the
following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee
hereunder, including under Section 606;
SECOND: To the payment of the amounts then due and
unpaid for principal of (and premium, if any, on,) and
interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal
(and premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons
entitled thereto.
Section 507. Limitation on Suits.
-------------------
No Holders of any Security shall have any right to
institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default with respect to
the Securities;
(2) the Holders of not less than 25% in principal
amount of the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect
of such Event of Default in its own name as Trustee
hereunder;
(3) such Holder or Holders have offered to the Trustee
an indemnity, reasonably satisfactory to the Trustee,
against the costs, expenses and liabilities to be incurred
in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to
institute any such proceeding; and
<PAGE>
41
(5) no direction inconsistent with such written
request has been given to the Trustee during such 60-day
period by the Holders of a majority or more in principal
amount of the Outstanding Securities;
it being understood and intended that no one or more of such
Holders shall have any right in any manner whatever by virtue of,
or by availing of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other of such Holders, or
to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal
and ratable benefit of all of such Holders.
Section 508. Unconditional Right of Holders to
---------------------------------
Receive Principal, Premium and Interest.
---------------------------------------
Notwithstanding any other provision in this Indenture,
the Holder of any Security shall have the right, which is
absolute and unconditional, to receive payment of the principal
of (and premium, if any, on) and (subject to Section 307)
interest on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any
such payment, and such rights shall not be impaired without the
consent of such Holder.
Section 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder of a Security has
instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the
Trustee or to such Holder, then and in every such case, subject
to any determination in such proceeding, the Company, the Trustee
and the Holders of Securities shall be restored severally and
respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the
replacement or payment of mutilated, destroyed, lost or stolen
Securities in the last paragraph of Section 306, no right or
remedy herein conferred upon or reserved to the Trustee or to the
Holders of Securities is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of
any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate
right or remedy.
<PAGE>
42
Section 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of
any Securities to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders of Securities
may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders of Securities, as the
case may be.
Section 512. Control by Holders.
------------------
The Holders of a majority in principal amount of the
Outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power
conferred on the Trustee, with respect to the Securities,
provided that
(1) such direction shall not be in conflict with any
rule of law or with this Indenture,
(2) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction, and
(3) the Trustee may refuse to follow any
direction which, in the opinion of Counsel to the Trustee,
is unduly prejudicial to other Holders of Securities or
would subject the Trustee to personal liability.
Section 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal
amount of the Outstanding Securities may on behalf of the Holders
of all the Securities waive any past default hereunder and its
consequences, except a default
(1) in the payment of the principal of (or premium, if
any, on) or interest on any Security, or
(2) in respect of a provision hereof which under
Article Nine cannot be modified or amended without the
consent of the Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to
exist, and any Event of Default with respect to Securities
arising therefrom shall be deemed to have been cured, for
<PAGE>
43
every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other default or Event of Default or impair
any right consequent thereon.
Section 514. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants or
the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
Section 601. Notice of Defaults.
------------------
Within 90 days after the occurrence of any Default
hereunder with respect to the Securities, the Trustee shall
transmit, in the manner and to the extent provided in TIA Section
313(c), notice of such Default hereunder known to the Trustee,
unless such Default shall have been cured or waived; provided,
however, that, except in the case of a Default in the payment of
the principal of (or premium, if any, on) or interest on any
Security or in the payment of any sinking fund installment with
respect to Securities, the Trustee shall be protected in
withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determines that
the withholding of such notice is in the interest of the Holders
of Securities; and provided further, that in the case of any
Default or breach of the character specified in Section 501(4)
with respect to Securities, no such notice to Holders shall be
given until at least 30 days after the occurrence thereof.
<PAGE>
44
Section 602. Certain Rights of Trustee.
-------------------------
The Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this
Indenture against the Trustee. Subject to the provisions of TIA
Sections 315(a) through 315(d):
(a) the Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note,
coupon, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request
or Company Order or as otherwise expressly provided herein
and any resolution of the Board of Directors of the Company
may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture
the Trustee shall deem it desirable that a matter be proved
or established prior to taking, suffering or omitting any
action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel and the
advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Holders
of Securities pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it
shall be entitled upon reasonable notice and at reasonable
times during normal business hours
<PAGE>
45
to examine the books, records and premises of the Company,
personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys and the
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed
with due care by it hereunder;
(h) the permissive rights of the Trustee to do things
enumerated in this Indenture shall not be construed as a
duty and the Trustee shall be liable for its negligence, bad
faith or willful misconduct;
(i) the Trustee shall not be required to give any note
or surety in respect of the execution of the said trusts and
powers or otherwise in respect of the premises; and
(j) except for (i) a default under Section 501(1), (2)
or (3) hereof and (ii) any other event of which the Trustee
has "actual knowledge," which event, with the giving of
notice or the passage of time or both, would constitute an
Event of Default, the Trustee shall not be deemed to have
notice of any default or event unless specifically notified
in writing of such event by the Company or the Holders of
not less than 25% in aggregate principal of Securities
Outstanding; as used herein, the term "actual knowledge"
means the actual fact or statement of knowing, without any
duty to make any investigation without regard thereto.
No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
Section 603. Trustee Not Responsible for Recitals or
---------------------------------------
Issuance of Securities.
----------------------
The recitals contained herein and in the Securities
(except for the Trustee's certificates of authentication) shall
be taken as the statements of the Company, and neither the
Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the
Securities. Neither the Trustee nor any Authenticating Agent
shall be accountable for the use or application by the Company of
Securities or the proceeds thereof.
<PAGE>
46
Section 604. May Hold Securities.
-------------------
The Trustee, any Authenticating Agent, any Paying
Agent, any Security Registrar or any other agent of the Company,
in its individual or any other capacity, may become the owner or
pledgee of Securities and, subject to TIA Sections 310(b) and
311, may otherwise deal with the Company with the same rights it
would have if it were not Trustee, Authenticating Agent, Paying
Agent, Security Registrar or such other agent.
Section 605. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not
be segregated from other funds except to the extent required by
law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with
the Company.
Section 606. Compensation, Reimbursement and
-------------------------------
Indemnification of Trustee.
--------------------------
The Company agrees:
(a) to pay to the Trustee or any predecessor Trustee
from time to time reasonable compensation for all services
rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee or any predecessor Trustee upon its
request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee or such predecessor
Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
(c) to indemnify the Trustee or any predecessor
Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the
costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of
any of its powers or duties hereunder, including the
enforcement of this Section 606.
As security for the performance of such obligations of
the Company under this Section, the Trustee shall have a claim
prior to the Securities upon all property and funds
<PAGE>
47
held or collected by the Trustee as such, except funds held in
trust for the payment of principal of (and premium, if any, on)
or interest, if any, on particular Securities.
When the Trustee incurs expenses or renders services
after a Default specified in Section 501(5) or 501(6) occurs, the
reasonable expenses and the compensation for services (including
the reasonable fees and expenses of its agents and counsel) are
intended to constitute expenses of administration under any
bankruptcy law.
Section 607. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which
shall be eligible to act as Trustee under TIA Section 310(a)(1)
and shall have a combined capital and surplus of at least
$50,000,000 and its Corporate Trust Office in The City of New
York or The City of Chicago. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of a federal, state, territorial or District of
Columbia supervising or examining authority, then, for the
purposes of this Section, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter
specified in this Article.
Section 608. Resignation and Removal; Appointment of
---------------------------------------
Successor.
---------
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee in accordance with the applicable requirements
of Section 609.
(b) The Trustee may resign at any time with respect to
the Securities by giving written notice thereof to the Company.
If the instrument of acceptance by a successor Trustee required
by Section 609 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with
respect to the Securities.
(c) The Trustee may be removed at any time with
respect to the Securities by (i) the Company, by a Board
Resolution, or (ii) Act of the Holders of a majority in principal
amount of the Outstanding Securities delivered to the Trustee and
to the Company.
(d) If at any time:
<PAGE>
48
(1) the Trustee shall fail to comply with TIA Section
310(b) after written request therefor by the Company or by
any Holder of a Security who for at least six months has
been a bona fide Holder of a Security, or
(2) the Trustee shall cease to be eligible under
Section 607 hereof and shall fail to resign after written
request therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution,
may remove the Trustee with respect to the Securities, or (ii)
subject to TIA Section 315(e), any Holder of a Security who has
been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of
the Trustee with respect to the Securities and the appointment of
a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee or Trustees and shall comply
with the applicable requirements of Section 609. If, within one
year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount
of the Outstanding Securities delivered to the Company and the
retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 609, become the
successor Trustee and supersede the successor Trustee appointed
by the Company. If no successor Trustee shall have been so
appointed by the Company or the Holders of Securities and
accepted appointment in the manner required by Section 609, any
Holder of a Security who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee with
respect to the Securities.
(f) The Company shall give notice of each resignation
and each removal of the Trustee with respect to the Securities
and each appointment of a successor Trustee with respect to the
Securities in the manner provided for in Section 106. Each
notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
<PAGE>
49
Section 609. Acceptance of Appointment by Successor.
--------------------------------------
(a) Every successor Trustee appointed hereunder shall
execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but,
on request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver
an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
(c) No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee
shall be qualified and eligible under this Article.
Section 610. Merger, Conversion, Consolidation or
------------------------------------
Succession to Business.
----------------------
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor
of the Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part
of any of the parties hereto. In case any Securities shall have
been authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation to
such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated with the same effect as
if such successor Trustee had itself authenticated such
Securities; and in case at that time any of the Securities shall
not have been authenticated, any successor Trustee may
authenticate such Securities either in the name of any
predecessor hereunder or in the name of the successor Trustee;
and in all such cases such certificates shall have the full force
which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have;
provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate
Securities in the name of any predecessor Trustee shall apply
only to its successor or successors by merger, conversion or
consolidation.
<PAGE>
50
Section 611. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or
Agents (which may be an Affiliate or Affiliates of the Company)
with respect to the Securities which shall be authorized to act
on behalf of the Trustee to authenticate Securities issued upon
original issue or upon exchange, registration of transfer or
partial redemption thereof or pursuant to Section 306, and
Securities so authenticated shall be entitled to the benefits of
this Indenture and shall be valid and obligatory for all purposes
as if authenticated by the Trustee hereunder. Wherever reference
is made in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed
on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall
at all times be a corporation organized and doing business under
the laws of the United States of America, any State thereof or
the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of
not less than $50,000,000 and subject to supervision or
examination by federal or state authority. If such
Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said
supervising or examining authority, then, for the purposes of
this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition
so published. If at any time an Authenticating Agent shall cease
to be eligible in accordance with the provisions of this Section,
such Authenticating Agent shall resign immediately in the manner
and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may
be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a
party, or any corporation succeeding to the corporate agency or
corporate trust business of such Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation
shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part
of the Trustee or such Authenticating Agent.
An Authenticating Agent may resign at any time by
giving written notice thereof to the Trustee and to the Company.
The Trustee may at any time terminate the agency of an
Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at
any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may
appoint a successor Authenticating Agent which shall be
acceptable to the Company and shall promptly give notice of such
appointment to all Holders of Securities pursuant to Section 106.
Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become
<PAGE>
51
vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent
from time to time reasonable compensation for its services under
this Section.
If an appointment is made pursuant to this Section, the
Securities may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities referred to in the
within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By:
---------------------
as Authenticating Agent
By:
--------------------
Authorized Signatory
If all of the Securities may not be originally issued
at one time, and the Trustee does not have an office or agency
capable of authenticating Securities upon original issuance
located in a Place of Payment where the Company wishes to have
Securities authenticated upon original issuance, the Trustee, if
so requested by the Company in writing (which writing need not
comply with Section 102 and need not be accompanied by an Opinion
of Counsel), shall appoint in accordance with this Section an
Authenticating Agent (which, if so requested by the Company,
shall be an Affiliate of the Company) having an office or agency
in a Place of Payment designated by the Company with respect to
such series of Securities, provided that the terms and conditions
of such appointment are acceptable to the Trustee.
<PAGE>
52
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Disclosure of Names and Addresses of
------------------------------------
Holders.
-------
Every Holder of Securities, by receiving and holding
the same, agrees with the Company and the Trustee that none of
the Company or the Trustee or any agent of either of them shall
be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders of
Securities in accordance with TIA Section 312, regardless of the
source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under TIA Section 312(b).
Section 702. Reports by Trustee.
------------------
Within 60 days after July 15 of each year commencing
with the July 15 occurring after the initial issuance of
Securities hereunder, the Trustee shall transmit by mail to the
Holders of Securities, in the manner and to the extent provided
in TIA Section 313(c), and to the Company a brief report dated as
of such July 15 which satisfies the requirements of TIA Section
313(a).
Section 703. Reports by Company.
------------------
The Company shall:
(a) file with the Trustee, within 15 days after the
Company is required to file the same with the Commission,
copies of the annual reports and of the information,
documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time
by rules and regulations prescribe) which the Company may be
required to file with the Commission pursuant to Section 13
or Section 15(d) of the Exchange Act; or, if the Company is
not required to file information, documents or reports
pursuant to either of said Sections, then the Company shall
file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic
information, documents and reports which may be required
pursuant to Section 13 of the Exchange Act in respect of a
security listed and registered on a national securities
exchange as may be prescribed from time to time in such
rules and regulations; and
(b) file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time
to time by the Commission, such additional
<PAGE>
53
information, documents and reports with respect to
compliance by the Company with the conditions and covenants
of this Indenture as may be required from time to time by
such rules and regulations.
The Trustee shall transmit, within 30 days after the
filing thereof with the Trustee, to the Holders of Securities, in
the manner and to the extent provided in TIA Section 313(c), such
summaries of any information, documents and reports required to
be filed by the Company pursuant to paragraphs (a) and (b) of
this Section as may be required by rules and regulations
prescribed from time to time by the Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc.
----------------------------
The Company shall not consolidate with or merge into
any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, unless:
(1) in case the Company shall consolidate with or
merge into any other Person or convey, transfer or lease its
properties and assets substantially as an entirety to any
person, the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety (the
"Surviving Person") shall be a corporation, partnership or
trust organized and existing under the laws of the United
States of America, any state thereof or the District of
Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, the due and punctual
payment of the principal of and any premium and interest on
all the Securities and the performance of every covenant of
this Indenture on the part of the Company to be performed or
observed;
(2) immediately after giving effect to such
transaction and treating any indebtedness which becomes an
obligation of the Surviving Person, the Company or any
Subsidiary as a result of such transaction as having been
incurred by the Surviving Person, the Company or such
Subsidiary at the time of such transaction, no Event of
Default shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an
Officer's Certificate, stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction,
such
<PAGE>
54
supplemental indenture, shall comply with this Article and
that all conditions precedent herein provided for relating
to such transaction have been complied with.
For purposes of this Section 801, "convey, transfer or
lease its properties and assets substantially as an entirety"
shall mean properties and assets contributing in the aggregate at
least 80% of the Company's total revenues as reported in the
Company's last available periodic financial report (quarterly or
annual, as the case may be) filed with the Commission.
Section 802. Successor Substituted.
---------------------
Upon any consolidation of or merger by the Company with
or into any other Person, or any conveyance, transfer or lease of
the properties and assets substantially as an entirety to any
Person in accordance with Section 801, the Surviving Person shall
succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same
effect as if the Surviving Person had been named as the Company
herein, and thereafter, except in the case of a lease, the
predecessor corporation shall be relieved of all obligations and
covenants under this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent
---------------------------------------
of Holders.
----------
Without the consent of any Holders of Securities, the
Company, when authorized by a Board Resolution, and the Trustee,
at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form reasonably satisfactory
to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to
the Company and the assumption by any such successor of the
covenants of the Company contained herein and in the
Securities in accordance with Article Eight hereof; or
(2) to add to the covenants of the Company for the
benefit of the Holders of (if necessary) Securities or to
surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default; or
<PAGE>
55
(4) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to
the Securities pursuant to the requirements of Section 609;
or
(5) to cure any ambiguity, to correct or supplement
any provision herein which may be inconsistent with any
other provision herein, or to make any other provisions with
respect to matters or questions arising under this
Indenture; provided that such action shall not adversely
affect the interests of the Holders of Securities in any
material respect.
Section 902. Supplemental Indentures with Consent of
---------------------------------------
Holders.
-------
With the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding
Securities, by Act of said Holders delivered to the Company and
the Trustee, the Company, when authorized by a Board Resolution,
and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the
Holders of Securities under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of
the Holder of each Outstanding Security:
(1) change the Stated Maturity of the principal of, or
any installment of principal of or interest on, or the terms
of any sinking fund or analogous payment with respect to,
any Security, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which
any Security or any premium or the interest thereon is
payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after
the Redemption Date), or modify the provisions of this
Indenture with respect to the subordination of the
Securities in a manner adverse to any Holder of any
Securities, or
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is
required for any such supplemental indenture, or the consent
of whose Holders is required for any waiver (of compliance
with any provisions of this Indenture or defaults hereunder
and their consequences) provided for in this Indenture, or
reduce the requirements of Section 1604 for quorum or
voting, or
<PAGE>
56
(3) modify any of the provisions of this Section or
Section 513, except to increase any such percentage or to
provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the
Holder of each Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders of
Securities under this Section to approve the particular form
of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures.
------------------------------------
In executing any supplemental indenture permitted by
this Article or the modifications thereby of the trusts created
by this Indenture, the Trustee shall be entitled to receive, and
shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under
this Article, this Indenture shall be modified in accordance
therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to the
Article shall conform to the requirements of the Trust Indenture
Act as then in effect.
Section 906. Reference in Securities to Supplemental
---------------------------------------
Indentures.
----------
Securities authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article
may, and shall if required by the Trustee, bear a notation in
form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities.
<PAGE>
57
Section 907. Effect on Senior Obligations.
----------------------------
No supplemental indenture shall adversely affect the
rights of the holders of Senior Obligations of the Company under
Article Thirteen without the consent of the representative of
such holders.
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium, if any,
--------------------------------------
and Interest.
------------
The Company covenants and agrees for the benefit of the
Holders of Securities that it will duly and punctually pay the
principal of (and premium, if any, on) and interest on the
Securities in accordance with the terms of such Securities and
this Indenture.
Section 1002. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in each Place of Payment, an
office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration
of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may
be served, which agency initially shall be the agency of the
Trustee at 77 Water Street, New York, New York 10005. The
Company will give prompt notice to the Trustee and give prompt
notice to the Holders as provided in Section 106 of the location,
and any change in the location, of any such office or agency. If
at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations and surrenders of Securities
may be made and, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or
more other offices or agencies where the Securities may be
presented or surrendered for any or all such purposes and may
from time to time rescind any such designation; provided,
however, that no such designation or rescission shall in any
manner relieve the Company of its obligation to maintain an
office or agency in accordance with the requirements set forth
above for Securities for such purposes. The Company will give
prompt written notice to the Trustee and the Holders of any such
designation or rescission and of any change in the location of
any such other office or agency.
<PAGE>
58
Section 1003. Money for Security Payments to Be Held
--------------------------------------
in Trust.
--------
If the Company shall at any time act as its own Paying
Agent, it will, on or before each due date of the principal of
(and premium, if any, on) or interest on any of the Securities,
segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or
failure so to act.
Whenever the Company shall have one or more Paying
Agents for the Securities, it will, prior to each due date of the
principal of (and premium, if any, on) or any interest on any
Securities, deposit with a Paying Agent a sum sufficient to pay
the principal (and premium, if any) or any interest so becoming
due, such sum of money to be held in trust for the benefit of the
Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of such action or any failure so to
act.
The Company will cause each Paying Agent (other than
the Trustee) to execute and deliver to the Trustee an instrument
in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section, that such Paying Agent will:
(1) hold all sums of money for the payment of the
principal of (and premium, if any, on) or interest on
Securities in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the
Company (or any other obligor upon the Securities) in the
making of any payment of principal (and premium, if any) or
interest on the Securities; and
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith
pay to the Trustee all sums so held in trust by such Paying
Agent.
The Company may at any time, for the purpose of
obtaining the satisfaction and discharge of this Indenture or for
any other purpose, pay, or by Company Order direct any Paying
Agent to pay, to the Trustee all sums of money held in trust by
the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were
held by the Company or such Paying Agent; and, upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
<PAGE>
59
Any money deposited with the Trustee or any Paying
Agent, or then held by the Company, in trust for the payment of
the principal of (and premium, if any, on) or interest on any
Security and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if
then held by the Company) shall be discharged from such trust;
and the Holder of such Security thereafter shall, as an unsecured
general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with
respect to such money held in trust, and all liability of the
Company as trustee thereof, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the
Company cause to be published once, in an Authorized Newspaper
published in each Place of Payment, notice that such money
remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid
to the Company.
Section 1004. Corporate Existence.
-------------------
Subject to Article Eight, the Company will do or cause
to be done all things necessary to preserve and keep in full
force and effect the corporate existence, rights (charter and
statutory) and franchises of the Company; provided, however, that
the Company shall not be required to preserve any such right or
franchise if its Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the
business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders of the
Securities.
Section 1005. Compliance Certificate.
----------------------
(a) The Company will deliver to the Trustee, within
120 days after the end of each fiscal year, a brief certificate
from the principal executive officer, principal financial officer
or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this
Indenture. For purposes of this Section 1005(a), such compliance
shall be determined without regard to any period of grace or
requirement of notice under this Indenture.
(b) The Company will, so long as any of the Securities
are outstanding, deliver to the Trustee, as promptly as
practicable upon any officer listed in (a) above becoming aware
of (i) any Default, Event of Default or default in the
performance of any covenant, agreement or condition contained in
this Indenture or (ii) any event of default under any evidence of
Senior Obligations of the Company or any Subsidiary (other than
with respect to Senior Obligations in the principal amount of
less than $100,000,000), an Officer's Certificate specifying such
Default, Event of Default or default and what action the Company
is taking or proposes to take with respect thereto and the status
thereof.
<PAGE>
60
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article.
------------------------
The Securities may be redeemed, at the election of the
Company, as a whole or from time to time in part, at any time
after [the fifth anniversary of the Effective Time], in
accordance with their terms and in accordance with this Article.
Section 1102. Election to Redeem; Notice to
-----------------------------
Trustee.
-------
The election of the Company to redeem any Securities
shall be evidenced by an Officer's Certificate. In case of any
redemption at the election of the Company of less than all the
Securities, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date, and of the principal amount of Securities to be
redeemed. In the case of any redemption of Securities (i) prior
to the expiration of any restriction of such redemption provided
in the terms of such Securities or elsewhere in this Indenture or
(ii) pursuant to an election of the Company which is subject to a
condition specified in the terms of such Securities, the Company
shall furnish the Trustee with an Officer's Certificate
evidencing compliance with such restriction or condition.
Section 1103. Selection by Trustee of Securities
----------------------------------
to Be Redeemed.
--------------
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more
than 45 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities not previously called for redemption,
by such method as the Trustee shall deem fair and appropriate,
provided such method complies with the rules of any national
securities exchange or quotation system on which the Securities
are then listed, and which may provide for the selection for
redemption of portions (equal to the minimum authorized
denomination for Securities or any integral multiple thereof) of
the principal of Registered Securities; provided, however, that
no such partial redemption shall reduce the portion of the
principal amount of a Security not redeemed to less than $1,000.
The Trustee shall promptly notify the Company in
writing of the Securities selected for redemption and, in the
case of any Securities selected for partial redemption, the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of
Securities shall relate, in the case of any Securities
<PAGE>
61
redeemed or to be redeemed only in part, to the portion of the
principal amount of such Securities which has been or is to be
redeemed.
Section 1104. Notice of Redemption.
--------------------
Notice of redemption shall be given in the manner
provided for in Section 106 to the Holders of Securities to be
redeemed not less than 30 nor more than 60 days prior to the
Redemption Date.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities are to be
redeemed, the identification (and, in the case of a partial
redemption, the principal amounts) of the particular
Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price
will become due and payable upon each such Security, or the
portion thereof, to be redeemed and, if applicable, and that
interest thereon will cease to accrue on and after said
date, and
(5) the place or places which must include the
applicable Place or Places of Payment where such Securities
are to be surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at
the election of the Company shall be given by the Company or, at
the Company's request, by the Trustee in the name and at the
expense of the Company.
Section 1105. Deposit of Redemption Price.
---------------------------
Prior to any Redemption Date, the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money in the currency in
which the Securities are payable sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities which are
to be redeemed on that date.
<PAGE>
62
Section 1106. Securities Payable on Redemption
--------------------------------
Date.
----
Notice of redemption having been given as aforesaid,
the Securities so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified,
and from and after such date (unless the Company shall default in
the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price,
together with accrued interest, to the Redemption Date; provided,
however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions
of Section 307.
If any Security called for redemption shall not be so
paid upon surrender thereof for redemption, the principal (and
premium, if any) shall, until paid, bear interest from the
Redemption Date at the rate prescribed therefor in the Security.
Section 1107. Securities Redeemed in Part.
---------------------------
Any Registered Security which is to be redeemed only in
part shall be surrendered at a Place of Payment therefor (with,
if the Company or the Trustee so requires, due endorsement by, or
a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or
such Holder's attorney duly authorized in writing), and the
Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a
new Registered Security or Securities, of any authorized
denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
ARTICLE TWELVE
Defeasance and Covenant Defeasance
Section 1201. Company's Option to Effect
--------------------------
Defeasance or Covenant Defeasance.
---------------------------------
The Company may, at its option by Officer's
Certificate, at any time, with respect to the Securities, elect
to have either Section 1202 (if applicable) or Section 1203 (if
applicable) be applied to all Outstanding Securities upon
compliance with the conditions set forth below in this Article
Twelve.
<PAGE>
63
Section 1202. Defeasance and Discharge.
------------------------
Upon the Company's exercise of the above option
applicable to this Section and subject to Section 1205, the
Company shall be deemed to have been discharged from its
obligations with respect to all Outstanding Securities on and
after the date the conditions precedent set forth below are
satisfied but subject to satisfaction of the conditions
subsequent set forth below (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company shall be deemed
to have paid and discharged the entire indebtedness represented
by the Outstanding Securities and to have satisfied all its other
obligations under such Securities and this Indenture insofar as
such Securities are concerned (and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Securities to receive, solely from the
trust fund described in Section 1204 and as more fully set forth
in such Section, payments of the principal of (and premium, if
any, on) and interest on such Securities when such payments are
due, (B) the Company's obligations with respect to such
Securities under Sections 304, 305, 306, 1002 and 1003 and such
obligations as shall be ancillary thereto, (C) the rights,
powers, trusts, duties and immunities and other provisions in
respect of the Trustee hereunder and (D) this Article Twelve.
Subject to compliance with this Article Twelve, the Company may
exercise its option under this Section 1202 notwithstanding the
prior exercise of its option under Section 1203 with respect to
the Securities. Following a defeasance, payment of the
Securities may not be accelerated because of an Event of Default.
Section 1203. Covenant Defeasance.
-------------------
Upon the Company's exercise of the above option
applicable to this Section, the Company shall be released from
its obligations under any covenant contained in Section 801 and
in Section 1005 with respect to the Outstanding Securities on and
after the date the conditions precedent set forth below are
satisfied but subject to satisfaction of the conditions
subsequent set forth below (hereinafter, "covenant defeasance").
For this purpose, such covenant defeasance means that, with
respect to the Outstanding Securities, the Company may omit to
comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any
such covenant to any other provision herein or in any other
document, but the remainder of this Indenture and such Securities
shall be unaffected thereby. Following a covenant defeasance,
payment of the Securities may not be accelerated because of an
Event of Default solely by reference to such Sections specified
above in this Section 1203.
<PAGE>
64
Section 1204. Conditions to Defeasance or
---------------------------
Covenant Defeasance.
-------------------
The following shall be the conditions precedent or, as
specifically noted below, subsequent to application of either
Section 1202 or Section 1203 to the Outstanding Securities:
(1) The Company shall have irrevocably deposited or
caused to be irrevocably deposited with the Trustee (or
another trustee satisfying the requirements of Section 607
who shall agree to comply with the provisions of this
Article Twelve applicable to it) as trust funds in trust for
the purpose of making the following payments, specifically
pledged as security for the benefit of, and dedicated solely
to, the Holders of such Securities, (A) money in an
amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, money
in an amount, or (C) a combination thereof, sufficient, in
the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification
thereof delivered to the Trustee (or other qualifying
trustee), to pay and discharge, and which shall be applied
by the Trustee to pay and discharge, (i) each installment of
the principal of (and premium, if any, on) and interest on
the Outstanding Securities to Stated Maturity of each such
installment of principal or interest on the day on which
such payments are due and payable in accordance with the
terms of this Indenture and the Securities and (ii) any
mandatory sinking fund payments or analogous payments
applicable to the Outstanding Securities on the
due dates thereof. Before such a deposit, the
Company may make arrangements satisfactory to the
Trustee for the redemption of Securities at a future date or
dates in accordance with Article Eleven which shall be given
effect in applying the foregoing. For this purpose, "U.S.
Government Obligations" means securities that are (x) direct
obligations of the United States of America for the payment
of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States
of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act of
1933, as amended), as custodian with respect to any such
U.S. Government Obligation or a specific payment of
principal of or interest on any such U.S. Government
Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make
any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian
in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government
Obligation evidenced by such depository receipt.
<PAGE>
65
(2) No Event of Default, or event which after notice
or lapse of time, or both, would become an Event of Default
with respect to the Securities, shall have occurred and be
continuing (A) on the date of such deposit or (B) insofar as
paragraphs (5) and (6) of Section 501 hereof are concerned,
at any time during the period ending on the 91st day after
the date of such deposit or, if longer, ending on the day
following the expiration of the longest preference period
applicable to the Company in respect of such deposit (it
being understood that the condition in this clause (B) is a
condition subsequent and shall not be deemed satisfied until
the expiration of such period).
(3) Such defeasance or covenant defeasance shall not
(A) cause the Trustee for the Securities to have a
conflicting interest as defined in TIA Section 310(b) or
otherwise for purposes of the Trust Indenture Act with
respect to any securities of the Company or (B) result in
the trust arising from such deposit to constitute, unless it
is qualified as, a regulated investment company under the
Investment Company Act of 1940, as amended.
(4) Such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default
under, this Indenture or any other agreement or instrument
to which the Company is a party or by which it is bound.
(5) Such defeasance or covenant defeasance shall not
cause any Securities then listed on any registered national
securities exchange under the Exchange Act to be delisted.
(6) In the case of an election under Section 1202, the
Company shall have delivered to the Trustee an Opinion of
Counsel stating that (x) the Company has received from, or
there has been published by, the Internal Revenue Service a
ruling, or (y) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such
opinion shall confirm that, the Holders of the Outstanding
Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance
and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would
have been the case if such defeasance had not occurred.
(7) In the case of an election under Section 1203, the
Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Holders of the Outstanding
Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not
occurred.
<PAGE>
66
(8) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each
stating that all conditions precedent and subsequent
provided for in this Indenture relating to either the
defeasance under Section 1202 or the covenant defeasance
under Section 1203 (as the case may be) have been complied
with.
Section 1205. Deposited Money and U.S. Government
-----------------------------------
Obligations to Be Held in Trust; Other Miscellaneous Provisions.
---------------------------------------------------------------
Subject to the provisions of the last paragraph of
Section 1003, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee
pursuant to Section 1204 in respect of the Outstanding Securities
shall be held in trust and applied by the Trustee, in accordance
with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (but not
including the Company acting as Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and
to become due thereon in respect of principal (and premium, if
any) and interest, but such money need not be segregated from
other funds except to the extent required by law. Without
limiting the generality of the preceding sentence, such money,
U.S. Government Obligations and proceeds shall not be subject to
the provisions of Article Thirteen.
The Company shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the
money or U.S. Governmental Obligations deposited pursuant to
Section 1204 or the principal and interest received in respect
thereof.
Anything in this Article Twelve to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company
from time to time upon Company Request any money or U.S.
Government Obligations held by it as provided in Section 1204
which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of
the amount thereof which would then be required to be deposited
to effect an equivalent defeasance or covenant defeasance or to
pay accrued and unpaid Trustee's fees and reasonable expenses,
provided that the Trustee shall not be required to liquidate any
U.S. Government Obligations in order to comply with the
provisions of this paragraph.
Section 1206. Reinstatement.
-------------
Anything herein to the contrary notwithstanding, if and
to the extent the deposited money or U.S. Government Obligations
(or the proceeds thereof) either (i) cannot be applied by the
Trustee in accordance with this Section because of any order or
judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application or (ii) are
for any reason insufficient in amount, then (x) the Company's
<PAGE>
67
obligations to pay principal of and any premium and interest on
the Securities shall be reinstated to the extent necessary to
cover the deficiency on any due date for payment and (y) in the
case of a covenant defeasance under Section 1203, the Company's
obligations under Sections 801 and 1005 shall be reinstated
unless and until all deficiencies on any due date for payment are
covered. In any case specified in clause (i), the Company's
interest in the deposited money and U.S. Government Obligations
(and proceeds thereof) shall be reinstated to the extent the
Company's payment obligations are reinstated.
ARTICLE THIRTEEN
Subordination of Securities
Section 1301. Securities Subordinate to Senior
--------------------------------
Obligations.
-----------
The Company covenants and agrees, and each Holder of a
Security, by his acceptance thereof, likewise covenants and
agrees, that, to the extent and in the manner hereinafter set
forth in this Article (subject to the provisions of Article Four
and Article Twelve), the indebtedness represented by the
Securities and the payment of the principal of (and premium, if
any, on) and interest on each and all of the Securities are
hereby expressly made subordinate and subject in right of payment
as provided in this Article to the prior payment in full of all
Senior Obligations of the Company.
Section 1302. Payment over of Proceeds upon
-----------------------------
Dissolution, Etc.
----------------
In the event of (a) any insolvency or bankruptcy case
or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith,
relative to the Company or to its creditors, as such, or to its
assets, or (b) any liquidation, dissolution or other winding up
of the Company, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, or (c) any assignment for
the benefit of creditors or any other marshalling of assets or
liabilities of the Company, then and in any such event the
holders of Senior Obligations of the Company shall be entitled to
receive payment in full of all amounts due or to become due on or
in respect of all Senior Obligations of the Company, or provision
shall be made for such payment in cash, before the Holders of the
Securities are entitled to receive any payment or distribution of
any kind or character on account of principal of (or premium, if
any, on) or interest on the Securities, and to that end the
holders of Senior Obligations of the Company shall be entitled to
receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property
or securities, including any such payment or distribution which
may be payable or deliverable by reason of the payment of any
other indebtedness of the Company being subordinated to the
payment of the Securities, which may be payable or
<PAGE>
68
deliverable in respect of the Securities in any such case,
proceedings, dissolution, liquidation or other winding up or
event.
In the event that, notwithstanding the foregoing
provisions of this Section, the Trustee or the Holder of any
Security shall have received any payment or distribution of
assets of the Company of any kind or character, whether in cash,
property or securities, including any such payment or
distribution which may be payable or deliverable by reason of the
payment of any other indebtedness of the Company being
subordinated to the payment of the Securities, before all Senior
Obligations of the Company are paid in full or payment thereof
provided for, then and in such event such payment or distribution
shall be held for the benefit of, and upon receipt by the Trustee
of the notice set forth in Section 1309, shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other Person
making payment or distribution of assets of the Company for
application to the payment of all Senior Obligations of the
Company remaining unpaid, to the extent necessary to pay all
Senior Obligations of the Company in full, after giving effect to
any concurrent payment or distribution to or for the holders of
Senior Obligations of the Company.
For purposes of this Article only, the words "cash,
property or securities" shall not be deemed to include shares of
stock of the Company as reorganized or readjusted, or securities
of the Company as reorganized or readjusted, or securities of the
Company or any other corporation provided for by a plan of
reorganization or readjustment which are subordinated in right of
payment to all Senior Obligations of the Company which may at the
time be outstanding to substantially the same extent as, or to a
greater extent than, the Securities are so subordinated as
provided in this Article. The consolidation of the Company with,
or the merger of the Company into, another Person or the
liquidation or dissolution of the Company following the
conveyance or transfer of its properties and assets substantially
as an entirety to another Person upon the terms and conditions
set forth in Article Eight shall not be deemed a dissolution,
winding up, liquidation, reorganization, assignment for the
benefit of creditors or marshalling of assets and liabilities of
the Company for the purposes of this Section if the Surviving
Person as a part of such consolidation, merger, conveyance or
transfer, complies with the conditions set forth in Article
Eight.
Section 1303. No Payment When Senior Obligations
----------------------------------
in Default.
----------
If (a) in the event and during the continuation of any
default in the payment of principal of (or premium, if any) or
interest on any Senior Obligations of the Company beyond any
applicable grace period with respect thereto, or in the event
that any nonpayment event of default with respect to any Senior
Obligations of the Company shall have occurred and be continuing
and shall have resulted in such Senior Obligations of the Company
becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, or (b) in
the event that any other nonpayment event of default
<PAGE>
69
with respect to any Senior Obligations of the Company shall have
occurred and be continuing permitting the holders of such Senior
Obligations of the Company (or a trustee on behalf of the holders
thereof) to declare such Senior Obligations of the Company due
and payable prior to the date on which it would otherwise have
become due and payable, then no payment, direct or indirect
(including any payment which may be payable by reason of the
payment of any other indebtedness of the Company being
subordinated to the payment of the Securities), shall be made by
the Company on account of principal of (or premium, if any) or
interest on the Securities or on account of the purchase or
redemption or other acquisition of Securities (x) in
case of any payment or nonpayment event of default
specified in (a), unless and until (A) such event of
default shall have been cured or waived or shall have
ceased to exist or such acceleration shall have been rescinded or
annulled or (B) the Senior Obligations of the Company in respect
of which such declaration of acceleration has occurred is
discharged, (y) in case of any nonpayment event of default
specified in (b), from the earlier of the dates the Company and
the Trustee receive written notice of such event of default from
an Agent Bank or any other representative of a holder of Senior
Obligations of the Company until the earlier of (A) 180 days
after such date and (B) the date, if any, on which the Senior
Obligations of the Company to which such default relates are
discharged or such default is waived by the holders of such
Senior Obligations of the Company or otherwise cured (provided
that further written notice relating to the same or any other
nonpayment event of default specified in (b) above with respect
to the same Senior Obligations of the Company received by the
Company or the Trustee within 12 months after such receipt shall
not be effective for purposes of this clause (y)) or (z) in case
of any payment or nonpayment event of default specified in clause
(a) or (b), as long as any judicial proceeding is pending with
respect to such event.
In the event that, notwithstanding the foregoing, the
Company shall make any payment to the Trustee or the Holder of
any Security prohibited by the foregoing provisions of this
Section, then and in such event such payment shall be held for
the benefit of, and upon receipt by the Trustee of the notice set
forth in Section 1309, shall be paid over and delivered forthwith
to the appropriate Agent Bank or other representative of such
Senior Obligations of the Company, provided that in the event
--------
there are no outstanding Senior Obligations of the Company under
any Credit Agreement, such payment shall be paid over and
delivered to the Company, in each case for the benefit of the
holders of Senior Obligations of the Company, and to the extent
of any such payment over the rights and remedies of the Trustee
and the Holders of Securities, and the obligations of
the Company, shall be reinstated in full force and effect as if
such payment by the Company to the Trustee or such Holders had
never been made.
The provisions of this Section shall not apply to any
payment with respect to which Section 1302 (without giving effect
to the exclusion from the applicability of said Section contained
in the last paragraph thereof) would be applicable. Nothing in
this Section 1303 shall apply to amounts received by the Trustee
for its own account.
<PAGE>
70
Section 1304. Payment Permitted if No Default.
-------------------------------
Nothing contained in this Article or elsewhere in this
Indenture or in any of the Securities shall prevent the Company,
at any time except during the pendency of any case, proceeding,
dissolution, liquidation or other winding up, assignment for the
benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Section 1302 or under
the conditions described in Section 1303, from making payments at
any time of principal of (and premium, if any, on) or interest on
the Securities or from making the deposits contemplated by
Section 401 or Section 1204 hereof.
Section 1305. Subrogation to Rights of Holders of
-----------------------------------
Senior Obligations.
------------------
Subject to the payment in full of all Senior
Obligations of the Company, the Holders of the Securities shall
be subrogated to the rights of the holders of such Senior
Obligations of the Company to receive payments and distributions
of cash, property and securities applicable to the Senior
Obligations of the Company until the principal of (and premium,
if any, on) and interest on the Securities shall be paid in full.
For purposes of such subrogation, no payments or distributions to
the holders of Senior Obligations of the Company of any cash,
property or securities to which the Holders of the Securities or
the Trustee would be entitled except for the provisions of this
Article, and no payments pursuant to the provisions of this
Article to the holders of Senior Obligations of the Company by
Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Obligations
of the Company, and the Holders of the Securities, be deemed to
be a payment or distribution by the Company to or on account of
the Senior Obligations of the Company.
Section 1306. Provisions Solely to Define
---------------------------
Relative Rights.
---------------
The provisions of this Article are and are intended
solely for the purpose of defining the relative rights of the
Holders of the Securities on the one hand and the holders of
Senior Obligations of the Company on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in
the Securities is intended to or shall (a) impair, as among the
Company, its creditors and the Holders of the Securities, the
obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of (and
premium, if any, on) and interest on the Securities as and when
the same shall become due and payable in accordance with their
terms; (b) affect the relative rights against the Company of the
Holders of the Securities and creditors of the Company other than
the holders of Senior Obligations of the Company; or (c) prevent
the Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this
Article, of the holders of Senior Obligations of the Company
(i) in any case, proceeding, dissolution, liquidation or other
winding up, assignment for the benefit of creditors or other
marshalling of assets and
<PAGE>
71
liabilities of the Company referred to in Section 1302, to
receive, pursuant to and in accordance with such Section, cash,
property and securities otherwise payable or deliverable to the
Trustee or such Holder, or (ii) under the conditions specified in
Section 1303, to prevent any payment prohibited by such Section.
