<PAGE>
As filed with the Securities and Exchange Commission on November 24, 1999
Registration No. 333-88613
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Amendment No. 3
to
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
VIACOM INC.
(Exact name of Registrant as specified in its charter)
Delaware 4841 04-2949533
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
Viacom Inc. Michael D. Fricklas, Esq.
1515 Broadway Senior Vice President, General Counsel
New York, New York 10036 and Secretary
(212) 258-6000 Viacom Inc.
(Address, including zip code, and 1515 Broadway
telephone number, including area code, New York, NY 10036
of Registrant's principal executive (212) 258-6000
offices) (Name, address, including zip code, and
telephone number,
including area code, of agent for
service)
---------------
<TABLE>
<C> <S> <C>
Copies To:
Creighton O'M. Condon, Esq. Louis J. Briskman, Esq. Scott A. Barshay, Esq.
Stephen T. Giove, Esq. Executive Vice Cravath, Swaine & Moore
Shearman & Sterling President and 825 Eighth Avenue
599 Lexington Avenue General Counsel New York, NY 10019
New York, NY 10022 CBS Corporation (212) 474-1000
(212) 848-4000 51 West 52nd Street
New York, NY 10019
(212) 975-4321
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective and the
conditions to consummation of the offer described herein have been satisfied or
waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
Title of each Class of to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Share Offering Price Fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Common Stock, par value $.01 per
share....................................... 907,746,991(1) Not Applicable $38,386,428,800(2) $10,671,428(2)
- --------------------------------------------------------------------------------------------------------------
Series C Convertible Preferred Stock, par
value $.01 per share........................ 11,003(3) Not Applicable $ 485,000,000(4) $134,830(4)
- --------------------------------------------------------------------------------------------------------------
Total........................................ $ 38,871,428,800 $10,806,258(5)
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the maximum number of shares of Viacom Class B Common Stock that
may be required to be issued in connection with the merger, calculated as
the product of (a) 826,492,158, which is the sum of (i) the number of
shares of CBS Corporation common stock, par value $1.00 per share ("CBS
Common Stock") outstanding on August 31, 1999, (ii) the number of shares of
CBS Common Stock issuable pursuant to outstanding stock options through the
date the merger is expected to be consummated, and (iii) the number of
shares of CBS Common Stock otherwise expected to be issued prior to the
date the merger is expected to be consummated and (b) the exchange ratio
for the merger of 1.085 shares of Viacom Class B Common Stock for each
outstanding share of CBS Common Stock. This number also includes 11,003,000
shares of Viacom Class B Common Stock issuable upon conversion of the
Viacom Series C Preferred Stock being registered hereunder.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended (the
"Securities Act") (the "Registration Fee"), and computed pursuant to Rule
457(f)(1) and Rule 457(c) thereunder on the basis of the market value of
the CBS Common Stock to be exchanged in the merger, as the product of (a)
$46.445 (the average of the high and low sales prices per share of CBS
Common Stock as reported on the New York Stock Exchange Transactions Tape
on September 30, 1999) and (b) 826,492,158, which is the sum of (i) the
number of shares of CBS Common Stock outstanding on August 31, 1999, (ii)
the number of shares of CBS Common Stock issuable pursuant to outstanding
stock options through the date the merger is expected to be consummated and
(iii) the number of shares of CBS Common Stock otherwise expected to be
issued prior to the date the merger is expected to be consummated. This
number does not account for shares issuable upon conversion of the Viacom
Series C Preferred Stock being registered hereunder.
(3) Based on the product of (a) the total number of outstanding shares of
Series B Participating Preferred Stock, par value $1.00 per share, of CBS
Corporation ("CBS Series B Preferred Stock") on November 9, 1999, and (b)
the exchange ratio for the merger of 1.085 shares of Viacom Series C
Preferred Stock for each outstanding share of CBS Series B Preferred Stock.
(4) Estimated solely for the purpose of calculating the Registration Fee, and
computed pursuant to Rule 475(f)(2) under the Securities Act as the book
value of the outstanding shares of CBS Series B Preferred Stock.
(5) Pursuant to Rule 457 under the Securities Act, the registration fee is
$10,671,428 plus $134,830. $10,671,428 of the Registration Fee was paid on
October 7, 1999 in connection with the initial filing of this Registration
Statement on Form S-4 and the remainder was paid on November 10, 1999 in
connection with the filing of Amendment No. 1 to this Registration
Statement.
---------------
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
VIACOM [LOGO]
1515 Broadway
New York, New York 10036
November 26, 1999
Dear Viacom Shareholder,
As you no doubt have heard, Viacom and CBS have agreed to a merger. The new
company, which will retain the Viacom name, will be the largest seller of
advertising across the media landscape, with extraordinary assets in broadcast
and cable television, a leading radio and outdoor media company, a preeminent
motion picture studio, a world-class consumer publishing group, a leading
regional theme park operation and a growing portfolio of Internet ventures.
This merger advances the vision we share with CBS of building the preeminent
global media and entertainment company. The new Viacom will have exceptional
content and a portfolio of some of the world's most powerful brands.
Viacom is soliciting consents from holders of Viacom Class A common stock in
connection with this merger.
Under the terms of the merger, holders of CBS common stock will have the
right to receive 1.085 shares of Viacom Class B common stock for each share of
CBS common stock that they own and holders of CBS Series B preferred stock will
have the right to receive 1.085 shares of newly created Viacom Series C
preferred stock for each share of CBS Series B preferred stock that they own.
Both Viacom Class A and Class B common stock and CBS common stock are primarily
traded on the New York Stock Exchange.
National Amusements, Inc., which owns approximately 68% of Viacom's Class A
common stock, has agreed to consent to the merger and the other proposals
described in this joint proxy statement/prospectus. Therefore, approval of
these proposals by the shareholders of Viacom is assured.
If you hold Viacom Class A common stock, please complete, sign, date and
mail your signed written consent card in the enclosed return envelope. Approval
of these matters by Viacom's shareholders will occur when the holders of a
majority of the outstanding Viacom Class A common stock deliver dated and
properly executed consents to Viacom. National Amusements is expected to
deliver its consent at 12:00 noon, New York City time, on December 29, 1999.
Therefore, for your consent to be counted, we must receive it, dated and
properly executed, no later than 12:00 noon, New York City time, on December
29, 1999. You may revoke your written consent in the manner described in this
document at any time prior to the time that sufficient consents are delivered
to Viacom.
Detailed information concerning the merger, the merger agreement, related
agreements, Viacom's proposed new Restated Certificate of Incorporation and
other important information is contained in the attached joint proxy
statement/prospectus and its annexes. Please read this information carefully.
Sincerely,
/s/ Sumner M. Redstone
----------------------
Sumner M. Redstone
Chairman and Chief Executive Officer
For a discussion of risk factors which you should consider in evaluating the
merger, see "Risk Factors" beginning on page 18.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the securities to be
issued in the merger or determined whether this joint proxy
statement/prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
This joint proxy statement/prospectus is dated November 24, 1999, and is
first being mailed to shareholders on or about November 26, 1999.
<PAGE>
[VIACOM LOGO]
1515 Broadway
New York, New York 10036
NOTICE OF CONSENT SOLICITATION
To the Shareholders of Viacom:
The enclosed materials seek your consent in connection with the Agreement
and Plan of Merger, dated as of September 6, 1999, as amended and restated as
of October 8, 1999 and as of November 23, 1999, among Viacom, CBS Corporation,
a Pennsylvania corporation, and Viacom/CBS LLC, a Delaware limited liability
company, a copy of which is attached as Annex A to the joint proxy
statement/prospectus that accompanies this notice. The merger agreement
provides for the merger of CBS with and into Viacom or, under specified
circumstances, with and into Viacom/CBS LLC, a wholly owned subsidiary of
Viacom, the issuance of shares of Viacom Class B common stock, par value $.01
per share, and shares of Viacom Series C preferred stock, par value $.01 per
share, in the merger, and the adoption of the proposed new Restated Certificate
of Incorporation for Viacom. If the merger agreement is adopted and the merger
is consummated, each issued and outstanding share of CBS common stock, par
value $1.00 per share, will be converted into the right to receive 1.085 shares
of Viacom Class B common stock and each issued and outstanding share of CBS
Series B preferred stock, par value $1.00 per share, will be converted into the
right to receive 1.085 shares of Viacom Series C preferred stock.
Viacom's Class A shareholders are requested to take action by written
consent to approve all of the following:
1. if the merger is structured as a merger of CBS into Viacom, the
adoption of the merger agreement;
2. if the merger is structured as a merger of CBS into Viacom/CBS LLC,
the adoption of the proposed new Restated Certificate of
Incorporation of Viacom;
3. if the merger is structured as a merger of CBS into Viacom/CBS LLC,
the issuance of up to 907,746,991 shares of Viacom Class B common
stock to the holders of CBS common stock and up to 11,003 shares of
Viacom Series C preferred stock to the holders of CBS Series B
preferred stock in the merger, in accordance with the terms set
forth in the merger agreement; and
4. the amendment to increase the number of shares of Viacom Class B
common stock authorized to be issued under the Viacom incentive plan
by an additional 10 million shares.
Holders of record of Viacom Class A common stock at the close of business on
November 12, 1999 will be entitled to take action by written consent concerning
these proposals.
The Board of Directors of Viacom has declared that the merger agreement is
advisable and has unanimously approved the merger agreement and unanimously
recommends that shareholders approve the adoption of the merger agreement. The
Board of Directors of Viacom has also unanimously approved the issuance of
Viacom Class B common stock and Viacom Series C preferred stock in connection
with the merger and declared advisable and approved the proposed new Restated
Certificate of Incorporation, and unanimously recommends that you approve the
issuance of Viacom Class B common stock and Viacom Series C preferred stock in
connection with the merger and the adoption of the proposed new Restated
Certificate of Incorporation. In addition, the Board of Directors has approved
the amendment to increase the number of shares of Viacom Class B common stock
authorized to be issued under the Viacom incentive plan and unanimously
recommends that you approve the amendment.
<PAGE>
Detailed information concerning the merger, the merger agreement, related
agreements, Viacom's proposed new Restated Certificate of Incorporation and
other important information is contained in the attached joint proxy
statement/prospectus and its annexes. Please read this information carefully.
If you hold Viacom Class A common stock, please complete, sign, date and
mail your signed written consent card in the enclosed return envelope. Approval
of these matters by Viacom's shareholders will occur when the holders of a
majority of the outstanding Viacom Class A common stock deliver dated and
properly executed consents to Viacom. National Amusements is expected to
deliver its consent at 12:00 noon, New York City time, on December 29, 1999.
Therefore, for your consent to count, we must receive it, dated and properly
executed, no later than 12:00 noon, New York City time, on December 29, 1999.
You may revoke your written consent in the manner described in this document at
any time prior to the time that sufficient consents are delivered to Viacom.
By Order of the Board of Directors,
/s/ Michael D. Fricklas
Michael D. Fricklas
Secretary
November 26, 1999
YOUR CONSENT IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR CONSENT CARD.
<PAGE>
[LOGO OF CBS CORPORATION]
CBS CORPORATION
51 West 52nd Street
New York, New York 10019
November 26, 1999
Dear CBS Shareholder,
You are cordially invited to attend a special meeting of shareholders of CBS
Corporation to be held on December 29, 1999 at the Sheraton New York Hotel, 811
Seventh Avenue, New York, New York 10019, commencing at 10:00 a.m., eastern
standard time.
At the special meeting, you will be asked to consider and vote upon a
proposal to adopt the Agreement and Plan of Merger, dated as of September 6,
1999, as amended and restated as of October 8, 1999 and as of November 23,
1999, among CBS, Viacom Inc. and Viacom/CBS LLC, which provides for the merger
of CBS and Viacom or, under specified circumstances, Viacom/CBS LLC, a wholly
owned subsidiary of Viacom. Under the terms of the merger agreement, each
issued and outstanding share of CBS common stock will be converted into the
right to receive 1.085 shares of Viacom non-voting Class B common stock and
each issued and outstanding share of CBS Series B preferred stock will be
converted into the right to receive 1.085 shares of Viacom Series C preferred
stock. Both Viacom's Class B common stock and CBS' common stock are listed and
traded on the New York Stock Exchange.
The merger agreement advances the vision we share with Viacom of building
the preeminent global media and entertainment company. The combination of our
companies, our powerful brands and our highly complementary businesses will
create a company we believe is uniquely qualified to capitalize on new
opportunities domestically and around the world.
Your participation in the special meeting, in person or by proxy, is
important. Even if you anticipate attending in person, we urge you to mark,
sign and return the enclosed proxy card promptly in the enclosed postage-paid
envelope to ensure that your shares of CBS common stock and CBS Series B
preferred stock will be represented at the special meeting. If you do attend in
person, you will be entitled to vote your shares in person.
The joint proxy statement/prospectus that accompanies this letter contains
information about Viacom and CBS and describes in detail the merger and related
matters. Attached to the joint proxy statement/prospectus is a copy of the
merger agreement, related agreements and other important information.
Thank you, and we look forward to seeing you at the special meeting.
Very truly yours,
/s/ David T. McLaughlin /s/ Mel Karmazin
David T. McLaughlin Mel Karmazin
Chairman of the Board President and Chief Executive Officer
For a discussion of risk factors which you should consider in evaluating the
merger, see "Risk Factors" beginning on page 18.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued in the
merger or determined whether this joint proxy statement/prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
This joint proxy statement/prospectus is dated November 24, 1999, and is
first being mailed to shareholders on or about November 26, 1999.
<PAGE>
[LOGO OF CBS CORPORATION]
CBS CORPORATION
51 West 52nd Street
New York, New York 10019
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held December 29, 1999
To the Shareholders of CBS:
A special meeting of shareholders of CBS Corporation, a Pennsylvania
corporation, will be held on December 29, 1999 at 10:00, a.m., eastern standard
time, at the Sheraton New York Hotel, 811 Seventh Avenue, New York, New York
10019, to consider and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated as of September 6, 1999, as amended and restated as of October 8,
1999 and as of November 23, 1999, among CBS, Viacom Inc., a Delaware
corporation, and Viacom/CBS LLC, a Delaware limited liability company, a copy
of which is attached as Annex A to the joint proxy statement/prospectus that
accompanies this notice. The merger agreement provides for the merger of CBS
with and into Viacom or, under specified circumstances, with and into
Viacom/CBS LLC, a wholly owned subsidiary of Viacom. If the merger agreement is
adopted and the merger is consummated each issued and outstanding share of CBS
common stock, par value $1.00 per share, will be converted into the right to
receive 1.085 shares of Viacom non-voting Class B common stock, par value $.01
per share, and each issued and outstanding share of CBS Series B preferred
stock, par value $1.00 per share, will be converted into the right to receive
1.085 shares of Viacom Series C preferred stock, par value $.01 per share.
Holders of record of CBS common stock and CBS Series B preferred stock at
the close of business on November 17, 1999, will be entitled to vote at the
special meeting or any adjournments or postponements of the special meeting.
The Board of Directors of CBS has determined that the merger is in the best
interests of CBS and its shareholders, has unanimously approved the merger and
the merger agreement and unanimously recommends that shareholders vote to adopt
the merger agreement.
Detailed information concerning the merger, the merger agreement, related
agreements and other related matters is contained in the attached joint proxy
statement/prospectus and its annexes. Please read this information carefully.
The vote of each CBS shareholder is important. We urge you to mark, sign and
return your proxy card promptly in the enclosed postage-paid envelope to ensure
that your shares of CBS common stock and CBS Series B preferred stock will be
represented at the special meeting. If you attend the special meeting in
person, you will be entitled to vote your shares in person.
<PAGE>
If you plan to attend the special meeting, please keep the admission ticket
that is attached to your proxy card, and also check the appropriate box on your
proxy card. Shareholders who own shares through banks or brokers and who plan
to attend must send a written notification, along with proof of ownership, such
as a bank or brokerage firm account statement, to the Secretary's Office, CBS
Corporation, 51 West 52nd Street, New York, New York 10019. The names of those
shareholders indicating they plan to attend will be placed on an admission list
held at the entrance to the meeting. Admission tickets will not be mailed in
advance of the meeting.
On behalf of the Board of Directors,
/s/ Angeline C. Straka
Angeline C. Straka
Secretary
New York, New York
November 26, 1999
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
HOLDERS OF CBS COMMON STOCK AND CBS SERIES B PREFERRED STOCK
SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... 1
SUMMARY................................................................... 5
The Companies........................................................... 5
Terms of the Merger..................................................... 5
Ownership of the Combined Company Following the Merger.................. 6
Shareholders Entitled to Consent or Vote; Vote Required; Voting
Agreements............................................................. 6
Quorum at CBS Special Meeting........................................... 6
Interests of Directors and Executive Officers of Viacom and CBS......... 6
Fairness Opinions of Financial Advisors................................. 8
The Merger.............................................................. 8
Viacom Summary Historical Financial Data................................ 11
CBS Summary Historical Financial Data................................... 12
Summary Unaudited Viacom/CBS Pro Forma Combined Financial Information... 14
Unaudited Viacom/CBS Comparative Per Share Data......................... 15
Comparative Market Prices and Dividends................................. 16
RISK FACTORS.............................................................. 18
Risks Relating to the Merger............................................ 18
Fixed Exchange Ratio May Result in Lower Value of Merger
Consideration........................................................ 18
The Merger Is Subject to Review and Approval by the Federal
Communications Commission Which May Delay the Completion of the
Merger and/or Lessen the Anticipated Benefits of the Merger.......... 18
Antitrust Regulatory Agencies May Oppose or Impose Conditions on the
Merger Which May Delay the Completion of the Merger and/or Lessen the
Anticipated Benefits of the Merger................................... 18
Mr. Redstone, Chairman and Chief Executive Officer of Viacom, Will Be
the Controlling Shareholder and May Therefore Determine the Outcome
of Most Shareholder Votes............................................ 19
The Combined Company's Corporate Governance Structure Will Be Unusual
and May Not be a Successful Model for Managing the Combined Company.. 19
The Split-off of Blockbuster from Viacom May Not Occur, Which May
Hinder the Operations of Viacom's Different Businesses............... 19
Viacom May Incur a Significant Loss Resulting from the Split-off of
Blockbuster.......................................................... 20
Potentially Significant Increases in Depreciation and Amortization
Expense May Result from Amortization Periods Which Are Shorter than
Preliminary Estimates Reflected in the Pro Forma Financial Statements
Which Would Cause Net Earnings to Decrease........................... 20
Risks Relating to the Combined Company.................................. 20
Competitive Developments and Technologies May Adversely Affect the
Combined Company's Future Market Share of Entertainment Audiences and
Customers, Which in Turn May Affect the Combined Company's
Advertising Revenues and Profitability............................... 20
Expenditures by Advertisers Tend to Be Cyclical and Dependent on the
Economic Prospects of Advertisers and the Economy in General Which
Could Cause Revenues of the Combined Company from Advertisements to
Decline Significantly in any Given Period Generally or in Specific
Markets.............................................................. 21
Acceptance of the Combined Company's Programming by the Public is
Difficult to Predict, Which Could Lead to Fluctuations in Revenues... 21
The Combined Company's Revenues are Dependent upon the Maintenance of
Affiliation Agreements............................................... 22
Changes in Federal Communications Laws and Regulations May Have an
Adverse Effect on the Combined Company's Business.................... 22
The Combined Company Has Environmental, Asbestos and Other Contingent
Liabilities That Could Have a Significant Impact on the Combined
Company.............................................................. 22
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS................ 24
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION.............. 25
Unaudited Viacom/CBS Pro Forma Combined Condensed Financial
Information............................................................ 25
Unaudited CBS/King World Pro Forma Combined Condensed Financial
Information............................................................ 34
THE MERGER................................................................ 46
Background to the Merger................................................ 46
Reasons for the Merger and Board Recommendations........................ 49
Opinions of Financial Advisors.......................................... 53
Directors, Management and Corporate Governance of the Combined Company.. 67
Accounting Treatment.................................................... 70
Federal Income Tax Consequences......................................... 71
Merger Consideration.................................................... 73
Conversion of Shares; Procedures for Exchange of Certificates;
Fractional Shares...................................................... 73
Litigation.............................................................. 74
Effective Time of the Merger............................................ 74
Federal Securities Laws Consequences.................................... 74
Stock Exchange Quotation................................................ 74
Dissenters' Rights of Appraisal......................................... 75
Delisting and Deregistration of CBS Common Stock........................ 75
THE MERGER AGREEMENT AND RELATED AGREEMENTS............................... 76
The Merger Agreement.................................................... 76
The Voting Agreements................................................... 83
The Stockholder Agreement............................................... 84
INTERESTS OF PERSONS IN THE MERGER--SENIOR MANAGEMENT ARRANGEMENTS........ 85
Viacom.................................................................. 85
CBS..................................................................... 87
THE COMPANIES............................................................. 89
Viacom's Business....................................................... 89
CBS' Business........................................................... 91
</TABLE>
<TABLE>
<S> <C>
REGULATORY MATTERS AND THIRD-PARTY APPROVALS............................... 93
Antitrust................................................................ 93
Federal Regulation of Television and Radio Broadcasting.................. 93
Other Regulations, Legislation and Recent Developments Affecting
Broadcast Stations...................................................... 97
Internet................................................................. 98
DESCRIPTION OF VIACOM CAPITAL STOCK FOLLOWING THE MERGER................... 99
Viacom Class A Common Stock.............................................. 99
Viacom Class B Common Stock.............................................. 99
Voting and Other Rights of Viacom Common Stock........................... 99
Viacom Series C Preferred Stock.......................................... 100
Other Viacom Preferred Stock............................................. 102
COMPARISON OF RIGHTS OF HOLDERS OF VIACOM STOCK AND CBS STOCK.............. 103
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
ADOPTION OF NEW RESTATED CERTIFICATE OF INCORPORATION.................... 132
AMENDMENT TO THE VIACOM 1997 LONG-TERM MANAGEMENT INCENTIVE PLAN......... 133
SOLICITATION OF CONSENTS AND PROXIES..................................... 135
SHAREHOLDER PROPOSALS.................................................... 136
LEGAL MATTERS............................................................ 137
EXPERTS.................................................................. 137
WHERE YOU CAN FIND MORE INFORMATION AND INCORPORATION OF DOCUMENTS BY
REFERENCE............................................................... 137
Viacom................................................................. 138
CBS.................................................................... 138
</TABLE>
<TABLE>
<C> <S>
ANNEXES
Annex A Amended and Restated Agreement and Plan of Merger
Annex B Restated Certificate of Incorporation
Annex C Amended and Restated By-laws
Annex D Voting Agreement
Annex E Stockholder Agreement
Annex F Sumner Redstone's Employment Agreement
Annex G Mel Karmazin's Employment Agreement
Annex H Opinion of Morgan Stanley & Co. Incorporated
Annex I Opinion of Evercore Group Inc.
Annex J Viacom Inc. 1997 Long-Term Management Incentive Plan
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why are the two companies proposing to merge?
A: Viacom and CBS believe that the merger advances the vision we share of
building the preeminent global media and entertainment company. The
combination of our companies, our powerful brands and our highly
complementary businesses will create a company we believe is uniquely
qualified to capitalize on new opportunities domestically and around the
world.
To review the reasons for the merger in greater detail, see pages 49
through 52.
Q: What will I receive in the merger?
A: Viacom Shareholders: You will retain the shares of Viacom common stock
you currently own.
CBS Holders of Common Stock: You will be entitled to receive 1.085 shares
of Viacom non-voting Class B common stock in exchange for each share of
CBS common stock you own. Viacom will not issue fractional shares.
Instead, you will receive a payment equal to the market value of the
fractional share.
For example:
. If you currently own 1,000 shares of CBS common stock, then after the
merger you will be entitled to receive 1,085 shares of Viacom non-
voting Class B common stock.
. If you currently own 100 shares of CBS common stock, then after the
merger you will be entitled to receive 108 shares of Viacom non-voting
Class B common stock and a check for the market value of the 0.5
fractional share of Viacom non-voting Class B common stock.
CBS Holders of Preferred Stock: You will be entitled to receive 1.085
shares of Viacom Series C preferred stock in exchange for each share of
CBS Series B preferred stock you own. Viacom will not issue fractional
shares. Instead, you will receive a payment equal to the market value of
the Viacom Class B common stock into which the fractional share would be
convertible. Each share of Viacom Series C preferred stock has the voting
power of 100 shares of Viacom Class A common stock and is convertible at
the option of the holder into 1,000 shares of Viacom non-voting Class B
common stock.
On November 23, 1999, the closing price per share on the NYSE of Viacom
Class B common stock was $51.6875 and of CBS common stock was $53.625.
Q: As a shareholder, how will the merger affect me?
A: Viacom Shareholders: After the merger, each share of Viacom common stock
that you own will represent a smaller ownership percentage of a
significantly larger company.
CBS Holders of Common Stock and Preferred Stock: After the merger, you
will own shares of a combined company that will own the assets of both
Viacom and CBS. The name of the combined company will be Viacom Inc.
Holders of CBS common stock will receive shares of Viacom non-voting
Class B common stock. Holders of CBS Series B preferred stock will
receive shares of Viacom Series C preferred stock. The holders of Viacom
Class A common stock and the holders of Viacom Series C preferred stock
will have all the voting rights of Viacom's capital stock. A majority of
the Viacom Class A common stock is held by National Amusements, Inc.
which, in turn, is controlled by Sumner Redstone, the Chairman and Chief
Executive Officer of Viacom.
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Q: Who will manage the combined company after the merger?
A: Following the merger, the Board of Directors of the combined company will
be expanded from ten to 18 directors. The eight additional directors will
initially be selected from and designated by the Board of Directors of
CBS and vacancies in this group will be filled during the initial three-
year term by independent directors designated by the remaining CBS
directors.
Mr. Redstone will continue to serve as Chairman and Chief Executive
Officer of the combined company and will be responsible, in consultation
with the President and Chief Operating Officer, for corporate policy and
strategy.
Mel Karmazin, the current President and Chief Executive Officer of CBS,
will serve as President and Chief Operating Officer of the combined
company, will report directly to the CEO of the combined company and
consult with the CEO on all major decisions and will supervise,
coordinate and manage the combined company's business.
In a number of areas, such as approving larger transactions, Mr. Karmazin
may not act without the approval of, and the combined company's board may
act by, a majority of the directors. Ten of the 18 directors of the
combined company are expected to be designees of Viacom or their
successors and could therefore control actions which may be taken by a
majority of the combined company's directors. In all other areas, Mr.
Karmazin's authority to manage the combined company may be limited only
through action by a supermajority of at least 14 directors. As a result,
Mr. Karmazin will have an unusual degree of autonomy for a President and
COO of a large corporation.
The governance arrangements described above will be in effect for a
period of three years from the closing of the merger, unless 14 of the 18
directors determine to modify these arrangements or Mr. Karmazin is not
the COO or CEO of the combined company.
The governing structure of the combined company during this three year
period is an important part of the merger. We recommend that you read the
complete explanation of this structure on pages 67 through 70 carefully,
as well as the complete text of the proposed new Restated Certificate of
Incorporation attached as Annex B to this joint proxy
statement/prospectus.
Q: What do I need to do now?
A: Viacom Class A Shareholders: After carefully reading and considering the
information contained in this joint proxy statement/prospectus, complete
the enclosed consent card and sign and submit it in the enclosed return
envelope as soon as possible. If you sign and submit your consent card
but do not indicate whether you consent to any individual proposal, your
consent card will be counted as a consent to the adoption of the merger
agreement and the proposed new Viacom Restated Certificate of
Incorporation, and the issuance of shares of Viacom Class B common stock
and Viacom Series C preferred stock in connection with the merger and the
amendment to Viacom's incentive plan. If you do not submit a properly
executed consent card or if you abstain, it will have the effect of a
vote against the adoption of the merger agreement and the proposed new
Viacom Restated Certificate of Incorporation and the issuance of Viacom
Class B common stock and Viacom Series C preferred stock in connection
with the merger and the amendment to Viacom's incentive plan.
CBS Holders of Common Stock and Preferred Stock: After carefully reading
and considering the information contained in this joint proxy
statement/prospectus,
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indicate on the enclosed proxy card how you want to vote, and sign and
submit it in the enclosed return envelope as soon as possible so that
your shares may be represented at the special meeting. If you sign and
submit your proxy card but do not indicate how you want to vote, your
shares will be voted in favor of the adoption of the merger agreement. If
you do not vote or you abstain, it will have no effect on whether the
proposal is passed. The CBS Board is not aware of any matter other than
that set forth in this joint proxy statement/prospectus that will be
brought before the CBS special meeting. If, however, other matters are
properly presented at the CBS special meeting, proxies will be voted in
accordance with the discretion of the holders of such proxies.
Q: If my shares are held in the name of my broker, will my broker give
consent or vote for me?
A: Viacom Class A Shareholders: Your broker will execute a consent card for
your shares only if you provide instructions to do so. Without
instructions, your broker will not execute a consent card for your
shares.
CBS Holders of Common Stock and Preferred Stock: Your broker will vote
your shares only if you provide instructions on how to vote. You should
instruct your broker to vote your shares according to your directions.
Without instructions, your shares will not be voted.
Q: Can I revoke my consent card or change my vote after I have submitted my
signed consent card or proxy card?
A: Viacom Class A Shareholders: You can revoke your consent or, if you have
previously revoked your consent, submit a new consent card at any time
prior to the time that consents from the holders of a majority of the
outstanding Viacom Class A common stock are delivered to Viacom, which is
expected to occur at 12:00 noon on December 29 , 1999, by sending your
revocation or new consent card to Viacom at the address indicated below.
CBS Holders of Common Stock and Preferred Stock: You can change your vote
at any time before your proxy is voted at the special meeting. You can do
this in one of the following three ways:
. First, you can send a written notice stating that you would like to
revoke your proxy to the appropriate company at the address indicated
below.
. Second, you can complete and submit a new proxy card.
. Third, you can attend the special meeting and vote in person. Simply
attending the meeting, however, will not revoke your proxy; you must
vote at the special meeting. If you have instructed a broker to vote
your shares, you must follow directions received from your broker to
change your vote.
Q: Should I send in my stock certificates now?
A: Viacom Shareholders: No. You will keep the stock certificates you
currently own.
CBS Holders of Common Stock and Preferred Stock: No. After the merger is
completed, Viacom will appoint an exchange agent to coordinate the
exchange of your shares of CBS common stock or preferred stock for shares
of Viacom non-voting Class B common stock or Viacom Series C preferred
stock. The exchange agent will send you written instructions on how to
exchange your stock certificates.
Q: When do you expect the merger to be completed?
A: We are working to complete the merger as soon as possible. In addition to
shareholder approvals, we must also obtain regulatory approvals and
satisfy other conditions set forth in the merger agreement. We hope to
complete the merger in the first half of 2000.
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Q: What are the tax consequences of the merger to me?
A: Viacom Shareholders: There will be no tax consequences to you as a result
of the merger.
CBS Holders of Common Stock and Preferred Stock: The exchange of CBS
common stock for Viacom non-voting Class B common stock and the exchange
of CBS Series B preferred stock for Viacom Series C preferred stock will
be tax-free for federal income tax purposes. However, you will have to
pay taxes on the payments received for fractional shares. We recommend
that you read the complete explanation of the tax consequences on pages
71 through 72 carefully.
Q: Who can help answer my questions?
A: If you would like additional copies of this joint proxy
statement/prospectus, or if you have questions about the merger, you
should contact:
VIACOM SHAREHOLDERS:
Viacom Inc.
1515 Broadway
53rd Floor
New York, New York 10036
Attention: Investor Relations
Phone Number: (212) 258-6700
CBS SHAREHOLDERS:
CBS Corporation
40 West 57th Street
New York, New York 10019
Attention: Investor Relations
Phone Number: (212) 314-9209
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SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus, and may not contain all of the information that is
important to you. To understand the merger fully and for a complete description
of the legal terms of the merger, you should read carefully this entire joint
proxy statement/prospectus and the documents to which we have referred you. See
"Where You Can Find More Information and Incorporation of Documents by
Reference" on page 137. The merger agreement is attached as Annex A to this
joint proxy statement/prospectus. We encourage you to read the merger
agreement, as it is the legal document that governs the merger.
The Companies
Viacom Inc.
1515 Broadway
New York, NY 10036
(212) 258-6000
Viacom Inc. is a diversified entertainment company with operations in six
segments: (1) Networks, (2) Entertainment, (3) Video, (4) Parks, (5) Publishing
and (6) Online. The Networks segment operates MTV: Music Television(R),
Showtime(R), Nickelodeon(R), Nick at Nite(R), VH1 Music First(R) and TV
Land(R), among other program services. The Entertainment segment, which
includes Paramount Pictures(R), Paramount Television(R), Paramount Stations
Group and Spelling Entertainment Group Inc., produces and distributes
theatrical motion pictures and television programming and operates or programs
19 broadcast television stations. The Video segment consists of an
approximately 82% interest in Blockbuster Inc. (NYSE: BBI) which operates and
franchises Blockbuster Video(R) stores worldwide. The Parks segment, through
Paramount Parks(R), owns and operates five theme parks and a themed attraction
in the U.S. and Canada. The Publishing segment publishes and distributes
consumer books and related multimedia products under such imprints as Simon &
Schuster(R). The Online segment provides online music and children destinations
featuring entertainment, information, community tools and e-commerce.
CBS Corporation
51 West 52nd Street
New York, NY 10019
(212) 975-4321
CBS is one of the largest radio and television broadcasters in the United
States. CBS operates its business through its Television, Cable and Infinity
segments. The Television segment consists of CBS' 16 owned and operated
television stations and the CBS television network, which includes CBS'
Internet businesses. CBS acquired television broadcast station KTVT-TV Dallas-
Fort Worth, Texas on October 12, 1999. CBS acquired King World Productions,
Inc., the distributor of a number of shows, including "The Oprah Winfrey Show",
on November 15, 1999. The Cable segment includes CBS' cable networks,
consisting of The Nashville Network, Country Music Television and two regional
sports networks. The Infinity segment corresponds to Infinity Broadcasting
Corporation (NYSE: INF), which conducts CBS' radio and outdoor advertising
business.
CBS' Internet businesses include its operation of the Internet sites CBS.com
and Country.com, as well as its investments in SportsLine.com Inc.,
MarketWatch.com, Inc. and other Internet businesses.
CBS, through Infinity, has entered into a definitive agreement to acquire
Outdoor Systems, Inc., a leading outdoor advertising company in North America.
CBS believes that this transaction will be completed during November 1999.
Terms of the Merger
Either CBS will be merged with and into Viacom and Viacom will be the
surviving corporation or CBS will merge with and into Viacom/CBS LLC and
Viacom/CBS LLC will be the surviving entity and wholly owned by Viacom. The
merger of CBS into Viacom/CBS LLC will occur only if guidance is received from
the IRS or another appropriate governmental authority that the merger of CBS
into Viacom/CBS LLC will not adversely affect the tax treatment of the merger
and if the merger would not result in an adverse tax effect to Viacom, CBS or
their respective shareholders.
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The alternative structure for the proposed merger results in the formation
of a subsidiary of Viacom which will only contain the assets and liabilities of
CBS, thereby providing Viacom with insulation from CBS' contingent liabilities,
such as CBS' environmental liabilities.
Ownership of the Combined Company Following the Merger
We anticipate that holders of CBS common stock will receive approximately
812 million shares of Viacom non-voting Class B common stock in the merger and
that holders of CBS Series B preferred stock will receive Viacom Series C
preferred stock convertible into approximately 11 million shares of Viacom
Class B common stock. Based on those numbers, immediately following the merger,
the former CBS shareholders will hold an aggregate equity interest in Viacom of
approximately 54%. The Viacom voting Class A common stock will continue to be
controlled by National Amusements which, in turn, is controlled by Mr.
Redstone.
Shareholders Entitled to Consent or Vote; Vote Required; Voting Agreements
Viacom Class A Shareholders: Only shareholders of record at the close of
business on the record date of November 12, 1999 will be entitled to take
action by written consent concerning these proposals. On the record date, there
were 139,690,499 shares of Viacom Class A common stock outstanding. Approval of
the adoption of the merger agreement and the proposed new Restated Certificate
of Incorporation, the issuance of Viacom Class B common stock and Viacom Series
C preferred stock in connection with the merger and the amendment to the Viacom
incentive plan will occur when the holders of a majority of the outstanding
Viacom Class A common stock deliver properly dated and executed consents to
Viacom.
CBS Holders of Common Stock and Preferred Stock: Only shareholders of record
at the close of business on the record date of November 17, 1999 will be
entitled to vote at the special meeting. On the record date, there were
approximately 764.3 million shares of CBS common stock outstanding and
approximately 10,142 shares of CBS Series B preferred stock outstanding. Each
holder of CBS common stock will have one vote at the special meeting for each
share of CBS common stock owned on the record date. Each holder of CBS Series B
preferred stock will have 1,000 votes at the special meeting for each share of
CBS Series B preferred stock owned on the record date. A majority of votes cast
by all shareholders entitled to vote at the CBS special meeting is required to
adopt the merger agreement. On the record date, directors and executive
officers of CBS and their affiliates were entitled to vote 4,630,080 shares of
CBS common stock, or approximately 0.6% of the shares of CBS common stock
outstanding on the record date, and no shares of CBS Series B preferred stock.
Quorum at CBS Special Meeting
CBS. The presence at the CBS special meeting, either in person or by proxy,
of shareholders entitled to cast at least a majority of the votes that all
shareholders are entitled to cast is required in order for a quorum to be
present for purposes of voting on the adoption of the merger agreement. In the
event that a quorum is not present at the CBS special meeting, it is expected
that the meeting will be adjourned or postponed to solicit additional proxies.
Shares of CBS common stock or CBS Series B preferred stock represented at
the applicable special meeting but not voting, including shares of CBS common
stock or CBS Series B preferred stock for which proxy cards have been received,
but with respect to which holders of shares have abstained on any matter, will
be treated as present at the special meeting for purposes of determining the
presence or absence of a quorum for the transaction of all business. The
persons named as proxies by a CBS shareholder may propose and vote for one or
more adjournments of the applicable special meeting, including, without
limitation, adjournments to permit further solicitations of proxies in favor of
a proposal; provided, however, that a proxy that is voted against the proposal
to adopt the merger agreement may not be voted in favor of any such adjournment
or postponement.
Interests of Directors and Executive Officers of Viacom and CBS
A number of directors and executive officers of CBS and Viacom have
interests in the merger as employees and/or directors that are different from,
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or in addition to, your interests as a shareholder. If the merger is completed,
several of the directors and members of the existing senior management of each
of CBS and Viacom will be designated as members of the initial Board of
Directors and senior management of the combined company after the merger.
Indemnification arrangements for existing directors and officers of CBS and
Viacom will be continued.
In particular, the following executives have entered into compensation
arrangements in connection with the Merger:
Mr. Redstone:
Viacom entered into an employment agreement with Mr. Redstone to serve as
its Chairman and CEO following the effective time of the merger. Mr. Redstone
will receive an annual base salary of $1 million and an annual bonus, with an
established target bonus of $5 million and a maximum bonus of $10 million for
calendar year 2000, prorated to reflect the actual number of days that the
agreement is in effect during the year 2000. The target and maximum bonus
amounts increase by 10% annually through 2003. Mr. Redstone will also receive
deferred compensation of $2 million during calendar year 2000, prorated to
reflect the number of days the agreement is in effect during the year 2000,
thereafter to be increased annually by 10% of his salary and deferred
compensation for the preceding year. He will also receive a grant of options to
purchase 2,000,000 shares of Viacom Class B common stock, vesting in three
equal annual installments.
Mr. Karmazin:
In contemplation of the merger, Viacom entered into an employment agreement
with Mr. Karmazin that becomes effective only upon the consummation of the
merger, except for a stock "lock-up" provision which became effective upon the
signing of the employment agreement, and continues through December 31, 2003.
Pursuant to the agreement, Mr. Karmazin will serve as the President and COO of
Viacom.
Mr. Karmazin will receive an annual base salary of $1 million and an annual
bonus, with an established target bonus of $5 million and a maximum bonus of
$10 million for calendar year 2000, prorated to reflect the actual number of
days that the agreement is in effect during the year 2000, which target and
maximum amounts will increase by 10% annually. Mr. Karmazin will also receive
deferred compensation of $2 million during calendar year 2000, prorated to
reflect the number of days that the agreement is in effect during the year
2000, thereafter to be increased annually during the remainder of his
employment in an amount equal to 10% of his salary and deferred compensation
for the preceding year. The agreement provides for a grant of options to
purchase 2,000,000 shares of Viacom Class B common stock, vesting in three
equal annual installments. During his employment term, Mr. Karmazin will be
provided with $5 million of life insurance. Mr. Karmazin will also be entitled
to a gross-up for any "golden parachute" excise tax that may be imposed on him
under the Internal Revenue Code as a result of any payment or benefit he
receives under his agreement or otherwise.
Messrs. Dauman and Dooley:
Pursuant to agreements entered into with Viacom on September 6, 1999,
Messrs. Dauman and Dooley, the Deputy Chairmen and Executive Vice Presidents of
Viacom, have agreed to resign from Viacom effective at the effective time of
the merger and will each receive the following payments:
(1) as soon as practicable after their resignations:
. a one-time cash payment equal to the amount that would have been
payable under their current employment agreements through their
original terms, or December 31, 2003,
. payouts of all deferred compensation accounts and the balance of their
accounts under the Viacom Excess Investment Plan, and
. a transaction bonus in the amount of $5,000,000;
(2) on the earlier of the effective time of the merger and the date on
which Viacom pays 1999 bonuses to its executive officers generally, the
greatest of:
. 110% of their respective bonuses received for 1998,
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. amounts which, when added to their salary and deferred compensation
payable for 1999, would produce the highest 1999 total cash
compensation paid to any other executive officer of Viacom or any of
its affiliates, and
. an amount the Viacom Board determines is appropriate to compensate
each executive for his contribution to Viacom in 1999; and
(3) All equity-based compensation awards previously granted to Messrs.
Dauman and Dooley will vest on the effective date of their resignation
and each stock option will continue to be exercisable in accordance
with its terms until December 31, 2003, subject to their compliance
with the provisions of their resignation agreements.
Assuming the merger is consummated on January 1, 2000 and the 1999 bonuses are
paid at 110%, it is estimated that each of Messrs. Dauman and Dooley will
receive aggregate payments under (1) and (2) above (excluding any payouts of
deferred compensation accounts and Viacom Excess Investment Plan balances) of
approximately $41 million. In addition, under (3) above, each of Messrs. Dauman
and Dooley's unexercised stock options have a value of approximately $114
million, assuming such options were exercised on November 19, 1999 at their
applicable exercise price.
For a more complete description of these arrangements, please read the section
"Interests of Persons in the Merger--Senior Management Arrangements."
Fairness Opinions of Financial Advisors
In deciding to approve the merger, each Board considered the opinion of its
financial advisor. Viacom received an opinion from its financial advisor,
Morgan Stanley & Co. Incorporated, as to the fairness of the merger to Viacom
from a financial point of view, and CBS received an opinion from its financial
advisor, Evercore Group Inc., an affiliate of Evercore Partners Inc., as to the
fairness of the merger to its shareholders from a financial point of view.
These opinions are attached as Annexes H and I, respectively, to this joint
proxy statement/prospectus. The opinions are not a recommendation as to how you
should vote your shares. We encourage you to read these opinions carefully.
The Merger
Conditions to the Merger
We will complete the merger only if various conditions are satisfied or
waived, including the following:
. CBS shareholders vote to adopt the merger agreement;
. Viacom shareholders approve:
- the adoption of the merger agreement if CBS merges into Viacom;
- the adoption of the proposed new Restated Certificate of
Incorporation and the issuance of Viacom Class B common stock and
Viacom Series C preferred stock in connection with the merger, if CBS
merges into Viacom/CBS LLC;
. no law or court order prohibits the merger or makes the merger illegal;
. the registration statement of which this joint proxy statement/prospectus
forms a part has been declared effective and no stop order suspending its
effectiveness is in effect;
. the shares of Viacom Class B common stock to be issued to shareholders of
CBS in the merger have been authorized for listing by the NYSE, subject
to official notice of issuance;
. Viacom and CBS obtain all regulatory approvals necessary to complete the
merger;
. each of Viacom and CBS has certified to the other that its
representations and warranties are true and correct except as would not
have a material adverse effect and that its material obligations under
the merger agreement have been complied with in all material respects;
and
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. Viacom and CBS have each obtained an opinion from their respective tax
counsel that the merger will be tax-free.
If the CBS shareholders do not vote to adopt the merger agreement, the
companies currently contemplate continuing their businesses in substantially
the same manner as previously conducted, subject to reassessment based on then
existing circumstances.
No Solicitation of Competing Transactions
The merger agreement prohibits CBS from soliciting any proposal from, or
providing information to or negotiating with, another party for the sale or
transfer of more than 35% of the voting power or assets of CBS.
However, until the CBS shareholders adopt the merger agreement, CBS may
consider an unsolicited proposal for a competing transaction from another party
which CBS' Board of Directors determines in good faith reasonably can be
expected to result in a superior proposal, and CBS may furnish information to
that party. A superior proposal is a proposal to acquire more than 50% of the
voting power or all or substantially all of the assets of CBS for consideration
which the CBS Board determines in good faith is more favorable than that to be
received by CBS shareholders in the merger. CBS must notify Viacom if it begins
to negotiate a competing transaction.
Termination of the Merger Agreement
The Boards of Directors of both our companies can jointly agree to terminate
the merger agreement at any time without completing the merger. In addition,
the merger agreement may also be terminated:
. by either company, if the merger is not completed by August 31, 2000;
. by either company, if the shareholders of CBS do not approve the merger;
. by either company, if a governmental authority has issued a final and
nonappealable order permanently prohibiting the merger;
. by either company, if the other company breaches any of the
representations or warranties it made in the merger agreement in a manner
so as to have a material adverse effect on that company, or the other
company, including, in Viacom's case, Viacom/CBS LLC, materially fails to
comply with any of the material obligations it has under the merger
agreement, in either case such that the conditions to closing relating to
the representations and warranties or covenants would not be satisfied;
or
. by CBS, if prior to the adoption of the merger agreement by the CBS
shareholders CBS gives notice to Viacom of the existence of a superior
proposal.
Termination Fees
CBS is required to pay Viacom a termination fee of $1 billion if:
. (1) Viacom or CBS terminates the merger agreement because the CBS
shareholders fail to adopt the merger agreement at the CBS special
meeting, (2) a competing proposal to acquire more than 50% of the voting
power or assets of CBS has been made public at or prior to the failure to
adopt the merger agreement and (3) within 12 months after termination, a
binding agreement to enter into a competing transaction is entered into
by CBS or a competing transaction is consummated; or
. CBS terminates the merger agreement because, prior to the adoption of the
merger agreement by CBS shareholders, CBS gives notice to Viacom of the
existence of a superior proposal.
Regulatory Approvals
Under U.S. antitrust laws, we may not complete the merger until we have
notified the Antitrust Division of the Department of Justice and the Federal
Trade Commission of the merger and filed the necessary report forms and until a
required waiting period has ended. Viacom made its notification on September
20, 1999 and CBS made its notification on September 23, 1999. On October 22,
1999, the Antitrust Division of the DOJ issued to the parties a Request for
Additional Information and Documentary Material, which extends the waiting
period until 20 calendar days after the parties substantially comply with the
request. However, the Antitrust Division of the Department of Justice and the
Federal Trade Commission continue to have the authority to challenge the merger
on antitrust grounds before and after the merger is completed.
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Under U.S. federal communications laws, the merger will result in a transfer
of control to Viacom of licenses held by CBS, and, therefore, the merger
requires the prior review and approval of the Federal Communications
Commission. Both Viacom and CBS have requested the required approval in an
application to the FCC, which was filed November 16, 1999. This application is
subject to comments by the public, and any decision may be further reviewed or
reconsidered by the FCC or a court. In order to comply with applicable law and
to secure the approval of the FCC, Viacom, CBS or both may need to divest some
or all of their respective interests in a number of radio and television
licenses as well as some or all of Viacom's interest in United Paramount
Network. Further, Viacom, CBS or both may be required to divest additional
broadcast stations in the event rules recently adopted by the FCC that relax
ownership restrictions fail to become effective, or are stayed, reconsidered or
modified by the FCC or a court.
Both companies are required to make filings with or obtain approvals from
other domestic and international regulatory authorities in connection with the
merger.
We cannot predict whether we will obtain all required regulatory approvals
to complete the merger, or whether any approvals will include conditions that
would be detrimental to CBS or Viacom.
Dissenters' Rights of Appraisal
Neither Viacom shareholders nor CBS shareholders have dissenters' rights to
an appraisal of the value of their shares in connection with the merger.
Accounting Treatment
The merger will be accounted for under the purchase method of accounting in
accordance with generally accepted accounting principles. Accordingly, the cost
to acquire CBS will be allocated to the assets acquired and liabilities assumed
based on their fair values, with any excess being treated as goodwill and
amortized over its estimated useful life.
* * *
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Viacom Summary Historical Financial Data
The summary consolidated financial data presented below have been derived
from, and should be read together with, Viacom's audited consolidated financial
statements and the accompanying notes included in Viacom's annual report on
Form 10-K for the year ended December 31, 1998 and the unaudited interim
consolidated financial statements and the accompanying notes included in
Viacom's quarterly report on Form 10-Q for the quarterly period ended September
30, 1999, both of which are incorporated by reference into this joint proxy
statement/prospectus. The historical financial data presented below include the
results of Paramount Communications Inc. after its acquisition by Viacom on
March 11, 1994 and the results of Blockbuster Entertainment Corporation after
its acquisition by Viacom on September 29, 1994.
Statement of Operations Data
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------- -------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- ------- ------- ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 9,286 $ 8,754 $12,096 $10,685 $9,684 $8,700 $4,486
Operating income........ $ 881 $ 455 $ 752 $ 685 $1,197 $1,247 $ 354
Earnings (loss) from
continuing operations.. $ 239 $ (133) $ (44) $ 374 $ 152 $ 88 $ 19
Net earnings (loss)..... $ 201 $ (141) $ (122) $ 794 $1,248 $ 223 $ 90
Net earnings (loss)
attributable to common
stock.................. $ 189 $ (186) $ (150) $ 734 $1,188 $ 163 $ 15
Earnings (loss) per
common share:
Basic:
Earnings (loss) from
continuing
operations........... $ .33 $ (.25) $ (.10) $ .44 $ .13 $ .04 $ (.14)
Net earnings (loss)... $ .27 $ (.26) $ (.21) $ 1.04 $ 1.63 $ .22 $ .04
Diluted:
Earnings (loss) from
continuing
operations........... $ .32 $ (.25) $ (.10) $ .44 $ .13 $ .04 $ (.13)
Net earnings (loss)... $ .27 $ (.26) $ (.21) $ 1.04 $ 1.62 $ .22 $ .03
</TABLE>
Balance Sheet Data
(in millions)
<TABLE>
<CAPTION>
As of December 31,
As of ---------------------------------------
September 30, 1999 1998 1997 1996 1995 1994
------------------ ------- ------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Total assets............ $24,268 $23,613 $28,289 $28,834 $28,991 $28,274
Total long-term debt,
net of current
portion................ $ 6,142 $ 3,813 $ 7,423 $ 9,856 $10,712 $10,402
Shareholders' equity.... $10,918 $12,050 $13,384 $12,587 $12,094 $11,792
</TABLE>
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CBS Summary Historical Financial Data
The selected consolidated historical financial data presented below have
been derived from, and should be read together with, the CBS audited
consolidated financial statements and the accompanying notes included in CBS'
Annual Report on Form 10-K for the year ended December 31, 1998 and the
unaudited interim consolidated financial statements and the accompanying notes
included in CBS' quarterly report on Form 10-Q for the nine months ended
September 30, 1999, which are incorporated by reference in this joint proxy
statement/ prospectus. The historical financial data presented below include
the results of CBS Radio Inc., formerly American Radio Systems Corporation,
after its acquisition by CBS on June 4, 1998, the results of The Nashville
Network and Country Music Television, Gaylord Entertainment Company's two major
cable networks, after their acquisition by CBS on September 30, 1997, the
results of Infinity Media Corporation, formerly known as Infinity Broadcasting
Corporation, after its acquisition by CBS on December 31, 1996 and the results
of CBS Inc. after its acquisition by CBS, formerly Westinghouse Electric
Corporation, on November 24, 1995.