Section 1307. Trustee to Effectuate
---------------------
Subordination.
-------------
Each Holder of a Security by his acceptance thereof
authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the
subordination provided in this Article and appoints the Trustee
his attorney-in-fact for any and all such purposes.
Section 1308. No Waiver of Subordination
--------------------------
Provisions.
----------
(a) No right of any present or future holder of any
Senior Obligations of the Company to enforce subordination as
herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such
holder, or by any non-compliance by the Company with the terms,
provisions and covenants of this Indenture, regardless of any
knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without in any way limiting the generality of
paragraph (a) of this Section, the holders of Senior Obligations
of the Company may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of
the Securities and without impairing or releasing the
subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of
Senior Obligations of the Company, do any one or more of the
following: (1) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, Senior
Obligations of the Company, or otherwise amend or supplement in
any manner Senior Obligations of the Company or any instrument
evidencing the same or any agreement under which Senior
Obligations of the Company are outstanding; (2) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Obligations of the Company; (3) release
any Person liable in any manner for the collection of Senior
Obligations of the Company; and (4) exercise or refrain from
exercising any rights against the Company and any other Person.
Section 1309. Notice to Trustee.
-----------------
(a) The Company shall give prompt written notice to
the Trustee and the Agent Bank of any fact known to the Company
which would prohibit the making of any payment to or by the
Trustee in respect of the Securities pursuant to the provision of
this Article. The Company shall also furnish to the Agent Bank
copies of all notices provided to
<PAGE>
72
the Trustee pursuant to Section 703. Notwithstanding the
provisions of this Article or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any
payment to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article, unless and until the
Trustee shall have received written notice thereof from the
Company, any Agent Bank or holder of Senior Obligations of the
Company or from any trustee therefor, and, prior to the receipt
of any such written notice, the Trustee, subject to the
provisions of TIA Sections 315(a) through 315(d), shall be
entitled in all respects to assume that no such facts exist;
provided, however, that, if the Trustee shall not have received
the notice provided for in this Section at least three Business
Days prior to the date upon which by the terms hereof any money
may become payable for any purpose (including, without
limitation, the payment of the principal of (and premium, if any,
on) or interest on any Security), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such money and to apply the same
to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by
it within three Business Days prior to such date.
(b) Subject to the provisions of TIA Sections 315(a)
through 315(d), the Trustee shall be entitled to rely on the
delivery to it of a written notice by a Person representing
himself to be a holder of Senior Obligations of the Company (or a
trustee therefor) to establish that such notice has been given by
a holder of Senior Obligations of the Company (or a trustee
therefor). In the event that the Trustee determines in good
faith that further evidence is required with respect to the right
of any Person as a holder of Senior Obligations of the Company to
participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence
to the reasonable satisfaction of the Trustee as to the amount of
Senior Obligations of the Company held by such Person, the extent
to which such Person is entitled to participate in such payment
or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not
furnished, the Trustee and any Agent Bank may defer any payment
to such Person pending judicial determination as to the right of
such Person to receive such payment.
Section 1310. Reliance on Judicial Order or
-----------------------------
Certificate of Liquidating Agent.
--------------------------------
Upon any payment or distribution of assets of the
Company referred to in this Article, the Trustee, subject to the
provisions of TIA Sections 315(a) through 315(d), and the Holders
of the Securities shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which
such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or
proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee
for the benefit of creditors, agent or other Person making such
payment or distribution, delivered to the Trustee or to the
Holders of Securities, for the purpose of ascertaining the
<PAGE>
73
Persons entitled to participate in such payment or distribution,
the holders of Senior Obligations of the Company and other
indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and
all other facts pertinent thereto or to this Article.
Section 1311. Rights of Trustee as a Holder of
--------------------------------
Senior Obligations; Preservation of Trustee's Rights.
----------------------------------------------------
The Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article with respect
to any Senior Obligations of the Company which may at any time be
held by it, to the same extent as any other holder of Senior
Obligations of the Company, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 606.
Section 1312. Article Applicable to Paying
----------------------------
Agents.
------
In case at any time any Paying Agent other than the
Trustee shall have been appointed by the Company and be then
acting hereunder, the term "Trustee" as used in this Article
shall in such case (unless the context otherwise requires) be
construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article in addition to or in
place of the Trustee; provided, however, that Section 1311 shall
not apply to the Company or any Affiliates of the Company if it
or such Affiliate acts as Paying Agent.
Section 1313. Trustee Not Fiduciary for Holders
---------------------------------
of Senior Obligations.
---------------------
The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Obligations of the Company and
shall not be liable to any such holders if it shall in good faith
mistakenly pay over to distribute to Holders of Securities or to
any other Person cash, property or securities to which any
holders of Senior Obligations of the Company shall be entitled by
virtue of this Article or otherwise.
Section 1314. No Suspension of Remedies.
-------------------------
Nothing contained in this Article shall limit the right
of the Trustee or the Holders of Securities to take any action to
accelerate the maturity of the Securities pursuant to Article
Five or to pursue any rights or remedies hereunder or under
applicable law, except as provided in Article Five.
<PAGE>
74
Section 1315. Article Thirteen Not to Prevent
-------------------------------
Events of Default.
-----------------
The failure to make payment pursuant to the Securities
by reason of any provision in this Article Thirteen shall not be
construed as preventing the occurrence of a Default or an Event
of Default.
Section 1316. Notices to Agent Bank.
---------------------
Any notice or communication by the Company or the
Trustee to any Agent Bank is duly given if in writing and mailed
by first-class mail, postage prepaid, or delivered in person or
by telex, telecopies or overnight air courier guaranteeing next
day delivery to such Agent Bank at the address set forth on
Schedule I hereto, as such schedule may hereafter be amended from
time to time. Any Agent Bank by notice to the Company and the
trustee pursuant to Section 105 may designate additional or
different addresses for subsequent notices or communications.
All notices and communications to any Agent Bank shall be deemed
to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in
the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next day delivery.
If a notice or communication is given in the manner
provided above within the time prescribed, it is duly given,
whether or not the Agent Bank receives it. Notwithstanding any
provisions of this Indenture to the contrary, the Trustee shall
have no liability to any Agent Bank based on or arising from the
failure to receive any notice required by or relating to this
Indenture or the Securities.
Section 1317. Restriction on Amendment of
---------------------------
Indenture.
---------
No amendment, modification, waiver or change of any
kind, by supplemental indenture or otherwise, may be made with
respect to any provision of the Indenture which would adversely
affect the holders of the Company's indebtedness under any Credit
Agreement or would expand the definition of Senior Obligations of
the Company or would amend this Section 1317 of the Indenture
without, in each case, the prior written consent of a majority of
the Banks affected thereby.
The Company and the Trustee shall give the Agent Bank
written notice within 20 days of receipt of a Company Request
instructing the Trustee to enter into any such amendment,
modification, waiver or change of any kind, by supplemental
indenture or otherwise, and, if the Agent Bank does not object
within 20 days of receipt of such notice, the Trustee shall be
entitled to conclude that such amendment, modification, waiver,
change or supplemental indenture does not adversely affect the
holders of the Company's indebtedness under any Credit Agreement.
<PAGE>
75
Section 1318. Inapplicability of This Article
-------------------------------
Thirteen to Certain Trustee Monies and Certain Payments.
-------------------------------------------------------
The subordination of the Securities provided by this
Article Thirteen is expressly made subject to the provisions of
Section 402 and the provisions of defeasance or covenant
defeasance in Article Twelve and, anything herein to the contrary
notwithstanding, the provisions of this Article Thirteen shall
not apply to any money, U.S. Government Obligations or proceeds
thereof held in trust by the Trustee pursuant to Article Four or
Article Twelve.
ARTICLE FOURTEEN
Exchange of Initial Securities
Section 1401. Right to Exchange.
-----------------
The Company may, at its option, on or after the earlier
of (i) January 1, 1995, but only if the Blockbuster Merger has
not been consummated by such date, and (ii) the acquisition by a
third party of beneficial ownership of a majority of the
outstanding voting securities of Blockbuster Entertainment
Corporation, exchange the Initial Securities, in whole but not in
part, for shares of the Company's Series C Preferred Stock.
Holders of Initial Securities so exchanged will be entitled to
receive one fully paid and nonassessable share of Series C
Preferred Stock for each $50 in principal amount of Initial
Securities. At the time of the exchange of the Series C
Preferred Stock for the Securities, all accrued and unpaid
interest on the Securities will not be paid and dividends on the
Series C Preferred Stock will be deemed to have accrued from the
later of the Effective Time and the latest date through which
interest has been paid on the Securities, the Holders of such
exchanged Initial Securities shall cease to have any further
rights with respect thereto on the Initial Exchange Date, other
than the right to receive the Series C Preferred Stock and the
accrued and unpaid dividends on the Series C Preferred Stock, and
the person or persons entitled to receive the Series C Preferred
Stock issuable upon exchange shall be treated as the registered
Holder or Holders of such Series C Preferred Stock.
Section 1402. Election to Exchange; Notice to
-------------------------------
Trustee.
-------
The election of the Company to exchange the Initial
Securities shall be evidenced by an Officer's Certificate. The
Company shall, at least 70 days prior to the Initial Exchange
Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Initial
Exchange Date.
<PAGE>
76
Section 1403. Notice of Exchange.
------------------
Notice of exchange (the "Exchange Notice") shall be
given in the manner provided for in Section 106 not less than 30
nor more than 60 days prior to the Initial Exchange Date, to each
Holder of Initial Securities to be exchanged; provided, however,
that neither any failure to give such notice nor any deficiency
therein shall affect the validity of the procedure for the
exchange of any Initial Securities except as to the Holder or
Holders to whom the Company has failed to give said notice or
except as to the Holder or Holders whose notice was defective.
The Exchange Notice shall state:
(A) the Initial Exchange Date;
(B) that the Holder is to surrender to the Company, in
the manner and at the place designated, his
certificate or certificates representing the
Initial Securities held by him; and
(C) that interest on the Initial Securities to be
exchanged will cease to accrue on the Initial
Exchange Date and that no accrued interest will be
paid.
Notice of exchange of the Initial Securities shall be
given by the Company or, at the Company's request, by the Trustee
in the name and at the expense of the Company.
Section 1404. Procedure for Exchange.
----------------------
On or before the Initial Exchange Date, each Holder
shall surrender the certificate or certificates representing such
Initial Securities to the Company, in the manner and at the place
designed in the Exchange Notice, and on the Initial Exchange Date
the person whose name appears on such certificate or certificates
as the owners of such Initial Securities shall receive the amount
of Series C Preferred Stock described in Section 1401, and each
surrendered certificate shall be cancelled and retired.
Dividends on the Series C Preferred Stock will be
deemed to have accrued from the Effective Time and no accrued
interest will be paid with respect to the Initial Securities, and
the Holders of such exchanged Initial Securities shall cease to
have any further rights with respect thereto on the Initial
Exchange Date, other than the right to receive the Series C
Preferred Stock and the accrued and unpaid dividends on the
Series C Preferred Stock.
<PAGE>
77
ARTICLE FIFTEEN
Meetings of Holders of Securities
Section 1501. Purposes for Which Meetings May Be
----------------------------------
Called.
------
A meeting of Holders of Securities may be called at any
time and from time to time pursuant to this Article to make, give
or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be
made, given or taken by Holders of Securities.
Section 1502. Call, Notice and Place of Meetings.
----------------------------------
(a) The Trustee may at any time call a meeting of
Holders of Securities for any purpose specified in Section 1501,
to be held at such time and at such place in the Borough of
Manhattan, The City of New York, as the Trustee shall determine.
Notice of every meeting of Holders of Securities, setting forth
the time and the place of such meeting and in general terms the
action proposed to be taken at such meeting, shall be given, in
the manner provided in Section 106, not less than 21 nor more
than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Company, pursuant to a
Board Resolution, or the Holders of at least [10%] in aggregate
principal amount of the Outstanding Securities shall have
requested the Trustee to call a meeting of the Holders of
Securities for any purpose specified in Section 1501, by written
request setting forth in reasonable detail the action proposed to
be taken at the meeting, and the Trustee shall not have made the
first publication of the notice of such meeting within 21 days
after receipt of such request or shall not thereafter proceed to
cause the meeting to be held as provided herein, then the Company
or the Holders of Securities in the amount above specified, as
the case may be, may determine the time and the place in the
Borough of Manhattan, The City of New York for such meeting and
may call such meeting for such purposes by giving notice thereof
as provided in subsection (a) of this Section.
Section 1503. Persons Entitled to Vote at
---------------------------
Meetings.
--------
To be entitled to vote at any meeting of Holders of
Securities, a Person shall be (1) a Holder of one or more
Outstanding Securities, or (2) a Person appointed by an
instrument in writing as proxy for a Holder or Holders of one or
more Outstanding Securities by such Holder or Holders. The only
Persons who shall be entitled to be present or speak at any
meeting of Holders of Securities shall be Persons entitled to
vote at such meeting and their counsel, any representatives of
the Trustee and its counsel and any representatives of the
Company and its counsel.
<PAGE>
78
Section 1504. Quorum; Action.
--------------
The Persons entitled to vote a majority in principal
amount of the Outstanding Securities shall constitute a quorum
for a meeting of Holders of Securities; provided, however, that
if any action is to be taken at such meeting with respect to a
consent, waiver, request, demand, notice, authorization,
direction or other action which may be given by the Holders of
not less than a specified percentage in principal amount of the
Outstanding Securities, the Persons holding or representing such
specified percentage in principal amount of the Outstanding
Securities will constitute a quorum. In the absence of a quorum
within 30 minutes of the time appointed for any such meeting, the
meeting shall, if convened at the request of Holders of
Securities, be dissolved. In any other case the meeting may be
adjourned for a period of not less than 10 days as determined by
the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned
meeting, such adjourned meeting may be further adjourned for a
period of not less than 10 days as determined by the chairman of
the meeting prior to the adjournment of such adjourned meeting.
Notice of the reconvening of any adjourned meeting shall be given
as provided in Section 1502(a), except that such notice need be
given only once not less than five days prior to the date on
which the meeting is scheduled to be reconvened. Notice of the
reconvening of an adjourned meeting shall state expressly the
percentage, as provided above, of the principal amount of the
Outstanding Securities which shall constitute a quorum.
Except as limited by the proviso to the first paragraph
of Section 902, any resolution presented to a meeting or
adjourned meeting duly reconvened at which a quorum is present as
aforesaid may be adopted by the affirmative vote of the Holders
of a majority in principal amount of the Outstanding Securities,
provided, however, that, except as limited by the proviso to the
first paragraph of Section 902, any resolution with respect to
any consent, waiver, request, demand, notice, authorization,
direction or other action which this Indenture expressly provides
may be given by the Holders of not less than a specified
percentage in principal amount of the Outstanding Securities may
be adopted at a meeting or an adjourned meeting duly reconvened
and at which a quorum is present as aforesaid only by the
affirmative vote of the Holders of a not less than such specified
percentage in principal amount of the Outstanding Securities.
Any resolution passed or decision taken at any meeting
of Holders of Securities duly held in accordance with this
Section shall be binding on all the Holders of Securities whether
or not present or represented at the meeting.
Section 1505. Determination of Voting Rights;
-------------------------------
Conduct and Adjournment of Meetings.
-----------------------------------
(a) Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it
may deem advisable for any meeting of Holders of
<PAGE>
79
Securities in regard to proof of the holding of Securities and of
the appointment of proxies and in regard to the appointment and
duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as
it shall deem appropriate.
(b) The Trustee shall, by an instrument in writing,
appoint a temporary chairman of the meeting, unless the meeting
shall have been called by the Company or by Holders of Securities
as provided in Section 1502(b), in which case the Company or the
Holders of Securities calling the meeting, as the case may be,
shall in like manner appoint a temporary chairman. A permanent
chairman and a permanent secretary of the meeting shall be
elected by vote of the Persons entitled to vote a majority in
principal amount of the Outstanding Securities represented at the
meeting.
(c) At any meeting each Holder of a Security or proxy
shall be entitled to one vote for each $1,000 principal amount of
the Outstanding Securities held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in
respect of any Security challenged as not Outstanding and ruled
by the chairman of the meeting to be not Outstanding. The
chairman of the meeting shall have no right to vote, except as a
Holder of a Security or proxy.
(d) Any meeting of Holders of Securities duly called
pursuant to Section 1502 at which a quorum is present may be
adjourned from time to time by Persons entitled to vote a
majority in principal amount of the Outstanding Securities
represented at the meeting; and the meeting may be held as so
adjourned without further notice.
Section 1506. Counting Votes and Recording Action
-----------------------------------
of Meetings.
-----------
The vote upon any resolution submitted to any meeting
of Holders of Securities shall be by written ballots on which
shall be subscribed the signatures of the Holders of Securities
or of their representatives by proxy and the principal amounts
and serial numbers of the Outstanding Securities held or
represented by them. The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at
the meeting for or against any resolution and who shall make and
file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record,
at least in duplicate, of the proceedings of each meeting of
Holders of Securities shall be prepared by the secretary of the
meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken
thereat and affidavits by one or more persons having knowledge of
the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 1502
and, if applicable, Section 1504. Each copy shall be signed and
verified by the affidavits of the permanent chairman and
secretary of the meeting and one such copy shall be delivered to
the Company, and another to the Trustee to be preserved by the
Trustee, the latter to have
<PAGE>
80
attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters
therein stated.
This Indenture may be signed in any number of
counterparts each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but
one and the same Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, all as of the day and
year first above written.
VIACOM INC.
By
---------------------------------
Title:
Attest:
----------------------
Title:
HARRIS TRUST AND SAVINGS BANK
By
---------------------------------
Title:
Attest:
----------------------
Title:
<PAGE>
Schedule I
----------
Notices to Agent Bank(s)
------------------------
Name Address
---- -------
S-1
DRAFT: May 23, 1994
- -----------------------------------------------------------------
VIACOM INC.
TO
HARRIS TRUST AND SAVINGS BANK,
Trustee
----------------------------------------------------
CONTINGENT VALUE RIGHTS
AGREEMENT
Dated as of
----------------------
----------------------------------------------------
- -----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
--------------------------------
Page
----
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions . . . . . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . 2
Agreement . . . . . . . . . . . . . . . . . . 2
Authorized Newspaper . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . 3
Business Day . . . . . . . . . . . . . . . . . 3
Class B Common Stock . . . . . . . . . . . . . 3
Commission . . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . 3
Company Request or Company Order . . . . . . . 3
Control . . . . . . . . . . . . . . . . . . . 3
Corporate Trust Office . . . . . . . . . . . . 3
Current Market Value . . . . . . . . . . . . . 4
CVR Certificate . . . . . . . . . . . . . . . 4
Default Amount . . . . . . . . . . . . . . . . 4
Default Interest Rate . . . . . . . . . . . . 4
Default Payment Date . . . . . . . . . . . . . 4
Discounted Target Price . . . . . . . . . . . 4
____________________
Note: This table of contents shall not, for any purpose, be
deemed to be a part of this Agreement.
<PAGE>
ii
Page
----
Disposition . . . . . . . . . . . . . . . . . 4
Disposition Payment Date . . . . . . . . . . . 4
Effective Time . . . . . . . . . . . . . . . . 4
Exchange Act . . . . . . . . . . . . . . . . 4
First Extended Maturity Date . . . . . . . . . 5
Holder . . . . . . . . . . . . . . . . . . . . 5
Independent Financial Expert . . . . . . . . . 5
Maturity Date . . . . . . . . . . . . . . . . 5
Minimum Price . . . . . . . . . . . . . . . . 5
Officer's Certificate . . . . . . . . . . . . 5
Opinion of Counsel . . . . . . . . . . . . . . 5
Outstanding . . . . . . . . . . . . . . . . . 5
Paying Agent . . . . . . . . . . . . . . . . . 6
Person . . . . . . . . . . . . . . . . . . . . 6
Responsible Officer . . . . . . . . . . . . . 6
Second Extended Maturity Date . . . . . . . . 6
Security Register and Security
Registrar . . . . . . . . . . . . . . . . 6
Surviving Person . . . . . . . . . . . . . . . 6
Target Price . . . . . . . . . . . . . . . . . 6
Trust Indenture Act . . . . . . . . . . . . . 7
Trustee . . . . . . . . . . . . . . . . . . . 7
Valuation Period . . . . . . . . . . . . . . . 7
vice president . . . . . . . . . . . . . . . . 7
Section 102. Compliance Certificates and Opinions . . . . . 7
Section 103. Form of Documents Delivered to Trustee . . . . 8
Section 104. Acts of Holders . . . . . . . . . . . . . . . 9
Section 105. Notices, etc., to Trustee and Company . . . . 9
Section 106. Notice to Holders; Waiver . . . . . . . . . 10
Section 107. Conflict with Trust Indenture Act . . . . . . 10
Section 108. Effect of Headings and Table of Contents . . . 11
Section 109. Successors and Assigns . . . . . . . . . . . . 11
Section 110. Benefits of Agreement . . . . . . . . . . . . 11
Section 111. Governing Law . . . . . . . . . . . . . . . . 11
Section 112. Legal Holidays . . . . . . . . . . . . . . . . 11
Section 113. Separability Clause . . . . . . . . . . . . . 11
<PAGE>
iii
Page
----
ARTICLE TWO
CVR FORMS
Section 201. Forms Generally . . . . . . . . . . . . . . . 12
Section 202. Form of Face of CVR . . . . . . . . . . . . . 12
Section 203. Form of Reverse of CVR . . . . . . . . . . . . 14
Section 204. Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . . . . . 19
ARTICLE THREE
THE CVRs
Section 301. Title and Terms . . . . . . . . . . . . . . . 19
Section 302. Registrable Form . . . . . . . . . . . . . . . 24
Section 303. Execution, Authentication, Delivery and Dating 24
Section 304. Temporary CVRs . . . . . . . . . . . . . . . . 25
Section 305. Registration, Registration of Transfer and
Exchange . . . . . . . . . . . . . . . . . . . 25
Section 306. Mutilated, Destroyed, Lost and Stolen CVRs . . 26
Section 307. Presentation of CVR Certificate . . . . . . . 27
Section 308. Persons Deemed Owners . . . . . . . . . . . . 28
Section 309. Cancellation . . . . . . . . . . . . . . . . . 28
ARTICLE FOUR
THE TRUSTEE
Section 401. Certain Duties and Responsibilities . . . . . 28
Section 402. Certain Rights of Trustee . . . . . . . . . . 30
Section 403. Not Responsible for Recitals or Issuance of
CVRs . . . . . . . . . . . . . . . . . . . . . 31
Section 404. May Hold CVRs . . . . . . . . . . . . . . . . 32
Section 405. Money Held in Trust . . . . . . . . . . . . . 32
Section 406. Compensation, Reimbursement and Indemnification
of the Trustee . . . . . . . . . . . . . . . . 32
<PAGE>
iv
Page
----
Section 407. Disqualification; Conflicting Interests . . . 33
Section 408. Corporate Trustee Required; Eligibility . . . 33
Section 409. Resignation and Removal; Appointment of
Successor . . . . . . . . . . . . . . . . . . 33
Section 410. Acceptance of Appointment by Successor . . . . 35
Section 411. Merger, Conversion, Consolidation or Succession
to Business . . . . . . . . . . . . . . . . . 35
ARTICLE FIVE
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 501. Company to Furnish Trustee Names and Addresses
of Holders . . . . . . . . . . . . . . . . . . 36
Section 502. Preservation of Information; Communications to
Holders . . . . . . . . . . . . . . . . . . . 36
Section 503. Reports by Trustee . . . . . . . . . . . . . . 37
Section 504. Reports by Company . . . . . . . . . . . . . . 38
ARTICLE SIX
AMENDMENTS
Section 601. Amendments Without Consent of Holders . . . . 38
Section 602. Amendments with Consent of Holders . . . . . . 39
Section 603. Execution of Amendments . . . . . . . . . . . 40
Section 604. Effect of Amendments . . . . . . . . . . . . . 41
Section 605. Conformity with Trust Indenture Act . . . . . 41
Section 606. Reference in CVRs to Amendments . . . . . . . 41
ARTICLE SEVEN
COVENANTS
Section 701. Payment of Amounts, if Any, to Holders . . . . 41
Section 702. Maintenance of Office or Agency . . . . . . . 41
<PAGE>
v
Page
----
Section 703. Money for CVR Payments to Be Held in Trust . . 42
Section 704. Certain Purchases and Sales . . . . . . . . . 43
Section 705. Written Statement to Trustee . . . . . . . . . 43
ARTICLE EIGHT
REMEDIES OF THE TRUSTEE AND HOLDERS
ON EVENT OF DEFAULT
Section 801. Event of Default Defined; Acceleration of
Maturity; Waiver of Default . . . . . . . . . 44
Section 802. Collection of Indebtedness by Trustee; Trustee
May Prove Debt . . . . . . . . . . . . . . . . 45
Section 803. Application of Proceeds . . . . . . . . . . . 47
Section 804. Suits for Enforcement . . . . . . . . . . . . 48
Section 805. Restoration of Rights on Abandonment of
Proceedings . . . . . . . . . . . . . . . . . 48
Section 806. Limitations on Suits by Holders . . . . . . . 49
Section 807. Unconditional Right of Holders to Institute
Certain Suits . . . . . . . . . . . . . . . . 49
Section 808. Powers and Remedies Cumulative; Delay or
Omission Not Waiver of Default . . . . . . . . 49
Section 809. Control by Holders . . . . . . . . . . . . . . 50
Section 810. Waiver of Past Defaults . . . . . . . . . . . 50
Section 811. Trustee to Give Notice of Default, but May
Withhold in Certain Circumstances . . . . . . 51
Section 812. Right of Court to Require Filing of Undertaking
to Pay Costs . . . . . . . . . . . . . . . . . 51
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 901. Company May Consolidate, Etc. . . . . . . . . 52
Section 902. Successor Substituted . . . . . . . . . . . . 53
Section 903. Opinion of Counsel to Trustee . . . . . . . . 53
<PAGE>
AGREEMENT, dated as of ___________, 1994, between
VIACOM INC., a Delaware corporation (hereinafter called the
"Company"), and HARRIS TRUST AND SAVINGS BANK, trustee
(hereinafter called the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the creation
of an issue of contingent value rights (hereinafter called the
"CVRs"), of substantially the tenor and amount hereinafter set
forth, and to provide therefor the Company has duly authorized
the execution and delivery of this Agreement;
WHEREAS, pursuant to the Amended and Restated Agreement
and Plan of Merger dated as of February 4, 1994, as further
amended as of May 26, 1994 (the "Merger Agreement"), among the
Company, Viacom Sub Inc. (the "Merger Subsidiary") and Paramount
Communications Inc., a Delaware corporation ("Paramount"), the
Company has agreed to issue and deliver to stockholders of
Paramount, among other securities, 0.93065 of a CVR for each
share of common stock, par value $1.00 per share, of Paramount
("Paramount Common Stock") issued and outstanding immediately
prior to the effective time (the "Effective Time") of the merger
of the Merger Subsidiary with and into Paramount (other than
shares of Paramount Common Stock to be cancelled pursuant to
Section 1.6(c) of the Merger Agreement and other than any
Dissenting Shares (as defined in the Merger Agreement)); and
WHEREAS, all things necessary have been done to make
the CVRs, when executed by the Company and authenticated and
delivered hereunder, the valid obligations of the Company and to
make this Agreement a valid agreement of the Company, in
accordance with their and its terms.
NOW, THEREFORE, for and in consideration of the
premises and the consummation of the transactions referred to
above, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the CVRs, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.
-----------
<PAGE>
2
For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the
meanings assigned to them in this Article, and include the
plural as well as the singular;
(b) all accounting terms used herein and not expressly
defined shall have the meanings assigned to such terms in
accordance with generally accepted accounting principles,
and the term "generally accepted accounting principles"
means such accounting principles as are generally accepted
at the time of any computation;
(c) all other terms used herein which are defined in
the Trust Indenture Act, either directly or by reference
therein, have the meanings assigned to them therein; and
(d) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other
subdivision.
Certain terms, used principally in Article Four, are
defined in that Article.
"Act", when used with respect to any Holder, has the
meaning specified in Section 104.
"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.
"Agreement" means this instrument as originally
executed and as it may from time to time be supplemented or
amended pursuant to the applicable provisions hereof.
"Authorized Newspaper" means The Wall Street Journal
-----------------------
(Eastern Edition), or if The Wall Street Journal (Eastern
-----------------------
Edition) shall cease to be published, or, if the publication or
general circulation of The Wall Street Journal (Eastern Edition)
-----------------------
shall be suspended for whatever reason, such other English
language newspaper as is selected by the Company with general
circulation in The City of New York, New York.
"Board of Directors" means either the board of
directors of the Company or any duly authorized committee of that
board.
<PAGE>
3
"Board Resolution" means a copy of a resolution
certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means any day (other than a Saturday or
a Sunday) on which banking institutions in The City of New York,
New York or in the State of the principal office of the Trustee
are not authorized or obligated by law or executive order to
close and, if the CVRs are listed on a national securities
exchange, such exchange is open for trading.
"Class B Common Stock" means the Class B Common Stock,
par value $.01 per share, of the Company.
"Commission" means the Securities and Exchange
Commission, as from time to time constituted, created under the
Exchange Act, or if at any time after the execution of this
instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Company" means the Person named as the "Company" in
the first paragraph of this instrument, until a successor Person
shall have become such pursuant to the applicable provisions of
this Agreement, and thereafter "Company" shall mean such
successor Person. To the extent necessary to comply with the
requirements of the provisions of Trust Indenture Act Sections
310 through 317 as they are applicable to the Company, the term
"Company" shall include any other obligor with respect to the
CVRs for the purposes of complying with such provisions.
"Company Request" or "Company Order" means a written
request or order signed in the name of the Company by the
chairman of the Board of Directors, the president, any vice
president, the controller, the treasurer, the secretary or any
assistant secretary, and delivered to the Trustee.
"Control" (including the terms "controlled",
"controlled by" and "under common control with") means the
possession, directly or indirectly or as trustee or executor, of
the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock or
as trustee or executor, by contract or otherwise.
"Corporate Trust Office" means the office of the
Trustee at which at any particular time its corporate trust
business shall be principally administered, which office at the
date of execution of this Agreement is located at 311 West Monroe
Street, Chicago, Illinois 60606.
<PAGE>
4
"Current Market Value" has the meaning set forth in
Section 301(g).
"CVR Certificate" means a certificate representing any
of the CVRs.
"Default Amount" means the amount, if any, by which the
Discounted Target Price exceeds the Minimum Price.
"Default Interest Rate" means 8% per annum.
"Default Payment Date" means the date upon which the
CVRs become due and payable pursuant to Section 801.
"Discounted Target Price" means (i) if a Disposition or
an Event of Default shall occur prior to the Maturity Date,
$48.00 discounted from the Maturity Date back to the Disposition
Payment Date or the Default Payment Date, as the case may be, at
a per annum rate of 8%, (ii) if a Disposition or an Event of
Default shall occur after the Maturity Date but prior to the
First Extended Maturity Date, $51.00 discounted from the First
Extended Maturity Date back to the Disposition Payment Date or
Default Payment Date, as the case may be, at a per annum rate of
8% or (iii) if a Disposition or an Event of Default shall occur
after the First Extended Maturity Date but prior to the Second
Extended Maturity Date, $55.00 discounted from the Second
Extended Maturity Date back to the Disposition Payment Date or
Default Payment Date, as the case may be, at a per annum rate of
8%. In each case, upon each occurrence of an event specified in
Section 301(k), such amounts, as they may have been previously
adjusted, shall be adjusted pursuant to Section 301(k).
"Disposition" means (i) a merger, consolidation or
other business combination involving the Company as a result of
which no shares of Class B Common Stock shall remain outstanding,
(ii) a sale, transfer or other disposition, in one or a series of
transactions, of all or substantially all of the assets of the
Company or (iii) a reclassification of Class B Common Stock as
any other capital stock of the Company or any other Person;
provided, however, that a "Disposition" shall not mean, or occur
- -------- -------
upon, a merger of the Company and any wholly owned subsidiary of
the Company.
"Disposition Payment Date" has the meaning set forth in
Section 301(e).
"Effective Time" has the meaning set forth in the
Preamble.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
<PAGE>
5
"First Extended Maturity Date" means the second
anniversary of the Effective Time.
"Holder" means a Person in whose name a CVR is
registered in the Security Register.
"Independent Financial Expert" means an independent
nationally recognized investment banking firm.
"Maturity Date" means the first anniversary of the
Effective Time.
"Minimum Price" means (i) at the Maturity Date, $36.00,
(ii) at the First Extended Maturity Date, $37.00 and (iii) at the
Second Extended Maturity Date, $38.00. In each case, upon each
occurrence of an event specified in Section 301(k), such amounts,
as they may have been previously adjusted, shall be adjusted
pursuant to Section 301(k).
"Officer's Certificate" means a certificate signed by
the chairman of the Board of Directors, the president, any vice
president, the controller, the treasurer, the secretary or any
assistant secretary of the Company in his or her capacity as such
an officer, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of
counsel, who may be General Counsel for the Company, and who
shall be reasonably acceptable to the Trustee.
"Outstanding", when used with respect to CVRs means, as
of the date of determination, all CVRs theretofore authenticated
and delivered under this Agreement, except:
(a) CVRs theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(b) From and after the earlier of the Default Payment
Date, the Disposition Payment Date, the Maturity Date or, in
the event the Company shall extend the Maturity Date, the
First Extended Maturity Date or, in the event the Company
shall extend the First Maturity Date, the Second Extended
Maturity Date, CVRs, or portions thereof, for whose payment
cash or securities of the Company in the necessary amount
has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall
act as its own Paying Agent) for the Holders of such CVRs;
and
<PAGE>
6
(c) CVRs in exchange for or in lieu of which other
CVRs have been authenticated and delivered pursuant to this
Agreement, other than any such CVRs in respect of which
there shall have been presented to the Trustee proof
satisfactory to it that such CVRs are held by a bona fide
purchaser in whose hands the CVRs are valid obligations of
the Company;
provided, however, that in determining whether the Holders of the
- -------- -------
requisite Outstanding CVRs have given any request, demand,
direction, consent or waiver hereunder, CVRs owned by the Company
or any other obligor upon the CVRs or any affiliate of the
Company or such other obligor shall be disregarded and deemed not
to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request,
demand, direction, consent or waiver, only CVRs which the Trustee
knows to be so owned shall be so disregarded.
"Paying Agent" means any Person authorized by the
Company to pay the amount determined pursuant to Section 301, if
any, on any CVRs on behalf of the Company, which shall initially
be Harris Trust Company of New York.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Responsible Officer", when used with respect to the
Trustee, means any officer assigned to the Corporate Trust Office
and also means, with respect to any particular corporate trust
matter, any other officer of the Trustee to whom such matter is
referred because of his knowledge of and familiarity with the
particular subject.
"Second Extended Maturity Date" means the third
anniversary of the Effective Time.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Surviving Person" has the meaning set forth in
Section 901.
"Target Price" means (a) at the Maturity Date, $48.00,
(b) at the First Extended Maturity Date, $51.00 and (c) at the
Second Extended Maturity Date, $55.00. In each case, upon each
occurrence of an event specified in Section 301(k), such amounts,
as they may have been previously adjusted, shall be adjusted
pursuant to Section 301(k).
<PAGE>
7
"Trust Indenture Act" means the Trust Indenture Act of
1939 as in force at the date as of which this Agreement was
executed, except as provided in Section 605.
"Trustee" means the Person named as the "Trustee" in
the first paragraph of this Agreement, until a successor Trustee
shall have become such pursuant to the applicable provisions of
this Agreement, and thereafter "Trustee" shall mean such
successor Trustee.
"Valuation Period" has the meaning set forth in Section
301(g).
"vice president", when used with respect to the Company
or the Trustee, means any vice president, whether or not
designated by a number or a word or words added before or after
the title of "vice president".
Section 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the
Trustee to take any action under any provision of this Agreement,
the Company shall furnish to the Trustee an Officer's Certificate
stating that all conditions precedent, if any, provided for in
this Agreement (including any covenants, compliance with which
constitutes a condition precedent) relating to the proposed
action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that, in the
case of any such application or request as to which the
furnishing of such documents is specifically required by any
provision of this Agreement relating to such particular
application or request, no additional certificate or opinion need
be furnished.
Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Agreement shall
include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or condition
and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(c) a statement that, in the opinion of each such
individual, he has made such examination or investigation as
is necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been
complied with; and
<PAGE>
8
(d) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been
complied with.
Section 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one
or several documents.
Any certificate or opinion of an officer of the Company
may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless
such officer knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with
respect to the matters upon which his certificate or opinion is
based are erroneous. Any such certificate or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect
to such factual matters is in the possession of the Company,
unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Any certificate, statement or opinion of an officer of
the Company or of counsel may be based, insofar as it relates to
accounting matters, upon a certificate or opinion of or
representations by an accountant or firm of accountants in the
employ of the Company, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or
representations with respect to the accounting matters upon which
his certificate, statement or opinion may be based as aforesaid
are erroneous, or in the exercise of reasonable care should know
that the same are erroneous. Any certificate or opinion of any
independent firm of public accountants filed with the Trustee
shall contain a statement that such firm is independent.
Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates,
statements, opinions or other instruments under this Agreement,
they may, but need not, be consolidated and form one instrument.
<PAGE>
9
Section 104. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this
Agreement to be given or taken by Holders may be embodied in and
evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed
in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Agreement
and (subject to Section 401) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person
of any such instrument or writing may be proved in any reasonable
manner which the Trustee deems sufficient.
(c) The ownership of CVRs shall be proved by the
Security Register.
(d) At any time prior to (but not after) the
evidencing to the Trustee, as provided in this Section 104, of
the taking of any action by the Holders of the CVRs specified in
this Agreement in connection with such action, any Holder of a
CVR the serial number of which is shown by the evidence to be
included among the serial numbers of the CVRs the Holders of
which have consented to such action may, by filing written notice
at the Corporate Trust Office and upon proof of holding as
provided in this Section 104, revoke such action so far as
concerns such CVR. Any request, demand, authorization,
direction, notice, consent, waiver or other action by the Holder
of any CVR shall bind every future Holder of the same CVR or the
Holder of every CVR issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof, in respect of
anything done, suffered or omitted to be done by the Trustee, any
Paying Agent or the Company in reliance thereon, whether or not
notation of such action is made upon such CVR.
Section 105. Notices, etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or
permitted by this Agreement to be made upon, given or furnished
to, or filed with:
<PAGE>
10
(a) the Trustee by any Holder or by the Company shall
be sufficient for every purpose hereunder if made, given,
furnished or filed, in writing, to or with the Trustee at
its Corporate Trust Office, Attention: Indenture Trust
Division; or
(b) the Company by the Trustee or by any Holder shall
be sufficient for every purpose hereunder if in writing and
mailed, first-class postage prepaid, to the Company
addressed to it at 1515 Broadway, New York, New York 10036,
Attention: Treasury Department, or at any other address
previously furnished in writing to the Trustee by the
Company.
Section 106. Notice to Holders; Waiver.
-------------------------
Where this Agreement provides for notice to Holders of
any event, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such
event, at his address as it appears in the Security Register, not
later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice
with respect to other Holders. Where this Agreement provides for
notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to
the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail
service or by reason of any other cause, it shall be
impracticable to mail notice of any event as required by any
provision of this Agreement, then any method of giving such
notice as shall be satisfactory to the Trustee shall be deemed to
be a sufficient giving of such notice.
Section 107. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts
with another provision hereof which is required to be included in
this Agreement by any of the provisions of the Trust Indenture
Act, such required provision shall control.
<PAGE>
11
Section 108. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table
of Contents are for convenience only and shall not affect the
construction hereof.
Section 109. Successors and Assigns.
----------------------
All covenants and agreements in this Agreement by the
Company shall bind its successors and assigns, whether so
expressed or not.
Section 110. Benefits of Agreement.
---------------------
Nothing in this Agreement or in the CVRs, express or
implied, shall give to any Person (other than the parties hereto
and their successors hereunder, any Paying Agent and the Holders)
any benefit or any legal or equitable right, remedy or claim
under this Agreement or under any covenant or provision herein
contained, all such covenants and provisions being for the sole
benefit of the parties hereto and their successors and of the
Holders.
Section 111. Governing Law.
-------------
This Agreement and the CVRs shall be governed by and
construed in accordance with the laws of the State of New York.
Section 112. Legal Holidays.
--------------
In the event that the Maturity Date, the First Extended
Maturity Date, the Second Extended Maturity Date, the Disposition
Payment Date or the Default Payment Date, as the case may be,
shall not be a Business Day, then (notwithstanding any provision
of this Agreement or the CVRs to the contrary) payment on the
CVRs need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made
on the Maturity Date, the First Extended Maturity Date, the
Second Extended Maturity Date, the Disposition Payment Date or
the Default Payment Date, as the case may be.
Section 113. Separability Clause.
-------------------
In case any provision in this Agreement or in the CVRs
shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
<PAGE>
12
ARTICLE TWO
CVR FORMS
Section 201. Forms Generally.
---------------
The CVRs and the Trustee's certificate of
authentication shall be in substantially the forms set forth in
this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted
by this Agreement and may have such letters, numbers or other
marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any
securities exchange or as may be required by law or any rule or
regulation pursuant thereto, all as may be determined by officers
executing such CVRs, as evidenced by their execution of the CVRs.
Any portion of the text of any CVR may be set forth on the
reverse thereof, with an appropriate reference thereto on the
face of the CVR.
The definitive CVRs shall be printed, lithographed or
engraved on steel engraved borders or produced by any combination
of these methods or may be produced in any other manner permitted
by the rules of any securities exchange on which the CVRs may be
listed, all as determined by the officers executing such CVRs, as
evidenced by their execution of such CVRs.
Section 202. Form of Face of CVR.
-------------------
VIACOM INC.