Statement of Operations Data
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Year Ended December 31,
-------------------- -------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- ------ ------ ------ ------ -----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 5,154 $ 5,014 $6,805 $5,367 $4,143 $1,074 $ 744
Operating profit........ 658 365 482 253 54 160 151
Interest expense........ (143) (272) (370) (386) (401) (184) (26)
Income (loss) from
Continuing Operations
before income taxes,
minority interest and
equity losses of
unconsolidated
affiliated companies... 519 122 155 (59) (292) 128 (6)
Income tax (expense)
benefit................ (302) (134) (161) (73) 71 (75) 1
Income (loss) from
Continuing Operations.. 138 (15) (12) (131) (221) 47 (10)
Income (loss) from
Discontinued
Operations............. 396 -- -- 680 409 (57) 58
Extraordinary item, net
of income taxes........ (5) (5) (9) -- (93) -- --
Net income (loss)....... 529 (20) (21) 549 95 (10) 48
Basic earnings (loss)
per common share:
Continuing Operations.. $ .20 $ (.02) $ (.02) $ (.24) $ (.67) $ (.09) $(.27)
Discontinued
Operations............ .57 -- -- 1.08 1.02 (.16) .16
Extraordinary item..... (.01) (.01) (.01) -- (.23) -- --
--------- --------- ------ ------ ------ ------ -----
Basic earnings (loss)
per common share....... $ .76 $ (.03) $ (.03) $ .84 $ .12 $ (.25) $(.11)
========= ========= ====== ====== ====== ====== =====
Diluted earnings (loss)
per common share:
Continuing Operations.. $ .19 $ (.02) $ (.02) $ (.24) $ (.67) $ (.09) $(.27)
Discontinued
Operations............ .56 -- -- 1.08 1.02 (.16) .16
Extraordinary item..... (.01) (.01) (.01) -- (.23) -- --
--------- --------- ------ ------ ------ ------ -----
Diluted earnings (loss)
per common share....... $ .74 $ (.03) $ (.03) $ .84 $ .12 $ (.25) $(.11)
========= ========= ====== ====== ====== ====== =====
Dividends per common
share.................. $ -- $ .05 $ .05 $ .20 $ .20 $ .20 $ .20
========= ========= ====== ====== ====== ====== =====
</TABLE>
12
<PAGE>
Balance Sheet Data
(in millions)
<TABLE>
<CAPTION>
As of As of December 31,
September 30, ---------------------------------------
1999 1998 1997 1996 1995 1994
------------- ------- ------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Total assets--Continuing
Operations............. $20,723 $20,139 $16,503 $15,406 $10,391 $ 2,524
Total assets--
Discontinued
Operations............. 811 1,919 4,101 5,710 8,157 9,273
------- ------- ------- ------- ------- -------
Total assets............ $21,534 $22,058 $20,604 $21,116 $18,548 $11,797
======= ======= ======= ======= ======= =======
Long-term debt--
Continuing Operations.. $ 2,346 $ 2,506 $ 3,236 $ 5,147 $ 7,222 $ 1,865
Long-term debt--
Discontinued
Operations............. 407 382 440 419 161 589
------- ------- ------- ------- ------- -------
Total long-term debt.... $ 2,753 $ 2,888 $ 3,676 $ 5,566 $ 7,383 $ 2,454
======= ======= ======= ======= ======= =======
Total debt--Continuing
Operations............. $ 2,352 $ 2,665 $ 3,387 $ 5,635 $ 7,840 $ 2,471
Total debt--Discontinued
Operations............. 418 428 543 439 528 1,266
------- ------- ------- ------- ------- -------
Total debt.............. $ 2,770 $ 3,093 $ 3,930 $ 6,074 $ 8,368 $ 3,737
======= ======= ======= ======= ======= =======
Shareholders' equity.... $ 9,630 $ 9,054 $ 8,080 $ 5,731 $ 1,453 $ 1,789
======= ======= ======= ======= ======= =======
</TABLE>
13
<PAGE>
Summary Unaudited Viacom/CBS Pro Forma Combined Financial Information
The following summary unaudited pro forma combined financial information is
derived from and should be read together with the information provided in the
section, "Unaudited Viacom/CBS Pro Forma Combined Condensed Financial
Information" and the notes thereto. The summary unaudited pro forma combined
financial information is based upon the historical financial statements of
Viacom, adjusted for the initial public offering of Blockbuster and other
related transactions, and the historical financial statements of CBS, adjusted
for the acquisitions of American Radio and King World and the pending
acquisition of Outdoor Systems, Inc. The acquisition of King World by CBS was
completed on November 15, 1999. The unaudited pro forma combined condensed
statement of operations data for the nine months ended September 30, 1999 and
the year ended December 31, 1998 is presented as if the merger of Viacom and
CBS and all other aforementioned transactions had occurred on January 1, 1998.
The unaudited pro forma combined balance sheet data at September 30, 1999 is
presented as if the merger of Viacom and CBS and all other aforementioned
transactions had occurred on September 30, 1999.
The summary unaudited pro forma combined financial data is for illustrative
purposes only and does not necessarily indicate the operating results or
financial position that would have been achieved had the merger of Viacom and
CBS and all other aforementioned transactions been completed as of the dates
indicated or of the results that may be obtained in the future. In addition,
the data does not reflect synergies that might be achieved from combining these
operations.
Unaudited Pro Forma Combined Statement of Operations Data
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Revenues................................. $15,583 $20,457
Operating income......................... $ 1,171 $ 695
Earnings (loss) from continuing
operations before income taxes.......... $ 594 $ (369)
Loss from continuing operations.......... $ (200) $ (776)
Net loss from continuing operations
attributable to common stock............ $ (213) $ (803)
Basic and diluted loss from continuing
operations per share.................... $ (.14) $ (.53)
Weighted average shares outstanding:
Basic.................................. 1,507 1,521
Diluted................................ 1,507 1,521
</TABLE>
Unaudited Pro Forma Combined Balance Sheet Data
(in millions)
<TABLE>
<CAPTION>
At September 30, 1999
---------------------
<S> <C>
Total assets.............................................. $78,871
Total long-term debt, net of current portion.............. $10,686
Shareholders' equity...................................... $47,895
</TABLE>
14
<PAGE>
Unaudited Viacom/CBS Comparative Per Share Data
The following tables present the Viacom and CBS historical and pro forma
combined and CBS pro forma equivalent comparative per share data for the nine
months ended or at September 30, 1999 and the twelve months ended or at
December 31, 1998.
<TABLE>
<CAPTION>
Pro Forma Combined as CBS
Nine Months Ended Viacom Adjusted for Other Pro Forma
or at September 30, 1999 Historical CBS Historical Viacom Events Equivalent(/3/)
- ------------------------ ---------- -------------- --------------------- ---------------
<S> <C> <C> <C> <C>
Earnings (loss) per
common share from
continuing
operations(/1/):
Basic................. $ .33 $ .20 $ (.14) $ (.15)
Diluted............... .32 .19 (.14) (.15)
Book value per common
share(/2/):
Basic................. $15.67 $13.93 $31.74 $34.44
Diluted............... 15.40 13.60 31.49 34.17
Cash dividends per
common share........... -- -- -- --
<CAPTION>
Pro Forma Combined as CBS
Twelve Months Ended Viacom Adjusted for Other Pro Forma
or at December 31, 1998 Historical CBS Historical Viacom Events Equivalent(/3/)
- ----------------------- ---------- -------------- --------------------- ---------------
<S> <C> <C> <C> <C>
Earnings (loss) per
common share from
continuing
operations(/1/):
Basic................. $ (.10) $ (.02) $ (.53) $ (.57)
Diluted............... (.10) (.02) (.53) (.57)
Book value per common
share(/2/):
Basic................. $17.34 $13.12 $32.09 $34.82
Diluted............... 17.07 12.85 31.86 34.57
Cash dividends per
common share........... -- $ .05 -- --
</TABLE>
- --------
(/1/) The weighted average common shares outstanding used in calculating pro
forma combined basic and diluted earnings (loss) from continuing
operations per common share, as adjusted for all transactions, are
calculated assuming that the estimated number of shares of Viacom common
stock to be issued in the merger were outstanding from January 1, 1998.
For both periods presented, the weighted average common shares
outstanding used in calculating pro forma combined diluted earnings
(loss) from continuing operations per common share do not include the
impact of Viacom stock options, as they are antidilutive.
(/2/) The book value per common share amounts of Viacom and CBS were calculated
by dividing shareholders' equity by the number of common shares
outstanding at the end of the period. The common shares outstanding used
in calculating basic pro forma combined book value per share include
approximately 697 million and approximately 695 million of Viacom common
shares outstanding at September 30, 1999 and December 31, 1998,
respectively, plus approximately 812 million shares representing the
estimated number of common shares to be issued in the merger. (See Note 2
to the Unaudited Viacom/CBS Pro Forma Combined Condensed Financial
Statements.) The common shares outstanding used in calculating diluted
pro forma combined book value per common share as of September 30, 1999
and December 31, 1998 include the Viacom common shares, plus the
estimated number of common shares to be issued in the merger, as well as
the dilutive impact of Viacom options to purchase shares of common stock,
and totaled approximately 1.5 billion for both periods.
(/3/) CBS pro forma equivalent amounts are calculated by multiplying the
respective pro forma combined per common share amounts by the exchange
ratio of 1.085.
15
<PAGE>
Comparative Market Prices and Dividends
Viacom Class A common stock and Class B common stock are listed and traded
on the NYSE under the symbols "VIA" and "VIA.B," respectively. CBS common stock
is listed and traded on the NYSE under the symbol "CBS."
On February 25, 1999, the Board of Directors of Viacom declared a 2-for-1
common stock split, to be effected in the form of a dividend. The additional
shares were issued on March 31, 1999 to shareholders of record on March 15,
1999. All common share and per share amounts have been adjusted to reflect the
stock split for all periods presented.
The following tables set forth, for the calendar periods indicated, the per
share range of high and low sales prices for Viacom Class A common stock,
Viacom non-voting Class B common stock and CBS common stock as reported on the
NYSE or by the American Stock Exchange, together with the dividend declaration
history of Viacom and CBS. Only shares of Viacom non-voting Class B common
stock will be issued to shareholders of CBS in the merger in exchange for their
shares of CBS common stock.
<TABLE>
<CAPTION>
Viacom Class A Viacom Class B
Common Stock(/1/) Common Stock(/1/)
------------------ ------------------
High Low High Low
--------- -------- --------- --------
<S> <C> <C> <C> <C>
1997
1st Quarter........................ $18 9/16 $16 $18 15/16 $16
2nd Quarter........................ 17 23/32 12 5/8 18 12 5/8
3rd Quarter........................ 17 3/8 13 3/4 17 9/16 13 5/8
4th Quarter........................ 20 7/8 13 21 1/8 13 1/4
1998
1st Quarter........................ $27 1/8 $19 15/16 $27 17/32 $20 1/4
2nd Quarter........................ 30 1/2 26 1/8 30 5/8 26 13/32
3rd Quarter........................ 34 11/16 24 5/8 35 24 3/4
4th Quarter........................ 36 29/32 25 7/16 37 1/8 25 163/512
1999
1st Quarter........................ $45 1/2 $35 5/16 $45 15/16 $35 3/8
2nd Quarter(/2/)................... 48 3/4 36 11/16 49 3/16 36 5/8
3rd Quarter........................ 49 5/8 38 7/16 48 3/4 38 9/16
4th Quarter (through November 23,
1999)............................. 54 1/4 40 5/16 53 15/16 39 13/16
</TABLE>
- --------
(/1/) Viacom has not declared cash dividends on its Class A or Class B common
stock and has no present intention of doing so.
(/2/) As of April 8, 1999, Viacom Class A and Class B common stock ceased
trading on the American Stock Exchange and commenced trading on the NYSE.
16
<PAGE>
<TABLE>
<CAPTION>
CBS Common Stock
----------------------------------
Dividends
High Low per Share(/1/)
---- ---- --------------
<S> <C> <C> <C>
1997
1st Quarter............................... $20 3/8 $16 3/4 $.05
2nd Quarter............................... 23 13/16 16 .05
3rd Quarter............................... 27 15/16 22 3/4 .05
4th Quarter............................... 32 1/16 23 3/8 .05
1998
1st Quarter............................... $34 3/16 $26 3/4 $.05
2nd Quarter............................... 36 5/8 29 11/16 --
3rd Quarter............................... 35 1/2 21 7/8 --
4th Quarter............................... 33 1/8 18 --
1999
1st Quarter............................... $41 5/8 $31 11/16 --
2nd Quarter............................... 47 5/16 39 3/16 --
3rd Quarter............................... 51 15/16 43 5/8 --
4th Quarter (through November 23, 1999)... 55 1/8 43 3/16 --
</TABLE>
- --------
(/1/) CBS suspended payments of dividends after it commenced its stock buy-back
program in March 1998.
On September 3, 1999, the last trading day prior to the announcement of the
execution of the merger agreement, the last reported closing sale prices per
share of Viacom Class A common stock and Class B common stock were $45 5/16 and
$45 1/16, respectively, and the last reported sale price per share of CBS
common stock was $48 15/16. On November 23, 1999, the last trading day prior to
the printing of this joint proxy statement/prospectus, the last reported sale
prices per share of Viacom Class A common stock and Class B common stock were
$51 15/16 and $51 11/16, respectively, and the last reported sale price per
share of CBS common stock was $53 5/8.
The market prices of shares of Viacom Class A common stock, Viacom Class B
common stock and CBS common stock are subject to fluctuations. As a result,
Viacom and CBS shareholders are urged to obtain current market quotations.
At the close of business on each company's record date, there were
approximately 9,136 holders of record of Viacom Class A common stock,
approximately 18,186 holders of record of Viacom Class B common stock,
approximately 103,135 holders of record of CBS common stock and one holder of
record of CBS Series B preferred stock.
17
<PAGE>
RISK FACTORS
You should consider the following risks in deciding whether to adopt the
merger agreement and approve the related proposals. These matters should be
considered along with the other information included or incorporated by
reference in this joint proxy statement/prospectus. We have separated the risks
into two groups:
. risks relating to the merger; and
. risks relating to the combined company.
Risks Relating to the Merger
Fixed Exchange Ratio May Result in Lower Value of Merger Consideration
Upon completion of the merger, each share of CBS common stock will be
exchanged for 1.085 shares of Viacom non-voting Class B common stock and each
share of CBS Series B preferred stock will be exchanged for 1.085 shares of
Viacom Series C preferred stock, which are convertible into Viacom non-voting
Class B common stock. These exchange ratios are fixed and will not be adjusted
as a result of any increase or decrease in the price of either Viacom non-
voting Class B common stock or CBS common stock. Any change in the price of
Viacom non-voting Class B common stock will affect the value the CBS
shareholders receive in the merger. In addition, because the merger will be
completed only after all the conditions to the merger are satisfied or waived,
including the receipt of regulatory approvals, there is no way to be sure that
the price of Viacom non-voting Class B common stock or CBS common stock at the
time the merger is completed will be the same as their prices on the date of
the special meeting and the end of the consent solicitation period. Changes in
the business, operations or prospects of Viacom or CBS, regulatory
considerations, general market and economic conditions and other factors may
affect the prices of Viacom non-voting Class B common stock, CBS common stock
or both. Many of those factors are beyond our control. You are encouraged to
obtain current market quotations for both Viacom non-voting Class B common
stock and CBS common stock.
The Merger Is Subject to Review and Approval by the Federal Communications
Commission Which May Delay the Completion of the Merger and/or Lessen the
Anticipated Benefits of the Merger
Approval by the FCC is required for the transfer of control to Viacom of the
television and radio station licenses currently held by CBS. An application was
filed on November 16, 1999 requesting such approval of the transfer of control
to Viacom. This application is subject to public comment. FCC approval will be
predicated, in part, on the effectiveness of new FCC rules permitting a single
company to hold two television stations in a single market and upon the
effectiveness of modifications to the former "one-to-a-market" rule, now called
the "radio-television cross-ownership" rule, which governs the degree of common
ownership of television and radio stations in one market. In addition, the
combined company may be required under current law to divest some of its
broadcasting assets in order to receive FCC approval.
In order to consummate the merger on an orderly and timely basis, Viacom and
CBS have requested deferred enforcement of applicable FCC rules. There can be
no assurance that such requests for deferred enforcement will be granted or
other relief obtained or that consummation of the merger will not be delayed
pending receipt of FCC approval of the merger. Further, there can be no
assurance that no action will be brought challenging such approvals or actions,
or, if such challenge is made, as to the result thereof. See "Federal
Regulation of Television and Radio Broadcasting."
Antitrust Regulatory Agencies May Oppose or Impose Conditions on the Merger
Which May Delay the Completion of the Merger and/or Lessen the Anticipated
Benefits of the Merger
Viacom and CBS have filed Premerger Notification and Report Forms with the
Antitrust Division of the Department of Justice and the Federal Trade
Commission and are providing additional information in response to a request
made by the Department of Justice, which has been assigned to review the
merger. A 20 calendar day waiting period must expire or terminate following the
provision of additional information before the merger
18
<PAGE>
may be completed. We do not know whether the federal antitrust authorities will
permit the HSR Act waiting period to expire without challenging the merger. We
also do not know whether a third party will challenge the merger on antitrust
grounds or what the result of a third party challenge might be.
In addition, it is possible that one or more individual states could
investigate and challenge the merger under either federal law or their own
state law, although states have no notification and waiting period
requirements. Depending on the nature of any of these challenges, and any
conditions imposed as a result, these challenges and conditions could delay
completion of the merger or lessen the anticipated benefits of the merger.
The merger agreement requires the parties to use their respective best
efforts, and to take all actions necessary, to satisfy the conditions to the
merger, and to do so in a manner designed to obtain all regulatory clearances
and the satisfaction of the conditions as expeditiously as possible. This
includes agreeing to the sale or other disposition of assets or businesses and
taking all steps necessary to vacate or lift any order, judgment or injunction
that would prohibit or materially delay consummation of the merger.
Mr. Redstone, Chairman and Chief Executive Officer of Viacom, Will Be the
Controlling Shareholder and May Therefore Determine the Outcome of Most
Shareholder Votes
Immediately after completion of the merger, National Amusements, which is
controlled by Mr. Redstone, will own approximately 68% of the voting stock of
the combined company. The former CBS holders of common stock will hold only
Viacom non-voting Class B common stock and the former holders of CBS Series B
preferred stock will hold only Viacom Series C preferred stock. Mr. Redstone,
through his control of National Amusements, and not the former CBS
shareholders, will be able to determine the outcome of all corporate actions
requiring shareholder approval except actions that under Delaware law require a
class vote of the Viacom Class B common stock or Viacom Series C preferred
stock. However, in connection with the merger, National Amusements has entered
into a stockholder agreement pursuant to which it has agreed for a three-year
period to ensure, among other things, that eight of the 18 members of the Board
of Directors of the combined company will be directors of CBS or replacements
they may designate. In addition, the proposed new Restated Certificate of
Incorporation of Viacom, which will become effective at the time of the merger,
will provide that Board action will require the approval of 14 of the 18
directors of the combined company, except for a number of areas where the
directors of the combined company may act by a majority vote of the Board. Such
arrangements will be in place for a three-year period unless 14 of 18 directors
determine to modify these arrangements or Mr. Karmazin is not the COO or the
CEO of the combined company. For a more detailed discussion of the corporate
governance of the combined company, see "The Merger--Directors, Management and
Corporate Governance of the Combined Company."
The Combined Company's Corporate Governance Structure Will Be Unusual and May
Not be a Successful Model for Managing the Combined Company
This structure is unusual because, compared to other large U.S.
corporations, the Chief Operating Officer will have more autonomy and this
autonomy cannot easily be limited, even if a majority of the Board disagrees
with the COO. In the merger agreement, CBS and Viacom have agreed to a variety
of unusual corporate governance arrangements that will differ significantly
from the manner in which the two companies are currently managed. There can be
no assurance that these arrangements will prove to be a successful model for
managing the combined company. For a detailed description of the corporate
governance arrangements, see "The Merger--Directors, Management and Corporate
Governance of the Combined Company."
The Split-off of Blockbuster from Viacom May Not Occur, Which May Hinder the
Operations of Viacom's Different Businesses
Viacom has announced that, subject to Viacom Board approval, which will be
based on an assessment of market conditions, and the receipt of a supplemental
tax ruling from the Internal Revenue Service reflecting the proposed merger
between Viacom and CBS, it intends to split-off Blockbuster by offering to
exchange all of its
19
<PAGE>
shares of Blockbuster for shares of Viacom's common stock. The split-off is
intended to establish Blockbuster as a stand-alone entity with objectives
separate from those of Viacom's other businesses. Viacom believes that the
split-off will resolve management, systemic, competitive and other problems
that have arisen from the operation of various different businesses under a
common parent corporation. For example, the split-off will resolve perceived
conflicts of interest between Blockbuster and Paramount. These conflicts are
perceived both by the movie studio competitors of Paramount and the video
retail competitors of Blockbuster. In addition, Viacom believes the split-off
will allow Blockbuster to facilitate the expansion of Blockbuster's business by
issuing its stock to make acquisitions. The split-off will also allow
Blockbuster to modify its compensation structure to provide incentives to its
employees that are more closely linked to its performance. Viacom has no
obligation to effect the split-off either before or after the merger. Viacom
and CBS cannot give any assurance as to whether or not or when the split-off
will occur or as to the terms of the split-off if it does occur, or whether or
not the split-off, if it does occur, will be tax-free.
Viacom May Incur a Significant Loss Resulting from the Split-off of Blockbuster
If the split-off of Blockbuster occurs, any difference between the fair
market value and net book value of Blockbuster at the time of the split-off
will be recognized as a gain or loss for accounting purposes. Based on the
November 19, 1999 closing price of Blockbuster common stock, a split-off would
have resulted in a pre-tax pro forma loss from discontinued operations of
approximately $2.9 billion.
Potentially Significant Increases in Depreciation and Amortization Expense May
Result from Amortization Periods Which Are Shorter than Preliminary Estimates
Reflected in the Pro Forma Financial Statements Which Would Cause Net Earnings
to Decrease
Pro forma results of operations reflect adjustments, which are based upon
preliminary estimates, to reflect the allocation of purchase consideration to
the acquired assets and liabilities of CBS. The final allocation of the
purchase consideration will be determined after the completion of the
Viacom/CBS merger and will be based on appraisals and a comprehensive final
evaluation of the fair value of CBS' tangible assets acquired, liabilities
assumed, identifiable intangible assets and goodwill at the time of the merger.
Accordingly, the final determination of tangible and intangible assets may
result in depreciation and amortization expense that is significantly higher
than the preliminary estimates of these amounts, which would cause net earnings
to be lower. See note 3 of Notes to unaudited Viacom/CBS pro forma combined
condensed financial statements.
Risks Relating to the Combined Company
Competitive Developments and Technologies May Adversely Affect the Combined
Company's Future Market Share of Entertainment Audiences and Customers, Which
in Turn May Affect the Combined Company's Advertising Revenues and
Profitability
Film and Television Production. The television and motion picture industry
has experienced cycles in which increased costs of talent and other factors
have resulted in higher production costs and increased competition. In
addition, television and movie producers are indirectly affected by changes in
viewership of broadcast and cable networks, the amount of broadcast time
available on local stations for syndicated television programs and, for movies,
the relative success of different forms of distribution, such as home video,
pay television and network television, each of which have different
profitability to producers. There can be no assurance that developments in
these areas will not adversely affect the profitability of the combined
company.
Television and Cable Television Networks. The combined company will directly
compete for viewers in general, as well as for viewers in specific demographic
categories, and for programming with other cable and broadcast television
networks. The recently expanded availability of digital cable television and
the introduction of direct-to-home satellite distribution has greatly increased
the amount of channel capacity available for new networks, resulting in the
launch of a number of new cable television networks by both our companies and
20
<PAGE>
their competitors. In addition, digital broadcast television, which has
recently become available in major markets, may allow a single television
station to broadcast several channels simultaneously. Increasing audience
fragmentation could have an adverse effect on advertising revenue and
subscription revenues. Broadcast television has experienced a decline in total
audience viewership in recent years. Among the major networks, CBS delivers an
audience that has an older demographic. An older demographic may result in
lower revenue for an advertising spot. There can be no assurance that this
audience decline will not continue or that CBS network programming will appeal
to an audience having a younger demographic.
Television and Radio Broadcast Stations. New technologies, such as digital
radio services, direct-to-home satellite, wireless and wired cable television
and Internet radio and video programming, compete for programming, audiences
and advertising revenues. Each of these technologies are different from
traditional broadcasting and there can be no assurance that these or other new
technologies will not have an adverse effect on the combined company's business
in the future.
Video. Videocassette rental competes with other forms of distribution of
movies, including theatrical distribution, cable, satellite and broadcast
television. In particular, direct broadcast satellite and digital cable
providers who are able to offer an expanded number of channels and expanded
programming could have a material adverse effect on the business if these
services become more widely available and accepted by consumers. In addition,
some digital cable providers have begun testing technology designed to transmit
movies on demand with interactive capabilities such as start, stop and rewind.
This "video-on-demand" technology could have a material adverse effect on the
videocassette rental market if it could be provided profitably at a reasonable
price and if video-on-demand rights were to be provided with a favorable window
by the movie studios. Movie studios make available videocassettes for rental
during a distribution "window" of time which is in advance of, and exclusive
against, distribution through most other forms of non-theatrical movie
distribution. Although the studios have a significant interest in maintaining a
viable home video rental industry, changes in the videocassette exclusive
window in relation to other windows could have an adverse effect upon the video
rental business. In addition, if the revenue-sharing agreements pursuant to
which video rental revenues are shared with the studios are materially
adversely changed or discontinued, it will have a material adverse effect upon
the video rental business.
Internet. While the amount of advertising on the Internet is currently
small, the Internet is a rapidly growing competitor for advertising spending
and viewership, the full impact of which cannot be predicted.
Expenditures by Advertisers Tend to Be Cyclical and Dependent on the Economic
Prospects of Advertisers and the Economy in General Which Could Cause Revenues
of the Combined Company from Advertisements to Decline Significantly in any
Given Period Generally or in Specific Markets
The combined company will derive a substantial portion of its revenues from
the sale of advertising on its television stations, cable networks, radio
stations and outdoor displays. Expenditures by advertisers tend to be cyclical,
reflecting overall economic conditions as well as budgeting and buying
patterns. A decline in the economic prospects of advertisers or the economy in
general could alter current or prospective advertisers' spending priorities or
increase the time it takes to close a sale with our advertisers. This could
cause revenues of the combined company from advertisements to decline
significantly in any given period. In addition, because a substantial portion
of the combined company's revenues will be derived from local advertisers, the
combined company's ability to generate advertising revenues in specific markets
could be adversely affected by local or regional economic downturns.
Acceptance of the Combined Company's Programming by the Public is Difficult to
Predict, Which Could Lead to Fluctuations in Revenues
Revenues derived from the production and distribution of a feature film,
television series or radio show depend primarily upon its acceptance by the
public, which is difficult to predict. The commercial success of a feature
film, television series or radio show also depends upon the quality and
acceptance of other competing
21
<PAGE>
films, television series or radio shows released into the marketplace at or
near the same time, the availability of alternative forms of entertainment and
leisure time activities, general economic conditions and other tangible and
intangible factors, all of which can change and cannot be predicted with
certainty. Further, the theatrical success of a feature film and the audience
ratings for a television series are generally key factors in generating
revenues from other distribution channels, such as home video, free television
and premium pay television.
The Combined Company's Revenues are Dependent upon the Maintenance of
Affiliation Agreements
Much of the combined company's broadcast network programming will be
provided to its broadcast affiliates pursuant to affiliation agreements which
are generally long-term agreements with staggered expirations. The combined
company will be dependent upon the maintenance of affiliation agreements with
third-party owned television stations, and there can be no assurance that such
affiliation agreements will be renewed in the future on terms acceptable to the
combined company. The loss of a significant number of such affiliation
arrangements could reduce the distribution of the combined company's
programming, thereby adversely affecting the combined company's ability to sell
national advertising time.
Similarly, the basic cable networks in which the combined company will hold
interests, including MTV, VH1, Nickelodeon, The Nashville Network, Country
Music Television and other cable networks maintain affiliation arrangements
that enable them to reach a large percentage of cable and direct broadcast
satellite households across the United States. These arrangements are generally
long-term arrangements with staggered expirations. Such cable networks also
depend on achieving and maintaining carriage within the most widely distributed
cable programming tiers to maximize their subscriber base and revenues. The
loss of a significant number of affiliation arrangements on basic programming
tiers could reduce the distribution of such cable networks, thereby adversely
affecting such networks' revenues from subscriber fees and the ability to sell
advertising time. The combined company's non-advertiser supported pay
television networks, such as Showtime, are similarly dependent for their
distribution on the maintenance of affiliation agreements with cable and direct
broadcast satellite distributors on acceptable terms. The loss of carriage on
cable systems or direct broadcast satellite platforms, or continued carriage on
less favorable terms, could adversely affect such networks' subscriber fee
revenues.
Changes in Federal Communications Laws and Regulations May Have an Adverse
Effect on the Combined Company's Business
The television and radio broadcasting industries are subject to regulation
by the FCC under the Communications Act of 1934. The FCC generally regulates,
among other things, the ownership of media, including ownership by non-U.S.
citizens, broadcast programming and technical operations. Further, the U.S.
Congress and the FCC currently have under consideration, and may in the future
adopt, new laws, regulations and policies regarding a wide variety of matters,
including technological changes, which could, directly or indirectly, affect
the operations and ownership of the combined company's broadcast properties.
The Combined Company Has Environmental, Asbestos and Other Contingent
Liabilities That Could Have a Significant Impact on the Combined Company
Primarily as a result of Viacom's mergers with Paramount Communications,
formerly Gulf & Western and Blockbuster, which owned a controlling interest in
Spelling Entertainment Group Inc., formerly the Charter Company, in 1994 and
the operations of Westinghouse Electric Corporation which merged with CBS Inc.
in 1995, the combined company will have significant environmental liabilities.
Both Paramount and Westinghouse were diversified, global companies with
portfolios including a wide variety of industrial businesses. The Charter
Company was in various businesses related to petroleum products. As a result,
Viacom and CBS have contingent liabilities related to discontinued operations,
including environmental liabilities, and have in some instances indemnified
others against those liabilities, and in other instances have received
indemnities from third parties for those liabilities.
Under federal and state Superfund and other environmental laws, Viacom and
CBS each have been named as a potentially responsible party at numerous sites
located throughout the country. At many of these sites,
22
<PAGE>
Viacom and CBS are either not responsible parties or their site involvement is
very limited or de minimis. However, Viacom or CBS, as the case may be, may
have varying degrees of cleanup responsibilities at a number of sites. Viacom
and CBS believe that any liability incurred for cleanup at these sites will be
satisfied over a number of years, and in many cases, the costs will be shared
with other potentially responsible parties. These sites include locations for
which Viacom or CBS, as the case may be, as part of an agreement for sale, may
have retained obligations for remediation of possible environmental
contamination or may have continuing obligations under applicable environmental
laws.
In addition, CBS and Viacom are parties to various lawsuits and have
received claims relating to their continuing and discontinued operations. Some
of these lawsuits and claims, including those related to asbestos liabilities,
seek substantial monetary damages.
The combined company will have access to insurance in substantial amounts
and management believes it has sufficient reserves. Accordingly, while there
can be no assurance in this regard, the pending or potential litigation,
environmental and other liabilities should not have a material adverse effect
on the financial condition of the combined company.
23
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This document and the documents incorporated by reference into this joint
proxy statement/prospectus contain both historical and forward-looking
statements. All statements other than statements of historical fact are, or may
be deemed to be, forward-looking statements within the meaning of section 27A
of the Securities Act of 1933 and section 21E of the Securities Exchange Act of
1934. These forward-looking statements are not based on historical facts, but
rather reflect Viacom's and CBS' current expectations concerning future results
and events. These forward-looking statements generally can be identified by use
of statements that include phrases such as "believe," "expect," "anticipate,"
"intend," "plan," "foresee," "likely," "will" or other similar words or
phrases. Similarly, statements that describe our objectives, plans or goals are
or may be forward-looking statements. These forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of Viacom or CBS to be different
from any future results, performance and achievements expressed or implied by
these statements. You should review carefully all information, including the
financial statements and the notes to the financial statements, included or
incorporated by reference into this joint proxy statement/prospectus.
In addition to the risk factors described in the previous section, the
following important factors could affect future results, causing these results
to differ materially from those expressed in our forward-looking statements:
. the timing, impact and other uncertainties related to pending
acquisitions by CBS or Viacom and future acquisitions and dispositions by
the combined company;
. the ability of the combined company to renew existing programming,
licensing and distribution agreements and to enter into new agreements;
. the success of CBS and Viacom and their suppliers and customers in
achieving year 2000 compliance;
. the impact of new technologies including the magnitude of equity losses
and other uncertainties related to CBS' Internet based investments;
. changes in tax requirements, including tax rate changes, new tax laws and
revised tax law interpretations; and
. interest rate fluctuations and other capital market conditions.
These factors and the risk factors described in the previous section are not
necessarily all of the important factors that could cause actual results to
differ materially from those expressed in any of our forward-looking
statements. Other unknown or unpredictable factors also could have material
adverse effects on our future results. The forward-looking statements included
in this joint proxy statement/prospectus are made only as of the date of this
joint proxy statement/prospectus and under section 27A of the Securities Act
and section 21E of the Exchange Act we do not have any obligation to publicly
update any forward-looking statements to reflect subsequent events or
circumstances. We cannot assure you that projected results or events will be
achieved.
24
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
Unaudited Viacom/CBS Pro Forma Combined Condensed Financial Information
General
The merger will be accounted for by the purchase method of accounting.
Consideration provided by Viacom in this merger includes: approximately $36.7
billion through the issuance of approximately 812 million shares of Viacom non-
voting Class B common stock plus, approximately $833 million of cash
consideration, net of approximately $556 million of deferred taxes, for the
assumed settlement of a portion of the historical CBS stock options and the
assumption of approximately $200 million of CBS stock options by Viacom, both
of which were granted prior to the date of the merger agreement, and
approximately $4.1 billion for the assumption of debt. This consideration will
be allocated to the tangible and identifiable intangible assets acquired and
liabilities assumed according to their respective fair values, with the excess
purchase consideration being allocated to goodwill. The merger is contingent
upon, among other things, regulatory and Viacom and CBS shareholder approval.
The following unaudited pro forma combined condensed balance sheet as of
September 30, 1999, is presented as if the merger and other CBS transactions
described in the notes to the unaudited Viacom/CBS and CBS/King World pro forma
combined condensed financial statements had occurred on September 30, 1999. The
unaudited pro forma combined condensed statements of operations for the nine
months ended September 30, 1999, and for the year ended December 31, 1998, are
presented as if the merger and the other Viacom and other CBS transactions had
occurred on January 1, 1998. In the opinion of Viacom and CBS management, all
adjustments and/or disclosures necessary for a fair presentation of the pro
forma data have been made. These unaudited pro forma combined condensed
financial statements are presented for illustrative purposes only and are not
necessarily indicative of the operating results or the financial position that
would have been achieved had the merger, or the other Viacom and other CBS
transactions had been consummated as of the dates indicated or of the results
that may be obtained in the future.
These unaudited pro forma combined condensed financial statements and notes
thereto should be read in conjunction with the unaudited CBS/King World pro
forma combined condensed financial information included herein, and:
. CBS' consolidated financial statements and the notes thereto as of and
for the year ended December 31, 1998, and Management's Discussion and
Analysis included in CBS' Annual Report on Form 10-K for the year ended
December 31, 1998, as amended by Form 10-K/A, which is incorporated by
reference in this joint proxy statement/prospectus;
. King World's consolidated financial statements and the notes thereto as
of August 31, 1999
and 1998 and for the three years ended August 31, 1999, which are
included in CBS' Current Report on Form 8-K filed on November 22, 1999
which is incorporated by reference in this joint proxy
statement/prospectus;
. CBS' Quarterly Reports on Form 10-Q for the quarterly periods ended March
31, 1999, as amended by Form 10-Q/A, June 30, 1999 and September 30, 1999
which are incorporated by reference in this joint proxy
statement/prospectus;
. Viacom's consolidated financial statements and the notes thereto as of
and for the year ended December 31, 1998, and Management's Discussion and
Analysis included in Viacom's Annual Report on Form 10-K for the year
ended December 31, 1998 which is incorporated by reference in this joint
proxy statement/prospectus; and
. Viacom's consolidated financial statements and the notes thereto as of
and for the nine-month period ended September 30, 1999, on Form 10-Q
which is incorporated by reference in this joint proxy
statement/prospectus.
25
<PAGE>
UNAUDITED VIACOM/CBS PRO FORMA
COMBINED CONDENSED BALANCE SHEET
As of September 30, 1999
(in millions)
<TABLE>
<CAPTION>
CBS Pro Forma
Viacom Pro Forma Pro Forma Combined
Historical Combined Adjustments Viacom/CBS
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents..... $ 674 $ 524 $ (474)(/3/) $ 724
Customer receivables, net..... 1,677 1,477 -- 3,154
Other current assets.......... 2,631 1,245 450 (/3/) 4,326
------- ------- ------- -------
Total current assets.......... 4,982 3,246 (24) 8,204
Property and equipment, net... 3,316 3,055 -- 6,371
Goodwill and other
intangibles, net............. 11,424 23,951 22,596 (/3/) 57,971
Other noncurrent assets....... 4,546 2,027 (340)(/3/) 6,325
92 (/3/)
------- ------- ------- -------
Total assets.................. $24,268 $32,279 $22,324 $78,871
======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Current portion of long-term
debt......................... $ 131 $ 189 $ -- $ 320
Accounts payable, accrued
expenses and other........... 4,054 2,078 (106)(/3/) 6,001
(25)(/3/)
------- ------- ------- -------
Total current liabilities..... 4,185 2,267 (131) 6,321
Long-term debt................ 6,142 3,904 575 (/3/) 10,686
65 (/3/)
Net liabilities of
discontinued operations...... -- 966 -- 966
Other noncurrent liabilities.. 1,924 4,581 8 (/3/) 6,513
------- ------- ------- -------
Total liabilities............. 12,251 11,718 517 24,486
------- ------- ------- -------
Minority interest in equity of
consolidated subsidiaries.... 1,099 5,391 -- 6,490
Shareholders' Equity:
Common Stock.................. 7 802 8 (/2/) 15
(802)(/3/)
Additional paid-in capital.... 10,260 14,759 36,725 (/2/) 47,408
200 (/2/)
223 (/3/)
(14,759)(/3/)
Common stock held in treasury,
at cost...................... (1,432) (1,683) 1,683 (/3/) (1,432)
Retained earnings............. 2,115 1,957 (1,957)(/3/) 1,936
(179)(/3/)
Accumulated other
comprehensive loss........... (32) (665) 665 (/3/) (32)
------- ------- ------- -------
Total shareholders' equity.... 10,918 15,170 21,807 47,895
------- ------- ------- -------
Total liabilities and
shareholders' equity......... $24,268 $32,279 $22,324 $78,871
======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited Viacom/CBS
pro forma combined condensed financial statements.
26
<PAGE>
UNAUDITED VIACOM/CBS PRO FORMA
COMBINED CONDENSED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1999
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Combined
CBS for Pro Forma Adjustments as Adjusted
Viacom Pro Forma Viacom/CBS Combined For Other For Other
Historical Combined Merger Viacom/CBS Viacom Events Viacom Events
---------- --------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $ 9,286 $ 6,297 $ -- $15,583 $-- $15,583
Operating expenses...... (6,007) (3,605) -- (9,612) -- (9,612)
Selling, general and
administrative......... (1,712) (1,009) -- (2,721) -- (2,721)
Depreciation and
amortization........... (616) (839) (424)(/3/) (1,879) -- (1,879)
Restructuring charge.... (70) -- -- (70) -- (70)
Residual costs of
discontinued
businesses............. -- (130) -- (130) -- (130)
------- ------- ------ ------- ---- -------
Operating income
(loss)................. 881 714 (424) 1,171 -- 1,171
Other income and
expense, net........... 3 5 -- 8 -- 8
Interest expense, net... (311) (217) (61)(/3/) (589) 4 (/4/) (585)
------- ------- ------ ------- ---- -------
Earnings (loss) from
continuing operations
before income taxes.... 573 502 (485) 590 4 594
Income tax (expense)
benefit................ (295) (393) 24 (/5/) (664) (2)(/5/) (666)
Equity in loss of
affiliated companies,
net of tax............. (38) (28) -- (66) -- (66)
Minority interest....... (1) (66) -- (67) 5 (/4/) (62)
------- ------- ------ ------- ---- -------
Earnings (loss) from
continuing operations.. 239 15 (461) (207) 7 (200)
Cumulative convertible
preferred stock
dividend requirement
and premium on
repurchase of preferred
stock.................. (13) -- -- (13) -- (13)
------- ------- ------ ------- ---- -------
Net earnings (loss) from
continuing operations
attributable to common
stock.................. $ 226 $ 15 $ (461) $ (220) $ 7 $ (213)
======= ======= ====== ======= ==== =======
Earnings (loss) from
continuing operations
per common share:
Basic.................. $ .33 $ (.15) $ (.14)
Diluted................ $ .32 $ (.15) $ (.14)
Weighted average shares
outstanding:
Basic.................. 695 812 (/2/) 1,507 1,507
Diluted................ 709 812 (/2/) 1,507 1,507
</TABLE>
See accompanying notes to unaudited Viacom/CBS
pro forma combined condensed financial statements.
27
<PAGE>
UNAUDITED VIACOM/CBS PRO FORMA
COMBINED CONDENSED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1998
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Combined
CBS for Pro Forma Adjustments as Adjusted
Viacom Pro Forma Viacom/CBS Combined For Other For Other
Historical Combined Merger Viacom/CBS Viacom Events Viacom Events
---------- --------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $12,096 $ 8,361 $ -- $ 20,457 $-- $ 20,457
Operating expenses...... (8,506) (5,242) -- (13,748) -- (13,748)
Selling, general and
administrative......... (2,061) (1,335) -- (3,396) -- (3,396)
Depreciation and
amortization........... (777) (1,113) (565)(/3/) (2,455) -- (2,455)
Residual costs of
discontinued
businesses............. -- (163) -- (163) -- (163)
------- ------- ----- -------- ---- --------
Operating income
(loss)................. 752 508 (565) 695 -- 695
Other income and
expense, net........... (57) 38 -- (19) -- (19)
Interest expense, net... (599) (363) (89)(/3/) (1,051) 6 (/4/) (1,045)
------- ------- ----- -------- ---- --------
Earnings (loss) from
continuing operations
before income taxes.... 96 183 (654) (375) 6 (369)
Income tax (expense)
benefit................ (139) (320) 36 (/5/) (423) (2)(/5/) (425)
Minority interest....... (1) (35) -- (36) 54 (/4/) 18
------- ------- ----- -------- ---- --------
Earnings (loss) from
continuing operations.. (44) (172) (618) (834) 58 (776)
Cumulative convertible
preferred stock
dividend requirement
and discount on
repurchase of preferred
stock.................. (27) -- -- (27) -- (27)
------- ------- ----- -------- ---- --------
Net earnings (loss) from
continuing operations
attributable to common
stock.................. $ (71) $ (172) $(618) $ (861) $ 58 $ (803)
======= ======= ===== ======== ==== ========
Loss from continuing
operations per common
share:
Basic.................. $(.10) $(.57) $(.53)
Diluted................ $(.10) $(.57) $(.53)
Weighted average shares
outstanding:
Basic.................. 709 812 1,521 1,521
Diluted................ 709 812 1,521 1,521
</TABLE>
See accompanying notes to unaudited Viacom/CBS
pro forma combined condensed financial statements.
28
<PAGE>
NOTES TO UNAUDITED VIACOM/CBS PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
(tables in millions, except per share amounts)
(1) Basis of Presentation
The purchase method of accounting has been used in the preparation of the
accompanying unaudited pro forma combined condensed financial statements. Under
this method of accounting, the purchase consideration is allocated to tangible
and identifiable intangible assets acquired and liabilities assumed based on
their respective fair values, with the excess purchase consideration being
allocated to goodwill. For purposes of the unaudited pro forma combined
condensed financial statements, the preliminary fair values of CBS' assets and
liabilities were estimated by CBS and Viacom management. The final allocation
of the purchase price will be determined after the completion of the merger and
will be based on appraisals and a comprehensive final evaluation of tangible
and identifiable intangible assets acquired (including their estimated useful
lives) and liabilities assumed.
(2) Consideration
Pursuant to the merger agreement, holders of CBS common stock will receive
1.085 shares of Viacom non-voting Class B common stock for each CBS share of
common stock issued and outstanding at the completion of the merger. The total
number of CBS shares issued and outstanding during the period subsequent to the
merger announcement but prior to its completion is not anticipated to fluctuate
from the ordinary course. For purposes of the unaudited pro forma combined
condensed financial statements, the $45.225 per share value of Viacom non-
voting Class B common stock to be issued was calculated based on its average
market price per share from September 2, 1999 through September 9, 1999.
<TABLE>
<S> <C>
Total estimated CBS common shares outstanding (including shares to be
issued to King World shareholders)................................... 748.6
Exchange Ratio........................................................ 1.085
-------
Estimated Viacom Class B common shares to be issued................... 812.2
=======
Purchase Consideration:
Estimated value of Viacom Class B common stock to be issued (812.2
shares at $45.225 per share):
Common stock, $.01 par value........................................ $ 8
Additional paid-in capital.......................................... 36,725
Estimated fair value of CBS stock options to be assumed by Viacom
(note 3)............................................................. 200
-------
Estimated net increase in Viacom equity............................... $36,933
=======
</TABLE>
29
<PAGE>
NOTES TO UNAUDITED VIACOM/CBS PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share amounts)
(3) Merger
To record the excess purchase price over the net tangible and identifiable
intangible assets acquired in connection with the merger as described in notes
1 and 2 above:
<TABLE>
<S> <C>
Estimated net increase in Viacom equity............................. $ 36,933
Less: Shareholders' equity of CBS Pro Forma Combined at September
30, 1999
Common stock...................................................... (802)
Additional paid-in capital........................................ (14,759)
Common stock held in treasury..................................... 1,683
Retained earnings/Accumulated other comprehensive loss............ (1,292)
Adjustments:
Add: Liability for conversion of CBS stock options, net of
deferred taxes................................................... 833
--------
Excess purchase price over net tangible and identifiable intangible
assets acquired.................................................... 22,596
Identifiable intangible assets acquired............................. 23,951
--------
Excess purchase price over net tangible assets acquired............. $ 46,547
========
Incremental amortization expense of excess purchase price over net
tangible and identifiable intangible assets acquired:
Twelve month amortization......................................... $ 565
========
Nine month amortization........................................... $ 424
========
</TABLE>
The above pro forma adjustments are based on preliminary estimates. The
final allocation of the purchase price will be determined after the completion
of the merger and will be based on appraisals and a comprehensive final
evaluation of the fair value of CBS' tangible and identifiable intangible
assets acquired and liabilities assumed at the time of the merger. For the
purpose of these unaudited pro forma combined condensed financial statements,
amortization of the excess purchase price over tangible net assets acquired of
approximately $46.5 billion is computed on a straight-line basis using useful
lives as follows: $37.5 billion (40 years), $6.6 billion (30 years) and $2.4
billion (10 years).
Generally accepted accounting principles currently require that acquired
intangible assets be amortized over periods not to exceed 40 years. Viacom
believes that the intangible assets acquired from CBS included in the 40-year
category are comprised principally of the franchises, FCC licenses, and
trademarks of CBS-assets with indefinite lives, which have historically
appreciated in value over time. In addition, Viacom intends to continue to
expand the combined company's existing lines of business, develop new
businesses by leveraging the well known franchises, trademarks and products of
Viacom and CBS, and take advantage of synergies that exist between Viacom and
CBS to further strengthen existing lines of business. Viacom believes that it
will benefit from the merger for an indeterminable period of time of at least
40 years and, therefore, a 40-year amortization period for the $37.5 billion
portion of the excess purchase consideration is appropriate. After the
completion of the merger, Viacom will complete valuations and other studies of
the significant assets, liabilities and business operations of CBS as of the
time of the merger. Using this information, Viacom will make a final allocation
of the purchase consideration, including allocation to tangible assets and
liabilities, identifiable intangible assets and goodwill. Accordingly,
depreciation and amortization, as presented in the pro forma combined condensed
statements of operations for the year and nine months ended December 31, 1998
and September 30, 1999, may fluctuate significantly from the preliminary
estimate when the final appraisals of tangible and intangible assets are
completed.
30
<PAGE>
NOTES TO UNAUDITED VIACOM/CBS PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share amounts)
The following table presents the incremental reduction to pro forma net
income (loss) from continuing operations attributable to common stock and pro
forma net income (loss) from continuing operations per common share resulting
from the allocation of each $1 billion of purchase consideration to assets with
useful lives of thirty, twenty, or ten years rather than the forty year life
reflected in the pro forma financial statements.
<TABLE>
<CAPTION>
30 years 20 years 10 years
-------- -------- --------
<S> <C> <C> <C>
Impact on pro forma net income (loss) from
continuing operations attributable to common
stock:
For the twelve month period...................... $ (8) $ (25) $ (75)
====== ====== ======
For the nine month period........................ $ (6) $ (19) $ (56)
====== ====== ======
Impact on pro forma net income (loss) from
continuing operations per common share:
For the year ended December 31, 1998............. $(0.01) $(0.02) $(0.05)
====== ====== ======
For the nine months ended September 30, 1999..... $ -- $(0.01) $(0.04)
====== ====== ======
</TABLE>
Limited rights to receive cash in lieu of Viacom options exist for the
majority of the historical CBS stock options outstanding prior to the
announcement of the merger. To reflect the liability associated with these
stock options, these unaudited pro forma combined condensed financial
statements assume that the options will be settled in cash for approximately
$1.4 billion. Accordingly, the issuance of long-term debt of $575 million and
adjustments to reflect the use of cash and investments, classified as other
noncurrent assets, of $474 million and $340 million, respectively, have been
recorded in the pro forma balance sheet to reflect the financing and funding of
such obligations at the effective time of the merger. In addition, related
interest expense of $58 million and $85 million for the nine months of 1999 and
the twelve months of 1998, respectively, have been recorded in the unaudited
pro forma combined condensed statements of operations. Deferred taxes have been
provided for on the respective book and tax basis differences at a 40 percent
marginal tax rate. Additional options with a fair value of $200 million either
do not contain these limited rights or are options related to underlying shares
which cannot be disposed of for some designated period of time, and, as such,
have been reflected as an adjustment to additional paid-in capital within
shareholders' equity.
Viacom has entered into agreements with the two Deputy Chairmen of Viacom
regarding the terms of their resignations upon the effective time of the
merger. Accordingly, the pro forma balance sheet includes a charge as a
reduction to retained earnings of $179 million, net of tax benefit of $119
million, which principally reflects the stock options granted to them over the
life of their employment with Viacom as well as cash payments in accordance
with their resignation agreements. The tax benefit assumes a 40 percent
marginal tax rate. The pro forma statement of operations includes a charge for
the incremental interest expense associated with the increase in long-term
debt.
(4) Other Viacom Events
On August 10, 1999, Blockbuster Inc., a subsidiary of Viacom, completed the
initial public offering of 31 million shares of its Class A common stock at $15
per share. Viacom owns 100% of the outstanding shares of Blockbuster Class B
common stock, which represents approximately 82.3% of Blockbuster's equity
value after the initial public offering. As a result of the issuance of
subsidiary stock, Viacom recorded a reduction to additional paid-in capital of
approximately $662 million.
31
<PAGE>
NOTES TO UNAUDITED VIACOM/CBS PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share amounts)
The net decrease in interest expense of $4 million and $6 million for the
nine months ended September 30, 1999 and the twelve months ended December 31,
1998, respectively, is attributable to the repayment of debt with the
Blockbuster initial public offering net proceeds of $437 million, partially
offset by the increase in interest expense due to the higher interest rate
attributable to the Blockbuster debt and the amortization of deferred debt
issue costs incurred in connection with the Blockbuster debt.
The adjustment to minority interest in the unaudited pro forma combined
condensed statements of operations reflects the interest in the net loss of
Blockbuster attributable to holders of Blockbuster's Class A Common Stock.
(5) Income Tax Expense
Income tax expense on the pro forma results of operations and the pro forma
adjustments, excluding non-deductible goodwill amortization, is calculated at a
40 percent marginal tax rate.
(6) Items not included in the Unaudited Pro Forma Combined Condensed Financial
Statements
The preceding unaudited pro forma combined condensed financial statements do
not include any pro forma adjustments for the following:
. Any operating efficiencies and cost savings that may be achieved with
respect to the combined companies.
. Upon closing of the merger, the combined companies may incur integration
related expenses as a result of the elimination of duplicate facilities
and functions, operational realignment and related workforce reductions.
Such CBS costs would generally be recognized as a liability assumed as of
the merger date resulting in additional goodwill while Viacom related
costs would be recognized as an expense through the statements of
operations.
. Transactions between Viacom and CBS, including transactions between
Viacom and companies proposed to be acquired by CBS, have not been
eliminated in the unaudited pro forma combined condensed financial
statements, as the amounts are not material for the periods presented.
. Transaction costs related to the merger are not expected to have a
material impact on these unaudited pro forma combined condensed financial
statements.
. In connection with the merger, some radio and television stations may
have to be divested in order to comply with current FCC regulations.
Also, Viacom may be required to reduce or divest its interest in the
United Paramount Network to comply with FCC rules limiting the common
ownership of some television networks. Generally, any gains or losses
associated with disposition of historical Viacom assets would be
recognized through the statements of operations while the gain or loss on
the disposition of historical CBS assets would likely be recognized as an
adjustment to goodwill.
. Viacom has announced that, subject to Viacom Board approval, which will
be based on an assessment of market conditions, and the receipt of a
supplemental tax ruling from the Internal Revenue Service reflecting the
merger, it intends to split off Blockbuster by offering to exchange all
of its shares of Blockbuster for shares of Viacom's common stock. The
aggregate market value of the shares of Blockbuster common stock based on
the November 19, 1999 closing price of $15.375 per share of Blockbuster
common stock was approximately $2.7 billion. The net book value of
Viacom's investment in Blockbuster at September 30, 1999, after giving
effect to the initial public offering, was approximately
32
<PAGE>
NOTES TO UNAUDITED VIACOM/CBS PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share amounts)
$5.1 billion. If Viacom determines to engage in the split-off, any
difference between the fair market value and net book value at the time of
the split-off will be recognized as a gain or loss for accounting
purposes. Based on the November 19, 1999 closing stock price of
Blockbuster, a split-off would have resulted in a pre-tax pro forma loss
on discontinued operations of approximately $2.9 billion. The actual
amount of the gain or loss will depend upon the fair market value and net
book value of Blockbuster at the time of the split-off as well as the
exchange ratio used in the split-off. In addition, in a tax-free split-
off, Viacom/CBS pro forma shareholders' equity will be reduced by an
amount no greater than the net book value of Blockbuster at the time of
the split-off. Viacom has no obligation to effect the split-off either
before or after the merger. Viacom and CBS cannot give any assurance as to
whether or not or when the split-off will occur or as to the terms of the
split-off if it does occur, or whether or not the split-off, if it does
occur, will be tax-free.
(7) Reclassifications
Some reclassifications have been made from the historical Viacom financial
statements to conform to the unaudited pro forma combined condensed financial
statements presentation.
33
<PAGE>
Unaudited CBS/King World Pro Forma Combined Condensed Financial Information
General
The following unaudited pro forma combined condensed financial statements
are presented using the purchase method of accounting for the merger of CBS
and King World, the June 4, 1998 acquisition of CBS Radio, Inc., formerly
American Radio Systems Corporation, by CBS and the probable acquisition of
Outdoor Systems, Inc. by Infinity Broadcasting Corporation which was announced
on May 27, 1999. These financial statements also reflect the combination of
consolidated historical financial data of CBS, King World, American Radio, and
Outdoor Systems.
The unaudited pro forma combined condensed balance sheet as of September
30, 1999 is presented as if the merger of CBS and King World, and the Outdoor
Systems acquisition had occurred on September 30, 1999. The unaudited pro
forma combined condensed statement of operations for the nine months ended
September 30, 1999 and the year ended December 31, 1998 is presented as if the
merger of CBS and King World, the acquisition of American Radio by CBS, the
probable acquisition of Outdoor Systems by Infinity, and the Infinity initial
public offering had occurred on January 1, 1998. In the opinion of CBS
management, all adjustments and/or disclosures considered necessary for a fair
presentation of the pro forma data have been made.
These unaudited pro forma combined condensed financial statements should be
read in conjunction with:
. CBS' consolidated financial statements and the notes thereto as of and
for the year ended December 31, 1998 and Management's Discussion and
Analysis included in CBS' Annual Report on Form 10-K for the year ended
December 31, 1998, as amended by Form 10-K/A, which is incorporated by
reference in this joint proxy statement/prospectus;
. King World's consolidated financial statements and the notes thereto as
of August 31, 1999 and 1998 and for the three years ended August 31,
1999, which are included in CBS' Current Report on Form 8-K filed on
November 22, 1999, which is incorporated by reference in this joint proxy
statement/prospectus; and
. CBS' Quarterly Reports on Form 10-Q for the quarterly periods ended
September 30, 1999, June 30, 1999 and March 31, 1999, as amended by Form
10-Q/A, which are incorporated by reference in this joint proxy
statement/prospectus.
These unaudited pro forma combined condensed financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the operating results or financial position that would have been achieved had
the CBS and King World merger, the acquisition of American Radio by CBS, the
probable acquisition of Outdoor Systems by Infinity, or the Infinity initial
public offering been consummated as of the dates indicated, or of the results
that may be obtained in the future.
34
<PAGE>
UNAUDITED CBS/KING WORLD PRO FORMA
COMBINED CONDENSED BALANCE SHEET
As of September 30, 1999
(in millions)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments for Combined Adjustments CBS
CBS King World CBS/King CBS/King For Other CBS Pro Forma
Historical August 31, 1999 World Merger World Events (8) Combined
---------- --------------- --------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash
equivalents............. $ 185 $ 468 $ -- $ 653 $ (129) $ 524
Short-term investments.. -- 38 -- 38 -- 38
Customer receivables,
net..................... 1,227 81 (6)(/4/) 1,302 175 1,477
Program rights.......... 568 -- -- 568 -- 568
Deferred income taxes... 243 -- -- 243 13 256
Prepaid and other
current assets.......... 178 110 -- 288 95 383
------- ------ ------ ------- ------ -------
Total current assets.... 2,401 697 (6) 3,092 154 3,246
Long-term investments... -- 340 -- 340 -- 340
Property and equipment,
net..................... 1,138 19 -- 1,157 1,898 3,055
FCC licenses, net....... 4,282 -- -- 4,282 -- 4,282
Goodwill, net........... 10,637 -- 1,694 (/3/) 12,331 6,596 18,927
Other intangible and
noncurrent assets....... 2,265 96 -- 2,361 68 2,429
------- ------ ------ ------- ------ -------
Total assets............ $20,723 $1,152 $1,688 $23,563 $8,716 $32,279
======= ====== ====== ======= ====== =======
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current maturities of
long-term debt.......... $ 6 $ -- $ -- $ 6 $ 183 $ 189
Liabilities for talent
and program rights...... 426 -- -- 426 -- 426
Accounts payable,
accrued and other
liabilities............. 1,377 152 25 (/3/) 1,548 104 1,652
(6)(/4/)
------- ------ ------ ------- ------ -------
Total current
liabilities............ 1,809 152 19 1,980 287 2,267
Long-term debt.......... 2,346 -- -- 2,346 1,558 3,904
Net liabilities of
discontinued
operations.............. 966 -- -- 966 -- 966
Pension liability....... 761 -- -- 761 -- 761
Postretirement benefit
liability............... 1,008 -- -- 1,008 -- 1,008
Other noncurrent
liabilities............. 2,713 -- -- 2,713 99 2,812
------- ------ ------ ------- ------ -------
Total liabilities....... 9,603 152 19 9,774 1,944 11,718
------- ------ ------ ------- ------ -------
Minority interest in
equity of consolidated
subsidiaries............ 1,490 -- -- 1,490 3,901 5,391
Shareholders' equity:
Preferred stock......... -- -- -- -- -- --
Common stock............ 745 1 57 (/2/) 802 -- 802
(1)(/3/)
Capital in excess of par
value................... 9,276 153 2,282 (/2/) 11,888 2,871 14,759
330 (/2/)
(153)(/3/)
Common stock held in
treasury, at cost....... (1,683) (446) 446 (/3/) (1,683) -- (1,683)
Retained earnings....... 1,957 1,292 (1,292)(/3/) 1,957 -- 1,957
Accumulated other
comprehensive loss...... (665) -- -- (665) -- (665)
------- ------ ------ ------- ------ -------
Total shareholders'
equity................. 9,630 1,000 1,669 12,299 2,871 15,170
------- ------ ------ ------- ------ -------
Total liabilities and
shareholders' equity... $20,723 $1,152 $1,688 $23,563 $8,716 $32,279
======= ====== ====== ======= ====== =======
</TABLE>
See accompanying notes to unaudited CBS/King World pro forma
combined condensed financial statements.
35
<PAGE>
UNAUDITED CBS/KING WORLD PRO FORMA
COMBINED CONDENSED STATEMENT OF OPERATIONS
For the nine months ended September 30, 1999
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Pro Forma Adjustments
King World Adjustments for Combined For CBS
Nine months ended CBS/King CBS/King Other CBS Pro Forma
CBS Historical August 31, 1999(/7/) World Merger World Events (/8/) Combined
-------------- -------------------- --------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $ 5,154 $ 582 $ (30)(/4/) $ 5,706 $ 591 $ 6,297
Operating expenses...... (3,000) (364) 30 (/4/) (3,334) (271) (3,605)
Marketing, general and
administrative......... (915) (66) -- (981) (28) (1,009)
Depreciation and
amortization........... (451) (2) (127)(/5/) (580) (259) (839)
Residual costs of
discontinued
businesses............. (130) -- -- (130) -- (130)
------- ----- ----- ------- ----- -------
Operating profit
(loss)................. 658 150 (127) 681 33 714
Other income and
expense, net........... 4 -- -- 4 1 5
Interest expense, net... (143) 24 -- (119) (98) (217)
------- ----- ----- ------- ----- -------
Income (loss) from
continuing operations
before income taxes,
minority interest in
income of consolidated
subsidiaries and equity
losses of
unconsolidated
affiliated companies... 519 174 (127) 566 (64) 502
Income tax expense...... (302) (61) -- (363) (30) (393)
Minority interest in
income of consolidated
subsidiaries........... (51) -- -- (51) (15) (66)
Equity losses of
unconsolidated
affiliated companies,
net of income taxes.... (28) -- -- (28) -- (28)
------- ----- ----- ------- ----- -------
Income (loss) from
continuing operations.. $ 138 $ 113 $(127) $ 124 $(109) $ 15
======= ===== ===== ======= ===== =======
Income from continuing
operations per share:
Basic................. $ .20 $ .17 $ .02
Diluted............... $ .19 $ .16 $ .02
Weighted average shares
outstanding
Basic................. 693 57 (/2/) 750 750
Diluted............... 710 60 (/6/) 770 770
</TABLE>
See accompanying notes to unaudited CBS/King World pro forma
combined condensed financial statements.
36
<PAGE>
UNAUDITED CBS/KING WORLD PRO FORMA
COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
(in millions, except per share amounts)
<TABLE>
<CAPTION>
King World Pro Forma Pro Forma Adjustments
Twelve months Adjustments for Combined For CBS
ended CBS/King CBS/King Other CBS Pro Forma
CBS Historical November 30, 1998(/7/) World Merger World Events(/8/) Combined
-------------- ---------------------- --------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $ 6,805 $ 705 $ (23)(/4/) $ 7,487 $ 874 $ 8,361
Operating expenses...... (4,373) (442) 23 (/4/) (4,792) (450) (5,242)
Marketing, general and
administrative......... (1,216) (78) -- (1,294) (41) (1,335)
Depreciation and
amortization........... (571) (2) (177)(/5/) (750) (363) (1,113)
Residual costs of
discontinued
businesses............. (163) -- -- (163) -- (163)
------- ----- ----- ------- ----- -------
Operating profit
(loss)................. 482 183 (177) 488 20 508
Other income and
expense, net........... 43 -- -- 43 (5) 38
Interest expense, net... (370) 34 -- (336) (27) (363)
------- ----- ----- ------- ----- -------
Income (loss) from
continuing operations
before income taxes and
minority interest in
income of consolidated
subsidiaries........... 155 217 (177) 195 (12) 183
Income tax expense...... (161) (74) -- (235) (85) (320)
Minority interest in
income of consolidated
subsidiaries........... (6) -- -- (6) (29) (35)
------- ----- ----- ------- ----- -------
Income (loss) from
continuing operations.. $ (12) $ 143 $(177) $ (46) $(126) $ (172)
======= ===== ===== ======= ===== =======
Basic and diluted loss
from continuing
operations per share... $ (.02) $ (.06) $ (.23)
Weighted average Basic
and Diluted shares
outstanding............ 696 57 (/2/)(/6/) 753 753
</TABLE>
See accompanying notes to unaudited CBS/King World pro forma
combined condensed financial statements.
37
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
(tables in millions, except per share data)
(1) Basis of Presentation
The purchase method of accounting has been used in the preparation of the
accompanying unaudited pro forma combined condensed financial statements. Under
this method of accounting, the purchase price is allocated to assets acquired
and liabilities assumed based on their respective fair values as of the
effective time of the CBS/King World merger. The excess of consideration paid
over the estimated fair value of net assets acquired will be recorded as
goodwill and amortized as a charge to earnings. For purposes of the unaudited
pro forma combined condensed financial statements, the preliminary fair values
of King World's assets and liabilities were estimated by CBS management based
primarily on information furnished by the management of King World. The final
allocation of the purchase price will be determined after the consummation of
the CBS/King World merger and will be based on appraisals and a comprehensive
final evaluation of the fair value of assets acquired and liabilities assumed
of King World. The acquisition of King World by CBS was completed on November
15, 1999.
(2) Purchase Price Information
Pursuant to the merger agreement, shareholders of King World will receive
.81 of a share of CBS common stock for each share of King World common stock
issued and outstanding at the consummation of the CBS/King World merger. The
total number of King World shares issued and outstanding during the period
subsequent to the CBS/King World merger announcement but prior to its
consummation is not anticipated to fluctuate from the ordinary course. For the
purpose of the pro forma combined condensed financial statements, the $40.8125
per share value of CBS common stock to be issued was calculated based upon the
market price per share at the close of business on March 31, 1999.
<TABLE>
<S> <C>
Total estimated King World common shares outstanding................ 70.8
Exchange Ratio...................................................... .81
------
Estimated CBS common shares to be issued............................ 57.3
======
Purchase Price:
Estimated value of CBS common stock to be issued in connection with
CBS/King World merger (57.3 shares at $40.8125 per share):
Common Stock, $1.00 par value..................................... $ 57
Capital in excess of par value.................................... 2,282
Estimated fair value of stock options assumed....................... 330
------
Estimated net increase in CBS equity................................ $2,669
======
</TABLE>
38
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
(3) Purchase Price and Elimination of Historical Balances
To record the purchase price paid in connection with the CBS/King World
merger as described in Note 1 and Note 2 above:
<TABLE>
<S> <C>
Estimated net increase in CBS equity (see Note 2).................... $2,669
Less: Shareholders' equity of King World at September 30, 1999
Common stock....................................................... (1)
Capital in excess of par value..................................... (153)
Common stock held in treasury...................................... 446
Retained earnings.................................................. (1,292)
Adjustments:
Add: Estimated accrued transaction costs............................. 25
------
Excess purchase price over fair value of net assets acquired......... $1,694
======
</TABLE>
The above pro forma adjustments are based on preliminary estimates. The
final allocation of the purchase price will be determined after the
consummation of the CBS/King World merger and will be based on appraisals and a
comprehensive final evaluation of the fair value of assets acquired and
liabilities assumed of King World. As further analysis is performed, these
estimates may be revised at a later date.
(4) Existing Relationship Between CBS and King World
Through an existing agreement with King World, CBS' owned-and-operated
television stations pay for some of King World's programming. The following
adjustments have been made to eliminate the balances associated with the
transactions between CBS and King World:
<TABLE>
<S> <C>
Balance Sheet
Customer receivables/Accounts payable at September 30, 1999............ $ 6
Statements of Operations
Revenue/operating expenses for the nine months ended September 30,
1999.................................................................. $30
Revenue/operating expenses for the year ended December 31, 1998........ $23
</TABLE>
(5) Amortization of Goodwill
The pro forma adjustments are based on preliminary estimates. The final
allocation of the purchase price will be determined after the consummation of
the CBS/King World merger and will be based on appraisals and a comprehensive
final evaluation of the fair value of assets acquired and liabilities assumed
of King World. As further analysis is performed, including obtaining appraisals
for identifiable intangible assets and programming commitments acquired, these
estimates may be significantly revised, including the estimated amortization
periods. Estimated goodwill amortization is computed on a straight-line basis
over a 10-year period. If goodwill amortization had been computed assuming a
20-year period, pro forma operating results for the nine months ended September
30, 1999 and for the year ended December 31, 1998 on a pre- and post-tax basis
would have improved by $63 million and $89 million, respectively, or
approximately $.08 and $.12 per share, respectively, on both a basic and
diluted basis.
39
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
(6) Average Shares Outstanding
The average CBS common shares outstanding used in calculating pro forma
income (loss) per common share from continuing operations, as adjusted for
Other CBS Events, are calculated assuming that the estimated number of shares
of CBS common stock to be issued in connection with the CBS/King World merger
were outstanding from January 1, 1998. For the nine months ended September 30,
1999, the average common shares outstanding used in calculating pro forma
combined diluted income per share include the impact of options to purchase
shares of common stock. Shares of common stock issuable under deferred
compensation arrangements were not included in computing pro forma diluted
income per common share for the nine months ended September 30, 1999, because
their inclusion would result in increased income per common share. Shares of
common stock issuable under deferred compensation arrangements approximated 3
million for the nine months ended September 30, 1999. For the year ended
December 31, 1998, options to purchase shares of common stock as well as shares
issuable under deferred compensation arrangements were not included in
computing pro forma diluted income per common share because their inclusion
would result in a smaller loss per common share. For the year ended December
31, 1998, the options to purchase shares of common stock as well as the common
stock issuable under deferred compensation arrangements approximated 21 million
shares.
(7) King World Condensed Statements of Operations
The King World condensed statement of operations for the nine months ended
August 31, 1999 is calculated by subtracting the King World first quarter
statement of operations as filed in its Quarterly Report on Form 10-Q for the
three month period ended November 30, 1998 from its total year 1999 statement
of operations which is included in CBS' Current Report on Form 8-K filed on
November 22, 1999.
The King World condensed statement of operations for the twelve month period
ended November 30, 1998 is calculated by adding the King World first quarter
statement of operations as filed in its Quarterly Report on Form 10-Q for the
three month period ended November 30, 1998, and subtracting the prior year
first quarter statement of operations as filed in their Quarterly Report on
Form 10-Q for the period ended November 30, 1997, from its total year 1998
statement of operations as filed in its Annual Report on Form 10-K for the
fiscal year ended August 31, 1998.
(8) Other CBS Events
The unaudited pro forma combined condensed financial statements are
presented after giving effect to the following Other CBS Events:
Acquisition of American Radio by CBS
On June 4, 1998, CBS acquired the radio operations of American Radio for
$1.4 billion in cash plus the assumption of debt with a fair value of
approximately $1.3 billion. This acquisition has been accounted for under the
purchase method of accounting.
Probable Acquisition of Outdoor Systems by Infinity
On May 27, 1999, Infinity signed a definitive agreement to acquire Outdoor
Systems for approximately $8.7 billion which includes the assumption of debt
with a fair value of approximately $1.9 billion. This acquisition will be
accounted for under the purchase method of accounting. In connection with this
acquisition Infinity will issue approximately 231 million shares of its Class A
common stock which will dilute CBS' equity
40
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
ownership in Infinity to approximately 65 percent. On November 4, 1999 the
Outdoor Systems and Infinity Broadcasting shareholders approved the transaction
which is expected to close during November 1999 subject to certain closing
conditions as set forth in the merger agreement.
Infinity Initial Public Offering
In 1998, CBS formed a new company, named Infinity, comprising the radio and
outdoor advertising operations of CBS. In December 1998, Infinity sold 18.2
percent of its common stock in an initial public offering, generating proceeds
of approximately $3 billion. These proceeds were used to pay down an
intercompany note payable to CBS. CBS used the proceeds of the payment on the
note to pay down existing debt under the CBS revolving credit facility and
other debt of CBS and made investments in short-term marketable securities.
The following table sets forth the estimated adjustments affecting CBS'
consolidated financial statements for the inclusion of the probable acquisition
of Outdoor Systems by Infinity. In that regard, the historical statement of
position at September 30, 1999, has been incorporated into the pro forma
financial information and is adjusted to reflect the acquisition purchase price
as well as other items such as: the repayment of long-term debt; the step up in
value of long-term debt instruments; the elimination of existing debt financing
costs; the accrual for the estimated transaction costs; and the recognition of
the estimated excess purchase price over the fair value of assets acquired as
goodwill. As further analysis is performed, including appraisals on
identifiable tangible and intangible assets acquired and liabilities assumed,
these estimates may be significantly revised including the estimated
amortization periods. Minority interest in equity of consolidated subsidiaries
has also been adjusted to reflect Infinity's distribution of its stock in
connection with the acquisition of Outdoor Systems and thus the reduction of
CBS' equity interest in Infinity from approximately 83 percent at September 30,
1999 to approximately 65 percent.
41
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
<TABLE>
<CAPTION>
Outdoor Adjustments
Systems Pro Forma For Other CBS
September 30, 1999 Adjustments Events
------------------ ----------- -------------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents........ $ 16 $ (145) $ (129)
Customer receivables, net........ 175 -- 175
Deferred income taxes............ 13 -- 13
Prepaid and other current
assets.......................... 95 -- 95
------ ------ ------
Total current assets............. 299 (145) 154
Property and equipment, net...... 1,898 -- 1,898
Goodwill, net.................... 605 5,991 6,596
Other intangible and noncurrent
assets.......................... 48 20 68
------ ------ ------
Total assets..................... $2,850 $5,866 $8,716
====== ====== ======
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Current maturities of long-term
debt............................ $ 183 $ -- $ 183
Accounts payable, accrued and
other liabilities............... 89 15 104
------ ------ ------
Total current liabilities........ 272 15 287
Long-term debt................... 1,628 (70) 1,558
Other noncurrent liabilities..... 109 (10) 99
------ ------ ------
Total liabilities................ 2,009 (65) 1,944
------ ------ ------
Minority interest in equity of
consolidated subsidiaries....... -- 3,901 3,901
Shareholders' equity:
Common stock..................... 2 (2) --
Capital in excess of par value... 764 2,107 2,871
Common stock held in treasury, at
cost............................ (4) 4 --
Retained earnings................ 80 (80) --
Accumulated other comprehensive
loss............................ (1) 1 --
------ ------ ------
Total shareholders' equity....... 841 2,030 2,871
------ ------ ------
Total liabilities and
shareholders' equity............ $2,850 $5,866 $8,716
====== ====== ======
</TABLE>
42
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
The following table combines the above mentioned Other CBS Events as if
these transactions had occurred as of January 1, 1999 and were reflected in
CBS' results of operations for the nine-month period ended September 30, 1999:
<TABLE>
<CAPTION>
Outdoor Adjustments
Systems Pro Forma For Other CBS
September 30, 1999 Adjustments Events
------------------ ----------- -------------
<S> <C> <C> <C>
Revenues......................... $ 591 $ -- $ 591
Operating expenses............... (271) -- (271)
Marketing, general and
administrative.................. (28) -- (28)
Depreciation and amortization.... (109) (150)(d) (259)
----- ----- -----
Operating profit (loss).......... 183 (150) 33
Other income and expense, net.... 1 -- 1
Interest expense, net............ (111) 13 (e) (98)
----- ----- -----
Income (loss) from continuing
operations before income taxes
and minority interest in income
of consolidated subsidiaries.... 73 (137) (64)
Income tax expense............... (25) (5)(c) (30)
Minority interest in income of
consolidated subsidiaries....... -- (15)(f) (15)
----- ----- -----
Income (loss) from continuing
operations...................... $ 48 $(157) $(109)
===== ===== =====
</TABLE>
43
<PAGE>
NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
The following table combines the above mentioned Other CBS Events as if
these transactions had occurred as of January 1, 1998 and were reflected in
CBS' results of operations for the year ended December 31, 1998:
<TABLE>
<CAPTION>
American Radio Acquisition Outdoor Systems Acquisition
------------------------------- -----------------------------------
American
Radio American Outdoor Outdoor Adjustments
through Radio Systems Systems For
June 4, Pro Forma Pro Forma Infinity December 31, Pro Forma Pro Forma Other CBS
1998 Adjustments Combined IPO 1998 Adjustments Combined Events
-------- ----------- --------- -------- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $168 $ -- $ 168 $ -- $706 $ -- $ 706 $ 874
Operating expenses...... (119) -- (119) -- (331) -- (331) (450)
Marketing, general and
administrative......... (4) -- (4) -- (37) -- (37) (41)
Depreciation and
amortization........... (28) (10)(a) (38) -- (123) (202)(d) (325) (363)
---- ----- ----- ----- ---- ----- ----- -----
Operating profit
(loss)................. 17 (10) 7 -- 215 (202) 13 20
Other income and
expense, net........... -- -- -- -- (5) -- (5) (5)
Interest expense, net... (30) (45)(b) (75) 169 (g) (138) 17 (e) (121) (27)
---- ----- ----- ----- ---- ----- ----- -----
Income (loss) from
continuing operations
before income taxes and
minority interest in
income of consolidated
subsidiaries........... (13) (55) (68) 169 72 (185) (113) (12)
Income tax expense...... 9 10 (c) 19 (67)(c) (31) (6)(c) (37) (85)
Minority interest in
income of consolidated
subsidiaries........... -- -- -- (13)(f) -- (16)(f) (16) (29)
---- ----- ----- ----- ---- ----- ----- -----
Income (loss) from
continuing operations.. $ (4) $ (45) $ (49) $ 89 $ 41 $(207) $(166) $(126)
==== ===== ===== ===== ==== ===== ===== =====
</TABLE>
Pro forma adjustments giving effect to the Other CBS Events in the unaudited
pro forma combined condensed financial statements reflect the following:
(a) American Radio acquisition--amortization of goodwill and identifiable
intangible assets, including FCC licenses on a straight-line basis over
40 years.
(b) Increase in interest expense resulting from borrowings under CBS'
credit facility to finance the acquisition of American Radio including
the repayment of a portion of American Radio revolver borrowings in
conjunction with the consummation of the acquisition.
(c) Income tax expense on the pro forma results of operations and the pro
forma adjustments, excluding non-deductible goodwill amortization, is
calculated at a 40 percent marginal tax rate.
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NOTES TO UNAUDITED CBS/KING WORLD PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (continued)
(tables in millions, except per share data)
(d) Outdoor Systems acquisition--amortization of goodwill and identifiable
intangible assets on a straight-line basis over 30 years.
(e) Reduction in interest expense resulting from the repayment of Outdoor
Systems' credit facility with credit facility borrowings of Infinity
where average borrowing rates are more favorable than previously
experienced by Outdoor Systems. In addition, the reduction of interest
expense reflects the recording of all debt instruments assumed at fair
value within the pro forma financial statements. These reductions were
partially offset by incremental interest expense recognized as a result
of the assumed deconsolidation of Infinity from the CBS consolidated
income tax return.
(f) The adjustment to minority interest in income of consolidated
subsidiaries reflects CBS' ownership interest dilution resulting from
Infinity's assumed issuance of common stock to acquire Outdoor Systems.
In addition, for the year ended December 31, 1998 the adjustment
reflects the impact of Infinity's initial public offering. As a result
of the December 1998 initial public offering CBS' equity ownership in
Infinity was reduced to approximately 81.8 percent and will be further
reduced to approximately 65 percent after Infinity's probable
acquisition of Outdoor Systems.
(g) Reduction in the interest expense represents savings resulting from the
assumed repayment of debt with the proceeds received from the Infinity
public offering.
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THE MERGER
The discussion in this joint proxy statement/prospectus of the merger and
the principal terms of the merger agreement is subject to, and qualified in its
entirety by reference to, the merger agreement, a copy of which is attached to
this joint proxy statement/prospectus as Annex A and is incorporated herein by
reference.
Background to the Merger
On August 5, 1999, the FCC announced that it had adopted new regulations
that, for the first time, would permit a single person to own two television
stations in a single market, subject to limitations. Since that date, it has
been widely reported that numerous owners of television stations have been
seeking opportunities to acquire or sell stations in reliance on the new rules.
On August 11, at the request of Mr. Karmazin, Mr. Karmazin and Mr. Redstone
met at the offices of Viacom. Mr. Karmazin reviewed with Mr. Redstone the
businesses of CBS and discussed with Mr. Redstone various possible transactions
between the two companies, including an exchange of assets in the television
and cable television businesses and ways in which various businesses of the two
companies could be combined.
On August 12, Mr. Redstone called Mr. Karmazin and suggested that they meet
again, together with Philippe Dauman and Thomas Dooley, Viacom's Deputy
Chairmen and Executive Vice Presidents, to discuss further the possible
transactions discussed at their August 11 meeting.
On August 16, Messrs. Redstone, Dauman and Dooley met with Mr. Karmazin. Mr.
Karmazin proposed various alternative transactions involving the two companies,
including swapping Viacom's television stations for the cable television
networks of CBS and combining the entire businesses of Viacom and CBS. Mr.
Karmazin emphasized the complementary nature of the assets of the two
companies. Mr. Redstone indicated interest in the swap transaction, but did not
express a conclusion regarding a possible merger. Mr. Karmazin said that he
would like to make a more detailed presentation regarding the businesses of CBS
to Messrs. Redstone, Dauman and Dooley. The parties agreed to meet again on
August 24.
On August 24, Mr. Karmazin again met with Messrs. Redstone, Dauman and
Dooley. Mr. Karmazin presented information regarding CBS, describing the
performance of its assets, strategies for growth and the benefits of selling
advertising across different advertising media. At the conclusion of the
presentation, Mr. Karmazin again suggested a merger involving the two
companies, proposing that CBS acquire Viacom at a premium to market value. Mr.
Redstone indicated that he would not be interested in selling his stake in
Viacom, but indicated that, in light of the strong strategic fit between the
two companies, he would consider a merger of equals priced at market value, in
which Mr. Redstone's controlling interest in Viacom was preserved in the
combined company through the issuance of Viacom's non-voting Class B common
stock to the shareholders of CBS. Mr. Redstone indicated that, if such a
transaction was pursued, he would recommend a role for Mr. Karmazin in which he
would serve as President and Chief Operating Officer of the combined company.
Mr. Karmazin indicated his willingness to consider these terms and said that he
would like to discuss such a transaction with members of the CBS Board of
Directors.
On August 26, the CBS Board held a special meeting at which Mr. Karmazin
reviewed for the Board the conversations and contacts he had had with Mr.
Redstone to date and the current status of discussions regarding the structure
and terms of a possible transaction with Viacom. Mr. Karmazin and Fredric G.
Reynolds, CBS' Executive Vice President and Chief Financial Officer, also
reviewed for the Board the capital structure and share ownership of Viacom. The
CBS Board authorized Mr. Karmazin to continue his discussions with Mr.
Redstone. Following the August 26 meeting, detailed publicly available
information and analyst reports relating to the share ownership of Viacom were
distributed to the CBS Board.
On August 25 and 26, representatives of Shearman & Sterling, counsel to
Viacom, held various discussions with representatives of Cravath, Swaine &
Moore, legal counsel to CBS, and representatives of
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Evercore, financial advisors to CBS, concerning the structure of a possible
transaction, exchange ratio mechanisms and related matters.
On August 26, Mr. Redstone and Mr. Karmazin met to continue their
discussions regarding management of the combined company and ways to assure
the CBS Board of Directors as to the management of the combined company in
light of the controlling shareholdings of Mr. Redstone.
On August 27, representatives of Viacom, Morgan Stanley & Co. Incorporated,
financial advisors to Viacom, and Shearman & Sterling met with representatives
of CBS, Evercore and Cravath, Swaine & Moore to discuss the structure and
exchange ratio for a possible transaction, board composition and management
issues, the due diligence review process and related matters. The parties also
finalized and executed a confidentiality agreement at this meeting.
On August 29, senior executives and professional advisors of each of Viacom
and CBS met to exchange financial, legal and business due diligence
information. The due diligence process, which included review of documents and
interviews with executives and professional advisors of each company,
continued through the signing of the merger agreement.
On August 30, Mr. Redstone and Mr. Karmazin discussed further the proposed
governance of the combined company. The discussions related to Mr. Karmazin's
proposed responsibilities and powers as Chief Operating Officer and Mr.
Redstone's responsibilities and powers as Chief Executive Officer as well as
whether the proposed responsibilities of the Chief Operating Officer were
inconsistent with the continued involvement of Messrs. Dauman and Dooley as
senior managers of Viacom following the merger. Mr. Redstone advised Mr.
Karmazin that Messrs. Dauman and Dooley had indicated to Mr. Redstone that, in
view of the strategic benefits to Viacom of the proposed transaction, they
would be willing to resign from their respective management positions at
Viacom at the closing of the transaction if that would facilitate the
resolution of the governance arrangements for the combined company. Messrs.
Redstone and Karmazin also confirmed their understanding that the combined
board of directors would consist of a majority of Viacom representatives.
These points were discussed further on August 31 between Mr. Redstone and Mr.
Karmazin.
On August 30, Shearman & Sterling delivered a draft merger agreement to
Cravath, Swaine & Moore.
On August 31, the CBS Board held a special meeting to continue the Board's
previous discussions regarding a possible transaction between CBS and Viacom.
Mr. Karmazin described in detail the discussions with Mr. Redstone leading up
to the current proposal for a merger of CBS with Viacom. Mr. Karmazin and
other members of CBS' senior management discussed with the CBS Board their
views of various aspects of the proposed transaction. Louis Briskman, CBS'
Executive Vice President and General Counsel, and representatives of Cravath,
Swaine & Moore discussed with the CBS Board its fiduciary duties with regard
to its consideration of the proposed transaction under applicable law.
Representatives of Evercore discussed with the CBS Board their views and
preliminary analyses of the financial aspects of the proposed transaction. The
CBS Board reviewed and considered, among other things, the initial results of
the due diligence investigation conducted to date, the proposed terms of the
transaction, the impact of the proposed transaction on CBS' other pending
transactions and the proposed terms relating to the management, board
representation and governance of the combined company. Following extensive
discussion of these matters, the CBS Board directed Mr. Karmazin to negotiate
further with Viacom on the basis of the CBS Board's recommendations with
respect to the matters discussed during the meeting. In particular, the CBS
Board directed Mr. Karmazin to negotiate arrangements substantially consistent
with the management, board representation and governance arrangements which
are described on pages 67 through 70.
Following the CBS Board meeting on August 31, Cravath, Swaine & Moore and
Shearman & Sterling reviewed and discussed those areas identified by the CBS
Board of Directors as important for Mr. Karmazin to have delegated authority
to manage, those areas which a majority of the board of directors of the
combined company should have authority over and those areas requiring a
supermajority board vote, and the conceptual framework for implementing this
arrangement. Representatives of Cravath, Swaine & Moore and Shearman &
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<PAGE>
Sterling negotiated the terms of these arrangements, including related changes
to the Restated Certificate of Incorporation and By-laws of Viacom, together
with the terms and conditions of the merger agreement and Mr. Karmazin's
employment agreement, throughout the period from August 31 through the signing
of definitive documentation on September 6. In addition, Morgan Stanley, on
behalf of Viacom, and Evercore on behalf of CBS, continued to negotiate the
exchange ratio through September 2. The parties mutually agreed to an at market
exchange ratio. The negotiation of the exchange ratio involved discussions
concerning the appropriate measurement period for determining the market value
of Viacom and CBS without any premium. No financial analysis was performed in
determining the exchange ratio. A fixed exchange ratio at market was agreed to
on or about September 3, subject to Board approvals.
On September 2, the Board of Directors of Viacom, at a special meeting,
received a presentation regarding the proposed terms of the transaction from
Viacom's outside counsel, and a presentation from Morgan Stanley regarding the
financial terms of the transaction and discussed the proposed terms and the
risks and merits of the proposed transaction.
On September 2, the special meeting of the CBS Board reconvened and Mr.
Karmazin recounted for the CBS Board the events that had transpired since the
meeting recessed on August 31. Mr. Karmazin described in detail the proposed
terms that had been negotiated with Viacom with respect to the corporate
governance of Viacom following consummation of the proposed transaction, and
explained to the CBS Board that such governance arrangements would be reflected
in the proposed new Restated Certificate of Incorporation and By-laws of Viacom
as well as in a voting agreement between National Amusements, the holder of a
majority of Viacom's voting stock, and CBS. Following extensive discussion
among the members of the CBS Board, Mr. Karmazin, other members of CBS' senior
management, representatives of Cravath, Swaine & Moore and representatives of
Evercore, the CBS Board directed Mr. Karmazin to negotiate definitive
agreements and related documentation based on the terms outlined by Mr.
Karmazin during the meeting.
On September 5, the CBS Board held a special meeting to continue the Board's
discussions with respect to the proposed merger and to consider the merger
agreement and the transactions contemplated thereby, including the proposed
consideration to be issued to CBS shareholders and the proposed terms regarding
the powers of the board of directors, the chief executive officer and the chief
operating officer of Viacom following the merger. Mr. Karmazin and other
members of CBS' senior management, representatives of Cravath, Swaine & Moore
and representatives of Evercore made presentations to the CBS Board and
discussed with the CBS Board their views and analyses of various aspects of the
proposed transaction. Evercore delivered its oral opinion, which was
subsequently confirmed in writing, that, based upon the matters presented to
the CBS Board and as set forth in its opinion, as of such date, the exchange
ratio was fair, from a financial point of view, to the shareholders of CBS.
After further deliberation, the CBS Board unanimously approved the merger
and the merger agreement and authorized, among other things, the execution of
the merger agreement, the voting agreement and the stockholder agreement and
unanimously recommended that CBS shareholders vote to adopt the merger
agreement.
On September 5, the Compensation Committee of the Viacom Board met to review
and, subject to approval of the merger by the Viacom Board, approved the
proposed terms of Mr. Redstone's and Mr. Karmazin's employment agreements, the
resignation agreements for Messrs. Dauman and Dooley and the Viacom executive
severance plans. For a more complete description of these terms, see the
section entitled "Interests of Persons in the Merger--Senior Management
Arrangements."
Also on September 5, at a special meeting of the Viacom Board, the Board
heard presentations on the results of the due diligence investigation and the
status of the negotiation of the merger agreement and related agreements and
received an updated presentation from Morgan Stanley. Morgan Stanley also
delivered to the Viacom Board its oral opinion that the exchange ratio was fair
from a financial point of view to Viacom.
Further, on September 5, the Board also was briefed on and ratified the
actions of the Compensation Committee, in the case of the resignation
agreements of Messrs. Dauman and Dooley and the employment
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<PAGE>
agreement of Mr. Redstone, without the participation of such individuals. The
Board then discussed the proposed terms and conditions of the transaction
extensively, following which the Board adjourned the meeting in order to
consider the results of further negotiations.
During the evening of September 5, management of CBS and Viacom and their
respective legal advisors continued their negotiations regarding the terms of
the merger agreement and, in particular, the proposed terms regarding the
respective powers of the board of directors, chief executive officer and chief
operating officer.
On the morning of September 6, the Board of Directors of Viacom met and
reviewed the finalized terms of the proposed transactions. Following a
discussion, the Viacom Board unanimously approved the merger agreement and the
transactions contemplated thereby. In the afternoon of September 6, CBS and
Viacom executed the merger agreement, National Amusements executed the voting
agreement and the stockholder agreement, Viacom and Messrs. Redstone and
Karmazin executed their respective employment agreements, and Viacom executed
resignation agreements with Messrs. Dauman and Dooley.
On October 8, 1999, the merger agreement was amended and restated to provide
for the issuance of Viacom Series C preferred stock in exchange for the CBS
Series B preferred stock issued to Gaylord in connection with CBS' acquisition
of KTVT-TV Dallas-Fort Worth from Gaylord. On November 23, 1999, the merger
agreement was amended and restated again to provide for the alternative
structure of the merger as a merger of CBS with and into Viacom/CBS LLC and to
provide each company with additional flexibility to compensate its employees.
Reasons for the Merger and Board Recommendations
Viacom
The Viacom Board carefully considered the terms of the merger and believes
that the merger serves the best interests of Viacom and its shareholders. As a
result, the Viacom Board declared that the merger agreement was advisable,
unanimously approved the merger agreement and unanimously recommends that the
Viacom shareholders approve the adoption of the merger agreement and the other
proposals described in this joint proxy statement/prospectus.
The Viacom Board considered a number of factors, including those listed
below. The Viacom Board did not consider it practical, and did not try, to rank
or weigh the importance of each factor, and different members of the Viacom
Board may have given different weight to different factors. The Viacom Board
also considered presentations by, and consulted with, members of Viacom's
management as well as its financial advisors and outside and inside legal
counsel. The list of factors set forth below is not exhaustive but is believed
to include all material factors considered by Viacom's Board.
CBS Assets and Relationship with the Existing Businesses of Viacom. The
Viacom Board considered the quality and breadth of the assets of CBS, including
the radio and outdoor advertising assets of Infinity, and its financial
condition, competitive position and prospects for growth. In particular, the
Board considered the complementary nature of the businesses of CBS and Viacom
in that Viacom is a leader in the cable television programming, motion picture
and television production businesses and CBS is a leader in the television
network distribution, television and radio broadcasting and outdoor advertising
businesses. The Board recognized the tremendous opportunities for the combined
company to reach large audiences and cross-promote and cross-market its assets
among various distribution outlets. Similarly, the Board recognized that the
combined company would have greater opportunities to increase its advertising,
licensing and other revenue than either company would on its own. The Board
also considered potential economies of scale by combining these businesses. The
Board took into account that the combined company would have an increased
dependence on the advertising market, but concluded that the risk of such
dependence was outweighed by the strategic benefits of the transaction.
Financial Terms. The Viacom Board considered that the merger of equals
structure, in which no premium would be paid to the shareholders of either
company, would create a company with considerable financial resources. The
Viacom Board considered the historical trading ranges of Viacom Class B common
stock and CBS common stock as compared with the proposed exchange ratio. The
Viacom Board also considered the fact that the merger would be tax-free to
Viacom's shareholders. In addition, the Viacom Board considered the pro
forma effect of the proposed transaction on the financial condition and results
of the combined company and the price of CBS as compared with other comparable
companies using various methods of valuation.
Management and Governance Provisions. The Viacom Board considered the
experience and accomplishments of Mr. Karmazin and other members of CBS
management and the benefits of Mr. Karmazin's
49
<PAGE>
service as President and Chief Operating Officer and Mr. Redstone's continuing
service as Chairman and Chief Executive Officer to the Viacom shareholders. The
Viacom Board weighed these benefits against the limitations the proposed
governance structure would impose on its power to manage the combined company
by majority vote of the board of the combined company and concluded that these
limitations represented an acceptable balance of management responsibilities.
Support of Sumner Redstone. The Viacom Board considered the fact that
Viacom's controlling shareholder, National Amusements, which in turn is
controlled by Mr. Redstone, supported the proposed transaction and was prepared
to sign a voting agreement, in which National Amusements would agree to vote
its shares in favor of the proposed transaction.
Presentation and Opinion of Morgan Stanley. At its meeting on September 6,
the Viacom Board considered the financial presentation made to the Viacom Board
on September 5 and the oral opinion rendered by Morgan Stanley on September 5,
subsequently confirmed in writing, that, as of that date, the proposed exchange
ratio was fair to Viacom from a financial point of view. Morgan Stanley's
opinion as to the fairness of the exchange ratio to Viacom contributed to the
Viacom Board's determination that the merger is in the best interests of
Viacom's shareholders. The Viacom Board did not request an opinion as to the
fairness of the exchange ratio specifically to the shareholders of Viacom
because Viacom is the surviving corporation in the merger and its shareholders
are not exchanging their shares in the merger. In contrast, the CBS
shareholders will be exchanging their shares of CBS stock for shares of Viacom
stock.
Regulatory Matters. The Viacom Board considered the fact that Viacom might
be required to divest or reduce its interest in United Paramount Network and
Viacom and/or CBS would be required to divest a number of television and radio
stations in the event that current law and regulations were not amended or
waived. The Viacom Board also considered the ability to obtain other necessary
regulatory approvals.
Terms, Conditions, Termination Provisions and Termination Fee. The Viacom
Board reviewed the representations, warranties, covenants and conditions to
consummation of the proposed transaction and the circumstances under which CBS
would have the right to terminate the merger agreement. The Viacom Board
considered the fact that the vote of the Viacom shareholders was assured by
reason of the voting agreement to be entered into by National Amusements and
that CBS would have the right to terminate the merger agreement under specified
circumstances if there was a superior proposal. The Viacom Board considered the
circumstances in which a termination fee would be payable in the event that the
merger agreement was terminated. The Viacom Board considered that there could
be no assurance that the acquisition of Outdoor Systems by Infinity or King
World by CBS would be consummated. The Viacom Board also considered the fact
that the merger would not be conditioned on the completion of the pending CBS
transactions with King World and Outdoor Systems.
The Viacom Board unanimously recommends that the holders of Viacom Class A
common stock approve the adoption of the merger agreement and the other
proposals described in this joint proxy statement/prospectus.
CBS
Reasons for the Merger. At its meeting on September 5, 1999, the CBS Board
of Directors determined that the merger is in the best interests of CBS and its
shareholders, has unanimously approved the merger and the merger agreement and
unanimously recommended that CBS shareholders vote to adopt the merger
agreement.
In reaching its decision to approve the merger and the merger agreement and
to recommend that CBS shareholders vote to adopt the merger agreement, the CBS
Board of Directors consulted with senior management and its financial and legal
advisors and considered a number of factors, including the following positive
factors:
. recent trends in the entertainment and media industries and that a
combination of Viacom, a leading "content provider" in the entertainment
and media industries, with CBS, a leading distributor and
50
<PAGE>
marketer of programming, would create an even stronger global competitor
in the entertainment and media industries;
. the opportunity to create the premier seller of advertising in the media
industry, which could result in increased advertising revenue for the
combined company;
. the opportunity for synergies and revenue generation through cross-
promoting and cross-marketing the combined company's film, television,
radio, theme park, home video, publishing, outdoor advertising and
Internet businesses;
. that the merger would benefit the shareholders of CBS because they would
participate in the value generated by increases in the opportunities for
revenue generation through their equity participation in Viacom;
. the management and corporate governance arrangements agreed to between
CBS and Viacom that would provide for a strong management team drawn from
both companies that would work together to integrate the two companies,
to realize growth opportunities, to achieve synergistic benefits, and to
successfully implement strategies of the combined company, including
that:
. the Board of Directors of the combined company would be expanded
from ten to eighteen directors. The eight additional directors will
initially be selected from and designated by the Board of Directors
of CBS and vacancies in this group will be filled during the
initial three-year term by independent directors designated by
these eight CBS directors;
. Mr. Redstone, the current Chairman and Chief Executive Officer of
Viacom, would continue to serve as Chairman and Chief Executive
Officer of the combined company and would be responsible, in
consultation with the President and Chief Operating Officer, for
corporate policy and strategy;
. Mr. Karmazin, the current President and Chief Executive Officer of
CBS, would serve as President and Chief Operating Officer of the
combined company, would directly report to the CEO and consult with
the CEO on all major decisions and would have responsibility for
the supervision, coordination and management of the combined
company's business;
. Mr. Karmazin, as President and Chief Operating Officer, would be
entitled to manage the combined company's business, subject to the
ability of the combined company's board of directors to take action
with the approval of at least 14 directors. However, in a number of
areas the President and Chief Operating Officer would not be
entitled to act without the approval of, and the combined company's
board would be entitled to act by, a majority of the directors; and
. the governance arrangements described above would be in effect for
a period of three years from the closing of the merger.
. the expected qualification of the merger as a tax-free reorganization;
. the oral opinion of Evercore, delivered on September 5, 1999, which was
subsequently confirmed in a written opinion, a copy of which is attached
as Annex I to this joint proxy statement/prospectus, that, subject to the
assumptions and limitations contained in that opinion, as of that date,
the exchange ratio was fair, from a financial point of view, to the
shareholders of CBS, and the financial presentation made by Evercore to
the CBS Board of Directors in connection with delivering that opinion;
. the terms and conditions of the merger agreement, including the right of
CBS to consider and negotiate superior proposals;
. the financial condition, cash flows and results of operations of CBS and
Viacom, on both a historical and prospective basis, which indicated that
the combined company would enjoy financial strength immediately upon
consummation of the merger;
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. the historical market prices and trading information with respect to CBS
common stock and Viacom non-voting Class B common stock, including that
the Viacom non-voting Class B common stock and the Viacom Class A common
stock have historically traded at comparable levels;
. that the complementary nature of the businesses of CBS and Viacom would
enable the combined company to maintain important relationships with
customers, suppliers and employees;
. the fact that CBS as an independent company has not fully participated in
aspects of the media and entertainment industry where Viacom had
particular strengths, such as MTV Networks and Paramount Pictures;
. the belief that the terms of the merger agreement, including the parties'
representations, warranties and covenants, and the conditions to their
respective obligations are reasonable;
. the fact that Viacom might be required to divest or reduce its interest
in United Paramount Network and that Viacom and/or CBS would be required
to divest a number of television and radio stations in the event that
current law and regulations were not amended or waived;
. the regulatory approvals required to complete the merger and the
favorable prospects for receiving those approvals; and
. satisfactory reports from CBS management and its advisors as to their due
diligence investigations of Viacom.
The CBS Board of Directors also identified and considered a number of
potentially negative factors in deliberations concerning the merger, including:
. the status, timing and tax considerations relating to the potential
split-off of Blockbuster to the shareholders of Viacom;
. the existence of a controlling shareholder of the combined company
following the merger and the non-voting security to be received by CBS
shareholders in the merger;
. the possible effects of the provisions regarding termination fees on the
ability of a third party to make an unsolicited superior proposal;
. the risk that the operations of CBS and Viacom might not be successfully
integrated;
. the risk that, despite the efforts of CBS and Viacom, key management and
other personnel might not remain employed by the combined company after
the merger; and
. the risk that potential benefits of the merger might not be fully
realized.
The CBS Board of Directors believed that some of these risks were unlikely
to occur, while others could be avoided or mitigated by CBS, and that, overall
these risks were outweighed by the potential benefits of the merger.
The discussion of the information and factors considered by the CBS Board of
Directors in making its decision is not intended to be exhaustive but is
believed to include all material factors considered by the CBS Board of
Directors. In view of the variety of material factors considered in connection
with its evaluation of the merger, the CBS Board of Directors did not find it
practicable to, and did not, quantify or otherwise assign relative weights to,
the specific factors considered in reaching its determination. In addition,
individual members of the CBS Board of Directors may have given different
weight to different factors.
Recommendation of the CBS Board of Directors. After careful consideration,
the CBS Board of Directors has determined that the merger is in the best
interests of CBS and its shareholders, has unanimously approved the merger and
the merger agreement and unanimously recommends that CBS shareholders vote
"for" the adoption of the merger agreement.
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Opinions of Financial Advisors
Viacom
Under a letter agreement dated as of September 2, 1999, Viacom engaged
Morgan Stanley to act as its financial advisor in connection with a possible
combination with CBS. The Viacom Board of Directors selected Morgan Stanley to
act as its financial advisor based on Morgan Stanley's qualifications,
expertise and reputation, as well as its knowledge of the business and affairs
of Viacom. On September 5, 1999, Morgan Stanley delivered an oral opinion to
the Viacom Board of Directors which was subsequently confirmed in writing,
that, as of that date, and based upon and subject to the considerations set
forth in the written opinion, the exchange ratio was fair from a financial
point of view to Viacom.
The full text of the opinion, which sets forth, among other things, the
assumptions made, procedures followed, matters considered and limitations on
the scope of the review undertaken by Morgan Stanley in rendering its opinion,
is attached as Annex H to this joint proxy statement/prospectus. Morgan
Stanley's written opinion is directed to the Viacom Board of Directors and only
addresses the fairness of the exchange ratio to Viacom as of the date of the
opinion. Morgan Stanley's written opinion does not address any other aspect of
the merger and does not constitute a recommendation to any Viacom shareholder
as to how to vote at the Viacom special meeting. The summary of the opinion set
forth in this joint proxy statement/prospectus is qualified in its entirety by
reference to the full text of the opinion attached as Annex H hereto. The
following is only a summary of the Morgan Stanley opinion. Viacom shareholders
are urged to, and should, read the opinion carefully and in its entirety.
In arriving at Morgan Stanley's opinion, Morgan Stanley, among other things:
. reviewed certain publicly available financial statements and other
information of Viacom and CBS;
. reviewed and analyzed certain internal financial statements and other
financial and operating data concerning Viacom and CBS prepared by the
respective managements of Viacom and CBS;
. discussed the past and current operations and financial condition and the
prospects of Viacom and CBS with senior executives of Viacom and CBS
including their estimates of the strategic operating benefits of the
merger and analyzed the pro forma impact of the merger on Viacom's
financial ratios;
. reviewed the reported prices and trading activity for the Class B common
stock of Viacom and the common stock of CBS;
. compared the financial performance of Viacom and CBS and the prices and
trading activity of Viacom and CBS with that of certain other comparable
publicly traded companies and their securities;
. participated in discussions and negotiations among representatives of
Viacom, CBS and their respective financial and legal advisors;
. reviewed the merger agreement and certain related documents; and
. performed such other analyses and considered such other factors that
Morgan Stanley deemed appropriate.
Morgan Stanley assumed and relied upon without independent verification the
accuracy and completeness of the information it reviewed for the purposes of
its opinion. With respect to the financial projections, Morgan Stanley assumed
that they had been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of Viacom
and CBS. Morgan Stanley has not made any independent valuation or appraisal of
the assets or liabilities of Viacom and CBS, nor has Morgan Stanley been
furnished with any such appraisals. Morgan Stanley has assumed that the merger
will be consummated in accordance with the terms set forth in the merger
agreement. Morgan Stanley's opinion is necessarily based on economic, market
and other conditions as in effect on, and the information made available to it
as of, the date of its opinion.
53
<PAGE>
The following is a brief description of all material analyses performed by
Morgan Stanley in connection with its oral opinion and the preparation of its
written opinion letter. These summaries of financial analyses include
information presented in tabular format. In order to understand the financial
analysis used by Morgan Stanley, the tables must be read together with the text
of each summary. The tables alone do not constitute a complete description of
the financial analyses.
Historical Public Market Trading Value. Morgan Stanley reviewed the stock
price performance of CBS based on an analysis of the historical closing prices
and trading volumes for the one year period beginning September 3, 1998 and
ending September 3, 1999. The year long time period chosen for the analysis of
historical public market trading values is a traditional measurement period for
stock prices chosen to reflect the impact of corporate events which might be
deemed to have an impact on the current share price performance of two
companies which are considering a stock-for-stock merger. The use of
incremental measurement periods within the year long review is designed to
better capture the progression of each company's share price throughout the
year and can better isolate the impact of specific corporate events on share
price performance.
The following table lists the low, average and high daily closing prices of
shares of CBS common stock for the periods indicated. These prices compare to
$48.89, the price for CBS common stock implied by multiplying the exchange
ratio by the price of Viacom Class B common stock on September 3, 1999.
<TABLE>
<CAPTION>
Historical CBS Common Stock Prices
------------------------------------
Low Average High
----------- ------------------------
<S> <C> <C> <C>
Last One Year........................... $ 18.00 $ 36.90 $ 50.44
Last Nine Months........................ 26.75 40.93 50.44
Last Six Months......................... 35.38 43.98 50.44
Last Three Months....................... 40.56 45.07 50.44
Last One Month.......................... 44.13 46.71 50.44
Last Two Weeks.......................... 45.88 47.81 50.44
</TABLE>
Comparative Stock Price Performance. As part of its analysis, Morgan Stanley
reviewed the stock price performance of Viacom Class B common stock and CBS
common stock and compared this performance with the following peer groups:
<TABLE>
<CAPTION>
Viacom Peer Group CBS Peer Group
----------------- --------------
<S> <C>
The Walt Disney Company A.H. Belo Corporation
Fox Entertainment Group, Inc. Clear Channel Communications, Inc.