No. Certificate for Contingent Value Rights
This certifies that
or registered assigns (the "Holder"), is the registered holder of
the number of Contingent Value Rights ("CVRs") set forth above.
Each CVR entitles the Holder, subject to the provisions contained
herein and in the Agreement referred to on the reverse hereof, to
a payment from Viacom Inc., a Delaware corporation (the
"Company"), in an amount and in the form determined pursuant to
the provisions set forth on the reverse hereof and as more fully
described in the Agreement. Such payment shall be made on the
Maturity Date, the First Extended Maturity Date, if the Maturity
Date shall be extended by the Company in its sole discretion, the
Second Extended Maturity Date, if the First Extended Maturity
Date shall be extended by the Company in its sole discretion or
the Default Payment Date or the Disposition Payment Date upon the
<PAGE>
13
occurrence of an Event of Default or a Disposition, as the case
may be, each as defined in the Agreement referred to on the
reverse hereof.
Payment of any amounts pursuant to this CVR Certificate
shall be made only upon presentation of this CVR Certificate by
the Holder hereof, at the office or agency of the Company
maintained for that purpose. Such payment shall be made in the
Borough of Manhattan, The City of New York, or at any other
office or agency maintained by the Company for such purpose
either, in the Company's sole discretion, (i) in such coin or
currency of the United States of America as at the time is legal
tender for the payment of public and private debts; provided,
--------
however, the Company may pay such amounts by its check payable in
- -------
such money or (ii) by delivering the equivalent fair market value
(as determined by an Independent Financial Expert) of securities
of the Company, including, without limitation, common stock or
preferred stock, options or warrants therefor, other securities
convertible into or exchangeable for common stock or preferred
stock, notes, debentures, or any other security or any
combination of the foregoing. Harris Trust Company of New York
has been appointed as Paying Agent in the Borough of Manhattan,
The City of New York.
Reference is hereby made to the further provisions of
this CVR Certificate set forth on the reverse hereof, which
further provisions shall for all purposes have the same effect as
if set forth at this place.
Unless the certificate of authentication hereon has
been duly executed by the Trustee referred to on the reverse
hereof by manual signature, this CVR Certificate shall not be
entitled to any benefit under the Agreement, or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed under its corporate seal.
Dated: VIACOM INC.
By
----------------------------
Attest:
[SEAL]
<PAGE>
14
- ------------------------------
Authorized Signature
Section 203. Form of Reverse of CVR.
----------------------
This CVR Certificate is issued under and in accordance
with the Contingent Value Rights Agreement, dated as of
----------
, 1994 (the "Agreement"), between the Company and Harris
- -------
Trust and Savings Bank, trustee (the "Trustee", which term
includes any successor Trustee under the Agreement), and is
subject to the terms and provisions contained in the Agreement,
to all of which terms and provisions the Holder of this CVR
Certificate consents by acceptance hereof. The Agreement is
hereby incorporated herein by reference and made a part hereof.
Reference is hereby made to the Agreement for a full statement of
the respective rights, limitations of rights, duties, obligations
and immunities thereunder of the Company, the Trustee and the
holders of the CVRs. Copies of the Agreement can be obtained by
contacting the Trustee.
Subject to adjustment pursuant to Section 301(k) of the
Agreement, the Company shall pay to the Holder hereof on
---------
, 1995 (the "Maturity Date"), unless the Company
- --------------
shall, in its sole discretion, extend the Maturity Date to
-------
, 1996 (the "First Extended Maturity Date"), then on the
- ---------
First Extended Maturity Date, or unless the Company shall, in its
sole discretion, extend the First Extended Maturity Date to
, 1997 (the "Second Extended
- --------------------------------
Maturity Date"), then on the Second Extended Maturity Date for
each CVR represented hereby an amount, if any, as determined by
the Company, by which the Target Price, as defined below, exceeds
the greater of (i) the Current Market Value, as defined below,
and (ii) the Minimum Price, as defined below. Such determination
by the Company absent manifest error shall be final and binding
on the Company and the Holder.
Such amount, if any, shall be payable by the Company,
either, in the Company's sole discretion, (i) in such coin or
currency of the United States of America as at the time is legal
tender for the payment of public and private debts; provided,
--------
however, the Company may pay such amounts by its check payable in
- -------
such money or (ii) by delivering the equivalent fair market value
(as determined by an Independent Financial Expert) of securities
of the Company, including, without limitation, common stock or
preferred stock, options or
<PAGE>
15
warrants therefor, other securities convertible into or
exchangeable for common stock or preferred stock, notes,
debentures, or any other security or any combination of the
foregoing. Such securities shall be offered pursuant to
registration under the Securities Act of 1933, as amended, or
under an exemption thereof and the type and the terms of such
securities shall be at the Company's sole discretion. Harris
Trust Company of New York has been appointed as Paying Agent in
the Borough of Manhattan, The City of New York.
The Company may at its option extend the Maturity Date
to the First Extended Maturity Date and the Company may at its
option extend the First Extended Maturity Date to the Second
Extended Maturity Date. Such option shall be exercised by (i)
publishing notice of such extension in the Authorized Newspaper
and (ii) furnishing notice to the Holder hereof and the Trustee
of such extension, in each case, not less than one business day
preceding the Maturity Date or the First Extended Maturity Date,
as the case may be; provided, however, that no defect in any such
-------- -------
notice shall affect the validity of the extension of the Maturity
Date to the First Extended Maturity Date or the validity of the
extension of the First Extended Maturity Date to the Second
Extended Maturity Date, and that any notice when published to the
Holder hereof in the aforesaid manner shall be conclusively
deemed to have been received by the Holder hereof whether or not
actually received by the Holder.
Upon the consummation of a Disposition, as defined
below, the Company shall pay to the Holder hereof (in cash or
securities of the Company, at the Company's sole option) for each
CVR represented hereby an amount, if any, as determined by the
Company, by which the Discounted Target Price exceeds the greater
of (i) the fair market value, as determined by an Independent
Financial Expert, of the consideration, if any, received for each
share of the Class B Common Stock by the holder thereof as a
result of such Disposition and assuming that such holder did not
exercise any right of appraisal granted under law with respect to
such Disposition and (ii) the Minimum Price. Such determinations
by the Company and such Independent Financial Expert absent
manifest error shall be final and binding on the Company and the
Holder. Such payment shall be made on the date (the "Disposition
Payment Date") established by the Company, which in no event
shall be more than 30 days after the date on which the
Disposition was consummated. As soon as practicable after the
Disposition, the Company shall give the Holder hereof and the
Trustee notice of such Disposition and the Disposition Payment
Date.
If an Event of Default occurs and is continuing, either
the Trustee or the Holders holding an aggregate of at least 25%
of the Outstanding CVRs, by notice to the Company (and to the
Trustee if given by the Holders), may declare the CVRs due and
payable, and upon such declaration, the Company shall pay to the
Holder (in cash or securities of the Company, at the Company's
sole option) for each CVR held by the Holder
<PAGE>
16
the Default Amount with interest at the Default Interest Rate
from the Default Payment Date through the date payment is made or
duly provided for.
In the event that the Company determines that no amount
is payable on the CVRs to the Holder on the Maturity Date, the
First Extended Maturity Date, the Second Extended Maturity Date
or the Disposition Payment Date, as the case may be, the Company
shall give to the Holder and the Trustee notice of such
determination. Upon making such determination, absent manifest
error, the CVR Certificates shall terminate and become null and
void and the Holder hereof shall have no further rights with
respect hereto. The failure to give such notice or any defect
therein shall not affect the validity of such determination.
Notwithstanding any provision of the Agreement or of
this CVR Certificate to the contrary, other than in the case of
interest on the Default Amount, no interest shall accrue on any
amounts payable on the CVRs to the Holder.
"Authorized Newspaper" means The Wall Street Journal
-----------------------
(Eastern Edition), or if The Wall Street Journal (Eastern
-----------------------
Edition) shall cease to be published, or, if the publication or
general circulation of The Wall Street Journal (Eastern Edition)
-----------------------
shall be suspended for whatever reason, such other English
language newspaper as is selected by the Company with general
circulation in The City of New York, New York.
"Current Market Value" means (i) with respect to the
Maturity Date and the First Extended Maturity Date, the median of
the averages of the closing prices on the American Stock Exchange
(or such other exchange on which shares of Class B Common Stock
are then listed) of shares of Class B Common Stock during each 20
consecutive trading day period that both begins and ends in the
Valuation Period and (ii) with respect to the Second Extended
Maturity Date, the average of the closing prices on the American
Stock Exchange (or such other exchange on which such shares are
then listed) of the Class B Common Stock during the 20
consecutive trading days in the Valuation Period which yield the
highest such average of the closing prices for any such period
within the Valuation Period.
"Default Amount" means the amount, if any, by which the
Discounted Target Price exceeds the Minimum Price.
"Discounted Target Price" means (a) if a Disposition
or an Event of Default shall occur prior to the Maturity Date,
$48.00 discounted from the Maturity Date back to the Disposition
Payment Date or the Default Payment Date, as the case may be, at
a per annum rate of 8%; (b) if a Disposition or an Event of
Default shall occur after the Maturity Date but prior to the
First Extended Maturity Date, $51.00 discounted from the First
Extended
<PAGE>
17
Maturity Date back to the Disposition Payment Date or Default
Payment Date, as the case may be, at a per annum rate of 8% or
(c) if a Disposition or an Event of Default shall occur after the
First Extended Maturity Date but prior to the Second Extended
Maturity Date, $55.00 discounted from the Second Extended
Maturity Date back to the Disposition Payment Date or Default
Payment Date, as the case may be, at a per annum rate of 8%. In
each case, upon each occurrence of an event specified in Section
301(k) of the Agreement, such amounts, as they may have been
previously adjusted, shall be adjusted pursuant to Section 301(k)
of the Agreement.
"Disposition" means (i) a merger, consolidation or
other business combination involving the Company as a result of
which no shares of Class B Common Stock shall remain outstanding,
(ii) a sale, transfer or other disposition, in one or a series of
transactions, of all or substantially all of the assets of the
Company or (iii) a reclassification of Class B Common Stock as
any other capital stock of the Company or any other Person;
provided, however, that "Disposition" shall not mean a merger of
- -------- -------
the Company and any wholly owned subsidiary of the Company.
"Independent Financial Expert" means an independent
nationally recognized investment banking firm.
The "Minimum Price" means (i) at the Maturity Date,
$36.00, (ii) at the First Extended Maturity Date, $37.00 and
(iii) at the Second Extended Maturity Date, $38.00. In each
case, upon each occurrence of an event specified in Section
301(k) of the Agreement, such amounts, as they may have been
previously adjusted, shall be adjusted pursuant to Section 301(k)
of the Agreement.
The "Target Price" means (a) at the Maturity Date,
$48.00, (b) at the First Extended Maturity Date, $51.00 and (c)
at the Second Extended Maturity Date, $55.00. In each case, upon
each occurrence of an event specified in Section 301(k) of the
Agreement, such amounts, as they may have been previously
adjusted, shall be adjusted pursuant to Section 301(k) of the
Agreement.
"Valuation Period" means the 60 trading day period
immediately preceding (and including) the Maturity Date, the
First Extended Maturity Date or the Second Extended Maturity
Date, as the case may be.
The Agreement permits, with certain exceptions as
therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the
holders of CVRs under the Agreement at any time by the Company
and the Trustee with the consent of the holders of a majority of
the CVRs at the time outstanding.
<PAGE>
18
No reference herein to the Agreement and no provision
of this CVR Certificate or of the Agreement shall alter or impair
the obligation of the Company, which is absolute and
unconditional, to pay any amounts determined pursuant to the
terms hereof and of the Agreement at the times, place, and
amount, and in the cash or securities of the Company, herein
prescribed.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of the CVRs
represented by this CVR Certificate is registerable on the
Security Register of the Company, upon surrender of this CVR
Certificate for registration of transfer at the office or agency
of the Company maintained for such purpose in The City of New
York or Chicago, Illinois, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon
one or more new CVR Certificates, for the same amount of CVRs,
will be issued to the designated transferee or transferees. The
Company hereby initially designates the office of Harris Trust
Company of New York, 77 Water Street, 4th Floor, New York, New
York 10005 as the office for registration of transfer of this
CVR Certificate.
As provided in the Agreement and subject to certain
limitations therein set forth, this CVR Certificate is
exchangeable for one or more CVR Certificates representing the
same number of CVRs as represented by this CVR Certificate as
requested by the Holder surrendering the same.
No service charge will be made for any registration of
transfer or exchange of CVRs, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to the time of due presentment of this CVR
Certificate for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this CVR Certificate is registered as the
owner hereof for all purposes, and neither the Company, the
Trustee nor any agent shall be affected by notice to the
contrary.
All capitalized terms used in this CVR Certificate
without definition shall have the meanings assigned to them in
the Agreement.
<PAGE>
19
Section 204. Form of Trustee's Certificate of
--------------------------------
Authentication.
- --------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the CVR Certificates referred to in the
within-mentioned Agreement.
HARRIS TRUST AND SAVINGS BANK
Trustee
By
----------------------------
Authorized Officer
ARTICLE THREE
THE CVRs
Section 301. Title and Terms.
---------------
(a) The aggregate number of CVR Certificates which may
be authenticated and delivered under this Agreement is limited to
the number equal to 0.93065 multiplied by the number of shares of
Paramount Common Stock issued and outstanding immediately prior
to the Effective Time (other than shares of Paramount Common
Stock in the treasury of Paramount and shares of Paramount Common
Stock owned by the Company or any direct or indirect wholly owned
subsidiary of the Company or of Paramount and other than
Dissenting Shares (as defined in the Merger Agreement)), except
for CVRs authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other CVRs
pursuant to Section 304, 305, 306 or 606.
(b) The CVRs shall be known and designated as the
"Contingent Value Rights" of the Company.
(c) Subject to adjustment pursuant to Section 301(k),
the Company shall pay to each Holder on the Maturity Date, unless
the Company shall, in its sole discretion, extend the Maturity
Date to the First Extended Maturity Date, then on the First
Extended Maturity Date or unless the Company shall, in its sole
discretion, extend the First Extended
<PAGE>
20
Maturity Date to the Second Extended Maturity Date, then on the
Second Extended Maturity Date, for each CVR held by such Holder
an amount, if any, as determined by the Company, by which the
Target Price exceeds the greater of (i) the Current Market Value
and (ii) the Minimum Price. Such determinations by the Company
absent manifest error shall be final and binding on the Company
and the Holders.
(d) The Company may at its option extend the Maturity
Date to the First Extended Maturity Date and the Company may at
its option extend the First Extended Maturity Date to the Second
Extended Maturity Date. Such option shall be exercised by (i)
publishing notice of such extension in the Authorized Newspaper,
and (ii) furnishing notice, in the form set forth below, to the
Trustee and each Holder of such extension, in each case, not less
than one business day prior to the Maturity Date or the First
Extended Maturity Date, as the case may be; provided, however,
-------- -------
that no defect in any such notice shall affect the validity of
the extension of the Maturity Date to the First Extended Maturity
Date or the validity of the extension of the First Extended
Maturity Date to the Second Extended Maturity Date, and that any
notice when published and mailed to the Trustee and a Holder in
the aforesaid manner shall be conclusively deemed to have been
received by such Holder whether or not actually received by such
Holder.
* * * * * * *
<PAGE>
21
VIACOM INC.
CONTINGENT PAYMENT RIGHTS
[Date]
NOTICE OF EXTENSION OF MATURITY
DATE TO
---------------------------------------------
NOTICE IS HEREBY GIVEN THAT, pursuant to Section 301 of
the Contingent Value Rights Agreement, dated as of
---------------
(the "Agreement"), between Viacom Inc. (the "Company") and
-------
, as trustee (the "Trustee"), the Company has
- -----------------
extended the [Maturity Date] [First Extended Maturity Date] on
the Contingent Value Rights to (the "[First Extended
------------
Maturity Date]" "[Second Extended Maturity Date"]). All terms
used in this Notice which are defined in the Agreement shall have
the meanings assigned to them in the Agreement.
The amount payable (in cash or securities of the
Company, at the Company's sole option) to each Holder on the
[First Extended Maturity Date] [Second Extended Maturity Date]
for each CVR held by such Holder shall be equal to an amount, if
any, by which the Target Price exceeds the greater of (i) the
Current Market Value and (ii) the Minimum Price.
Upon the consummation of a Disposition, the Company
shall pay to each Holder (in cash or securities of the Company,
at the Company's sole option) for each CVR held by such Holder an
amount, if any, as determined by the Company, by which the
Discounted Target Price exceeds the greater of (i) the fair
market value, as determined by an Independent Financial Expert of
the consideration, if any, received for each share of Class B
Common Stock by the holder thereof as a result of such
Disposition and assuming that such holder did not exercise any
right of appraisal granted under law with respect to such
Disposition and (ii) the Minimum Price.
If an Event of Default occurs and is continuing, either
the Trustee or the Holders holding an aggregate of at least 25%
of the Outstanding CVRs, by notice to the Company (and to the
Trustee if given by the Holders), may declare the CVRs due and
payable, and upon such declaration, the Company shall pay to the
Holder (in cash or securities of the Company, at the Company's
sole option) for each CVR held by the Holder the Default Amount
with interest at the Default Interest Rate from the Default
Payment Date through the date payment is made or duly provided
for.
<PAGE>
22
The Target Price is currently $ ,
the Discounted Target Price is currently $
(which price shall be discounted to the Disposition Payment
Date or the Default Payment Date, as the case may be, at a per
annum rate of 8%, and the Minimum Price is currently $
. The Target Price, the Discounted Target Price and
the Minimum Price are subject to adjustment pursuant to Section
301(k) of the Agreement.
VIACOM INC.
* * * * * * *
(e) Upon the consummation of a Disposition, the
Company shall pay (in the manner provided in Section 307) to each
Holder for each CVR held by such Holder an amount, if any, as
determined by the Company, by which the Discounted Target Price
exceeds the greater of (i) the fair market value, as determined
by an Independent Financial Expert, of the consideration, if any,
received for each share of Class B Common Stock by the holder
thereof as a result of such Disposition and assuming that such
holder did not exercise any right of appraisal granted under law
with respect to such Disposition and (ii) the Minimum Price.
Such determinations by the Company and such Independent Financial
Expert absent manifest error shall be final and binding on the
Company and the Holders. Such payment shall be made on the date
(the "Disposition Payment Date") established by the Company,
which in no event shall be more than 30 days after the date on
which the Disposition was consummated.
(f) As soon as practicable, the Company shall give the
Trustee and each Holder notice of such Disposition and the date
on which the payment referred to in Section 301(e) shall be made.
(g) The current market value per share of Class B
Common Stock (the "Current Market Value") shall be: (i) with
respect to the Maturity Date and the First Extended Maturity
Date, the median of the averages of the closing prices on the
American Stock Exchange (or such other exchange on which such
shares are then listed) of shares of the Class B Common Stock
during each 20 consecutive trading day period that both begins
and ends in the Valuation Period and (ii) with respect to the
Second Extended Maturity Date, the average of the closing prices
on the American Stock Exchange (or such other exchange on which
such shares are then listed) of the Class B Common Stock during
the 20 consecutive trading days in the Valuation Period which
yield the highest such average of the closing prices for any such
20 consecutive trading day period within the Valuation Period.
<PAGE>
23
"Valuation Period" means the 60 trading day period
immediately preceding (and including) the Maturity Date, the
First Extended Maturity Date or the Second Extended Maturity
Date, as the case may be.
The daily market price for each such trading day shall
be: (A) if the shares of Class B Common Stock are listed or
admitted to trading on any securities exchange, the closing
price, regular way, on such day on the principal securities
exchange on which shares of Class B Common Stock are traded, (B)
if the shares of Class B Common Stock are not then listed or
admitted to trading on any securities exchange, the last reported
sale price on such day, or if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as
reported by a reputable quotation source designated by the
Company and (C) if the shares of Class B Common Stock are not
then listed or admitted to trading on any securities exchange and
no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked
prices on the last day on which such information was available,
as reported in the Authorized Newspaper.
(h) In the event the Current Market Value or fair
market value, as the case may be, is determined by an Independent
Financial Expert, the Company shall cause the Independent
Financial Expert to deliver to the Company, with a copy to the
Trustee, a value report (the "Value Report") stating the methods
of valuation considered or used and, if applicable, the per share
value of the Common Stock, and containing a statement as to the
nature and scope of the examination or investigation upon which
the determination of value was made. The Trustee shall make
available a copy of the Value Report to each Holder who requests
such Value Report. The determination of the Independent Financial
Expert as set forth in the Valuation Report absent manifest error
shall be final and binding on the Company and the Holders.
(i) Notwithstanding any provision of this Agreement or
the CVR Certificates to the contrary, other than in the case of
interest on the Default Amount, no interest shall accrue on any
amounts payable on the CVRs to any Holder.
(j) In the event that the Company determines that no
amount is payable on the CVRs to the Holders on the Maturity
Date, the First Extended Maturity Date, the Second Extended
Maturity Date or the Disposition Payment Date, as the case may
be, the Company shall give to the Trustee and each Holder notice
of such determination. Upon making such determination, absent
manifest error, the CVR Certificates shall terminate and become
null and void and the Holders thereof shall have no further
rights with respect thereto. The failure to give such notice or
any defect therein shall not affect the validity of such
determination.
<PAGE>
24
(k) In the event the Company shall in any manner
subdivide (by stock split, stock dividend or otherwise) or
combine (by reverse stock split or otherwise) the number of
outstanding shares of Class B Common Stock, the Company shall
similarly subdivide or combine the CVRs and shall appropriately
adjust the Discounted Target Price, the Target Price and the
Minimum Price. Whenever an adjustment is made as provided in
this Section 301(k), the Company shall (i) promptly prepare a
certificate setting forth such adjustment and a brief statement
of the facts accounting for such adjustment, (ii) promptly file
with the Trustee a copy of such certificate and (iii) mail a
brief summary thereof to each Holder. The Trustee shall be fully
protected in relying on any such certificate and on any
adjustment therein contained. Such adjustment absent manifest
error shall be final and binding on the Company and the Holders.
Each outstanding CVR Certificate shall thenceforth represent that
number of adjusted CVRs necessary to reflect such subdivision or
combination, and reflect the adjusted Discounted Target Price,
Target Price and Minimum Price.
Section 302. Registrable Form.
----------------
The CVRs shall be issuable only in registered form.
Section 303. Execution, Authentication, Delivery and
---------------------------------------
Dating.
- ------
The CVRs shall be executed on behalf of the Company by
its chairman of the Board of Directors or its president or any
vice president or its treasurer, under its corporate seal which
may, but need not, be attested. The signature of any of these
officers on the CVRs may be manual or facsimile.
CVRs bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of such CVRs or did not hold
such offices at the date of such CVRs.
At any time and from time to time after the execution
and delivery of this Agreement, the Company may deliver CVRs
executed by the Company to the Trustee for authentication,
together with a Company Order for the authentication and delivery
of such CVRs; and the Trustee in accordance with such Company
Order shall authenticate and deliver such CVRs as provided in
this Agreement and not otherwise.
Each CVR shall be dated the date of its authentication.
No CVR shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose unless there
appears on such CVR a certificate of authentication
<PAGE>
25
substantially in the form provided for herein duly executed by
the Trustee by manual signature of an authorized officer, and
such certificate upon any CVR shall be conclusive evidence, and
the only evidence, that such CVR has been duly authenticated and
delivered hereunder and that the Holder is entitled to the
benefits of this Agreement.
Section 304. Temporary CVRs.
--------------
Pending the preparation of definitive CVRs, the Company
may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary CVRs which are printed,
lithographed, typewritten, mimeographed or otherwise produced,
substantially of the tenor of the definitive CVRs in lieu of
which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers
executing such CVRs may determine with the concurrence of the
Trustee. Temporary CVRs may contain such reference to any
provisions of this Agreement as may be appropriate. Every
temporary CVR shall be executed by the Company and be
authenticated by the Trustee upon the same conditions and in
substantially the same manner, and with like effect, as the
definitive CVRs.
If temporary CVRs are issued, the Company will cause
definitive CVRs to be prepared without unreasonable delay. After
the preparation of definitive CVRs, the temporary CVRs shall be
exchangeable for definitive CVRs upon surrender of the temporary
CVRs at the office or agency of the Company designated for such
purpose pursuant to Section 702, without charge to the Holder.
Upon surrender for cancellation of any one or more temporary CVRs
the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like amount of definitive CVRs.
Until so exchanged, the temporary CVRs shall in all respects be
entitled to the same benefits under this Agreement as definitive
CVRs.
Section 305. Registration, Registration of Transfer
--------------------------------------
and Exchange.
- ------------
The Company shall cause to be kept at the Corporate
Trust Office of the Trustee a register (the register maintained
in such office and in any other office or agency designated
pursuant to Section 702 being herein sometimes referred to as the
"Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for
the registration of CVRs and of transfers of CVRs. The Trustee
is hereby initially appointed "Security Registrar" for the
purpose of registering CVRs and transfers of CVRs as herein
provided.
Upon surrender for registration of transfer of any CVR
at the office or agency of the Company designated pursuant to
Section 702, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated
transferee or transferees,
<PAGE>
26
one or more new CVR Certificates representing the same aggregate
number of CVRs represented by the CVR Certificate so surrendered
that are to be transferred and the Company shall execute and the
Trustee shall authenticate and deliver, in the name of the
transferor, one or more new CVR Certificates represented by such
CVR Certificate that are not to be transferred.
At the option of the Holder, CVR Certificates may be
exchanged for other CVR Certificates that represent in the
aggregate the same number of CVRs as the CVR Certificates
surrendered at such office or agency. Whenever any CVR
Certificates are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the CVR
Certificates which the Holder making the exchange is entitled to
receive.
All CVRs issued upon any registration of transfer or
exchange of CVRs shall be the valid obligations of the Company,
evidencing the same right, and entitled to the same benefits
under this Agreement, as the CVRs surrendered upon such
registration of transfer or exchange.
Every CVR presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or
the Security Registrar) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the
Company and the Security Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of CVRs, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any registration of
transfer or exchange of CVRs, other than exchanges pursuant to
Section 304 or not involving any transfer.
Section 306. Mutilated, Destroyed, Lost and Stolen
-------------------------------------
CVRs.
- ----
If (a) any mutilated CVR is surrendered to the Trustee,
or (b) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any CVR, and
there is delivered to the Company and the Trustee such security
or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the
Trustee that such CVR has been acquired by a bona fide purchaser,
the Company shall execute and upon its written request the
Trustee shall authenticate and deliver, in exchange for any such
mutilated CVR or in lieu of any such destroyed, lost or stolen
CVR, a new CVR Certificate of like tenor and amount of CVRs,
bearing a number not contemporaneously outstanding.
<PAGE>
27
In case any such mutilated, destroyed, lost or stolen
CVR has become or is to become due and payable within 15 days,
the Company in its discretion may, instead of issuing a new CVR
Certificate, pay such CVR on the Maturity Date, the First
Extended Maturity Date, the Second Extended Maturity Date, the
Disposition Payment Date or the Default Payment Date, as the case
may be.
Upon the issuance of any new CVRs under this Section,
the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith.
Every new CVR issued pursuant to this Section in lieu
of any destroyed, lost or stolen CVR shall constitute an original
additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen CVR shall be at any time
enforceable by anyone, and shall be entitled to all benefits of
this Agreement equally and proportionately with any and all other
CVRs duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen CVRs.
Section 307. Presentation of CVR Certificate.
-------------------------------
Payment of any amounts on the CVRs shall be made only
upon presentation by the Holder thereof at the office or agency
of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, or the Corporate Trust Office
and at any other office or agency maintained by the Company for
such purpose. Such payment shall be made, either, in the
Company's sole discretion, (i) in such coin or currency of the
United States of America as at the time is legal tender for the
payment of public and private debts; provided, however, the
-------- -------
Company may pay such amounts by its check payable in such money
or (ii) by the equivalent fair market value (as determined by an
Independent Financial Expert) of securities of the Company,
including, without limitation, common stock or preferred stock,
options or warrants therefor, other securities convertible into
or exchangeable for common stock or preferred stock, notes,
debentures, or any other security or any combination of the
foregoing. Such securities shall be offered pursuant to
registration under the Securities Act or under an exemption
thereof and the type and the terms of such securities shall be at
the Company's sole discretion.
<PAGE>
28
Section 308. Persons Deemed Owners.
---------------------
Prior to the time of due presentment for registration
of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name any CVR
is registered as the owner of such CVR for the purpose of
receiving payment on such CVR and for all other purposes
whatsoever, whether or not such CVR be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Section 309. Cancellation.
------------
All CVRs surrendered for payment, registration of
transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be
promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any CVRs previously authenticated
and delivered hereunder which the Company may have acquired in
any manner whatsoever, and all CVRs so delivered shall be
promptly cancelled by the Trustee. No CVRs shall be
authenticated in lieu of or in exchange for any CVRs cancelled as
provided in this Section, except as expressly permitted by this
Agreement. All cancelled CVRs held by the Trustee shall be
disposed of as directed by a Company Order.
ARTICLE FOUR
THE TRUSTEE
Section 401. Certain Duties and Responsibilities.
-----------------------------------
(a) With respect to the Holders of CVRs issued
hereunder, the Trustee, prior to the occurrence of an Event of
Default with respect to the CVRs and after the curing or waiving
of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set
forth in this Agreement. In case an Event of Default with
respect to the CVRs has occurred (which has not been cured or
waived), the Trustee shall exercise such of the rights and powers
vested in it by this Agreement, and use the same degree of care
and skill in their exercise, as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
(b) In the absence of bad faith on its part, prior to
the occurrence of an Event of Default and after the curing or
waiving of all such Events of Default which may have occurred,
the Trustee may conclusively rely, as to the truth of the
statements and the
<PAGE>
29
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Agreement; but in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful
misconduct, except that
------
(1) this Subsection (c) shall not be construed to
limit the effect of Subsections (a) and (b) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(3) no provision of this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it; and
(4) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders pursuant to
Section 809 relating to the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee, under this Agreement.
(d) Whether or not therein expressly so provided,
every provision of this Agreement relating to the conduct or
affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.
<PAGE>
30
Section 402. Certain Rights of Trustee.
-------------------------
The Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement, and
no implied covenants or obligations shall be read into this
Agreement against the Trustee. Subject to the provisions of
Trust Indenture Act Sections 315(a) through 315(d) and Section
401 hereof:
(a) the Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request
or Company Order and any resolution of the Board of
Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Agreement
the Trustee shall deem it desirable that a matter be proved
or established prior to taking, suffering or omitting any
action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Agreement at the request or direction of any of the Holders
pursuant to this Agreement, unless such Holders shall have
offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval,
appraisal, bond, debenture, note, coupon, security, or other
paper or document unless requested in writing to do so by
the Holders of not less than a majority in aggregate number
of the CVRs then Outstanding; provided that, if the payment
--------
within a reasonable time to the Trustee of
<PAGE>
31
the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of
the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such
expenses or liabilities as a condition to proceeding; the
reasonable expenses of every such investigation shall be
paid by the Company or, if paid by the Trustee or any
predecessor Trustee, shall be repaid by the Company upon
demand; and
(g) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys and the
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed
with due care by it hereunder.
(h) the permissive rights of the Trustee to do things
enumerated in this Indenture shall not be construed as a
duty and the Trustee shall be liable for its negligence, bad
faith or willful misconduct;
(i) the Trustee shall not be required to give any note
or surety in respect of the execution of the said trusts and
powers or otherwise in respect of the premises; and
(j) except for (i) a default under Section 801(a) and
(ii) any other event of which the Trustee has "actual
knowledge," which event, with the giving of notice or the
passage of time or both, would constitute an Event of
Default, the Trustee shall not be deemed to have notice of
any default or event unless specifically notified in writing
of such event by the Company or the Holders of not less than
25% in aggregate number of CVRs Outstanding; as used herein,
the term "actual knowledge" means the actual fact or
statement of knowing, without any duty to make any
investigation without regard thereto.
No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if
it shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
Section 403. Not Responsible for Recitals or Issuance
----------------------------------------
of CVRs.
- -------
The recitals contained herein and in the CVRs, except
the Trustee's certificates of authentication, shall be taken as
the statements of the Company, and the Trustee assumes
<PAGE>
32
no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this
Agreement or of the CVRs. The Trustee shall not be accountable
for the use or application by the Company of CVRs or the proceeds
thereof.
Section 404. May Hold CVRs.
-------------
The Trustee, any Paying Agent, Security Registrar or
any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of CVRs, and, subject
to Sections 407 and 412, may otherwise deal with the Company with
the same rights it would have if it were not Trustee, Paying
Agent, Security Registrar or such other agent.
Section 405. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not
be segregated from other funds except to the extent required by
law. The Trustee shall be under no liability for interest on any
money received by it hereunder.
Section 406. Compensation, Reimbursement and
-------------------------------
Indemnification of the Trustee.
- ------------------------------
The Company agrees
(a) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder
(which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee of an express
trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Agreement
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it
harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of
this trust, including the costs and expenses of defending
itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties
hereunder, including the enforcement of this Section 406.
<PAGE>
33
When the Trustee incurs expenses or renders services
after a Default specified in Section 801(c) or 801(d) occurs, the
reasonable expenses and the compensation for services (including
the reasonable fees and expenses of its agents and counsel) are
intended to constitute expenses of administration under any
bankruptcy law.
Section 407. Disqualification; Conflicting Interests.
---------------------------------------
The Trustee shall be subject to the provisions of
Section 310(b) of the Trust Indenture Act during the period of
time provided for therein. Nothing herein shall prevent the
Trustee from filing with the Commission the application referred
to in the penultimate paragraph of Section 310(b) of the Trust
Indenture Act.
Section 408. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which
shall be a corporation organized and doing business under the
laws of the United States of America or of any State, authorized
under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, subject to
supervision or examination by Federal or State authority and, to
the extent there is such an institution eligible and willing to
serve, having an office or agency in The City of New York or the
City of Chicago. If such corporation publishes reports of
condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section,
it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 409. Resignation and Removal; Appointment of
---------------------------------------
Successor.
- ---------
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee under Section 410.
(b) The Trustee, or any trustee or trustees hereafter
appointed, may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
<PAGE>
34
(c) The Trustee may be removed at any time by (i) the
Company, by a Board Resolution or (ii) an Act of the Holders of a
majority of the Outstanding CVRs, delivered to the Trustee and to
the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section
407(a) after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a CVR for at
least six months, or
(2) the Trustee shall cease to be eligible under
Section 408 and shall fail to resign after written request
therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any case, (i) the Company by a Board Resolution may
remove the Trustee, or (ii) the Holder of any CVR who has been a
bona fide Holder of a CVR for at least six months may, on behalf
of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee. If, within one year after
such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority of the Outstanding CVRs delivered to
the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such
appointment in accordance with Section 410, become the successor
Trustee and supersede the successor Trustee appointed by the
Company. If no successor Trustee shall have been so appointed by
the Company or the Holders of the CVRs and so accepted
appointment, the Holder of any CVR who has been a bona fide
Holder for at least six months may on behalf of himself and all
others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation
and each removal of the Trustee and each appointment of a
successor Trustee by mailing written notice of such event by
first-class mail, postage prepaid, to the Holders of CVRs as
their names and addresses appear in the Security Register. Each
notice shall include the name of the
<PAGE>
35
successor Trustee and the address of its Corporate Trust Office.
If the Company fails to send such notice within ten days after
acceptance of appointment by a successor Trustee, the successor
Trustee shall cause the notice to be mailed at the expense of the
Company.
Section 410. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall
execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but,
on request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver
an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee, and shall duly
assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder. Upon
request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers
and trusts.
No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee
shall be qualified and eligible under this Article.
Section 411. Merger, Conversion, Consolidation or
------------------------------------
Succession to Business.
- ----------------------
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor
of the Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part
of any of the parties hereto. In case any CVRs shall have been
authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver
the CVRs so authenticated with the same effect as if such
successor Trustee had itself authenticated such CVRs; and such
certificate shall have the full force which it is anywhere in the
CVRs or in this Agreement provided that the certificate of the
Trustee shall have; provided that the right to adopt the
--------
certificate of authentication of any predecessor Trustee shall
apply only to its successor or successors by merger, conversion
or consolidation.
<PAGE>
36
ARTICLE FIVE
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 501. Company to Furnish Trustee Names and
------------------------------------
Addresses of Holders.
- --------------------
The Company will furnish or cause to be furnished to
the Trustee (a) semiannually, not later than [SIX MONTHS AFTER
DATE OF CVR] and [DATE OF CVR], a list, in such form as the
Trustee may reasonably require, of the names and addresses of the
Holders as of [FIVE MONTHS 15 DAYS AFTER DATE OF CVR] and [ELEVEN
MONTHS 15 DAYS AFTER DATE OF CVR], respectively, and (b) at such
times as the Trustee may request in writing, within 30 days after
receipt by the Company of any such request, a list, in such form
as the Trustee may reasonably require, of the names and the
addresses of the Holders as of a date not more than 15 days prior
to the time such list is furnished; provided, however, that, if
-------- -------
and so long as the Trustee shall be the Security Registrar, no
such list need be furnished.
Section 502. Preservation of Information;
----------------------------
Communications to Holders.
- -------------------------
(a) The Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of Holders
contained in the most recent list furnished to the Trustee as
provided in Section 501 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar.
The Trustee may destroy any list furnished to it as provided in
Section 501 upon receipt of a new list so furnished.
(b) If three or more Holders (hereinafter referred to
as "applicants") apply in writing to the Trustee, and furnish to
the Trustee reasonable proof that each such applicant has owned a
CVR for a period of at least six months preceding the date of
such application, and such application states that the applicants
desire to communicate with other Holders with respect to their
rights under this Agreement or under the CVRs and is accompanied
by a copy of the form of proxy or other communication which such
applicants propose to transmit, then the Trustee shall, within
five Business Days after the receipt of such application at its
election, either
(1) afford such applicants access to the information
preserved at the time by the Trustee in accordance with
Section 502(a), or
(2) inform such applicants as to the approximate
number of Holders whose names and addresses appear in the
information preserved at the time by the Trustee in
accordance with Section 502(a), and as to the approximate
cost of mailing to such
<PAGE>
37
Holders the form of proxy or other communication, if any,
specified in such application.
If the Trustee shall elect not to afford such
applicants access to such information, the Trustee shall, upon
the written request of such applicants, mail to each Holder whose
name and address appear in the information preserved at the time
by the Trustee in accordance with Section 502(a), a copy of the
form of proxy or other communication which is specified in such
request, with reasonable promptness after a tender to the Trustee
of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within
five days after such tender, the Trustee shall mail to such
applicants and file with the Commission, together with a copy of
the material to be mailed, a written statement to the effect
that, in the opinion of the Trustee, such mailing would be
contrary to the best interests of the Holders or would be in
violation of applicable law. Such written statement shall
specify the basis of such opinion. If the Commission, after
opportunity for a hearing upon the objections specified in the
written statement so filed, shall enter an order refusing to
sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Commission shall
find, after notice and opportunity for hearing, that all the
objections so sustained have been met and shall enter an order so
declaring, the Trustee shall mail copies of such material to all
such Holders with reasonable promptness after the entry of such
order and the renewal of such tender otherwise the Trustee shall
be relieved of any obligation or duty to such applicants
respecting their application.
(c) Every Holder of CVRs, by receiving and holding the
same, agrees with the Company and the Trustee that neither the
Company nor the Trustee shall be held accountable by reason of
the disclosure of any such information as to the names and
addresses of the Holders in accordance with Section 502(b),
regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of
mailing any material pursuant to a request made under Section
502(b).
Section 503. Reports by Trustee.
------------------
(a) Within 60 days after July 15 of each year
commencing with the July 15 occurring after the initial issuance
of CVRs hereunder, the Trustee shall transmit by mail to the
Holders of CVRs, in the manner and to the extent provided in
Section 313(c) of the Trust Indenture Act, and to the Company a
brief report dated as of such July 15 which satisfies the
requirements of Section 313(a) of the Trust Indenture Act .
<PAGE>
38
Section 504. Reports by Company.
------------------
The Company shall:
(a) file with the Trustee, within 15 days after the
Company is required to file the same with the Commission,
copies of the annual reports and of the information,
documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time
by rules and regulations prescribe) which the Company may be
required to file with the Commission pursuant to Section 13
or Section 15(d) of the Exchange Act; or, if the Company is
not required to file information, documents or reports
pursuant to either of said Sections, then it shall file with
the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission,
such of the supplementary and periodic information,
documents and reports which may be required pursuant to
Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and
regulations; and
(b) file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time
to time by the Commission, such additional information,
documents and reports with respect to compliance by the
Company with the conditions and covenants of this Agreement
as may be required from time to time by such rules and
regulations.
The Trustee shall transmit by mail to all Holders, as
their names and addresses appear in the Security Register, within
30 days after the filing thereof with the Trustee, such summaries
of any information, documents and reports required to be filed by
the Company pursuant to Subsections (a) and (b) of this Section
as may be required by rules and regulations prescribed from time
to time by the Commission.
ARTICLE SIX
AMENDMENTS
Section 601. Amendments Without Consent of Holders.
-------------------------------------
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more amendments
hereto, in form satisfactory to the Trustee, for any of the
following
<PAGE>
39
purposes:
(a) to convey, transfer, assign, mortgage or pledge to
the Trustee as security for the CVRs any property or assets;
or
(b) to evidence the succession of another Person to
the Company, and the assumption by any such successor of the
covenants of the Company herein and in the CVRs; or
(c) to add to the covenants of the Company such
further covenants, restrictions, conditions or provisions as
its Board of Directors and the Trustee shall consider to be
for the protection of the Holders of CVRs, and to make the
occurrence, or the occurrence and continuance, of a default
in any such additional covenants, restrictions, conditions
or provisions an Event of Default permitting the enforcement
of all or any of the several remedies provided in this
Agreement as herein set forth; provided that in respect of
--------
any such additional covenant, restriction, condition or
provision such amendment may provide for a particular period
of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or
may provide for an immediate enforcement upon such an Event
of Default or may limit the remedies available to the
Trustee upon such an Event of Default or may limit the right
of the Holders of a majority in aggregate principal amount
of the CVRs to waive such an Event of Default; or
(d) to cure any ambiguity, to correct or supplement
any provision herein which may be defective or inconsistent
with any other provision herein, or to make any other
provisions with respect to matters or questions arising
under this Agreement; provided that in each case, such
--------
provisions shall not adversely affect the interests of the
Holders.