The Seagram Company Ltd. Hearst-Argyle Television, Inc.
Time Warner Inc. Sinclair Broadcast Group, Inc.
Young Broadcasting Inc.
</TABLE>
Morgan Stanley observed that over the one year period from September 3, 1998
to September 3, 1999, the closing market prices appreciated as set forth below:
<TABLE>
<CAPTION>
% Total Appreciation
--------------------
<S> <C>
Viacom............................................... 56%
CBS.................................................. 80
Viacom Peer Group.................................... 23
(equity market capitalization-weighted index)
CBS Peer Group....................................... 42
(equity market capitalization-weighted index)
</TABLE>
Securities Research Analysts' Future Price Targets. Morgan Stanley reviewed
and analyzed future public market trading price targets for Viacom Class B
common stock and CBS common stock prepared and published
54
<PAGE>
by securities research analysts during the period from May 5, 1999 to August
18, 1999 for Viacom and May 26, 1999 to August 20, 1999 for CBS. Based upon
discussions with senior executives of Viacom and CBS, these analysts'
projections were viewed by Morgan Stanley as being representative of the future
prospects of Viacom and CBS. These targets reflected each analyst's estimate of
the future public market trading price of Viacom Class B common stock and CBS
common stock at the end of the particular period considered for each estimate.
Applying equity discount rates of 13.4% for Viacom and 12.8% for CBS, which
reflect each company's cost of equity, Morgan Stanley arrived at a range of
present values as of September 3, 1999 of these targets as set forth below:
<TABLE>
<CAPTION>
Present
Value
Range
-------
Low High
--- ----
<S> <C> <C>
Viacom Public Market Trading Price Target........................... $42 $50
CBS Public Market Trading Price Target.............................. 46 53
</TABLE>
The present value range of the Viacom Public Market Trading Price Targets
compares to a $45.06 price for the Viacom Class B common stock as of September
3, 1999. The present value range of the CBS Public Market Trading Price
Targets compares to a $48.89 price for the CBS common stock implied by
multiplying the exchange ratio by the price of Viacom Class B common stock on
September 3, 1999. Morgan Stanley noted that the public market trading price
targets published by the securities research analysts do not reflect current
market trading prices and that these estimates are subject to uncertainties,
including the future financial performance of Viacom and CBS and future
financial market conditions.
Peer Group Comparison. Morgan Stanley compared financial information of
Viacom and CBS with corresponding financial information for their respective
peer groups.
Morgan Stanley analyzed, among other things, for each company, the current
aggregate value, i.e., equity value adjusted for capital structure, expressed
as a multiple of earnings before interest, taxes, depreciation and
amortization expense, or EBITDA.
As of June 30, 1999 and based on estimates of EBITDA taken from selected
securities research analysts, the statistics derived from this analysis are
set forth below:
<TABLE>
<CAPTION>
Viacom Peer
Group CBS Peer Group
----------------- ----------------
Viacom Median High Low CBS Median High Low
------ ------ ---- ---- ---- ------ ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 EBITDA Multiple....... 17.1x 15.7x 19.0x 14.4x 22.7x 11.7x 25.7x 8.8x
2000 EBITDA Multiple....... 14.5 13.3 16.6 12.7 19.6 10.0 22.6 8.1
</TABLE>
The trading multiples for Viacom, CBS and their respective peer groups compare
to the transaction multiples implied by the exchange ratio of 22.7x 1999E CBS
EBITDA and 19.6x 2000E CBS EBITDA.
Discounted Cash Flow Analysis. Morgan Stanley performed a discounted cash
flow analysis of CBS' business. A discounted cash flow analysis involves an
analysis of the present value of projected cash flows and a terminal value
using discount rates and terminal year free cash flow perpetual growth rates
as indicated below. Morgan Stanley analyzed CBS' business using a forecast for
the period beginning January 1, 1999 and ending December 31, 2003, based on
estimates published by securities research analysts. Based upon discussions
with senior executives of CBS, these analysts' projections were viewed by
Morgan Stanley as being representative of the future prospects of CBS. Morgan
Stanley estimated the CBS common stock discounted cash flow value by using a
discount rate of 10% and a perpetual growth rate applied to 2003 free cash
flow ranging from 4.5% to 5.5%. This analysis yielded a range of per share
values for CBS common stock of
55
<PAGE>
approximately $45 to $54. This range of per share values for CBS common stock
compares to $48.89, the price for CBS common stock implied by multiplying the
exchange ratio by the price of Viacom Class B common stock on September 3,
1999.
The discount rates used in the discounted cash flow analysis of Viacom and
CBS reflect each company's weighted average cost of capital. The weighted
average cost of capital represents the cost of capital for CBS and Viacom based
on the relative proportion of debt, preferred equity and common equity employed
by each company. The range of perpetual growth rates employed in the CBS
discounted cash flow analysis reflects certain assumption of CBS' cash flow
growth in perpetuity. The terminal EBITDA multiple range used in the Viacom
discounted cash flow analysis was based on a review of the trading multiples
for Viacom and the companies in the Viacom peer group and a comparison of
Viacom's business position relative to its peers.
Morgan Stanley also performed a discounted cash flow analysis of Viacom's
business. Morgan Stanley analyzed Viacom's business using a forecast for the
period beginning January 1, 1999 and ending December 31, 2003, based on
estimates published by securities research analysts. Based upon discussions
with senior executives of Viacom, these analysts' projections were viewed by
Morgan Stanley as being representative of the future prospects of Viacom.
Morgan Stanley estimated the Viacom Class B common stock discounted cash flow
value by using a discount rate of 10% and terminal multiples of estimated 2003
EBITDA ranging from 13.0x to 15.0x. This analysis yielded a range of per share
values for Viacom Class B common stock of approximately $39 to $45. This range
of per share values for Viacom Class B common stock compares to a $45.06 price
for the Viacom Class B common stock as of September 3, 1999.
Sum-of-the-Parts Analysis. Morgan Stanley performed a sum-of-the-parts
analysis of CBS' business. A sum-of-the-parts analysis involves a separate
valuation of each of CBS' core businesses. The valuation methodology applied to
each component is set forth below:
<TABLE>
<CAPTION>
Component Valuation Methodology
--------- ---------------------
<S> <C>
Infinity Broadcasting Corporation Market Value of CBS' 700 million shares
Television Assets(a) 13x-15x 2000E EBITDA
Cable Programming (CMT/TNN) 17x-19x 2000E EBITDA
King World Productions, Inc. CBS net purchase price
Internet Holdings Morgan Stanley equity research estimate
</TABLE>
- --------
(a) Includes an analysis of CBS' Television Station group and Television
Network which were each analyzed as separate components.
This analysis yielded a range of per share values for CBS common stock of
approximately $42-$47. This range of per share values for CBS common stock
compares to $48.89, the price for CBS common stock implied by multiplying the
exchange ratio by the price of Viacom Class B common stock on September 3,
1999. The multiples for the Television Assets and Cable programming used in the
sum-of-the-parts analysis were arrived at after a review of publicly traded
companies with a similar operating profile to the CBS assets. Market position,
growth prospects and profitability were a few of the many factors used in
comparing the CBS assets to the publicly traded comparables.
Relative Contribution Analysis. Morgan Stanley compared pro forma
contribution of each of Viacom and CBS, based on securities research analyst
estimates, to the resultant combined company assuming completion of the merger.
Morgan Stanley adjusted these statistics to reflect each company's respective
capital structure and then compared them to the pro forma ownership by Viacom
shareholders of the common stock of the combined company, implied by the
exchange ratio, of approximately 46%. Morgan Stanley performed this
56
<PAGE>
analysis with and without Blockbuster as part of Viacom to reflect Viacom's
previously announced intention to split-off Blockbuster to the Viacom
shareholders and as a consequence, deconsolidate Blockbuster for accounting
purposes. The results in terms of both EBITDA and after tax cash flow are set
forth below:
<TABLE>
<CAPTION>
Viacom Equity Contribution
--------------------------------
With Without
Blockbuster Blockbuster
------------- -------------
<S> <C> <C>
2000E EBITDA........................... 55.3% 46.9%
2001E EBITDA........................... 54.5 45.9
2002E EBITDA........................... 53.1 44.9
2000E After Tax Cash Flow.............. 55.5 44.5
2001E After Tax Cash Flow.............. 56.2 45.4
2002E After Tax Cash Flow.............. 55.2 45.1
</TABLE>
Historical Exchange Ratio Analysis. Morgan Stanley compared the exchange
ratio of 1.085 to the ratio of the closing market prices of Viacom Class B
common stock and CBS common stock on September 3, 1999. Morgan Stanley also
compared this ratio to selected average historical ratios of the closing market
prices of CBS common stock to Viacom Class B common stock over various periods
ending September 3, 1999. Morgan Stanley then calculated the premiums
represented by the exchange ratio over these ratios. The results of this
analysis are set forth below:
<TABLE>
<CAPTION>
% Premium/
Market (Discount) to
Price Ratio Market Price Ratio
----------- ------------------
<S> <C> <C>
Current (9/3/99).............................. 1.086x (0.1)%
Prior 5 Days.................................. 1.109 (2.2)
Prior 10 Days................................. 1.123 (3.4)
Prior 20 Days................................. 1.116 (2.8)
Prior 30 Days................................. 1.097 (1.1)
Prior 45 Days................................. 1.071 1.3
Prior 60 Days................................. 1.064 2.0
Last 6 Months................................. 1.043 4.0
</TABLE>
As of September 3, 1999, the exchange ratio multiplied by the closing price for
the Viacom Class B common stock implied a $48.89 share price for the CBS common
stock or approximately a 5 cent discount to the closing price for CBS common
stock.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all of its
analyses as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Furthermore, selecting any
portion of Morgan Stanley's analyses, without considering all analyses, would
create an incomplete view of the process underlying the Morgan Stanley opinion.
In addition, Morgan Stanley may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting
from any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of Viacom or CBS.
In performing its analysis, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Viacom or CBS. Any
estimates contained in the analyses performed by Morgan Stanley are not
necessarily indicative of actual values, which may be significantly more or
less favorable than suggested by such estimates. The analyses performed were
prepared solely as a part of Morgan Stanley's analysis of the fairness of the
exchange ratio to Viacom in connection with the delivery of Morgan Stanley's
opinion to Viacom's Board of Directors. The analyses do not purport to be
appraisals or to reflect the prices at which Viacom Class B common stock or CBS
common stock might actually trade.
57
<PAGE>
The exchange ratio was determined through arm's-length negotiations between
Viacom and CBS and was approved by the Viacom Board of Directors. Morgan
Stanley's opinion to the Viacom Board of Directors was one of many factors
taken into consideration by the Viacom Board of Directors in making its
determination to approve the merger. Consequently, the Morgan Stanley analyses
described above should not be viewed as determinative of the opinion of the
Viacom Board of Directors with respect to the value of CBS or of whether the
Viacom Board of Directors would have been willing to agree to different
consideration.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. In the ordinary
course of Morgan Stanley's trading, brokerage and financing activities, Morgan
Stanley or its affiliates may at any time hold long or short positions, may
trade, make a market or otherwise effect transactions, for its own account or
for the accounts of customers, in the securities of Viacom or CBS.
In accordance with an engagement letter dated September 2, 1999, Viacom has
agreed to pay Morgan Stanley a $10 million fee for advisory services rendered
and to reimburse Morgan Stanley for reasonable expenses incurred. Of this $10
million fee, $7.5 million is contingent upon the closing of the merger. Viacom
has also agreed to indemnify Morgan Stanley and its affiliates, their
respective directors, officers, agents and employees and each person, if any,
controlling Morgan Stanley or any of its affiliates, against liabilities and
expenses, including certain liabilities under the federal securities laws,
arising out of Morgan Stanley's engagement. In the past, Morgan Stanley and its
affiliates have provided financial advisory and financing services for Viacom
and CBS and have received fees for the rendering of these services.
CBS
CBS retained Evercore to act as financial advisor to CBS and to render a
fairness opinion, from a financial point of view, in connection with the
merger. On September 5, 1999, Evercore delivered its oral opinion to the CBS
Board of Directors which was subsequently confirmed in a written opinion, that,
as of that date, the exchange ratio was fair, from a financial point of view,
to the shareholders of CBS.
The full text of the written opinion of Evercore is set forth as Annex I to
this joint proxy statement/prospectus and describes the assumptions made,
general procedures followed, matters considered and limits on the review
undertaken. Evercore's opinion is directed only to whether the exchange ratio
is fair, from a financial point of view, to the holders of CBS common stock and
does not constitute a recommendation of the merger over other courses of action
that may be available to CBS or constitute a recommendation to any CBS
shareholder as to how that shareholder should vote with respect to the merger.
The summary of the opinion of Evercore set forth in this joint proxy
statement/prospectus is qualified in its entirety by reference to the full text
of such opinion, attached as Annex I. Shareholders of CBS are urged to read the
opinion carefully and in its entirety.
In connection with rendering its opinion, Evercore has, among other things:
. analyzed various publicly available financial statements and other
information relating to CBS and Viacom;
. analyzed various internal financial statements and other non-public
financial and operating data concerning CBS, which were prepared by and
furnished to Evercore or reviewed for Evercore by the management of CBS,
and concerning Viacom, which were prepared by and furnished to Evercore
or reviewed for Evercore by the management of Viacom;
. analyzed various financial projections for 1999 concerning CBS, which
were prepared by the management of CBS, and concerning Viacom, which were
prepared by the management of Viacom;
. discussed the past and current operations and financial condition and the
prospects of CBS with the management of CBS;
58
<PAGE>
. discussed the past and current operations and financial condition and the
prospects of Viacom with the management of Viacom;
. reviewed the reported prices and trading activity of the CBS common stock
and Viacom Class B common stock;
. compared the market valuation and financial performance of CBS and Viacom
with that of several other comparable publicly traded companies;
. reviewed the financial terms to the extent available of certain
comparable acquisition transactions;
. participated in discussions and negotiations among representatives of
CBS, Viacom, and their respective financial and legal advisers;
. reviewed the merger agreement and the related exhibits and schedules;
. reviewed various information concerning cost savings and combination
benefits expected to result from the merger that was furnished to
Evercore or reviewed for Evercore by the managements of CBS and Viacom;
and
. performed other analyses and examinations and considered other factors as
Evercore in its sole judgment deemed appropriate.
For purposes of its analysis and opinion, Evercore assumed and relied,
without independent verification, upon the accuracy and completeness of the
information reviewed by Evercore or reviewed for Evercore. With respect to the
financial projections of CBS and Viacom for 1999 which were furnished to
Evercore by the managements of CBS and Viacom, and certain analyses concerning
the potential cost savings and combination benefits expected to result from the
merger which were reviewed for Evercore by the management of CBS, Evercore
assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and good faith judgments of the future
competitive, operating and regulatory environments and related financial
performance of CBS and Viacom, respectively. Evercore did not make nor assume
any responsibility for making any independent valuation or appraisal of the
assets or liabilities of CBS or Viacom, nor was Evercore furnished with any
such appraisals. Evercore's opinion was necessarily based on economic, market
and other conditions as in effect on, and the information and agreements made
available to Evercore as of the date of its opinion. Evercore assumed, with the
approval of CBS, that the merger would qualify as a tax-free reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986.
Evercore's opinion did not address CBS' underlying business decision to effect
the merger nor constitute a recommendation to any CBS shareholder as to how
that shareholder should vote with respect to the merger. Furthermore, Evercore
expressed no opinion as to the price or range of prices at which the shares of
Viacom Class B common stock would trade at any future time.
For purposes of its analyses, Evercore primarily relied upon publicly
available Wall Street research estimates for each company, and subsequently
compared those estimates to internal budgets for 1999 for each company to
confirm the reasonableness of the analysts' expectations.
For purposes of rendering its opinion, Evercore assumed, in all respects
material to its analysis, that the representations and warranties of each party
contained in the merger agreement were true and correct, that each party would
perform all the covenants and agreements required under the merger agreement,
and that all conditions to the consummation of the merger would be satisfied
without being waived.
In connection with a presentation to the CBS Board on September 5, 1999,
Evercore advised CBS' Board that, in evaluating the exchange ratio, Evercore
had performed a variety of financial analyses with respect to CBS and Viacom,
each of which material analysis is summarized below:
Historical Exchange Ratio Analysis. Evercore reviewed the daily closing
prices of CBS common stock and Viacom Class B common stock to determine the
implied exchange ratio based upon the relative prices of CBS common stock and
Viacom Class B common stock for each considered time period. Evercore did so in
order to analyze whether the agreed upon exchange ratio was consistent with the
implied exchange ratio during
59
<PAGE>
these periods. Evercore analyzed the implied exchange ratio between CBS common
stock and Viacom Class B common stock for various time periods between January
2, 1998 and September 3, 1999. Evercore noted that the agreed to exchange ratio
of 1.085 was within the range of historical implied exchange ratios in the
periods examined. The historical implied exchange ratios for the periods are
shown below:
<TABLE>
<CAPTION>
CBS Viacom Implied
Share Class B Exchange
Price Share Price Ratio
------ ----------- --------
<S> <C> <C> <C>
September 3, 1999................................... $48.94 $45.06 1.0860
10-Day Average...................................... 47.81 42.59 1.1225
20-Day Average...................................... 46.71 41.86 1.1159
30-Day Average...................................... 46.15 42.10 1.0964
45-Day Average...................................... 45.86 42.91 1.0688
60-Day Average...................................... 45.07 42.43 1.0621
90-Day Average...................................... 44.63 41.73 1.0695
1999 Year-to-Date Avg. (through 9/3/99)............. 41.57 42.11 0.9871
1998 Full-Year Average.............................. 30.33 28.64 1.0591
Merger Exchange Ratio............................... 1.0850
</TABLE>
Contribution Analysis. Evercore analyzed the relative contributions of CBS
and Viacom to the pro forma combined company with respect to revenues,
consolidated EBITDA, EBITDA less minority interest, adjusted to exclude
minority interests in the EBITDA of Infinity for CBS and in Blockbuster for
Viacom, equity market value, and enterprise value for the projected fiscal
years ending in 1999 and 2000. Evercore did so in order to compare CBS'
relative contribution to the combined company on these measurements to CBS' pro
forma ownership of the combined company based on the exchange ratio. Evercore
also reviewed the pro forma ownership of the combined company, taking into
account each company's outstanding options and warrants on common stock treated
under the treasury stock method. Evercore noted that the pro forma ownership
percentage based on the exchange ratio was consistent with CBS' contribution of
the measurements set forth below.
<TABLE>
<CAPTION>
FY 1999E FY 2000E
------------ ------------
CBS Viacom CBS Viacom
---- ------ ---- ------
<S> <C> <C> <C> <C>
Contribution Percentage:
Revenue........................................ 39.9% 60.1% 39.5% 60.5%
Consolidated EBITDA............................ 52.0% 48.0% 52.2% 47.8%
EBITDA Less Min. Int. (a)...................... 47.2% 52.8% 47.6% 52.4%
Equity Market Value............................ 54.7% 45.3%
Enterprise Value............................... 53.0% 47.0%
Pro Forma Economic Ownership Based on Exchange
Ratio:
CBS............................................ 54.6%
Viacom......................................... 45.4%
</TABLE>
- --------
(a) Excludes 35.8% minority interest in Infinity for CBS and 17.7% minority
interest in Blockbuster for Viacom.
Pro Forma Merger Analysis. Primarily relying on Wall Street research
estimates, Evercore analyzed the potential pro forma effects of the merger on
CBS' projected free cash flow per share based on various assumptions regarding
the merger. Evercore performed such analysis due to the fact that several Wall
Street research analysts use projected free cash flow per share as one, among
other, valuation measurements. For the purposes of this analysis, free cash
flow was defined as EBITDA less interest expense less cash taxes less capital
expenditures. This analysis indicated that the merger would initially be
dilutive to CBS' free cash flow per share. The actual results achieved by the
combined company may vary from projected results and the variations may be
material.
60
<PAGE>
Review of Selected Merger-of-Equals Transactions. Evercore reviewed the
financial terms, to the extent publicly available, of nine selected merger-of-
equals transactions, in order to compare the premiums implied in these
transactions to the implied premium in the merger. Evercore reviewed the
premiums implied in the selected merger-of-equals transactions relative to
market value contributions, assuming a constant market capitalization based on
closing stock prices prior to the announcement of such transactions.
Evercore noted that, if the merger had closed on September 3, 1999,
utilizing the Viacom closing stock price on September 3, 1999, and assuming the
exchange ratio of 1.085, CBS shareholders would have received Viacom Class B
common stock having a market value representing a discount of 0.1% to the CBS
common stock September 3, 1999 closing price. Evercore compared this implied
discount to the implied premiums/discounts for similar periods prior to public
announcement in the following comparable merger-of-equals transactions:
. Honeywell Inc./AlliedSignal Inc.;
. GTE Corporation/Bell Atlantic Corporation;
. Wells Fargo & Company/Norwest Corporation;
. Monsanto Company/American Home Products Corporation;
. BankAmerica Corporation/NationsBank Corp.;
. First Chicago NBD Corporation/Banc One Corporation;
. Citicorp/Travelers Group, Inc.;
. HFS Incorporated/CUC International Inc.; and
. NYNEX Corporation/Bell Atlantic Corporation.
In each of the above transactions, the shareholders of the first-named
company were to receive shares of the second-named company. Evercore considered
these merger-of-equals transactions to be reasonably similar to the merger, but
none of these precedents is identical to the merger.
The following table presents the premiums or discounts contemplated in the
merger and implied in these other transactions, from the perspective of the
shareholders of the first-named company, compared with the previous trading day
closing price per share:
<TABLE>
<CAPTION>
Premium to Prior Day Closing Price
----------------------------------
<S> <C>
CBS/Viacom.............................. -0.1%
Precedent "Merger-of-Equals"
Transactions:
Average............................... 3.5%
Median................................ 5.5%
Low................................... -5.8%
High.................................. 9.3%
</TABLE>
Evercore noted that the discount of 0.1% for the CBS/Viacom merger was
within the range of 5.8% -- 9.3% discount/premium for the other transactions
analyzed.
Selected Comparable Company Analysis. Evercore compared selected financial,
market and operating information of CBS with corresponding data of other
selected publicly traded companies with similar operations to those of CBS, in
order to compare CBS' public market valuation to public companies with similar
operations. Evercore compared the adjusted enterprise value to adjusted EBITDA
multiples of the consolidated CBS Corporation to a selected group of publicly
traded radio broadcasting and outdoor advertising companies. Adjusted
enterprise value for a given company was defined as total enterprise value,
which is equity market value plus total debt and preferred stock, less cash and
cash equivalents, less the value of unconsolidated stakes in other companies,
less the value of segments within the company that trade at multiples that are
significantly different from the rest of the company, and plus the value of any
minority stakes in consolidated businesses.
61
<PAGE>
Adjusted EBITDA for a given company was defined as EBITDA less the EBITDA
contributed by segments within the company that trade at multiples that are
significantly different from the rest of the company. This selected group of
publicly traded radio broadcasting and outdoor advertising companies was
comprised of:
. AM/FM Inc.;
. Citadel Communications Corporation;
. Clear Channel Communications, Inc.;
. Cox Radio, Inc.;
. Cumulus Media, Inc.;
. Emmis Communications Corporation;
. Entercom Communications Corp.;
. Hispanic Broadcasting Corporation;
. Infinity Broadcasting Corporation;
. Radio One, Inc.; and
. Saga Communications, Inc.
Evercore selected these radio broadcasting and outdoor advertising companies
because Evercore considered them to have operations similar to the operations
of CBS in this business segment. All multiples were calculated based on closing
prices as of September 3, 1999. For the comparable companies, EBITDA
projections were based on publicly available Wall Street research estimates.
Evercore noted that the closing price of CBS common stock on September 3, 1999
of $48.94 represented a multiple of EBITDA that was within the range found for
the CBS-comparable companies set forth above. To illustrate, Evercore
highlighted the following multiples of adjusted enterprise value to adjusted
1999E and 2000E EBITDA:
<TABLE>
<CAPTION>
Adj. Enterprise
Value to Adj. EBITDA
-----------------------
FY 1999E FY 2000E
---------- ----------
<S> <C> <C>
CBS Consolidated...................................... 20.8x 18.2x
Radio & Outdoor Advertising(a):
Average............................................. 22.5x 19.5x
Low................................................. 13.4x 12.0x
High................................................ 28.7x 24.2x
</TABLE>
- --------
(a) The analysis of Radio & Outdoor comparables excludes Hispanic Broadcasting
because its multiples were not in line with other comparables.
Evercore compared the adjusted enterprise value to adjusted EBITDA multiples
of CBS, excluding its majority-owned stake in Infinity, to a selected group of
publicly traded television broadcasting companies. Evercore looked at CBS
excluding Infinity due to the fact that many Wall Street research analysts also
analyze CBS in this manner in order to isolate the implied valuation of the
non-radio/outdoor advertising assets. In doing so, Evercore excluded the
financial impact of Infinity on the EBITDA of CBS. Evercore also reduced the
enterprise value of CBS used in the calculation by an amount equal to the
market value of Infinity common stock held by CBS plus Infinity's net debt
balance.
The group of publicly traded television broadcast companies selected for
this comparative analysis was comprised of:
. A.H. Belo Corporation;
. Granite Broadcasting Corporation;
. Hearst-Argyle Television, Inc.;
. Paxson Communications Corporation;
. Sinclair Broadcasting Group, Inc.;
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. United Television, Inc.; and
. Young Broadcasting, Inc.
Evercore selected these television broadcasting companies because Evercore
considered them to have operations similar to the operations of CBS, excluding
Infinity, in this business segment. All multiples were calculated based on
closing prices as of September 3, 1999. For the comparable companies, EBITDA
projections were based on publicly available Wall Street research estimates.
Evercore noted that the closing price of CBS common stock on September 3, 1999
of $48.94 represented a multiple of EBITDA that was within the range found for
the CBS-comparable companies set forth above. Evercore highlighted the
following multiples of adjusted enterprise value to adjusted 1999E and 2000E
EBITDA:
<TABLE>
<CAPTION>
Adj. Enterprise
Value to Adj. EBITDA
-----------------------
FY 1999E FY 2000E
---------- ----------
<S> <C> <C>
CBS Excluding Infinity(a) ............................ 19.2x 16.8x
Television Broadcasting(b):
Average............................................. 12.0x 10.9x
Low................................................. 9.0x 7.9x
High................................................ 14.2x 12.9x
</TABLE>
- --------
(a) Also excludes TV network and Internet assets.
(b) The analysis of Television Broadcasting comparables excludes Paxson
Communications because its multiples were not in line with other
comparables.
Evercore also compared financial, market and operating information of Viacom
with corresponding data of other selected publicly traded companies with
similar operations. Evercore compared the adjusted enterprise value to adjusted
EBITDA multiples of Viacom to a selected group of publicly traded entertainment
companies. The selected group of publicly traded entertainment companies was
comprised of:
. The Walt Disney Company;
. The News Corporation Limited;
. Time Warner Inc.;
. The Seagram Company Ltd.;
. Fox Entertainment Group, Inc.; and
. USA Networks, Inc.
Evercore selected these entertainment companies because Evercore considered
them to have operations similar to the operations of Viacom. All multiples were
calculated based on closing prices as of September 3, 1999. For the comparable
companies, EBITDA projections were based on publicly available Wall Street
research estimates. Evercore noted that the closing price of Viacom Class B
common stock on September 3, 1999 of $45.06 represented a multiple of Adjusted
EBITDA that was within the range found for the Viacom-comparable companies set
forth above. To illustrate, Evercore highlighted the following multiples of
adjusted enterprise value to adjusted 1999E and 2000E EBITDA:
<TABLE>
<CAPTION>
Adj. Enterprise
Value to Adj. EBITDA
-----------------------
FY 1999E FY 2000E
---------- ----------
<S> <C> <C>
Viacom(a)............................................. 20.2x 17.5x
Entertainment Comparable Firms(b):
Average............................................. 16.3x 13.8x
Low................................................. 12.2x 9.8x
High................................................ 20.8x 17.8x
</TABLE>
- --------
(a) Excludes Blockbuster.
(b) The analysis of Entertainment comparables excludes News Corp. due to its
relatively high concentration on publishing operations.
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No company used in the comparable company analyses summarized above is
identical to CBS or Viacom. Accordingly, any analysis of the fairness of the
consideration to be received by the holders of CBS common stock in the merger
involves complex considerations and judgments concerning differences in the
potential financial and operating characteristics of the comparable companies
and other factors in relation to the trading values of the comparable
companies.
Selected Comparable Transaction Analysis. Evercore reviewed the implied
transaction multiples paid in selected comparable merger and acquisition
transactions and compared these multiples to the multiples implied by the
consideration paid to CBS shareholders in the merger. Evercore did so in order
to compare the multiples paid in those transactions to the multiple implied in
the merger. Evercore noted that, if the merger had closed on September 3, 1999,
utilizing the closing price of Viacom Class B common stock on September 3, 1999
of $45.06, and assuming the exchange ratio of 1.085, CBS shareholders would
have received Viacom Class B common stock having a market value equal to $48.89
per each share of CBS common stock owned. Evercore analyzed the adjusted
enterprise value of CBS, derived from this implied price per share, as a
multiple of adjusted EBITDA and compared this multiple to multiples of EBITDA
paid in selected mergers and acquisitions of radio broadcasting and outdoor
advertising companies. The following selection of mergers and acquisitions of
radio broadcasting and outdoor advertising companies was used for purposes of
this analysis:
. Chancellor Media Outdoor Corporation/Lamar Advertising Co.
. Outdoor Systems, Inc./Infinity Broadcasting Corporation
. Jacor Communications, Inc./Clear Channel Communications, Inc.
. Capstar Broadcasting Corporation/Chancellor Media Corp.
. Universal Outdoor Holdings, Inc./Clear Channel Communications, Inc.
. American Radio Systems Corporation/CBS Corporation
. SFX Broadcasting, Inc./Capstar Broadcasting Corporation
. Viacom Radio/Evergreen Media Corp.
. Chancellor Media Corp./Evergreen Media Corp.
. Infinity Broadcasting Corporation/Westinghouse Electric Corporation
Evercore also performed this analysis for the following selection of mergers
and acquisitions involving television broadcasting companies:
. Gaylord Entertainment/CBS Corporation
. Kelly Broadcasting/Hearst-Argyle Television, Inc.
. Pulitzer Publishing Company (TV & Radio)/Hearst-Argyle Television, Inc.
. Sullivan Broadcasting/Sinclair Broadcast Group, Inc.
. LIN Television Corporation/Hicks Muse Tate & Furst
. Heritage Media Corporation/The News Corporation Limited
. Heritage Media Corporation/Sinclair Broadcast Group, Inc.
. A.H. Belo Corporation/Scripps Howard
. Argyle TV/Hearst-Argyle Television, Inc.
. Providence Journal Company/A.H. Belo Corporation
. First Media Television, L.P./Meredith Corporation
. New World Communications Group, Inc./The News Corporation Limited
. Renaissance Communications Corporation/Tribune Company
. Multimedia, Inc./Gannett Co., Inc.
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Evercore selected these transactions because they involved companies in
business segments in which CBS has operations. Evercore noted that the multiple
implied by the merger as of September 3, 1999 is within the range of multiples
paid in comparable transactions, and, therefore, that these analyses of
multiples supported a fairness determination concerning the merger.
<TABLE>
<CAPTION>
Transaction Value to EBITDA
---------------------------
<S> <C>
Merger Offer for CBS
CBS Consolidated.................................. 20.8x
CBS Excluding Infinity............................ 19.2x
Radio & Outdoor Transactions:
Average........................................... 17.7x
Low............................................... 14.2x
High.............................................. 21.0x
Television Broadcasting Transactions:
Average........................................... 14.4x
Low............................................... 9.8x
High.............................................. 23.3x
</TABLE>
Additionally, Evercore analyzed the adjusted enterprise value of Viacom as a
multiple of adjusted EBITDA and compared this multiple to multiples of EBITDA
paid in a selection of mergers and acquisitions of entertainment companies. The
following selection of mergers and acquisitions of entertainment companies was
used for purposes of this analysis:
. PolyGram N.V./The Seagram Company Ltd.
. Metro-Goldwyn-Mayer Inc./Management
. Turner Broadcasting System, Inc./Time Warner Inc.
. CBS, Inc./Westinghouse Electric Corp.
. Capital Cities/ABC, Inc./The Walt Disney Company
. MCA, Inc./The Seagram Company Ltd.
. Blockbuster Entertainment Corporation/Viacom Inc.
. Paramount Communications Inc./Viacom Inc.
Evercore selected these transactions because they involved companies in
business segments in which Viacom has operations. Evercore noted that the
multiple implied by Viacom's closing price on September 3, 1999 is within the
range of multiples paid in comparable transactions.
<TABLE>
<CAPTION>
Transaction
Value to
EBITDA
-----------
<S> <C>
Viacom (a).......................................................... 20.2x
Entertainment Transactions (b):
Average........................................................... 15.9x
Low............................................................... 12.3x
High.............................................................. 21.0x
</TABLE>
- --------
(a) Excludes Blockbuster.
(b) The analysis of Entertainment transactions excludes Blockbuster
Entertainment Corporation/Viacom Inc. transaction due to the retail nature
of Blockbuster's business.
No transaction used in the comparable transaction analyses summarized above
is identical to the merger. Accordingly, any analysis of the fairness of the
consideration to be received by the holders of CBS common stock in the merger
involves complex considerations and judgments concerning differences in the
potential financial and operating characteristics of the comparable
transactions and other factors in relation to the acquisition values of the
comparable companies.
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Discounted Cash Flow Analysis. Evercore estimated the present value of the
future stand-alone, unlevered free cash flows that could be produced by CBS.
Such analysis is performed to determine the value that a current share might be
worth based on various assumptions as set forth below. The net present value
ranges were estimated by applying one-year forward terminal value multiples
ranging from 16.0x to 18.0x 2004E EBITDA and discount rates ranging from 11.0%
to 14.0%. Terminal value multiples were determined based on both current public
and private market-based valuations, as well as Wall Street research analyst
estimates. The discount rates were determined based on the weighted average
cost of capital formulation, which utilizes the cost of both debt and equity
for a company/investment. This analysis indicated a value per share of CBS
common stock ranging from approximately $42.03 to $52.60, as compared to the
per share price of $48.89 for CBS common stock that was implied by the exchange
ratio as of September 3, 1999.
Evercore also performed a discounted cash flow analysis for Viacom. Evercore
estimated the present value of the future stand-alone, unlevered free cash
flows that could be produced by Viacom. The net present value ranges were
estimated by applying one-year forward terminal value multiples ranging from
16.0x to 18.0x 2004E EBITDA and discount rates ranging from 11.0% to 14.0%.
Terminal value multiples were determined based on both current public and
private market-based valuations, as well as Wall Street research analyst
estimates. The discount rates were determined based on the weighted average
cost of capital formulation, which utilizes the cost of both debt and equity
for a company. This analysis indicated a value per share of Viacom Class B
common stock ranging from approximately $42.80 to $53.18, as compared to the
per share price for Viacom Class B common stock of $45.06 on September 3, 1999.
Sum-of-the-Parts Analysis. Evercore estimated the value of CBS by
calculating the implied value of its different components at different
multiples and then adding these values to arrive at a value for the
consolidated entity. Evercore performed such analysis as it allows for the
different business segments of a company to be valued consistently with its
respective comparable peer group. This methodology is also commonly employed by
Wall Street research analysts as one, among other, valuation measurements. For
this sum-of-the-parts valuation, Evercore valued CBS' syndication business at a
range of 10.0x to 12.0x 2000E EBITDA, CBS' television segment at a fixed amount
for the network and at a range of 13.0x to 15.0x 2000E EBITDA for its
television stations, and CBS' cable network division at a range of 16.0x to
18.0x 2000E EBITDA. The remaining businesses of CBS, consisting of corporate
overhead, Internet assets, and CBS' stake in Infinity, were valued at fixed
amounts. Evercore based its valuation ranges of these segments on both current
public and private market-based valuations, as well as Wall Street analyst
estimates. The sum-of-the parts valuation yielded a CBS common stock valuation
range of $45.26 to $48.39 per share, as compared to the per share price of
$48.89 for CBS common stock that was implied by the exchange ratio as of
September 3, 1999.
Evercore also estimated the value of Viacom with a similar sum-of-the-parts
analysis. Evercore used a range of values for each of Viacom's business
segments and assets. These values were based on multiples of EBITDA,
subscribers or revenues, or on other metrics such as market value or historical
cost. The sum-of-the parts valuation yielded a Viacom Class B common stock
valuation range of $44.60 to $51.83 per share, as compared to the per share
price for Viacom Class B common stock of $45.06 on September 3, 1999.
The foregoing summary does not purport to be a complete description of the
analyses performed by Evercore or of its presentation to CBS' Board. The
preparation of financial analyses and a fairness opinion is not susceptible to
partial analysis or summary description. Evercore believes that its analyses
and the summary set forth above must be considered as a whole and that
selecting portions of its analyses and the factors considered by it, without
considering all analyses and factors, could create an incomplete view of the
processes underlying the analysis conducted by Evercore and its opinion.
Evercore has not indicated that any of the analyses which it performed had a
greater significance than any other.
In determining the appropriate analyses to conduct and when performing those
analyses, Evercore made numerous assumptions with respect to industry
performance, general business, financial, market and economic conditions and
other matters, many of which are beyond the control of CBS or Viacom. The
analyses which Evercore performed are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by the analyses. The analyses were prepared solely as
part
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of Evercore's analysis as to whether the exchange ratio is fair, from a
financial point of view, to the holders of CBS common stock. The analyses are
not appraisals and the estimates of values of companies do not reflect the
prices at which a company might actually be sold or the prices at which any
securities may trade at the present time or at any time in the future.
Evercore is a nationally recognized investment banking firm that is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions. CBS retained Evercore based on these
qualifications as well as its familiarity with CBS and Viacom. Evercore has
previously provided various investment banking and financial advisory services
to CBS, for which Evercore received customary fees for the rendering of these
services.
Pursuant to the terms of an engagement letter with Evercore, CBS agreed to
pay Evercore a fee equal to $2,500,000 following delivery of Evercore's
fairness opinion and $7,500,000 upon the completion of the merger. Whether or
not the merger is completed, CBS has agreed under the engagement letter to
reimburse Evercore for all its reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of its counsel, incurred in connection with
its engagement by CBS, and to indemnify Evercore against liabilities and
expenses in connection with its engagement.
Directors, Management and Corporate Governance of the Combined Company
Pursuant to the merger agreement, the proposed new Restated Certificate of
Incorporation and By-laws, and the stockholder agreement between National
Amusements and CBS, Viacom, CBS and National Amusements have agreed to
corporate governance arrangements which generally cannot be changed for three
years following the merger without approval of at least 14 directors and, in
some cases, approval of the combined company's shareholders. These corporate
governance arrangements are described below.
Chairman and Chief Executive Officer. Mr. Redstone, the current Chairman and
CEO of Viacom, will remain the Chairman and CEO of the combined company
following the merger. Mr. Redstone, as CEO, will be responsible, in
consultation with the President and COO, for the combined company's corporate
policy and strategy and will chair all Board and shareholder meetings at which
he is present. If Mr. Redstone ceases to be the CEO at any time during the
first three years following the merger, or if Mr. Redstone is no longer the CEO
at the effective time of the merger, Mr. Karmazin will be the CEO and will
retain the COO functions described below.
President and Chief Operating Officer. Mr. Karmazin, the current President
and CEO of CBS, will be the President and COO of the combined company following
the merger. The COO will report directly to the CEO and must consult with the
CEO on all major decisions affecting the combined company. Mr. Karmazin, as
COO, will be responsible for supervising, coordinating and managing the
combined company's business, operations, activities, operating expenses,
capital allocation, officers other than the CEO, and employees, including
hiring, terminating, changing positions and allocating responsibilities of
those officers and employees, other than hiring of the Chief Financial Officer,
Controller and General Counsel, which can only be done by majority vote of the
combined company's board. All officers, other than the CEO, and employees will
report directly or indirectly to the COO. During the three-year period
following the merger, Mr. Karmazin cannot be terminated or demoted, whether he
is COO or CEO, and none of the COO functions may be changed, unless approved by
a vote of at least 14 directors.
In a number of areas, Mr. Karmazin may not act without the approval of, and
the combined company's board may act by, a majority of the directors. As
described below, ten of the 18 directors of the combined company are expected
to be designees of Viacom or their successors and could therefore control
actions which may be taken by a majority of the combined company's directors.
In all other areas, Mr. Karmazin's authority to manage the combined company may
be limited only by a supermajority of the Board of at least 14 directors. As a
result, Mr. Karmazin will have an unusual degree of autonomy for a President
and COO of a large
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corporation. For example, Mr. Karmazin may approve the acquisition or
divestiture of an internet or internet related business meeting the criteria
discussed below for under $100 million, subject to an aggregate $550 million
limit, or the acquisition or divestiture of a radio or outdoor advertising
business, subject to an aggregate $300 million limit, and can only be overruled
in these decisions by a supermajority of 14 directors. Mr. Karmazin's ability
to hire and terminate officers of the combined company without board approval
is also unusual.
Board of Directors. At the effective time of the merger, the Board of
Directors of Viacom will be expanded to 18 directors. The Board size may not be
changed during the three-year period following the merger without the approval
of at least 14 directors. Eight of the 18 directors initially will be
individuals who were directors of CBS on September 6, 1999, or any independent
directors of CBS subsequently appointed to the CBS Board of Directors, as
selected by the CBS Board of Directors prior to the effective time of the
merger. The Viacom Board, subject to the fiduciary duties of its members, and
National Amusements, pursuant to its voting agreement with CBS, are required to
take all action necessary to fill any vacancy in any of the eight CBS
directorships with an independent director designated by a majority of the
remaining CBS directors. No CBS director serving on the Viacom Board may be
removed from office during the three-year period following the merger unless
the removal is for cause and is approved by at least 14 directors. The
remaining ten directors will be the Viacom directors immediately prior to the
effective time of the merger. Of these ten directors, two must either be the
current independent directors of Viacom or other disinterested, independent
persons that are chief executive officers, chief operating officers, chief
financial officers or former chief executive officers of a Fortune 500 company
or a non-U.S. public company of comparable size. Subject to the preceding
sentence, National Amusements, which is controlled by Mr. Redstone, through its
majority ownership of Viacom Class A common stock, has the ability to cause the
Viacom nominees to be elected to serve as the ten remaining directors.
Actions of the Board of Directors. All actions to be taken by the Board of
Directors of Viacom following the merger will require the approval of at least
14 directors, except for the actions specified below, which will require
approval only by a majority of the Board:
Acquisitions, Divestitures, Joint Ventures, Guarantees
. Any acquisition, equity investment or joint venture by Viacom or any of
its subsidiaries for more than $25 million.
. Any divestiture or other sale of assets not in the ordinary course by
Viacom or any of its subsidiaries for more than $25 million.
. Any real estate purchase, sale or lease by Viacom or any of its
subsidiaries for more than $25 million.
. Any guarantee by Viacom or any of its subsidiaries of an obligation of a
third party where the obligation guaranteed is more than $25 million.
. Notwithstanding any of the above, any acquisition or divestiture by
Viacom or any of its subsidiaries of:
-- internet or internet related businesses for more that $25 million
but less than $100 million, with the value thereof represented by
multi-year commitments for advertising, promotion and content
licensing, is excluded, so long as the aggregate of these
acquisitions or divestitures, in each case, does not exceed $550
million and
-- radio or outdoor advertising businesses for more than $25 million
but less than $100 million is excluded, so long as the aggregate of
these acquisitions or divestitures, in each case, does not exceed
$300 million;
provided that:
-- any divestiture of shares of a publicly traded internet or internet
related business with a value of up to $75 million is excluded and
will not be included in the calculation of any of the threshold
amounts set forth above,
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-- Board approval may be secured, but is not required, for any
transaction of more than $25 million but less than $100 million
where the regular meeting schedule of the Board so permits and is
not otherwise required,
-- the Board will be provided with information about and a status
report on the transactions completed without Board approval and
-- this limit of authority will be reviewed 12 months following the
merger and may be amended only with the approval of 14 directors.
. Any contract of Viacom or any of its subsidiaries not in the ordinary
course with a value in excess of $25 million.
. Notwithstanding any of the above, any of the acquisitions, divestitures
or other transactions described above that are approved by a majority of
the Board will not be included in the calculation of any of the threshold
amounts for these transactions. For example, if a majority of the Board
elects to approve the acquisition of an internet business for $100
million, the $100 million would not count against the $550 million
aggregate threshold above which this type of transaction would require
majority Board approval.
Employee Matters
. Employee benefit plans of Viacom or any of its subsidiaries: (1) creating
a new plan, (2) suspending or terminating an existing plan or (3)
adopting any amendment that materially increases costs to Viacom or any
subsidiary.
. Entering into any modifications or amendments to the employment
agreements with the CEO or the COO.
General
. The Annual Report on Form 10-K.
. The proxy statement and notice of meeting, including annual or special
meeting date, location, record date for voting.
. Any issuance of Viacom stock, or options, warrants or other similar
rights, including stock appreciation rights or debt or other securities
convertible into or exchangeable for Viacom stock.
. Any issuance of debt unless the debt is short term and is within the
spending limits of the annual operating budget or is replacing existing
debt.
. Annual capital expenditure and annual operating budgets and individual
capital expenditures in excess of $25 million for Viacom or any of its
subsidiaries.
. Viacom or any of its subsidiaries pays a dividend or repurchases its
stock from a third party.
. Review and approval of any action or transaction where Board action is
required by law, other than Section 141(a) of the Delaware General
Corporation Law, or by the terms of the transaction, in all cases other
than as specifically set forth in Viacom's proposed new Restated
Certificate of Incorporation.
. Review and approval of Board minutes.
. Subject to other provisions of Viacom's proposed new Restated Certificate
of Incorporation, determining Board administration, including number of
directors, meeting schedule, nominees, committees, director compensation,
director and officer insurance authorization, internal investigations and
retention of advisors in connection with the foregoing, and decisions
regarding indemnification of individuals.
. Subject to other provisions of Viacom's proposed new Restated Certificate
of Incorporation, amendments to the proposed new Restated Certificate of
Incorporation and By-laws of Viacom.
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. Commencement and settlement of major litigation.
. Selection of independent auditors.
. All matters on which Viacom's Board of Directors has historically taken
action other than:
-- matters relating to the subject matters addressed in this list and
not requiring the approval of the Board of Directors under Viacom's
proposed new Restated Certificate of Incorporation and
-- those matters delegated to the COO, including all the COO functions
set forth in Viacom's proposed new Restated Certificate of
Incorporation.
Committees of the Board. The Board of Directors of Viacom may delegate any
of its responsibilities to a committee. During the three-year period following
the merger, except with respect to the Compensation Committee and the Officers
Nominating Committee described below, CBS directors must be represented on
each committee in the same proportion as their representation on the full
Board of Directors, with a minimum of one CBS director on each committee.
Viacom's proposed new Restated Certificate of Incorporation specifically
provides for two committees, the Officers Nominating Committee and the
Compensation Committee:
Officers Nominating Committee. The Officers Nominating Committee will be
composed of the COO or, in the event Mr. Karmazin is CEO, the CEO. During
the three-year period following the merger, the Officers Nominating
Committee has the power, subject to the powers of the Compensation
Committee, to hire, elect, terminate, change positions, allocate
responsibilities and determine non-equity compensation of officers and
employees, other than the Chairman, CEO and COO. The Officers Nominating
Committee will not, however, have the power to fill the position of Chief
Financial Officer, Controller or General Counsel without approval by a
majority of the Board of Directors, although the Officers Nominating
Committee will have the power to terminate the employment of the persons
holding those positions. Any action taken by the Officers Nominating
Committee may be overturned by a vote of at least 14 directors.
Compensation Committee. The Compensation Committee will be composed of
three CBS directors who are independent directors and three non-CBS
directors, all of whom are independent. Except as set forth in the
following sentence, all compensation must be approved by the Compensation
Committee. The Compensation Committee does not have the power to approve
the annual compensation of any talent, as that term is commonly used in
the media or entertainment industries, or of any employee whose annual
cash compensation, measured as salary plus target bonus is less than $1
million. These powers are delegated to the Officers Nominating Committee.
Subsidiaries. The CEO and COO will be elected or appointed to the boards of
directors of all public subsidiaries of Viacom following the merger. In
addition, the Board of Directors of Viacom will have the right, in
consultation with the COO or, if Mr. Karmazin is the CEO, the CEO, to
implement corporate governance arrangements for any public subsidiary of
Viacom consistent with the corporate governance arrangements contained in
Viacom's proposed new Restated Certificate of Incorporation.
Miscellaneous. The combined company may not issue any stock or other
securities, including authorized shares of Viacom Class A common stock and
Viacom preferred stock, giving the holder the right to vote on any matter on
which shareholders are entitled to vote, if National Amusements would, as a
result of the issuance, no longer own a majority of the outstanding voting
stock of the combined company. Any amendment, alteration, repeal or waiver of
the provisions of the new proposed Restated Certificate of Incorporation
summarized above requires the approval of at least 14 directors of the
combined company.
Accounting Treatment
The merger will be accounted for as a purchase for financial accounting
purposes in accordance with generally accepted accounting principles. For
purposes of preparing Viacom's consolidated financial statements,
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Viacom will establish a new accounting basis for CBS' assets and liabilities
based upon their fair values, the merger consideration and the costs of the
merger. Viacom believes that any excess of cost over the fair value of the net
assets of CBS will be recorded as goodwill and other intangible assets. A final
determination of the intangible asset lives and required purchase accounting
adjustments, including the allocation of the purchase price to the assets
acquired and liabilities assumed based on their respective fair values, has not
yet been made. Accordingly, the purchase accounting adjustments made in
connection with the development of the unaudited pro forma combined financial
information appearing elsewhere in or incorporated by reference into this joint
proxy statement/prospectus are preliminary and have been made solely for
purposes of developing that pro forma information. Viacom will determine the
fair value of CBS' assets and liabilities and will make appropriate purchase
accounting adjustments, including adjustments to the amortization period of the
intangible assets, upon completion of that determination.
Federal Income Tax Consequences
The following discussion summarizes the material United States federal
income tax consequences of the merger assuming that it is consummated as
contemplated by this joint proxy statement/prospectus. This discussion is based
on the Internal Revenue Code, U.S. Treasury regulations, judicial decisions and
administrative rulings as of the date hereof, all of which are subject to
change, including changes with retroactive effect. The discussion below does
not address any state, local or foreign tax consequences of the merger. This
discussion assumes that shareholders hold such shares as capital assets. The
tax treatment of a shareholder may vary depending upon the shareholder's
particular situation, and some shareholders, including individuals who hold
options in respect of CBS common stock, insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, and persons who are
neither citizens nor residents of the United States or that are foreign
corporations, foreign partnerships or foreign estates or trusts as to the
United States, may be subject to special rules not discussed below.
Each CBS shareholder is urged to consult his, her or its own tax advisor as
to the particular tax consequences to him, her or it of the merger, including
the applicability and effect of any state, local or foreign laws, and of
changes in applicable tax laws.
Federal Income Tax Consequences of the Merger. The material federal income
tax consequences of the merger of CBS directly into Viacom will be as follows
and Cravath, Swaine & Moore, counsel to CBS, and Paul, Weiss, Rifkind, Wharton
& Garrison, counsel to Viacom, have each rendered an opinion to such effect:
(1) The merger will qualify as a reorganization under Section 368(a) of
the Internal Revenue Code and each of CBS and Viacom will be a party to
that reorganization within the meaning of Section 368(b) of the Internal
Revenue Code.
(2) CBS shareholders will not recognize any income, gain or loss as a
result of the receipt of Viacom Class B common stock or Viacom Series C
preferred stock, except for any payment received in lieu of fractional
shares and to the extent that any payment by Viacom of transfer taxes is
treated as taxable consideration received by the CBS shareholders.
(3) A CBS shareholder's tax basis for the shares of Viacom Class B
common stock or Viacom Series C preferred stock received in the merger,
including any fractional share interest for which payment is received, will
equal such shareholder's tax basis in the shares of CBS common stock or CBS
Series B preferred stock exchanged therefor.
(4) A CBS shareholder's holding period for the Viacom Class B common
stock or Viacom Series C preferred stock received in the merger will
include the period during which the shares of CBS common stock or CBS
Series B preferred stock exchanged therefor were held.
Neither Viacom nor CBS has requested or will request an advance ruling from the
Internal Revenue Service as to whether the merger qualifies as a reorganization
under Section 368(a) of the Internal Revenue Code. An opinion of counsel is not
binding on the Internal Revenue Service or the courts.
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Further, the opinions of Cravath, Swaine & Moore and Paul, Weiss, Rifkind,
Wharton & Garrison referred to above are based on, among other things, current
law and representations as to factual matters made by, among others, CBS and
Viacom. Any change in current law, which may or may not be retroactive, or
failure of any such factual representations to be true, correct and complete in
all material respects would jeopardize the conclusions reached by counsel in
their opinions. Neither CBS nor Viacom is currently aware of any facts or
circumstances that would cause any representations made by it to Cravath,
Swaine & Moore and Paul, Weiss, Rifkind, Wharton & Garrison to be untrue or
incorrect in any material respect.
Viacom and CBS have requested a private letter ruling from the Internal
Revenue Service that a merger of CBS into Viacom/CBS LLC will be viewed, for
purposes of determining qualification under Section 368(a) of the Internal
Revenue Code, as a merger of CBS into Viacom. A non-waivable condition of the
merger of CBS into Viacom/CBS LLC is that Cravath, Swaine & Moore and Paul,
Weiss, Rifkind, Wharton & Garrison provide opinions in substance identical to
those in paragraphs (1) through (4) above.