Section 602. Amendments with Consent of Holders.
----------------------------------
With the consent of the Holders of not less than
66 2/3% of the Outstanding CVRs, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into one or more
amendments hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the
Holders under this Agreement; provided, however, that no such
-------- -------
amendment shall, without the consent of the Holder of each
Outstanding CVR affected thereby:
<PAGE>
40
(a) modify the definition of Maturity Date, First
Extended Maturity Date, Second Extended Maturity Date,
Disposition Payment Date, Default Payment Date, Current
Market Value, Valuation Period, Minimum Price, Discounted
Target Price, Target Price, Default Amount or Default
Interest Rate or modify Section 301(k) or otherwise extend
the maturity of the CVRs or reduce the amounts payable in
respect of the CVRs;
(b) reduce the amount of the Outstanding CVRs, the
consent of whose Holders is required for any such amendment;
or
(c) modify any of the provisions of this Section,
except to increase any such percentage or to provide that
certain other provisions of this Agreement cannot be
modified or waived without the consent of the Holder of each
CVR affected thereby.
It shall not be necessary for any Act of Holders under
this Section to approve the particular form of any proposed
amendment, but it shall be sufficient if such act shall approve
the substance thereof.
Promptly after the execution by the Company and the
Trustee of any amendment pursuant to the provisions of this
Section, the Company shall mail a notice thereof by first class
mail to the Holders of CVRs at their addresses as they shall
appear on the Security Register, setting forth in general terms
the substance of such amendment. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment.
Section 603. Execution of Amendments.
-----------------------
In executing any amendment permitted by this Article,
the Trustee shall be entitled to receive, and (subject to Section
401) shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Trustee may, but
shall not be obligated to, enter into any such amendment which
affects the Trustee's own rights, duties or immunities under this
Agreement or otherwise.
<PAGE>
41
Section 604. Effect of Amendments.
--------------------
Upon the execution of any amendment under this Article,
this Agreement shall be modified in accordance therewith, and
such amendment shall form a part of this Agreement for all
purposes; and every Holder of CVRs theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby.
Section 605. Conformity with Trust Indenture Act.
-----------------------------------
Every amendment executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in
effect.
Section 606. Reference in CVRs to Amendments.
-------------------------------
CVRs authenticated and delivered after the execution of
any amendment pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee
as to any matter provided for in such amendment. If the Company
shall so determine, new CVRs so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any such
amendment may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for
Outstanding CVRs.
ARTICLE SEVEN
COVENANTS
Section 701. Payment of Amounts, if Any, to Holders.
--------------------------------------
The Company will duly and punctually pay the amounts,
if any, in the manner provided for in Section 307 on the CVRs in
accordance with the terms of the CVRs and this Agreement.
Section 702. Maintenance of Office or Agency.
-------------------------------
As long as any of the CVRs remain Outstanding, the
Company will maintain in the Borough of Manhattan, The City of
New York, an office or agency where CVRs may be presented or
surrendered for payment. The Company also will maintain in
the Borough of Manhattan, The City of New York, or Chicago,
Illinois, an office or agency (i) where CVRs may be
surrendered for registration of transfer or exchange and (ii)
where notices and demands to or upon the Company in respect of
the CVRs and this Agreement may be served. The Company hereby
initially designates the office of Harris Trust Company of New
York at
<PAGE>
42
77 Water Street, 4th Floor, New York, New York 10005 as the
office or agency of the Company where CVRs may be presented for
payment, and the Corporate Trust Office as the office or agency
where CVRs may be surrendered for registration of transfer or
exchange and where such notices or demands may be served, in
each case, unless the Company shall designate and maintain some
other office or agency for one or more of such purposes. The
Company will give prompt written notice to the Trustee of any
change in the location of any such office or agency. If at
any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices
and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may from time to time designate one or more
other offices or agencies (in or outside of The City of New York)
where the CVRs may be presented or surrendered for any or all
such purposes, and may from time to time rescind such
designation; provided, however, that no such designation or
-------- -------
rescission shall in any manner relieve the Company of its
obligations as set forth in the preceeding paragraph.
The Company will give prompt written notice to the
Trustee of any such designation or rescission and any change in
the location of any such office or agency.
Section 703. Money for CVR Payments to Be Held in
------------------------------------
Trust.
- -----
If the Company shall at any time act as its own Paying
Agent, it will, on or before the Maturity Date, the First
Extended Maturity Date, the Second Extended Maturity Date, the
Disposition Payment Date or the Default Payment Date, as the case
may be, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the amounts, if
any, so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided, and will
promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying
Agents for the CVRs, it will, on or before the Maturity Date, the
First Extended Maturity Date, the Second Extended Maturity Date,
the Disposition Payment Date or the Default Payment Date, as the
case may be, deposit with a Paying Agent a sum in same day funds
sufficient to pay the amount, if any, so becoming due, such sum
to be held in trust for the benefit of the Persons entitled to
such amount, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of such action or any
failure so to act.
<PAGE>
43
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that (A) such Paying Agent will
hold all sums held by it for the payment of any amount payable
on CVRs in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and (B) that it will
give the Trustee notice of any failure by the Company (or by
any other obligor on the CVRs) to make any payment on the
CVRs when the same shall be due and payable.
Any money (or securities of Viacom) deposited with the
Trustee or any Paying Agent, or then held by the Company, in
trust for the payment on any CVR and remaining unclaimed for one
year after the Maturity Date, the First Extended Maturity Date,
the Second Extended Maturity Date, the Disposition Payment Date
or the Default Payment Date, as the case may be, shall be paid to
the Company on Company Request, or (if then held by the Company)
shall be discharged from such trust; and the Holder of such CVR
shall thereafter, as an unsecured general creditor, look only to
the Company for payment thereof and all liability of the Trustee
or such Paying Agent with respect to such trust money (or
securities of Viacom) shall thereupon cease.
Section 704. Certain Purchases and Sales.
---------------------------
The Company will not, and will not permit any of its
subsidiaries or controlled Affiliates to, purchase any shares of
Class B Common Stock in open market transactions, privately
negotiated transactions or otherwise, on any day during the
period commencing 10 trading days before the Valuation Period and
ending on the last day of the Valuation Period, except with
respect to employee benefit plans and other incentive
compensation arrangements.
Section 705. Written Statement to Trustee.
----------------------------
The Company will deliver to the Trustee, within
120 days after the end of each fiscal year, a brief certificate
from the principal executive officer, principal financial officer
or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this
Agreement. For purposes of this Section, such compliance shall
be determined without regard to any period of grace or
requirement of notice under this Agreement.
<PAGE>
44
ARTICLE EIGHT
REMEDIES OF THE TRUSTEE AND HOLDERS
ON EVENT OF DEFAULT
Section 801. Event of Default Defined; Acceleration of
-----------------------------------------
Maturity; Waiver of Default.
- ---------------------------
"Event of Default", with respect to CVRs, means each
one of the following events which shall have occurred and be
continuing (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative
or governmental body):
(a) default in the payment of all or any part of the
amounts payable in respect of any of the CVRs as and when
the same shall become due and payable either at the Maturity
Date, the First Extended Maturity Date, the Second Extended
Maturity Date, the Disposition Payment Date or otherwise; or
(b) default in the performance, or breach, of any
covenant or warranty of the Company in respect of the CVRs
(other than a covenant or warranty in respect of the CVRs a
default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of
such default or breach for a period of 90 days after there
has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% of the Outstanding CVRs, a
written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is
a "Notice of Default" hereunder; or
(c) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of the Company
in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect,
or appointing a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of the Company
or for any substantial part of its property or ordering the
winding up or liquidation of its affairs, and such decree or
order shall remain unstayed and in effect for a period of 60
consecutive days; or
(d) the Company shall commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consent to the entry of an
order for relief in an involuntary case under any such law,
or consent
<PAGE>
45
to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee or sequestrator (or
similar official) of the Company or for any substantial part
of its property, or make any general assignment for the
benefit of creditors.
If an Event of Default described above occurs and is continuing,
then, and in each and every such case, unless all of the CVRs
shall have already become due and payable, either the Trustee or
the Holders of not less than 25% of the CVRs then Outstanding
hereunder by notice in writing to the Company (and to the Trustee
if given by the Holders) may declare the CVRs to be due and
payable immediately, and upon any such declaration the Default
Amount shall become immediately due and payable and, thereafter,
shall bear interest at the Default Interest Rate until payment is
made to the Trustee.
The foregoing provisions, however, are subject to the
condition that if, at any time after the CVRs shall have been so
declared due and payable, and before any judgment or decree for
the payment of the moneys due shall have been obtained or entered
as hereinafter provided, the Company shall pay or shall deposit
with the Trustee a sum sufficient to pay all amounts which shall
have become due otherwise than by acceleration (with interest
upon such overdue amount at the Default Interest Rate to the date
of such payment or deposit) and such amount as shall be
sufficient to cover reasonable compensation to the Trustee, its
agents, attorneys and counsel, and all other expenses and
liabilities incurred and all advances made, by the Trustee except
as a result of negligence or bad faith, and if any and all Events
of Default under this Agreement, other than the nonpayment of the
amounts which shall have become due by acceleration, shall have
been cured, waived or otherwise remedied as provided herein, then
and in every such case the Holders of a majority of all the CVRs
then Outstanding, by written notice to the Company and to the
Trustee, may waive all defaults with respect to the CVRs and
rescind and annul such declaration and its consequences, but no
such waiver or rescission and annulment shall extend to or shall
affect any subsequent default or shall impair any right
consequent thereof.
Section 802. Collection of Indebtedness by Trustee;
--------------------------------------
Trustee May Prove Debt.
- ----------------------
The Company covenants that in case default shall be
made in the payment of all or any part of the CVRs when the same
shall have become due and payable; whether at the Maturity Date,
the First Extended Maturity Date, the Second Extended Maturity
Date, the Disposition Payment Date, the Default Payment Date or
otherwise, then upon demand of the Trustee, the Company will pay
to the Trustee for the benefit of the Holders of the CVRs the
whole amount, in cash or securities of the Company (at the option
of the Company) that then shall have become due and payable on
all CVRs (with interest from the date due and payable to the date
of such payment upon the overdue amount at the Default Interest
Rate);
<PAGE>
46
and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection,
including reasonable compensation to the Trustee and each
predecessor Trustee, their respective agents, attorneys and
counsel, and any expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee except
as a result of its negligence or bad faith.
In case the Company shall fail forthwith to pay such
amounts upon such demand, the Trustee, in its own name and as
trustee of an express trust, shall be entitled and empowered to
institute any action or proceedings at law or in equity for the
collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may
enforce any such judgment or final decree against the Company or
other obligor upon such CVRs and collect in the manner provided
by law out of the property of the Company or other obligor upon
such CVRs, wherever situated, the moneys adjudged or decreed to
be payable.
In case there shall be pending proceedings relative to
the Company or any other obligor upon the CVRs under Title 11 of
the United States Code or any other applicable Federal or State
bankruptcy, insolvency or other similar law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Company or its property
or such other obligor, or in case of any other judicial
proceedings relative to the Company or other obligor upon the
CVRs, or to the creditors or property of the Company or such
other obligor, the Trustee, irrespective of whether the principal
of any CVRs shall then be due and payable as therein expressed or
otherwise and irrespective of whether the Trustee shall have made
any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or
otherwise:
(a) to file and prove a claim or claims for the whole
amount owing and unpaid in respect of the CVRs, and to file
such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the
Trustee and each predecessor Trustee, and their respective
agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by
the Trustee and each predecessor Trustee, except as a result
of negligence or bad faith) and of the Holders allowed in
any judicial proceedings relative to the Company or other
obligor upon the CVRs, or to the creditors or property of
the Company or such other obligor;
(b) unless prohibited by applicable law and
regulations, to vote on behalf of the Holders in any
election of a trustee or a standby trustee in arrangement,
<PAGE>
47
reorganization, liquidation or other bankruptcy or
insolvency proceedings or person performing similar
functions in comparable proceedings; and
(c) to collect and receive any moneys or other
property payable or deliverable on any such claims, and to
distribute all amounts receivable with respect to the claims
of the Holders and of the Trustee on their behalf and any
trustee, receiver, or liquidator, custodian or other similar
official is hereby authorized by each of the Holders to make
payments to the Trustee, and, in the event that the Trustee
shall consent to the making of payments directly to the
Holders, to pay to the Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents,
attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Trustee
and each predecessor Trustee except as a result of
negligence or bad faith and all other amounts due to the
Trustee or any predecessor Trustee pursuant to Section 406.
Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or vote for or accept or
adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the CVRs or the
rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in
bankruptcy or similar person.
All rights of action and of asserting claims under this
Agreement, or under any of the CVRs, may be enforced by the
Trustee without the possession of any of the CVRs or the
production thereof on any trial or other proceedings relative
thereto, and any such action or proceedings instituted by the
Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of
the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys,
shall be for the ratable benefit of the Holders.
In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this
Agreement to which the Trustee shall be a party) the Trustee
shall be held to represent all the Holders, and it shall not be
necessary to make any Holders of such CVRs parties to any such
proceedings.
Section 803. Application of Proceeds.
-----------------------
Any monies (including CVRs of the Company) collected by
the Trustee pursuant to this Article in respect of any CVRs shall
be applied in the following order at the date or dates fixed by
the Trustee upon presentation of the several CVRs in respect of
which
<PAGE>
48
monies (including CVRs of the Company) have been collected and
stamping (or otherwise noting) thereon the payment in exchange
for the presented CVRs if only partially paid or upon surrender
thereof if fully paid:
FIRST: To the payment of costs and expenses in respect
of which monies have been collected, including reasonable
compensation to the Trustee and each predecessor Trustee and
their respective agents and attorneys and of all expenses
and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of
negligence or bad faith, and all other amounts due to the
Trustee or any predecessor Trustee pursuant to Section 406;
SECOND: To the payment of the whole amount then owing
and unpaid upon all the CVRs, with interest at the Default
Interest Rate on all such amounts, and in case such moneys
shall be insufficient to pay in full the whole amount so due
and unpaid upon the CVRs, then to the payment of such
amounts without preference or priority of any CVR over any
other CVR, ratably to the aggregate of such amounts due and
payable; and
THIRD: To the payment of the remainder, if any, to the
Company or any other person lawfully entitled thereto.
Section 804. Suits for Enforcement.
---------------------
In case an Event of Default has occurred, has not been
waived and is continuing, the Trustee may in its discretion
proceed to protect and enforce the rights vested in it by this
Agreement by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any of such
rights, either at law or in equity or in bankruptcy or otherwise,
whether for the specific enforcement of any covenant or agreement
contained in this Agreement or in aid of the exercise of any
power granted in this Agreement or to enforce any other legal or
equitable right vested in the Trustee by this Agreement or by
law.
Section 805. Restoration of Rights on Abandonment of
---------------------------------------
Proceedings.
- -----------
In case the Trustee shall have proceeded to enforce any
right under this Agreement and such proceedings shall have been
discontinued or abandoned for any reason, or shall have been
determined adversely to the Trustee, then and in every such case
the Company and the Trustee shall be restored respectively to
their former positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the Holders
shall continue as though no such proceedings had been taken.
<PAGE>
49
Section 806. Limitations on Suits by Holders.
-------------------------------
No Holder of any CVR shall have any right by virtue or
by availing itself of any provision of this Agreement to
institute any action or proceeding at law or in equity or in
bankruptcy or otherwise upon or under or with respect to this
Agreement, or for the appointment of a trustee, receiver,
liquidator, custodian or other similar official or for any other
remedy hereunder, unless such Holder previously shall have given
to the Trustee written notice of default and of the continuance
thereof as hereinbefore provided, and unless also the Holders of
not less than 25% of the CVRs then Outstanding shall have made
written request upon the Trustee to institute such action or
proceedings in its own name as trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be
incurred therein or thereby and the Trustee for 60 days after its
receipt of such notice, request and offer of indemnity shall have
failed to institute any such action or proceeding and no
direction inconsistent with such written request shall have been
given to the Trustee pursuant to Section 809; it being understood
and intended, and being expressly covenanted by the taker and
Holder of every CVR with every other taker and Holder and the
Trustee, that no one or more Holders of CVRs shall have any right
in any manner whatever by virtue or by availing itself or
themselves of any provision of this Agreement to effect, disturb
or prejudice the rights of any other such Holder of CVRs, or to
obtain or seek to obtain priority over or preference to any other
such Holder or to enforce any right under this Agreement, except
in the manner herein provided and for the equal, ratable and
common benefit of all Holders of CVRs. For the protection and
enforcement of the provisions of this Section, each and every
Holder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 807. Unconditional Right of Holders to
---------------------------------
Institute Certain Suits.
- -----------------------
Notwithstanding any other provision in this Agreement
and any provision of any CVR, the right of any Holder of any CVR
to receive payment of the amounts payable in respect of such CVR
on or after the respective due dates expressed in such CVR, or to
institute suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected
without the consent of such Holder.
Section 808. Powers and Remedies Cumulative; Delay or
----------------------------------------
Omission Not Waiver of Default.
- ------------------------------
Except as provided in Section 806, no right or remedy
herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law,
be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at
<PAGE>
50
law or in equity or otherwise. The assertion or employment of
any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate
right or remedy.
No delay or omission of the Trustee or of any Holder to
exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right
or power or shall be construed to be a waiver of any such Event
of Default or an acquiescence therein; and, subject to Section
806, every power and remedy given by this Agreement or by law to
the Trustee or to the Holders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by
the Holders.
Section 809. Control by Holders.
------------------
The Holders of a majority of the CVRs at the time
Outstanding shall have the right to direct the time, method, and
place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the
Trustee with respect to the CVRs by this Agreement; provided that
--------
such direction shall not be otherwise than in accordance with law
and the provisions of this Agreement; and provided further that
-------- -------
(subject to the provisions of Section 401) the Trustee shall have
the right to decline to follow any such direction if the Trustee,
being advised by counsel, shall determine that the action or
proceeding so directed may not lawfully be taken or if the
Trustee in good faith by its board of directors, the executive
committee, or a trust committee of directors or Responsible
Officers of the Trustee shall determine that the action or
proceedings so directed would involve the Trustee in personal
liability or if the Trustee in good faith shall so determine that
the actions or forbearances specified in or pursuant to such
direction would be unduly prejudicial to the interests of Holders
of the CVRs not joining in the giving of said direction, it being
understood that (subject to Section 401) the Trustee shall have
no duty to ascertain whether or not such actions or forbearances
are unduly prejudicial to such Holders.
Nothing in this Agreement shall impair the right of the
Trustee in its discretion to take any action deemed proper by the
Trustee and which is not inconsistent with such direction or
directions by Holders.
Section 810. Waiver of Past Defaults.
-----------------------
Prior to the declaration of the acceleration of the
maturity of the CVRs as provided in Section 801, in the case of a
default or an Event of Default specified in clause (b), (c) or
(d) of Section 801, the Holders of CVRs of a majority of all the
CVRs then Outstanding may waive any such default or Event of
Default, and its consequences, except a default in respect of a
covenant or provisions hereof which cannot be modified or amended
<PAGE>
51
without the consent of the Holder of each CVR affected. In the
case of any such waiver, the Company, the Trustee and the Holders
of the CVRs shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend
to any subsequent or other default or impair any right consequent
thereon.
Upon any such waiver, such default shall cease to exist
and be deemed to have been cured and not to have occurred, and
any Event of Default arising therefrom shall be deemed to have
been cured, and not to have occurred for every purpose of this
Agreement; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent
thereon.
Section 811. Trustee to Give Notice of Default, but
--------------------------------------
May Withhold in Certain Circumstances.
- -------------------------------------
The Trustee shall transmit to the Holders, as the names
and addresses of such Holders appear on the Security Register,
notice by mail of all defaults which have occurred, such notice
to be transmitted within 90 days after the occurrence thereof
unless such defaults shall have been cured before the giving of
such notice (the term "default" or "defaults" for the purposes of
this Section being hereby defined to mean any event or condition
which is, or with notice or lapse of time or both would become,
an Event of Default); provided that, except in the case of
--------
default in the payment of the amounts payable in respect of any
of the CVRs, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive
committee, or a trust committee of directors or trustees and/or
Responsible Officers of the Trustee in good faith determines that
the withholding of such notice is in the interests of the
Holders.
Section 812. Right of Court to Require Filing of
-----------------------------------
Undertaking to Pay Costs.
- ------------------------
All parties to this Agreement agree, and each Holder of
any CVR by his acceptance thereof shall be deemed to have agreed,
that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Agreement or in any
suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant
in such suit, having due regard to the merits and good faith or
the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted
by the Trustee, to any suit instituted by any Holder or group of
Holders holding in the aggregate more than 10% of the CVRs
Outstanding or to any suit instituted by any Holder for the
enforcement of the payment of any CVR on or after the due date
expressed in such CVR.
<PAGE>
52
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 901. Company May Consolidate, Etc.
-----------------------------
The Company shall not consolidate with or merge into
any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, unless:
(1) in case the Company shall consolidate with or
merge into any other Person or convey, transfer or lease its
properties and assets substantially as an entirety to any
person, the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety (the
"Surviving Person") shall be a corporation, partnership or
trust organized and existing under the laws of the United
States of America, any state thereof or the District of
Columbia and shall expressly assume payment of amounts on
all the CVRs and the performance of every covenant of this
Agreement on the part of the Company to be performed or
observed;
(2) immediately after giving effect to such
transaction and treating any indebtedness which becomes an
obligation of the Surviving Person, the Company or any
Subsidiary as a result of such transaction as having been
incurred by the Surviving Person, the Company or such
Subsidiary at the time of such transaction, no Event of
Default shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an
Officer's Certificate, stating that such consolidation,
merger, conveyance, transfer or lease complies with this
Article and that all conditions precedent herein provided
for relating to such transaction have been complied with.
Solely for purposes of this Section 901, "convey,
transfer or lease its properties and assets substantially as an
entirety" shall mean properties and assets contributing in the
aggregate at least 80% of the Company's total revenues as
reported in the Company's last available periodic financial
report (quarterly or annual, as the case may be) filed with the
Commission.
<PAGE>
53
Section 902. Successor Substituted.
---------------------
Upon any consolidation of or merger by the Company with
or into any other Person, or any conveyance, transfer or lease of
the properties and assets substantially as an entirety to any
Person in accordance with Section 901, the Surviving Person shall
succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Agreement with the same
effect as if the Surviving Person had been named as the Company
herein, and thereafter, except in the case of a lease, the
predecessor corporation shall be relieved of all obligations and
covenants under this Agreement and the CVRs.
Section 903. Opinion of Counsel to Trustee.
-----------------------------
The Trustee, subject to the provisions of Sections 401
and 402, may receive an Opinion of Counsel, prepared in
accordance with Sections 103 and 104, as conclusive evidence that
any such consolidation, merger, sale, lease or conveyance, and
any such assumption, and any such liquidation or dissolution,
complies with the applicable provisions of this Agreement.
* * * * * * *
<PAGE>
54
This Agreement may be signed in any number of
counterparts with the same effect as if the signatures to each
counterpart were upon a single instrument, and all such
counterparts together shall be deemed an original of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, all as of the day and
year first above written.
VIACOM INC.
By:
---------------------------
Title:
Attest:
----------------------
Title:
HARRIS TRUST AND SAVINGS BANK
By:
---------------------------
Title:
Attest:
----------------------
Title:
<PAGE>
State of )
) ss.:
County of )
On the day of , 1994,
before me personally came , to
me known, who, being by me duly sworn, did depose and say that
s/he resides at ; that
s/he is of Viacom Inc., one of
the corporations described in and which executed the above
instrument; and s/he knows the corporate seal of such
corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed pursuant to authority of
the Board of Directors of such corporation; and that s/he signed
her/his name thereto pursuant to like authority.
(NOTARIAL SEAL)
------------------------------
<PAGE>
State of )
) ss.:
County of )
On the day of , 1994,
before me personally came , to me
known, who, being by me duly sworn, did depose and say that s/he
resides at ; that s/he is
of
, one of the corporations
described in and which executed the above instrument; and s/he
knows the corporate seal of such corporation; that the seal
affixed to said instrument is such corporate seal; that it was so
affixed pursuant to authority of the Board of Directors of such
corporation; and that s/he signed her/his name thereto pursuant
to like authority.
(NOTARIAL SEAL)
------------------------------
- DRAFT -
THREE-YEAR
WARRANT AGREEMENT
Agreement dated as of [ ], 1994 between
VIACOM INC., a Delaware corporation (the "Company"), and Harris
-------
Trust and Savings Bank, warrant agent (the "Warrant Agent").
-------------
The Company proposes to issue and deliver its warrant
certificates (the "Warrant Certificates") evidencing warrants
--------------------
(the "Warrants") to purchase up to an aggregate of
--------
[ ] shares of its Common Stock (as
defined below), to certain holders (the "Warrant Recipients") of
------------------
the common stock, par value $1.00 per share, of Paramount
Communications Inc. ("Paramount") in connection with the Amended
---------
and Restated Agreement and Plan of Merger dated as of February 4,
1994, as further amended as of May 26, 1994 (the "Merger
------
Agreement") among the Company, Viacom Sub Inc., a wholly owned
---------
subsidiary of the Company, and Paramount. Each whole Warrant
will entitle the registered holder thereof (each, a "Holder" and
------
collectively, the "Holders") to purchase one share of Common
-------
Stock at a price of $60.00 per share, subject to adjustment under
certain circumstances.
In consideration of the foregoing and for the purpose
of defining the terms and provisions of the Warrants and the
respective rights and obligations thereunder of the Company and
the Holders, the Company and the Warrant Agent each agrees as
follows:
Section 1. Certain Definitions. As used in this
-------------------
Agreement, the following terms shall have the following
respective meanings:
"Affiliate" of any person means any person directly or
---------
indirectly controlling or controlled by or under direct or
indirect common control with such person. For purposes of this
definition, "control" when used with respect to any person means
the power to direct the management and policies of such person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Common Stock" means the Class B Common Stock, par
------------
value $.01 per share, of the Company, and any other capital stock
of the Company into which the Common Stock may be converted or
reclassified or that may be issued in respect of, in exchange
for, or in substitution of, the Common Stock by reason of any
stock splits, stock dividends, distributions, mergers,
consolidations or other like events.
"Company" shall have the meaning set forth in the
-------
preamble to this Agreement and its successors and assigns.
<PAGE>
2
"Current Market Value" shall have the meaning set forth
--------------------
in Section 8(e) of this Agreement.
"Effective Time" means the date of the filing of a
--------------
certificate of merger with the Secretary of State of the State
of Delaware in connection with the merger of Viacom Sub Inc. with
and into Paramount pursuant to the Merger Agreement or such later
date and time as set forth in the Merger Agreement.
"Exercise Price" means the purchase price per share of
--------------
Common Stock to be paid upon the exercise of each whole Warrant
in accordance with the terms hereof, which price shall initially
be $60.00 per share, subject to adjustment from time to time
pursuant to Section 8 hereof.
"Expiration Date" means the third anniversary of the
---------------
Effective Time.
"Holders" shall have the meaning set forth in the
-------
preamble to this Agreement.
"Merger Agreement" shall have the meaning set forth in
----------------
the preamble to this Agreement.
"person" means any individual, corporation,
------
partnership, joint venture, association, joint-stock company,
limited liability company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Register" shall have the meaning set forth in Section
--------
3(a) of this Agreement.
"Warrant Agent" shall have the meaning set forth in the
-------------
preamble to this Agreement or the successor or successors of such
Warrant Agent appointed in accordance with the terms hereof.
"Warrant Certificates" shall have the meaning set
--------------------
forth in the preamble to this Agreement.
"Warrant Recipients" shall have the meaning set forth
------------------
in the preamble to this Agreement.
"Warrants" shall have the meaning set forth in the
--------
preamble to this Agreement.
Section 2. The Warrant Certificates. (a) The
------------------------
Warrant Certificates shall be in registered form only and
substantially in the form attached hereto as Exhibit A. The
Warrant Certificates shall be dated the date on which
countersigned by the Warrant Agent
<PAGE>
3
and may have such legends and endorsements typed, stamped,
printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with applicable
laws, rules or regulations including any rule or regulation of
any securities exchange on which the Warrants may be listed, or
to conform to usage.
(b) Warrant Certificates evidencing Warrants to
purchase an aggregate of up to [ ]
shares of Common Stock may be executed, on or after the date of
this Agreement, by the Company and delivered to the Warrant Agent
for countersignature, and the Warrant Agent shall thereupon
countersign and deliver such Warrant Certificates upon the order
and at the direction of the Company to the Warrant Recipients.
The names and addresses of the Warrant Recipients shall be
specified by the Company pursuant to a list of Warrant Recipients
provided to the Warrant Agent by the Company. The Warrant Agent
is hereby authorized to countersign and deliver Warrant
Certificates as required by this Section 2(b) or by Section 3(b),
4(f) or 6 hereof. The Warrant Certificates shall be executed on
behalf of the Company by any of its officers, either manually or
by facsimile signature printed thereon. The Warrant Agent shall
countersign the Warrant Certificates either manually or by
facsimile signature printed thereon, and the Warrant Certificates
shall not be valid for any purpose unless so countersigned. In
case any officer of the Company whose signature shall have been
placed upon any of the Warrant Certificates shall cease to be
such officer of the Company before countersignature by the
Warrant Agent and issue and delivery thereof, such Warrant
Certificates may, nevertheless, be countersigned by the Warrant
Agent and issued and delivered with the same force and effect as
though such person had not ceased to be such officer of the
Company.
Section 3. Registration, Exchange and Transfer of
--------------------------------------
Warrants. (a) The Warrant Agent shall keep at the office of
--------
the Warrant Agent, specified in or pursuant to Section 4(e), a
register (the "Register") in which, subject to such regulations
--------
as the Company may prescribe, the Warrant Agent shall provide for
the registration of Warrant Certificates and of transfers or
exchanges of Warrant Certificates as herein provided.
(b) At the option of the Holder, Warrant Certificates
may be exchanged at such office and upon payment of the charges
hereinafter provided. Whenever any Warrant Certificates are so
surrendered for exchange, the Company shall execute, and the
Warrant Agent shall countersign and deliver, the Warrant
Certificates that the Holder making the exchange is entitled to
receive; provided, however, that the Company shall not be
required to issue and deliver Warrant Certificates representing
fractional warrants.
(c) All Warrant Certificates issued upon any
registration of transfer or exchange of Warrant Certificates
shall be the valid obligations of the Company, evidencing the
same obligations, and entitled to the same benefits under this
Agreement, as the Warrant Certificates surrendered for such
registration of transfer or exchange.
<PAGE>
4
(d) Every Warrant Certificate surrendered for
registration of transfer or exchange shall (if so required by the
Company or the Warrant Agent) be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the
Company and the Warrant Agent, duly executed by the Holder
thereof or his attorney duly authorized in writing.
(e) No service charge shall be made for any
registration of transfer or exchange of Warrant Certificates.
The Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of
Warrant Certificates.
(f) Any Warrant Certificate when duly endorsed in
blank shall be deemed negotiable and when a Warrant Certificate
shall have been so endorsed, the Holder thereof may be treated by
the Company, the Warrant Agent and all other persons dealing
therewith as the sole and absolute owner thereof for any purpose
and as the person solely entitled to exercise the rights
represented thereby, or to the transfer thereof on the register
of the Company maintained by the Warrant Agent, any notice to the
contrary notwithstanding; but until such transfer on such
register, the Company and the Warrant Agent may treat the
registered Holder thereof as the owner for all purposes.
Section 4. Exercise Price, Payment of the Exercise
---------------------------------------
Price, Duration and Exercise of Warrants Generally. (a) Each
--------------------------------------------------
Warrant Certificate shall, when countersigned by the Warrant
Agent, entitle the Holder thereof, subject to the provisions of
this Agreement, to receive one share of Common Stock for each
whole Warrant represented thereby, subject to adjustment as
herein provided, upon payment of the Exercise Price for each of
such shares.
(b) Payment of the Exercise Price shall be in cash or
by certified or official bank check payable to the order of the
Company. All funds received upon the exercise of Warrants shall
be deposited by the Warrant Agent for the account of the Company,
unless otherwise instructed in writing by the Company.
(c) Subject to the terms and conditions set forth
herein, the Warrants shall be exercisable from time to time by
the Holder thereof at any time on or prior to the Expiration
Date.
(d) The Warrants shall terminate and become void as
of the close of business on the Expiration Date.
(e) Subject to Sections 5 and 9 hereof, in order to
exercise a Warrant, the Holder thereof must surrender the Warrant
Certificate evidencing such Warrant, with one of the forms on the
reverse of or attached to the Warrant Certificates duly executed
(with
<PAGE>
5
signature guaranteed by a national bank or trust company or by a
member of any national securities exchange), to the Warrant Agent
at its office at 311 West Monroe Street, Chicago, Illinois
60606, or at such other address as the Warrant Agent may specify
in writing to the Holders at their respective addresses specified
in the Register, together with payment in full of the Exercise
Price thereof.
Upon surrender of a Warrant Certificate and payment of
the Exercise Price in conformity with the foregoing provisions,
the Warrant Agent shall thereupon promptly notify the Company,
and the Warrant Agent will deliver or cause to be delivered to or
upon any written order of any Holder appropriate evidence of
ownership of any shares of Common Stock issuable upon exercise of
the Warrants or other securities or property (including any cash)
to which the Holder is entitled hereunder, subject to Section 5.
(f) The Warrants evidenced by a Warrant Certificate
shall be exercisable either as an entirety or, from time to time,
for part only of the number of whole Warrants evidenced thereby.
If fewer than all of the Warrants evidenced by a Warrant
Certificate are exercised at any time, the Warrant Certificate
representing such Warrants shall be surrendered and a new Warrant
Certificate of the same tenor and for the number of Warrants that
were not exercised shall be issued by the Company. The Warrant
Agent shall countersign the new Warrant Certificate, register it
in such name or names as may be directed in writing by the Holder
and deliver the new Warrant Certificate to the person or persons
entitled to receive the same.
Section 5. Payment of Taxes. The Company will pay all
----------------
documentary stamp taxes, if any, attributable to the initial
issuance of Common Stock upon the exercise of Warrants; provided,
however, that the Company shall not be required to pay any tax or
other governmental charge which may be payable in respect of any
transfer involved in the issue or delivery of any Warrant
Certificates or certificates for Common Stock issued upon the
exercise of Warrants in a name other than that of the registered
Holder of such Warrants, and the Company shall not register any
such transfer or issue any such certificate until such tax or
governmental charge, if required, shall have been paid.
Section 6. Mutilated or Missing Warrant Certificates.
-----------------------------------------
If (a) any mutilated Warrant Certificate is surrendered to the
Warrant Agent or (b) the Company and the Warrant Agent receive
evidence to their satisfaction of the destruction, loss or theft
of any Warrant Certificate, and there is delivered to the Company
and the Warrant Agent such security or indemnity as may be
required by them to save each of them harmless, then, in the
absence of notice to the Company or the Warrant Agent that such
Warrant Certificate has been acquired by a bona fide purchaser,
the Company may execute and the Warrant Agent shall countersign
and deliver, in exchange for any such mutilated Warrant
Certificate or in lieu of any such destroyed, lost or stolen
Warrant Certificate, a new Warrant Certificate of like tenor and
for a like aggregate number of Warrants.
<PAGE>
6
Upon the issuance of any new Warrant Certificate under
this Section 6 the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto and other expenses (including the
reasonable fees and expenses of the Warrant Agent and of counsel
to the Company) in connection therewith.
Every new Warrant Certificate executed and delivered
pursuant to this Section 6 in lieu of any destroyed, lost or
stolen Warrant Certificate shall constitute an original
contractual obligation of the Company, whether or not the
destroyed, lost or stolen Warrant Certificate shall be at any
time enforceable by anyone, and shall be entitled to the benefits
of this Agreement equally and proportionately with any and all
other Warrant Certificates duly executed and delivered hereunder.
The provisions of this Section 6 are exclusive and
shall preclude (to the extent lawful) all other rights or
remedies with respect to the replacement of mutilated, destroyed,
lost or stolen Warrant Certificates.
Section 7. Reservation of Common Stock for Issuance on
-------------------------------------------
Exercise of Warrants; Listing. The Company will at all times
-----------------------------
reserve and keep available, free from preemptive rights, out of
its authorized but unissued Common Stock, solely for the purpose
of issuance upon exercise of Warrants as herein provided, such
number of shares of Common Stock as shall then be issuable upon
exercise of all outstanding Warrants. The Company covenants that
all shares of Common Stock which shall be so issuable shall,
upon issue, be duly and validly issued and fully paid and non-
assessable and that upon issuance such shares shall be listed on
each national securities exchange on which any other shares of
outstanding Common Stock are then listed.
Section 8. Adjustments. The Exercise Price and the
-----------
number of shares of Common Stock issuable upon exercise of each
whole Warrant shall be subject to adjustment from time to time as
follows:
(a) Stock Dividends; Stock Splits; Reverse Stock
--------------------------------------------
Splits; Reclassifications. In case the Company shall (i)
-------------------------
pay a dividend or make any other distribution with respect
to its Common Stock in shares of Common Stock, (ii)
subdivide its outstanding Common Stock, (iii) combine its
outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of Common Stock in a reclassification
of the Common Stock (including any such reclassification in
connection with a merger, consolidation or other business
combination in which the Company is the continuing
corporation), the number of shares of Common Stock issuable
upon exercise of each Warrant immediately prior to the
record date for such dividend or distribution or the
effective date of such subdivision or combination shall be
adjusted so that the Holder of each Warrant shall thereafter
be entitled to receive
<PAGE>
7
the kind and number of shares of Common Stock or other
securities of the Company that such Holder would have owned
or have been entitled to receive after the happening of any
of the events described above, had such Warrant been
exercised immediately prior to the happening of such event
or any record date with respect thereto. An adjustment made
pursuant to this Section 8(a) shall become effective
immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) Rights; Options; Warrants. In case the Company
-------------------------
shall issue rights, options, warrants or convertible or
exchangeable securities (other than a convertible or
exchangeable security subject to Section 8(a)) to all
holders of its Common Stock, entitling them to subscribe for
or purchase Common Stock at a price per share that is lower
(at the record date for such issuance) than the Current
Market Value per share of Common Stock, the number of shares
of Common Stock thereafter issuable upon the exercise of all
Warrants then outstanding shall be determined by adding (1)
the number of shares of Common Stock theretofore issuable
upon exercise of all Warrants then outstanding and (2) the
product of (x) the Cheap Stock Issued, multiplied by (y) the
Ownership Ratio. Such adjustment shall be made whenever
such rights, options, warrants or convertible or
exchangeable securities are issued, and shall become
effective retroactively immediately after the record date
for the determination of stockholders entitled to receive
such rights, options, warrants or convertible or
exchangeable securities.
For purposes of this Section 8(b), (i) the "Cheap Stock
Issued" shall be the number of additional shares of any
Common Stock offered by the Company for subscription or
purchase as described above minus the number of shares of
Common Stock that the aggregate offering price of the total
number of shares of Common Stock so offered would purchase
at the then Current Market Value per share of Common Stock
and (ii) the "Ownership Ratio" shall be a fraction, the
numerator of which shall be the number of shares of Common
Stock theretofore issuable upon exercise of all Warrants
then outstanding, and the denominator of which shall be (a)
the fully diluted shares of Common Stock outstanding on the
date of issuance of such rights, options, warrants or
convertible or exchangeable securities minus (b) the number
of shares of Common Stock theretofore issuable upon the
exercise of all Warrants then outstanding.
Any adjustment to the number of shares of Common Stock
issuable upon exercise of all Warrants then outstanding made
pursuant to this Section 8(b) shall be allocated among the
Warrants then outstanding on a pro rata basis.
(c) Issuance of Common Stock at Lower Values. In case
----------------------------------------
the Company shall, in a transaction in which Section 8(b) is
inapplicable, issue or sell shares of
<PAGE>
8
Common Stock, or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock, at a price per share
of Common Stock (determined in the case of such rights,
options, warrants or convertible or exchangeable securities,
by dividing (A) the total amount receivable by the Company
in consideration of the issuance and sale of such rights,
options, warrants or convertible or exchangeable securities,
plus the total consideration, if any, payable to the Company
upon exercise, conversion or exchange thereof, by (B) the
total number of shares of Common Stock covered by such
rights, options, warrants or convertible or exchangeable
securities) that is lower than the then Current Market Value
per share of the Common Stock in effect immediately prior to
such sale or issuance, then the number of shares of Common
Stock thereafter issuable upon the exercise of all Warrants
then outstanding shall be determined by adding (1) the
number of shares of Common Stock theretofore issuable upon
exercise of all Warrants then outstanding and (2) the
product of (x) the Cheap Stock Issued, multiplied by (y) the
Ownership Ratio. Such adjustment shall be made successively
whenever any such sale or issuance is made.
For purposes of this Section 8(c), (i) the "Cheap Stock
Issued" shall be the number of additional shares of any
Common Stock issued or offered by the Company for
subscription or purchase as described above minus the number
of shares of Common Stock that the aggregate offering price
of the total number of shares of Common Stock so offered
would purchase at the then Current Market Value per share of
Common Stock and (ii) the "Ownership Ratio" shall be a
fraction, the numerator of which shall be the number of
shares of Common Stock theretofore issuable upon exercise of
all Warrants then outstanding, and the denominator of which
shall be (a) the fully diluted shares of Common Stock
outstanding on the date of issuance of such Common Stock or
such rights, options, warrants or convertible or
exchangeable securities minus (b) the number of shares of
Common Stock theretofore issuable upon the exercise of all
Warrants then outstanding.
In case the Company shall issue and sell shares of
Common Stock or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock for a consideration
consisting, in whole or in part, of property other than cash
or its equivalent, then in determining the "price per share
of Common Stock" and the "consideration" receivable by or
payable to the Company for purposes of the first sentence of
this Section 8(c), the Board of Directors of the Company
shall determine, in good faith, the fair value of such
property. In case the Company shall issue and sell rights,
options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of
Common Stock, together with one or more other securities as
part of a unit at a price per unit, then in determining the
"price per share of Common Stock" and the "consideration"
receivable by or payable to the Company for purposes
<PAGE>
9
of the first sentence of this Section 8(c), the Board of
Directors of the Company shall determine, in good faith, the
fair value of the rights, options, warrants or convertible
or exchangeable securities then being sold as part of such
unit.
Any adjustment to the number of shares of Common Stock
issuable upon exercise of all Warrants then outstanding made
pursuant to this Section 8(c) shall be allocated among each
Warrant then outstanding on a pro rata basis.
The provisions of this Section 8(c) shall not apply (i)
to shares issued pursuant to an employee stock option plan
or similar plan providing for options or other similar
rights to purchase shares of Common Stock, (ii) to issuances
pursuant to incentive bonus plans or (iii) to shares issued
in payment or settlement of any other equity-related award
to employees.
(d) Expiration of Rights, Options and Conversion
--------------------------------------------
Privileges. Upon the expiration of any rights, options,
----------
warrants or conversion or exchange privileges that have
previously resulted in an adjustment hereunder, if any
thereof shall not have been exercised, the Exercise Price
and the number of shares of Common Stock issuable upon the
exercise of each Warrant shall, upon such expiration, be
readjusted and shall thereafter, upon any future exercise,
be such as they would have been had they been originally
adjusted (or had the original adjustment not been required,
as the case may be) as if (i) the only shares of Common
Stock so issued were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such rights,
options, warrants or conversion or exchange rights and (ii)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such
exercise plus the consideration, if any, actually received
by the Company for issuance, sale or grant of all such
rights, options, warrants or conversion or exchange rights
whether or not exercised; provided, however, that no such
-------- -------
readjustment shall have the effect of increasing the
Exercise Price by an amount, or decreasing the number of
shares issuable upon exercise of each Warrant by a number,
in excess of the amount or number of the adjustment
initially made in respect to the issuance, sale or grant of
such rights, options, warrants or conversion or exchange
rights.
(e) Current Market Value. For the purposes of any
--------------------
computation under this Section 8, the Current Market Value
per share of Common Stock at the date herein specified
shall be deemed to be the average of the daily market prices
of the Common Stock for the 10 consecutive trading days
immediately preceding the day as of which "Current Market
Value" is being determined. The market price for each such
trading day shall be the closing price, regular way, on such
day, or if no sale takes place on such day, the average of
the closing bid and asked prices on such day.
<PAGE>
10
(f) Adjustments for Consolidation, Merger, Sale of
----------------------------------------------
Assets, Reorganization, etc. In case the Company (i)
---------------------------
consolidates with or merges into any other corporation and
is not the continuing or surviving corporation of such
consolidation or merger, or (ii) permits any other
corporation to consolidate with or merge into the Company
and the Company is the continuing or surviving corporation
but, in connection with such consolidation or merger, the
Common Stock is changed into or exchanged for stock or other
securities of any other corporation or cash or any other
assets, or (iii) transfers all or substantially all of its
properties and assets to any other corporation, or (iv)
effects a capital reorganization or reclassification of the
capital stock of the Company in such a way that holders of
Common Stock shall be entitled to receive stock, securities,
cash or assets with respect to or in exchange for Common
Stock, then, and in each such case, proper provision shall
be made so that, upon the basis and upon the terms and in
the manner provided in this subsection (f), each Holder,
upon the exercise of each Warrant at any time after the
consummation of such consolidation, merger, transfer,
reorganization or reclassification, shall be entitled to
receive (at the aggregate Exercise Price in effect for all
shares of Common Stock issuable upon such exercise
immediately prior to such consummation as adjusted to the
time of such transaction), in lieu of shares of Common Stock
issuable upon such exercise prior to such consummation, the
stock and other securities, cash and assets to which such
Holder would have been entitled immediately prior to the
record date for such dividend or distribution or the
effective date of such consolidation, merger, transfer,
reorganization or reclassification.
(g) Adjustment of Exercise Price. Whenever the number
----------------------------
of shares of Common Stock purchasable upon the exercise of
each Warrant is adjusted, as provided in Section 8(a), (b)
or (c), the Exercise Price for each share of Common Stock
payable upon exercise of such Warrant shall be adjusted
(calculated to the nearest $.01) so that it shall equal the
price determined by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, the
numerator of which shall be the number of shares issuable
upon the exercise of each Warrant immediately prior to such
adjustment, and the denominator of which shall be the number
of shares so issuable immediately thereafter.
(h) De Minimis Adjustments. Except as provided in
----------------------
Section 8(c) with reference to adjustments required by such
Section 8(c), no adjustment in the number of shares of
Common Stock issuable hereunder shall be required unless
such adjustment would require an increase or decrease of at
least one percent (l%) in the number of shares of Common
Stock purchasable upon an exercise of each Warrant;
provided, however, that any adjustments which by reason of
-------- -------
this Section 8(h) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest
one-thousandth of a share.
<PAGE>
11
(i) Notice of Adjustment. Whenever the number of
--------------------
shares of Common Stock or other stock or property issuable
upon the exercise of each Warrant is adjusted, as herein
provided, the Company shall promptly give written notice to
the Warrant Agent of such adjustment or adjustments and
shall cause the Warrant Agent promptly to mail by first
class mail, postage prepaid, to each Holder notice of such
adjustment or adjustments and shall deliver to the Warrant
Agent a certificate of a firm of independent public
accountants selected by the Board of Directors of the
Company (who may be the regular accountants employed by the
Company) setting forth the number of shares of Common Stock
or other stock or property issuable upon the exercise of
each Warrant after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting
forth the computation by which such adjustment was made.
The Warrant Agent shall be entitled to rely on such
certificate and shall be under no duty or responsibility
with respect to any such certificate, except to exhibit the
same from time to time to any Holder desiring an inspection
thereof during reasonable business hours. The Warrant Agent
shall not at any time be under any duty or responsibility to
any Holder to determine whether any facts exist that may
require any adjustment of the number of shares of Common
Stock or other stock or property issuable on exercise of the
Warrants, or with respect to the nature or extent of any
such adjustment when made, or with respect to the method
employed in making such adjustment or the validity or value
(or the kind or amount) of any shares of Common Stock or
other stock or property which may be issuable on exercise of
the Warrants. The Warrant Agent shall not be responsible
for any failure of the Company to make any cash payment or
to issue, transfer or deliver any shares of Common Stock or
stock certificates or other common stock or property upon
the exercise of any Warrant.
(j) Statement on Warrants. Irrespective of any
---------------------
adjustment in the number or kind of shares issuable upon the
exercise of the Warrants, Warrants theretofore or thereafter
issued may continue to express the same number and kind of
shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
Section 9. Fractional Shares of Common Stock on
------------------------------------
Exercise of the Warrants. The Company shall not be required to
------------------------
issue fractional shares of Common Stock on exercise of the
Warrants. If more than one Warrant shall be presented for
exercise in full at the same time by the same Holder, the number
of full shares of Common Stock that shall be issuable upon such
exercise thereof shall be computed on the basis of the aggregate
number of shares of Common Stock acquirable on exercise of the
Warrants so presented. If any fraction of a share of Common
Stock would, except for the provisions of this Section 9, be
issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall pay an amount in cash calculated by
it to be equal to the then Current Market Value multiplied by
such fraction computed to the nearest whole cent. The Holders,
by their acceptance of the Warrant
<PAGE>
12
Certificates, expressly waive any and all rights to receive any
fraction of a share of Common Stock or a stock certificate
representing a fraction of a share of Common Stock.
Section 10. No Stock Rights. Prior to the exercise of
---------------
the Warrants, no Holder of a Warrant Certificate, as such, shall
be entitled to vote or be deemed the holder of shares of Common
Stock or any other securities of the Company that may at any time
be issuable on the exercise hereof, nor shall anything contained
herein be construed to confer upon any Holder of a Warrant
Certificate, as such, the rights of a stockholder of the Company
or the right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to
give or withhold consent to any corporate action, to exercise any
preemptive right, to receive notice of meetings or other actions
affecting stockholders (except as provided herein), or to receive
dividends or subscription rights or otherwise.
Section 11. The Warrant Agent. (a) The Company
-----------------
hereby appoints the Warrant Agent to act as agent of the Company
as set forth in this Agreement. The Warrant Agent hereby accepts
the appointment as agent of the Company and agrees to perform
that agency upon the terms and conditions herein set forth, by
all of which the Company and the Holders of Warrants, by their
acceptance thereof, shall be bound. The Warrant Agent shall not
by countersigning Warrant Certificates or by any other act
hereunder be deemed to make any representation as to validity or
authorization of the Warrants or the Warrant Certificates (except
as to its countersignature thereon) or of any securities or other
property delivered upon exercise of any Warrant, or as to the
number or kind or amount of stock or other securities or other
property deliverable upon exercise of any Warrant. The Warrant
Agent shall not have any duty to calculate or determine any
adjustments with respect either to the kind and amount of shares
or other securities or any property receivable by Holders upon
the exercise or tender of Warrants required from time to time,
and the Warrant Agent shall have no duty or responsibility in
determining the accuracy or correctness of any such calculation,
other than to apply any adjustment, notice of which is given by
the Company to the Warrant Agent to be mailed to the Holders in
accordance with Section 8(i). The Warrant Agent shall not (a) be
liable for any recital or statement of fact contained herein or
in the Warrant Certificates or for any action taken, suffered or
omitted by it in good faith on the belief that any Warrant
Certificate or any other documents or any signatures are genuine
or properly authorized, (b) be responsible for any failure on the
part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in the Warrant
Certificates, or (c) be liable for any act or omission in
connection with this Agreement except for its own negligence or
willful misconduct. The Warrant Agent is hereby authorized to
accept instructions with respect to the performance of its duties
hereunder from any officer of the Company and to apply to any
such officer for instructions (which instructions will be
promptly given in writing when requested) and the Warrant Agent
shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with the instructions of any
such officer, except for its own negligence or wilful misconduct,
but in its discretion the
<PAGE>
13
Warrant Agent may in lieu thereof accept other evidence of such
or may require such further or additional evidence as it may deem
reasonable.
(b) The Warrant Agent shall not be under any
obligation or duty to institute, appear in or defend any action,
suit or legal proceeding in respect hereof, unless first
indemnified to its satisfaction, but this provision shall not
affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without such
indemnity. The Warrant Agent shall promptly notify the Company
in writing of any claim made or action, suit or proceeding
instituted against it arising out of or in connection with this
Agreement.
(c) The Company will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and
delivered all such further acts, instruments and assurances as
may reasonably be required by the Warrant Agent in order to
enable it to carry out or perform its duties under this
Agreement.
(d) The Company agrees to pay to the Warrant Agent
from time to time compensation for all services rendered by it
hereunder as the Company and the Warrant Agent may agree from
time to time, and to reimburse the Warrant Agent for reasonable
expenses and disbursements incurred in connection with the
execution and administration of this Agreement (including the
reasonable compensation and the expenses of its counsel), and
further agrees to indemnify the Warrant Agent for, and to hold it
harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in
connection with the acceptance and administration of this
Agreement, including the reasonable costs and expenses of
defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties
hereunder.
(e) The Warrant Agent and any stockholder, director,
officer or employee of the Warrant Agent may buy, sell and deal
in any of the Warrants or other securities of the Company or its
Affiliates or become pecuniarily interested in transactions in
which the Company or its Affiliates may be interested, or
contract with or lend money to the Company or its Affiliates or
otherwise act as fully and freely as though it were not the
Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
(f) Anything in this Agreement to the contrary
notwithstanding, in no event shall the Warrant Agent be liable
for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to loss of profits), even
if the Warrant Agent has been advised of the form of action.
Section 12. Resignation and Removal of Warrant Agent;
-----------------------------------------
Appointment of Successor. (a) No resignation or removal of the
------------------------
Warrant Agent and no appointment of a
<PAGE>
14
successor warrant agent shall become effective until the
acceptance of appointment by the successor warrant agent provided
herein. The Warrant Agent may resign its duties and be
discharged from all further duties and liability hereunder
(except liability arising as a result of the Warrant Agent's own
negligence, bad faith or willful misconduct) after giving written
notice to the Company. The Company may remove the Warrant Agent
upon written notice, and the Warrant Agent thereupon in like
manner be discharged from all further duties and liabilities
hereunder, except as aforesaid. The Warrant Agent shall, at the
Company's expense, cause to be mailed (by first-class mail,
postage prepaid) to each Holder at his last address as shown on
the Register a copy of said notice of resignation or notice of
removal, as the case may be. Upon such resignation or removal,
the Company shall appoint in writing a new warrant agent. If the
Company shall fail to make such appointment within a period of 60
days after it has been notified in writing of such resignation by
the resigning Warrant Agent or after such removal, then the
Holder may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent,
whether appointed by the Company or by such a court, shall be a
corporation doing business under the laws of the United States or
any state thereof, in good standing and having a combined capital
and surplus of not less than $50,000,000. The combined capital
and surplus of any such new warrant agent shall be deemed to be
the combined capital and surplus as set forth in the most recent
annual report of its condition published by such warrant agent
prior to its appointment, provided that such reports are
published at least annually pursuant to law or to the
requirements of a Federal or state supervising or examining
authority. After acceptance in writing of such appointment by
the new warrant agent, it shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally
named herein as the Warrant Agent, without any further assurance,
conveyance, act or deed; but if for any reason it shall be
necessary or expedient to execute and deliver any further
assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed
and delivered by the resigning or removed Warrant Agent. Not
later than the effective date of any such appointment, the
Company shall give notice thereof to the resigning or removed
Warrant Agent. Failure to give any notice provided for in this
Section, however, or any defect therein, shall not affect the
legality or validity of the resignation of the Warrant Agent or
the appointment of a new warrant agent, as the case may be.
(b) Any corporation into which the Warrant Agent or
any new warrant agent may be merged or any corporation resulting
from any consolidation to which the Warrant Agent or any new
warrant agent shall be a party, shall be a successor Warrant
Agent under this Agreement without any further act, provided that
such corporation (i) would be eligible for appointment as
successor to the Warrant Agent under the provisions of Section
12(a) or (ii) is a wholly owned subsidiary of the Warrant Agent.
Any such successor Warrant Agent shall promptly cause notice of
its succession as Warrant Agent to be mailed (by first-class
mail, postage prepaid) to each Holder at such Holder's last
address as shown on the Register.
<PAGE>
15
Section 13. Money and Other Property Deposited with
---------------------------------------
the Warrant Agent. Any moneys, securities or other property that
-----------------
at any time shall be deposited on behalf of the Company with the
Warrant Agent pursuant to this Agreement shall be and are hereby
assigned, transferred and set over to the Warrant Agent in trust
for the purpose for which such moneys, securities or other
property shall have been deposited; but such moneys, securities
or other property need not be segregated from other funds,
securities or other property except to the extent required by
law.
Section 14. Notices. (a) Except as otherwise
-------
provided in Section 14(b), any notice, demand or delivery
authorized by this Agreement shall be sufficiently given or made
when mailed if sent by first-class mail, postage prepaid,
addressed to any Holder at such Holder's address shown on the
Register and to the Company or the Warrant Agent as follows:
If to the Company: Viacom Inc.
1515 Broadway
New York, New York 10036
Attention: General Counsel and Secretary
If to the Warrant Agent: Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Division
or such other address as shall have been furnished to the party
giving or making such notice, demand or delivery.
(b) Any notice required to be given by the Company to
the Holders shall be made by mailing by registered mail, return
receipt requested, to the Holders at their respective addresses
shown on the Register. The Company hereby irrevocably authorizes
the Warrant Agent, in the name and at the expense of the Company,
to mail any such notice upon receipt thereof from the Company.
Any notice that is mailed in the manner herein provided shall be
conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
Section 15. Amendments. The Company may from time to
----------
time supplement or amend this Agreement without the consent of
any Holder, in order to (a) cure any ambiguity or correct or
supplement any provision herein that may be defective or
inconsistent with any other provision herein or (b) add to the
covenants and agreements of the Company
<PAGE>
16
for the benefit of the Holders, or surrender any rights or power
reserved to or conferred upon the Company in this Agreement. The
Warrant Agent shall join with the Company in the execution and
delivery of any such supplemental agreements unless it affects
the Warrant Agent's own rights, duties or immunities hereunder in
which case such party may, but shall not be required to, join in
such execution and delivery.
Section 16. Persons Benefiting. This Agreement shall
------------------
be binding upon and inure to the benefit of the Company and the
Warrant Agent, and their respective successors, assigns,
beneficiaries, executors and administrators, and each registered
Holder of the Warrants. Nothing in this Agreement is intended or
shall be construed to confer upon any person, other than the
Company, the Warrant Agent and the Holders of the Warrants, any
right, remedy or claim under or by reason of this Agreement or
any part hereof.
Section 17. Counterparts. This Agreement may be
------------
executed in any number of counterparts, each of which shall be
deemed an original, but all of which together constitute one and
the same instrument.
Section 18. Surrender of Certificates. Any Warrant
-------------------------
Certificate surrendered for exercise or purchase or otherwise
acquired by the Company shall, if surrendered to the Company, be
delivered to the Warrant Agent, and all Warrant Certificates
surrendered or so delivered to the Warrant Agent shall be
promptly cancelled by such Warrant Agent and shall not be
reissued by the Company. The Warrant Agent shall destroy such
cancelled Warrant Certificates and deliver its certificate of
destruction to the Company unless the Company shall otherwise
direct.
Section 19. Termination of Agreement. This Agreement
------------------------
shall terminate and be of no further force and effect on the
earliest of (a) the Expiration date or (b) the date on which all
of the Warrants have been exercised, except that the provisions
of Sections 11 and 13 shall continue in full force and effect
after such termination date.
<PAGE>
17
Section 20. Governing Law. This Agreement and each
-------------
Warrant issued hereunder and all rights arising hereunder shall
be construed in accordance with and governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by its officer thereunto duly authorized
as of the date first above written.
VIACOM INC.
By:________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK
By:________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF FACE OF WARRANT CERTIFICATE
WARRANTS TO PURCHASE CLASS B COMMON STOCK
OF VIACOM INC.
No. ____ Certificate for ___ Warrants
This certifies that _________________________, or
registered assigns, is the registered holder of the number of
Warrants set forth above (the "Warrants"). Each whole Warrant
entitles the holder thereof (a "Holder"), subject to the
provisions contained herein and in the Warrant Agreement referred
to below, to purchase from Viacom Inc., a Delaware corporation
(the "Company"), one share of Class B Common Stock, par value
$.01 per share, of the Company ("Common Stock"), at the exercise
price (the "Exercise Price") of $60.00 per share, subject to
adjustment upon the occurrence of certain events. This Warrant
Certificate shall terminate and become void as of the close of
business on the third anniversary of the filing of a certificate
of merger with the Secretary of State of the State of Delaware in
connection with the merger of Viacom Sub Inc. with and into
Paramount Communications Inc. (the "Expiration Date").
This Warrant Certificate is issued under and in
accordance with the Warrant Agreement, dated as of [
] (the "Warrant Agreement"), between the Company and
Harris Trust and Savings Bank, as warrant agent (the "Warrant
Agent", which term includes any successor Warrant Agent under the
Warrant Agreement), and is subject to the terms and provisions
contained in the Warrant Agreement, to all of which terms and
provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated
herein by reference and made a part hereof. Reference is hereby
made to the Warrant Agreement for a full statement of the
respective rights, limitations of rights, duties, obligations and
immunities thereunder of the Company, the Warrant Agent and the
Holders of the Warrants.
As provided in the Warrant Agreement and subject to the
terms and conditions therein set forth, the Warrants are
immediately exercisable. At 5:00 P.M. (New York City time) on
the Expiration Date, each Warrant not exercised prior thereto
shall terminate and become void and of no value.
The Exercise Price and the number of shares of Common
Stock issuable upon the exercise of each whole Warrant are
subject to adjustment as provided in the Warrant Agreement.
<PAGE>
A-2
All shares of Common Stock issuable by the Company upon
the exercise of Warrants shall, upon such issue, be duly and
validly issued and fully paid and non-assessable.
In order to exercise a Warrant, the registered holder
hereof must surrender this Warrant Certificate at the office of
the Warrant Agent, with the Exercise Subscription Form on the
reverse hereof duly executed by the Holder hereof, with signature
guaranteed as therein specified, together with any required
payment in full of the Exercise Price then in effect for the
share(s) of Common Stock as to which the Warrant(s) represented
by this Warrant Certificate are submitted for exercise, all
subject to the terms and conditions hereof and of the Warrant
Agreement. Any such payment of the Exercise Price shall be in
cash or by certified or official bank check payable to the order
of the Company.
The Company will pay all documentary stamp taxes, if
any, attributable to the initial issuance of Common Stock upon
the exercise of Warrants; provided, however, that the Company
shall not be required to pay any tax or other governmental charge
which may be payable in respect of any transfer involved in the
issue or delivery of any Warrant Certificates or certificates for
Common Stock issued upon the exercise of Warrants in a name other
than that of the registered Holder of such Warrants, and the
Company shall not register any such transfer or issue any such
certificate until such tax or governmental charge, if required,
shall have been paid.
This Warrant Certificate and all rights hereunder are
transferable by the registered holder hereof, in whole or in
part, on the register of the Company, upon surrender of this
Warrant Certificate for registration of transfer at the office of
the Warrant Agent maintained for such purpose in the City of New
York or the City of Chicago, Illinois, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory
to the Company and the Warrant Agent duly executed by the Holder
hereof, or his attorney duly authorized in writing, with signature
guaranteed as specified in the attached Form of Assignment. Upon
any partial transfer, the Company will issue and deliver to such
holder a new Warrant Certificate or Certificates with respect to any
portion not so transferred; provided, however, that the Company
shall not be required to issue and deliver Warrant Certificates
representing fractional warrants.
No service charge shall be made for any registration of
transfer or exchange of the Warrant Certificates, but the Company
may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Each taker and holder of this Warrant Certificate by
taking or holding the same, consents and agrees that this Warrant
Certificate when duly endorsed in blank shall be
<PAGE>
A-3
deemed negotiable and that when this Warrant Certificate shall have
been so endorsed, theholder hereof may be treated by the Company,
the Warrant Agent and all other persons dealing with this Warrant
Certificate as the sole and absolute owner hereof for any purpose
and as the person solely entitled to exercise the rights represented
hereby, or to the transfer hereof on the register of the Company
maintained by the Warrant Agent, any notice to the contrary
notwithstanding, but until such transfer on such register, the
Company and the Warrant Agent may treat the registered Holder
hereof as the owner for all purposes.
This Warrant Certificate and the Warrant Agreement are
subject to amendment as provided in the Warrant Agreement.
All terms used in this Warrant Certificate that are
defined in the Warrant Agreement shall have the meanings assigned
to them in the Warrant Agreement.
Copies of the Warrant Agreement are on file at the
office of the Warrant Agent and may be obtained by writing to the
Warrant Agent at the following address: 311 West Monroe Street,
Chicago, Illinois 60606.
<PAGE>
A-4
This Warrant Certificate shall not be valid for any
purpose until it shall have been countersigned by the Warrant
Agent.
Dated: ______________, 19__
VIACOM INC.
By: __________________________________
Name and Title:
Countersigned:
HARRIS TRUST AND SAVINGS BANK,
as Warrant Agent
__________________________
By:________________________
Authorized Officer
RESTRICTIONS ON TRANSFER AND VOTING OF COMMON STOCK: THE
RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED, OF THE COMPANY
PROVIDES THAT, SO LONG AS THE COMPANY OR ANY OF ITS SUBSIDIARIES
HOLDS ANY AUTHORIZATION FROM THE FEDERAL COMMUNICATIONS
COMMISSION (OR ANY SUCCESSOR THERETO), IF THE COMPANY HAS REASON
TO BELIEVE THAT THE OWNERSHIP, OR PROPOSED OWNERSHIP, OF SHARES
OF CAPITAL STOCK OF THE COMPANY BY ANY STOCKHOLDER OR ANY PERSON
PRESENTING ANY SHARES OF CAPITAL STOCK OF THE COMPANY FOR
TRANSFER INTO HIS NAME (A "PROPOSED TRANSFEREE") MAY BE
INCONSISTENT WITH, OR IN VIOLATION OF, ANY PROVISION OF THE
FEDERAL COMMUNICATIONS LAWS (AS HEREINAFTER DEFINED), SUCH HOLDER
OR PROPOSED TRANSFEREE, UPON REQUEST OF THE COMPANY, SHALL
FURNISH PROMPTLY TO THE COMPANY SUCH INFORMATION (INCLUDING,
WITHOUT LIMITATION, INFORMATION WITH RESPECT TO CITIZENSHIP,
OTHER OWNERSHIP INTERESTS AND AFFILIATIONS) AS THE COMPANY SHALL
REASONABLY REQUEST TO DETERMINE WHETHER
<PAGE>
A-5
THE OWNERSHIP OF, OR THE EXERCISE OF ANY RIGHTS WITH RESPECT TO
SHARES OF CAPITAL STOCK OF THE COMPANY BY SUCH STOCKHOLDER OR
PROPOSED TRANSFEREE IS INCONSISTENT WITH, OR IN VIOLATION OF, THE
FEDERAL COMMUNICATIONS LAWS. AS USED HEREIN, THE TERM "FEDERAL
COMMUNICATIONS LAWS" SHALL MEAN ANY LAW OF THE UNITED STATES NOW
OR HEREAFTER IN EFFECT (AND ANY REGULATION THEREUNDER) PERTAINING
TO THE OWNERSHIP OF, OR THE EXERCISE OF RIGHTS OF OWNERSHIP WITH
RESPECT TO, CAPITAL STOCK OF CORPORATIONS HOLDING, DIRECTLY OR
INDIRECTLY, FEDERAL COMMUNICATIONS COMMISSION AUTHORIZATIONS,
INCLUDING, WITHOUT LIMITATION, THE COMMUNICATIONS ACT OF 1934, AS
AMENDED (THE "COMMUNICATIONS ACT"), AND REGULATIONS THEREUNDER
PERTAINING TO THE OWNERSHIP, OR THE EXERCISE OF THE RIGHTS OF
OWNERSHIP, OF CAPITAL STOCK OF CORPORATIONS HOLDING, DIRECTLY OR
INDIRECTLY, FEDERAL COMMUNICATIONS COMMISSION AUTHORIZATIONS, BY
(I) ALIENS, AS DEFINED IN OR UNDER THE COMMUNICATIONS ACT, AS IT
MAY BE AMENDED FROM TIME TO TIME, (II) PERSONS OR ENTITIES HAVING
INTERESTS IN TELEVISION OR RADIO STATIONS, DAILY NEWSPAPERS AND
CABLE TELEVISION SYSTEMS OR (III) PERSONS OR ENTITIES,
UNILATERALLY OR OTHERWISE, SEEKING DIRECT OR INDIRECT CONTROL OF
THE COMPANY, AS CONSTRUED UNDER THE COMMUNICATIONS ACT, WITHOUT
HAVING OBTAINED ANY REQUISITE PRIOR FEDERAL REGULATORY APPROVAL
OF SUCH CONTROL. IF ANY STOCKHOLDER OR PROPOSED TRANSFEREE FROM
WHOM INFORMATION IS REQUESTED AS DESCRIBED ABOVE SHOULD FAIL TO
RESPOND TO SUCH REQUEST OR THE COMPANY SHALL CONCLUDE THAT THE
OWNERSHIP, OR THE EXERCISE OF ANY RIGHTS OF OWNERSHIP WITH
RESPECT TO, SHARES OF CAPITAL STOCK OF THE COMPANY BY SUCH
STOCKHOLDER OR PROPOSED TRANSFEREE COULD RESULT IN ANY
INCONSISTENCY WITH, OR VIOLATION OF, THE FEDERAL COMMUNICATIONS
LAWS, THE COMPANY MAY REFUSE TO PERMIT THE TRANSFER OF SHARES OF
CAPITAL STOCK OF THE COMPANY TO SUCH PROPOSED TRANSFEREE, OR MAY
SUSPEND THOSE RIGHTS OF STOCK OWNERSHIP THE EXERCISE OF WHICH
WOULD RESULT IN ANY INCONSISTENCY WITH, OR VIOLATION OF, THE
FEDERAL COMMUNICATIONS LAWS, SUCH REFUSAL OF TRANSFER OR
SUSPENSION TO REMAIN IN EFFECT UNTIL THE REQUESTED INFORMATION
HAS BEEN RECEIVED AND THE COMPANY HAS DETERMINED THAT SUCH
TRANSFER OR THE EXERCISE OF SUCH SUSPENDED RIGHTS, AS THE CASE
MAY BE, IS PERMISSIBLE UNDER THE FEDERAL COMMUNICATIONS LAWS, AND
THE COMPANY MAY EXERCISE ANY AND ALL APPROPRIATE REMEDIES, AT LAW
OR IN EQUITY, IN ANY COURT OF COMPETENT JURISDICTION,
<PAGE>
A-6
AGAINST ANY SUCH STOCKHOLDER OR PROPOSED TRANSFEREE, WITH A VIEW
TOWARDS OBTAINING SUCH INFORMATION OR PREVENTING OR CURING ANY
SITUATION WHICH WOULD CAUSE ANY INCONSISTENCY WITH, OR VIOLATION
OF, ANY PROVISION OF THE FEDERAL COMMUNICATIONS LAWS, AS USED
HEREIN, THE WORD "PERSON" SHALL INCLUDE NOT ONLY NATURAL PERSONS
BUT PARTNERSHIPS, ASSOCIATIONS, CORPORATIONS, JOINT VENTURES, AND
OTHER ENTITIES AND THE "REGULATION" SHALL INCLUDE NOT ONLY
REGULATIONS BUT RULES, PUBLISHED POLICIES AND PUBLISHED
CONTROLLING INTERPRETATIONS BY AN ADMINISTRATIVE AGENCY OR BODY
EMPOWERED TO ADMINISTER A STATUTORY PROVISION OF THE FEDERAL
COMMUNICATIONS LAWS.
<PAGE>
A-7
FORM OF REVERSE OF WARRANT CERTIFICATE
EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: Viacom Inc.
The undersigned irrevocably exercises
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of the Warrants for the purchase of one share (subject to
------
adjustment) of Class B Common Stock, par value $.01 per share, of
Viacom Inc., for each whole Warrant represented by the Warrant
Certificate and herewith makes payment of $
-----------------------
(such payment being in cash or by certified or
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official bank check payable to the order of Viacom Inc.), all at
the Exercise Price and on the terms and conditions specified in
the Warrant Certificate and the Warrant Agreement therein
referred to, surrenders this Warrant Certificate and all right,
title and interest therein to
and directs that the shares of Common Stock deliverable upon the
exercise of such Warrants be registered or placed in the name and
at the address specified below and delivered thereto.
Date: , 19 . . . . . (1)
--------------------------- ---- ---------------
(Signature of Owner)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State)
(Zip Code)
Signature Guaranteed by:
-----------------------------------
--------------------
(1) The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatever, and must be guaranteed by a national bank or trust
company or by a member of any national securities exchange.
<PAGE>
A-8
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant
Certificate to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE>
A-9
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered holder of
the within Warrant Certificate hereby sells, assigns, and
transfers unto the Assignee(s) named below (including the
undersigned with respect to any Warrants constituting a part of
the Warrants evidenced by the within Warrant Certificate not
being assigned hereby) all of the right of the undersigned under
the within Warrant Certificate, with respect to the number of
whole Warrants set forth below:
Social
Security or
other
Names of Address identifying Number of
-------- --------------- ---------
Assignees number of Warrants
--------------- --------
assignee(s)
---------------
<PAGE>
A-10
and does hereby irrevocably constitute and appoint
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the undersigned's attorney to
---------------------------------
make such transfer on the books of
-------------------------------
maintained for that purpose, with full power of substitution
---
in the premises.
Date: , 19 (1)
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(Signature of Owner)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State)
(Zip Code)
Signature Guaranteed by:
-----------------------------------
--------------------
(1) The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatever, and must be guaranteed by a national bank or trust
company or by a member of any national securities exchange.
- DRAFT -
FIVE-YEAR
WARRANT AGREEMENT
Agreement dated as of [ ], 1994 between
VIACOM INC., a Delaware corporation (the "Company"), and Harris
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Trust and Savings Bank, warrant agent (the "Warrant Agent").
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The Company proposes to issue and deliver its warrant
certificates (the "Warrant Certificates") evidencing warrants
--------------------
(the "Warrants") to purchase up to an aggregate of
--------
[ ] shares of its Common Stock (as
defined below), to certain holders (the "Warrant Recipients") of
------------------
the common stock, par value $1.00 per share, of Paramount
Communications Inc. ("Paramount") in connection with the
---------
Amended and Restated Agreement and Plan of Merger dated as of
February 4, 1994, as further amended as of May 26, 1994 (the
"Merger Agreement") among the Company, Viacom Sub Inc., a wholly
owned subsidiary of the Company, and Paramount. Each whole
Warrant will entitle the registered holder thereof (each, a
"Holder" and collectively, the "Holders") to purchase one share
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of Common Stock at a price of $70.00 per share, subject to
adjustment under certain circumstances.
In consideration of the foregoing and for the purpose
of defining the terms and provisions of the Warrants and the
respective rights and obligations thereunder of the Company and
the Holders, the Company and the Warrant Agent each agrees as
follows:
Section 1. Certain Definitions. As used in this
-------------------
Agreement, the following terms shall have the following
respective meanings:
"Affiliate" of any person means any person directly or
---------
indirectly controlling or controlled by or under direct or
indirect common control with such person. For purposes of this
definition, "control" when used with respect to any person means
the power to direct the management and policies of such person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Aggregate Exchange Value" shall have the meaning set
------------------------
forth in Section 4(b) of this Agreement.
"Aggregate Exercise Price" shall have the meaning set
------------------------
forth in Section 4(b) of this Agreement.
"Common Stock" means the Class B Common Stock, par
------------
value $.01 per share, of the Company, and any other capital stock
of the Company into which the Common
<PAGE>
2
Stock may be converted or reclassified or that may be issued in
respect of, in exchange for, or in substitution of, the Common
Stock by reason of any stock splits, stock dividends,
distributions, mergers, consolidations or other like events.
"Company" shall have the meaning set forth in the
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preamble to this Agreement and its successors and assigns.
"Current Market Value" shall have the meaning set forth
--------------------
in Section 8(e) of this Agreement.
"Effective Time" means the date of the filing of a
certificate of merger with the Secretary of State of the State of
Delaware in connection with the merger of Viacom Sub Inc. with
and into Paramount pursuant to the Merger Agreement or such later
date and time as set forth in the Merger Agreement.
"Exchange Securities" shall have the meaning set forth
-------------------
in Section 4(b) of this Agreement.
"Exercise Price" means the purchase price per share of
--------------
Common Stock to be paid upon the exercise of each whole Warrant
in accordance with the terms hereof, which price shall initially
be $70.00 per share, subject to adjustment from time to time
pursuant to Section 8 hereof.
"Expiration Date" means the fifth anniversary of the
---------------
Effective Time.
"Holders" shall have the meaning set forth in the
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preamble to this Agreement.
"Merger Agreement" shall have the meaning set forth in
----------------
the preamble to this Agreement.
"person" means any individual, corporation,
------
partnership, joint venture, association, joint-stock company,
limited liability company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Register" shall have the meaning set forth in Section
--------
3(a) of this Agreement.
"Series C Preferred Stock" means the Series C
------------------------
Cumulative Exchangeable Redeemable Preferred Stock, par value $.01
per share, of the Company issuable upon the exchange, at the option
of the Company, of the 8% Exchangeable Subordinated Debentures
due 2006 of the Company.
<PAGE>
3
"Viacom Exchange Debentures" means the 5% Subordinated
--------------------------
Debentures due 2014 of the Company issuable pursuant to the
Indenture dated as of [ ] between the Company
and Harris Trust and Savings Bank, as trustee, upon the exchange,
at the option of the Company, of the Series C Preferred Stock.
"Warrant Agent" shall have the meaning set forth in the
-------------
preamble to this Agreement or the successor or successors of such
Warrant Agent appointed in accordance with the terms hereof.
"Warrant Certificates" shall have the meaning set
--------------------
forth in the preamble to this Agreement.
"Warrant Recipients" shall have the meaning set forth
------------------
in the preamble to this Agreement.
"Warrants" shall have the meaning set forth in the
--------
preamble to this Agreement.
Section 2. The Warrant Certificates. (a) The
------------------------
Warrant Certificates shall be in registered form only and
substantially in the form attached hereto as Exhibit A. The
Warrant Certificates shall be dated the date on which
countersigned by the Warrant Agent and may have such legends and
endorsements typed, stamped, printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be
required to comply with applicable laws, rules or regulations
including any rule or regulation of any securities exchange on
which the Warrants may be listed, or to conform to usage.
(b) Warrant Certificates evidencing Warrants to
purchase an aggregate of up to [ ]
shares of Common Stock may be executed, on or after the date of
this Agreement, by the Company and delivered to the Warrant Agent
for countersignature, and the Warrant Agent shall thereupon
countersign and deliver such Warrant Certificates upon the order
and at the direction of the Company to the Warrant Recipients.
The names and addresses of the Warrant Recipients shall be
specified by the Company pursuant to a list of Warrant Recipients
provided to the Warrant Agent by the Company. The Warrant Agent
is hereby authorized to countersign and deliver Warrant
Certificates as required by this Section 2(b) or by Section 3(b),
4(f) or 6 hereof. The Warrant Certificates shall be executed on
behalf of the Company by any of its officers, either manually or
by facsimile signature printed thereon. The Warrant Agent shall
countersign the Warrant Certificates either manually or by
facsimile signature printed thereon, and the Warrant Certificates
shall not be valid for any purpose unless so countersigned. In
case any officer of the Company whose signature shall have been
placed upon any of the Warrant Certificates shall cease to be
such officer of the Company before countersignature by the
Warrant Agent and issue and delivery
<PAGE>
4
thereof, such Warrant Certificates may, nevertheless, be
countersigned by the Warrant Agent and issued and delivered with
the same force and effect as though such person had not ceased to
be such officer of the Company.
Section 3. Registration, Exchange and Transfer of
--------------------------------------
Warrants. (a) The Warrant Agent shall keep at the office of
--------
the Warrant Agent, specified in or pursuant to Section 4(e), a
register (the "Register") in which, subject to such regulations
--------
as the Company may prescribe, the Warrant Agent shall provide for
the registration of Warrant Certificates and of transfers or
exchanges of Warrant Certificates as herein provided.
(b) At the option of the Holder, Warrant Certificates
may be exchanged at such office and upon payment of the charges
hereinafter provided. Whenever any Warrant Certificates are so
surrendered for exchange, the Company shall execute, and the
Warrant Agent shall countersign and deliver, the Warrant
Certificates that the Holder making the exchange is entitled to
receive; provided, however, that the Company shall not be
required to issue and deliver Warrant Certificates representing
fractional warrants.
(c) All Warrant Certificates issued upon any
registration of transfer or exchange of Warrant Certificates
shall be the valid obligations of the Company, evidencing the
same obligations, and entitled to the same benefits under this
Agreement, as the Warrant Certificates surrendered for such
registration of transfer or exchange.
(d) Every Warrant Certificate surrendered for
registration of transfer or exchange shall (if so required by the
Company or the Warrant Agent) be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the
Company and the Warrant Agent, duly executed by the Holder
thereof or his attorney duly authorized in writing.
(e) No service charge shall be made for any
registration of transfer or exchange of Warrant Certificates.
The Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of
Warrant Certificates.
(f) Any Warrant Certificate when duly endorsed in
blank shall be deemed negotiable and when a Warrant Certificate
shall have been so endorsed, the Holder thereof may be treated by
the Company, the Warrant Agent and all other persons dealing
therewith as the sole and absolute owner thereof for any purpose
and as the person solely entitled to exercise the rights
represented thereby, or to the transfer thereof on the register
of the Company maintained by the Warrant Agent, any notice to the
contrary notwithstanding; but until such transfer on such
register, the Company and the Warrant Agent may treat the
registered Holder thereof as the owner for all purposes.
<PAGE>
5
Section 4. Exercise Price, Payment of the Exercise
---------------------------------------
Price, Duration and Exercise of Warrants Generally. (a) Each
--------------------------------------------------
Warrant Certificate shall, when countersigned by the Warrant
Agent, entitle the Holder thereof, subject to the provisions of
this Agreement, to receive one share of Common Stock for each
whole Warrant represented thereby, subject to adjustment as
herein provided, upon payment of the Exercise Price for each of
such shares.