Payment received by a CBS shareholder in lieu of a fractional share interest
of Viacom Class B common stock or Viacom Series C preferred stock will be
treated as having been received in exchange for the fractional share interest
of Viacom Class B common stock or Viacom Series C preferred stock that the
shareholder would otherwise have been entitled to receive. This receipt of this
payment will result in gain or loss measured by the difference between the tax
basis allocable to the fractional share interest and the amount of payment
received. The gain or loss will be capital gain or loss to the shareholder.
Viacom and CBS do not believe that any significant transfer taxes will be
payable as a consequence of the merger. Viacom's payment of any transfer taxes
that, to the knowledge of Viacom and CBS, may be payable as a consequence of
the merger should not be treated as taxable consideration received by CBS
shareholders in the merger. If the payment of any such taxes were treated as
taxable consideration, the CBS shareholders would recognize income or gain in
an amount not in excess of the amount of such taxable consideration.
Viacom's obligation to complete the merger is conditioned upon, among other
things, its receipt of an opinion from Paul, Weiss, Rifkind, Wharton & Garrison
that the merger will be treated as a reorganization under Section 368(a) of the
Internal Revenue Code and that Viacom and CBS will each be a party to the
reorganization within the meaning of Section 368(b) of the Internal Revenue
Code. The obligation of CBS to complete the merger is conditioned upon, among
other things, CBS's receipt of an opinion from Cravath, Swaine & Moore that the
merger will be treated as a reorganization under Section 368(a) of the Internal
Revenue Code and that Viacom and CBS will each be a party to the reorganization
within the meaning of Section 368(b) of the Internal Revenue Code. These
opinions of counsel will be based in part upon representations, made as of the
effective time of the merger, by Viacom and CBS, which each counsel will assume
to be true, correct and complete. If the representations are inaccurate, the
opinions of counsel could be adversely affected.
Backup Withholding. Under the backup withholding rules, a holder of CBS
common stock or CBS Series B preferred stock may be subject to backup
withholding at the rate of 31% with respect to payment received in exchange for
the fractional share interest unless the shareholder:
. is a corporation or comes within other exempt categories and, when
required, demonstrates this fact or
. provides a taxpayer identification number and certifies that the
taxpayer identification number is correct and the taxpayer is not
subject to backup withholding for specified reasons, and otherwise
complies with applicable requirements of the backup withholding rules.
Any amount withheld under these rules will be credited against the
shareholder's federal income tax liability.
Reporting Requirements. CBS shareholders will be required to attach a
statement to their tax returns for the taxable year in which the merger is
completed that contains the information set forth in Treasury Regulation 1.368-
3(b) of the Department of Treasury regulations. The statement must include the
tax basis in the CBS common stock or CBS Series B preferred stock surrendered
and a description of the Viacom Class B common stock or Viacom Series C
preferred stock received in the merger.
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Merger Consideration
At the effective time of the merger, each outstanding share of CBS common
stock will be converted into the right to receive 1.085 fully paid and
nonassessable shares of Viacom non-voting Class B common stock and each
outstanding share of CBS Series B preferred stock will be converted into the
right to receive 1.085 fully paid and non-assessable shares of Viacom Series C
preferred stock, except that a payment will be made in lieu of fractional
shares as described below. Any shares of CBS common stock or CBS Series B
preferred stock held by any direct or indirect wholly owned subsidiary of
Viacom or CBS will be included in the exchange, but any shares of CBS common
stock or CBS Series B preferred stock held by Viacom or CBS will not be
included, as described in the next paragraph. As of the effective time of the
merger, all shares of CBS common stock and CBS Series B preferred stock will no
longer be outstanding, will automatically be cancelled and will cease to exist,
and each holder of a certificate representing any shares of CBS common stock or
CBS Series B preferred stock will cease to have any rights other than the right
to receive the merger consideration. The exchange ratio was determined through
arm's-length negotiations between CBS and Viacom.
As of the effective time of the merger, any shares of CBS common stock and
CBS Series B preferred stock owned immediately prior to the effective time of
the merger by Viacom or CBS, excluding any shares held by any direct or
indirect wholly owned subsidiary of Viacom or CBS, will be cancelled and
retired and will cease to exist and no consideration will be delivered in
exchange for these shares.
Conversion of Shares; Procedures for Exchange of Certificates; Fractional
Shares
The conversion of CBS common stock into the right to receive Viacom non-
voting Class B common stock, CBS Series B preferred stock into the right to
receive Viacom Series C preferred stock and, in both cases, the right to
receive payment instead of fractional shares will occur automatically at the
effective time of the merger. As soon as practicable after the effective time
of the merger, a bank or trust company designated by Viacom and reasonably
acceptable to CBS, in its capacity as exchange agent, will send a transmittal
letter to each former CBS shareholder. The transmittal letter will contain
instructions on how to obtain shares of Viacom Class B common stock in exchange
for shares of CBS common stock and shares of Viacom Series C preferred stock in
exchange for shares of CBS Series B preferred stock. CBS shareholders should
not send in their stock certificates until they receive the transmittal letter
and accompanying materials from the exchange agent.
In the event of a transfer of ownership of CBS common stock or CBS Series B
preferred stock which is not registered in the records of CBS' transfer agent,
a certificate representing the proper number of shares of Viacom Class B common
stock or CBS Series B preferred stock, as appropriate, may be issued to a
person other than the person in whose name the certificate surrendered is
registered if the certificate is properly endorsed or otherwise is in proper
form for transfer and the person requesting the issuance pays any required
transfer or other taxes required by reason of the issuance of shares of Viacom
Class B common stock or CBS Series B preferred stock to a person other than the
registered holder of the certificate or establishes to the satisfaction of
Viacom that the taxes have been paid or are not applicable.
All shares of Viacom Class B common stock issued upon conversion of shares
of CBS common stock and shares of Viacom Series C preferred stock issued upon
conversion of shares of CBS Series B preferred stock, together with any payment
in lieu of fractional shares of Viacom Class B common stock or Viacom Series C
preferred stock, will be deemed to have been issued and paid in full
satisfaction of all rights pertaining to the shares of CBS common stock or
preferred stock, subject to Viacom's obligation to pay any dividends or make
any other distributions with a record date after the effective time of the
merger that may have been declared or made by Viacom on shares of Viacom Class
B common stock or Viacom Series C preferred stock after the effective time of
the merger and which remain unpaid prior to the issuance of Viacom Class B
common stock in exchange for CBS common stock or Viacom Series C preferred
stock in exchange for CBS Series B preferred stock.
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No fractional shares of Viacom Class B common stock will be issued to any
CBS shareholder upon surrender of certificates previously representing CBS
common stock. For each fractional share of Viacom Class B common stock that
would otherwise be issued, Viacom, through the exchange agent, will pay to CBS
shareholders an amount equal to the product obtained by multiplying the
fractional share interest to which the shareholder would otherwise be entitled
by the 4:00 p.m. closing price for a share of Viacom Class B common stock as
reported in The Wall Street Journal (Northeast edition), or, if there is no
such report in The Wall Street Journal, any other authoritative source, on the
first trading day immediately following the effective time of the merger.
No fractional shares of Viacom Series C preferred stock will be issued to
any CBS shareholder upon surrender of certificates previously representing CBS
Series B preferred stock. For each fractional share of Viacom Series C
preferred stock that would otherwise be issued, Viacom, through the exchange
agent, will pay to CBS shareholders an amount equal to the product of 1,000 and
the closing price referred to in the preceding paragraph.
Litigation
In September 1999, two purported shareholder class action lawsuits were
filed against CBS and the members of the CBS Board of Directors; one in the
Supreme Court of the State of New York, County of New York, and one in the
Philadelphia County Court of Common Pleas. In the lawsuits, plaintiffs allege
that the defendants have breached their fiduciary duties by entering into the
merger agreement. The complaints seek an order declaring that defendants
breached their fiduciary duties and requiring defendants to take steps to
increase the short-term value of CBS stock through an active auction for
control of CBS and other means; compensatory damages in an unspecified amount;
costs and expenses; and such other relief as the courts may deem just and
proper. CBS believes that the lawsuits are without merit and plans to defend
vigorously against them.
Effective Time of the Merger
The effective time of the merger will be the time of the filing of the
certificate of merger with the Secretary of State of the State of Delaware or
any later time as is agreed upon by Viacom and CBS and specified in the
certificate of merger.
Federal Securities Laws Consequences
The Viacom Class B common stock and the Viacom Series C preferred stock to
be issued pursuant to the merger agreement will not be subject to any
restrictions on transfer arising under the Securities Act of 1933, except for
shares issued to any CBS shareholder who may be deemed to be an "affiliate" of
CBS or Viacom for purposes of Rule 145 under the Securities Act. It is expected
that each affiliate will enter into an agreement with Viacom providing that the
affiliate will not transfer any Viacom Class B common stock or Viacom Series C
preferred stock received in the merger except in compliance with the resale
provisions of Rules 144 or 145 under the Securities Act or as otherwise
permitted under the Securities Act. The merger agreement requires CBS to use
reasonable best efforts to cause its affiliates to enter into these agreements,
and CBS has represented and warranted that it has advised its affiliates of the
resale restrictions imposed by applicable securities laws. This joint proxy
statement/prospectus does not cover resales of Viacom Class B common stock or
Viacom Series C preferred stock received by any person upon consummation of the
merger, and no person is authorized to make any use of this joint proxy
statement/prospectus in connection with any resale.
Stock Exchange Quotation
It is a condition to the consummation of the merger that the shares of
Viacom Class B common stock to be issued pursuant to the merger agreement and
into which the Viacom Series C preferred stock is convertible be authorized for
listing on the New York Stock Exchange, subject to official notice of issuance.
Viacom will file a listing application with the New York Stock Exchange.
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The Viacom Series C preferred stock will not be listed on an exchange.
Dissenters' Rights of Appraisal
Holders of CBS common stock and CBS Series B preferred stock are not
entitled to dissenters' rights of appraisal in connection with the merger.
Holders of Viacom Class A common stock and Viacom Class B common stock are
not entitled to dissenters' rights of appraisal as a result of the merger.
Delisting and Deregistration of CBS Common Stock
If the merger is consummated, the shares of CBS common stock will be
delisted from the NYSE, the Boston Stock Exchange, the Chicago Stock Exchange,
the Pacific Exchange and the Philadelphia Stock Exchange and will be
deregistered under the Exchange Act.
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THE MERGER AGREEMENT AND
RELATED AGREEMENTS
The Merger Agreement
At the effective time of the merger, either CBS will merge with and into
Viacom or CBS will merge with and into Viacom/CBS LLC. The merger of CBS into
Viacom/CBS LLC will occur only if (1) guidance is received from the IRS, the
United States Department of Treasury or other appropriate governmental
authority and if the merger would not have an adverse tax effect to Viacom, CBS
or their shareholders, as a result of which, if the merger were structured as a
merger of CBS with and into Viacom/CBS LLC, each of Paul, Weiss, Rifkind,
Wharton & Garrison and Cravath, Swaine & Moore continues to be able to deliver
its opinion that the exchange of CBS common stock for Viacom Class B common
stock and the exchange of CBS Series B preferred stock for Viacom Series C
preferred stock will be tax-free for federal income tax purposes, and (2) the
merger would not have an adverse tax effect to Viacom, CBS or their
shareholders.
Effective Time and Closing of the Merger
The closing of the merger will take place on the first business day after
the satisfaction or, if permissible, waiver of the conditions to closing set
forth in the merger agreement. On the closing date, the merger will be
consummated by filing (1) a certificate of merger with the Secretary of State
of the State of Delaware and (2) articles of merger with the Department of
State of the Commonwealth of Pennsylvania. The effective time of the merger
will be the filing of the certificate of merger with the Secretary of State of
the State of Delaware, or any later time as may be agreed by the parties and
specified in the certificate of merger.
Conversion of Securities
At the effective time of the merger, each share of CBS Series B preferred
stock issued and outstanding immediately prior to the effective time of the
merger, including any shares owned by any direct or indirect wholly owned
subsidiary of Viacom or CBS but excluding any shares held in the treasury of
CBS or owned by Viacom immediately prior to the effective time of the merger
will be converted into the right to receive 1.085 shares of Viacom Series C
preferred stock and each share of CBS common stock issued and outstanding
immediately prior to the effective time of the merger, including any shares
owned by any direct or indirect wholly owned subsidiary of Viacom or CBS, and
any shares held by benefit plans or trusts, including Rabbi trusts, but
excluding any shares to be cancelled pursuant to the following sentence, will
be converted into the right to receive 1.085 shares of Viacom Class B common
stock. At the effective time of the merger, each share held in the treasury of
CBS and each share owned by Viacom immediately prior to the effective time of
the merger will be cancelled and extinguished and no payment will be made for
those shares. After the effective time of the merger, each certificate that
previously represented shares of CBS common stock will represent only the right
to receive Viacom Class B common stock into which the shares of CBS common
stock are converted in the merger and payment instead of fractional shares of
Viacom Class B common stock and each certificate that previously represented
shares of CBS Series B preferred stock will represent only the right to receive
Viacom Series C preferred stock into which the shares of CBS Series B preferred
stock are converted in the merger and payment instead of fractional shares of
Viacom Series C preferred stock.
As soon as practicable after the effective time of the merger, a bank or
trust company designated by Viacom and acceptable to CBS, in its capacity as
exchange agent, will send a transmittal letter to each former CBS shareholder.
The transmittal letter will contain instructions on how to obtain shares of
Viacom Class B common stock in exchange for shares of CBS common stock and
shares of Viacom Series C preferred stock in exchange for shares of CBS Series
B preferred stock. CBS shareholders should not send in their stock certificates
until they receive the transmittal materials from the exchange agent.
Viacom's Proposed New Restated Certificate of Incorporation and By-laws
Viacom's proposed new Restated Certificate of Incorporation and By-laws give
effect to the governance arrangements agreed between Viacom and CBS. You can
find more information on the governance arrangements in the sections titled
"The Merger--Directors, Management and Corporate Governance of the Combined
Company" and "Adoption of New Restated Certificate of Incorporation."
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Representations and Warranties of Viacom and CBS
Viacom and CBS made mutual customary representations and warranties in the
merger agreement regarding the following:
. corporate organization and qualification to do business of each of the
companies and their subsidiaries;
. validity and effectiveness of charters and by-laws;
. capitalization of the companies;
. authority to enter into the merger agreement;
. absence of conflicts between the merger agreement and the merger, on the
one hand, and other contractual and legal obligations of the companies,
on the other hand;
. requirement of consents, approvals, filings or other authorizations to
enter into the merger agreement and consummate the merger;
. possession and effectiveness of all permits and licenses and contracts
necessary to carry on business as currently conducted;
. absence of material non-competition agreements;
. operation of business in material compliance with permits, licenses and
applicable laws;
. compliance with all applicable SEC filing requirements and accuracy and
completeness of SEC filings;
. financial statements contained in SEC filings;
. absence of changes or events since December 31, 1998;
. litigation;
. employee benefit plans;
. labor matters;
. environmental matters;
. intellectual property;
. tax matters;
. Year 2000 compliance;
. opinion of financial advisors;
. shareholder vote required to adopt the merger agreement;
. use of brokers;
. inapplicability of state anti-takeover provisions;
. in the case of CBS, that neither the merger agreement nor the merger
would give rise to the exercise or issuance of rights under its
shareholders' rights plan;
. in the case of CBS, Gaylord Entertainment Company's agreement and proxy
to vote in favor of the merger; and
. in the case of Viacom, Viacom/CBS LLC has engaged in no business
activities and no election has been made to treat Viacom/CBS LLC as a
taxable entity.
None of the representations and warranties made in the merger agreement survive
the closing of the merger.
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No Solicitation Provision
CBS has agreed not to, directly or indirectly, through any officer,
director, agent or otherwise, initiate, solicit or knowingly encourage, or take
any other action knowingly to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
"competing transaction," which is defined in the merger agreement as any
transaction, other than the merger, that would result in a third party or its
shareholders acquiring more than 35% of the voting power of the CBS common
stock then outstanding or more than 35% of the assets of CBS and its
subsidiaries, taken as a whole, or enter into or maintain or continue
discussions or negotiate with any person in furtherance of any related
inquiries or to obtain a competing transaction, or agree to or endorse any
competing transaction, or authorize any of the officers, directors or employees
of CBS or any agent or representative of CBS to take any such action. CBS has
agreed to notify Viacom as promptly as practicable of all the relevant material
details relating to all inquiries and proposals that CBS, or any officer,
director, employee, agent or representative, may receive relating to any of the
foregoing matters.
Notwithstanding the foregoing, prior to the adoption of the merger agreement
by the shareholders of CBS, the Board of Directors of CBS is not prohibited
from:
(1) furnishing information to, or entering into and engaging in
discussions or negotiations with, any person that makes a bona fide
unsolicited written proposal that the Board of Directors of CBS determines
in good faith, after consultation with CBS' financial advisors and
independent legal counsel, can be reasonably expected to result in a
"superior proposal," which is defined in the merger agreement as any
proposal that would result in a third party acquiring, directly or
indirectly, more than 50% of the voting power of the outstanding CBS common
stock or all or substantially all the assets of CBS and its subsidiaries,
taken as a whole, for consideration which the Board of Directors of CBS
determines in its good faith judgment to be more favorable to CBS'
shareholders than the merger with Viacom, provided that CBS must notify
Viacom of its intention to provide information to, or enter into
negotiations with, a third party concerning a superior proposal, keep
Viacom informed of the status and material terms of any superior proposal
and enter into a confidentiality agreement with the third party on
customary terms;
(2) complying with its disclosure and other obligations under applicable
laws; or
(3) failing to make or withdrawing or modifying its recommendation to
shareholders regarding adoption of the merger agreement following the
making of a superior proposal if the Board of Directors of CBS, after
consultation with and based upon advice of independent legal counsel,
determines in good faith that the action is necessary for the Board of
Directors of CBS to comply with its fiduciary duties under applicable law.
Mutual Covenants of Viacom and CBS
Viacom and CBS have agreed as follows:
. each company will cooperate to file the SEC documents necessary to
complete the merger;
. Viacom will solicit consents and CBS will call and hold a shareholder's
meeting to vote upon the adoption of the merger agreement and, in the
case of Viacom, the adoption of the proposed new Restated Certificate of
Incorporation and the issuance of Viacom Class B common stock and Viacom
Series C preferred stock in connection with the merger;
. Viacom will solicit consents and CBS will solicit proxies in favor of the
adoption of the merger agreement and, in the case of Viacom, the adoption
of the proposed new Restated Certificate of Incorporation and the
issuance of Viacom Class B common stock and Viacom Series C preferred
stock in connection with the merger, unless it determines, after
receiving advice from independent legal counsel, that failure to do so is
required in order for its directors to comply with their fiduciary duties
under applicable law;
. each company will promptly make all governmental filings necessary to
consummate the merger and otherwise use best efforts to consummate the
merger, including, if necessary, committing to or effecting
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the disposition of those of its assets or businesses as are required to be
divested in order to obtain the consent of the FCC or to avoid or cause to
be removed any other legal impediment that would otherwise prevent or
materially delay the consummation of the merger;
. each party will use reasonable best efforts to obtain any third party
consents necessary, proper or advisable to consummate the merger;
. each company will continue to allow the other company reasonable access
to its corporate records;
. Viacom's proposed new Restated Certificate of Incorporation and By-laws
following the merger will contain the indemnification provisions in favor
of officers and directors that are contained in Viacom's current Restated
Certificate of Incorporation and By-laws;
. subject to dollar limitations, for six years following the merger the
combined company will maintain directors' and officers' liability
insurance covering those persons who are currently covered by CBS'
directors' and officers' liability insurance policy on terms comparable
to CBS' existing coverage;
. each company will promptly notify the other company of any event that
would likely cause any representation or warranty to be untrue or
inaccurate or any covenant or condition not to be complied with or
satisfied, or of any failure to comply with or satisfy any covenant or
condition;
. neither company will take any action that would undermine the
qualification of the merger as a tax-free reorganization under Section
368 of the Internal Revenue Code;
. Viacom will promptly prepare and submit an application to the New York
Stock Exchange for the listing of the new shares of Viacom Class B common
stock;
. the companies will consult with each other regarding any public
announcements they make concerning the merger;
. the Viacom Board of Directors will take all necessary action to increase
the number of Board members to eighteen and to cause to be appointed
eight designees of CBS;
. CBS will take the necessary action to render its shareholders' rights
agreement inapplicable to the merger agreement and the merger;
. Viacom will assume the debt and other liabilities and obligations of CBS;
. CBS will notify Viacom of all persons that may be deemed affiliates of
CBS under Rule 145 of the Securities Act, and CBS will use its reasonable
best efforts to obtain from each affiliate a letter in which the
affiliate agrees to comply with the resale restrictions of Rules 144 and
145 under the Securities Act following the merger;
. Viacom will take measures to give continuing employees credit under
Viacom's benefit plans for prior service with CBS;
. both companies may establish retention and severance agreements
consistent with terms and conditions set forth in the merger agreement;
. CBS will exercise its rights under the Gaylord proxy to vote in favor of
the merger;
. CBS will not take any action which would cause Viacom to be in violation
of the tax matters agreement between CBS and Gaylord; and
. Viacom will cause Viacom/CBS LLC to perform its obligations under the
merger agreement.
Conduct of Business Prior to the Closing
Viacom and CBS have each agreed that, subject to exceptions, between the
execution of the merger agreement and the effective time of the merger, each
company and its respective subsidiaries will:
. conduct their businesses in the ordinary course of business and in a
manner consistent with past practice;
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. use their reasonable best efforts to preserve substantially intact their
business organizations and to keep available the services of their
current officers, employees and consultants; and
. use their reasonable best efforts to preserve their current relationships
with customers, distributors, dealers, suppliers and other persons that
have significant business relations with the companies.
Viacom and CBS have also agreed that subject to exceptions, prior to the
effective time of the merger, without the prior written agreement of the other
party, they and their subsidiaries will not:
. amend or otherwise change their charters or by-laws in a manner that
would have a material adverse effect;
. with respect to CBS and its subsidiaries, issue, sell or otherwise
dispose of equity securities, except for:
--the issuance of common stock upon the exercise of outstanding options
and the conversion of CBS Series B preferred stock,
--the issuance of common stock in connection with pending transactions,
--the grant of options to purchase up to 22,200,000 shares of CBS
common stock and
--the grant of options to purchase up to 12,500,000 shares of Infinity
Broadcasting Corporation;
. with respect to Viacom and its subsidiaries, issue, sell or otherwise
dispose of equity securities, except for:
--the issuance of common stock upon the exercise of outstanding options
and
--the grant of options to purchase up to 6,000,000 shares of Viacom
Class B common stock;
. sell, encumber or otherwise dispose of any assets material to the
respective companies and their subsidiaries, taken as a whole, other than
in the ordinary course of business consistent with past practice;
. declare, make or pay any dividend or other distribution other than:
--intercompany cash dividends,
--in the case of CBS and its subsidiaries, dividends made or paid by
Infinity not to exceed $500,000,000 and
--in the case of Viacom and its subsidiaries, dividends made or paid by
Blockbuster not to exceed $50,000,000;
. reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of their or their subsidiaries'
capital stock;
. except in connection with acquisitions that individually do not exceed
$200,000,000 and in the aggregate do not exceed $1,000,000,000 and
except, in the case of CBS and its subsidiaries, in connection with
pending transactions:
--acquire or otherwise invest in other companies or business
organizations or
--incur any indebtedness other than in the ordinary course of business
and other than in connection with refinancings;
. enter into or amend any material contract, agreement or transaction that
would not be in the ordinary course of business and that would be
reasonably likely to prevent or materially delay the consummation of the
merger;
. authorize any capital expenditures which are in the aggregate in excess
of the amounts currently budgeted for fiscal year 1999 and, with respect
to fiscal year 2000, 10% in excess of the 1999 amount, in each case for
the respective companies and their subsidiaries taken as a whole;
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. increase compensation to executive officers or employees, except in
accordance with retention or severance arrangements generally agreed to
between the parties or as required by law or any existing agreement and
except for increases in the ordinary course of business consistent with
past practice;
. grant any severance or termination pay to, or enter into, extend or amend
any employment or severance agreement with, any director or executive
officer or establish, enter into or amend any plan, agreement, trust,
fund, policy or arrangement for the benefit of any director, executive
officer or employee, except to grant any severance or termination pay or
to enter into, extend or amend any employment or severance agreements in
the ordinary course of business in accordance with past practice with any
current or new employee other than a director or officer of the parent
company, subject to an agreed upon retention bonus cap;
. materially change their accounting practices;
. make any tax election that, individually or in the aggregate, would have
a material adverse effect, or settle or compromise any material tax
liability;
. enter into any contract, agreement, lease, license, permit, franchise or
other instrument or obligation which, if in existence and known prior to
the execution of the merger agreement, would have conflicted with the
entrance into and performance of the merger agreement in a manner that
would give rise to a material adverse effect; and
. CBS may not amend or modify the terms of the CBS Series B preferred stock
without Viacom's written consent.
Notwithstanding any of the foregoing:
. CBS is not restricted from taking actions in connection with the
consummation of the pending acquisition of Outdoor Systems on terms
previously agreed to or, unless Viacom has consented, on other terms that
would not be reasonably likely to have an impact that is both material
and detrimental to CBS and its subsidiaries, taken as a whole;
. Viacom is not restricted from consummating an exchange offer of
Blockbuster shares owned by Viacom for shares of Viacom common stock
owned by the shareholders of Viacom in accordance with procedures agreed
upon between Viacom and CBS;
. neither Infinity nor Blockbuster is restricted from taking any action
that would otherwise violate any of the restrictions on conduct of
business prior to the effective time of the merger if its Board of
Directors determines that the action is required to be taken in the
exercise of the Board's fiduciary duties; and
. Viacom may solicit consents from its shareholders to approve the
proposals described in this joint proxy statement/prospectus in lieu of
holding a special meeting and soliciting proxies.
Stock Options and Employee Benefit Plans
Stock Options and Other Stock Plans
Each outstanding unexpired and unexercised option or warrant to purchase
shares of common stock of CBS will be automatically converted at the effective
time of the merger into an option or warrant to purchase shares of Viacom Class
B common stock, in a number determined by multiplying the number of shares of
CBS common stock that could have been purchased under the CBS option or warrant
by the exchange ratio of 1.085. The exercise price of these options will equal
the per-share exercise price of the corresponding CBS option or warrant divided
by the exchange ratio. The substitute options or warrants will be subject to
the same terms and
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conditions as the corresponding CBS options or warrants and the vesting of the
options or warrants will accelerate on account of the merger to the extent
provided in the applicable option or warrant. After the effective time of the
merger:
. all references to CBS in CBS' equity based compensation plans and
agreements will be deemed to refer to Viacom; and
. Viacom will assume all of CBS' obligations with respect to the substitute
options and warrants.
Viacom will issue to each CBS option or warrant holder a document evidencing
its assumption of the options and warrants. Viacom has agreed to file a Form S-
8 or other appropriate registration statement covering the shares of Viacom
Class B common stock underlying the assumed options and warrants no later than
one business day after the effective time of the merger and to keep the
registration statement current.
Other Employee Arrangements
Viacom will recognize service with CBS under Viacom's employee benefit
plans, except where the crediting would result in duplication of benefits, and
will honor all personal and sick days accrued by CBS employees who continue
employment with Viacom after the effective time of the merger.
Viacom may pay up to a total of $30 million to its employees as retention
bonuses, payable on or after the effective time of the merger. Viacom has also
established severance arrangements for its corporate staff, including the
executive severance plans described in the section captioned "Interests of
Persons in the Merger--Senior Management Arrangements--Viacom--Executive
Severance Plans." CBS may also establish retention, severance and/or other
compensation arrangements for its officers and employees as long as the total
cost of those arrangements is not materially greater than the cost of Viacom's
arrangements.
Conditions to Closing
The obligations of Viacom and CBS to consummate the merger are subject to
the satisfaction or waiver of the following conditions:
. Viacom shareholders approve:
--the adoption of the merger agreement if CBS merges into Viacom;
--the adoption of the proposed new Restated Certificate of
Incorporation and the issuance of Viacom Class B common stock and
Viacom Series C preferred stock in connection with the merger, if
CBS merges into Viacom/CBS LLC;
. expiration or termination of any applicable waiting period under the HSR
Act;
. no governmental authority or court having entered an order or taken other
legal action making the merger illegal or otherwise prohibiting its
consummation;
. the SEC having declared the Viacom registration statement, of which this
joint proxy statement/prospectus forms a part, effective and there
existing no stop order or other action to suspend the effectiveness of
the registration statement;
.the making by both companies of all required filings and notices, and the
receipt by both companies of all required governmental consents, approvals
or other authorizations, other than those which, if not obtained, would
not have a material adverse effect, at or after the effective time of the
merger, on the business, results of operations or financial condition of
CBS, Viacom and their subsidiaries, collectively taken as a whole;
. authorization for listing on the New York Stock Exchange of the shares of
Viacom Class B common stock to be issued to CBS shareholders and upon
conversion of the CBS Series B preferred stock, subject to official
notice of issuance;
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. the continued truthfulness and accuracy of the representations and
warranties, except where the failure to be true or correct would not
have, individually or in the aggregate, a material adverse effect, and
the performance or compliance in all material respects with all material
agreements, and receipt from the other party of a certificate of an
officer certifying to the foregoing; and
. each company having received an opinion from its tax counsel that the
merger will qualify as a tax-free reorganization under Section 368 of the
Internal Revenue Code.
Termination and Termination Fees
The merger agreement may be terminated and the merger abandoned at any time
prior to the closing date:
. by mutual written consent of Viacom and CBS;
. by either company if the transaction is not completed on or prior to
August 31, 2000;
. by CBS upon written notice to Viacom of the existence of a competing
proposal for the acquisition of more than 50% of the voting power of CBS
or all or substantially all of the assets of CBS and its subsidiaries,
taken as a whole, for consideration which CBS' Board of Directors
determines in its good faith judgment to be more favorable to CBS
shareholders than the merger, provided, however, that termination
pursuant to this provision will not be effective until Viacom has had two
days within which to match the competing proposal and until CBS pays the
termination fee described below;
. by either company if CBS does not receive the required shareholder
approval;
. by either company upon the other company's breach of a representation,
warranty, covenant or agreement, or if any representation or warranty
becomes untrue, in either case so that the seventh condition to closing
set forth above cannot be satisfied on or before August 31, 2000; or
. by either company if a governmental authority has taken any final and
non-appealable action prohibiting the consummation of the merger.
If CBS terminates the merger agreement in accordance with the provision set
forth in the third bullet point above, CBS is required to pay Viacom a
termination fee of $1 billion. CBS is also required to pay Viacom a $1 billion
termination fee if all of the following occur:
. either company terminates the merger agreement as a result of the CBS
shareholders failing to adopt the merger agreement;
. a competing proposal for the acquisition of more than 50% of the voting
power or assets of CBS has been made public at or prior to the time of
the failure to adopt the merger agreement; and
. within 12 months after termination, CBS consummates, or enters into a
binding agreement with respect to, a competing proposal.
The Voting Agreements
Simultaneously with the execution of the merger agreement, National
Amusements, which is controlled by Mr. Redstone and which holds approximately
68% of the voting power of Viacom, entered into a voting agreement with CBS in
which it has agreed to vote all of its shares of Viacom Class A common stock in
favor of the adoption of the merger agreement and against any proposals in
opposition to the merger agreement. National Amusements has also agreed in the
voting agreement not to transfer ownership of any of its shares of Viacom Class
A common stock unless the transferee unconditionally agrees in writing to be
bound by the voting agreement. The voting agreement terminates upon the earlier
of the termination of the merger agreement or the effective time of the merger.
National Amusements has also entered into a Voting Agreement with Viacom
pursuant to which it has agreed to approve the amendment to the Viacom
incentive plan.
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The Stockholder Agreement
Simultaneously with the execution of the merger agreement, National
Amusements also entered into a stockholder agreement with CBS, pursuant to
which National Amusements has agreed, for a period of three years following the
merger, to support the governance arrangements agreed to between Viacom and
CBS. Among other things, National Amusements has agreed to:
. cause to be nominated and elected to the Viacom Board eight directors
designated by CBS or by the CBS designees, so that there are eight CBS
directors on the Viacom Board at all times;
. take all action necessary to ensure that any vacancy in a CBS
directorship is filled immediately by an independent director designated
by a majority of the remaining CBS directors;
. take all action necessary to ensure that no CBS director is removed
unless the removal is for cause and is approved by at least 14 members of
the Viacom Board;
. take all action necessary to cause any vacancy in a seat currently held
by a Viacom independent director to be filled by an independent director
that meets the qualifications stated in the proposed new Restated
Certificate of Incorporation;
. not take any action to amend, modify or repeal, or adopt provisions or
take other actions that would be inconsistent with, the provisions of
Viacom's proposed new Restated Certificate of Incorporation and By-laws
that relate to the governance structure of Viacom during the three year
period following the merger;
. not transfer any of its shares of Viacom Class A common stock unless the
transferee unconditionally agrees in writing to be bound by the
stockholder agreement; and
. take all action necessary to ensure that it or its transferees own at all
times a majority of the outstanding shares of voting stock of Viacom.
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INTERESTS OF PERSONS IN THE MERGER--SENIOR MANAGEMENT ARRANGEMENTS
In considering the respective recommendations of the Viacom Board and the
CBS Board with regard to the merger, you should be aware that, as described
below, several members of the respective managements and Boards of Directors of
Viacom and CBS may have interests in the merger that are different from, or in
addition to, your interests, and that may create potential conflicts of
interest. Three executive officers of Viacom are members of the ten-person
Viacom Board that approved the merger. Two executive officers of CBS are
members of the 11-person CBS Board that approved the merger.
Viacom
Continuing Board Positions. All ten members of the current Viacom Board are
expected to continue as members of the Viacom Board following the effective
time of the merger, including Messrs. Redstone, Dauman and Dooley.
Employment Agreement with Mr. Redstone. Viacom entered into an employment
agreement with Mr. Redstone to serve as its Chairman and CEO following the
effective time of the merger. Mr. Redstone will receive an annual base salary
of $1 million and an annual bonus, with an established target bonus of $5
million and a maximum bonus of $10 million for calendar year 2000, prorated to
reflect the actual number of days that the agreement is in effect during the
year 2000. The target and maximum bonus amounts increase by 10% annually
through 2003. Mr. Redstone will also receive deferred compensation of $2
million during calendar year 2000, prorated to reflect the number of days the
agreement is in effect during the year 2000, thereafter to be increased
annually by 10% of his salary and deferred compensation for the preceding year.
He will also receive a grant of options to purchase 2,000,000 shares of Viacom
Class B common stock, vesting in three equal annual installments.
Resignation Agreements. Pursuant to agreements entered into with Viacom on
September 6, 1999, Messrs. Dauman and Dooley have agreed to resign from Viacom
effective at the effective time of the merger. Messrs. Dauman and Dooley will
each continue to serve as Deputy Chairman and Executive Vice President of
Viacom until the effective time of the merger and will each receive the
following payments:
(1) as soon as practicable after their resignations:
. a one-time cash payment equal to the amount that would have been
payable under their current employment agreements through their
original terms, or December 31, 2003,
. payouts of all deferred compensation accounts and the balance of
their accounts under the Viacom Excess Investment Plan, and
. a transaction bonus in the amount of $5,000,000; and
(2) on the earlier of the effective time of the merger and the date on
which Viacom pays 1999 bonuses to its executive officers generally, the
greatest of:
. 110% of their respective bonuses received for 1998,
. amounts which, when added to their salary and deferred compensation
payable for 1999, would produce the highest 1999 total cash
compensation paid to any other executive officer of Viacom or any of
its affiliates, and
. an amount the Viacom Board determines is appropriate to compensate
each executive for his contribution to Viacom in 1999.
Assuming the merger is consummated on January 1, 2000 and the 1999 bonuses are
paid at 110%, it is estimated that each of Messrs. Dauman and Dooley will
receive aggregate payments under (1) and (2) above (excluding any payouts of
deferred compensation accounts and Viacom Excess Investment Plan balances) of
approximately $41 million.
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All equity-based compensation awards previously granted to Messrs. Dauman
and Dooley will vest on the effective date of their resignation and each stock
option will continue to be exercisable in accordance with its terms until
December 31, 2003, subject to their compliance with the provisions of their
resignation agreements. Each of Messrs. Dauman and Dooley's unexercised stock
options have a value of approximately $114 million, assuming such options were
exercised on November 19, 1999 at their applicable exercise price. In addition,
Viacom will provide each of Messrs. Dauman and Dooley with an office that is
comparable in quality and size to his current office at a location of his
choice in midtown Manhattan, subject to Viacom's approval, and a secretary
until December 31, 2003, or until he obtains full time employment, if earlier.
Messrs. Dauman and Dooley will continue to participate in all savings,
retirement, welfare and fringe benefit plans of Viacom, or will receive the
cash equivalent of these benefits with an income tax gross up, through December
31, 2003, or, with respect to any welfare benefit, the date on which they
become entitled to comparable benefits through a subsequent employer, if
earlier. Mr. Dauman will also receive all additional service credit necessary
to provide him with 20 years of service under any Viacom plans for which that
credit would entitle him to additional benefits.
In the event that either executive is terminated by Viacom without "cause,"
or terminates his own employment for "good reason," as these terms are defined
in their respective agreements, prior to the effective time of the merger, that
executive will be entitled to all of the payments described above promptly
following his termination, except for the $5 million transaction bonus, which
will be paid at the effective time of the merger. If the merger agreement is
terminated or the transactions contemplated by the merger agreement are
abandoned, the Viacom Board will determine in its good faith discretion whether
to pay Mr. Dauman and Mr. Dooley all or any part of the $5 million transaction
bonus.
The agreements provide for a gross-up payment to be made to Messrs. Dauman
and Dooley to eliminate the effects of any possible imposition under the
Internal Revenue Code of the "golden parachute" excise tax on any payment or
benefit they receive under their agreements or otherwise.
Messrs. Dauman and Dooley will be bound by restrictive covenants, including
a noncompetition covenant that applies for one year following their termination
of employment.
Executive Severance Plans. Viacom adopted executive severance plans covering
its approximately ten Senior Vice Presidents, which includes two Vice
Presidents who are treated as Senior Vice Presidents for this purpose, and
approximately 66 Vice Presidents that became effective on September 6, 1999 and
continue in effect for one year following the effective time of the merger. The
benefits provided under the executive severance plans are conditioned on the
participant's execution of a release in favor of Viacom and replace the
severance benefits provided to participants under their employment agreements
with Viacom and any other Viacom severance plan, program, policy or
arrangement.
Upon a termination of a participant's employment by Viacom without "cause"
or by the participant for "good reason," as those terms are defined in the
executive severance plans, Viacom will pay each participant a one-time cash
payment equal to the sum of any earned, unpaid base salary, automobile
allowance, vacation pay and pro-rated bonus through the date of termination and
the base salary, target bonus, prorated for partial years, and automobile
allowance he would have earned if he had remained employed for two years, in
the case of a Vice President, or three years, in the case of a Senior Vice
President. These payments will be made assuming increases in base salary and
bonus compensation consistent with the participant's existing employment
agreement and, after the expiration of such agreement, at an annualized rate
consistent with the last regular increase under the agreement. For participants
who do not have employment agreements and for participants whose employment
agreements did not specify a rate of increase, the salary increase shall be a
rate of increase, consistent with the participants' last regular increase prior
to September 6, 1999, but not in excess of 8% per year.
All equity-based compensation awards previously granted to a participant
will vest on the date of his or her involuntary termination, and each stock
option will continue to be exercisable in accordance with its terms, for two
years, in the case of a Vice President, and three years, in the case of a
Senior Vice President, or through the option's original expiration date, if
earlier.
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Additionally, for two years following termination in the case of a Vice
President and three years following termination in the case of a Senior Vice
President, each participant will be entitled to participate in Viacom's
medical, dental and life insurance plans until he or she secures full-time
employment that provides him or her with comparable coverage, and will either
be provided with car insurance or be reimbursed for his or her car insurance.
On the date of termination, participants will be:
. credited with two years of additional age and service for Vice Presidents
or three years of additional age and service for Senior Vice Presidents
for all purposes under all qualified and non-qualified retirement plans
of Viacom, and
. credited with two years of additional age and service for Vice Presidents
or three years of additional age and service for Senior Vice Presidents
under Viacom's retiree welfare benefit plans. Any increases in the annual
amount credited to the accounts of active employees will apply to the
participants.
In the case of Senior Vice Presidents only, for a period of one year
following their termination, or, if earlier, until the participant secures
full-time employment, they will be provided with an office comparable in both
quality and size to the office they had prior to their termination, at a
location of their choice, subject to Viacom's consent. Viacom will bear the
cost of relocating the participant and will provide him or her with a
secretary.
Each participant will continue to be bound by the non-solicitation, non-
disparagement, confidentiality and cooperation with litigation covenants in his
existing employment agreement, but the non-competition covenant in each of the
existing agreements will be waived by Viacom.
The executive severance plans provide for a gross-up payment to be made to
the participants to eliminate the effects of the imposition under the Internal
Revenue Code of the "golden parachute" excise tax, if any, on any payment or
benefit they may receive under the executive severance plans or otherwise.
CBS
Continuing Board Positions. Eight members of the CBS Board of Directors, to
be designated by the CBS Board prior to the effective time of the merger, will
become members of the Viacom Board as of the effective time of the merger. One
of the eight will be Mr. Karmazin.
Stock Options. At November 19, 1999, approximately 9,583,398 shares of CBS
common stock were subject to options granted to executive officers and
directors under compensatory equity-based plans of CBS. With limited
exceptions, all of these outstanding CBS stock options that have not yet become
exercisable, other than stock options granted on or after July 28, 1999, will
become exercisable as a result of the merger.
Restricted Stock. At November 19, 1999, approximately 8,768 shares of CBS
common stock had been granted to executive officers and directors in the form
of restricted stock awards under compensatory equity plans of CBS and were
still subject to restrictions. All restrictions to which these restricted stock
awards are subject will lapse and will be deemed earned as a result of the
merger.
Employment Agreement with Mr. Karmazin. In contemplation of the merger,
Viacom entered into an employment agreement with Mr. Karmazin that becomes
effective only upon the consummation of the merger, except for a stock "lock-
up" provision described below, which became effective upon the signing of the
employment agreement, and continues through December 31, 2003. Pursuant to the
agreement, Mr. Karmazin will serve as the President and COO of Viacom.
Mr. Karmazin will receive an annual base salary of $1 million and an annual
bonus, with an established target bonus of $5 million and a maximum bonus of
$10 million for calendar year 2000, prorated to reflect the
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actual number of days that the agreement is in effect during the year 2000,
which target and maximum amounts will increase by 10% annually. Mr. Karmazin
will also receive deferred compensation of $2 million during calendar year
2000, prorated to reflect the number of days that the agreement is in effect
during the year 2000, thereafter to be increased annually during the remainder
of his employment in an amount equal to 10% of his salary and deferred
compensation for the preceding year. The agreement provides for a grant of
options to purchase 2,000,000 shares of Viacom Class B common stock, vesting in
three equal annual installments. During his employment term, Mr. Karmazin will
be provided with $5 million of life insurance. Mr. Karmazin will also be
entitled to a gross-up for any "golden parachute" excise tax that may be
imposed on him under the Internal Revenue Code as a result of any payment or
benefit he receives under his agreement or otherwise.
The agreement provides that Mr. Karmazin will not, except in limited
circumstances, sell or otherwise dispose of his shares of CBS common stock, or,
following the merger, Viacom stock for the period beginning September 6, 1999,
the date the agreement was signed, and ending three years after the effective
time of the merger.
In the event of a termination of Mr. Karmazin's employment without "cause"
or his voluntary resignation for "good reason," as such terms are defined in
his employment agreement, during the employment term Mr. Karmazin will be
entitled to receive salary, bonus, deferred compensation, perquisites, medical
and dental coverage, life insurance coverage for the balance of the employment
term, a supplemental pension benefit under Viacom's Excess Pension Plan and an
office including secretarial assistance for up to six months after his
employment terminates. Also upon such termination, Mr. Karmazin's stock options
including options that would have vested during the employment term will remain
exercisable for six months following the date of termination but not beyond
their expiration dates.
CBS has the right under the merger agreement to establish retention,
severance and compensation arrangements for its officers and employees which
are similar to the retention and severance arrangements described above in
"Interests of Persons in the Merger--Senior Management Arrangements--Viacom"
provided that the aggregate cost of such CBS arrangements does not materially
exceed the aggregate cost of Viacom's similar arrangements. At present, CBS has
not made any final determination as to the types of arrangements which it may
establish or the officers or other employees who will be eligible to
participate in such arrangements.
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THE COMPANIES
Viacom's Business
Viacom is a diversified entertainment company with operations in six
segments:
. Networks . Parks
.Entertainment . Publishing
. Video . Online.
Networks
Viacom owns and operates advertiser-supported basic cable television program
services and premium subscription television program services in the United
States and internationally. Viacom's MTV Networks division includes such owned
and operated program services as:
. MTV: MUSIC TELEVISION in the United States, Europe and Latin America;
. NICKELODEON in the United States, Latin America, Scandinavia, Japan and
the Commonwealth of Independent States;
. NICK AT NITE in the United States;
. VH1 Music First in the United States, United Kingdom and Germany;
. MTV's spin-off, MTV2 in the United States and Europe; and
. TV LAND in the United States.
Viacom's MTV Networks division also participates in program services as a
joint venturer, including MTV in Asia and Brazil and NICKELODEON in the United
Kingdom and Australia.
Viacom's Showtime Networks Inc. subsidiary owns and operates SHOWTIME, THE
MOVIE CHANNEL(TM), and FLIX(R), and is a joint venture partner in and manager
of the SUNDANCE CHANNEL(R). Also, Viacom is a joint venture partner in:
. COMEDY CENTRAL(R), an advertiser-supported basic cable program service in
the United States;
. GULF DTH LDC, a satellite direct-to-home platform offering programming in
the Middle East; and
. NOGGIN(TM), a subscription-supported, non-commercial children's
educational program service, which is distributed by cable and satellite
and includes a related online service.
Entertainment
The principal businesses of Viacom's Entertainment segment are:
. PARAMOUNT PICTURES, which produces, acquires and distributes feature-
length motion pictures;
. PARAMOUNT HOME VIDEO, which distributes motion pictures and television
product produced by Paramount and third parties on videocassette and disc
in the U.S. and Canada;
. PARAMOUNT TELEVISION, VIACOM PRODUCTIONS, SPELLING TELEVISION and BIG
TICKET TELEVISION, which produce, acquire and distribute series,
miniseries, specials and made-for-television movies primarily for network
television, first-run syndication, pay television and basic cable
television;
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. THE PARAMOUNT STATIONS GROUP, which owns and operates 17 television
stations and programs two additional stations pursuant to local marketing
agreements;
. FAMOUS PLAYERS, which owns and operates movie theatres in Canada; and
. FAMOUS MUSIC, a music publisher.
Additionally, Viacom has joint venture interests in television broadcasting,
international motion picture and video distribution and television programming
services, including:
. UNITED PARAMOUNT NETWORK, in which Viacom is a 50% joint venture partner.
Pursuant to current FCC regulations, Viacom may not be permitted to
maintain its 50% ownership interest together with ownership of the CBS
network;
. UNITED INTERNATIONAL PICTURES (UIP); Viacom owns a one-third interest in
this venture which distributes Paramount's, Universal's and MGM's motion
pictures outside the U.S. and Canada. MGM announced this year that it
intends to withdraw from UIP effective October 31, 2000;
. UNITED CINEMAS INTERNATIONAL (UCI); Viacom owns a 50% interest in this
venture which owns and operates movie theatres in Europe, Latin America
and Asia;
. CINEMA INTERNATIONAL B.V. (CIBV), in which Viacom currently is a 50%
joint venture partner but has agreed to become the sole owner, which
distributes Paramount's motion pictures on videocassette and disc outside
the U.S. and Canada and acquires and distributes motion pictures and
television product produced by third parties; and
. Various international television programming services, including the
Movie Channel Middle East and the Paramount Comedy Channel in the UK.
Video
The Company operates the home video and video game rental and retailing
business through BLOCKBUSTER INC. As of December 31, 1998, the Company operated
or franchised approximately 6,380 stores in the U.S., its territories and 25
other countries. BLOCKBUSTER offers titles primarily for rental and also offers
titles for purchase on a "sell-through" and previously viewed basis. During
1998, BLOCKBUSTER implemented revenue-sharing arrangements directly with major
motion picture studios, including PARAMOUNT PICTURES, thereby increasing the
availability of newly released videos in its domestic stores. In all of its
domestic stores and many of its stores outside of the U.S., BLOCKBUSTER rents
video games and sells previously played video games. In addition, in several
hundred domestic stores and various international markets, BLOCKBUSTER rents
and sells digital versatile discs and rents DVD players. Approximately 18% of
Blockbluster's common stock was recently sold to the public.
Parks
Through PARAMOUNT PARKS, Viacom owns and operates five regional theme parks
and a themed attraction in the United States and Canada. Each of the theme
parks features attractions based on Viacom's intellectual properties.
Publishing
Through SIMON & SCHUSTER, Viacom publishes and distributes consumer
hardcover books, trade paperbacks, mass-market paperbacks, children's books,
audiobooks, electronic books and CD-ROM products in the United States and
internationally. SIMON & SCHUSTER's flagship imprints include SIMON & SCHUSTER,
POCKET BOOKS, SCRIBNER, and THE FREE PRESS. SIMON & SCHUSTER also develops
special imprints and publishes titles based on MTV, NICKELODEON and PARAMOUNT
PICTURES
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products. SIMON & SCHUSTER distributes its products directly and through third
parties. SIMON & SCHUSTER also delivers content and sells products on Internet
Web sites operated by various imprints or linked to individual titles.
Online
Viacom operates Internet sites which are targeted to the current audiences
of its various MTV, VH1 and NICKELODEON program services, including NOGGIN, as
well as to new audiences such as those who do not receive cable or direct-to-
home satellite services. In addition to providing entertainment and information
on such Internet sites, Viacom also sells its own licensed and third party
merchandise.
CBS' Business
CBS is one of the largest radio and television broadcasters in the United
States. CBS operates its businesses through its Television, Cable and Infinity
segments. The Television segment consists of CBS' 16 owned and operated
television stations, which are located in seven of the nation's ten largest
markets, and the CBS television network. The CBS television network operations
are subdivided into five areas: entertainment; news; sports; enterprises, which
produces, distributes and markets first-run and off-network programming; and
new media consisting of CBS' Internet businesses. CBS' Cable segment consists
of CBS' cable networks, including The Nashville Network, Country Music
Television and two regional sports networks and a global provider of satellite
services to broadcast, cable and corporate networks.
On October 12, 1999, CBS acquired from Gaylord Entertainment Company the
broadcast station KTVT-TV Dallas-Fort Worth, Texas. The CBS Series B preferred
stock was issued to Gaylord Entertainment Company in connection with this
acquisition. Although we believe that, under Pennsylvania law, the holders of
CBS Series B preferred stock are not entitled to a separate class or series
vote on the adoption of the merger agreement, Gaylord has agreed, in the event
the holders of CBS Series B preferred stock are entitled to vote separately as
a class or series, to vote the CBS Series B preferred stock in favor of the
adoption of the merger agreement, and has given its proxy for this vote to CBS.
Any subsequent purchaser of the CBS Series B preferred stock is required to
agree, in the event the holders of CBS Series B preferred stock are entitled to
vote separately as a class or series, to vote in favor of the adoption of the
merger agreement, and to be bound by the proxy given by Gaylord to CBS.
Therefore, in the event the holders of CBS Series B preferred stock are
entitled to vote separately as a class or series, approval of the adoption of
the merger agreement by the holders of the CBS Series B preferred stock is
assured.
The Infinity segment corresponds to CBS' majority owned subsidiary, Infinity
Broadcasting Corporation, which conducts CBS' radio and outdoor advertising
businesses.
Infinity Broadcasting Corporation owns and operates approximately 160 AM and
FM radio stations located in 35 markets. TDI Worldwide, Inc., a wholly owned
subsidiary of Infinity, is one of the largest outdoor advertising companies in
the United States and sells space on various media, including buses, trains,
train platforms and terminals throughout commuter rail systems and on painted
billboards and phone kiosks.
CBS' Internet businesses, which consist primarily of its operation of the
Internet sites CBS.com and Country.com, also include CBS' minority investments
in three public companies, SportsLine.com Inc. (NASDAQ: SPLN), which publishes
several sports Internet sites, including CBS.SportsLine.com, MarketWatch.com,
Inc. (NASDAQ: MKTW), which publishes the Internet site CBS.MarketWatch.com. and
Medscape Inc. (NASDAQ: MSCP), which publishes a consumer health Internet site.
CBS' other Internet investments include Storerunner, Inc., Office.com, Inc.,
Switchboard, Inc., ThirdAge Media, Inc., Webvan, Inc., Jobs.com, Inc., Women's
Consumer Network LLC, RX.com, Inc. and Wrenchead.com, Inc., as well as its
majority interest in the Internet portal operated by iWon, Inc. CBS has also
entered into an agreement to acquire an equity interest in Big E Entertainment
(NASDAQ: BIGE), which operates Hollywood.com.
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In addition to the acquisitions listed above, on November 15, 1999, CBS
acquired King World Productions, Inc. King World is the distributor of a number
of shows, including "The Oprah Winfrey Show," "Wheel of Fortune," "Jeopardy!"
and "Hollywood Squares." On May 27, 1999, Infinity entered into a definitive
agreement to acquire Outdoor Systems, Inc. Outdoor Systems is a leading outdoor
advertising company in North America, operating bulletin, poster, mall and
transit advertising display faces in the United States, Canada and Mexico. The
consummation of the merger with Outdoor Systems is subject to conditions,
including review by antitrust authorities. CBS believes that completion of the
Outdoor Systems transaction will occur during November 1999.