(b) Payment of the Exercise Price shall be (i) in
cash or by certified or official bank check payable to the order
of the Company or (ii) made by exchanging, if issued, either
Series C Preferred Stock with a liquidation preference equal to
the Exercise Price or Viacom Exchange Debentures with a principal
amount equal to the Exercise Price; provided, however, that if a
Holder shall elect to make payment of the Exercise Price by
exchanging Series C Preferred Stock or Viacom Exchange Debentures
(collectively, the "Exchange Securities"), then the Aggregate
-------------------
Exchange Value (as defined below) of the securities so exchanged
must be equal to or less than the aggregate Exercise Price (the
"Aggregate Exercise Price") to be paid with respect to all
------------------------
Warrants surrendered by such Holder pursuant to Section 4(e)
hereof and the remainder, if any, shall be payable by such Holder
in cash or by certified or official bank check payable to the
order of the Company. "Aggregate Exchange Value" shall mean the
------------------------
aggregate liquidation preference or principal amount, as the case
may be, of the Exchange Securities surrendered in payment of the
Aggregate Exercise Price pursuant to this Section 4(b). As of the
date of this Agreement, the Series C Preferred Stock has a
liquidation preference equal to $50 per share; the Company agrees
to notify the Warrant Agent, as promptly as practicable, upon a
change, if any, of the liquidation preference per share of the
Series C Preferred Stock.
All funds received upon the exercise of Warrants shall
be deposited by the Warrant Agent for the account of the Company,
unless otherwise instructed in writing by the Company. If a
Holder shall pay the Exercise Price by exchanging Exchange
Securities, such Holder shall surrender the certificate or
certificates representing such Exchange Securities to the Warrant
Agent. Following such exchange, the holders of such Exchange
Securities shall cease to have any further rights with respect to
those Exchange Securities.
(c) Subject to the terms and conditions set forth
herein, the Warrants shall be exercisable from time to time by
the Holder thereof at any time on or prior to the Expiration
Date.
(d) The Warrants shall terminate and become void as
of the close of business on the Expiration Date.
(e) Subject to Sections 5 and 9 hereof, in order to
exercise a Warrant, the Holder thereof must surrender the Warrant
Certificate evidencing such Warrant, with one of the forms on the
reverse of or attached to the Warrant Certificates duly executed
(with
<PAGE>
6
signature guaranteed by a national bank or trust company or
by a member of any national securities exchange), to the Warrant
Agent at its office at 311 West Monroe Street, Chicago, Illinois
60606, or at such other address as the Warrant Agent may specify
in writing to the Holders at their respective addresses specified
in the Register, together with payment in full of the Exercise
Price thereof.
Upon surrender of a Warrant Certificate and payment of
the Exercise Price in conformity with the foregoing provisions,
the Warrant Agent shall thereupon promptly notify the Company,
and the Warrant Agent will deliver or cause to be delivered to or
upon any written order of any Holder appropriate evidence of
ownership of any shares of Common Stock issuable upon exercise of
the Warrants or other securities or property (including any cash)
to which the Holder is entitled hereunder, subject to Section 5.
(f) The Warrants evidenced by a Warrant Certificate
shall be exercisable either as an entirety or, from time to time,
for part only of the number of whole Warrants evidenced thereby.
If fewer than all of the Warrants evidenced by a Warrant
Certificate are exercised at any time, the Warrant Certificate
representing such Warrants shall be surrendered and a new Warrant
Certificate of the same tenor and for the number of Warrants that
were not exercised shall be issued by the Company. The Warrant
Agent shall countersign the new Warrant Certificate, register it
in such name or names as may be directed in writing by the Holder
and deliver the new Warrant Certificate to the person or persons
entitled to receive the same.
Section 5. Payment of Taxes. The Company will pay all
----------------
documentary stamp taxes, if any, attributable to the initial
issuance of Common Stock upon the exercise of Warrants; provided,
however, that the Company shall not be required to pay any tax or
other governmental charge which may be payable in respect of any
transfer involved in the issue or delivery of any Warrant
Certificates or certificates for Common Stock issued upon the
exercise of Warrants in a name other than that of the registered
Holder of such Warrants, and the Company shall not register any
such transfer or issue any such certificate until such tax or
governmental charge, if required, shall have been paid.
Section 6. Mutilated or Missing Warrant Certificates.
-----------------------------------------
If (a) any mutilated Warrant Certificate is surrendered to the
Warrant Agent or (b) the Company and the Warrant Agent receive
evidence to their satisfaction of the destruction, loss or theft
of any Warrant Certificate, and there is delivered to the Company
and the Warrant Agent such security or indemnity as may be
required by them to save each of them harmless, then, in the
absence of notice to the Company or the Warrant Agent that such
Warrant Certificate has been acquired by a bona fide purchaser,
the Company may execute and the Warrant Agent shall countersign
and deliver, in exchange for any such mutilated Warrant
Certificate or in lieu of any such destroyed, lost or stolen
Warrant Certificate, a new Warrant Certificate of like tenor and
for a like aggregate number of Warrants.
<PAGE>
7
Upon the issuance of any new Warrant Certificate under
this Section 6 the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto and other expenses (including the
reasonable fees and expenses of the Warrant Agent and of counsel
to the Company) in connection therewith.
Every new Warrant Certificate executed and delivered
pursuant to this Section 6 in lieu of any destroyed, lost or
stolen Warrant Certificate shall constitute an original
contractual obligation of the Company, whether or not the
destroyed, lost or stolen Warrant Certificate shall be at any
time enforceable by anyone, and shall be entitled to the benefits
of this Agreement equally and proportionately with any and all
other Warrant Certificates duly executed and delivered hereunder.
The provisions of this Section 6 are exclusive and
shall preclude (to the extent lawful) all other rights or
remedies with respect to the replacement of mutilated, destroyed,
lost or stolen Warrant Certificates.
Section 7. Reservation of Common Stock for Issuance on
-------------------------------------------
Exercise of Warrants; Listing. The Company will at all times
-----------------------------
reserve and keep available, free from preemptive rights, out of
its authorized but unissued Common Stock, solely for the purpose
of issuance upon exercise of Warrants as herein provided, such
number of shares of Common Stock as shall then be issuable upon
exercise of all outstanding Warrants. The Company covenants that
all shares of Common Stock which shall be so issuable shall,
upon issue, be duly and validly issued and fully paid and non-
assessable and that upon issuance such shares shall be listed on
each national securities exchange on which any other shares of
outstanding Common Stock are then listed.
Section 8. Adjustments. The Exercise Price and the
-----------
number of shares of Common Stock issuable upon exercise of each
whole Warrant shall be subject to adjustment from time to time as
follows:
(a) Stock Dividends; Stock Splits; Reverse Stock
--------------------------------------------
Splits; Reclassifications. In case the Company shall (i)
-------------------------
pay a dividend or make any other distribution with respect
to its Common Stock in shares of Common Stock, (ii)
subdivide its outstanding Common Stock, (iii) combine its
outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of Common Stock in a reclassification
of the Common Stock (including any such reclassification in
connection with a merger, consolidation or other business
combination in which the Company is the continuing
corporation), the number of shares of Common Stock issuable
upon exercise of each Warrant immediately prior to the
record date for such dividend or distribution or the
effective date of such subdivision or combination shall be
adjusted so that the Holder of each Warrant shall thereafter
be entitled to receive
<PAGE>
8
the kind and number of shares of Common Stock or other
securities of the Company that such Holder would have owned
or have been entitled to receive after the happening of any of
the events described above, had such Warrant been exercised
immediately prior to the happening of such event or any record
date with respect thereto. An adjustment made pursuant to
this Section 8(a) shall become effective immediately after the
effective date of such event retroactive to the record date,
if any, for such event.
(b) Rights; Options; Warrants. In case the Company
-------------------------
shall issue rights, options, warrants or convertible or
exchangeable securities (other than a convertible or
exchangeable security subject to Section 8(a)) to all
holders of its Common Stock, entitling them to subscribe for
or purchase Common Stock at a price per share that is lower
(at the record date for such issuance) than the Current
Market Value per share of Common Stock, the number of shares
of Common Stock thereafter issuable upon the exercise of all
Warrants then outstanding shall be determined by adding (1)
the number of shares of Common Stock theretofore issuable
upon exercise of all Warrants then outstanding and (2) the
product of (x) the Cheap Stock Issued, multiplied by (y) the
Ownership Ratio. Such adjustment shall be made whenever
such rights, options, warrants or convertible or
exchangeable securities are issued, and shall become
effective retroactively immediately after the record date
for the determination of stockholders entitled to receive
such rights, options, warrants or convertible or
exchangeable securities.
For purposes of this Section 8(b), (i) the "Cheap Stock
Issued" shall be the number of additional shares of any
Common Stock offered by the Company for subscription or
purchase as described above minus the number of shares of
Common Stock that the aggregate offering price of the total
number of shares of Common Stock so offered would purchase
at the then Current Market Value per share of Common Stock
and (ii) the "Ownership Ratio" shall be a fraction, the
numerator of which shall be the number of shares of Common
Stock theretofore issuable upon exercise of all Warrants
then outstanding, and the denominator of which shall be (a)
the fully diluted shares of Common Stock outstanding on the
date of issuance of such rights, options, warrants or
convertible or exchangeable securities minus (b) the number
of shares of Common Stock theretofore issuable upon the
exercise of all Warrants then outstanding.
Any adjustment to the number of shares of Common Stock
issuable upon exercise of all Warrants then outstanding made
pursuant to this Section 8(b) shall be allocated among the
Warrants then outstanding on a pro rata basis.
(c) Issuance of Common Stock at Lower Values. In case
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the Company shall, in a transaction in which Section 8(b) is
inapplicable, issue or sell shares of
<PAGE>
9
Common Stock, or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock, at a price per share of
Common Stock (determined in the case of such rights, options,
warrants or convertible or exchangeable securities, by dividing
(A) the total amount receivable by the Company in consideration
of the issuance and sale of such rights, options, warrants or
convertible or exchangeable securities, plus the total
consideration, if any, payable to the Company upon exercise,
conversion or exchange thereof, by (B) the total number of
shares of Common Stock covered by such rights, options, warrants
or convertible or exchangeable securities) that is lower than
the then Current Market Value per share of the Common Stock
in effect immediately prior to such sale or issuance, then
the number of shares of Common Stock thereafter issuable
upon the exercise of all Warrants then outstanding shall be
determined by adding (1) the number of shares of Common
Stock theretofore issuable upon exercise of all Warrants
then outstanding and (2) the product of (x) the Cheap Stock
Issued, multiplied by (y) the Ownership Ratio. Such
adjustment shall be made successively whenever any such sale
or issuance is made.
For purposes of this Section 8(c), (i) the "Cheap Stock
Issued" shall be the number of additional shares of any
Common Stock issued or offered by the Company for
subscription or purchase as described above minus the number
of shares of Common Stock that the aggregate offering price
of the total number of shares of Common Stock so offered
would purchase at the then Current Market Value per share of
Common Stock and (ii) the "Ownership Ratio" shall be a
fraction, the numerator of which shall be the number of
shares of Common Stock theretofore issuable upon exercise of
all Warrants then outstanding, and the denominator of which
shall be (a) the fully diluted shares of Common Stock
outstanding on the date of issuance of such Common Stock or
such rights, options, warrants or convertible or
exchangeable securities minus (b) the number of shares of
Common Stock theretofore issuable upon the exercise of all
Warrants then outstanding.
In case the Company shall issue and sell shares of
Common Stock or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock for a consideration
consisting, in whole or in part, of property other than cash
or its equivalent, then in determining the "price per share
of Common Stock" and the "consideration" receivable by or
payable to the Company for purposes of the first sentence of
this Section 8(c), the Board of Directors of the Company
shall determine, in good faith, the fair value of such
property. In case the Company shall issue and sell rights,
options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of
Common Stock, together with one or more other securities as
part of a unit at a price per unit, then in determining the
"price per share of Common Stock" and the "consideration"
receivable by or payable to the Company for purposes
<PAGE>
10
of the first sentence of this Section 8(c), the Board of
Directors of the Company shall determine, in good faith, the
fair value of the rights, options, warrants or convertible or
exchangeable securities then being sold as part of such unit.
Any adjustment to the number of shares of Common Stock
issuable upon exercise of all Warrants then outstanding made
pursuant to this Section 8(c) shall be allocated among each
Warrant then outstanding on a pro rata basis.
The provisions of this Section 8(c) shall not apply (i)
to shares issued pursuant to an employee stock option plan
or similar plan providing for options or other similar
rights to purchase shares of Common Stock, (ii) to issuances
pursuant to incentive bonus plans or (iii) to shares issued
in payment or settlement of any other equity-related award
to employees.
(d) Expiration of Rights, Options and Conversion
--------------------------------------------
Privileges. Upon the expiration of any rights, options,
----------
warrants or conversion or exchange privileges that have
previously resulted in an adjustment hereunder, if any
thereof shall not have been exercised, the Exercise Price
and the number of shares of Common Stock issuable upon the
exercise of each Warrant shall, upon such expiration, be
readjusted and shall thereafter, upon any future exercise,
be such as they would have been had they been originally
adjusted (or had the original adjustment not been required,
as the case may be) as if (i) the only shares of Common
Stock so issued were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such rights,
options, warrants or conversion or exchange rights and (ii)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such
exercise plus the consideration, if any, actually received
by the Company for issuance, sale or grant of all such
rights, options, warrants or conversion or exchange rights
whether or not exercised; provided, however, that no such
-------- -------
readjustment shall have the effect of increasing the
Exercise Price by an amount, or decreasing the number of
shares issuable upon exercise of each Warrant by a number,
in excess of the amount or number of the adjustment
initially made in respect to the issuance, sale or grant of
such rights, options, warrants or conversion or exchange
rights.
(e) Current Market Value. For the purposes of any
--------------------
computation under this Section 8, the Current Market Value
per share of Common Stock at the date herein specified
shall be deemed to be the average of the daily market prices
of the Common Stock for the 10 consecutive trading days
immediately preceding the day as of which "Current Market
Value" is being determined. The market price for each such
trading day shall be the closing price, regular way, on such
day, or if no sale takes place on such day, the average of
the closing bid and asked prices on such day.
<PAGE>
11
(f) Adjustments for Consolidation, Merger, Sale of
----------------------------------------------
Assets, Reorganization, etc. In case the Company (i)
---------------------------
consolidates with or merges into any other corporation and
is not the continuing or surviving corporation of such
consolidation or merger, or (ii) permits any other
corporation to consolidate with or merge into the Company
and the Company is the continuing or surviving corporation
but, in connection with such consolidation or merger, the
Common Stock is changed into or exchanged for stock or other
securities of any other corporation or cash or any other
assets, or (iii) transfers all or substantially all of its
properties and assets to any other corporation, or (iv)
effects a capital reorganization or reclassification of the
capital stock of the Company in such a way that holders of
Common Stock shall be entitled to receive stock, securities,
cash or assets with respect to or in exchange for Common
Stock, then, and in each such case, proper provision shall
be made so that, upon the basis and upon the terms and in
the manner provided in this subsection (f), each Holder,
upon the exercise of each Warrant at any time after the
consummation of such consolidation, merger, transfer,
reorganization or reclassification, shall be entitled to
receive (at the aggregate Exercise Price in effect for all
shares of Common Stock issuable upon such exercise
immediately prior to such consummation as adjusted to the
time of such transaction), in lieu of shares of Common Stock
issuable upon such exercise prior to such consummation, the
stock and other securities, cash and assets to which such
Holder would have been entitled immediately prior to the
record date for such dividend or distribution or the
effective date of such consolidation, merger, transfer,
reorganization or reclassification.
(g) Adjustment of Exercise Price. Whenever the number
----------------------------
of shares of Common Stock purchasable upon the exercise of
each Warrant is adjusted, as provided in Section 8(a), (b)
or (c), the Exercise Price for each share of Common Stock
payable upon exercise of such Warrant shall be adjusted
(calculated to the nearest $.01) so that it shall equal the
price determined by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, the
numerator of which shall be the number of shares issuable
upon the exercise of each Warrant immediately prior to such
adjustment, and the denominator of which shall be the number
of shares so issuable immediately thereafter.
(h) De Minimis Adjustments. Except as provided in
----------------------
Section 8(c) with reference to adjustments required by such
Section 8(c), no adjustment in the number of shares of
Common Stock issuable hereunder shall be required unless
such adjustment would require an increase or decrease of at
least one percent (l%) in the number of shares of Common
Stock purchasable upon an exercise of each Warrant;
provided, however, that any adjustments which by reason of
-------- -------
this Section 8(h) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest
one-thousandth of a share.
<PAGE>
12
(i) Notice of Adjustment. Whenever the number of
--------------------
shares of Common Stock or other stock or property issuable
upon the exercise of each Warrant is adjusted, as herein
provided, the Company shall promptly give written notice to
the Warrant Agent of such adjustment or adjustments and
shall cause the Warrant Agent promptly to mail by first
class mail, postage prepaid, to each Holder notice of such
adjustment or adjustments and shall deliver to the Warrant
Agent a certificate of a firm of independent public
accountants selected by the Board of Directors of the
Company (who may be the regular accountants employed by the
Company) setting forth the number of shares of Common Stock
or other stock or property issuable upon the exercise of
each Warrant after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting
forth the computation by which such adjustment was made.
The Warrant Agent shall be entitled to rely on such
certificate and shall be under no duty or responsibility
with respect to any such certificate, except to exhibit the
same from time to time to any Holder desiring an inspection
thereof during reasonable business hours. The Warrant Agent
shall not at any time be under any duty or responsibility to
any Holder to determine whether any facts exist that may
require any adjustment of the number of shares of Common
Stock or other stock or property issuable on exercise of the
Warrants, or with respect to the nature or extent of any
such adjustment when made, or with respect to the method
employed in making such adjustment or the validity or value
(or the kind or amount) of any shares of Common Stock or
other stock or property which may be issuable on exercise of
the Warrants. The Warrant Agent shall not be responsible
for any failure of the Company to make any cash payment or
to issue, transfer or deliver any shares of Common Stock or
stock certificates or other common stock or property upon
the exercise of any Warrant.
(j) Statement on Warrants. Irrespective of any
---------------------
adjustment in the number or kind of shares issuable upon the
exercise of the Warrants, Warrants theretofore or thereafter
issued may continue to express the same number and kind of
shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
Section 9. Fractional Shares of Common Stock on
------------------------------------
Exercise of the Warrants. The Company shall not be required to
------------------------
issue fractional shares of Common Stock on exercise of the
Warrants. If more than one Warrant shall be presented for
exercise in full at the same time by the same Holder, the number
of full shares of Common Stock that shall be issuable upon such
exercise thereof shall be computed on the basis of the aggregate
number of shares of Common Stock acquirable on exercise of the
Warrants so presented. If any fraction of a share of Common
Stock would, except for the provisions of this Section 9, be
issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall pay an amount in cash calculated by
it to be equal to the then Current Market Value multiplied by
such fraction computed to the nearest whole cent. The Holders,
by their acceptance of the Warrant
<PAGE>
13
Certificates, expressly waive any and all rights to receive any
fraction of a share of Common Stock or a stock certificate
representing a fraction of a share of Common Stock.
Section 10. No Stock Rights. Prior to the exercise of
---------------
the Warrants, no Holder of a Warrant Certificate, as such, shall
be entitled to vote or be deemed the holder of shares of Common
Stock or any other securities of the Company that may at any time
be issuable on the exercise hereof, nor shall anything contained
herein be construed to confer upon any Holder of a Warrant
Certificate, as such, the rights of a stockholder of the Company
or the right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to
give or withhold consent to any corporate action, to exercise any
preemptive right, to receive notice of meetings or other actions
affecting stockholders (except as provided herein), or to receive
dividends or subscription rights or otherwise.
Section 11. The Warrant Agent. (a) The Company
-----------------
hereby appoints the Warrant Agent to act as agent of the Company
as set forth in this Agreement. The Warrant Agent hereby accepts
the appointment as agent of the Company and agrees to perform
that agency upon the terms and conditions herein set forth, by
all of which the Company and the Holders of Warrants, by their
acceptance thereof, shall be bound. The Warrant Agent shall not
by countersigning Warrant Certificates or by any other act
hereunder be deemed to make any representation as to validity or
authorization of the Warrants or the Warrant Certificates (except
as to its countersignature thereon) or of any securities or other
property delivered upon exercise of any Warrant, or as to the
number or kind or amount of stock or other securities or other
property deliverable upon exercise of any Warrant. The Warrant
Agent shall not have any duty to calculate or determine any
adjustments with respect either to the kind and amount of shares
or other securities or any property receivable by Holders upon
the exercise or tender of Warrants required from time to time,
and the Warrant Agent shall have no duty or responsibility in
determining the accuracy or correctness of any such calculation,
other than to apply any adjustment, notice of which is given by
the Company to the Warrant Agent to be mailed to the Holders in
accordance with Section 8(i). The Warrant Agent shall not (a) be
liable for any recital or statement of fact contained herein or
in the Warrant Certificates or for any action taken, suffered or
omitted by it in good faith on the belief that any Warrant
Certificate or any other documents or any signatures are genuine
or properly authorized, (b) be responsible for any failure on the
part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in the Warrant
Certificates, or (c) be liable for any act or omission in
connection with this Agreement except for its own negligence or
willful misconduct. The Warrant Agent is hereby authorized to
accept instructions with respect to the performance of its duties
hereunder from any officer of the Company and to apply to any
such officer for instructions (which instructions will be
promptly given in writing when requested) and the Warrant Agent
shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with the instructions of any
such officer, except for its own negligence or wilful misconduct,
but in its discretion the
<PAGE>
14
Warrant Agent may in lieu thereof accept other evidence of such
or may require such further or additional evidence as it may deem
reasonable.
(b) The Warrant Agent shall not be under any
obligation or duty to institute, appear in or defend any action,
suit or legal proceeding in respect hereof, unless first
indemnified to its satisfaction, but this provision shall not
affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without such
indemnity. The Warrant Agent shall promptly notify the Company
in writing of any claim made or action, suit or proceeding
instituted against it arising out of or in connection with this
Agreement.
(c) The Company will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and
delivered all such further acts, instruments and assurances as
may reasonably be required by the Warrant Agent in order to
enable it to carry out or perform its duties under this
Agreement.
(d) The Company agrees to pay to the Warrant Agent
from time to time compensation for all services rendered by it
hereunder as the Company and the Warrant Agent may agree from
time to time, and to reimburse the Warrant Agent for reasonable
expenses and disbursements incurred in connection with the
execution and administration of this Agreement (including the
reasonable compensation and the expenses of its counsel), and
further agrees to indemnify the Warrant Agent for, and to hold it
harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in
connection with the acceptance and administration of this
Agreement, including the reasonable costs and expenses of
defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties
hereunder.
(e) The Warrant Agent and any stockholder, director,
officer or employee of the Warrant Agent may buy, sell and deal
in any of the Warrants or other securities of the Company or its
Affiliates or become pecuniarily interested in transactions in
which the Company or its Affiliates may be interested, or
contract with or lend money to the Company or its Affiliates or
otherwise act as fully and freely as though it were not the
Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
(f) Anything in this Agreement to the contrary
notwithstanding, in no event shall the Warrant Agent be liable
for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to loss of profits), even
if the Warrant Agent has been advised of the form of action.
Section 12. Resignation and Removal of Warrant Agent;
-----------------------------------------
Appointment of Successor. (a) No resignation or removal of the
------------------------
Warrant Agent and no appointment of a
<PAGE>
15
successor warrant agent shall become effective until the
acceptance of appointment by the successor warrant agent provided
herein. The Warrant Agent may resign its duties and be
discharged from all further duties and liability hereunder
(except liability arising as a result of the Warrant Agent's own
negligence, bad faith or willful misconduct) after giving written
notice to the Company. The Company may remove the Warrant Agent
upon written notice, and the Warrant Agent thereupon in like
manner be discharged from all further duties and liabilities
hereunder, except as aforesaid. The Warrant Agent shall, at the
Company's expense, cause to be mailed (by first-class mail,
postage prepaid) to each Holder at his last address as shown on
the Register a copy of said notice of resignation or notice of
removal, as the case may be. Upon such resignation or removal,
the Company shall appoint in writing a new warrant agent. If the
Company shall fail to make such appointment within a period of 60
days after it has been notified in writing of such resignation by
the resigning Warrant Agent or after such removal, then the
Holder may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent,
whether appointed by the Company or by such a court, shall be a
corporation doing business under the laws of the United States or
any state thereof, in good standing and having a combined capital
and surplus of not less than $50,000,000. The combined capital
and surplus of any such new warrant agent shall be deemed to be
the combined capital and surplus as set forth in the most recent
annual report of its condition published by such warrant agent
prior to its appointment, provided that such reports are
published at least annually pursuant to law or to the
requirements of a Federal or state supervising or examining
authority. After acceptance in writing of such appointment by
the new warrant agent, it shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally
named herein as the Warrant Agent, without any further assurance,
conveyance, act or deed; but if for any reason it shall be
necessary or expedient to execute and deliver any further
assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed
and delivered by the resigning or removed Warrant Agent. Not
later than the effective date of any such appointment, the
Company shall give notice thereof to the resigning or removed
Warrant Agent. Failure to give any notice provided for in this
Section, however, or any defect therein, shall not affect the
legality or validity of the resignation of the Warrant Agent or
the appointment of a new warrant agent, as the case may be.
(b) Any corporation into which the Warrant Agent or
any new warrant agent may be merged or any corporation resulting
from any consolidation to which the Warrant Agent or any new
warrant agent shall be a party, shall be a successor Warrant
Agent under this Agreement without any further act, provided that
such corporation (i) would be eligible for appointment as
successor to the Warrant Agent under the provisions of Section
12(a) or (ii) is a wholly owned subsidiary of the Warrant Agent.
Any such successor Warrant Agent shall promptly cause notice of
its succession as Warrant Agent to be mailed (by first-class
mail, postage prepaid) to each Holder at such Holder's last
address as shown on the Register.
<PAGE>
16
Section 13. Money, Securities and Other Property
------------------------------------
Deposited with the Warrant Agent. Any moneys, securities or
--------------------------------
other property that at any time shall be deposited on behalf of
the Company with the Warrant Agent pursuant to this Agreement
shall be and are hereby assigned, transferred and set over to the
Warrant Agent in trust for the purpose for which such moneys,
securities or other property shall have been deposited; but such
moneys, securities or other property need not be segregated from
other funds, securities or other property except to the extent
required by law.
Section 14. Notices. (a) Except as otherwise
-------
provided in Section 14(b), any notice, demand or delivery
authorized by this Agreement shall be sufficiently given or made
when mailed if sent by first-class mail, postage prepaid,
addressed to any Holder at such Holder's address shown on the
Register and to the Company or the Warrant Agent as follows:
If to the Company: Viacom Inc.
1515 Broadway
New York, New York 10036
Attention: General Counsel and Secretary
If to the Warrant Agent: Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Division
or such other address as shall have been furnished to the party
giving or making such notice, demand or delivery.
(b) Any notice required to be given by the Company to
the Holders shall be made by mailing by registered mail, return
receipt requested, to the Holders at their respective addresses
shown on the Register. The Company hereby irrevocably authorizes
the Warrant Agent, in the name and at the expense of the Company,
to mail any such notice upon receipt thereof from the Company.
Any notice that is mailed in the manner herein provided shall be
conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
Section 15. Amendments. The Company may from time to
----------
time supplement or amend this Agreement without the consent of
any Holder, in order to (a) cure any ambiguity or correct or
supplement any provision herein that may be defective or
inconsistent with any other provision herein or (b) add to the
covenants and agreements of the Company
<PAGE>
17
for the benefit of the Holders, or surrender any rights or power
reserved to or conferred upon the Company in this Agreement.
The Warrant Agent shall join with the Company in the execution
and delivery of any such supplemental agreements unless it
affects the Warrant Agent's own rights, duties or immunities
hereunder in which case such party may, but shall not be required
to, join in such execution and delivery.
Section 16. Persons Benefiting. This Agreement shall
------------------
be binding upon and inure to the benefit of the Company and the
Warrant Agent, and their respective successors, assigns,
beneficiaries, executors and administrators, and each registered
Holder of the Warrants. Nothing in this Agreement is intended or
shall be construed to confer upon any person, other than the
Company, the Warrant Agent and the Holders of the Warrants, any
right, remedy or claim under or by reason of this Agreement or
any part hereof.
Section 17. Counterparts. This Agreement may be
------------
executed in any number of counterparts, each of which shall be
deemed an original, but all of which together constitute one and
the same instrument.
Section 18. Surrender of Certificates. Any Warrant
-------------------------
Certificate surrendered for exercise or purchase or otherwise
acquired by the Company shall, if surrendered to the Company, be
delivered to the Warrant Agent, and all Warrant Certificates
surrendered or so delivered to the Warrant Agent shall be
promptly cancelled by such Warrant Agent and shall not be
reissued by the Company. The Warrant Agent shall destroy such
cancelled Warrant Certificates and deliver its certificate of
destruction to the Company unless the Company shall otherwise
direct.
Section 19. Termination of Agreement. This Agreement
------------------------
shall terminate and be of no further force and effect on the
earliest of (a) the Expiration date or (b) the date on which all
of the Warrants have been exercised, except that the provisions
of Sections 11 and 13 shall continue in full force and effect
after such termination date.
<PAGE>
18
Section 20. Governing Law. This Agreement and each Warrant
-------------
issued hereunder and all rights arising hereunder shall be
construed in accordance with and governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by its officer thereunto duly authorized
as of the date first above written.
VIACOM INC.
By:________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK
By:________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF FACE OF WARRANT CERTIFICATE
WARRANTS TO PURCHASE CLASS B COMMON STOCK
OF VIACOM INC.
No. ____ Certificate for ___ Warrants
This certifies that _________________________, or
registered assigns, is the registered holder of the number of
Warrants set forth above (the "Warrants"). Each whole Warrant
entitles the holder thereof (a "Holder"), subject to the
provisions contained herein and in the Warrant Agreement referred
to below, to purchase from Viacom Inc., a Delaware corporation
(the "Company"), one share of Class B Common Stock, par value
$.01 per share, of the Company ("Common Stock"), at the exercise
price (the "Exercise Price") of $70.00 per share, subject to
adjustment upon the occurrence of certain events. This Warrant
Certificate shall terminate and become void as of the close of
business on the fifth anniversary of the filing of a certificate
of merger with the Secretary of State of the State of Delaware in
connection with the merger of Viacom Sub Inc. with and into
Paramount Communications Inc. (the "Expiration Date").
This Warrant Certificate is issued under and in
accordance with the Warrant Agreement, dated as of [
] (the "Warrant Agreement"), between the Company and
Harris Trust and Savings Bank, as warrant agent (the "Warrant
Agent", which term includes any successor Warrant Agent under the
Warrant Agreement), and is subject to the terms and provisions
contained in the Warrant Agreement, to all of which terms and
provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated
herein by reference and made a part hereof. Reference is hereby
made to the Warrant Agreement for a full statement of the
respective rights, limitations of rights, duties, obligations and
immunities thereunder of the Company, the Warrant Agent and the
Holders of the Warrants.
As provided in the Warrant Agreement and subject to the
terms and conditions therein set forth, the Warrants are
immediately exercisable . At 5:00 P.M. (New York City time) on
the Expiration Date, each Warrant not exercised prior thereto
shall terminate and become void and of no value.
The Exercise Price and the number of shares of Common
Stock issuable upon the exercise of each whole Warrant are
subject to adjustment as provided in the Warrant Agreement.
<PAGE>
A-2
All shares of Common Stock issuable by the Company upon
the exercise of Warrants shall, upon such issue, be duly and
validly issued and fully paid and non-assessable.
In order to exercise a Warrant, the registered holder
hereof must surrender this Warrant Certificate at the office of
the Warrant Agent, with the Exercise Subscription Form on the
reverse hereof duly executed by the Holder hereof, with signature
guaranteed as therein specified, together with any required
payment in full of the Exercise Price then in effect for the
share(s) of Common Stock as to which the Warrant(s) represented
by this Warrant Certificate are submitted for exercise, all
subject to the terms and conditions hereof and of the Warrant
Agreement.
Payment of the Exercise Price shall be (i) in cash or
by certified or official bank check payable to the order of the
Company or (ii) made by exchanging, if issued, either Series C
Cumulative Exchangeable Redeemable Preferred Stock, par value $.01
per share, of the Company ("Series C Preferred Stock") with a
------------------------
liquidation preference equal to the Exercise Price or 5%
Subordinated Debentures due 2014 of the Company ("Viacom Exchange
---------------
Debentures") with a principal amount equal to the Exercise Price;
----------
provided, however, that if a Holder shall elect to make payment
of the Exercise Price by exchanging Series C Preferred Stock or
Viacom Exchange Debentures (collectively, the "Exchange
--------
Securities"), then the Aggregate Exchange Value (as defined
----------
below) of the securities so exchanged must be equal to or less
than the aggregate Exercise Price (the "Aggregate Exercise
------------------
Price") to be paid with respect to all Warrants surrendered by
-----
such Holder pursuant to Section 4(e) of the Warrant Agreement and
the remainder, if any, shall be payable by such Holder in cash or
by certified or official bank check payable to the order of the
Company. "Aggregate Exchange Value" shall mean the aggregate
------------------------
liquidation preference or principal amount, as the case may be,
of the Exchange Securities surrendered in payment of the
Aggregate Exercise Price pursuant to Section 4(b) of the Warrant
Agreement.
All funds received upon the exercise of Warrants shall
be deposited by the Warrant Agent for the account of the Company,
unless otherwise instructed in writing by the Company. If a
Holder shall pay the Exercise Price by exchanging Exchange
Securities, such Holder shall surrender the certificate or
certificates representing such Exchange Securities to the Warrant
Agent. Following such exchange, the holders of such Exchange
Securities shall cease to have any further rights with respect to
those Exchange Securities.
The Company will pay all documentary stamp taxes, if
any, attributable to the initial issuance of Common Stock upon
the exercise of Warrants; provided, however, that the Company
shall not be required to pay any tax or other governmental charge
which may be payable in respect of any transfer involved in the
issue or delivery of any Warrant
<PAGE>
A-3
Certificates or certificates for Common Stock issued upon the
exercise of Warrants in a name other than that of the registered
Holder of such Warrants, and the Company shall not register any
such transfer or issue any such certificate until such tax or
governmental charge, if required, shall have been paid.
This Warrant Certificate and all rights hereunder are
transferable by the registered holder hereof, in whole or in
part, on the register of the Company, upon surrender of this
Warrant Certificate for registration of transfer at the office of
the Warrant Agent maintained for such purpose in the City of New
York or the City of Chicago, Illinois, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory
to the Company and the Warrant Agent duly executed by the Holder
hereof, or his attorney duly authorized in writing, with signature
guaranteed as specified in the attached Form of Assignment. Upon
any partial transfer, the Company will issue and deliver to such
holder a new Warrant Certificate or Certificates with respect to
any portion not so transferred; provided, however, that the Company
shall not be required to issue and deliver Warrant Certificates
representing fractional warrants.
No service charge shall be made for any registration of
transfer or exchange of the Warrant Certificates, but the Company
may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Each taker and holder of this Warrant Certificate by
taking or holding the same, consents and agrees that this Warrant
Certificate when duly endorsed in blank shall be deemed
negotiable and that when this Warrant Certificate shall have been
so endorsed, the holder hereof may be treated by the Company, the
Warrant Agent and all other persons dealing with this Warrant
Certificate as the sole and absolute owner hereof for any purpose
and as the person solely entitled to exercise the rights
represented hereby, or to the transfer hereof on the register of
the Company maintained by the Warrant Agent, any notice to the
contrary notwithstanding, but until such transfer on such
register, the Company and the Warrant Agent may treat the
registered Holder hereof as the owner for all purposes.
This Warrant Certificate and the Warrant Agreement are
subject to amendment as provided in the Warrant Agreement.
All terms used in this Warrant Certificate that are
defined in the Warrant Agreement shall have the meanings assigned
to them in the Warrant Agreement.
Copies of the Warrant Agreement are on file at the
office of the Warrant Agent and may be obtained by writing to the
Warrant Agent at the following address: 311 West Monroe Street,
Chicago, Illinois 60606.
<PAGE>
A-4
This Warrant Certificate shall not be valid for any
purpose until it shall have been countersigned by the Warrant
Agent.
Dated: ______________, 19__
VIACOM INC.
By: __________________________________
Name and Title:
Countersigned:
HARRIS TRUST AND SAVINGS BANK,
as Warrant Agent
__________________________
By:________________________
Authorized Officer
RESTRICTIONS ON TRANSFER AND VOTING OF COMMON STOCK: THE RESTATED
CERTIFICATE OF INCORPORATION, AS AMENDED, OF THE COMPANY PROVIDES
THAT, SO LONG AS THE COMPANY OR ANY OF ITS SUBSIDIARIES HOLDS ANY
AUTHORIZATION FROM THE FEDERAL COMMUNICATIONS COMMISSION (OR ANY
SUCCESSOR THERETO), IF THE COMPANY HAS REASON TO BELIEVE THAT THE
OWNERSHIP, OR PROPOSED OWNERSHIP, OF SHARES OF CAPITAL STOCK OF
THE COMPANY BY ANY STOCKHOLDER OR ANY PERSON PRESENTING ANY
SHARES OF CAPITAL STOCK OF THE COMPANY FOR TRANSFER INTO HIS NAME
(A "PROPOSED TRANSFEREE") MAY BE INCONSISTENT WITH, OR IN
VIOLATION OF, ANY PROVISION OF THE FEDERAL COMMUNICATIONS LAWS
(AS HEREINAFTER DEFINED), SUCH HOLDER OR PROPOSED TRANSFEREE,
UPON REQUEST OF THE COMPANY, SHALL FURNISH PROMPTLY TO THE
COMPANY SUCH INFORMATION (INCLUDING, WITHOUT LIMITATION,
INFORMATION WITH RESPECT TO CITIZENSHIP, OTHER OWNERSHIP
INTERESTS AND AFFILIATIONS) AS THE COMPANY SHALL REASONABLY
REQUEST TO DETERMINE WHETHER
<PAGE>
A-5
THE OWNERSHIP OF, OR THE EXERCISE OF ANY RIGHTS WITH RESPECT TO
SHARES OF CAPITAL STOCK OF THE COMPANY BY SUCH STOCKHOLDER OR
PROPOSED TRANSFEREE IS INCONSISTENT WITH, OR IN VIOLATION OF, THE
FEDERAL COMMUNICATIONS LAWS. AS USED HEREIN, THE TERM "FEDERAL
COMMUNICATIONS LAWS" SHALL MEAN ANY LAW OF THE UNITED STATES NOW
OR HEREAFTER IN EFFECT (AND ANY REGULATION THEREUNDER) PERTAINING
TO THE OWNERSHIP OF, OR THE EXERCISE OF RIGHTS OF OWNERSHIP WITH
RESPECT TO, CAPITAL STOCK OF CORPORATIONS HOLDING, DIRECTLY OR
INDIRECTLY, FEDERAL COMMUNICATIONS COMMISSION AUTHORIZATIONS,
INCLUDING, WITHOUT LIMITATION, THE COMMUNICATIONS ACT OF 1934, AS
AMENDED (THE "COMMUNICATIONS ACT"), AND REGULATIONS THEREUNDER
PERTAINING TO THE OWNERSHIP, OR THE EXERCISE OF THE RIGHTS OF
OWNERSHIP, OF CAPITAL STOCK OF CORPORATIONS HOLDING, DIRECTLY OR
INDIRECTLY, FEDERAL COMMUNICATIONS COMMISSION AUTHORIZATIONS, BY
(I) ALIENS, AS DEFINED IN OR UNDER THE COMMUNICATIONS ACT, AS IT
MAY BE AMENDED FROM TIME TO TIME, (II) PERSONS OR ENTITIES HAVING
INTERESTS IN TELEVISION OR RADIO STATIONS, DAILY NEWSPAPERS AND
CABLE TELEVISION SYSTEMS OR (III) PERSONS OR ENTITIES,
UNILATERALLY OR OTHERWISE, SEEKING DIRECT OR INDIRECT CONTROL OF
THE COMPANY, AS CONSTRUED UNDER THE COMMUNICATIONS ACT, WITHOUT
HAVING OBTAINED ANY REQUISITE PRIOR FEDERAL REGULATORY APPROVAL
OF SUCH CONTROL. IF ANY STOCKHOLDER OR PROPOSED TRANSFEREE FROM
WHOM INFORMATION IS REQUESTED AS DESCRIBED ABOVE SHOULD FAIL TO
RESPOND TO SUCH REQUEST OR THE COMPANY SHALL CONCLUDE THAT THE
OWNERSHIP, OR THE EXERCISE OF ANY RIGHTS OF OWNERSHIP WITH
RESPECT TO, SHARES OF CAPITAL STOCK OF THE COMPANY BY SUCH
STOCKHOLDER OR PROPOSED TRANSFEREE COULD RESULT IN ANY
INCONSISTENCY WITH, OR VIOLATION OF, THE FEDERAL COMMUNICATIONS
LAWS, THE COMPANY MAY REFUSE TO PERMIT THE TRANSFER OF SHARES OF
CAPITAL STOCK OF THE COMPANY TO SUCH PROPOSED TRANSFEREE, OR MAY
SUSPEND THOSE RIGHTS OF STOCK OWNERSHIP THE EXERCISE OF WHICH
WOULD RESULT IN ANY INCONSISTENCY WITH, OR VIOLATION OF, THE
FEDERAL COMMUNICATIONS LAWS, SUCH REFUSAL OF TRANSFER OR
SUSPENSION TO REMAIN IN EFFECT UNTIL THE REQUESTED INFORMATION
HAS BEEN RECEIVED AND THE COMPANY HAS DETERMINED THAT SUCH
TRANSFER OR THE EXERCISE OF SUCH SUSPENDED RIGHTS, AS THE CASE
MAY BE, IS PERMISSIBLE UNDER THE FEDERAL COMMUNICATIONS LAWS, AND
THE COMPANY MAY EXERCISE ANY AND ALL APPROPRIATE REMEDIES, AT LAW
OR IN EQUITY, IN ANY COURT OF COMPETENT JURISDICTION,
<PAGE>
A-6
AGAINST ANY SUCH STOCKHOLDER OR PROPOSED TRANSFEREE, WITH A VIEW
TOWARDS OBTAINING SUCH INFORMATION OR PREVENTING OR CURING ANY
SITUATION WHICH WOULD CAUSE ANY INCONSISTENCY WITH, OR VIOLATION
OF, ANY PROVISION OF THE FEDERAL COMMUNICATIONS LAWS, AS USED
HEREIN, THE WORD "PERSON" SHALL INCLUDE NOT ONLY NATURAL PERSONS
BUT PARTNERSHIPS, ASSOCIATIONS, CORPORATIONS, JOINT VENTURES, AND
OTHER ENTITIES AND THE "REGULATION" SHALL INCLUDE NOT ONLY
REGULATIONS BUT RULES, PUBLISHED POLICIES AND PUBLISHED
CONTROLLING INTERPRETATIONS BY AN ADMINISTRATIVE AGENCY OR BODY
EMPOWERED TO ADMINISTER A STATUTORY PROVISION OF THE FEDERAL
COMMUNICATIONS LAWS
<PAGE>
A-7
FORM OF REVERSE OF WARRANT CERTIFICATE
EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: Viacom Inc.