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REGULATORY MATTERS AND THIRD-PARTY APPROVALS
Antitrust
Viacom and CBS each have filed a Premerger Notification and Report Form for
review under the HSR Act with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice. The HSR Act provides for
an initial 30 calendar day waiting period following the filing by the parties
of the Premerger Notification and Report Forms before the merger may be
consummated. Viacom made its filing on September 20, 1999 and CBS made its
filing on September 23, 1999. However, the Antitrust Division of the Department
of Justice and the Federal Trade Commission continue to have the authority to
challenge the merger on antitrust grounds before and after the merger is
completed. The HSR Act further provides that if, within the initial 30 calendar
day waiting period, the Federal Trade Commission or the Department of Justice
issues a request for additional information or documents, the waiting period
will be extended until 11:59 p.m. on the twentieth day after the date of
substantial compliance by both filing parties with the request. On October 22,
1999, the Antitrust Division issued a request for additional information to the
parties.
Viacom and CBS conduct operations in a number of foreign countries where
regulatory filings or approvals with applicable authorities will be required in
connection with the consummation of the merger.
At a minimum, premerger notification filings with national antitrust
authorities will be required in the following foreign jurisdictions: Brazil,
Canada, Germany, Ireland, Japan, The Netherlands and South Africa. A post-
closing submission will be required with the antitrust authorities in Austria.
The Brazilian antitrust filing was made on September 28, 1999. The Irish
antitrust filing was made on October 6, 1999. The required premerger filings
with the antitrust authorities in the remaining jurisdictions are expected to
be made promptly.
Consummation of the merger is conditioned upon, among other things, the
absence of any preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction which prohibits or restricts
the consummation of the merger. Viacom and CBS believe that all material
filings and approvals have been made or obtained, or will be made or obtained,
as the case may be.
Federal Regulation of Television and Radio Broadcasting
General. Television and radio broadcasting are subject to the jurisdiction
of the Federal Communications Commission under the Communications Act of 1934,
most recently amended by the Telecommunications Act of 1996. The Communications
Act prohibits the operation of broadcasting stations except under a license
issued by the FCC and empowers the FCC, among other actions, to:
. issue, renew, revoke and modify broadcasting licenses;
. assign frequency bands;
. determine stations' frequencies, locations and operating power;
. regulate some of the equipment used by stations;
. adopt other regulations to carry out the provisions of the Communications
Act;
. impose penalties for violation of such regulations; and
. impose annual fees as well as fees for processing applications and other
administrative functions.
Under the Communications Act, the FCC also regulates certain aspects of the
operation of cable television systems and other electronic media that compete
with broadcast stations.
The Communications Act prohibits the assignment of a broadcast license or
the transfer of control of a licensee without prior approval of the FCC. The
merger is subject to such FCC approval of the transfer of control of CBS and
its various licensee subsidiaries to Viacom. Because the application for
transfer of control of CBS will involve a substantial change in ownership or
control, the application must be placed on public notice for a period of no
less than 30 days during which time petitions to deny the application may be
filed by
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the public. If the FCC grants the application, interested parties would have 30
days from the date of public notice of the grant to seek reconsideration or
review of that grant by the full commission, or as the case may be, a court of
competent jurisdiction. The full commission has an additional 10 days to set
aside on its own motion any action taken by the FCC's staff, if action on the
application were taken in the first instance by the staff of the FCC; if action
is taken in the first instance by the full commission, the full commission may
set aside its own action within 30 days of public notice of such action. When
passing on an assignment or transfer application, the FCC is prohibited from
considering whether the public interest might be served by an assignment or
transfer to any party other than the assignee or transferee specified in the
application.
License Renewals. Under the Communications Act, the FCC is authorized to
renew broadcast licenses for terms of up to eight years. The Communications Act
requires renewal of a broadcast license if the FCC finds that:
. the station has served the public interest, convenience and necessity;
. there have been no serious violations of either the Communications Act or
the FCC's rules and regulations by the licensee; and
. there have been no other serious violations that taken together
constitute a pattern of abuse.
In making its determination, the FCC may consider petitions to deny but cannot
consider whether the public interest would be better served by a person other
than the renewal applicant. Under the Telecommunications Act, competing
applications for the same frequency may be accepted only after the FCC has
denied an incumbent's application for renewal of license. Applications for
renewal of licenses for one television station owned by CBS and 10 radio
stations owned by Infinity are currently pending before the FCC. Petitions to
deny were filed against the renewal applications of seven of the radio
stations; however, CBS continues to believe that it will receive renewal of
these licenses.
Ownership Regulation. The Communications Act and FCC rules and regulations
also regulate broadcast ownership. The FCC has promulgated rules that, among
other matters, limit the ability of individuals and entities to own or have an
official position or ownership interest, known as an attributable interest,
above a specific level in broadcast stations as well as other specified mass
media entities. As detailed below, in August 1999, the FCC substantially
revised a number of its multiple ownership and attribution rules. Although
these rules became effective November 16, 1999, they may still be stayed,
modified or reconsidered in subsequent proceedings. In three separate orders,
the FCC revised its rules regarding restrictions on television ownership,
radio-television cross-ownership, and attribution of broadcast ownership
interests. The three orders, which resolve a number of rulemaking proceedings
launched at the beginning of the decade, take into consideration mandates
included in the Telecommunications Act, which liberalized the radio ownership
rules and directed the FCC to consider similar deregulation for television. The
FCC's various broadcast ownership rules, inclusive of the recent revisions, are
summarized below:
Local Radio Ownership. With respect to radio licenses, the maximum allowable
number of stations that can be commonly owned in a market varies depending on
the number of radio stations within that market, as determined using a method
prescribed by the FCC. In markets with more than 45 stations, one company may
own, operate or control up to eight radio stations, with no more than five in
either AM or FM.
Local Television Ownership. The FCC's new TV duopoly rule permits parties to
own two TV stations without regard to signal contour overlap provided they are
located in separate markets referred to as designated market areas. In
addition, the new rules permit parties in larger designated market areas to own
up to two television stations in the same designated market area so long as at
least eight independently owned and operating full-power television stations
remain in the market at the time of acquisition and at least one of the two
stations is not among the top four-ranked stations in the market based on
audience share. In addition, without regard to numbers of remaining or
independently owned TV stations, the FCC will permit television duopolies
within the same designated market area so long as certain signal contours of
the stations involved do not overlap. Satellite stations that simply
rebroadcast the programming of a "parent" station will continue to be
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exempt from the duopoly rule if located in the same designated market area as
the "parent" station. The duopoly rule also applies to same-market local
marketing agreements involving more than 15% of the brokered station's program
time, although current local marketing agreements will be exempt from the TV
duopoly rule for a limited period of time of either two or five years,
depending on the date of the adoption of the local marketing agreement.
Further, the FCC may grant a waiver of the TV duopoly rule if one of the two
television stations is a "failed" or "failing" station, or the proposed
transaction would result in the construction of a new television station.
Following consummation of the merger, and exclusive of other acquisitions,
the combined company could potentially have duopolies in the following six
television markets: Philadelphia, Boston, Dallas, Miami, Detroit, and
Pittsburgh. While the combined company will seek to maintain ownership of the
television stations in these markets under the new television duopoly rules,
there can be no assurance that the combined company will be able to retain two
television stations in each of the duopoly markets. It is possible that on
November 16, 1999, more than one application was filed relating to stations in
these markets, all of which may not be able to be granted because of the
requirement that eight independent voices must remain in the market. In such
situations, random selection will be employed to determine the order in which
the simultaneously filed applications will be processed.
National Television Ownership Cap. On the national level, the FCC imposes a
35 percent national audience reach cap for television ownership, under which
one party may not have an attributable interest in television stations which
reach more than 35 percent of all U.S. television households. The Commission
discounts the audience reach of a UHF station for this purpose by 50 percent.
The FCC will consider whether to change the national ownership cap and the "UHF
discount" as part of the biennial review of its broadcast ownership rules
initiated in 1998. Additionally, under the new FCC rules, for entities that
have attributable interests in two stations in the same market, the FCC counts
the audience reach of that market only once for national cap purposes.
The television stations currently held by Viacom and CBS would have an
aggregate national audience reach for purposes of the national ownership cap of
approximately 41%. As these stations would exceed the FCC's 35% national
ownership cap under the merger, it will be necessary, absent legislative or
regulatory relief, to divest specific television stations in order to comply
with the national ownership cap. In their application for FCC consent to the
transfer of control of the CBS broadcast licenses, the companies requested, if
necessary, a 24 month period following consummation of the merger to comply
with the national television ownership cap.
Dual Network Rule. In the Telecommunications Act, Congress directed the FCC
to liberalize its rule, which then generally prohibited television stations
from affiliating with an entity that maintained more than one national network.
The FCC's implementing regulation states that a television broadcast station
may not affiliate with an entity that maintains one of the existing four major
networks (ABC, CBS, NBC, and Fox) and one of other specific qualifying networks
in existence as of February 8, 1996. The legislative history of the dual
network rule suggests that the rule was intended to prohibit one of the four
major networks from acquiring either of The WB or United Paramount Network. The
FCC is reviewing this rule as part of the biennial review.
Although the acquisition of an ownership interest in CBS will be reviewed by
the FCC under the dual network rule, the FCC regulations do not identify the
amount and nature of the ownership interest required to trigger the dual
network prohibition. Accordingly, it is possible that, absent either
legislative or regulatory relief, the combined company might be required to
divest some or all of Viacom's 50% interest in United Paramount Network. As
with the national television ownership cap, the companies have requested, if
necessary, a 24 month period following consummation of the merger to comply
with the dual network rule.
Radio-Television Cross Ownership. The so-called "one-to-a-market" rule has
until recently prohibited common ownership or control of a radio station,
whether AM, FM or both, and a television station in the same market, subject to
waivers in some circumstances. The FCC's new radio-television cross-ownership
rule embodies a graduated test based on the number of independently owned media
voices in the local market. In
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large markets, i.e., markets with at least 20 independently owned media voices,
a single entity can own up to one television station and seven radio stations
or, if permissible under the new TV duopoly rule, two television stations and
six radio stations.
Waivers of the new radio-television cross-ownership rule will be granted
only under the failed station test. Unlike under the TV duopoly rule, the FCC
will not waive the radio-television cross-ownership rules in situations of
failing or unbuilt stations.
In accordance with the schedule imposed by the FCC for comments under the
proposed FCC rules, by November 16, 1999, licensees with existing conditional
waivers of the former one-to-a-market rule had to demonstrate to the FCC their
compliance or non-compliance with the new rule. CBS, which has numerous
conditional waivers, filed such a showing on November 15, 1999. The FCC's Mass
Media Bureau will replace these waivers with permanent approvals as
appropriate. Existing conditional waivers which do not comply with the new rule
will be extended until the conclusion of the FCC's biennial review in 2004; the
same grandfathering relief will be afforded to pending applications for
conditional waivers filed on or before July 29, 1999, which are ultimately
granted by the Commission. Any application proposing a radio-television
combination filed after that date must comply with the new rules.
CBS currently holds conditional temporary waivers granted under the prior
FCC one-to-a-market rule allowing CBS to operate station combinations of one TV
station and up to eight radio stations in numerous markets. These combinations
are grandfathered under the new rules. However, the grandfathered status of
radio/TV combinations will terminate upon an arrangement or transfer of
control. The combined company exceeds radio-television cross-ownership caps and
may need to divest up to an aggregate of 12 radio stations in the Los Angeles,
Chicago, Dallas, Washington/Baltimore and Sacramento markets. Viacom and CBS
have requested a period of six months following consummation of the merger to
file applications with the FCC to dispose of all radio stations necessary to
come into compliance in each of these markets.
Attribution of Ownership. Under the FCC's recently revised attribution
rules, a direct or indirect purchaser of various types of securities of the
combined company could violate FCC regulations or policies if that purchaser
owned or acquired an "attributable" interest in other media properties in the
same area as stations owned by the combined company in a manner prohibited by
the FCC. Under the FCC's revised rules, an "attributable" interest for purposes
of the Commission's broadcast ownership rules generally includes:
. equity and debt interests, which combined exceed 33% of a licensee's
total assets, if the interest holder supplies more than 15% of total
weekly programming, or is a same-market media entity, whether TV, radio,
cable or newspaper;
. 5% or greater voting stock interest. Note that equity interests up to 49%
are nonattributable if the licensee is controlled by a single majority
shareholder and the interest holder is not otherwise attributable under
the "equity/debt plus" standard;
. 20% or greater voting stock interest, if the holder is a qualified
passive investor;
. any equity interest in a limited liability company or limited
partnership, unless properly "insulated" from management activities; and
. all officers and directors of a licensee and its direct or indirect
parent.
Under the new rules, all non-conforming interests acquired before November
7, 1996 are permanently grandfathered and thus do not constitute attributable
ownership interests. Any nonconforming interests acquired after that date need
to be brought into compliance by August 5, 2000.
Alien Ownership. The Communications Act limits the ability of foreign
entities or individuals to own or hold interests in broadcast licenses. As
applicable to the combined company, non-U.S. citizens, collectively, may
directly or indirectly own or vote up to twenty percent of the capital stock of
a corporate licensee. In addition, a broadcast license may not be granted to or
held by any corporation that is controlled, directly or indirectly, by any
other corporation more than one-fourth of whose capital stock is owned or voted
by non-U.S. citizens or their representatives, by foreign governments or their
representatives, or by non-U.S. corporations, if
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the FCC finds that the public interest will be served by the refusal or
revocation of such license. The FCC has interpreted this provision of the
Communications Act to require an affirmative public interest finding before a
broadcast license may be granted to or held by any such corporation, and the
FCC has made such affirmative findings only in limited circumstances.
Other Regulations, Legislation and Recent Developments Affecting Broadcast
Stations
Digital Television Service. The FCC has taken a number of steps to implement
digital television broadcasting service in the United States. The FCC has
adopted a digital television table of allotments that provides all authorized
television stations with a second channel on which to broadcast a digital
television signal. The FCC has attempted to provide digital television coverage
areas that are comparable to stations' existing service areas. The FCC has
ruled that television broadcast licensees may use their digital channels for a
wide variety of services such as high-definition television, multiple channels
of standard definition television programming, audio, data, and other types of
communications, subject to the requirement that each broadcaster provide at
least one free video channel equal in quality to the current technical
standard.
Digital television channels will generally be located in the range of
channels from channel 2 through channel 51. The FCC has required affiliates of
ABC, CBS, Fox and NBC in the top 10 television markets to begin digital
broadcasting by May 1, 1999. Many stations, including several of the combined
company's stations, have already begun digital broadcasting. Affiliates of the
four major networks in the top 30 markets were required to begin digital
broadcasting by November 1, 1999, and all other commercial broadcasters must do
so by May 1, 2002.
The FCC's plan calls for the digital television transition period to end in
the year 2006, at which time the FCC expects that television broadcasters will
cease non-digital broadcasting and return one of their two channels to the
government, allowing that spectrum to be recovered for other uses. Under the
Balanced Budget Act, however, the FCC is authorized to extend the December 31,
2006 deadline for reclamation of a television station's non-digital channel if,
in any given market one or more television stations affiliated with ABC, CBS,
NBC or Fox is not broadcasting digitally, and the FCC determines that such
stations have "exercised due diligence" in attempting to convert to digital
broadcasting; or less than 85% of the television households in the station's
market subscribe to a multichannel video service that carries at least one
digital channel from each of the local stations in that market, and less than
85% of the television households in the market can receive digital signals off
the air using either a set-top converter box for an analog television set or a
new digital television set.
The FCC is currently considering whether cable television system operators
should be required to carry stations' digital television signals in addition to
the currently required carriage of stations' analog signals. In July 1998, the
FCC issued a Notice of Proposed Rulemaking posing several different options for
the carriage of digital signals and solicited comments from all interested
parties. The FCC has yet to issue a decision on this matter.
The implementation of digital television will also impose substantial
additional costs on television stations because of the need to replace
equipment and because some stations will need to operate at higher utility
costs and there can be no assurance that our television stations will be able
to increase revenue to offset such costs. The FCC is also considering imposing
new public interest requirements on television licensees in exchange for their
receipt of digital television channels. In addition, the Communications Act
allows the FCC to charge a spectrum fee to broadcasters who use the digital
spectrum to offer subscription-based services. The FCC has adopted rules that
require broadcasters to pay a fee of 5% of gross revenues received from
ancillary or supplementary uses of the digital spectrum for which they charge
subscription fees, excluding revenues from the sale of commercial time. Neither
Viacom nor CBS can predict what future actions the FCC might take with respect
to digital television, nor can either company predict the effect of the FCC's
present digital television implementation plan or such future actions on the
combined company's business. The combined company will incur considerable
expense in the conversion to digital television and is unable to predict the
extent or timing of consumer demand for any such digital television services.
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Digital Audio Radio Service and Low-Power FM. The Commission has authorized
or is considering various digital audio radio services. In January 1995, the
Commission adopted rules to allocate spectrum for satellite digital audio radio
services. The Commission has issued two authorizations to launch and operate
satellite digital audio radio services. The FCC also has undertaken an inquiry
into the terrestrial broadcast of digital audio radio services signals. On
November 1, 1999, the FCC issued a Notice of Proposed Rulemaking on the subject
which solicits comments or proposals to implement terrestrial digital audio
radio services, including a conversion to in-band on-channel transmissions by
existing radio broadcasters. Neither Viacom nor CBS can predict the impact of
either satellite or terrestrial digital audio radio services on its business.
CBS has a significant ownership interest in USA Digital Radio, Inc., which is
developing an in-band on-channel terrestrial digital audio radio services
technology.
In addition, the FCC recently proposed the creation of a new low-power FM
radio service that would operate in the existing FM band. The Commission is in
the process of collecting comments on this proposal and at this time neither
Viacom nor CBS can predict either the outcome of this proceeding or the impact,
if any, that a new low-power FM radio service might have on the combined
company's broadcast operations.
Internet
Federal, state and international laws and regulations either in effect or
under consideration that govern interactive or online communications prohibit
the transmission of obscene, indecent, or otherwise unlawful communications and
impose restrictions on the collection, use, and disclosure of personally
identifiable information about both children and adults. Such prohibitions and
restrictions could affect the business and operations of the combined company.
In addition, some of the businesses operated by CBS and Viacom permit online
users to post and access content and to communicate through a web site or
comparable vehicle. In some instances, the material posted or communicated by
third parties may infringe the copyrights or trademarks of others, be subject
to libel, fraud, or other claims, or otherwise be actionable. Although Federal
legislation limits the liability of web site operators for copyright
infringement and other types of civil claims by users of their systems, the
precise contours of these limitations are not yet clear. Similarly, the
combined company may face claims of liability by third parties who believe
users of the combined company's web sites infringe their interests and there
can be no assurance any such liabilities will not have an adverse effect on the
combined company's businesses or operations.
Some businesses operated by both CBS and Viacom permit users to perform
musical works and sound recordings over the Internet. The owners of the
copyrights in the performed musical works and the sound recordings may be
entitled to receive license fees for some or all of these performances.
Further, license fees may need to be paid for the copies of the works that are
stored on the combined company's servers to facilitate such performances. Some
of these fees have not yet been set, and there can be no assurance that such
fees will not have an adverse effect on the combined company's businesses or
operations.
Proposals for additional or revised statutory or regulatory requirements are
considered by Congress, the FTC, the FCC, other Federal agencies, and state and
local governments from time to time, and a number of such proposals are under
consideration at this time. Moreover, both the FTC and state attorneys general
are actively monitoring online offerings in connection with consumer protection
concerns. It is possible that some of the provisions and requirements described
herein are now, and in the future may be, the subject of Federal or state
legislation, agency proceedings or court litigation. It is not possible to
predict what legal, legislative, regulatory or judicial changes, if any, may
occur or their impact on the combined company's businesses or operations.
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DESCRIPTION OF VIACOM CAPITAL STOCK FOLLOWING THE MERGER
The following summary of the terms of the capital stock of Viacom following
the merger may not contain all information that is important to you and we
refer you to the full text of Viacom's proposed new Restated Certificate of
Incorporation, attached to this joint proxy statement/prospectus as Annex B,
Viacom's amended By-laws, attached to this joint proxy statement/prospectus as
Annex C, the Delaware General Corporation Law and the merger agreement,
attached to this joint proxy statement/prospectus as Annex A. This summary is
qualified in its entirety by reference to these documents.
The authorized capital stock of Viacom consists of 500 million shares of
Viacom Class A common stock, three billion shares of Viacom Class B common
stock and 200 million shares of preferred stock, par value $0.01 per share,
issuable in series.
Viacom Class A Common Stock
As of November 12, 1999, the most recent practicable date prior to the
printing of this joint proxy statement/prospectus, there were 138,334,099
shares of Viacom Class A common stock issued and outstanding. Shares of Viacom
Class A common stock are not redeemable. Holders of shares of Viacom Class A
common stock are entitled to one vote per share.
Viacom Class B Common Stock
Viacom Class B common stock has rights, privileges, limitations,
restrictions and qualifications identical to Viacom Class A common stock except
that shares of Viacom Class B common stock have no voting rights other than
those required by the Delaware General Corporation Law. As of November 12,
1999, the most recent practicable date prior to the printing of this joint
proxy statement/prospectus, there were 558,771,779 shares of Viacom Class B
common stock issued and outstanding. Shares of Viacom Class B common stock are
not redeemable.
Voting and Other Rights of Viacom Common Stock
Voting Rights. Under Viacom's proposed new Restated Certificate of
Incorporation, except as noted below or otherwise required by the Delaware
General Corporation Law, holders of the outstanding shares of Viacom Class A
common stock vote together with the holders of the outstanding shares of all
other classes of capital stock of Viacom entitled to vote, without regard to
class. At the present time, however, there are no outstanding shares of any
other class of capital stock of Viacom entitled to vote. Under Viacom's
proposed new Restated Certificate of Incorporation:
. each holder of an outstanding share of Viacom Class A common stock is
entitled to cast one vote for each share registered in the name of the
holder and
. 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 to vote on any question presented to the shareholders of Viacom,
including but not limited to whether to increase or decrease, but not below the
number of shares then outstanding, the number of authorized shares of Viacom
Class B common stock. However, under the Delaware General Corporation Law, a
holder of an outstanding share of Viacom Class B common stock is entitled to
vote on any proposed amendment to Viacom's Restated Certificate of
Incorporation, if the amendment will increase or decrease the par value of the
shares of Viacom Class B common stock, or alter or change the powers,
preferences or special rights of the shares of Viacom Class B
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common stock so as to affect them adversely. Subject to the foregoing, any
future change in the number of authorized shares of Viacom Class B common stock
or any consolidation or merger of Viacom with or into another corporation
pursuant to which shares of Viacom Class B common stock would be converted into
or exchanged for any securities or other consideration could be consummated
with the approval of the holders of a majority of the outstanding shares of
Viacom Class A common stock and without any action by the holders of shares of
Viacom Class B common stock.
Dividends. Subject to the rights and preferences of any outstanding
preferred stock, dividends on Viacom Class A common stock and Viacom Class B
common stock are payable equally on shares of Class A common stock and Class B
common stock out of the funds of Viacom legally available therefor when, as and
if declared by the Viacom Board.
Rights in Liquidation. In the event Viacom is liquidated, dissolved or wound
up, whether voluntarily or involuntarily, the net assets of Viacom would be
divided ratably among the holders of the then outstanding shares of Viacom
Class A common stock and Viacom Class B common stock after payment or provision
for payment of the full preferential amounts to which the holders of any series
of preferred stock of Viacom then issued and outstanding would be entitled.
Split, Subdivision or Combination. If Viacom splits, subdivides or combines
the outstanding shares of Viacom Class A common stock or Viacom Class B common
stock, the outstanding shares of the other class of Viacom common stock shall
be proportionally split, subdivided or combined in the same manner and on the
same basis as the outstanding shares of the other class of Viacom common stock
have been split, subdivided or combined.
Preemptive Rights. Shares of Viacom Class A common stock and Viacom Class B
common stock do not entitle a holder to any preemptive rights enabling a holder
to subscribe for or receive shares of stock of any class or any other
securities convertible into shares of stock of any class of Viacom. The Viacom
Board possesses the power to issue shares of authorized but unissued Viacom
Class A common stock and Viacom Class B common stock without further
shareholder action, subject to the requirements of applicable law and stock
exchanges, unless National Amusements would no longer hold a majority of the
outstanding shares of voting stock of Viacom as a result of the issuance. The
number of authorized shares of Viacom Class A common stock and Viacom Class B
common stock could be increased with the approval of the holders of a majority
of the outstanding shares of Viacom Class A common stock and without any action
by the holders of shares of Viacom Class B common stock.
Trading Market. The outstanding shares of Viacom Class A common stock and
Viacom Class B common stock are listed for trading on the NYSE. The Registrar
and Transfer Agent for Viacom common stock is The Bank of New York.
Alien Ownership. Viacom's proposed new Restated Certificate of Incorporation
provides that Viacom may prohibit the ownership or voting of a percentage of
its equity securities in order to ensure compliance with the requirements of
the Communications Act.
Viacom Series C Preferred Stock
Designation. Series C Preferred Stock, par value $.01.
Dividends. If declared by the Viacom Board of Directors, cash dividends are
payable in an amount per share equal to 1,000 times the aggregate per share
amount of each cash dividend declared or paid on the Viacom Class B common
stock. In addition, in the event any dividend or distribution on the shares of
Viacom Class B common stock is paid in cash or any debt security or instrument
or other property, other than (1) cash dividends subject to the immediately
preceding sentence, (2) a distribution of shares of Viacom Class B common stock
or other Viacom capital stock or (3) a distribution of rights or warrants to
acquire Viacom Class B common stock or other Viacom capital stock, at a price
less than the fair market value, then like kind
100
<PAGE>
dividends are paid on each share of Viacom Series C preferred stock, in an
amount equal to 1,000 times the distribution paid on each share of Viacom Class
B common stock. The dividend multiple is subject to adjustment in the event of
a stock dividend or distribution paid on, or a subdivision, split, combination,
consolidation or reverse split of, the Viacom Class B common stock, whether by
way of reclassification, reorganization or otherwise.
Voting Rights. Each share of Viacom Series C preferred stock entitles the
holder to 100 votes on all matters submitted to a vote of the holders of the
Viacom common stock. The vote multiple is subject to adjustment in the event of
a stock dividend or distribution paid on, or a subdivision, split, combination,
consolidation or reverse split of the Viacom Class A common stock, whether by
way of reclassification, reorganization or otherwise.
Conversion. Each share of Viacom Series C preferred stock is convertible, at
the option of the holder, at any time, into 1,000 shares of Viacom Class B
common stock. Payment of fair market value will be made in lieu of issuing
fractional shares. The conversion rate is subject to adjustment in the event of
a stock dividend or distribution paid on, or a subdivision, split, combination,
consolidation or reverse split of the Viacom Class B common stock, whether by
way of reclassification, reorganization or otherwise.
Liquidation, Dissolution or Winding Up. Upon any voluntary or involuntary
liquidation, dissolution or winding up of Viacom, no distribution will be made
to the holders of Viacom common stock unless the holders of Viacom Series C
preferred stock have received:
. $.01 plus an amount equal to accrued and unpaid dividends and
distributions on the Viacom Series C preferred stock or
. if greater, an amount equal to 1,000 times the aggregate amount to be
distributed per share to holders of Viacom Class B common stock.
In addition, no distributions will be made to the holders of stock ranking on a
parity with the Viacom Series C preferred stock, unless simultaneous
distributions are made to the holders of Viacom Series C preferred stock in
proportion to the total amounts to which the holders of shares of Viacom Series
C preferred stock are entitled as described above. The liquidation multiple is
subject to adjustment in the event of a stock dividend or distribution paid on,
or a subdivision, split, combination, consolidation or reverse split of the
Viacom Class B common stock, whether by way of reclassification, reorganization
or otherwise.
Consolidation, Merger, Etc. If Viacom enters into any consolidation, merger,
division, share exchange, combination, sale of all or substantially all of its
assets, or other transaction in which the shares of Viacom Class B common stock
are exchanged for or changed into other securities, cash and/or any other
property, then each share of Series C preferred stock will be similarly
exchanged for or changed into the aggregate amount of securities, cash and/or
other property (payable in like kind) for which or into which each share of
Viacom Class B common stock is changed or exchanged multiplied by the highest
of the dividend multiple, the conversion rate or the liquidation multiple in
effect immediately prior to the event.
No Redemption. The shares of Viacom Series C Preferred Stock are not
redeemable by Viacom or the holder.
Amendment. A vote of two-thirds of all outstanding shares of Viacom Series C
preferred stock is required to amend the proposed new Restated Certificate of
Incorporation in any manner which would alter or change the rights, preferences
or limitations of the Viacom Series C preferred stock in any material respect
prejudicial to its holders. Creation of series of preferred stock ranking on
parity or senior to the Viacom Series C preferred stock, in terms of dividends,
distributions or voting, is not deemed prejudicial.
Other Viacom Preferred Stock
Unless National Amusements would no longer hold a majority of the
outstanding shares of voting stock of Viacom as a result of the issuance, the
Viacom Board, without further action by the shareholders, is authorized to
issue preferred stock from time to time in one or more series, with such
distinctive serial designations as
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<PAGE>
may be stated or expressed in the resolution or resolutions providing for the
issue of such stock adopted from time to time by the Board of Directors; and in
the resolution or resolutions providing for the issuance of shares of each
particular series, the Board of Directors is also expressly authorized to fix:
. the right to vote, if any;
. the consideration for which the shares of the series are to be issued;
. the number of shares constituting the series, which number may be
increased, except as otherwise fixed by the Board of Directors, or
decreased (but not below the number of shares then outstanding) from time
to time by action of the Board of Directors;
. the rate of dividends and the times at which dividends will be payable on
the series and the preference, if any, which the dividends will have
relative to dividends payable on shares of any other preferred stock of
Viacom;
. whether dividends will be cumulative or noncumulative, and, if
cumulative, the date or dates from which dividends will be cumulative;
. the rights, if any, of holders in the event of any voluntary or
involuntary liquidation, merger, consolidation, distribution or sale of
assets, dissolution or winding up of the affairs of Viacom; the rights,
if any, of holders to convert the shares into or exchange the shares for
shares of any other preferred stock of Viacom or for any debt securities
of Viacom, and the terms and conditions, including price and rate of
exchange, of the conversion or exchange:
. whether shares of the series will be subject to redemption, and the
redemption price or prices and other terms or redemption, if any,
including redemption prices payable in shares of Viacom Class A common
stock or Viacom Class B common stock;
. the terms and amounts of any sinking fund for the purchase or redemption
of shares of the series; and
. any and all other powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions pertaining to shares of the series permitted by law.
102
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COMPARISON OF RIGHTS OF HOLDERS OF
VIACOM STOCK AND CBS STOCK
The rights of Viacom shareholders are governed by Delaware law, including
the Delaware General Corporation Law, and Viacom's current Restated Certificate
of Incorporation and By-laws. The rights of CBS shareholders are governed by
Pennsylvania law, including the Pennsylvania Business Corporation Law, and CBS'
Restated Articles of Incorporation and By-laws.
Upon consummation of the merger, holders of shares of CBS common stock will
become holders of shares of Viacom non-voting Class B common stock and holders
of CBS Series B preferred stock will become holders of shares of Viacom Series
C preferred stock, which is in turn convertible into shares of Viacom non-
voting Class B common stock. Consequently, following the merger, Delaware law
and Viacom's proposed new Restated Certificate of Incorporation and its By-
laws, both as amended as a result of the merger, will govern the rights of
former holders of CBS common stock and CBS Series B preferred stock. Copies of
Viacom's current Restated Certificate of Incorporation and By-laws and CBS'
Restated Articles of Incorporation and By-laws have been filed with the SEC and
will be sent to any shareholder of Viacom or CBS upon request. Copies of
Viacom's proposed new Restated Certificate of Incorporation and By-laws, as
they will be amended as a result of the merger, are attached as Annexes B and C
to this joint proxy statement/prospectus.
A tabular comparison of shareholder rights of holders of common stock of
Viacom and CBS both before and after the effective time of the merger is
included below. This table is not intended to be a complete statement of all
differences or a complete description of the specific provisions referred to in
this summary, and the identification of specific differences is not intended to
indicate that other significant differences do not exist. However, the table
includes a description of these differences that we believe to be material.
Other than voting rights, there is no difference between the rights of holders
of Viacom Class A common stock and Viacom Class B common stock.
103
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- -------------------------------------------------------------------------------
Voting, Class A Common Common Stock: See "Viacom Before
generally.... Stock: the Merger." Shares
. 1 vote per share. of Viacom Class B
. 1 vote per share. Common Stock,
. No cumulative including the
. No cumulative voting. shares which CBS
voting. shareholders will
. Plurality vote receive in the
. Plurality vote for directors. merger, have no
for directors. voting rights or
. Majority vote for powers except as
. Majority vote for all other matters required by
all other except as set Delaware law.
matters. forth below where
a higher vote is
Class B Common required for
Stock: certain approvals
and except as
. Except as otherwise
required by required by
Delaware law, Pennsylvania law.
this class has no
voting rights or
powers.
- -------------------------------------------------------------------------------
Approval of
Certain
Business
Combinations..
Under Delaware law, Under Pennsylvania See "Viacom Before
subject to certain law, subject to the Merger."
limited exceptions, certain limited
the approval of the exceptions, the
holders of a affirmative vote of
majority of the a majority of the
outstanding stock votes cast by all
entitled to vote is shareholders
required for any entitled to vote
merger or thereon and, if the
consolidation of a transaction will
Delaware effect any changes
corporation with in the articles of
another corporation the corporation,
or the sale, lease the same class or
or exchange of all series vote that
or substantially would have been
all of that required under
corporation's Pennsylvania law to
assets. amend the articles,
if any, is required
for any merger or
consolidation of a
Pennsylvania
corporation with
another corporation
or the sale, lease,
exchange or other
disposition of all
or substantially
all of that
corporation's
property and assets
outside of the
ordinary course of
business.
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104
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Approval of
Certain
Business
Combinations
with
Affiliates...
Delaware law Pennsylvania law See "Viacom Before
contains provisions contains provisions the Merger."
that may restrict that may restrict
certain business certain business
combinations combinations
between a between a
corporation and its corporation and its
affiliates which affiliates. See the
are not wholly provisions
owned. Viacom's described under
Restated "Anti-Takeover
Certificate of Provisions".
Incorporation and
By-laws do not
impose any higher
voting requirements
for the approval of
these actions.
Except as described
in the next
paragraph, CBS'
Restated Articles
of Incorporation
and By-laws do not
impose any higher
voting requirements
for the approval of
business
combinations.
CBS' Restated
Articles of
Incorporation
require that
certain
combinations with a
5% (at least)
shareholder receive
the approval of
holders of a
supermajority (80%)
of all shares
entitled to vote
and a majority of
shares held by all
shareholders other
than such 5%
shareholder and its
affiliates unless
the transaction is
approved by a
majority of
disinterested
directors or
satisfies certain
specified fairness
criteria with
respect to the
consideration to be
received and
certain other
matters.
Amendment of these
provisions requires
the approval of at
least 80% of the
combined vote of
all shares entitled
to vote generally
in an annual
election of
directors and a
majority of the
combined vote of
such shares held by
all shareholders
other than 5%
shareholders and
their affiliates,
voting as a class.
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<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Number of
Directors
and Size of
Board........
Under Delaware law, Under Pennsylvania Under Viacom's
the certificate of law, the articles proposed new
incorporation or of incorporation or Restated
the by-laws may the by-laws may Certificate of
specify the number specify the number Incorporation, the
of directors. of directors. number of directors
will be expanded to
Viacom's Restated CBS' By-laws allow 18. In addition,
Certificate of between 3 and 24 (1) the size of the
Incorporation directors to serve Board may only be
allows between on its board. CBS' changed by the
three and 20 By-laws authorize affirmative vote of
directors to serve the board to set at least 14
on their board. the number of directors, (2)
Viacom's By-laws directors within eight of the
authorize the board these limits. directors serving
to set the number as CBS directors on
of directors within CBS' board has set September 6, 1999
the parameters set the number of (or any independent
by the Restated directors at 11, director elected or
Certificate of increasing to 12 on appointed prior to
Incorporation. December 1, 1999. the effective time
of the merger to
Viacom's board has Under the CBS By- serve as a CBS
set the number of laws, a majority of director) that are
directors at ten. the directors must designated by CBS'
be independent board prior to the
directors. merger (or
replacements who
are independent
directors) will
become members of
Viacom's board at
the effective time
and (3) of the 10
directors on
Viacom's board who
are not CBS' board
designees, two are
directors who were
first elected to
serve on the Viacom
board after 1993,
are not members of
the management of
either Viacom or
National
Amusements, and, in
the event they
leave the board,
must be replaced
with disinterested,
independent
directors who are
chief executive
officers, chief
operating officers
or chief financial
officers or former
chief executive
officers of a
Fortune 500 company
or a non-U.S.
company of
comparable size.
Generally, for a
period of three
years following the
merger, these
provisions cannot
be changed without
the approval of at
least 14 directors.
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106
<PAGE>
- --------------------------------------------------------------------------------
Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Term of Under Viacom's by- Under CBS' Restated Under Viacom's
Office....... laws, each director Articles of proposed new
serves for a one- Incorporation, CBS Restated
year term. may, but need not, Certificate of
create a classified Incorporation and
board. However CBS applicable law, all
has not done so directors will
and, under CBS' By- serve for a one-
laws, each year term. Pursuant
director's term to the National
expires at the next Amusements
annual meeting. stockholder
agreement, for the
three-year period
following the
merger, National
Amusements agreed
to cause to be
nominated and
elected each CBS
director (or
replacements who
are independent
directors).
- --------------------------------------------------------------------------------
Removal of
Directors....
Under Delaware law, Under Pennsylvania After the effective
any director may be law, unless time of the merger,
removed from office otherwise provided any director may be
with or without in a by-law adopted removed with or
cause by the by the without cause in
affirmative vote of shareholders, any accordance with
the holders of a director may be Delaware law.
majority of the removed from office However, pursuant
shares of by the shareholders to the National
outstanding stock with or without Amusements
entitled to vote in cause by the stockholder
the election of affirmative vote of agreement, for the
that director. a majority of the three-year period
votes cast with following the
Viacom's By-laws certain exceptions merger, National
provide for the in the case of a Amusements has
removal of classified board. agreed to take any
directors in action necessary to
accordance with Under CBS' Restated ensure that no CBS
Delaware law. Articles of director is removed
Incorporation and as a director of
its By-laws, Viacom unless such
directors may be removal is for
removed by CBS' cause and is
shareholders approved by at
without cause only least 14 members of
by the affirmative Viacom's board.
vote of holders of
at least 80% of the
combined vote of
the shares of
outstanding stock
entitled to vote
generally in an
annual election.
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107
<PAGE>
- --------------------------------------------------------------------------------
Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Vacancies.... Under Viacom's By- Under CBS' By-laws, Under Viacom's
laws, vacancies on vacancies on the proposed new
the Viacom board CBS board may be Restated
shall be filled by filled by the Certificate of
the board only, board, even if less Incorporation, if
even if less than a than a quorum is one of the eight
quorum is present. present, or the CBS CBS directors
board may reduce vacates his or her
the size of the seat, the Viacom
board. Vacancies board, subject to
may also be filled its fiduciary
by election by the duties, is required
shareholders. to take all action
necessary to
appoint as a
successor a person
designated by a
majority of the
remaining CBS
directors. National
Amusements has
agreed in its
shareholder
agreement with CBS
to vote for such
designee.
If one of the ten
Viacom directors
vacates his or her
seat, the Viacom
board will fill the
vacancy. However,
if a directorship
held by a person
who is a director
of Viacom first
elected after 1993
and is not
management of
Viacom or National
Amusements, or the
replacement of any
such person,
becomes vacant, the
Viacom board,
subject to its
fiduciary duties,
is required to take
all action
necessary to ensure
that the vacancy is
filled by a
disinterested,
independent person
who is the chief
executive officer,
chief operating
officer or chief
financial officer
or former chief
executive officer
of a Fortune-500
company or a non-
U.S. public company
of comparable size.
Generally, for a
period of three
years following the
merger, these
provisions cannot
be changed without
the approval of at
least 14 directors.
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108
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Calling of
Special
Meeting of
Shareholders..
Under Delaware law, Under Pennsylvania Under Viacom's By-
special meetings of law for "registered laws, special
shareholders may be corporations" such meetings may be
called by the board as CBS, special called by the:
or by persons meetings of
authorized to do so shareholders may be . majority of the
in the certificate called only by the board;
of incorporation or board, or by the
by-laws. officers or other . chairman of the
persons, if any, board;
Under Viacom's By- provided in the by-
laws, special laws, except that . chief executive
meetings of an Interested officer;
shareholders of Shareholder (as
Viacom may be defined below for . vice chairman of
called by the: purposes of the the board;
business
. majority of the combination . president and
board; moratorium under chief operating
"Anti-Takeover officer; or
. chairman of the Provisions") can
board; call a special . chairman of the
meeting to approve board, chief
. vice chairman of certain business executive
the board; combinations. officer, the vice
chairman of the
. president; or Under CBS' By-laws, board, the
special meetings of president and
. chairman of the shareholders of CBS chief operating
board, vice may be called only officer or the
chairman of the by: secretary at the
board, president request of at
or secretary at . the CBS Board; or least 50.1% of
the request of at Viacom's Class A
least 50.1% of . the chairman of common stock.
Viacom's Class A the Board.
common stock.
Under CBS' By-laws,
Under Viacom's By- the only business
laws, the only that may be
business that may conducted at a
be conducted at a special meeting is
special meeting is the business stated
the business stated in the notice of
in the notice of that special
that special meeting delivered
meeting. at the direction of
the CBS Board or
the chairman of the
Board and matters
which are
incidental or
germane thereto.
- --------------------------------------------------------------------------------
109
<PAGE>
- --------------------------------------------------------------------------------
Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Amendment to Delaware law Pennsylvania law Under Viacom's
By-laws...... provides that the provides that the proposed new
by-laws may be by-laws may be Restated
amended by an amended by an Certificate of
action of the action of the Incorporation,
shareholders. shareholders. The during the three-
However, the by-laws may also year period
certificate of give the power to following the
incorporation may amend the by-laws merger, any
also give the power to the board. provisions of
to amend the by- Article VIII of
laws to the board. Pennsylvania law Viacom's By-laws,
limits the board's which states that
Viacom's Restated power to amend the the By-laws are
Certificate of by-laws, however, subject to Article
Incorporation in respect to XIII of the
allows the board to certain matters, proposed new
repeal, alter or unless allowed by Restated
amend the by-laws the articles of Certificate of
by majority vote. incorporation. Incorporation,
which contain the
Under CBS' Restated principal
Articles of provisions setting
Incorporation and forth the corporate
By-laws, CBS' governance
shareholders may requirements
amend the By-laws relating to the
with the merger, may not be
affirmative vote of amended, repealed
holders of at least or waived by
80% of the combined Viacom's board
vote of the shares without the
entitled to vote approval of at
generally in an least 14 directors.
annual election.
Also, CBS' Restated
Articles of
Incorporation and
By-laws allow the
board to repeal,
alter or amend the
By-laws by majority
vote of the entire
board.
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110
<PAGE>
- --------------------------------------------------------------------------------
Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Amendments
to
certificate
of
incorporation..Under Delaware law, Under Pennsylvania Under Viacom's
any provision of law, an amendment proposed new
the certificate of to the articles of Restated
incorporation may incorporation Certificate of
be amended by the requires the Incorporation,
approval of the approval of the during the three-
board and the board and, except year period
affirmative vote of in limited cases following the
a majority of the where a greater merger, any
holders of the vote may be provisions of
combined voting required, the Viacom's proposed
power of the affirmative vote of new Restated
outstanding stock a majority of the Certificate of
entitled to vote, votes cast by all Incorporation which
and a majority of shareholders refer to Article
each class entitled entitled to vote on VIII of Viacom's
to vote as a class. the matter and the By-laws and the
affirmative vote of provisions of
Viacom's Restated a majority of the Article XIII of the
Certificate of votes cast by all proposed new
Incorporation shareholders within Restated
provides that each class or Certificate of
amendments to the series of shares if Incorporation,
Restated such class or which contain the
Certificate of series of shares is principal
Incorporation may entitled to vote on provisions setting
be adopted as the matter as a forth the corporate
allowed by Delaware class. governance
law. arrangements
Also, Pennsylvania following the
No amendments to law provides that merger, may not be
the Restated shareholders of a amended, repealed
Certificate of registered or waived without
Incorporation corporation, such the approval of at
require a as CBS, are not least 14 directors.
supermajority vote. entitled to propose
amendments to the
articles of
incorporation.
Amendments to some
provisions of the
CBS Restated
Articles of
Incorporation
require the
approval of holders
of at least 80% of
the combined vote
of the shares
entitled to vote
generally in an
annual election,
and certain other
amendments require
such vote unless
first recommended
and approved by a
majority of the
entire board. See
also "Approval of
Certain Business
Combinations With
Affiliates" above
for the required
vote to amend that
provision.
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111
<PAGE>
- --------------------------------------------------------------------------------
Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Dividends.... Under Delaware law, Under Pennsylvania See "Viacom Before
a corporation may law, unless the Merger."
pay dividends out restricted by the
of surplus or, if by-laws, a
no surplus exists, corporation may pay
out of net profits dividends unless
for the fiscal year the payment would
in which the leave the
dividends are corporation unable
declared and/or its to pay its debts as
preceding fiscal they become due in
year. However, the usual course of
dividends may not business, or unless
be declared out of the payment would
net profits if the leave the
capital of the corporation with
corporation is less total assets that
than the aggregate were less than the
amount of capital sum of its total
represented by any liabilities plus
issued and the amount that
outstanding would be
preferred stock. distributable upon
dissolution to
shareholders having
senior rights.
- --------------------------------------------------------------------------------
Federal
Communications
Laws.........
Viacom's Restated The CBS Restated See "Viacom Before
Certificate of Articles of the Merger."
Incorporation Incorporation and
provides that it By-laws do not
may request certain contain special
information from provisions with
the shareholder or respect to
proposed compliance with
shareholder in federal
order to determine communications
whether ownership laws.
of Viacom's Class A
or Class B common
stock is
inconsistent with,
or in violation of,
any of the federal
communications
laws. If the
necessary
information is not
provided or if
Viacom finds that
the ownership of
its Class A or
Class B common
stock by a
shareholder or
proposed
shareholder is
inconsistent with,
or in violation of,
any of the federal
communications
laws, Viacom may:
. refuse to permit
the transfer of
shares of its
Class A or Class
B common stock to
the proposed
person or entity;
or
. exercise any and
all appropriate
remedies, at law
or in equity,
against any
shareholder in
order to obtain
the necessary
information or
prevent or cure
any situation
112
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
which would cause
the inconsistency
with, or violation
of, the offending
provision of the
federal
communications
laws.
- --------------------------------------------------------------------------------
Conversion... As long as 10,000 CBS' common stock See "Viacom Before
shares of Viacom's has no conversion the Merger."
Class A common features.
stock are
outstanding, each
record holder of
shares of Class A
or Class B common
stock may convert
any or all of such
shares into an
equal number of
shares of Class B
common stock.
- --------------------------------------------------------------------------------
Committees... Under its By-laws, Under its By-laws, All Committees.
Viacom's board may CBS' board is Under Viacom's
create one or more required to create proposed new
committees. Each a compensation Restated
committee would committee, an audit Certificate of
consist of one or review committee Incorporation, all
more of the and a nominating committees, other
directors of and governance than the
Viacom. committee. Each of compensation
these committees committee and the
shall consist of officers nominating
not less than two committee, must
members of the have the same
board, at least two proportion of CBS
of whom are and Viacom
required to be directors as the
independent full Viacom board
directors on the has, with a minimum
date of their of one CBS director
appointment. CBS' on each committee.
By-laws require
that all members of Officers Nominating
the compensation Committee. Under
committee and the Viacom's proposed
nominating and new Restated
governance Certificate of
committee be Incorporation,
independent Viacom will have an
directors on the officers nominating
date of their committee and Mr.
appointment. The Karmazin will be
CBS board can also the only member of
create additional this committee.
standing or special This committee will
committees of one have the powers to
or more members. hire, elect,
terminate, change
positions, allocate
responsibilities or
determine non-
equity
compensations, with
respect to the
officers and
employees. However,
this committee will
not have these
powers with respect
to the chairman,
the chief executive
officer and the
chief operating
officer.
113
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
This committee will
not have the power
to fill the
positions of the
chief financial
officer, controller
and general counsel
without the
approval of the
board. However,
this committee will
have all of the
other powers
delegated to it for
other officers with
respect to the
chief financial
officer, controller
and general
counsel, including
the power to
terminate
employment of
persons holding
those positions.
Any decision of
this committee can
be overridden by
the affirmative
vote of at least 14
directors.
Compensation
Committee. Under
Viacom's proposed
new Restated
Certificate of
Incorporation, this
committee shall
consist of three
CBS directors who
are independent
directors and three
directors who are
not CBS directors.
Of the three non-
CBS directors, two
will be persons who
were first elected
as directors of
Viacom after 1993
and who are not
management of
Viacom or National
Amusements and the
third will be a
disinterested
independent
director.
This committee must
approve the annual
compensation of all
other officers and
employees and any
equity or equity-
based compensation
of any officer or
employee. However,
this committee will
not have the power
to approve the
annual compensation
of:
. any employee if
the total value
of such
employee's annual
cash compensation
is less than $1
million; or
114
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
. any talent, as
such term is
commonly used in
the media or
entertainment
industries.
These powers will
be delegated to the
officers nominating
committee.
Generally, for a
period of three
years following the
merger, these
provisions cannot
be changed without
the approval of at
least 14 directors.
- --------------------------------------------------------------------------------
Officers..... Under Viacom's By- Under its By-laws, Chairman and Chief
laws, Viacom's CBS' board shall Executive Officer.
board shall elect a elect a chairman, Under Viacom's
president, a who may be proposed new
treasurer and a designated an Restated
secretary. The officer of CBS, a Certificate of
board may also president or a Incorporation,
elect a chairman, chief executive Sumner Redstone
one or more vice officer or both, will serve as
chairmen and vice such vice chairman and chief
presidents and one presidents as may executive officer
or more assistant from time to time of Viacom and Mel
treasurers and be necessary or Karmazin will serve
assistant desirable, a as president and
secretaries. Any secretary and a chief operating
number of offices treasurer. There officer of Viacom.
may be held by the shall also be one If Mr. Redstone is
same person, except or more assistant not the chief
the offices of secretaries and executive officer
president and treasurers and such at the effective
secretary. Vice other officers and time of the merger
presidents may be assistant officers or ceases to be the
given distinctive as the board may chief executive
designations such deem appropriate. officer at any time
as executive vice The board shall during the three-
president or senior elect all officers, year period
vice president. The except assistant following the
board may elect officers. The term merger, Mr.
other officers and of office for all Karmazin will
agents as it deems officers shall be become the chief
necessary. The until the executive officer
officers shall hold organization while retaining his
office until their meeting of the title and
successors are board following the responsibilities as
elected or next annual meeting chief operating
appointed and of shareholders and officer. The chief
qualify or until until their executive officer
their earlier respective shall be
resignation or successors are responsible, in
removal. Any elected or consultation with
officer elected or appointed and shall the chief operating
appointed by the qualify, or until officer, for
board may be their earlier corporate policy
removed at any time death, resignation and strategy and
with or without or removal. The the chief operating
cause by the chairman or any officer shall
affirmative vote of officer may be consult on all
a majority of the removed from major decisions
whole board. office, either with with, and shall
or without cause, report directly to,
at any time by the the chief executive
affirmative vote of officer. However,
the majority of the unless Mr. Karmazin
members of the is the chief
board then in executive officer,
office. the chief executive
officer will not
exercise any
powers, rights,
functions or
responsibilities of
the chief operating
officer.
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<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
President and Chief
Operating Officer.
Under Viacom's
proposed new
Restated
Certificate of
Incorporation, Mr.
Karmazin will also
serve as president
as well as chief
operating officer.
Mr. Karmazin may
not be terminated
or demoted from his
position as chief
operating officer
or chief executive
officer, if he is
serving in that
capacity, and none
of his functions as
chief operating
officer may be
changed without the
affirmative vote of
at least 14
directors.
The chief operating
officer will:
. supervise,
coordinate and
manage Viacom's
business,
operations,
activities,
operating
expenses and
capital
allocation;
. handle matters
relating to
officers (other
than the chief
executive officer
and chief
operating
officer) and
employees
including hiring,
terminating,
changing
positions and
allocating
responsibilities,
other than (a)
specific board
authority with
respect to the
chief financial
officer, the
general counsel
and the
controller and
(b) the authority
of the officers
nominating
committee and the
compensation
committee; and
. hold
substantially all
of the powers,
rights, functions
and
responsibilities
typically
exercised by a
chief operating
officer.
116
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
All officers (other
than the chairman,
chief executive
officer and chief
operating officer)
will report,
directly or
indirectly, to the
chief operating
officer.
If Mr. Karmazin is
not the chief
operating officer
or chief executive
officer, the Viacom
board may terminate
the chief operating
officer, eliminate
that position and
the officers
nominating
committee and
reallocate the
functions of those
positions to whom
the officers will
report.
Vice Presidents,
Secretary,
Assistant
Secretary,
Treasurer and
Assistant
Treasurer. Under
Viacom's By-laws,
the president and
chief operating
officer may assign
additional duties
to the vice
presidents,
secretary,
assistant
secretary,
treasurer and
assistant
treasurer.
Generally, for a
period of three
years following the
merger, these
provisions cannot
be changed without
the approval of at
least 14 directors.
- --------------------------------------------------------------------------------
117
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Shareholder
Action.......