The undersigned irrevocably exercises
------------------
of the Warrants for the purchase of one share (subject to
------
adjustment) of Class B Common Stock, par value $.01 per share, of
Viacom Inc., for each whole Warrant represented by the Warrant
Certificate. The undersigned herewith makes payment of $
---------
, with such payment to be made (i) by
------------------------
surrendering herewith Series C Cumulative Exchangeable Preferred
Stock, par value $.01 per share, of Viacom Inc. with a
liquidation preference of $ _________, (ii) by surrendering
herewith 5% Subordinated Debentures due 2014 of Viacom Inc. with
a principal amount of $__________ and/or (iii) by delivering
herewith cash or a certified or official bank check payable to
the order of Viacom Inc. in the amount of $__________. The
Warrants are being exercised at the Exercise Price and on the
terms and conditions specified in the Warrant Certificate and the
Warrant Agreement which is referred to therein. The undersigned
surrenders this Warrant Certificate and all right, title and
interest therein to and directs
that the shares of Common Stock deliverable upon the exercise of
such Warrants be registered or placed in the name and at the
address specified below and delivered thereto.
Date: , 19 . . . . . (1)
--------------------------- ---- ---------------
(Signature of Owner)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State)
(Zip Code)
Signature Guaranteed by:
-----------------------------------
--------------------
(1) The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatever, and must be guaranteed by a national bank or trust
company or by a member of any national securities exchange.
<PAGE>
A-8
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant
Certificate to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE>
A-9
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered holder of
the within Warrant Certificate hereby sells, assigns, and
transfers unto the Assignee(s) named below (including the
undersigned with respect to any Warrants constituting a part of
the Warrants evidenced by the within Warrant Certificate not
being assigned hereby) all of the right of the undersigned under
the within Warrant Certificate, with respect to the number of
whole Warrants set forth below:
Social
Security or
other
Names of Address identifying Number of
-------- --------------- ---------
Assignees number of Warrants
--------------- --------
assignee(s)
---------------
<PAGE>
A-10
and does hereby irrevocably constitute and appoint
---------------
the undersigned's attorney to
---------------------------------
make such transfer on the books of
-------------------------------
maintained for that purpose, with full power of substitution
---
in the premises.
Date: , 19 (1)
--------------------------- ---- ---------------
(Signature of Owner)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State)
(Zip Code)
Signature Guaranteed by:
-----------------------------------
--------------------
(1) The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change
whatever, and must be guaranteed by a national bank or trust
company or by a member of any national securities exchange.
NUMBER SHARES
R __________
CUSIP __________
SERIES C CUMULATIVE SEE REVERSE FOR CERTAIN
EXCHANGEABLE REDEEMABLE DEFINITIONS AND A STATEMENT
PREFERRED STOCK AS TO THE RIGHTS,
PAR VALUE $0.01 PER SHARE PREFERENCES, PRIVILEGES AND
AND RESTRICTIONS OF SHARES
VIACOM
VIACOM INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NY AND
CHICAGO, IL.
This certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE SERIES C
CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK OF VIACOM INC. (the
"Corporation"), transferable on the books of the Corporation in
person or by duly authorized Attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares
represented hereby are issued and shall be held subject to all of
the provisions of the Restated Certificate of Incorporation, as
amended, the Certificate of Designation of the Series C
Cumulative Exchangeable Redeemable Preferred Stock and the Bylaws, as
amended, of the Corporation, to all of which the holder by
acceptance hereof assents. This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
Countersigned and Registered: HARRIS TRUST AND SAVINGS BANK,
Transfer Agent and Registrar
-----------------------
Authorized Signature
WITNESS the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.
Dated:
VIACOM INC.
CORPORATE SEAL
1986 /s/ Frank J. Biondi, Jr. /s/ Philippe P. Dauman
------------------------ ------------------------
DELAWARE President Secretary
<PAGE>
VIACOM INC.
THE CORPORATION WILL FURNISH WITHOUT CHARGE, TO EACH
STOCKHOLDER WHO SO REQUESTS, THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING OPTIONAL OR OTHER SPECIAL
RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF OF THE
CORPORATION AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTION OF
SUCH PREFERENCES AND/OR RIGHTS.
RESTRICTIONS ON TRANSFER AND VOTING THE RESTATED CERTIFICATE
OF INCORPORATION, AS AMENDED, OF THE CORPORATION PROVIDES THAT,
SO LONG AS THE CORPORATION OR ANY OF ITS SUBSIDIARIES HOLDS ANY
AUTHORIZATION FROM THE FEDERAL COMMUNICATIONS COMMISSION (OR ANY
SUCCESSOR THERETO), IF THE CORPORATION HAS REASON TO BELIEVE THAT
THE OWNERSHIP, OR PROPOSED OWNERSHIP, OF SHARES OF CAPITAL STOCK
OF THE CORPORATION BY ANY STOCKHOLDER OR ANY PERSON PRESENTING
ANY SHARES OF CAPITAL STOCK OF THE CORPORATION FOR TRANSFER INTO
HIS NAME (A "PROPOSED TRANSFEREE") MAY BE INCONSISTENT WITH, OR
IN VIOLATION OF, ANY PROVISION OF THE FEDERAL COMMUNICATIONS LAWS
(AS HEREINAFTER DEFINED), SUCH STOCKHOLDER OR PROPOSED TRANSFEREE
UPON REQUEST OF THE CORPORATION, SHALL FURNISH PROMPTLY TO THE
CORPORATION SUCH INFORMATION (INCLUDING, WITHOUT LIMITATION,
INFORMATION WITH RESPECT TO CITIZENSHIP, OTHER OWNERSHIP
INTERESTS AND AFFILIATIONS) AS THE CORPORATION SHALL REASONABLY
REQUEST TO DETERMINE WHETHER THE OWNERSHIP OF, OR THE EXERCISE OF
ANY RIGHTS WITH RESPECT TO, SHARES OF CAPITAL STOCK OF THE
CORPORATION BY SUCH STOCKHOLDER OR PROPOSED TRANSFEREE IS
INCONSISTENT WITH, OR IN VIOLATION OF, THE FEDERAL COMMUNICATIONS
LAWS AS USED HEREIN. THE TERM "FEDERAL COMMUNICATIONS LAWS"
SHALL MEAN ANY LAW OF THE UNITED STATES NOW OR HEREAFTER IN
EFFECT (AND ANY REGULATION THEREUNDER) PERTAINING TO THE
OWNERSHIP OF OR THE EXERCISE OF RIGHTS OF OWNERSHIP WITH RESPECT
TO, CAPITAL STOCK OF CORPORATIONS HOLDING, DIRECTLY OR
INDIRECTLY, FEDERAL COMMUNICATIONS COMMISSION AUTHORIZATIONS,
INCLUDING, WITHOUT LIMITATION, THE COMMUNICATIONS ACT OF 1934 AS
AMENDED (THE "COMMUNICATIONS ACT"), AND REGULATIONS THEREUNDER
PERTAINING TO THE OWNERSHIP OR THE EXERCISE OF THE RIGHTS OF
OWNERSHIP OF CAPITAL STOCK OF CORPORATIONS HOLDING, DIRECTLY OR
INDIRECTLY, FEDERAL COMMUNICATIONS COMMISSION AUTHORIZATIONS BY
(i) ALIENS, AS DEFINED IN OR UNDER THE COMMUNICATIONS ACT, AS IT
MAY BE AMENDED FROM TIME TO TIME, (ii) PERSONS AND ENTITIES
HAVING INTERESTS IN TELEVISION OR RADIO STATIONS, DAILY
NEWSPAPERS AND CABLE TELEVISION SYSTEMS OR (iii) PERSONS OR
ENTITIES, UNILATERALLY OR OTHERWISE, SEEKING DIRECT OR INDIRECT
CONTROL OF THE CORPORATION, AS CONSTRUED UNDER THE COMMUNICATIONS
ACT, WITHOUT HAVING OBTAINED ANY REQUISITE PRIOR FEDERAL
REGULATORY APPROVAL OF SUCH CONTROL. IF ANY STOCKHOLDER OR
PROPOSED TRANSFEREE FROM WHOM INFORMATION IS REQUESTED AS
DESCRIBED ABOVE SHOULD FAIL TO RESPOND TO SUCH REQUEST OR THE
CORPORATION SHALL CONCLUDE THAT THE OWNERSHIP OF, OR THE EXERCISE
OF ANY RIGHTS OF OWNERSHIP WITH RESPECT TO, SHARES OF CAPITAL
STOCK OF THE CORPORATION BY SUCH STOCKHOLDER OR PROPOSED
TRANSFEREE COULD RESULT IN ANY INCONSISTENCY WITH, OR VIOLATION
<PAGE>
OF, THE FEDERAL COMMUNICATIONS LAWS, THE CORPORATION MAY REFUSE
TO PERMIT THE TRANSFER OF SHARES OF CAPITAL STOCK OF THE
CORPORATION TO SUCH PROPOSED TRANSFEREE, OR MAY SUSPEND THOSE
RIGHTS OF STOCK OWNERSHIP THE EXERCISE OF WHICH WOULD RESULT IN
ANY INCONSISTENCY WITH, OR VIOLATION OF, THE FEDERAL
COMMUNICATIONS LAWS, SUCH REFUSAL OF TRANSFER OR SUSPENSION TO
REMAIN IN EFFECT UNTIL THE REQUESTED INFORMATION HAS BEEN
RECEIVED AND THE CORPORATION HAS DETERMINED THAT SUCH TRANSFER,
OR THE EXERCISE OF SUCH SUSPENDED RIGHTS, AS THE CASE MAY BE, IS
PERMISSIBLE UNDER THE FEDERAL COMMUNICATIONS LAWS, AND THE
CORPORATION MAY EXERCISE AND ALL APPROPRIATE REMEDIES AT LAW OR
IN EQUITY, IN ANY COURT OF COMPETENT JURISDICTION, AGAINST ANY
SUCH STOCKHOLDER OR PROPOSED TRANSFEREE WITH A VIEW TOWARDS
OBTAINING SUCH INFORMATION OR PREVENTING OR CURING ANY SITUATION
WHICH WOULD CAUSE ANY INCONSISTENCY WITH, OR VIOLATION OF, ANY
PROVISION OF THE FEDERAL COMMUNICATIONS LAWS AS USED HEREIN. THE
WORD "PERSON" SHALL INCLUDE NOT ONLY NATURAL PERSONS BUT
PARTNERSHIPS, ASSOCIATIONS, CORPORATIONS, JOINT VENTURES AND
OTHER ENTITIES, AND THE WORD "REGULATION" SHALL INCLUDE NOT ONLY
REGULATIONS BUT RULES, PUBLISHED POLICIES AND PUBLISHED
CONTROLLING INTERPRETATIONS BY AN ADMINISTRATIVE AGENCY OR BODY
EMPOWERED TO ADMINISTER A STATUTORY PROVISION OF THE FEDERAL
COMMUNICATIONS LAWS.
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or
regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - ..................Custodian..................
(Cust) (Minor)
under Uniform Gifts to Minors
Act.......................
(State)
Additional abbreviations may also be used through not in the
above list.
For value received..........hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
...................
---------------------------------------------
<PAGE>
.................................................................
Please print or typewrite name and address including postal zip
code of assignee
.................................................................
...........................................................Shares
of the capital stock represented by the within Certificate, and
do
hereby irrevocably constitute and appoint........................
.................................................................
Attorney to transfer the said stock on the books of the within-
named Corporation with full power of substitution in the
premises.
Notice: The signature to this assignment must correspond with
the name as written upon the face of the Certificate, in every
particular, without alteration or enlargement or any change
whatever.
Dated.....................................
(212) 848-7325
June 2, 1994
Viacom Inc.
200 Elm Street
Dedham, Massachusetts 02026
Ladies and Gentlemen:
We have acted as counsel for Viacom Inc., a Delaware
corporation (the "Company"), in connection with the Registration
Statement on Form S-4 (the "Registration Statement") filed with
the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Securities Act"), relating
to the solicitation of proxies in connection with the
merger of a wholly-owned subsidiary of the Company
with and into Paramount Communications Inc. and to the
registration under the Securities Act of (i) 56,895,733 shares of
the Company's Class B Common Stock, par value $.01 per share (the
"Class B Common Stock"), (ii) $1,069,870,865 principal amount of
the Company's 8% Exchangeable Subordinated Debentures due 2006
(the "Merger Debentures"), the Series C Cumulative Exchangeable
Redeemable Preferred Stock, par value $.01 per share, of the
Company (the "Series C Preferred Stock") which may be issued in
exchange for the Merger Debentures and the 5% Subordinated
Debentures due 2014 of the Company (the "Exchange Debentures", and
together with the Merger Debentures, the "Debentures") which may
be issued in exchange for the Series C Preferred Stock, (iii)
56,895,733 of the Company's contingent value rights (the "CVRs"),
(iv) 30,567,739 of the Company's three-year warrants to purchase
one share of Class B Common Stock at $60 per share (the "Three-
Year Warrants") and the Class B Common Stock which is issuable
upon the exercise thereof and (v) 18,340,643 of the Company's
five-year warrants to purchase one share of Class B Common Stock
at $70 per share (the "Five-Year Warrants", and together with the
Three-Year Warrants, the "Warrants") and the Class B Common Stock
which is issuable upon the exercise thereof. The Class B Common
Stock issuable upon exercise of the Warrants is hereinafter
referred to as the "Additional Class B Common Stock". Capitalized
terms used but not defined herein shall have the meanings assigned
to such terms in the Registration Statement.
26741/NYL3
<PAGE>
Viacom Inc. 2 June 2, 1994
The Debentures are to be issued under an indenture (the
"Indenture") in the form included in the Registration Statement as
Exhibit 4.5, the Series C Preferred Stock is to be governed by the
Certificate of Designation of Series C Cumulative Exchangeable
Redeemable Preferred Stock (the "Certificate of Designation") in
the form included in the Registration Statement as Exhibit 4.4,
the CVRs are to be governed by the Contingent Value Rights
Agreement (the "CVR Agreement") in the form included in the
Registration Statement as Exhibit 4.6, the Three-Year Warrants are
to be governed by the Warrant Agreement (the "Three-Year Warrant
Agreement") in the form included in the Registration Statement as
Exhibit 4.7 and the Five-Year Warrants are to be governed by the
Warrant Agreement (the "Five Year Warrant Agreement", and together
with the Three-Year Warrant Agreement, the "Warrant Agreements")
in the form included in the Registration Statement as Exhibit 4.8.
In so acting, we have examined the Registration
Statement including the joint proxy statement/prospectus (the
"Joint Proxy Statement/Prospectus") contained therein, the
Indenture, the Certificate of Designation, the CVR Agreement and
the Warrant Agreements. We have also examined and relied as to
factual matters upon the representations and warranties contained
in originals, or copies certified or otherwise identified to our
satisfaction, of such records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to
enable us to render the opinions expressed below. In such
examination, we have assumed the genuineness of all signatures,
the authenticity of all documents, certificates and instruments
submitted to us as originals and the conformity with originals of
all documents submitted to us as copies.
In connection with these opinions, we have assumed that
each of the following shall occur on or prior to the issuance of
the Class B Common Stock, the Debentures, the Series C Preferred
Stock, the CVRs, the Warrants and the Additional Class B Common
Stock (a) the holders of Viacom Class A Common Stock at the Viacom
Special Meeting approve and adopt the Paramount Merger Agreement
(including the issuance of the Paramount Merger Consideration) and
approve the Viacom Charter Amendments, (b) the holders of
Paramount Common Stock (the "Paramount Stockholders") at the
Paramount Special Meeting approve and adopt the Paramount Merger
Agreement, (c) there shall have been filed with the Secretary of
State of the State of Delaware (i) the "Certificate of Merger
Merging Viacom Sub Inc. with and into Paramount Communications
Inc." in the form set forth in Annex VI to the Joint Proxy
Statement/Prospectus and (ii) the "Certificate of Amendment to the
Restated Certificate of Incorporation of Viacom" in the form set
forth in Annex VII to the Joint Proxy Statement/Prospectus.
The opinions expressed below are limited to the law of
the State of New York, the General Corporation Law of Delaware and
the federal law of the United States, and we do not express any
opinion herein concerning any other law.
26741/NYL3
<PAGE>
Viacom Inc. 3 June 2, 1994
Based upon the foregoing, and having regard for such
legal considerations as we have deemed relevant, we are of the
opinion that:
1. The Class B Common Stock will be duly authorized by
the Company and when issued by the Company to the Paramount
Stockholders as contemplated by the Paramount Merger
Agreement, will be validly issued, fully paid and non-
assessable.
2. The Debentures and the Indenture will be duly
authorized by the Company, and when (a) the Indenture has
been duly executed and delivered by the parties thereto, (b)
the Debentures have been duly executed by the Company and
duly authenticated by the trustee under the Indenture and (c)
the Debentures have been duly issued by the Company to the
Paramount Stockholders as contemplated by the Paramount
Merger Agreement in the case of the Merger Debentures and to
the holders of the Series C Preferred Stock in the case of
the Exchange Debentures, in each case, in accordance with the
provisions of the Indenture (including the provisions of the
Indenture regarding establishment of the forms of Debentures)
and the provisions of the Certificate of Designation in the
case of the Exchange Debentures, the Debentures will be
validly issued and will constitute valid and binding
obligations of the Company enforceable against the Company in
accordance with their terms, entitled to the benefit of the
Indenture.
3. The Series C Preferred Stock will be duly
authorized and when the Series C Preferred Stock is issued by
the Company to the holders of the Merger Debentures in
accordance with the Certificate of Designation and the
provisions of the Indenture, the Series C Preferred Stock
will be validly issued, fully paid and non-assessable.
4. The CVRs and the CVR Agreement will be duly
authorized by the Company, and when (a) the CVR Agreement has
been duly executed and delivered by the parties thereto, (b)
the CVRs have been duly executed by the Company and duly
authenticated by the CVR Trustee under the CVR Agreement and
(c) the CVRs have been duly issued by the Company to the
Paramount Stockholders as contemplated by the Paramount
Merger Agreement in accordance with the provisions of the CVR
Agreement (including the provisions of the CVR Agreement
regarding establishment of the form of CVRs), the CVRs will
be validly issued and will constitute valid and binding
obligations of the Company enforceable against the Company in
accordance with their terms, entitled to the benefit of the
CVR Agreement.
5. The Warrants and the Warrant Agreements will be
duly authorized by the Company, and when (a) the Warrant
Agreements have been duly executed and
26741/NYL3
<PAGE>
Viacom Inc. 4 June 2, 1994
delivered by the parties thereto, (b) the Warrants have been
duly executed by the Company and duly countersigned by the
warrant agents under the Warrant Agreements and (c) the
Warrants have been duly issued by the Company to the
Paramount Stockholders as contemplated by the Paramount
Merger Agreement in accordance with the provisions of the
Warrant Agreements (including the provisions of the Warrant
Agreements regarding establishment of the forms of Warrants),
the Warrants will be validly issued and will constitute the
valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, entitled
to the benefit of the Warrant Agreements.
6. The Additional Class B Common Stock will be duly
authorized by the Company and when issued by the Company to
the holders of the Warrants in accordance with the provisions
of the Warrant Agreements against receipt of the exercise
price therefor, the Additional Class B Common Stock will be
validly issued, fully paid and non-assessable.
The opinions set forth in paragraphs 2., 4. and 5. above
are subject to (i) the effect of any applicable bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting creditors' rights generally and (ii) the effect of
general principles of equity (regardless of whether considered in
a proceeding in equity or at law).
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to us
under the headings "Special Factors - Certain Federal Income Tax
Consequences" and "Experts - Legal Matters" contained in the Joint
Proxy Statement/Prospectus.
Very truly yours,
26741/NYL3
<TABLE>
Viacom-Paramount and the Combined Company
Unaudited Pro Forma Combined
Ratio of Earnings to Fixed Charges
For the Three Months Ended March 31, 1994
(In millions, except ratios)
<CAPTION>
Viacom
------------------------------
Paramount Blockbuster
Pro Forma Pro Forma Merger Viacom- Pro Forma Merger Combined
Viacom Adjustments Pro Forma Paramount Adjustments Paramount Blockbuster Adjustments Company
------ ----------- --------- --------- ----------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings before income
taxes................... ($352.3) 2.4 ($349.9) ($84.5) $267.3 ($167.1) $104.8 ($31.4) ($93.7)
Add:
Distributed income of
affiliated companies.. 7.8 (4.5) 3.3 3.3 3.3
Distributed income of
affiliated companies,
net of equity pick-up. (2.3) (2.3) (2.3)
Interest expense, net
of capitalized
interest.............. 61.4 (2.4) 59.0 14.1 65.9 139.0 22.0 161.0
Capitalized interest
amortized............. 1.9 1.9 1.9 3.8 3.8
Interest rate factor
of rental expense..... 8.7 8.7 5.7 14.4 17.0 31.4
------------------------------ --------- ----------- --------- ----------- ----------- --------
Earnings................ ($272.5) ($4.5) ($277.0) ($65.1) $333.2 ($8.9) $143.8 ($31.4) $103.5
============================== ========= =========== ========= =========== =========== ========
Fixed Charges:
Interest costs on all
indebtedness......... $62.4 ($2.4) $60.0 $15.9 $65.9 $141.8 $22.0 $163.8
Interest rate factor
of rental expense.... 8.7 8.7 5.7 14.4 17.0 31.4
------------------------------ --------- ----------- --------- ----------- ----------- --------
Total fixed charges..... 71.1 (2.4) 68.7 21.6 65.9 156.2 39.0 195.2
Preferred stock
dividend
requirement.......... 17.6 17.6 17.6 (5.9) 11.7
Total fixed charges and
preferred stock
dividend requirements. $88.7 ($2.4) $86.3 $21.6 $65.9 $173.8 $39.0 ($5.9) $206.9
============================== ========= =========== ========= =========== =========== ========
Ratio of earnings to
fixed charges......... (a) (a) (a) (a) 3.7x (a)
====== ========= ========= ========= =========== ========
Ratio of earnings to
fixed charges and
preferred stock
dividend requirements. (b) (b) (b) (b) 3.7x (b)
====== ========= ========= ========= =========== ========
(a) Additional earnings
required to cover
fixed charges....... $343.6 $345.7 $86.7 $165.1 $91.7
====== ========= ========= ========= ========
(b) Additional earnings
required to cover
combined fixed
charges and
preferred stock
dividends........... $361.2 $363.3 $86.7 $182.7 $103.4
====== ========= ========= ========= ========
</TABLE>
<PAGE>
<TABLE>
Viacom-Paramount and the Combined Company
Unaudited Pro Forma Combined
Ratio of Earnings to Fixed Charges
For the Year Ended December 31, 1993
(In millions, except ratios)
<CAPTION>
Viacom
------------------------------
Offer and
Paramount Blockbuster
Pro Forma Pro Forma Merger Viacom- Pro Forma Merger Combined
Viacom Adjustments Pro Forma Paramount Adjustments Paramount Blockbuster Adjustments Company
------ ----------- --------- --------- ----------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings before income
taxes................. $301.8 $8.9 $310.7 $241.7 ($399.5) $152.9 $360.4 ($125.4) $387.9
Add:
Distributed income of
affiliated companies.. 13.4 (12.0) 1.4 -- 1.4 1.4
Distributed income of
affiliated companies,
net of equity pick-up. (9.5) (9.5) (9.5)
Interest expense, net
of capitalized
interest.............. 154.1 (8.9) 145.2 76.0 250.5 471.7 98.7 570.4
Capitalized interest
amortized............. 2.1 2.1 6.2 8.3 8.3
Interest rate factor
of rental expense..... 24.8 24.8 33.8 58.6 60.4 119.0
Preferred stock
dividends of majority-
owned subsidiaries.... 0.8 0.8
------------------------------ --------- ----------- --------- ----------- ----------- --------
Earnings................ $496.2 ($12.0) $484.2 $348.2 ($149.0) $683.4 $520.3 ($125.4) $1,078.3
============================== ========= =========== ========= =========== =========== =========
Fixed Charges:
Interest costs on all
indebtedness.......... $154.5 ($8.9) $145.6 $82.4 $250.5 $478.5 $98.7 $577.2
Interest rate factor
of rental expense..... 24.8 24.8 33.8 58.6 60.4 119.0
Preferred stock
dividends of
majority-owned
subsidiaries........ 0.8 0.8
------------------------------ --------- ----------- --------- ----------- ----------- --------
Total fixed charges...... 179.3 (8.9) 170.4 116.2 250.5 537.1 159.9 697.0
Preferred stock
dividend requirement.. 22.4 130.2 152.6 152.6 (51.0) 101.6
Total fixed charges and
preferred stock
dividend requirements.. $201.7 $121.3 $323.0 $116.2 $250.5 $689.7 $159.9 ($51.0) $798.6
============================== ========= =========== ========= =========== =========== ========
Ratio of earnings to
fixed charges.......... 2.8x 2.8x 3.0x 1.3x 3.3x 1.5x
======= ========= ========= ========= =========== ========
Ratio of earnings to fixed
charges and preferred
stock dividend
requirements........... 2.5x 1.5x 3.0x (a) 3.3x 1.4x
======= ========= ========= ========= =========== ========
<FN>
(a) Pro forma earnings of Viacom-Paramount were insufficient to cover pro forma combined fixed charges and preferred stock
dividends; additional pro forma earnings required to cover combined fixed charges and preferred stock dividends would be $6.3
million.
</TABLE>
<PAGE>
<TABLE><CAPTION>
VIACOM INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNING TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(In millions, except ratios)
Three Months Ended
March 31, Year Ended December 31,
1994 1993 1993 1992 1991 1990 1989
------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before
income taxes $(352.3) $102.1 $301.8 $155.6 $ 8.2 $(70.4) $144.9
Add:
Distributed income of
affiliated companies 7.8 .6 13.4 9.5 5.6 2.8 4.5
Interest expense, net of
capitalized interest 61.4 41.2 154.1 195.2 298.1 295.3 313.1
Capitalized interest 1.9 .6 2.1 2.4 2.3 2.3 2.3
amortized
1/3 of rental expense 8.7 6.3 24.8 22.6 21.5 18.8 15.5
------- ------ ------ ------ ------ ------- ------
Earnings (Loss) $(272.5) $150.8 $496.2 $385.3 $335.7 $ 248.8 $480.3
======= ====== ====== ====== ====== ======= ======
Fixed charges:
Interest costs on all
indebtedness $ 62.4 $ 41.3 $154.5 $195.7 $298.6 $296.1 $313.8
1/3 of rental expense 8.7 6.3 24.8 22.6 21.5 18.8 15.5
------- ------ ------ ------ ------ ------- ------
Total fixed charges $ 71.1 $ 47.6 $179.3 $218.3 $320.1 $314.9 $329.3
======= ====== ====== ====== ====== ======= ======
Ratio of earnings to
fixed charges Note (a) 3.2X 2.8X 1.8X 1.0X Note (a) 1.5X
======= ====== ====== ====== ====== ======= ======
Ratio of earnings to combined
fixed charges and preferred
stock dividends Note (b) -- -- -- -- -- 1.3X
======= ====== ====== ====== ====== ======= ======
</TABLE>
(a) Earnings were inadequate to cover fixed charges; the additional amount of
earnings required to cover fixed charges for the three months ended March
31, 1994, and the year ended December 31, 1990, would have been $343.6
million and $66.2 million, respectively.
(b) Earnings were inadequate to cover combined fixed charges and preferred
stock dividends; the additional amount of earnings required to cover
combined fixed charges and preferred stock dividends for the three
months ended March 31, 1994, would have been $361.2 million.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Viacom Inc. of
our reports dated February 4, 1994, except as to Note 2, which is as of
March 11, 1994, which appear on pages 11-32 and F-2 of the Viacom Inc. Annual
Report on Form 10-K for the year ended December 31, 1993 as amended by Form
10-K/A Amendment No. 1. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ Price Waterhouse
Price Waterhouse
New York, New York
June 3, 1994
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Proxy Statement/Prospectus
of Viacom Inc. for the registration of 105,804,115 shares of Class B common
stock, $1,069,870,865 of 8% exchangeable subordinated debentures,
56,895,733 contingent value rights, 30,567,739 three-year warrants and
18,340,643 five-year warrants and 21,397,417 shares of Series C cumulative
exchangeable redeemable preferred stock and to the incorporation by reference
therein of our reports dated August 27, 1993, except for Notes A and I,
as to which the date is September 10, 1993, with respect to the consolidated
financial statements and schedules of Paramount Communications Inc.
included in its Transition Report (Form 10-K) for the six months ended
April 30, 1993, as amended September 28, 1993, as further amended
September 30, 1993, and as futher amended March 21, 1994, all filed with
the Securities and Exchange Commission.
/s/ Ernst & Young
ERNST & YOUNG
New York, New York
May 31, 1994
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
March 23, 1994 included in Blockbuster Entertainment Corporation's Form 10-K for
the year ended December 31, 1993 and to all references to our Firm included in
this registration statement.
/s/ Arthur Andersen & Co.
-------------------------
ARTHUR ANDERSEN & CO.
Fort Lauderdale, Florida,
May 31, 1994.
CONSENT OF COUNSEL
The undersigned hereby consents to the reference to
this firm under the caption "SPECIAL FACTORS - Certain Federal
Income Tax Consequences" in the Registration Statement on Form
S-4 filed by Viacom Inc. and in the Joint Proxy Statement/
Prospectus of Viacom Inc. and Paramount Communications Inc. for
the Special Meetings of Stockholders of Viacom Inc. and Paramount
Communications Inc. and the Annual Meeting of Stockholders of
Viacom Inc. which constitutes part of such Registration Statement.
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
(a partnership which includes
professional corporations)
June 2, 1994
CONSENT OF SMITH BARNEY SHEARSON INC.
June 3, 1994
Viacom Inc.
200 Elm Street
Dedham, Massachusetts 02026
Dear Sirs:
We hereby consent to the inclusion in the Rule 13E-3 Transaction
Statement on Schedule 13E-3 and in the Registration Statement on Form
S-4 filed with the Securities and Exchange Commission on June 3, 1994
of our opinion letter appearing as Annex III to the Joint Proxy
Statement/Prospectus of Viacom Inc. and Paramount Communications Inc.
which is a part of each of the Rule 13E-3 Transaction Statement and
the Registration Statement and to the references thereto, and the use
of our name, under the captions "Summary -- The Paramount Merger",
"Special Factors -- Opinions of Financial Advisors" and "Certain
Considerations" in the Joint Proxy Statement/Prospectus.
Very truly yours,
/s/ Smith Barney Shearson
SMITH BARNEY SHEARSON INC.
CONSENT OF LAZARD FRERES & CO.
June 3, 1994
Board of Directors
Paramount Communications, Inc.
15 Columbus Circle
New York, New York 10023
Ladies and Gentlemen:
We hereby consent to the inclusion in the Registration Statement on Form
S-4 filed with the Securities and Exchange Commission on June 3, 1994 of our
letters appearing as Exhibits 99.2 and 99.3 to the Registration Statement and
to the references thereto, and the use of our name, under the captions
"Summary - The Paramount Merger", "Special Factors - Opinions of
Financial Advisors", "Special Factors - Reasons for the Paramount Merger;
Recommendations of the Board of Directors; Fairness of the Transaction" and
"Certain Considerations" in the Joint Proxy Statement/Prospectus which is
part of the Registration Statement. In giving such consent, we do not admit
and we hereby disclaim that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we thereby admit that we are experts with respect to any
part of such Registration Statement within the meaning of the term "experts"
as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Lazard Freres & Co.
LAZARD FRERES & CO.
Exhibit 24
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby
constitutes and appoints Philippe Dauman, Michael Fricklas and Nancy Rosenfeld
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign (1) a Rule 13e-3 Transaction Statement (the "Transaction
Statement"), or such other form as may be recommended by counsel, to be filed
with the Securities and Exchange Commission (the "Commission"), and any and all
amendments and post-effective amendments thereto and supplements to the Joint
Proxy and Prospectus contained therein, and any and all instruments and
documents filed as a part of or in connection with the said registration
statement or amendments thereto or supplements or amendments to such Prospectus,
covering the offering and issuance of shares of Viacom Inc.'s (the "Company")
Class B Common Stock, 8% exchangeable subordinated debentures and the shares of
the Company's Preferred Stock into which such debentures are exchangeable and
the 5% subordinated debentures into which such preferred shares are
exchangeable, contingent value rights, three year warrants and five year
warrants and the shares of Class B Common Stock issuable upon exercise of the
three year warrants and the five year warrants (collectively, the "Securities")
certain of which are to be issued and certain of which may be issued at the
option of the Company in connection with the merger of Paramount Communications
Inc., a Delaware corporation ("Paramount"), with and into a subsidiary of the
Company, (2) the Registration Statement on Form S-4 included within the
Transaction Statement relating to the Securities to be filed by the Company with
the Commission under the Securities Exchange Act of 1934, as amended, and with
one or more national securities exchange, and any and all amendments thereto,
and any and all instruments and documents filed as part of or in connection with
such registration statement or amendments thereto, and (3) any documents in
connection with the Amended and Restated Agreement and Plan of Merger dated as
of February 4, 1994 between the Company and Paramount and any transactions
contemplated thereby; granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 12th day of
April, 1994.
/s/ George S. Abrams
-----------------------------
George S. Abrams
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby
constitutes and appoints Philippe Dauman, Michael Fricklas and Nancy Rosenfeld
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign (1) a Rule 13e-3 Transaction Statement (the "Transaction
Statement"), or such other form as may be recommended by counsel, to be filed
with the Securities and Exchange Commission (the "Commission"), and any and all
amendments and post-effective amendments thereto and supplements to the Joint
Proxy and Prospectus contained therein, and any and all instruments and
documents filed as a part of or in connection with the said registration
statement or amendments thereto or supplements or amendments to such Prospectus,
covering the offering and issuance of shares of Viacom Inc.'s (the "Company")
Class B Common Stock, 8% exchangeable subordinated debentures and the shares of
the Company's Preferred Stock into which such debentures are exchangeable and
the 5% subordinated debentures into which such preferred shares are
exchangeable, contingent value rights, three year warrants and five year
warrants and the shares of Class B Common Stock issuable upon exercise of the
three year warrants and the five year warrants (collectively, the "Securities")
certain of which are to be issued and certain of which may be issued at the
option of the Company in connection with the merger of Paramount Communications
Inc., a Delaware corporation ("Paramount"), with and into a subsidiary of the
Company, (2) the Registration Statement on Form S-4 included within the
Transaction Statement relating to the Securities to be filed by the Company with
the Commission under the Securities Exchange Act of 1934, as amended, and with
one or more national securities exchange, and any and all amendments thereto,
and any and all instruments and documents filed as part of or in connection with
such registration statement or amendments thereto, and (3) any documents in
connection with the Amended and Restated Agreement and Plan of Merger dated as
of February 4, 1994 between the Company and Paramount and any transactions
contemplated thereby; granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 12th day of
April, 1994.
/s/ Frank J. Biondi, Jr.
-----------------------------
Frank J. Biondi, Jr.
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby
constitutes and appoints Philippe Dauman, Michael Fricklas and Nancy Rosenfeld
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign (1) a Rule 13e-3 Transaction Statement (the "Transaction
Statement"), or such other form as may be recommended by counsel, to be filed
with the Securities and Exchange Commission (the "Commission"), and any and all
amendments and post-effective amendments thereto and supplements to the Joint
Proxy and Prospectus contained therein, and any and all instruments and
documents filed as a part of or in connection with the said registration
statement or amendments thereto or supplements or amendments to such Prospectus,
covering the offering and issuance of shares of Viacom Inc.'s (the "Company")
Class B Common Stock, 8% exchangeable subordinated debentures and the shares of
the Company's Preferred Stock into which such debentures are exchangeable and
the 5% subordinated debentures into which such preferred shares are
exchangeable, contingent value rights, three year warrants and five year
warrants and the shares of Class B Common Stock issuable upon exercise of the
three year warrants and the five year warrants (collectively, the "Securities")
certain of which are to be issued and certain of which may be issued at the
option of the Company in connection with the merger of Paramount Communications
Inc., a Delaware corporation ("Paramount"), with and into a subsidiary of the
Company, (2) the Registration Statement on Form S-4 included within the
Transaction Statement relating to the Securities to be filed by the Company with
the Commission under the Securities Exchange Act of 1934, as amended, and with
one or more national securities exchange, and any and all amendments thereto,
and any and all instruments and documents filed as part of or in connection with
such registration statement or amendments thereto, and (3) any documents in
connection with the Amended and Restated Agreement and Plan of Merger dated as
of February 4, 1994 between the Company and Paramount and any transactions
contemplated thereby; granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 12th day of
April, 1994.
/s/ William C. Ferguson
-----------------------------
William C. Ferguson
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby
constitutes and appoints Philippe Dauman, Michael Fricklas and Nancy Rosenfeld
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign (1) a Rule 13e-3 Transaction Statement (the "Transaction
Statement"), or such other form as may be recommended by counsel, to be filed
with the Securities and Exchange Commission (the "Commission"), and any and all
amendments and post-effective amendments thereto and supplements to the Joint
Proxy and Prospectus contained therein, and any and all instruments and
documents filed as a part of or in connection with the said registration
statement or amendments thereto or supplements or amendments to such Prospectus,
covering the offering and issuance of shares of Viacom Inc.'s (the "Company")
Class B Common Stock, 8% exchangeable subordinated debentures and the shares of
the Company's Preferred Stock into which such debentures are exchangeable and
the 5% subordinated debentures into which such preferred shares are
exchangeable, contingent value rights, three year warrants and five year
warrants and the shares of Class B Common Stock issuable upon exercise of the
three year warrants and the five year warrants (collectively, the "Securities")
certain of which are to be issued and certain of which may be issued at the
option of the Company in connection with the merger of Paramount Communications
Inc., a Delaware corporation ("Paramount"), with and into a subsidiary of the
Company, (2) the Registration Statement on Form S-4 included within the
Transaction Statement relating to the Securities to be filed by the Company with
the Commission under the Securities Exchange Act of 1934, as amended, and with
one or more national securities exchange, and any and all amendments thereto,
and any and all instruments and documents filed as part of or in connection with
such registration statement or amendments thereto, and (3) any documents in
connection with the Amended and Restated Agreement and Plan of Merger dated as
of February 4, 1994 between the Company and Paramount and any transactions
contemplated thereby; granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 12th day of
April, 1994.
/s/ H. Wayne Huizenga
-----------------------------
H. Wayne Huizenga
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby
constitutes and appoints Philippe Dauman, Michael Fricklas and Nancy Rosenfeld
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign (1) a Rule 13e-3 Transaction Statement (the "Transaction
Statement"), or such other form as may be recommended by counsel, to be filed
with the Securities and Exchange Commission (the "Commission"), and any and all
amendments and post-effective amendments thereto and supplements to the Joint
Proxy and Prospectus contained therein, and any and all instruments and
documents filed as a part of or in connection with the said registration
statement or amendments thereto or supplements or amendments to such Prospectus,
covering the offering and issuance of shares of Viacom Inc.'s (the "Company")
Class B Common Stock, 8% exchangeable subordinated debentures and the shares of
the Company's Preferred Stock into which such debentures are exchangeable and
the 5% subordinated debentures into which such preferred shares are
exchangeable, contingent value rights, three year warrants and five year
warrants and the shares of Class B Common Stock issuable upon exercise of the
three year warrants and the five year warrants (collectively, the "Securities")
certain of which are to be issued and certain of which may be issued at the
option of the Company in connection with the merger of Paramount Communications
Inc., a Delaware corporation ("Paramount"), with and into a subsidiary of the
Company, (2) the Registration Statement on Form S-4 included within the
Transaction Statement relating to the Securities to be filed by the Company with
the Commission under the Securities Exchange Act of 1934, as amended, and with
one or more national securities exchange, and any and all amendments thereto,
and any and all instruments and documents filed as part of or in connection with
such registration statement or amendments thereto, and (3) any documents in
connection with the Amended and Restated Agreement and Plan of Merger dated as
of February 4, 1994 between the Company and Paramount and any transactions
contemplated thereby; granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 12th day of
April, 1994.