Under Delaware law, Under Pennsylvania See "Viacom Before
unless the law, unless the Merger."
certificate of otherwise
incorporation restricted by the
provides otherwise, by-laws, a
a shareholder shareholder action
action may be taken may be taken
if written consents without a meeting
are received from upon the unanimous
the holders of the written consent of
minimum number of all of the
votes that would be shareholders
necessary to entitled to vote
authorize that thereon.
action at a meeting Shareholders of a
at which all the registered
shares entitled to corporation, such
vote for that as CBS, may
action were present authorize an action
and voted. Viacom's without a meeting
Restated by less than
Certificate of unanimous written
Incorporation does consent only if
not restrict the such action without
ability of a meeting is
shareholders to act permitted by the
by written consent. articles of
incorporation. CBS'
Restated Articles
of Incorporation do
not provide for a
partial written
consent; and CBS'
By-laws do not
restrict
shareholder action
by unanimous
written consent.
- --------------------------------------------------------------------------------
Notice of
Some
Shareholder
Actions......
Neither Viacom's Under CBS' By-laws, See "Viacom Before
Restated for nominations for the Merger."
Certificate of the election of
Incorporation nor directors to be
its By-laws require properly brought by
shareholders to a shareholder
give Viacom advance before an annual
notice of director meeting or a
nominations or special meeting at
business to be which directors are
presented at an to be elected
annual or general pursuant to CBS'
shareholders' notice of meeting,
meeting. or for other
business to be
properly brought by
a shareholder
before an annual
meeting, the
shareholder must
have given timely
notice thereof in
writing to CBS'
secretary and the
shareholder must be
entitled by
Pennsylvania law to
present such
business at the
meeting and must be
a shareholder of
record at the time
the required notice
is given and at the
time of the
meeting. To be
timely, a
shareholder's
notice must be
delivered to CBS'
secretary at CBS'
principal executive
offices:
118
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
. in the case of an
annual meeting,
for receipt not
less than 90 days
nor more than 120
days prior to the
first anniversary
of the preceding
year's annual
meeting
(provided, if the
date of the
annual meeting is
advanced more
than 30 days or
delayed more than
90 days from the
anniversary date,
the notice can be
as late as the
10th day
following public
announcement of
the meeting
date); and
. with respect to
the nomination of
a person or
persons for
election to such
position(s) as
are specified in
CBS' notice of
meeting in the
case of a special
meeting, for
receipt no more
than 120 days
prior to the date
of such special
meeting and no
later than the
90th day prior to
the date of such
special meeting
or the 10th day
following the day
on which public
announcement is
first made of the
date of the
special meeting
and of the
nominees proposed
by the board to
be elected at
such meeting.
In no event will
the public
announcement of an
adjournment or
postponement of an
annual or special
meeting commence a
new time period for
the giving of a
shareholder's
notice. Such
shareholder's
notice shall
include:
. certain
information
relating to the
relationship, if
any, between the
shareholder and
the nominee being
proposed, the
nominee's written
consent, and the
information
required to be
disclosed under
the Exchange Act;
119
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
. a brief
description of
the business
desired to be
brought before
the meeting and
the reasons
therefor and any
material interest
of the
shareholder and
the beneficial
owner therein;
and
. as to the
shareholder
giving the notice
and as to the
beneficial owner,
if different from
the shareholder
giving notice, on
whose behalf the
nomination or
proposal is made,
the name and
address and
number of shares
held by the
shareholder and
beneficial owner,
and a
representation by
the shareholder
as to the intent
to hold such
shares until the
meeting and to
attend the
meeting and make
the proposal.
- --------------------------------------------------------------------------------
120
<PAGE>
- --------------------------------------------------------------------------------
Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Dissenters'
Rights of
Appraisal.... Delaware law Pennsylvania law See "Viacom Before
provides for provides, with the Merger."
appraisal rights on certain exceptions,
the part of the that shareholders
shareholders of a of a corporation
corporation only in have a right to
the case of certain dissent from a
mergers or proposed
consolidations and transaction and to
not in the case of obtain payment of
other mergers, the judicially
sales or transfers determined "fair
of all or value" of their
substantially all shares in a merger,
of a corporation's consolidation,
assets or division, share
amendments to a exchange or
corporation's conversion, in
certificate of certain asset
incorporation. transfers, in
Moreover, unless transactions where
the certificate of the board grants
incorporation so dissenters rights,
provides, Delaware and in certain
law does not other plans or
provide for amendments to the
appraisal rights in articles of
connection with a incorporation in
merger or which disparate
consolidation for treatment is given
stock listed on a to the holders of
national securities shares of the same
exchange or class or series
designated as a unless each group
national market has approved by a
system security on special class vote.
the Nasdaq stock These dissenters'
market or held of rights are not
record by more than available, however,
2,000 shareholders, for any class of
unless the stock that is
agreement of merger either listed on a
or consolidation national securities
requires the exchange or held of
holders of the record by more than
stock to receive, 2,000 shareholders
in exchange for (as is the case
their shares, any with CBS common
property other than stock) unless (a)
shares of stock of the shares are not
the surviving converted solely
corporation, shares into shares of the
of stock of any acquiring,
other corporation surviving, new or
listed on a other corporation,
national securities or solely into such
exchange or shares combined
designated as a with cash for any
national market fractional shares;
system security on (b) the shares
the Nasdaq stock being converted are
market or held of shares of any
record by more than preferred or
2,000 holders, cash special class of
instead of stock, unless the
fractional shares articles of
or any combination incorporation, the
of the foregoing. plan, or the terms
Viacom's Restated of the transaction
Certificate of entitle all holders
Incorporation does of the shares of
not provide for the preferred or
appraisal rights in special class to
these vote on the
circumstances. In transaction and
addition, Delaware require the
law denies approval of the
appraisal rights to affirmative vote of
the shareholders of a majority of the
the surviving votes cast by all
corporation in a shareholders of the
merger if the preferred or
merger did not special class; or
require the (c) (1) the
approval of the transaction
shareholders of the provides for
surviving disparate treatment
corporation. for shares of the
same class or
series,
121
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
(2) the shares
being converted are
a group of a class
or series of shares
which are to
receive the same
special treatment
in the transaction,
and (3) the group
is not entitled to
vote as a special
class for such
transaction.
- --------------------------------------------------------------------------------
Fiduciary
Duties of
Directors.... Under Delaware law, Under Pennsylvania See "Viacom Before
the business and law, directors have the Merger."
affairs of a a fiduciary duty to
corporation are their corporation
managed by or under and are required to
the direction of perform their
its board. In duties in good
exercising their faith, in a manner
powers, directors they reasonably
are charged with believe to be in
the fiduciary the best interests
duties of loyalty of the corporation,
and care to both and with the care,
the corporation and including
the shareholders. A reasonable inquiry,
party challenging skill and
the decision of a diligence, that a
board generally person of ordinary
bears the burden of prudence would use
rebutting the so- under similar
called "business circumstances.
judgment rule," a Directors, in
presumption that, considering the
in making a best interests of
business decision, their corporation,
directors acted on may, but are not
an informed basis, required to,
in good faith and consider the
in the honest effects of any
belief that the action upon
action was taken in employees,
the best interests suppliers and
of the corporation. customers of the
Unless this corporation, and
presumption is upon communities in
rebutted, the which offices or
business judgment other
exercised by establishments of
directors in making the corporation are
their decisions is located and all
not subject to other pertinent
judicial review. To factors. Under
rebut this Pennsylvania law,
presumption, a absent a breach of
party must fiduciary duty, a
demonstrate that, lack of good faith
in reaching their or self-dealing,
decision, the any act of the
directors breached board, a committee
one or more of of the board or an
their fiduciary individual director
duties. If the is presumed to be
presumption is so in the best
rebutted, the interests of the
directors bear the corporation. The
burden of Pennsylvania
demonstrating the Supreme Court has
entire fairness of recognized the
the relevant common law
transaction. "business judgment
Notwithstanding the rule". Pennsylvania
foregoing, Delaware courts have not
courts may subject imposed any
directors' heightened
defensive actions obligations on
taken in response directors to
to a threat to justify their
corporate control conduct in the
or their approval context of a
of a change-of- potential or
control transaction proposed
to enhanced acquisition of
scrutiny and may control or required
require the directors to
directors to maximize the short-
maximize the short- term financial
term financial return to
interests of shareholders.
shareholders.
122
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Limitation Delaware law Under See "Viacom
of Personal permits a Pennsylvania law, a Before the Merger."
Liability of corporation to corporation may
Directors.... include in its include in its by-
certificate of laws a provision
incorporation a which eliminates
provision that the liability of
limits or its directors for
eliminates the monetary damages
liability of its for any action
directors to the taken or the
corporation or its failure to take any
shareholders for action, unless (a)
monetary damages the directors have
arising from a breached or failed
breach of fiduciary to perform their
duty, except under duties and (b) the
certain breach or failure
circumstances. Some to perform
of these constitutes self-
circumstances would dealing, willful
include a breach of misconduct or
the duty of loyalty recklessness.
to the corporation However, a
or its Pennsylvania
shareholders, acts corporation may not
or omissions not in eliminate the
good faith or which liability of
involve intentional directors where the
misconduct or a responsibility or
knowing violation liability of a
of law, an unlawful director arises
declartion of a under any criminal
declaration of a statute or is for
dividend or the payment of
unlawful federal, state or
authorization of local taxes. CBS'
the repurchase or Restated Articles
redemption of stock of Incorporation
or any transaction and By-laws
from which the eliminate director
director derived an liability to the
improper personal fullest extent
benefit. Viacom's permitted by
Restated Pennsylvania law.
Certificate of
Incorporation
eliminates director
liability to the
fullest extent
permitted by
Delaware law.
- --------------------------------------------------------------------------------
123
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
See "Viacom
Indemnification Under Delaware The provisions of Before the Merger."
of Directors law, a corporation Pennsylvania law
and may indemnify a regarding
Officers..... director or officer indemnification are
of the corporation substantially
against expenses, similar to those of
including Delaware law.
attorneys' fees, Unlike Delaware
judgments, fines law, however,
and settlement Pennsylvania law
amounts actually expressly permits
and reasonably indemnification in
incurred in a civil connection with any
or criminal action, action, including a
suit or proceeding derivative action,
by reason of being unless a court
or having been a determines that the
representative of acts or omissions
or serving at the giving rise to the
request of the claim constituted
corporation. This willful misconduct
indemnification is or recklessness.
available if the
person acted in
good faith and
reasonably believed
that his or her
actions were in or
not opposed to the
best interests of
the corporation
and, in a criminal
proceeding, had no
reasonable cause to
believe that his or
her conduct was
unlawful. In an
action brought by
or on behalf of the
corporation, this
indemnification is
limited to expenses
incurred. Delaware
law also provides
that a corporation
may advance a
director, officer,
employee or agent
the expenses
incurred in
defending any
action, but that,
in the case of
advances to
directors or
officers the
corporation must
first receive an
undertaking from
the officer or
director to repay
the amount advanced
if it is ultimately
determined that the
person is not
entitled to
indemnification. A
determination of
the amount of the
indemnification to
be paid in any
circumstance must
be made by a
majority of the
directors who are
not parties to the
action, even though
less than a quorum,
by a committee of
such disinterested
directors or, if
there are no such
directors
CBS' Restated
Articles of
Incorporation and
By-laws provide for
broad
indemnification of
directors and
officers. However,
CBS' By-laws
specifically state
that there will be
no indemnification
where the
indemnitee
initiates the
claim, except for a
claim to enforce
by-law
indemnification
rights. The By-laws
provide for the
advancement of
certain expenses if
the person seeking
indemnification
agrees to repay all
amounts advanced if
it is later
determined that
such person is not
entitled to be
indemnified
pursuant to the By-
laws against such
expenses.
124
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
or if such
directors so
direct, by
independent legal
counsel. No
indemnification for
expenses in
derivative actions
is permitted under
Delaware law if the
person is found to
be liable to the
corporation, unless
a court finds him
or her entitled to
such
indemnification.
If, however, that
person is
successful, on the
merits or
otherwise, in
defending a third-
party or derivative
action,
indemnification for
expenses incurred
is mandatory. The
indemnification
provisions of
Delaware law are
not exclusive of
any other rights to
which the party may
be entitled under
any by-law,
agreement or vote
of shareholders or
disinterested
directors.
Viacom's Restated
Certificate of
Incorporation
provides for
mandatory
indemnification of
its directors,
officers, employees
or agents to the
fullest extent
provided by law.
However, Viacom
will not indemnify
a person who was
adjudged to be
liable to Viacom,
unless the court
decides that such
person is entitled
to Viacom's
indemnity. Viacom's
Restated
Certificate of
Incorporation
provides for the
advancement of
expenses for its
directors and
officers if they
agree to repay all
amounts advanced if
it is later
ultimately
determined that
they are not
entitled to be
indemnified. In
addition, Viacom's
Restated
Certificate of
Incorporation
provides for the
advancement of
expenses for its
employees and
agents as Viacom
deems it
appropriate.
125
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Anti-
Takeover
Provisions... Under Delaware law, Pennsylvania law See "Viacom Before
a corporation is contains several the Merger."
prohibited from anti-takeover
engaging in any provisions which
"business apply to registered
combination" with corporations such
an "interested as CBS.
shareholder," which
is defined as a Transactions with
person who, Interested
together with Shareholders.
affiliates or Pennsylvania law
associates, owns, provides that the
or within a three- types of
year period did transactions listed
own, 15% or more of below must be
the corporation's approved by the
voting stock for a affirmative vote of
period of three at least a majority
years following the of the votes that
date on which the all shareholders
shareholder became are entitled to
an interested cast with respect
shareholder, to such
unless: transaction,
excluding all
. the certificate voting shares owned
of incorporation by an interested
provides shareholder. An
otherwise; interested
shareholder
. prior to the date generally means,
on which the for purposes of
person became an this provision, a
interested shareholder who is
shareholder, the a party to the
board approved transaction or who
either the is treated
business differently from
combination or other shareholders,
the transaction together with their
which resulted in affiliates and
the shareholder persons acting
becoming an jointly or in
interested concert with them.
shareholder; The following types
of transactions
. the interested require the special
shareholder owned vote described
85% or more of above:
the voting stock
of the . a merger or
corporation, consolidation, a
excluding share exchange or
specified shares, certain sales of
upon completion assets between a
of the corporation or
transaction as its subsidiary
the result of and a shareholder
which the person of the
became an corporation;
interested
shareholder; or . a division of the
corporation, if
. on or after the an interested
date on which shareholder is to
such person receive a
became an disproportionate
interested amount of any of
shareholder, the the securities of
business any corporation
combination is surviving or
approved by the resulting from
board and the the division;
affirmative vote,
at a special . a voluntary
meeting and not dissolution of
by written the corporation,
consent, of at if any
least 66 2/3% of shareholder is to
the outstanding be treated
voting shares of differently from
the corporation, others holding
excluding shares shares of the
held by such same class (other
interested than dissenters'
shareholder. rights); or
126
<PAGE>
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Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
A "business . a
combination" reclassification,
includes: if any
shareholder's
. mergers, percentage of
consolidations voting or
and sales or economic share
other interest in the
dispositions of corporation is
10% or more of materially
the assets of a increased
corporation to or relative to
with an substantially all
interested other
shareholder; shareholders.
. certain The special voting
transactions requirement with
resulting in the respect to the
issuance or above types of
transfer to an transactions does
interested not apply if:
shareholder of
any stock of such . the proposed
corporation or transaction has
its subsidiaries; been approved by
and a majority of the
corporation's
. other board, excluding
transactions directors
resulting in a affiliated with
disproportionate or nominated by
financial benefit the interested
to an interested shareholder;
shareholder.
Delaware law does . the consideration
not contain a received for each
"control-share class of stock
acquisition" owned by the
statute similar to interested
that contained in shareholder is at
Pennsylvania law. least as high as
the highest
consideration
paid for that
class by the
interested
shareholder; or
. the transaction
is a merger or
consolidation
involving a
parent
corporation which
owns at least 80%
of each class of
the stock of each
other constituent
party.
Business
Combination
Moratorium.
Pennsylvania law
provides for a
five-year
moratorium on
business
combinations with a
registered
corporation by an
interested
shareholder after
the date such
person first
becomes an
interested
shareholder. For
this purpose,
interested
shareholder
generally means a
person who
individually or
with or through any
of its affiliates
or associates owns
stock with 20% or
more of the
combined vote of
shares entitled to
elect directors or
who held such
amount in the last
five years and is
still an affiliate.
127
<PAGE>
- --------------------------------------------------------------------------------
Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Following the
expiration of the
five-year
moratorium, a
business
combination with
that interested
shareholder must be
approved by either:
. a majority of the
shares not held
by the interested
shareholder or
its affiliates
and associates;
or
. a majority of the
shares cast
including those
shares held by
the interested
shareholder, and
the business
combination (a)
must meet certain
fair price
criteria and (b)
the interested
shareholder
cannot have
increased its
holdings during
the five-year
period.
"Business
combinations"
include:
. mergers,
consolidations,
share exchanges
or divisions of a
registered
corporation or
its subsidiary:
with an
interested
shareholder; or
with, involving
or resulting in
any other
corporation which
is, or after such
merger,
consolidation,
share exchange or
division would
be, an affiliate
or associate of
such interested
shareholder;
. a sale, lease,
exchange,
mortgage, pledge,
transfer or other
disposition to or
with an
interested
shareholder or
any affiliate or
associate of an
interested
shareholder of
assets of the
corporation or
any subsidiary
having a value
equal to at least
10% of (a) the
assets, (b) all
the outstanding
shares or (c) the
earning power or
net income on a
consolidated
basis, of such
registered
corporation or
its subsidiary;
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<PAGE>
- --------------------------------------------------------------------------------
Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
. the adoption of a
plan of
liquidation or
dissolution
proposed by the
interested
shareholder or
its affiliates or
associates; and
. other specified
self-dealing
transactions
between such
registered
corporation and
an interested
shareholder or
any affiliate or
associate
thereof.
The five-year
moratorium does not
apply to:
. business
combinations with
persons who
became interested
shareholders with
the prior
approval of the
board;
. business
combinations that
were approved by
the board prior
to the date on
which the
shareholder
became an
interested
shareholder;
. business
combinations
approved by all
of the holders of
the outstanding
common shares;
and
. business
combinations
approved by a
majority of the
voting shares,
not including any
voting shares
beneficially
owned by the
interested
shareholder or
any affiliate or
associate of the
interested
shareholder, at a
meeting called
for such purpose
no earlier than
three months
after the date
the interested
shareholder
became the
beneficial owner
of 80% of the
voting shares,
provided that the
interested
shareholder
continues to
beneficially own
80% of the voting
shares at the
time of such
meeting and
certain fair
price criteria
are met and the
interested
shareholder has
not increased its
holdings.
129
<PAGE>
- --------------------------------------------------------------------------------
Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
Shareholder Right
to Have Shares
Purchased in
Control
Transactions. Under
Pennsylvania law,
when a person or
group of persons
acting together
holds 20% of the
shares entitled to
vote in the
election of
directors, any
other holder of
voting shares of
the registered
corporation who
objects can, within
a reasonable time
after the control
person or group of
persons acquires
the 20% stake,
require the control
group to purchase
his or her shares
at a fair value.
Fair value is
defined as not less
than the highest
price per share
paid by the control
person at any time
during the 90-day
period ending on
the date of the
control transaction
plus any value,
including any value
paid or payable for
the acquisition of
control, that may
not be reflected in
such price.
- --------------------------------------------------------------------------------
Rights Viacom does not On December 29, See "Viacom Before
Plan......... have a rights plan. 1995, the board of the Merger."
directors of CBS
adopted a
shareholder rights
plan providing for
the distribution of
one right for each
share of its common
stock outstanding
on January 9, 1996
or issued
thereafter until
the occurrence of
certain events. The
rights become
exercisable only in
the event, with
certain exceptions,
that an acquiring
party accumulates
15% or more of CBS'
voting stock or a
party announces an
offer to acquire
30% or more of CBS'
voting stock. The
rights will not
become exercisable
as a result of the
merger because of
prior approval of
the merger by the
board of directors
of CBS. The rights
initially have an
exercise price of
$64 per share and
expire on January
9, 2006;
130
<PAGE>
- --------------------------------------------------------------------------------
Combined Company
Shareholder Viacom Before the CBS Before the Shareholder Rights
Rights Merger Merger
- --------------------------------------------------------------------------------
however, the CBS
Board has adopted a
resolution
affirming its
intention to redeem
the rights in
January 2001 if
still outstanding.
Upon the occurrence
of certain events,
holders of the
rights will be
entitled to
purchase either CBS
Series A preferred
shares or shares in
an acquiring entity
at half of market
value. CBS is
entitled to redeem
the rights at a
value of $.01 per
right at any time
until the tenth day
following the
acquisition of a
15% position in its
voting stock.
- --------------------------------------------------------------------------------
Rights of
Inspection...
Under Delaware law, Under Pennsylvania See "Viacom Before
every shareholder, law every the Merger."
upon proper written shareholder, upon
demand stating the proper written
purpose, may demand stating the
inspect the purpose, may
corporate books and inspect the
records as long as corporate books and
the inspection is records as long as
for a proper the inspection is
purpose and during for a proper
normal business purpose and during
hours. A "proper normal business
purpose" is any hours. A "proper
purpose reasonably purpose" is any
related to the purpose reasonably
interest of the related to the
inspecting person interest of the
as a shareholder. inspecting person
as a shareholder.
- --------------------------------------------------------------------------------
Liquidation
Rights.......
The rights of the See "Viacom Before
holders of shares the Merger."
of Viacom's common Holders of shares
stock upon the of CBS' common
liquidation or stock upon the
dissolution of liquidation or
Viacom are dissolution of CBS
substantially the have the right to
same as those of receive (on a
the holders of parity with any
shares of CBS' preferred stock
common stock upon ranking on a parity
the liquidation or with the common for
dissolution of CBS. this purpose) any
surplus that
remains after
paying or providing
for all liabilities
of CBS and after
all distributions
have been made to
stock having a
preference to the
common with respect
to
liquidation/dissolution.
- --------------------------------------------------------------------------------
131
<PAGE>
In addition, upon consummation of the merger, holders of shares of CBS
Series B preferred stock will become holders of shares of Viacom Series C
preferred stock. Consequently, following the merger, Delaware law and Viacom's
proposed new Restated Certificate of Incorporation and its By-laws, both as
amended as a result of the merger, will govern the rights of former holders of
CBS Series B preferred stock. Except as described in the table below, the
rights of holders of Viacom Series C preferred stock are substantially
identical to the rights of holders of CBS Series B preferred stock:
<TABLE>
<CAPTION>
Viacom Series C
CBS Series B Preferred Stock Preferred Stock
-------------------------------- ----------------------------
<S> <C> <C>
Par Value: $1.00 per share $.01 per share
Voting Rights Equal To: 1,000 shares of CBS common stock 100 shares of Viacom Class A
common stock
Convertible into: 1,000 shares of CBS common stock 1,000 shares of Viacom
non-voting Class B common
stock
</TABLE>
ADOPTION OF NEW RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors of Viacom has declared the advisability, approved and
is submitting for shareholder adoption a new Restated Certificate of
Incorporation for Viacom. The full text of the proposed new Restated
Certificate of Incorporation is attached as Annex B. For a summary of the
material provisions, see "The Merger--Directors, Management and Corporate
Governance of the Combined Company," which should be read in conjunction with,
and is qualified in its entirety by reference to, the full text of the proposed
new Restated Certificate of Incorporation attached as Annex B. For a summary of
the material differences between the Restated Certificate of Incorporation as
in effect immediately prior to the effective time of the merger and the
proposed new Restated Certificate of Incorporation, see "Comparison of Rights
of Holders of Viacom Stock and CBS Stock."
132
<PAGE>
AMENDMENT TO THE VIACOM 1997 LONG-TERM
MANAGEMENT INCENTIVE PLAN
The Viacom 1997 long-term management incentive plan was adopted on March 27,
1997 and was approved by Viacom's shareholders. The Viacom board amended the
plan on July 29, 1999 and September 6, 1999 to increase the number of shares of
Viacom Class B common stock authorized for issuance under this plan by an
additional 10 million shares to a total of 50 million shares of Class B common
stock, as described more fully below, as well as to make certain other
amendments. The increase in the number of shares of Class B common stock
authorized for issuance under the plan is being submitted for approval by the
affirmative vote of the holders of a majority of the shares of Viacom's Class A
common stock outstanding on the record date, by written consent.
General Description of this Plan
The following is a description of the material features of this plan. The
full text of this plan is attached as Annex J to this joint proxy
statement/prospectus. This plan provides for grants of stock options to
purchase shares of Class B common stock, stock appreciation rights, restricted
shares of Class B common stock and phantom shares. However, no incentive stock
options, stock appreciation rights, restricted shares or phantom shares have
been or will be granted under this plan. The terms and conditions of the non-
qualified stock options granted or to be granted under the plan are described
in more detail below. Approximately 1,000 of Viacom's employees are eligible
for grants under this plan. Where necessary, compensation relating to awards
under this plan is generally intended to qualify as "qualified performance-
based compensation," which is excluded from the $1.0 million limit on
deductible compensation set forth in Section 162(m) of the Internal Revenue
Code.
The maximum aggregate number of shares of Class B common stock that may be
distributed under this plan, whether reserved for issuance upon grants of stock
options or stock appreciation rights or granted as restricted shares, is
currently 40 million, subject to adjustment. On July 29, 1999 and September 6,
1999, the board amended this plan to authorize the issuance of an additional 10
million shares of Class B common stock, subject to approval of the Viacom
shareholders, for a total of 50 million shares. Shares of Class B common stock
covered by expired or terminated stock options are not counted in applying such
limit. The maximum aggregate number of shares of Class B common stock that may
be granted pursuant to awards granted to any participant during the five-year
term of this plan is 10 million. Grants under this plan are currently
authorized by the senior executive compensation committee of the Viacom board,
in its sole discretion. For this reason, it is not possible to determine the
benefits or amounts of the awards that will be received by any particular
employees or group of employees in the future.
Administration
This plan is administered by the senior executive compensation committee, or
such other committee appointed by the Viacom board, which, following
consummation of the merger, will be the compensation committee under Article
XIII of the company's restated certificate of incorporation and will be
referred to as the "committee" throughout the description of this plan. The
committee must be comprised of at least two members of the board of directors,
each of whom must be a "non-employee" director within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934.
Stock Options
Stock options can be either incentive stock options or options that do not
qualify as incentive stock options for federal income tax purposes, called non-
qualified stock options, as determined by the committee. However, all stock
options issued under the plan or to be issued will be non-qualified stock
options.
133
<PAGE>
Subject to some limits described below, the committee determines the number
of stock options granted, the exercise price of the stock options, the vesting
schedule applicable to the stock options and the period during which they can
be exercised. The committee may, in its discretion, accelerate the vesting date
of any stock option. No stock option can be exercised more than ten years after
the date of grant. The exercise price of a stock option must be paid in full at
the time of exercise as follows:
. in cash,
. in the discretion of the committee, in shares of Viacom Class B common
stock or other Viacom securities designated by the committee, or
. in a combination of cash, shares or such other securities.
Generally, if a participant voluntarily terminates employment or his or her
employment is terminated by Viacom other than for cause, his or her outstanding
stock options may be exercised, to the extent then exercisable, for six months
following the date of termination. In the event of a participant's retirement,
he or she may exercise his or her stock options, to the extent exercisable on
the date of retirement, for six months after his or her retirement for options
granted prior to August 1, 1999 and for two years after his or her retirement
for options granted on or after August 1, 1999. In the event of a participant's
death, his or her stock options may be exercised, to the extent exercisable at
the date of death, by the person who acquired the right to exercise the stock
options by will or the laws of descent and distribution for one year following
the date of death. In the event of the permanent disability of a participant,
his or her stock options may be exercised, to the extent exercisable upon the
date of the onset of such permanent disability, for one year following such
date. If any participant's employment is terminated for cause, then, unless the
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. The committee generally has the discretion to set post-termination
exercise periods in excess of those described above. However, in no event may a
stock option be exercised following the earlier to occur of the expiration of
the option and the tenth anniversary of the date of grant.
In the event that a participant's employment terminates under circumstances
that would constitute an "involuntary termination," within the meaning of
Viacom's executive severance plans, all of the participant's options will vest
on the date of his or her involuntary termination, and each stock option will
continue to be exercisable in accordance with its terms, for two years, in case
of a Vice President, and for three years, in the case of a Senior Vice
President, or through the option's original expiration date, if earlier. For
Messrs. Dauman and Dooley only, the post-resignation option exercise periods of
their options have been extended through December 31, 2003 or through the
option's original expiration date, if earlier, subject to their compliance with
the restrictive covenants in their agreements. The executive severance plans
and the agreements with Messrs. Dauman and Dooley are described in detail in
the section captioned "Interests of Persons in the Merger--Senior Management
Arrangements" above.
Adjustments
In the event of a merger, consolidation, stock split, dividend,
distribution, combination, reclassification or recapitalization that changes
the character or amount of the Class B common stock, the committee will make
any adjustments as it deems appropriate to the following:
. the number of shares of Class B common stock subject to any stock
options,
. the exercise price of any outstanding stock options, and
. the maximum number of shares of Class B common stock that may be granted
under the plan or the aggregate number of shares that may be granted to
any participant.
134
<PAGE>
Transfer Restrictions, Etc.
The rights of a participant with respect to the stock options granted under
this plan are not transferable by the participant except:
. by will or the laws of descent and distribution, or
. to members of the participant's immediate family or trusts whose
beneficiaries are members of the participant's immediate family, as
permitted by the committee.
Except as described above, no grant under this plan entitles a participant
to any rights of a holder of shares of Class B common stock, nor will any grant
be construed as giving any employee a right to continued service with Viacom.
Amendment and Termination of this Plan
This plan, by its terms, expires on March 27, 2002. This plan may be
terminated and may be altered, amended, suspended or terminated at any time, in
whole or in part, by the board of directors, except that no alteration or
amendment will be effective without shareholder approval if approval is
required.
Tax Consequences
The following is intended as a general summary of the federal income tax
consequences associated with the grant and exercise of non-qualified stock
options. This summary does not purport to be complete and does not address any
applicable state or local tax law. In general, the grant of a non-qualified
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 non-qualified 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 non-qualified 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 participant's
employer. Gain or loss upon a subsequent sale of the stock received upon
exercise of a non-qualified 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 if the exercise price for a non-
qualified stock option is paid in shares or other securities previously owned
by the participant.
The Viacom Board Unanimously Recommends That The Holders Of Viacom Class A
Common Stock Approve The Amendment To The Plan.
SOLICITATION OF CONSENTS AND PROXIES
Each of Viacom and CBS will bear the cost of the solicitation of consents
and proxies from its own shareholders, except that Viacom and CBS will share
equally the cost of printing this joint proxy statement/prospectus and the fees
associated with the filing of this joint proxy statement/prospectus with the
SEC. In addition to solicitation by mail, directors, officers and employees of
each of Viacom and CBS may solicit consents or proxies from shareholders of
their respective companies by telephone, facsimile or telegram or in person.
Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of stock held of record by these persons, and Viacom and CBS
will reimburse these custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses.
Georgeson & Company Inc. will assist in the solicitation of proxies by CBS.
Georgeson & Company Inc. will receive a fee of $25,000, plus costs and
expenses, for its services.
135
<PAGE>
SHAREHOLDER PROPOSALS
The Viacom board will consider proposals of shareholders intended to be
presented for action at Viacom's next or, if the merger is completed, the
combined company's, annual meeting of shareholders. A shareholder proposal must
be submitted in writing and be received at Viacom's principal executive
offices, 1515 Broadway, New York, NY 10036, Attn: Corporate Secretary. The
deadline for shareholders to submit proposals pursuant to Rule 14a-8 of the
Securities Exchange Act of 1934 for inclusion in Viacom's proxy statement and
form of proxy for the annual meeting is December 17, 1999.
If the merger is not completed, CBS will hold a 2000 annual meeting of
shareholders. If such meeting is held, shareholders' proposals must be in
writing, addressed to the CBS Secretary, and received at the principal
executive offices of CBS on or before November 26, 1999, to be considered for
inclusion in the proxy materials relating to that meeting. Shareholder nominees
or proposals outside of the processes of Rule 14a-8 of the Exchange Act must be
sent to the CBS Secretary at the principal executive offices of CBS for receipt
between January 5, 2000 and February 4, 2000 and must include the information
required by CBS' By-laws. In the event the combination is completed, there will
not be an annual meeting of CBS in 2000.
136
<PAGE>
LEGAL MATTERS
Legal matters with respect to the validity of the securities offered hereby
and the merger will be passed upon for Viacom by Michael D. Fricklas, Esq.,
Senior Vice President, General Counsel and Secretary of Viacom.
EXPERTS
The consolidated financial statements of Viacom incorporated into this
document by reference to Viacom's Annual Report on Form 10-K for the year ended
December 31, 1998, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements and the related financial statement
schedule of CBS, as of December 31, 1998 and 1997 and for each of the years in
the three year period ended December 31, 1998, incorporated by reference in
this joint proxy statement/prospectus from CBS' Annual Report on Form 10-K for
the year ended December 31, 1998, have been audited by KPMG LLP, independent
auditors, as stated in their reports, which are incorporated in this document
by reference, and have been so incorporated in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of King World incorporated in this
joint proxy statement/prospectus by reference from CBS' Current Report on Form
8-K dated on or about October 8, 1999, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto and is incorporated in this document by reference in reliance upon the
authority of said firm as experts in giving said report.
WHERE YOU CAN FIND MORE INFORMATION AND
INCORPORATION OF DOCUMENTS BY REFERENCE
Viacom and CBS are subject to the informational requirements of the
Securities Exchange Act of 1934 and each accordingly files reports and other
information with the SEC. Reports, proxy statements and other information filed
by Viacom or CBS with the SEC can be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 or at its regional offices located at Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661
and at Seven World Trade Center, 13th Floor, New York, New York 10048, and
copies of these materials can be obtained from the Public Reference Section of
the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates,
or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an
Internet site that contains reports, proxy statements and other information
regarding registrants that file electronically, such as Viacom and CBS. The
address of the SEC's Internet site is http://www.sec.gov.
Viacom has filed a registration statement on Form S-4 under the Securities
Act of 1933, of which this joint proxy statement/prospectus forms a part,
relating to the Viacom Class B common stock to be issued in connection with the
merger. This joint proxy statement/prospectus does not contain all the
information set forth in the registration statement, selected portions of which
are omitted in accordance with the rules and regulations of the SEC. For
further information pertaining to Viacom, CBS and the Viacom Class B common
stock, reference is made to the registration statement and its exhibits.
Statements contained in this joint proxy statement/prospectus or in any
document incorporated in this joint proxy statement/prospectus by reference as
to the contents of any contract or other document referred to within this
document or other documents that are incorporated by reference are not
necessarily complete and, in each instance, reference is made to the copy of
the applicable contract or other document filed as an exhibit to the
registration statement or otherwise filed with the SEC. Each statement
contained in this joint proxy statement/prospectus is qualified in its entirety
by reference to the underlying documents.
137
<PAGE>
Viacom Class A and Class B common stock are listed on the NYSE and were
previously listed on the American Stock Exchange. Reports, proxy statements and
other information concerning Viacom can be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005 and the American Stock
Exchange, 86 Trinity Place, New York, New York 10006. CBS common stock is
listed on the NYSE, the Chicago Stock Exchange, the Boston Stock Exchange, the
Philadelphia Stock Exchange and the Pacific Stock Exchange. Reports, proxy
statements and other information concerning CBS can also be inspected at the
offices of the NYSE.
This joint proxy statement/prospectus incorporates documents by reference
that are not included as part of this document. Viacom and CBS undertake to
provide, without charge, to each person, including any beneficial owner of
Viacom Class A common stock, Viacom Class B common stock and CBS Common Stock,
to whom a copy of this joint proxy statement/prospectus has been delivered,
upon written or oral request, a copy of any and all of the documents that have
been incorporated into this document by reference, other than exhibits to those
documents unless the exhibits are specifically incorporated into this document
by reference. Requests for these documents should be directed, in the case of
documents relating to Viacom or any of its subsidiaries, to Viacom Inc., 1515
Broadway, 53rd Floor, New York, New York 10036, Attention: Investor Relations,
phone number: (212) 258-6700, and, in the case of documents relating to CBS or
any of its subsidiaries, to CBS Corporation, 51 W. 52nd Street, New York, New
York 10019, Attention: Secretary, phone number:(212) 975- 4321. In order to
ensure timely delivery of requested documents, requests should be made by
December 13, 1999.
The following documents, which have been filed with the SEC by Viacom (File
No. 1-9553) and CBS (File No. 1-977), are incorporated into this document by
reference:
Viacom
(a) the Annual Report on Form 10-K of Viacom for the fiscal year ended
December 31, 1998;
(b) the Viacom Quarterly reports on Form 10-Q for the periods ended March
31, 1999, June 30, 1999 and September 30, 1999;
(c) the Current Reports on Form 8-K of Viacom filed May 18, 1999, June 24,
1999, September 8, 1999, as amended, and October 12, 1999; and
(d) the definitive Proxy Statement filed on April 16, 1999, in connection
with Viacom's 1999 Annual Meeting.
CBS
(a) the Annual Report on Form 10-K, as amended by Form 10-K/A, of CBS for
the fiscal year ended December 31, 1998;
(b) the CBS Quarterly report on Form 10-Q, as amended by Form 10-Q/A, for
the period ended March 31, 1999, the CBS Quarterly report on Form 10-Q for the
period ended June 30, 1999 and the CBS Quarterly report on Form 10-Q for the
period ended September 30, 1999;
(c) the Current Reports on Form 8-K of CBS filed January 29, 1999, February
5, 1999, April 1, 1999, April 13, 1999, April 30, 1999, June 4, 1999, June 28,
1999, July 30, 1999, August 4, 1999, September 8, 1999, September 15, 1999,
October 8, 1999 (in respect of the Viacom/CBS merger), October 12, 1999,
October 29, 1999, November 2, 1999, November 5, 1999 and November 22, 1999;
(d) the Current Report on Form 8-K of CBS filed on November 22, 1999 which
includes King World's consolidated financial statements and the notes thereto
as of August 31, 1999 and 1998 and for the three years ended August 31, 1999;
(e) the description of CBS common stock contained in CBS' registration
statement on Form 10 dated May 15, 1935; and
(f) the definitive Proxy Statement filed on March 25, 1999, in connection
with CBS' 1999 Annual Meeting.
138
<PAGE>
All references within this document to:
(a) the Form 10-K of CBS for the fiscal year ended December 31, 1998,
refer to that Form 10-K as amended by the Form 10-K/A; and
(b) the Form 10-Q of CBS for the period ended March 31, 1999, refer to
that Form 10-Q as amended by the Form 10-Q/A.
All documents filed by Viacom and CBS according to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act, after the date of this joint proxy
statement/prospectus and prior to the date of the special shareholders'
meetings are incorporated by reference into this joint proxy
statement/prospectus and are considered a part of this joint proxy
statement/prospectus from the date of filing of those documents.
Any statement contained within this joint proxy statement/prospectus or in
any document incorporated by reference will be deemed to be modified or
superseded for purposes of this joint proxy statement/prospectus to the extent
that the statement contained in this joint proxy statement/prospectus or in any
subsequently filed document that also is or is deemed to be incorporated by
reference in this joint proxy statement/prospectus modifies or supersedes that
statement. Statements so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this joint proxy
statement/prospectus.
No person has been authorized to give any information or to make any
representation other than as contained in this joint proxy statement/prospectus
in connection with the Viacom Class B common stock to be issued in connection
with the merger and, if given or made, the information or representation must
not be relied upon as having been authorized. This joint proxy
statement/prospectus does not constitute an offer to sell or a solicitation of
an offer to purchase securities in any jurisdiction in which, or to any person
to whom, it would be unlawful to make such an offer or solicitation. Neither
the delivery of this joint proxy statement/prospectus nor any distribution of
the securities offered hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of Viacom or CBS since
the date of this joint proxy statement/prospectus or that the information
contained in this joint proxy statement/prospectus is correct as of any time
subsequent to that date. All information in this joint proxy
statement/prospectus regarding Viacom has been provided by Viacom, and all
information regarding CBS has been provided by CBS.
139
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNEX A
AMENDED AND RESTATED AGREEMENT
AND PLAN OF MERGER
Among
VIACOM INC.,
CBS CORPORATION
and
Viacom/CBS LLC
Dated as of September 6, 1999,
as amended and restated as of October 8, 1999 and
as of November 23, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
ARTICLE 1
The Merger
<C> <S> <C>
1.01. The Merger....................................................... A-2
1.02. Effective Time; Closing.......................................... A-2
1.03. Effect of the Merger............................................. A-2
1.04. Constituent Documents............................................ A-3
ARTICLE II
Conversion of Securities; Exchange of Certificates
2.01. Conversion of Securities......................................... A-3
2.02. Exchange of Certificates......................................... A-4
2.03. Stock Transfer Books............................................. A-6
2.04. Stock Options and Other Stock Plans.............................. A-6
ARTICLE III
Representations and Warranties of CBS
3.01. Organization and Qualification; Subsidiaries..................... A-7
3.02. Certificate of Incorporation and By-Laws......................... A-7
3.03. Capitalization................................................... A-7
3.04. Authority Relative to Agreement.................................. A-8
3.05. No Conflict; Required Filings and Consents....................... A-8
3.06. Permits and Licenses; Contracts.................................. A-9
3.07. SEC Filings; Financial Statements................................ A-9
3.08. Absence of Certain Changes or Events............................. A-10
3.09. Absence of Litigation............................................ A-10
3.10. Employee Benefit Plans........................................... A-11
3.11. Labor Matters.................................................... A-12
3.12. Environmental Matters............................................ A-12
3.13. Trademarks, Patents and Copyrights............................... A-12
3.14. Taxes............................................................ A-13
3.15. Tax Matters...................................................... A-13
3.16. Year 2000 Compliance............................................. A-14
3.17. Opinion of Financial Advisors.................................... A-14
3.18. Vote Required.................................................... A-14
3.19. Brokers.......................................................... A-14
3.20. Pennsylvania Law................................................. A-14
3.21. Rights Agreement................................................. A-14
3.22. Gaylord.......................................................... A-14
ARTICLE IV
Representations and Warranties of Viacom
4.01. Organization and Qualification; Subsidiaries..................... A-15
4.02. Certificate of Incorporation and By-Laws......................... A-15
4.03. Capitalization................................................... A-15
4.04. Authority Relative to Agreement.................................. A-16
</TABLE>
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<TABLE>
<CAPTION>
Section Page
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<C> <S> <C>
4.05. No Conflict; Required Filings and Consents....................... A-16
4.06. Permits and Licenses; Contracts.................................. A-17
4.07. SEC Filings; Financial Statements................................ A-18
4.08. Absence of Certain Changes or Events............................. A-18
4.09. Absence of Litigation............................................ A-19
4.10. Employee Benefit Plans........................................... A-19
4.11. Labor Matters.................................................... A-20
4.12. Environmental Matters............................................ A-20
4.13. Trademarks, Patents and Copyrights............................... A-20
4.14. Taxes............................................................ A-21
4.15. Tax Matters...................................................... A-21
4.16. Year 2000 Compliance............................................. A-21
4.17. Opinion of Financial Advisors.................................... A-22
4.18. Vote Required.................................................... A-22
4.19. Section 203 of Delaware Corporation Law.......................... A-22
4.20. Brokers.......................................................... A-22
4.21. Operations of Viacom/CBS LLC..................................... A-22
ARTICLE V
Conduct of Business Pending the Merger
5.01. Conduct of Business by CBS Pending the Merger.................... A-22
5.02. Conduct of Business by Viacom Pending the Merger................. A-24
5.03. Other Actions.................................................... A-26
ARTICLE VI
Additional Agreements
6.01. Registration Statement; Joint Proxy Statement.................... A-26
6.02. Stockholders' Meetings........................................... A-28
6.03. Appropriate Action; Consents; Filings............................ A-29
6.04. Access to Information; Confidentiality........................... A-30
6.05. No Solicitation of Competing Transactions........................ A-30
6.06. Directors' and Officers' Indemnification and Insurance........... A-31
6.07. Notification of Certain Matters.................................. A-31
6.08. Tax Treatment.................................................... A-32
6.09. Stock Exchange Listing........................................... A-32
6.10. Public Announcements............................................. A-32
6.11. Viacom's Directors............................................... A-32
6.12. Rights Agreement................................................. A-32
6.13. Assumption of Debt and Leases.................................... A-32
6.14. Affiliates of CBS................................................ A-33
6.15. Prior Service.................................................... A-33
6.16. Employee Matters................................................. A-33
6.17. Gaylord.......................................................... A-33
6.18. Gaylord Tax Matters.............................................. A-33
6.19. Obligations of Viacom/CBS LLC.................................... A-33
</TABLE>
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<TABLE>
<CAPTION>
Section Page
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ARTICLE VII
Conditions to the Merger
<C> <S> <C>
7.01. Conditions to the Obligations of Each Party..................... A-34
7.02. Conditions to the Obligations of Viacom and Viacom/CBS LLC...... A-34
7.03. Conditions to the Obligations of CBS............................ A-35
ARTICLE VIII
Termination, Amendment and Waiver
8.01. Termination..................................................... A-35
8.02. Effect of Termination........................................... A-36
8.03. Amendment....................................................... A-36
8.04. Waiver.......................................................... A-36
8.05. Expenses........................................................ A-36
ARTICLE IX
General Provisions
9.01. Non-Survival of Representations, Warranties and Agreements...... A-37
9.02. Notices......................................................... A-37
9.03. Interpretation, Certain Definitions............................. A-38
9.04. Severability.................................................... A-39
9.05. Entire Agreement; Assignment.................................... A-39
9.06. Parties in Interest............................................. A-39
9.07. Specific Performance............................................ A-39
9.08. Governing Law................................................... A-39
9.09. Consent to Jurisdiction......................................... A-39
9.10. Counterparts.................................................... A-40
9.11. WAIVER OF JURY TRIAL............................................ A-40
</TABLE>
EXHIBITS
<TABLE>
<C> <S>
Exhibit A-1 Restated Certificate of Incorporation
Exhibit A-2 By-laws
Exhibit 6.14 Form of CBS Affiliate Letter
</TABLE>
A-iii
<PAGE>
Index of Defined Terms
<TABLE>
<CAPTION>
Defined Term Location of Definition
- ------------ ----------------------
<S> <C>
affiliate................................................ Section 9.03(a)
Agreement................................................ Recitals
Articles of Merger....................................... Section 1.02
beneficial owner......................................... Section 9.03(b)
Blockbuster.............................................. Section 4.02
Blockbuster Options...................................... Section 4.03
Blue Sky Laws............................................ Section 3.05(b)
business day............................................. Section 9.03(c)
CBS...................................................... Recitals
CBS Alternative Transaction Fee.......................... Section 8.05(b)
CBS Benefit Plans........................................ Section 3.10(a)
CBS Common Stock......................................... Section 2.01(a)
CBS Disclosure Schedule.................................. Article III
CBS FCC Licenses......................................... Section 3.06(c)
CBS Financial Advisor.................................... Section 3.17
CBS Indentures........................................... Section 6.13(a)
CBS Licensed Facilities.................................. Section 3.06(c)
CBS Material Adverse Effect.............................. Section 3.01
CBS Options.............................................. Section 2.04(a)
CBS Permits.............................................. Section 3.06(a)
CBS Preferred Stock...................................... Section 3.03
CBS Rights Agreement..................................... Section 3.03
CBS SEC Reports.......................................... Section 3.07(a)
CBS Series B Preferred Stock............................. Section 2.01(a)
CBS Stock Option Plans................................... Section 2.04(a)
CBS Superior Proposal.................................... Section 6.05(c)
CBS Systems.............................................. Section 3.16(b)
CBS Year 2000 Compliant.................................. Section 3.16(b)
CBS Year 2000 Plan....................................... Section 3.16(a)
CERCLA................................................... Section 3.12(d)
Certificate of Merger.................................... Section 1.02
Certificates............................................. Section 2.02(b)
Closing.................................................. Section 1.02
Closing Date............................................. Section 1.02
Code..................................................... Recitals
Communications Act....................................... Section 3.05(b)
Competing Transaction.................................... Section 6.05(b)
Confidentiality Agreement................................ Section 6.04(c)
Continuing Employees..................................... Section 6.15
control.................................................. Section 9.03(d)
controlled by............................................ Section 9.03(d)
Delaware Corporation Law................................. Recitals
Delaware LLC Law......................................... Recitals
Effective Time........................................... Section 1.02
Environmental Laws....................................... Section 3.12(d)
Environmental Permits.................................... Section 3.12(d)
ERISA.................................................... Section 3.10(a)
Exchange Act............................................. Section 2.04(c)
</TABLE>
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<TABLE>
<CAPTION>
Defined Term Location of Definition
- ------------ ----------------------
<S> <C>
Exchange Agent........................................... Section 2.02(a)
Exchange Fund............................................ Section 2.02(a)
Exchange Ratio........................................... Section 2.01(a)
Expenses................................................. Section 8.05(a)
FCC...................................................... Section 3.05(b)
Gaylord.................................................. Section 3.22
Gaylord Agreement........................................ Section 3.22
Gaylord Proxy............................................ Section 3.22
Governmental Authority................................... Section 9.03(e)
Hazardous Materials...................................... Section 3.12(d)
HSR Act.................................................. Section 3.05(b)
Infinity................................................. Section 3.02
IRS...................................................... Section 3.10(a)
King World............................................... Section 3.03
knowledge................................................ Section 9.03(f)
Laws..................................................... Section 3.05(a)
LLC Merger............................................... Recitals
Merger................................................... Recitals
NYSE..................................................... Section 3.03
Order.................................................... Section 6.03(b)
Original Merger Agreement................................ Recitals
Parent................................................... Recitals
Parent Merger............................................ Recitals
Parent Stockholder Agreement............................. Recitals
Parent Voting Agreements................................. Recitals
Pending Transactions..................................... Section 5.01
Pennsylvania Law......................................... Recitals
person................................................... Section 9.03(g)
Preferred Exchange Ratio................................. Section 2.01(a)
Proxy Statement.......................................... Section 6.01(a)
Registration Statement................................... Section 6.01(a)
Representatives.......................................... Section 6.04(a)
Rights................................................... Section 3.03
SEC...................................................... Article III
Securities Act........................................... Section 3.05(b)
Shares................................................... Section 2.01(a)
Split-off................................................ Section 5.02
Stockholders' Meeting.................................... Section 6.02
subsidiaries............................................. Section 9.03(h)
subsidiary............................................... Section 9.03(h)
Substituted Option....................................... Section 2.04(a)
Surviving Corporation.................................... Section 1.01
Tax...................................................... Section 3.14(a)
Tax Event................................................ Section 1.01(b)
Taxes.................................................... Section 3.14(a)
Terminating CBS Breach................................... Section 8.01(f)
Terminating Viacom Breach................................ Section 8.01(e)
under common control with................................ Section 9.03(d)
Viacom................................................... Recitals
Viacom Benefit Plans..................................... Section 4.10(a)
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
Defined Term Location of Definition
- ------------ ----------------------
<S> <C>
Viacom/CBS LLC........................................... Recitals
Viacom Class A Common Stock.............................. Recitals
Viacom Class B Common Stock.............................. Recitals
Viacom Disclosure Schedule............................... Article IV
Viacom Employee Arrangements............................. Section 6.16(a)
Viacom FCC Licenses...................................... Section 4.06(c)
Viacom Financial Advisor................................. Section 4.17
Viacom Licensed Facilities............................... Section 4.06(c)
Viacom Material Adverse Effect........................... Section 4.01
Viacom Options........................................... Section 4.03
Viacom Permits........................................... Section 4.06(a)
Viacom Preferred Stock................................... Section 4.03
Viacom Proposals......................................... Recitals
Viacom SEC Reports....................................... Section 4.07(a)
Viacom Series C Preferred Stock.......................... Section 2.01(a)
Viacom Stock Option Plans................................ Section 4.03
Viacom Systems........................................... Section 4.16(b)
Viacom Year 2000 Compliant............................... Section 4.16(b)
Viacom Year 2000 Plan.................................... Section 4.16(a)
</TABLE>
A-iii
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER dated as of September 6,
1999, as amended and restated as of October 8, 1999 and as of November 23, 1999
(this "Agreement"), among VIACOM INC., a Delaware corporation ("Viacom"), CBS
CORPORATION, a Pennsylvania corporation ("CBS"), and Viacom/CBS LLC, a Delaware
limited liability company, the sole member of which is Viacom ("Viacom/CBS
LLC").