/s/ Ken Miller
-----------------------------
Ken Miller
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby
constitutes and appoints Philippe Dauman, Michael Fricklas and Nancy Rosenfeld
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign (1) a Rule 13e-3 Transaction Statement (the "Transaction
Statement"), or such other form as may be recommended by counsel, to be filed
with the Securities and Exchange Commission (the "Commission"), and any and all
amendments and post-effective amendments thereto and supplements to the Joint
Proxy and Prospectus contained therein, and any and all instruments and
documents filed as a part of or in connection with the said registration
statement or amendments thereto or supplements or amendments to such Prospectus,
covering the offering and issuance of shares of Viacom Inc.'s (the "Company")
Class B Common Stock, 8% exchangeable subordinated debentures and the shares of
the Company's Preferred Stock into which such debentures are exchangeable and
the 5% subordinated debentures into which such preferred shares are
exchangeable, contingent value rights, three year warrants and five year
warrants and the shares of Class B Common Stock issuable upon exercise of the
three year warrants and the five year warrants (collectively, the "Securities")
certain of which are to be issued and certain of which may be issued at the
option of the Company in connection with the merger of Paramount Communications
Inc., a Delaware corporation ("Paramount"), with and into a subsidiary of the
Company, (2) the Registration Statement on Form S-4 included within the
Transaction Statement relating to the Securities to be filed by the Company with
the Commission under the Securities Exchange Act of 1934, as amended, and with
one or more national securities exchange, and any and all amendments thereto,
and any and all instruments and documents filed as part of or in connection with
such registration statement or amendments thereto, and (3) any documents in
connection with the Amended and Restated Agreement and Plan of Merger dated as
of February 4, 1994 between the Company and Paramount and any transactions
contemplated thereby; granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 12th day of
April, 1994.
/s/ Brent D. Redstone
-----------------------------
Brent D. Redstone
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby
constitutes and appoints Philippe Dauman, Michael Fricklas and Nancy Rosenfeld
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign (1) a Rule 13e-3 Transaction Statement (the "Transaction
Statement"), or such other form as may be recommended by counsel, to be filed
with the Securities and Exchange Commission (the "Commission"), and any and all
amendments and post-effective amendments thereto and supplements to the Joint
Proxy and Prospectus contained therein, and any and all instruments and
documents filed as a part of or in connection with the said registration
statement or amendments thereto or supplements or amendments to such Prospectus,
covering the offering and issuance of shares of Viacom Inc.'s (the "Company")
Class B Common Stock, 8% exchangeable subordinated debentures and the shares of
the Company's Preferred Stock into which such debentures are exchangeable and
the 5% subordinated debentures into which such preferred shares are
exchangeable, contingent value rights, three year warrants and five year
warrants and the shares of Class B Common Stock issuable upon exercise of the
three year warrants and the five year warrants (collectively, the "Securities")
certain of which are to be issued and certain of which may be issued at the
option of the Company in connection with the merger of Paramount Communications
Inc., a Delaware corporation ("Paramount"), with and into a subsidiary of the
Company, (2) the Registration Statement on Form S-4 included within the
Transaction Statement relating to the Securities to be filed by the Company with
the Commission under the Securities Exchange Act of 1934, as amended, and with
one or more national securities exchange, and any and all amendments thereto,
and any and all instruments and documents filed as part of or in connection with
such registration statement or amendments thereto, and (3) any documents in
connection with the Amended and Restated Agreement and Plan of Merger dated as
of February 4, 1994 between the Company and Paramount and any transactions
contemplated thereby; granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 12th day of
April, 1994.
/s/ Sumner M. Redstone
-----------------------------
Sumner M. Redstone
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby
constitutes and appoints Philippe Dauman, Michael Fricklas and Nancy Rosenfeld
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign (1) a Rule 13e-3 Transaction Statement (the "Transaction
Statement"), or such other form as may be recommended by counsel, to be filed
with the Securities and Exchange Commission (the "Commission"), and any and all
amendments and post-effective amendments thereto and supplements to the Joint
Proxy and Prospectus contained therein, and any and all instruments and
documents filed as a part of or in connection with the said registration
statement or amendments thereto or supplements or amendments to such Prospectus,
covering the offering and issuance of shares of Viacom Inc.'s (the "Company")
Class B Common Stock, 8% exchangeable subordinated debentures and the shares of
the Company's Preferred Stock into which such debentures are exchangeable and
the 5% subordinated debentures into which such preferred shares are
exchangeable, contingent value rights, three year warrants and five year
warrants and the shares of Class B Common Stock issuable upon exercise of the
three year warrants and the five year warrants (collectively, the "Securities")
certain of which are to be issued and certain of which may be issued at the
option of the Company in connection with the merger of Paramount Communications
Inc., a Delaware corporation ("Paramount"), with and into a subsidiary of the
Company, (2) the Registration Statement on Form S-4 included within the
Transaction Statement relating to the Securities to be filed by the Company with
the Commission under the Securities Exchange Act of 1934, as amended, and with
one or more national securities exchange, and any and all amendments thereto,
and any and all instruments and documents filed as part of or in connection with
such registration statement or amendments thereto, and (3) any documents in
connection with the Amended and Restated Agreement and Plan of Merger dated as
of February 4, 1994 between the Company and Paramount and any transactions
contemplated thereby; granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 12th day of
April, 1994.
/s/ Frederick V. Salerno
-----------------------------
Frederick V. Salerno
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby
constitutes and appoints Philippe Dauman, Michael Fricklas and Nancy Rosenfeld
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign (1) a Rule 13e-3 Transaction Statement (the "Transaction
Statement"), or such other form as may be recommended by counsel, to be filed
with the Securities and Exchange Commission (the "Commission"), and any and all
amendments and post-effective amendments thereto and supplements to the Joint
Proxy and Prospectus contained therein, and any and all instruments and
documents filed as a part of or in connection with the said registration
statement or amendments thereto or supplements or amendments to such Prospectus,
covering the offering and issuance of shares of Viacom Inc.'s (the "Company")
Class B Common Stock, 8% exchangeable subordinated debentures and the shares of
the Company's Preferred Stock into which such debentures are exchangeable and
the 5% subordinated debentures into which such preferred shares are
exchangeable, contingent value rights, three year warrants and five year
warrants and the shares of Class B Common Stock issuable upon exercise of the
three year warrants and the five year warrants (collectively, the "Securities")
certain of which are to be issued and certain of which may be issued at the
option of the Company in connection with the merger of Paramount Communications
Inc., a Delaware corporation ("Paramount"), with and into a subsidiary of the
Company, (2) the Registration Statement on Form S-4 included within the
Transaction Statement relating to the Securities to be filed by the Company with
the Commission under the Securities Exchange Act of 1934, as amended, and with
one or more national securities exchange, and any and all amendments thereto,
and any and all instruments and documents filed as part of or in connection with
such registration statement or amendments thereto, and (3) any documents in
connection with the Amended and Restated Agreement and Plan of Merger dated as
of February 4, 1994 between the Company and Paramount and any transactions
contemplated thereby; granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that the said attorney-in-fact
and agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 12th day of
April, 1994.
/s/ William Schwartz
-----------------------------
William Schwartz
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as
Trustee
Check if an Application to Determine
Eligibility of a Trustee Pursuant to Section
305(b)(2) _______________
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
<TABLE>
<S> <C>
Illinois 36-1194448
(State of Incorporation) (I.R.S. Employer
Identification No.)
</TABLE>
111 West Monroe Street; Chicago, Illinois 60603
(Address of principal executive offices)
Judith Bartolini, Harris Trust and Savings Bank,
111 West Monroe Street, Chicago, Illinois, 60603
312-461-2527
(Name, address and telephone number for agent for service)
VIACOM INC.
(Name of obligor)
<TABLE>
<S> <C>
Delaware 04-2949533
(State of Incorporation) (I.R.S. Employer
Identification No.)
</TABLE>
200 Elm Street
Dedham, Massachusetts 02026
(Address of principal executive offices)
Contingent Value Rights
Subordinated Debentures
(Title of indenture securities)
<PAGE>
1. GENERAL INFORMATION. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164 West
Jackson Boulevard, Chicago, Illinois; Federal Deposit Insurance
Corporation, Washington, D.C.; The Board of Governors of the Federal
Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise corporate trust
powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee,
describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. thru 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee is now in effect
which includes the authority of the trustee to commence business and
to exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between
Harris Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc.
which constitutes the articles of association of the Trustee as now
in effect and includes the authority of the Trustee to commence
business and to exercise corporate trust powers was filed in
connection with the Registration Statement of Louisville Gas and
Electric Company, File No. 2-44295, and is incorporated herein by
reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in connection
with the Registration Statement of Hillenbrand Industries, Inc.,
File No. 33-44086, and is incorporated herein by reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
(included as Exhibit B on page 3 of this statement)
1
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SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all
in the City of Chicago, and State of Illinois, on the 19th day of May, 1994.
HARRIS TRUST AND SAVINGS BANK
By: Judith Bartolini
-------------------------------------
Judith Bartolini
Vice President
EXHIBIT A
The consents of the trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents
that reports of examinations of said trustee by Federal and State authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
HARRIS TRUST AND SAVINGS BANK
By: Judith Bartolini
-------------------------------------
Judith Bartolini
Vice President
2
<PAGE>
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of March 31, 1994, as published in accordance
with a call made by the State Banking Authority and by the Federal Reserve
Bank of the Seventh Reserve District.
HARRIS BANK
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, and Foreign and Domestic Subsidiaries, at the close of
business on March 31, 1994, a state banking institution organized and operating
under the banking laws of this State and a member of the Federal Reserve System.
Published in accordance with a call made by the Commissioner of Banks and Trust
Companies of the State of Illinois and by the Federal Reserve Bank of this
District.
Bank's Transit Number 71000288
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THOUSANDS
ASSETS OF DOLLARS
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Cash and balances due from depository institutions:
Non-interest bearing balances and currency and coin.......... $917,983
Interest bearing balances.................................... $693,930
Securities:
a. Held-to-maturity securities $335,627
b. Available-for-sale securities $1,386,254
Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBF's:
Federal funds sold........................................... $444,750
Securities purchased under agreements to resell.............. $148,063
Loans and lease financing receivables:
Loans and leases, net of unearned income..................... $6,011,024
LESS: Allowance for loan and lease losses................... $99,591
--------------
Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b)................................. $5,911,433
Assets held in trading accounts.................................... $251,234
Premises and fixed assets (including capitalized leases)........... $137,974
Other real estate owned............................................ $2,023
Investments in unconsolidated subsidiaries and associated companies $565
Customer's liability to this bank on acceptances outstanding....... $66,441
Intangible assets.................................................. $29,864
Other assets....................................................... $370,864
-----------
TOTAL ASSETS $10,697,005
===========
LIABILITIES
Deposits:
In domestic offices............................................. $4,538,277
Non-interest bearing......................................... $2,415,608
Interest bearing............................................. $2,122,669
In foreign offices, Edge and Agreement subsidiaries, and IBF's.. $2,271,529
Non-interest bearing......................................... $27,115
Interest bearing............................................. $2,244,414
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3
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Federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBF's:
Federal funds purchased......................................... $624,510
Securities sold under agreements to repurchase.................. $1,220,539
Trading Liabilities......................................... $210,412
Other borrowed money:
a. With original maturity of one year or less..................... $491,636
b. With original maturity of more than one year................... $41,669
Bank's liability on acceptances executed and outstanding........... $66,441
Subordinated notes and debentures.................................. $235,000
Other liabilities.................................................. $271,260
--------------
TOTAL LIABILITIES $9,971,273
==============
EQUITY CAPITAL
Common stock....................................................... $100,000
Surplus............................................................ $275,000
a. Undivided profits and capital reserves......................... $342,563
b. Net unrealized holding gains (losses) on available-for-sale
securities................................................... $8,169
--------------
TOTAL EQUITY CAPITAL $725,732
==============
Total liabilities, limited-life preferred stock, and equity capital $10,697,005
==============
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I, David H. Charney, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Govenors of the Federal Reserve System and
is true to the best of my knowledge and belief.
DAVID H. CHARNEY
4/27/1994
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
ALAN G. McNALLY,
DONALD S. HUNT,
DARYL F. GRISHAM,
Directors.
STATE OF ILLINOIS, COUNTY OF COOK, ss:
Sworn to and subscribed before me this 27th day of April, 1994. My
commission expires April 22, 1996.
DIANALYNN GIRTEN
4
SPECIAL MEETING PROXY CARD
VIACOM INC.
1515 BROADWAY
NEW YORK, NEW YORK 10036
The undersigned hereby appoints Frank J. Biondi, Jr. and Philippe P. Dauman,
and each of them, as proxies with full power of substitution, to represent and
to vote on behalf of the undersigned all of the shares of Class A Common Stock
of Viacom Inc. which the undersigned is entitled to vote at the Special Meeting
of Stockholders to be held at the Equitable Center, 787 Seventh Avenue (at 51st
Street), New York, New York on Thursday, July 7, 1994, at 10:30 a.m., and at any
adjournments or postponements thereof, upon the following proposals more fully
described in the Notice of Special and Annual Meetings of Stockholders and the
VIACOM INC. and PARAMOUNT COMMUNICATIONS INC. Joint Proxy Statement/Prospectus.
The proxies are directed to vote as specified below and in their discretion on
all other matters.
You are encouraged to specify your choices by marking the appropriate boxes,
but you need not mark any boxes if you wish to vote in accordance with the
Board of Directors' recommendations.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (1), (2), (3), (4) and (5). UNLESS
OTHERWISE SPECIFIED, THE VOTE REPRESENTED BY THIS PROXY WILL BE CAST FOR (1),
(2), (3), (4) AND (5).
1. PROPOSAL TO APPROVE AND ADOPT THE AMENDED AND RESTATED AGREEMENT AND PLAN OF
MERGER, AS FURTHER AMENDED AS OF MAY 26, 1994, PROVIDING FOR A BUSINESS
COMBINATION TRANSACTION BETWEEN PARAMOUNT COMMUNICATIONS INC. AND VIACOM SUB
INC., A WHOLLY OWNED SUBSIDIARY OF VIACOM INC., INCLUDING THE APPROVAL OF THE
ISSUANCE OF SECURITIES OF VIACOM INC. IN CONNECTION THEREWITH.
/ / FOR / / AGAINST / / ABSTAIN
2. PROPOSAL TO APPROVE THE ADOPTION OF AN AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION OF VIACOM INC. TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF
CLASS A COMMON STOCK.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO APPROVE THE ADOPTION OF AN AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION OF VIACOM INC. TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF
CLASS B COMMON STOCK.
/ / FOR / / AGAINST / / ABSTAIN
4. PROPOSAL TO APPROVE THE ADOPTION OF AN AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION OF VIACOM INC. TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF
PREFERRED STOCK.
/ / FOR / / AGAINST / / ABSTAIN
continued on reverse side
<PAGE>
5. PROPOSAL TO APPROVE THE ADOPTION OF AN AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION OF VIACOM INC. TO INCREASE THE MAXIMUM NUMBER OF DIRECTORS
CONSTITUTING THE ENTIRE BOARD FROM 12 TO 20.
/ / FOR / / AGAINST / / ABSTAIN
IF YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE CHECK THIS BOX. / /
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF VIACOM
INC. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER.
Please sign exactly as name(s)
appears below. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person.
Dated: ........................
Signature: ....................
...............................
Signature if held jointly
PARAMOUNT COMMUNICATIONS INC.
15 COLUMBUS CIRCLE
NEW YORK, NEW YORK 10023-7780
THE UNDERSIGNED HEREBY APPOINTS FRANK J. BIONDI, JR. AND PHILIPPE P. DAUMAN, AND
EACH OF THEM, AS PROXIES WITH FULL POWER OF SUBSTITUTION, TO REPRESENT AND TO
VOTE ON BEHALF OF THE UNDERSIGNED ALL OF THE SHARES OF COMMON STOCK OF PARAMOUNT
COMMUNICATIONS INC. WHICH THE UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL
MEETING OF STOCKHOLDERS TO BE HELD AT HOTEL DU PONT, 11TH AND MARKET STREETS,
WILMINGTON, DELAWARE ON WEDNESDAY, JULY 6, 1994, AT 10:00 A.M. (LOCAL TIME), AND
AT ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF, UPON THE FOLLOWING PROPOSAL MORE
FULLY DESCRIBED IN THE NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND THE VIACOM
INC. AND PARAMOUNT COMMUNICATIONS INC. JOINT PROXY STATEMENT/PROSPECTUS.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX, BUT
YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATION.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO APPROVE
THE AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, AS FURTHER AMENDED AS OF
MAY 26, 1994, PROVIDING FOR A BUSINESS COMBINATION TRANSACTION BETWEEN PARAMOUNT
COMMUNICATIONS INC. AND VIACOM SUB INC., A WHOLLY OWNED SUBSIDIARY OF VIACOM
INC., AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS.
YOUR SIGNATURE ON THE PROXY IS YOUR ACKNOWLEDGEMENT OF RECEIPT OF THE NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS AND THE JOINT PROXY STATEMENT, BOTH DATED
JUNE 6, 1994.
THE SIGNER HEREBY REVOKES ALL PROXIES HERETOFORE GIVEN BY THE SIGNER TO VOTE AT
SAID MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
THE PROXIES ARE DIRECTED TO VOTE AS SPECIFIED BELOW AND IN THEIR DISCRETION ON
ALL OTHER MATTERS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, AS FURTHER AMENDED AS OF
MAY 26, 1994, PROVIDING FOR A BUSINESS COMBINATION TRANSACTION BETWEEN PARAMOUNT
COMMUNICATIONS INC. AND VIACOM SUB INC.
/ / FOR / / AGAINST / / ABSTAIN
IF YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE CHECK THIS BOX. / /
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PARAMOUNT
COMMUNICATIONS INC. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER.
PLEASE SIGN EXACTLY AS NAME(S)
APPEARS BELOW. WHEN SHARES ARE
HELD BY JOINT TENANTS, BOTH
SHOULD SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE
AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE
NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
DATED: .........................
SIGNATURE: .....................
...............................
SIGNATURE IF HELD JOINTLY
ANNUAL MEETING PROXY CARD
VIACOM INC.
1515 BROADWAY
NEW YORK, NEW YORK 10036
The undersigned hereby appoints Frank J. Biondi, Jr. and Philippe P. Dauman,
and each of them, as proxies with full power of substitution, to represent and
to vote on behalf of the undersigned all of the shares of Class A Common Stock
of Viacom Inc. which the undersigned is entitled to vote at the Annual Meeting
of Stockholders to be held at the Equitable Center, 787 Seventh Avenue (at 51st
Street), New York, New York on Thursday, July 7, 1994 immediately following
the Special Meeting of Stockholders, and at any adjournments or postponements
thereof, upon the following matters more fully described in the Notice of
Special and Annual Meetings to Stockholders and the VIACOM INC. and
PARAMOUNT COMMUNICATIONS INC. Joint Proxy Statement/Prospectus.
You are encouraged to specify your choices by marking the appropriate boxes,
but you need not mark any boxes if you wish to vote in accordance with the Board
of Directors' recommendations.
The proxies are directed to vote as specified below and in their discretion on
all other matters.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (1), (2), (3), (4) and (5). UNLESS
OTHERWISE SPECIFIED, THE VOTE REPRESENTED BY THIS PROXY WILL BE CAST FOR (1),
(2), (3), (4) and (5).
1. ELECTION OF DIRECTORS
NOMINEES: GEORGE S. ABRAMS, FRANK J. BIONDI, JR., PHILIPPE P. DAUMAN, WILLIAM C.
FERGUSON, H. WAYNE HUIZENGA, KEN MILLER, BRENT D. REDSTONE, SUMNER M. REDSTONE,
FREDERIC V. SALERNO, WILLIAM SCHWARTZ.
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/ / FOR ALL NOMINEES (EXCEPT AS MARKED TO / / WITHHOLD AUTHORITY TO VOTE ALL
THE CONTRARY BELOW) NOMINEES
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TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), WRITE NAME(S) OF
SUCH NOMINEE(S) IN THE SPACE PROVIDED BELOW:
- --------------------------------------------------------------------------------
2. APPROVAL OF THE VIACOM INC. SENIOR EXECUTIVE SHORT-TERM INCENTIVE PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. APPROVAL OF THE VIACOM INC. 1994 LONG-TERM MANAGEMENT INCENTIVE PLAN.
/ / FOR / / AGAINST / / ABSTAIN
continued on reverse side
<PAGE>
4. APPROVAL OF THE VIACOM INC. STOCK OPTION PLAN FOR OUTSIDE DIRECTORS.
/ / FOR / / AGAINST / / ABSTAIN
5. APPROVAL OF THE APPOINTMENT OF PRICE WATERHOUSE AS INDEPENDENT AUDITORS OF
VIACOM INC. FOR 1994.
/ / FOR / / AGAINST / / ABSTAIN
IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE CHECK THIS BOX. / /
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF VIACOM
INC. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER.
Please sign exactly as name(s)
appears below. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person.
Dated: ........................
Signature: ....................
...............................
Signature if held jointly
[LETTERHEAD OF PARAMOUNT]
June 6, 1994
Dear Stockholder:
On behalf of our Board of Directors, I am pleased to invite you to attend a
Special Meeting of Stockholders of Paramount Communications Inc., which will be
held at Hotel du Pont, 11th and Market Streets, Wilmington, Delaware at
10:00 a.m. (local time) on July 6, 1994.
At this meeting, stockholders will be asked to approve the merger of a
wholly owned subsidiary of Viacom Inc. with and into Paramount. Paramount and
Viacom have complementary businesses and a commitment to innovation and
creativity. The combination of these businesses will create a global
entertainment and communications company with extraordinary resources.
On February 4, 1994 the Board of Directors of Paramount, after careful
consideration, determined that the combination with Viacom is in the best
interests of Paramount and its stockholders. Accordingly, it unanimously
approved the merger and related transactions and recommended that you vote in
favor of the merger at the meeting. At the request of Paramount, on February 14,
1994, Paramount's financial advisor, Lazard Freres & Co., reaffirmed its written
opinion addressed to the Paramount Board, dated February 4, 1994. Lazard Freres
has not been requested to update that opinion.
Pursuant to its successful tender offer, on March 11, 1994, Viacom
completed its purchase of a majority of the outstanding shares of Paramount
Common Stock. In the merger, each share of Paramount Common Stock not owned by
Viacom will be converted into the right to receive (i) 0.93065 of a share of
non-voting Viacom Class B Common Stock, (ii) $17.50 principal amount of 8%
exchangeable subordinated debentures of Viacom, (iii) 0.93065 of a contingent
value right, representing the right to receive (under certain circumstances)
cash or securities depending on market prices of Viacom Class B Common Stock
during a one-, two-or three-year period following the merger, (iv) 0.5 of a
three-year warrant to purchase one share of Viacom Class B Common Stock at $60
per share and (v) 0.3 of a five-year warrant to purchase one share of Viacom
Class B Common Stock at $70 per share. On February 1, 1994, the last trading
day before the announcement of the terms of the merger agreement with Viacom,
on February 14, 1994, the date on which Lazard Freres reaffirmed its
February 4, 1994 opinion, and on June 3, 1994, the last trading day before
the printing of this Proxy Statement/Prospectus, the last sales price of a
share of Viacom Class B Common Stock as reported on the American Stock
Exchange was $34-1/8, $29-7/8 and $28-5/8, respectively.
A Notice of the Special Meeting and a Joint Proxy Statement/Prospectus
containing detailed information concerning the merger with the subsidiary of
Viacom and related transactions is attached. The Joint Proxy
Statement/Prospectus also contains detailed information regarding Viacom's
proposed merger with Blockbuster Entertainment Corporation. I urge you to read
this material carefully. In connection with the Paramount Merger, appraisal
rights will be available to those stockholders of Paramount who have not voted
in favor of the Paramount Merger and who meet and comply with the requirements
of Section 262 of the Delaware General Corporation Law ("DGCL"). See the
section entitled "Dissenting Stockholders' Rights of Appraisal" in the
accompanying Joint Proxy Statement/Prospectus for a discussion of procedures
to be followed in asserting appraisal rights.
As Viacom has acquired a majority of the outstanding shares of Paramount
Common Stock, Viacom has sufficient voting power to approve the merger and the
related transactions, even if no other stockholder of Paramount votes in favor
of the merger. Delaware law and the merger agreement with Viacom nevertheless
require that a meeting of Paramount stockholders be held to vote on the merger
of our two companies and we would appreciate your show of support by voting in
favor of the merger.
Your participation in this meeting, in person or by proxy, is important.
Please mark, date, sign and return the enclosed proxy as soon as possible,
whether or not you plan to attend the meeting.
Sincerely,
/s/ SUMNER M. REDSTONE
SUMNER M. REDSTONE
Chairman of the Board
[PARAMOUNT LETTERHEAD]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A Special Meeting of Stockholders of Paramount Communications Inc.
("Paramount") will be held on July 6, 1994, at 10:00 a.m. (local time),
at Hotel du Pont, 11th and Market Streets, Wilmington, Delaware, for the
purposes of:
1. Considering and voting upon a proposal to approve and adopt the
Amended and Restated Agreement and Plan of Merger dated as of February 4,
1994, as further amended as of May 26, 1994 (the "Paramount Merger
Agreement"), among Paramount, Viacom Inc. ("Viacom") and Viacom Sub Inc.
(the "Merger Subsidiary"), a wholly owned subsidiary of Viacom, a copy of
which is attached as Annex I to the accompanying Joint Proxy
Statement/Prospectus, providing for the merger of the Merger
Subsidiary with and into Paramount (the "Paramount Merger"), pursuant
to which each share of Common Stock, par value $1.00 ("Paramount
Common Stock"), of Paramount (other than shares held by Paramount, Viacom
and their subsidiaries and by holders who demand and perfect appraisal
rights) will be converted into the right to receive (i) 0.93065 of a share
of Class B Common Stock, par value $.01 per share, of Viacom ("Viacom Class
B Common Stock"), (ii) $17.50 principal amount of 8% exchangeable
subordinated debentures due 2006 of Viacom, (iii) 0.93065 of a contingent
value right of Viacom, representing the right to receive (under certain
circumstances) cash or securities of Viacom depending on market prices of
Viacom Class B Common Stock during a one-, two-or three-year period
following the Paramount Merger, (iv) 0.5 of a three-year warrant to
purchase one share of Viacom Class B Common Stock at $60 per share, and (v)
0.3 of a five-year warrant to purchase one share of Viacom Class B Common
Stock at $70 per share, all as more fully described in the accompanying
Joint Proxy Statement/Prospectus; and
2. Transacting any other business that may properly come before the
meeting or any adjournments or postponements thereof.
Only stockholders of record at the close of business on May 31, 1994 are
entitled to notice of the meeting, and only holders of Paramount Common Stock of
record at that time are entitled to vote at the meeting. Every holder of
outstanding shares of Paramount Common Stock entitled to be voted at the meeting
is entitled to one vote for each such share held. The Paramount Merger will be
consummated on the date that the approvals of the stockholders of Paramount and
Viacom are obtained.
As Viacom has acquired a majority of the outstanding shares of
Paramount Common Stock, Viacom has sufficient voting power to approve the
Paramount Merger and the related transactions, even if no other stockholder of
Paramount votes in favor of the Paramount Merger.
In connection with the Paramount Merger, appraisal rights will be available
to those stockholders of Paramount who have not voted in favor of the Paramount
Merger and who meet and comply with the requirements of Section 262 of the
Delaware General Corporation Law ("DGCL"). Any holder of Paramount Common
Stock who wishes to seek appraisal rights must meet and comply with the
requirements of Section 262 of the DGCL, a copy of which Section 262 is
attached as Annex V to the accompanying Joint Proxy Statement/Prospectus. See
the section entitled "Dissenting Stockholders' Rights of Appraisal" in the
accompanying Joint Proxy Statement/Prospectus for a discussion of procedures to
be followed in asserting appraisal rights.
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE SPECIAL MEETING IN PERSON,
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING
ENVELOPE. IF YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE MARK THE APPROPRIATE
SPACE ON THE ENCLOSED PROXY.
By order of the Board of Directors,
/s/ PHILIPPE P. DAUMAN
PHILIPPE P. DAUMAN
Secretary
June 6, 1994
[LETTERHEAD OF VIACOM]
June 6, 1994
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Viacom Inc., which will be held at the Equitable Center, 787 Seventh Avenue
(at 51st Street), New York, New York at 10:30 a.m. (local time) on July 7,
1994. At the Special Meeting, holders of Viacom Class A Common Stock will be
asked to approve proposals providing for the merger of a wholly owned
subsidiary of Viacom with and into Paramount Communications Inc.
The merger with Paramount reflects our vision of building an integrated
global entertainment company. The combination of Viacom and Paramount will form
an entertainment and communications powerhouse uniquely positioned to exploit
new opportunities in the entertainment business, domestically and around the
world. Viacom is also a party to a merger agreement with Blockbuster
Entertainment Corporation, however, there can be no assurance that the merger
with Blockbuster will ultimately be consummated. ANY CONSIDERATION OF THE
BLOCKBUSTER MERGER WILL TAKE PLACE AT A SEPARATE SPECIAL MEETING OF VIACOM
STOCKHOLDERS FOR WHICH YOU WILL RECEIVE A SEPARATE JOINT PROXY
STATEMENT/PROSPECTUS OF VIACOM AND BLOCKBUSTER.
Pursuant to a successful tender offer, on March 11, 1994, Viacom completed
its purchase of a majority of the outstanding shares of Paramount Common Stock.
In the merger, each share of Paramount Common Stock not owned by Viacom will be
converted into the right to receive (i) 0.93065 of a share of non-voting Viacom
Class B Common Stock, (ii) $17.50 principal amount of 8% exchangeable
subordinated debentures of Viacom, (iii) 0.93065 of a contingent value right,
representing the right to receive (under certain circumstances) cash or
securities depending on market prices of Viacom Class B Common Stock during a
one-, two-or three-year period following the merger, (iv) 0.5 of a three-year
warrant to purchase one share of Viacom Class B Common Stock at $60 per share
and (v) 0.3 of a five-year warrant to purchase one share of Viacom Class B
Common Stock at $70 per share. The proposed merger with Paramount is described
in the accompanying Joint Proxy Statement/Prospectus.
The Viacom Board of Directors has determined that the tender offer and the
merger with Paramount, taken together, are fair to, and in the best interests
of, Viacom and its stockholders. Accordingly, the Board approved the Paramount
merger agreement and certain other transactions with Paramount and recommends
that holders of Viacom Class A Common Stock vote to approve the merger with
Paramount and the issuance of shares of Viacom Class B Common Stock and other
Viacom securities in connection with the merger. The Board also recommends that
such holders approve proposals to amend the Restated Certificate of
Incorporation of Viacom to increase the number of shares of Viacom Class A
Common Stock authorized to be issued from 100 million to 200 million, to
increase the number of shares of Viacom Class B Common Stock authorized to be
issued from 150 million to one billion, to increase the number of shares of
preferred stock of Viacom authorized to be issued from 100 million to 200
million and to increase the maximum number of directors constituting the entire
Board of Directors of Viacom from 12 to 20.
National Amusements, Inc., which owns approximately 85% of Viacom's voting
stock, has agreed to vote such shares in favor of the transactions contemplated
by the Paramount merger agreement in accordance with National Amusement's
obligations under a Voting Agreement executed with Paramount. Therefore,
approval of such transactions by the stockholders of Viacom is assured.
Immediately following the Special Meeting, the 1994 Annual Meeting of
Viacom Stockholders will be convened for the purposes listed in the accompanying
Notice of Special and Annual Meetings of Stockholders. The proposals to be
considered at the Annual Meeting are described in the accompanying Joint Proxy
Statement/Prospectus.
<PAGE>
Because of the significance to Viacom of the transactions described above,
your participation in these meetings, in person or by proxy, is especially
important.
I hope you will be able to attend the meetings. However, even if you
anticipate attending in person, we urge you to mark, sign and return the
enclosed proxy cards promptly to ensure that your shares of Viacom Class A
Common Stock will be represented at the meetings. If you do attend, you will,
of course, be entitled to vote such shares in person.
Thank you, and I look forward to seeing you at the meetings.
Sincerely,
/s/ SUMNER M. REDSTONE
SUMNER M. REDSTONE
Chairman of the Board
2
[VIACOM LETTERHEAD]
------------------------
NOTICE OF SPECIAL AND ANNUAL MEETINGS OF STOCKHOLDERS
TO BE HELD ON JULY 7, 1994
------------------------
To Viacom Inc. Stockholders:
A Special Meeting (the "Special Meeting") of Stockholders of Viacom Inc.
("Viacom") will be held at the Equitable Center, 787 Seventh Avenue (at 51st
Street), New York, New York at 10:30 a.m. (local time) on July 7, 1994 to
consider the following proposals:
(1) the approval and adoption of the Amended and Restated Agreement
and Plan of Merger dated as of February 4, 1994, as further amended as of
May 26, 1994 (the "Paramount Merger Agreement") among Viacom, Viacom Sub
Inc., a wholly owned subsidiary of Viacom (the "Merger Subsidiary"), and
Paramount Communications Inc. ("Paramount"), a copy of which is attached as
Annex I to the accompanying Joint Proxy Statement/Prospectus, providing for
the merger of the Merger Subsidiary with and into Paramount, pursuant to
which each share of Common Stock, par value $1.00 per share, of Paramount
(other than shares held by Viacom, Paramount and their subsidiaries and by
holders who demand and perfect appraisal rights) will be converted into the
right to receive (i) 0.93065 of a share of Class B Common Stock, par value
$.01 per share, of Viacom ("Viacom Class B Common Stock"), (ii) $17.50
principal amount of 8% exchangeable subordinated debentures due 2006 of
Viacom, (iii) 0.93065 of a contingent value right of Viacom, representing
the right to receive (under certain circumstances) cash or securities of
Viacom depending on market prices of Viacom Class B Common Stock during a
one-, two-or three-year period following the merger, (iv) 0.5 of a
three-year warrant to purchase one share of Viacom Class B Common Stock at
$60 per share, and (v) 0.3 of a five-year warrant to purchase one share of
Viacom Class B Common Stock at $70 per share, all as more fully described
in the accompanying Joint Proxy Statement/Prospectus (collectively, the
"Paramount Merger Consideration"); such approval and adoption includes,
without limitation, the approval of the issuance of the Paramount Merger
Consideration;
(2) the approval of an amendment to the Restated Certificate of
Incorporation of Viacom increasing the number of shares of Viacom Class A
Common Stock authorized to be issued from 100 million to 200 million;
(3) the approval of an amendment to the Restated Certificate of
Incorporation of Viacom increasing the number of shares of Viacom Class B
Common Stock authorized to be issued from 150 million to one billion;
(4) the approval of an amendment to the Restated Certificate of
Incorporation of Viacom increasing the number of shares of preferred stock
of Viacom authorized to be issued from 100 million to 200 million;
(5) the approval of an amendment to the Restated Certificate of
Incorporation of Viacom increasing the maximum number of directors
constituting the Board of Directors of Viacom from 12 to 20; and
(6) such other business as may properly be brought before the Special
Meeting.
<PAGE>
Under applicable law, holders of Viacom Class A Common Stock or Viacom
Class B Common Stock will not have appraisal rights in connection with the
approval and adoption of the Paramount Merger Agreement because, among other
reasons, Viacom is not a constituent corporation in the merger.
The 1994 Annual Meeting of Stockholders of Viacom will be held immediately
following the Special Meeting, at the same location as the Special Meeting, to
consider the following proposals:
(1) the election of 10 directors;
(2) the approval of the Viacom Senior Executive Short-Term Incentive
Plan;
(3) the approval of the Viacom 1994 Long-Term Management Incentive
Plan;
(4) the approval of the Viacom Stock Option Plan for Outside
Directors;
(5) the approval of the appointment of independent auditors for 1994;
and
(6) such other business as may properly come before the Annual Meeting
or any adjournment thereof.
Pursuant to the By-laws of Viacom, the Board of Directors has fixed the
close of business on May 31, 1994 as the time for determining stockholders of
record entitled to notice of, and to vote at, the Special Meeting and the Annual
Meeting.
Each share of Viacom Class A Common Stock will entitle the holder thereof
to one vote on all matters which may properly come before the meetings.
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETINGS IN PERSON, PLEASE
MARK, DATE AND SIGN THE ENCLOSED PROXIES AND RETURN THEM IN THE ACCOMPANYING
ENVELOPE. IF YOU PLAN TO ATTEND THE MEETINGS, PLEASE MARK THE APPROPRIATE
SPACE ON EACH OF THE ENCLOSED PROXIES.
By order of the Board of Directors,
/s/ PHILIPPE P. DAUMAN
PHILIPPE P. DAUMAN
Secretary
June 6, 1994
2
[VIACOM LETTERHEAD]
June 7, 1994
Dear Shareholder:
The last year and a half has been an extraordinary time in the history of
Viacom. As you are keenly aware, after a hard-fought battle, we won control
of Paramount Communications Inc. and by doing so, created a global
entertainment and media giant with unparalleled assets and franchises. Our
new Company has the financial resources to enhance its core businesses while
extending its franchises into new product areas, emerging distribution outlets
and untapped geographic markets. We are committed to building those financial
resources and strengthening our capital structure to ensure that our
long-range strategies and opportunities are fully realized. These
opportunities represent the future of Viacom.
The new Viacom, now one of the largest, most diversified global entertainment
companies, owns and operates one of the world's largest groups of basic cable
and premium television networks; controls more than 15,000 hours of film and
television programming; owns Paramount Pictures, a major producer and
worldwide distributor of films; owns Simon & Schuster, the largest publisher
in the U.S. and the largest educational publisher in the world; is a
significant cable operator and key player in the development of new media and
interactive programming; owns 12 television stations and is pursuing the
opportunities associated with creating The Paramount Network; is the sixth
largest radio group in the nation; owns Madison Square Garden and the New York
Knicks and the New York Rangers; owns five theme parks in the U.S. and Canada;
and owns hundreds of movie theaters throughout the world.
Viacom is further strengthened through the strategic alliances it has forged
with Blockbuster Entertainment Corporation and NYNEX. Our Merger Agreement
with Blockbuster is pending and is subject to shareholder approval. While
there can be no assurance that the merger will ultimately be consummated,
Blockbuster remains an important strategic partner. The global leader in the
home video rental market, Blockbuster is the world's largest retailer of home
videos and a major force in music retailing, controls more than 20,000 hours
of film and television programming, and develops entertainment facilities
domestically and in the U.K. NYNEX, a global force in telecommunications, is
one of the largest cable operators in the U.K., and is exploring and
developing interactive technology.
Viacom's potential for expanding its core franchises and exploiting new
markets is staggering, and we have assembled a superlative management team to
ensure that we reach that potential. This team comprises the men and women
who made Viacom one of the fastest growing global media companies in the
world, as well as many of those from Paramount who created and conducted the
businesses that made Paramount a highly sought after company. By combining
these two groups, we have what we believe to be the finest, deepest, most
experienced and most creative management team in the industry.
Looking ahead, we are already beginning to realize the rewards of our merger.
At Paramount Pictures, we have an exciting slate of upcoming films, including
Forrest Gump, starring Tom Hanks, and Clear and Present Danger, starring
Harrison Ford. In the future, we expect the studio to work with MTV to
develop the film version of Beavis & Butt-Head and with Nickelodeon to develop
a slate of modest-budget kids' films. We also recently announced a production
agreement with Douglas/Reuther, the partnership of Michael Douglas and Steven
Reuther, that will give Paramount Pictures access to high-quality films while
limiting our financial exposure. This agreement is indicative of the creative
and cost-conscious management approach we will implement at the studio.
-over-
<PAGE>
-2-
Simon & Schuster, formerly known as Paramount Publishing and which we recently
renamed, acquired Macmillan Publishing in 1994, dramatically expanding its
leadership position in the industry, and recently formed a venture with
Davidson & Associates to develop, publish and distribute multimedia products
for a broad spectrum of publishing markets. And just last week, we announced
that Nickelodeon and Simon & Schuster will collaborate on a line of children's
books drawing from Nickelodeon's programming and Simon & Schuster's expertise
in children's publishing.
Our Company is proving itself a leader in seizing new technology-based
opportunities and new media is a key example. We have combined our new media
operations, which together have a full slate of new titles, including several
drawn from successful Viacom and Paramount programming. We are also
developing interactive versions of our cable networks that will be tested at
our state-of-the-art cable system in Castro Valley, California, and MTV
Networks (MTVN) will test an interactive home shopping service drawn from its
channels.
Programming from our newly combined television production and syndication
division will be prominent in the fall television season, with six shows
returning to the broadcast line-up, two broadcast pilots ordered and eight
programs appearing in first-run syndication. We are preparing for the January
launch of The Paramount Network, which will be anchored by a newly developed
spin-off from our enormously successful Star Trek franchise. Popular Wayne's
World theme areas, based on Paramount Pictures' hit films, have been
introduced at two Paramount Parks and we expect to develop similar marketing
and promotional opportunities for characters and programming from MTV and
Nickelodeon.
All of Viacom's pre-merger businesses continued to accelerate the growth of
their franchises in 1993. At MTVN, MTV's global growth continued to soar and
we entered entirely new markets with the launch of MTV Latino. In addition,
the network recently announced plans to launch two new, wholly owned networks
in Asia. Nickelodeon U.K. was launched and the network introduced a new line
of entertainment products, including Nickelodeon Magazine, videos and CDs.
VH-1 continued development on a version of the network to be introduced in the
U.K. At Showtime Networks Inc., which grew by more than 1 million new
subscribers in 1993, we announced plans to introduce five new value-added,
genre-specific services.
On the distribution side, we are working toward the introduction of our
interactive cable system in Castro Valley, where initial offerings will
include an interactive shopping service being developed by Viacom, AT&T and
CUC International, as well as StarSight, the electronic on-screen programming
guide in which we have a significant investment. We are also testing
high-speed modem technologies with Intel and General Instrument which give
home personal computer users access to on-line services using our cable
infrastructure.
For a more thorough review of the performance of our businesses in 1993, we
encourage you to read the enclosed Annual Report on Form 10-KA. We hope you
continue to share our enthusiasm for Viacom's future. We believe that our
combination with Paramount will provide benefits for our shareholders for many
years to come and that we will begin to realize those benefits shortly. We
will soon have the latitude to communicate the strengths of this merger to our
financial constituencies. Your stalwart support is deeply appreciated and we
remain firm in our belief that the best for our Company is yet to come.
Sincerely,
/s/ Sumner M. Redstone /s/ Frank J. Biondi, Jr.
Sumner M. Redstone Frank J. Biondi, Jr.
Chairman of the Board President and Chief Executive
Officer