WHEREAS, Viacom and CBS entered into an Agreement and Plan of Merger dated
as of September 6, 1999, which was amended and restated as of October 8, 1999
(the "Original Merger Agreement"), and they now desire to further amend and
restate the Original Merger Agreement (it being understood that all references
herein to this "Agreement" refer to the Original Merger Agreement as amended
and restated hereby and that all references herein to the date hereof or the
date of this Agreement refer to September 6, 1999);
WHEREAS, the Boards of Directors of CBS and Viacom have determined that it
is in the best interests of their respective companies and stockholders to
combine their respective businesses in a "merger of equals" transaction to be
effected as set forth in this Agreement;
WHEREAS, CBS and Viacom have structured the combination of CBS's and
Viacom's businesses as a merger pursuant to the General Corporation Law of the
State of Delaware ("Delaware Corporation Law") and the Business Corporation Law
of the Commonwealth of Pennsylvania ("Pennsylvania Law") of CBS with and into
Viacom (the "Parent Merger"), unless the Tax Event (as defined in Section
1.01(b)) occurs prior to the consummation of such combination, in which case
such combination will be structured as a merger pursuant to Pennsylvania Law
and the Limited Liability Company Act of the State of Delaware ("Delaware LLC
Law") of CBS with and into Viacom/CBS LLC (the "LLC Merger"; the Parent Merger
or, if the Tax Event has occurred, the LLC Merger, being referred to herein as
the "Merger"), in each case on the terms and conditions set forth in this
Agreement;
WHEREAS, the Board of Directors of CBS has (i) determined that the Merger is
fair to CBS and the holders of Shares (as defined in Section 2.01) and is in
the best interests of CBS and (ii) approved this Agreement, the Merger and the
other transactions contemplated hereby and has recommended that the
shareholders of CBS adopt this Agreement;
WHEREAS, the Board of Directors of Viacom has declared to be advisable this
Agreement, the Merger, the proposed amended and restated Restated Certificate
of Incorporation of Viacom attached hereto as Exhibit A-1 and the other
transactions contemplated hereby;
WHEREAS, Viacom, as the sole member of Viacom/CBS LLC, has approved the
Merger and this Agreement;
WHEREAS, the Board of Directors of Viacom has recommended that the holders
of the Class A Common Stock, par value $.01 per share, of Viacom (the "Viacom
Class A Common Stock") (i) in the event the Merger is structured as the Parent
Merger, adopt this Agreement and (ii) in the event the Merger is structured as
the LLC Merger, (A) approve the issuance of shares of Class B Common Stock, par
value $.01 per share, of Viacom (the "Viacom Class B Common Stock") and the
issuance of shares of Series C Preferred Stock, par value $.01 per share, of
Viacom (the "Viacom Series C Preferred Stock"), in each case pursuant to the
Merger and (B) adopt the amended and restated Restated Certificate of
Incorporation of Viacom in the form attached hereto as Exhibit A-1 (the
proposals set forth in (i) and (ii) being collectively referred to herein as
the "Viacom Proposals");
WHEREAS, concurrently with the original execution of this Agreement and as
an inducement to CBS to enter into this Agreement, National Amusements, Inc., a
Maryland corporation and the holder of a majority of the shares of Viacom Class
A Common Stock ("Parent"), and CBS entered into (i) a Stockholder Agreement
(the "Parent Stockholder Agreement") pursuant to which Parent has agreed, among
other things, to cause the election of eight members of the Board of Directors
of Viacom designated by CBS for a period of three years following the Merger
and (ii) a Voting Agreement (together with the Parent Stockholder Agreement,
the "Parent Voting Agreements") pursuant to which Parent has agreed, among
other things, to vote its shares of
A-1
<PAGE>
Viacom Class A Common Stock in favor of adoption of this Agreement and the
other transactions contemplated by this Agreement and to take certain other
actions in support of the Merger;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, as an inducement to Viacom to enter into this Agreement,
concurrently with the original execution and delivery of this Agreement, Mel
Karmazin entered into an employment agreement with Viacom, to be effective at
the Effective Time (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and intending to be legally bound hereby,
Viacom, CBS and Viacom/CBS LLC hereby agree as follows:
ARTICLE I
The Merger
Section 1.01. The Merger. (a) Except as otherwise provided in Section
1.01(b) below, upon the terms and subject to the conditions set forth in
Article VII, and in accordance with Section 252 of Delaware Corporation Law and
Section 1921 of Pennsylvania Law, at the Effective Time CBS shall be merged
with and into Viacom.
(b) In the event (i) Viacom and CBS (or the general public) receive guidance
from the IRS or other appropriate Governmental Authority, as a result of which,
if the Merger were structured as the LLC Merger, each of Paul, Weiss, Rifkind,
Wharton & Garrison and Cravath, Swaine & Moore would be able to deliver its
opinion pursuant to Sections 7.02(c) and 7.03(c), respectively, in substance
identical to the opinion it would have delivered pursuant to such Section if
the Merger were structured as the Parent Merger and (ii) the LLC Merger would
not have an adverse tax effect on Viacom, CBS or their respective shareholders
(the events set forth in clauses (i) and (ii) being the "Tax Event"), then upon
the terms and subject to the conditions set forth in Article VII, and in
accordance with Section 18-209 of Delaware LLC Law and Section 1921 of
Pennsylvania Law, at the Effective Time CBS shall be merged with and into
Viacom/CBS LLC.
(c) As a result of the Merger, the separate corporate existence of CBS shall
cease and Viacom or Viacom/CBS LLC, as the case may be, shall be the surviving
company of the Merger (the "Surviving Corporation").
Section 1.02. Effective Time; Closing. The closing of the Merger (the
"Closing") shall take place on the first business day after the satisfaction
or, if permissible, waiver of the conditions set forth in Article VII (such
date, the "Closing Date"). On the Closing Date, the parties hereto shall cause
the Merger to be consummated by filing (a) a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware,
in such form as is required by, and executed and, as applicable, acknowledged
in accordance with, Section 252 of the Delaware Corporation Law or Section 18-
209 of the Delaware LLC Law, as the case may be, and (b) articles of merger
(the "Articles of Merger") with the Department of State of the Commonwealth of
Pennsylvania, in such form as is required by, and executed in accordance with,
Section 1927 of Pennsylvania Law. The term "Effective Time" means the date and
time of the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware (or such later time as may be agreed by the parties
hereto and specified in the Certificate of Merger). The Closing will be held at
the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York
10022 (or such other place as the parties may agree).
Section 1.03. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware
Corporation Law or Delaware LLC Law, as the case may be,
A-2
<PAGE>
and Pennsylvania Law. Without limiting the generality of the foregoing, at the
Effective Time all the property, rights, privileges, powers and franchises of
CBS shall vest in the Surviving Corporation and all debts, liabilities,
obligations, restrictions, disabilities and duties of CBS shall become the
debts, liabilities, obligations, restrictions, disabilities and duties of the
Surviving Corporation.
Section 1.04. Constituent Documents. (a) The Restated Certificate of
Incorporation of Viacom, as in effect immediately prior to the Effective Time,
shall be amended as of the Effective Time to be and read in its entirety in the
form set forth as Exhibit A-1 (either as a result of the Parent Merger or, in
the LLC Merger, as a result of amendments thereto effected under Sections 242
and 245 of Delaware Corporation Law), and, as so amended, such Restated
Certificate of Incorporation shall be the certificate of incorporation of
Viacom until thereafter changed or amended as provided therein or by applicable
law. On the Closing Date, the parties hereto shall cause, if the Merger is
structured as the Parent Merger, the Certificate of Merger filed in accordance
with Section 1.02 of this Agreement to include as an attachment thereto the
Restated Certificate of Incorporation of Viacom in the form of Exhibit A-1 to
this Agreement or, if the Merger is structured as the LLC Merger, the Restated
Certificate of Incorporation of Viacom in the form attached as Exhibit A-1 to
this Agreement to be filed with the Secretary of State of the State of Delaware
pursuant to Sections 242 and 245 of the Delaware Corporation Law
contemporaneously with the filing of the Certificate of Merger.
(b) The By-laws of Viacom, as in effect immediately prior to the Effective
Time, shall be amended as of the Effective Time so as to read in their entirety
in the form set forth as Exhibit A-2 and, as so amended, such By-laws shall be
the by-laws of Viacom until thereafter changed or amended as provided therein
or by applicable law.
(c) In the event the Merger is structured as the LLC Merger, the Certificate
of Formation and the Limited Liability Company Agreement of Viacom/CBS LLC,
each dated November 4, 1999, as in effect prior to the Effective Time shall be
the Certificate of Formation and the Limited Liability Company Agreement of
Viacom/CBS LLC as the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
ARTICLE II
Conversion of Securities; Exchange of Certificates
Section 2.01. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Viacom, CBS, Viacom/CBS LLC or
the holders of any of the following securities:
(a) (i) Each share of Series B Participating Preferred Stock, par value
$1.00 per share, of CBS ("CBS Series B Preferred Stock"), if any, issued
and outstanding immediately prior to the Effective Time shall be converted
into the right to receive 1.085 shares (the "Preferred Exchange Ratio") of
Viacom Series C Preferred Stock and (ii) each share of common stock, par
value $1.00 per share, of CBS ("CBS Common Stock"; all issued and
outstanding shares of CBS Common Stock and all issued and outstanding
shares of CBS Series B Preferred Stock being hereinafter collectively
referred to as the "Shares") issued and outstanding immediately prior to
the Effective Time (other than any Shares to be cancelled or converted
pursuant to Section 2.01(b)) shall be converted, subject to Section
2.02(e), into the right to receive 1.085 shares (the "Exchange Ratio") of
Viacom Class B Common Stock.
(b) Each Share held in the treasury of CBS and each Share owned by
Viacom (in each case, other than Shares held by benefit plans or trusts
(including Rabbi trusts)) immediately prior to the Effective Time shall be
cancelled and extinguished without any conversion thereof and no payment
shall be made with respect thereto, and each Share owned by any direct or
indirect wholly owned subsidiary of Viacom or CBS immediately prior to the
Effective Time shall be converted into the right to receive a number of
shares of Viacom Class B Common Stock equal to the Exchange Ratio.
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<PAGE>
(c) If, prior to the Effective Time (and as permitted by Sections 5.01
and/or 5.02), the outstanding shares of CBS Common Stock or shares of
Viacom Class B Common Stock shall have been increased, decreased, changed
into or exchanged for a different number or class of shares or securities
as a result of a reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, combination or exchange of
shares or other similar change in capitalization, then an appropriate and
proportionate adjustment shall be made to the Exchange Ratio and, in the
case of any such adjustments to the CBS Series B Preferred Stock, then an
appropriate and proportionate adjustment shall be made to the Preferred
Exchange Ratio.
(d) If the Merger is structured as the LLC Merger, the 100% membership
interest in Viacom/CBS LLC issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding as the 100% membership
interest in Viacom/CBS LLC as the Surviving Corporation.
Section 2.02. Exchange of Certificates. (a) Exchange Agent. Viacom shall
deposit, or shall cause to be deposited, with such bank or trust company
designated by Viacom and reasonably acceptable to CBS (the "Exchange Agent"),
for the benefit of the holders of Shares, for exchange in accordance with this
Article II through the Exchange Agent, certificates representing the shares of
Viacom Class B Common Stock and certificates representing the shares of Viacom
Series C Preferred Stock (such certificates for shares of Viacom Class B Common
Stock and such certificates for shares of Viacom Series C Preferred Stock,
together with any dividends or distributions with respect thereto and any cash
in lieu of fractional shares of Viacom Class B Common Stock or Viacom Series C
Preferred Stock payable pursuant to Section 2.02(e), being hereinafter referred
to as the "Exchange Fund") issuable pursuant to Section 2.01 in exchange for
outstanding Shares. The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Viacom Class B Common Stock and the Viacom Series C
Preferred Stock contemplated to be issued pursuant to Section 2.01 out of the
Exchange Fund. Except as contemplated by Section 2.02(f) hereof, the Exchange
Fund shall not be used for any other purpose.
(b) Exchange Procedures. As promptly as practicable after the Effective
Time, Viacom shall cause the Exchange Agent to mail to each holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates") (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent, and shall be in customary form) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing whole shares of Viacom Class B Common Stock or
the shares of Viacom Series C Preferred Stock, as the case may be, together
with any dividends or distributions with respect thereto and any cash in lieu
of fractional shares. Upon surrender to the Exchange Agent of a Certificate for
exchange and cancellation, together with such letter of transmittal, duly
executed, and such other documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Viacom Class B Common Stock or that number of shares of Viacom Series C
Preferred Stock, as the case may be, which such holder has the right to receive
in respect of the Shares formerly represented by such Certificate (after taking
into account all Shares then held by such holder), cash in lieu of fractional
shares of Viacom Class B Common Stock or Viacom Series C Preferred Stock to
which such holder is entitled pursuant to Section 2.02(e) and any dividends or
other distributions to which such holder is entitled pursuant to
Section 2.02(c), and the Certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of Shares that is not
registered in the transfer records of CBS, a certificate representing the
proper number of shares of Viacom Class B Common Stock or the proper number of
shares of Viacom Series C Preferred Stock, as the case may be, may be issued to
a transferee if the Certificate representing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have
been paid. Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the certificate representing
shares of Viacom Class B Common Stock or the certificate representing shares of
Viacom Series C Preferred Stock, as the case may be, cash in lieu of any
fractional shares of Viacom Class B Common Stock or Viacom Series C Preferred
Stock to which such holder is entitled pursuant to Section 2.02(e) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.02(c).
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(c) Distributions with Respect to Unexchanged Shares of Viacom Class B
Common Stock and Viacom Series C Preferred Stock. No dividends or other
distributions with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of Viacom
Class B Common Stock or Viacom Series C Preferred Stock represented thereby,
and no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to Section 2.02(e), until the holder of such Certificate shall
surrender such Certificate. Subject to the effect of escheat, Tax (as defined
in Section 3.14) or other applicable Laws (as defined in Section 3.05),
following surrender of any such Certificate, there shall be paid to the record
holder thereof, without interest, (i) promptly, the amount of any cash payable
with respect to a fractional share of Viacom Class B Common Stock or Viacom
Series C Preferred Stock to which such holder is entitled pursuant to Section
2.02(e) and the amount of dividends or other distributions with a record date
after the Effective Time and theretofore paid with respect to such whole shares
of Viacom Class B Common Stock or such shares of Viacom Series C Preferred
Stock, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time and a payment
date occurring after surrender, payable with respect to such whole shares of
Viacom Class B Common Stock or such shares of Viacom Series C Preferred Stock.
(d) No Further Rights in CBS Common Stock. All shares of Viacom Class B
Common Stock and all shares of Viacom Series C Preferred Stock issued upon
conversion of the Shares in accordance with the terms hereof (including any
cash paid pursuant to Sections 2.02(c) or (e)) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such Shares.
(e) No Fractional Shares. No certificates or scrip representing fractional
shares of Viacom Class B Common Stock or shares of Viacom Series C Preferred
Stock shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to any
other rights of a stockholder of Viacom. Each holder of a fractional share
interest shall be paid an amount in cash equal to the product obtained by
multiplying (i) such fractional share interest to which such holder (determined
after taking into account all fractional share interests then held by such
holder) would otherwise be entitled by (ii) (x) in the case of shares of Viacom
Class B common stock, the 4:00 p.m. (New York time) closing price for a share
of Viacom Class B Common Stock, as reported in The Wall Street Journal
(Northeast edition) or, if there is no such report in The Wall Street Journal,
any other authoritative source on the first trading day immediately following
the Effective Time or (y) in the case of shares of Viacom Series C Preferred
Stock, the product of 1,000 multiplied by such closing price. From time to time
after the Effective Time, as promptly as practicable after the determination of
the amount of cash, if any, to be paid to any holders of fractional share
interests who have surrendered their Certificates to the Exchange Agent, the
Exchange Agent shall so notify Viacom, and Viacom shall deposit such amount
with the Exchange Agent and shall cause the Exchange Agent to forward payments
to such holder of fractional share interests subject to and in accordance with
the terms of Sections 2.02(b) and (c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Shares for six (6) months after the
Effective Time shall be delivered to Viacom, upon demand, and any holders of
Shares who have not theretofore complied with this Article II shall thereafter
look only to Viacom for the shares of Viacom Class B Common Stock or the shares
of Viacom Series C Preferred Stock, any cash in lieu of fractional shares of
Viacom Class B Common Stock or Viacom Series C Preferred Stock to which they
are entitled pursuant to Section 2.02(e) and any dividends or other
distributions with respect to Viacom Class B Common Stock or Viacom Series C
Preferred Stock to which they are entitled pursuant to Section 2.02(c). Any
portion of the Exchange Fund remaining unclaimed by holders of Shares as of a
date which is immediately prior to such time as such amounts would otherwise
escheat to or become property of any government entity shall, to the extent
permitted by applicable Law, become the property of Viacom free and clear of
any claims or interest of any person previously entitled thereto.
(g) No Liability. Neither Viacom nor CBS shall be liable to any holder of
Shares for any such Shares (or dividends or distributions with respect hereto)
or cash delivered to a public official pursuant to any abandoned property,
escheat or similar Law.
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(h) Lost, Stolen or Destroyed Certificates. In the event that any
Certificate has been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by Viacom, the posting by such person of a bond in
such reasonable amount as Viacom may direct as indemnity against any claim that
may be made against it with respect to such Certificate, Viacom will, in
exchange for such lost, stolen or destroyed Certificate, issue or cause to be
issued the number of whole shares of Viacom Common Stock or shares of Viacom
Series C Preferred Stock, as the case may be, and pay or cause to be paid the
amounts deliverable in respect thereof pursuant to Sections 2.02(e) and
2.02(c).
(i) Withholding Rights. Viacom shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as it is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of state, local or
foreign Tax Law. To the extent that amounts are so withheld by Viacom, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Shares in respect of which such deduction and
withholding was made by Viacom.
Section 2.03. Stock Transfer Books. At the Effective Time, the stock
transfer books of CBS shall be closed and there shall be no further
registration of transfers of Shares thereafter on the records of CBS. From and
after the Effective Time, the holders of Certificates shall cease to have any
rights with respect to such Shares except as otherwise provided herein or by
any Laws. On or after the Effective Time, any Certificates presented to the
Exchange Agent or Viacom for any reason shall be converted into shares of
Viacom Class B Common Stock or shares of Viacom Series C Preferred Stock, as
the case may be, any cash in lieu of fractional shares of Viacom Class B Common
Stock or shares of Viacom Series C Preferred Stock to which the holders thereof
are entitled pursuant to Section 2.02(e) and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
2.02(c).
Section 2.04. Stock Options and Other Stock Plans. (a) Prior to the
Effective Time, Viacom and CBS shall take such action as may be necessary to
cause each unexpired and unexercised option or warrant to purchase Shares which
are outstanding immediately prior to the Effective Time (collectively, "CBS
Options"), whether granted under CBS's stock option plans set forth in Section
2.04 of the CBS Disclosure Schedule (as defined below) or otherwise (the "CBS
Stock Option Plans"), to be automatically converted at the Effective Time into
an option or warrant (collectively, a "Substituted Option") to purchase a
number of shares of Viacom Class B Common Stock equal to the number of Shares
that could have been purchased (assuming full vesting) under such CBS Option
multiplied by the Exchange Ratio (rounded to the nearest whole number of shares
of Viacom Class B Common Stock) at a price per share of Viacom Class B Common
Stock equal to the per-share option exercise price specified in the CBS Option
divided by the Exchange Ratio (rounded down to the nearest whole cent). Except
as otherwise provided in this Agreement, such Substituted Option shall
otherwise be subject to the same terms and conditions as such CBS Option
(except that all vesting periods with respect thereto shall, to the extent
provided by the terms thereof, accelerate, and be subject to any other rights
which arise under the CBS Stock Option Plans or the option agreements
evidencing awards thereunder as a result of the transactions contemplated by
this Agreement). The date of grant of the Substituted Option shall be the date
on which the corresponding CBS Option was granted. At the Effective Time, (i)
all references (except to the extent that the references are to the price of
CBS Common Stock underlying the "limited rights" of the holder) in the related
stock option agreements to CBS shall be deemed to refer to Viacom and (ii)
Viacom shall assume all of CBS's obligations with respect to CBS Options as so
amended. As promptly as reasonably practicable after the Effective Time, Viacom
shall issue to each holder of an outstanding CBS Option a document evidencing
the foregoing assumption by Viacom. Employee and director deferrals and
director common stock equivalents and all other equity based compensation that
references CBS Common Stock will, as of and after the Effective Time, be deemed
to refer to Viacom Class B Common Stock (as adjusted to reflect the Exchange
Ratio).
(b) In respect of each CBS Option assumed by Viacom, and the shares of
Viacom Class B Common Stock underlying such CBS Option, Viacom shall, no later
than one Business Day after the Effective Time, file and keep current a Form S-
8 or other appropriate registration statement for as long as any Substituted
Options remain outstanding.
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(c) Prior to the Effective Time, Viacom and CBS shall take all steps
reasonably necessary to cause the transactions contemplated hereby and any
other dispositions of equity securities of CBS (including derivative
securities) or acquisitions of Viacom equity securities (including derivative
securities) in connection with this Agreement by each individual who (a) is a
director or officer of Viacom or (b) at the Effective Time, will become a
director or officer of Viacom, to be exempt under Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
ARTICLE III
Representations and Warranties of CBS
Except as disclosed in the report on Form 10-K dated March 24, 1999 for the
year ended December 31, 1998, the Reports on Form 10-K/A, Form 10-Q, Form 10-
Q/A and Form 8-K since December 31, 1998 or the proxy statement dated March 25,
1999, in each case in the form filed by CBS with the United States Securities
and Exchange Commission (the "SEC") or in a separate disclosure schedule which
has been delivered by CBS to Viacom prior to the date of this Agreement (the
"CBS Disclosure Schedule") (each section of which qualifies the correspondingly
numbered representation and warranty or covenant to the extent specified
therein and such other representations and warranties or covenants to the
extent a matter in such section is disclosed in such a way as to make its
relevance to the information called for by such other representation and
warranty or covenant readily apparent), CBS hereby represents and warrants to
Viacom that:
Section 3.01. Organization and Qualification; Subsidiaries. Each of CBS and
its subsidiaries is a corporation or entity duly incorporated or formed,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or formation and has the requisite corporate power and authority
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to have such power, authority and governmental approvals
would not have a CBS Material Adverse Effect (as defined below). Each of CBS
and its subsidiaries is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not have a CBS
Material Adverse Effect. The term "CBS Material Adverse Effect" means any
change, effect or circumstance that is or is reasonably likely to be materially
adverse to the business, results of operations or financial condition of CBS
and its subsidiaries taken as a whole, other than any change, effect or
circumstance relating to or resulting from (i) general changes in the media or
entertainment industries or the advertising markets, (ii) changes in general
economic conditions or securities markets in general or (iii) this Agreement or
the transactions contemplated hereby or the announcement thereof.
Section 3.02. Certificate of Incorporation and By-Laws. CBS has made
available to Viacom a complete and correct copy of the Articles of
Incorporation and the By-laws, each as amended to the date hereof, of CBS and
Infinity Broadcasting Corporation, a Delaware corporation ("Infinity"). The
Articles of Incorporation and By-laws (or equivalent organizational documents)
of CBS and its subsidiaries are in full force and effect. Except as would not
have a CBS Material Adverse Effect, none of CBS or its subsidiaries is in
violation of any provision of its Articles of Incorporation or By-laws (or
equivalent organizational documents).
Section 3.03. Capitalization. The authorized capital stock of CBS consists
of 1,100,000,000 shares of CBS Common Stock and 25,000,000 shares of preferred
stock, par value $1.00 per share (the "CBS Preferred Stock"). As of August 31,
1999, (a) 705,119,425 shares of CBS Common Stock were issued and outstanding,
all of which were validly issued, fully paid and nonassessable, (b) 40,099,599
shares of CBS Common Stock were held in the treasury of CBS, (c) 51,007,538
shares of CBS Common Stock were reserved for future issuance pursuant to
outstanding unexercised employee stock options granted pursuant to the CBS
Stock Option Plans or otherwise and (d) 70,365,195 shares of CBS Common Stock
were reserved for future issuance in connection with the merger of a wholly
owned subsidiary of CBS with and into King World Productions, Inc. ("King
World") and 9,910,600 shares of CBS Common Stock (or some equivalent amount of
CBS Preferred
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Stock, if appropriate), measured at the September 3, 1999 New York Stock
Exchange (the "NYSE") closing price, were reserved for future issuance in
connection with the acquisition from Gaylord of television station KVTV,
Dallas/Fort Worth, Texas. As of the date of this Agreement, no shares of CBS
Preferred Stock are outstanding. As of the date of this Agreement, except for
the issuance of shares of CBS Common Stock pursuant to the exercise of CBS
Options and options to purchase 5,850,555 shares of Class A Common Stock, par
value $0.01 per share, of Infinity, outstanding prior to August 31, 1999, no
shares of capital stock of CBS or any of its subsidiaries have been issued
since August 31, 1999. Except as set forth in this Section 3.03, and except for
the Series A participating preferred stock purchase rights of CBS (the
"Rights") issued pursuant to the Rights Agreement, dated as of December 28,
1995, between CBS and First Chicago Trust Company of New York (the "CBS Rights
Agreement"), as of the date of this Agreement there are no options, warrants or
other rights, agreements (including registration rights agreements),
arrangements or commitments of any character relating to the issued or unissued
capital stock of CBS or any of its subsidiaries or obligating CBS or any of its
subsidiaries to issue or sell any shares of capital stock of, or other equity
interests in, CBS or any of its subsidiaries. All shares of capital stock of
CBS and its subsidiaries subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and
nonassessable. As of the date of this Agreement, there are no outstanding
contractual material obligations of CBS or any subsidiary to repurchase, redeem
or otherwise acquire any shares of capital stock of CBS or any of its
subsidiaries or to provide material funds to, or make any material investment
(in the form of a loan capital contribution or otherwise) in, any person.
Section 3.04. Authority Relative to Agreement. CBS has all necessary power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the Merger and the other transactions contemplated
hereby. The execution and delivery of this Agreement by CBS and the
consummation by CBS of the Merger and the other transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
and no other corporate proceedings on the part of CBS are necessary to
authorize the execution and delivery of this Agreement or to consummate the
Merger and the other transactions contemplated hereby (other than, with respect
to the Merger, the adoption of this Agreement by the affirmative vote of a
majority of the votes cast by all shareholders entitled to vote at the CBS
Stockholders' Meeting (as defined in Section 6.02) and the filing and
recordation of appropriate merger documents as required by Pennsylvania Law).
This Agreement has been duly and validly executed and delivered by CBS and,
assuming the due authorization, execution and delivery by Viacom and Viacom/CBS
LLC, this Agreement constitutes a legal, valid and binding obligation of CBS,
enforceable against CBS in accordance with its terms.
Section 3.05. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by CBS does not, and the performance of this
Agreement by CBS will not, (i) conflict with or violate the Articles of
Incorporation or By-laws of (A) CBS or Infinity or (B) any of its other
subsidiaries, (ii) assuming the consents, approvals, authorizations and waivers
specified in Section 3.05(b) have been received and the waiting periods
referred to therein have expired, and any condition precedent to such consent,
approval, authorization, or waiver has been satisfied, conflict with or violate
any domestic (federal, state or local) or foreign law, rule, regulation, order,
judgment or decree (collectively, "Laws") applicable to CBS or any of its
subsidiaries or by which any property or asset of CBS or any of its
subsidiaries is bound or affected or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration, or cancellation of, or result in the creation of a
lien or other encumbrance on any property or asset of CBS or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture or credit
agreement, or, to CBS's knowledge as of the date of this Agreement, any other
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which CBS or any of its subsidiaries is a party or by which CBS
or any of its subsidiaries or any property or asset of CBS or any of its
subsidiaries is bound or affected, except, in the case of clauses (i)(B), (ii)
and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences of the type referred to above which would not have a CBS Material
Adverse Effect or would not prevent or materially delay the consummation of the
Merger; provided, however, that for purposes of this Section 3.05(a), the
definition of CBS Material Adverse Effect shall be read so as not to include
clause (iii) of the definition thereof.
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(b) The execution and delivery of this Agreement by CBS do not, and the
performance of this Agreement by CBS will not, require any consent, approval,
authorization, waiver or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic, foreign or supranational,
except for applicable requirements of the Exchange Act, the Securities Act of
1933, as amended (the "Securities Act"), state securities or "blue sky" laws
("Blue Sky Laws"), the pre-merger notification arrangements of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the "HSR Act"), such filings, approvals and waivers of
the Federal Communications Commission or any successor entity (the "FCC") as
may be required under the Communications Act of 1934, as amended, and the rules
and regulations of the FCC thereunder (collectively, the "Communications Act"),
applicable requirements of the Investment Canada Act of 1985 and the
Competition Act (Canada), any other non-United States competition, antitrust
and investment law, filing and recordation of appropriate merger documents as
required by Delaware Corporation Law or Delaware LLC Law, as the case may be,
and Pennsylvania Law and the rules of the NYSE and except where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not have a CBS Material Adverse Effect or would
not prevent or materially delay the consummation of the Merger; provided,
however, that for purposes of this Section 3.05(b), the definition of CBS
Material Adverse Effect shall be read so as not to include clause (iii) of the
definition thereof.
Section 3.06. Permits and Licenses; Contracts. (a) Each of CBS and its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders necessary for CBS or any of its subsidiaries to own, lease
and operate the properties of CBS and its subsidiaries or to carry on their
business as it is now being conducted and contemplated to be conducted (the
"CBS Permits"), and no suspension or cancellation of any of the CBS Permits is
pending or, to the knowledge of CBS, threatened, except where the failure to
have, or the suspension or cancellation of, any of the CBS Permits would not
have a CBS Material Adverse Effect. None of CBS or any of its subsidiaries is
in conflict with, or in default or violation of, (i) any Laws applicable to CBS
or any of its subsidiaries or by which any property or asset of CBS or any of
its subsidiaries is bound or affected, (ii) any of the CBS Permits or (iii) any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which CBS or any of its
subsidiaries is a party or by which CBS or any of its subsidiaries or any
property or asset of CBS or any of its subsidiaries is bound or affected,
except for any such conflicts, defaults or violations that would not have a CBS
Material Adverse Effect.
(b) Except as would not have a CBS Material Adverse Effect, and to the
knowledge of CBS, except as would not have a material adverse effect on the
Surviving Corporation following the Effective Time, none of CBS or any of its
subsidiaries is a party to any contracts or agreements that limits the ability
of CBS or any of its subsidiaries or, after the Effective Time, Viacom or any
of its subsidiaries, to compete in any line of business or with any person or
engage in any business in any geographic area, in each case except for
competition in businesses that neither CBS nor Viacom are currently engaged in
or will reasonably foreseeably engage in.
(c) CBS and its subsidiaries have operated the radio and television stations
and associated facilities for which CBS or any of its subsidiaries holds
licenses from the FCC, in each case which are owned or operated by CBS and its
subsidiaries (the "CBS Licensed Facilities"), in material compliance with the
terms of the CBS Permits issued by the FCC to CBS and its subsidiaries ("CBS
FCC Licenses"), and in material compliance with the Communications Act, and CBS
and its subsidiaries have timely filed or made all applications, reports and
other disclosures required by the FCC to be filed or made with respect to the
CBS Licensed Facilities and have timely paid all FCC regulatory fees with
respect thereto, in each case except as would not have a CBS Material Adverse
Effect. As of the date hereof, to CBS's knowledge, there is not now pending or
threatened before the FCC any material investigation, proceeding, notice of
violation, order of forfeiture or complaint against CBS or any of its
subsidiaries, relating to any of the CBS Licensed Facilities or FCC regulated
services conducted by CBS that, if adversely decided, would have a CBS Material
Adverse Effect.
Section 3.07. SEC Filings; Financial Statements. (a) CBS and Infinity have
filed all forms, reports and documents required to be filed by it with the SEC
from December 31, 1996 to the date of this Agreement,
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including: (i) Annual Reports on Form 10-K, (ii) Quarterly Reports on Form 10-Q
and (iii) proxy statements relating to CBS's and Infinity's meetings of
shareholders (whether annual or special) (the forms, reports and other
documents referred to in clauses (i), (ii), (iii) and all other forms, reports
and other registration statements filed by CBS or Infinity with the SEC as of
the date of this Agreement, including all amendments and supplements thereto
filed with the SEC as of the date of this Agreement, above being referred to
herein, collectively, as the "CBS SEC Reports"). The CBS SEC Reports, as well
as all forms, reports and documents to be filed by CBS or Infinity with the SEC
after the date hereof and prior to the Effective Time, (i) were or will be
prepared in accordance with the requirements of the Securities Act, and the
Exchange Act, as the case may be, and the rules and regulations thereunder,
(ii) did not at the time they were filed, or will not at the time they are
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading, and (iii) did not at the time they were filed, or
will not at the time they are filed, omit any documents required to be filed as
exhibits thereto. No CBS subsidiary, except Infinity, is subject to the
periodic reporting requirements of the Exchange Act.
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the CBS SEC Reports and each of the financial statements
to be filed by CBS or Infinity with the SEC after the date hereof and prior to
the Effective Time was or will be prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presented in all material respects or will fairly
present in all material respects the consolidated financial position, results
of operations and cash flows of CBS and its subsidiaries as at the respective
dates thereof and for the respective periods indicated therein in accordance
with United States generally accepted accounting principles (subject, in the
case of unaudited statements, to normal and recurring year-end adjustments
which were not and are not expected to be material).
(c) Except as and to the extent set forth in the CBS SEC Reports, CBS and
its subsidiaries do not have any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise) other than liabilities and
obligations which, individually or in the aggregate, would not have a CBS
Material Adverse Effect.
(d) CBS has heretofore furnished to Viacom complete and correct copies of
all material amendments and modifications that have not been filed by CBS or
Infinity with the SEC to all agreements, documents and other instruments that
previously had been filed by CBS or Infinity with the SEC and are currently in
effect.
Section 3.08. Absence of Certain Changes or Events. (a) Since December 31,
1998, except as disclosed in any CBS SEC Report or as contemplated by this
Agreement, there has not been any change, event or circumstance which, when
taken individually or together with all other changes, events or circumstances,
has had or would have a CBS Material Adverse Effect, and (b) since December 31,
1998 to the date of this Agreement, except as disclosed in any CBS SEC Report
(i) each of CBS and its subsidiaries has conducted its businesses only in the
ordinary course and in a manner consistent with past practice and (ii) there
has not been (A) any material change by CBS or any of its subsidiaries in its
material accounting policies, practices and procedures, (B) any entry by CBS or
any of its subsidiaries into any commitment or transaction material to CBS and
its subsidiaries taken as a whole other than in the ordinary course of business
consistent with past practice, (C) any declaration, setting aside or payment of
any dividend or distribution in respect of any capital stock of CBS or any of
its subsidiaries (other than cash dividends payable by any wholly owned
subsidiary to another subsidiary or CBS), or (D) any increase in the
compensation payable or to become payable to any corporate officers or heads of
divisions of CBS or any of its subsidiaries, except in the ordinary course of
business consistent with past practice.
Section 3.09. Absence of Litigation. Except as disclosed in any CBS SEC
Report, there is no claim, action, proceeding or investigation pending or, to
the knowledge of CBS, threatened against CBS or any of its subsidiaries, or any
property or asset of CBS or any of its subsidiaries, before any court,
arbitrator or Governmental Authority, in each case except as would not have a
CBS Material Adverse Effect. As of the date
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of this Agreement, none of CBS, any of its subsidiaries nor any property or
asset of CBS or any of its subsidiaries is subject to any order, writ,
judgment, injunction, decree, determination or award imposed by any court,
arbitration or Governmental Authority, in each case except as would not have a
CBS Material Adverse Effect.
Section 3.10. Employee Benefit Plans. (a) With respect to each employee
benefit plan, program, arrangement and contract (including, without limitation,
any "employee benefit plan", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), maintained or
contributed to by CBS or any of its subsidiaries, or with respect to which CBS
or any of its subsidiaries could incur liability under Section 4069 of ERISA,
other than multiemployer plans within the meaning of Section 3(37) of ERISA
(the "CBS Benefit Plans"), CBS will provide to Viacom within 15 days of the
date of this Agreement a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the Internal Revenue Service (the "IRS"), (ii)
such CBS Benefit Plan, (iii) each trust agreement relating to such CBS Benefit
Plan, (iv) the most recent summary plan description for each CBS Benefit Plan
for which a summary plan description is required, (v) the most recent actuarial
report or valuation relating to a CBS Benefit Plan subject to Title IV of
ERISA, if any, and (vi) the most recent determination letter, if any, issued by
the IRS with respect to any CBS Benefit Plan qualified under Section 401(a) of
the Code. CBS will, promptly following the date of this Agreement, request a
copy of each CBS Benefit Plan that is a multiemployer plan within the meaning
of Section 3(37) of ERISA from the trustees of such multiemployer plan and CBS
shall deliver such copy of the plan to Viacom promptly upon its receipt
thereof.
(b) Each CBS Benefit Plan has been administered in accordance with its
terms, and in compliance with applicable laws, except as would not have a CBS
Material Adverse Effect. CBS and its subsidiaries have performed all
obligations required to be performed by them under, are not in any respect in
default under or in violation of, and have no knowledge of any default or
violation by any party to, any CBS Benefit Plans, except as would not have a
CBS Material Adverse Effect. With respect to the CBS Benefit Plans, no event
has occurred and, to the knowledge of CBS, there exists no condition or set of
circumstances, in connection with which CBS or any of its subsidiaries is
reasonably likely to be subject to any liability under the terms of such CBS
Benefit Plans, ERISA, the Code or any other applicable Law except as would not,
individually or in the aggregate, have a CBS Material Adverse Effect. Neither
CBS nor any of its subsidiaries has any actual or contingent liability under
Title IV of ERISA (other than the payment of premiums to the Pension Benefit
Guaranty Corporation), including, without limitation, any liability in
connection with (i) the termination or reorganization of any employee benefit
plan subject to Title IV of ERISA or (ii) the withdrawal from any multiemployer
plan or multiple employer plan, and no fact or event exists which is reasonably
likely to give rise to any such liability, in each case except as would not,
individually or in the aggregate, have a CBS Material Adverse Effect.
(c) CBS has made available to Viacom: (i) copies of all employment
agreements with the top five most highly compensated executive officers of CBS
and its subsidiaries; (ii) copies of all material severance agreements,
programs and policies of CBS or any of its subsidiaries with or relating to its
or its subsidiaries' employees; and (iii) copies of all material plans,
programs, agreements and other arrangements of CBS or any of its subsidiaries
with or relating to its or its subsidiaries' employees which contain change in
control provisions. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
"golden parachute" or otherwise) becoming due to any director, officer or
employee of CBS or any of its subsidiaries from CBS or any of its affiliates
under any CBS Benefit Plan or otherwise, which payment is material in relation
to the compensation previously provided to such individual (other than payments
resulting from a change in responsibilities or reporting obligations of
individual employees), (ii) materially increase any benefits otherwise payable
under any CBS Benefit Plan, which increase is material in relation to the
benefits previously provided or (iii) result in any acceleration of the time of
payment or vesting of any material benefits.
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(d) Each CBS Benefit Plan that is intended to be qualified under Section
401(a) of the Code or Section 401(k) of the Code has timely received a
favorable determination letter from the IRS covering all of the provisions
applicable to the Plan for which determination letters are currently available
that the CBS Benefit Plan is so qualified and each trust established in
connection with any CBS Benefit Plan which is intended to be exempt from
federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that it is so exempt, and no fact or event
has occurred since the date of such determination letter or letters from the
IRS which is reasonably likely to adversely affect the qualified status of any
such CBS Benefit Plan or the exempt status of any such trust.
Section 3.11. Labor Matters. There is no labor dispute, strike or work
stoppage against CBS or any of its subsidiaries pending or, to the knowledge of
CBS, threatened which would reasonably be expected to interfere with the
respective business activities of CBS or any of its subsidiaries, except for
such disputes, strikes or work stoppages which would not have a CBS Material
Adverse Effect. There is no charge or complaint against CBS or any of its
subsidiaries by the National Labor Relations Board or any comparable state
agency pending or threatened in writing, except for such charges or complaints
(or related unfair labor practices) which would not have a CBS Material Adverse
Effect.
Section 3.12. Environmental Matters. Except as would not, individually or in
the aggregate, have a CBS Material Adverse Effect:
(a) CBS and its subsidiaries (i) are in compliance with all, and are not
subject to any asserted liability or, to CBS's knowledge, any liability
(including liability with respect to current or former subsidiaries or
operations), in each case with respect to any, Environmental Laws (as
defined below), (ii) hold or have applied for all Environmental Permits (as
defined below) and (iii) are in compliance with their respective
Environmental Permits;
(b) neither CBS nor any CBS subsidiary has received any written notice,
demand, letter, claim or request for information alleging that CBS or any
of its subsidiaries is or may be in violation of, or liable under, any
Environmental Law;
(c) neither CBS nor any of its subsidiaries (i) has entered into or
agreed to any consent decree or order or is subject to any judgment, decree
or judicial order relating to compliance with Environmental Laws,
Environmental Permits or the investigation, sampling, monitoring,
treatment, remediation, removal or cleanup of Hazardous Materials (as
defined below) and, to the knowledge of CBS, no investigation, litigation
or other proceeding is pending or threatened in writing with respect
thereto, or (ii) is an indemnitor in connection with any threatened or
asserted claim by any third-party indemnitee for any liability under any
Environmental Law or relating to any Hazardous Materials; and
(d) none of the real property owned or leased by CBS or any of its
subsidiaries is listed or, to the knowledge of CBS, proposed for listing on
the "National Priorities List" under CERCLA, as updated through the date
hereof, or any similar state or foreign list of sites requiring
investigation or cleanup.
For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended as of the date hereof.
"Environmental Laws" means any applicable federal, state, local or
foreign statute, law, ordinance, regulation, rule, code, treaty, writ or
order and any enforceable judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree,
judgment, stipulation, injunction, permit, authorization, policy, opinion,
or agency requirement, in each case having the force and effect of law,
relating to the pollution, protection, investigation or restoration of the
environment, health and safety or natural resources, including those
relating to the use, handling, presence, transportation, treatment,
storage, disposal, release, threatened release or discharge of Hazardous
Materials or noise, odor, wetlands, pollution, contamination or any injury
or threat of injury to persons or property or to the siting, construction,
operation, closure and post-closure care of waste disposal, handling and
transfer facilities.
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"Environmental Permits" means any permit, approval, identification
number, license and other authorization required under any Environmental
Law.
"Hazardous Materials" means (i) any petroleum, petroleum products, by-
products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (ii) any chemical, material or
other substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any Environmental Law.
Section 3.13. Trademarks, Patents and Copyrights. Except as would not have a
CBS Material Adverse Effect, CBS and its subsidiaries own, or possess adequate
licenses or other valid rights to use, all material patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights,
service marks, service mark rights, trade secrets, applications to register,
and registrations for, the foregoing trademarks, know-how and other proprietary
rights and information used in connection with the business of CBS and its
subsidiaries as currently conducted, and no assertion or claim has been made in
writing challenging the validity of any of the foregoing which would have a CBS
Material Adverse Effect. To the knowledge of CBS, the conduct of the business
of CBS and its subsidiaries as currently conducted does not conflict in any way
with any patent, patent right, license, trademark, trademark right, trade name,
trade name right, service mark or copyright of any third party, except for such
conflicts which would not have a CBS Material Adverse Effect.
Section 3.14. Taxes. (a) For purposes of this Agreement, "Tax" or "Taxes"
means any and all taxes, fees, levies, duties, tariffs, imposts, and other
charges of any kind (together with any and all interest, penalties, additions
to tax and additional amounts imposed with respect thereto) imposed by any
governmental or taxing authority including, without limitation: taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment,
social security, workers' compensation, unemployment compensation, or net
worth; taxes or other charges in the nature of excise, withholding, ad valorem,
stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs' duties, tariffs, and similar charges.
(b) Except as would not have a CBS Material Adverse Effect: (i) each of CBS
and each of its subsidiaries has timely filed all federal, state, local and
foreign tax returns and reports (including extensions) required to be filed by
it and has paid and discharged all Taxes shown as due thereon and has paid all
of such other Taxes as are due, other than such payments as are being contested
in good faith by appropriate proceedings; (ii) neither the IRS nor any other
taxing authority or agency, domestic or foreign, is now asserting or, to the
knowledge of CBS after due inquiry, threatening to assert against CBS or any of
its subsidiaries any deficiency or claim for Taxes; (iii) no waiver of any
statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax has been granted by CBS or any of its subsidiaries; (iv)
the accruals and reserves for Taxes reflected in the CBS balance sheet included
in its Annual Report on Form 10-K for fiscal year 1998 and the most recent
quarterly financial statements are adequate to cover all Taxes accruable
through the date thereof in accordance with United States generally accepted
accounting principles; (v) no election under Section 341(f) of the Code has
been made by CBS or any of its subsidiaries; (vi) CBS and each of its
subsidiaries has withheld or collected and paid over to the appropriate
governmental authorities or is properly holding for such payment all Taxes
required by law to be withheld or collected; (vii) there are no liens for Taxes
upon the assets of CBS or any of its subsidiaries, other than liens for Taxes
that are being contested in good faith by appropriate proceedings; and (viii)
CBS has not constituted a "distributing corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code in the two years prior to the
date of this Agreement.
Section 3.15. Tax Matters. None of CBS or any of its affiliates has taken or
agreed to take any action that would prevent the Merger from constituting a
transaction qualifying under Section 368(a) of the Code. None of CBS or any of
its affiliates or agents is aware of any agreement, plan or other circumstance
that would prevent the Parent Merger, or, if the Tax Event occurs, the LLC
Merger from qualifying under Section 368(a) of the Code, that could prevent
them from providing representations required in Sections 7.02(c) or 7.03(c), or
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that could prevent the opinions described in such Sections from being given and
to the knowledge of CBS, the Parent Merger, or, if the Tax Event occurs, the
LLC Merger will so qualify.
Section 3.16. Year 2000 Compliance. (a) CBS has adopted a plan that it
believes will cause CBS Systems (as defined below) to be CBS Year 2000
Compliant (as defined below) (such plan, as it may be amended, modified or
supplemented from time to time being, the "CBS Year 2000 Plan") in all material
respects. CBS has taken, and between the date of this Agreement and the
Effective Time will continue to take, all reasonable steps to implement the CBS
Year 2000 Plan with respect to the CBS Systems. Notwithstanding anything in
this Section 3.16 to the contrary, CBS does not represent or warrant that CBS
Systems (or any other operations, systems, equipment or software of CBS or its
subsidiaries or any of their respective affiliates) are or will be CBS Year
2000 Compliant at or prior to the Effective Time, regardless of whether the CBS
Year 2000 Plan has or has not been implemented or complied with.
(b) For purposes of this Section 3.16, (i) "CBS Systems" shall mean all
computer, hardware, software, systems, and equipment (including embedded
microcontrollers in non-computer equipment) embedded within or required to
operate the current products of CBS and its subsidiaries, and/or material to or
necessary for CBS and its subsidiaries to carry on their respective businesses
as currently conducted; and (ii) "CBS Year 2000 Compliant" means that CBS
Systems will (A) manage, accept, process, store and output data involving dates
reasonably expected to be encountered in the foreseeable future and (B)
accurately process date data from, into and between the 20th and 21st centuries
and each date during the years 1999 and 2000.
Section 3.17. Opinion of Financial Advisors. CBS has received the written
opinion of Evercore Group Inc. (the "CBS Financial Advisor") on or prior to the
date of this Agreement, to the effect that, as of the date of such opinion, the
Exchange Ratio is fair to the shareholders of CBS from a financial point of
view, and CBS will deliver a copy of such opinion to Viacom promptly after the
date of this Agreement.
Section 3.18. Vote Required. The affirmative vote of a majority of the votes
cast by all shareholders entitled to vote at the CBS Stockholders' Meeting is
the only vote of the holders of any class or series of capital stock of CBS
necessary to adopt this Agreement.
Section 3.19. Brokers. No broker, finder or investment banker (other than
the CBS Financial Advisor) is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger based upon arrangements made by or
on behalf of CBS.
Section 3.20. Pennsylvania Law. Pursuant to its By-laws, CBS has opted out
of anti-takeover provisions contained in the Pennsylvania Law relating to (i)
"control share acquisitions" (Sections 2561 through 2568 of the Pennsylvania
Law) and (ii) disgorgement of profits by certain controlling shareholders
following attempts to acquire control (Sections 2571 through 2576 of the
Pennsylvania Law). Section 2538 of the Pennsylvania Law relating to "interested
shareholder transactions" and Sections 2551 through 2556 of the Pennsylvania
Law relating to "business combinations with interested shareholders" are not
applicable to this Agreement or the transactions contemplated hereby.
Section 3.21. Rights Agreement. As of the date of this Agreement, the copy
of the Rights Agreement, including all amendments and exhibits thereto, that is
set forth as an exhibit to CBS's Form 8-K, filed with the SEC on January 9,
1996, is a complete and correct copy thereof. Neither the execution of this
Agreement nor the consummation of the Merger will (A) cause the Rights issued
pursuant to the Rights Agreement to become exercisable, (B) cause Viacom or
Viacom/CBS LLC to become an Acquiring Person or a Principal Party (as each term
is defined in the Rights Agreement) or (C) give rise to a Distribution Date (as
such term is defined in the Rights Agreement).
Section 3.22. Gaylord. CBS and Gaylord Entertainment Company ("Gaylord")
have entered into an Agreement and Plan of Merger dated as of April 9, 1999, as
amended as of October 8, 1999 (the "Gaylord Agreement") and the Gaylord
Agreement is in full force and effect. Pursuant to the Gaylord Agreement,
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Gaylord has agreed, under certain circumstances, to vote its shares of CBS
Series B Preferred Stock in favor of adopting this Agreement, if required under
applicable law, and has, under certain circumstances, constituted and appointed
CBS as Gaylord's true and lawful proxy (the "Gaylord Proxy"), with full power
of substitution, for and in its name, place and stead, to vote each of
Gaylord's shares of CBS Series B Preferred Stock in favor of the adoption of
this Agreement at the CBS Stockholders' Meeting and any adjournment or
postponement thereof. CBS has not waived or transferred to a third party any of
its rights to vote Gaylord's shares under the Gaylord Proxy.
ARTICLE IV
Representations and Warranties of Viacom
Except as disclosed in the report on Form 10-K dated March 31, 1999 for the
year ended December 31, 1998, the reports on Form 10-Q and Form 8-K since
December 31, 1998 or the proxy statement dated April 16, 1999, in each case in
the form filed by Viacom with the SEC or in a separate disclosure schedule
which has been delivered by Viacom to CBS prior to the date of this Agreement
(the "Viacom Disclosure Schedule") (each section of which qualifies the
correspondingly numbered representation and warranty or covenant to the extent
specified therein and such other representations and warranties or covenants to
the extent a matter in such section is disclosed in such a way as to make its
relevance to the information called for by such other representation and
warranty or covenant readily apparent), Viacom hereby represents and warrants
to CBS that (provided that all representations and warranties relating to
Viacom/CBS LLC are originally made as of November 23, 1999):
Section 4.01. Organization and Qualification; Subsidiaries. Each of Viacom,
Viacom/CBS LLC and Viacom's other subsidiaries is a corporation or entity duly
incorporated or formed, validly existing and in good standing, under the laws
of its jurisdiction of incorporation or formation, and has the requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now
being conducted, except where the failure to have such power, authority and
governmental approvals would not have a Viacom Material Adverse Effect (as
defined below). Each of Viacom, Viacom/CBS LLC and Viacom's other subsidiaries
is duly qualified or licensed as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not have a Viacom
Material Adverse Effect. The term "Viacom Material Adverse Effect" means any
change, effect or circumstance that is or is reasonably likely to be materially
adverse to the business, results of operations or financial condition of Viacom
and its subsidiaries taken as a whole, other than any change, effect or
circumstance relating to or resulting from (i) general changes in the media or
entertainment industries or the advertising markets, (ii) changes in general
economic conditions or securities markets in general or (iii) this Agreement or
the transactions contemplated hereby or the announcement thereof.
Section 4.02. Certificate of Incorporation and By-Laws. Viacom has made
available to CBS a complete and correct copy of the Certificate of
Incorporation and the By-laws (or equivalent organizational documents), each as
amended to the date hereof, of Viacom, Viacom/CBS LLC and Blockbuster
Corporation ("Blockbuster"). The Certificates of Incorporation and By-laws (or
equivalent organizational documents) of Viacom, Viacom/CBS LLC and Viacom's
other subsidiaries are in full force and effect. Except as would not have a
Viacom Material Adverse Effect, none of Viacom, Viacom/CBS LLC or Viacom's
other subsidiaries is in violation of any provision of its Certificate of
Incorporation or By-laws (or equivalent organizational documents).
Section 4.03. Capitalization. The authorized capital stock of Viacom
consists of 500,000,000 shares of Viacom Class A Common Stock, 3,000,000,000
shares of Viacom Class B Common Stock and 200,000,000 shares of Preferred
Stock, par value $.01 per share, of Viacom ("Viacom Preferred Stock"). As of
September 3, 1999, (a) 139,923,921 shares of Viacom Class A Common Stock and
605,085,135 shares of Viacom
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Class B Common Stock were issued and outstanding, all of which were validly
issued, fully paid and nonassessable, (b) 1,356,400 shares of Viacom Class A
Common Stock and 47,101,300 shares of Viacom B Common Stock were held in the
treasury of Viacom, (c) no shares of Viacom Class A Common Stock or Viacom
Class B Common Stock were held by subsidiaries of Viacom and (d) as of
September 3, 1999, approximately 1,898,946 shares of Viacom Class B Common
Stock were reserved for future issuance pursuant to stock options or stock
incentive rights (collectively "Viacom Options") granted pursuant to Viacom's
stock option plans and arrangements (the "Viacom Stock Option Plans"). As of
September 3, 1999, no shares of Viacom Preferred Stock were issued and
outstanding. As of the date of this Agreement, except for the issuance of
Viacom Class B Common Stock pursuant to the exercise of Viacom Options and
options to purchase
11,600,000 shares of Class A Common Stock, par value $.01 per share, of
Blockbuster (the "Blockbuster Options") outstanding prior to September 3, 1999,
no shares of capital stock of Viacom or any of its subsidiaries have been
issued since September 3, 1999. Except as set forth in this Section 4.03, as of
the date of this Agreement, there are no options, warrants or other rights,
agreements (including registration rights agreements), arrangements or
commitments of any character relating to the issued or unissued capital stock
of Viacom or any of its subsidiaries or obligating Viacom or any of its
subsidiaries to issue or sell any shares of capital stock of, or other equity
interests in, Viacom or any of its subsidiaries. All shares of capital stock of
Viacom and its subsidiaries subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they
are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. As of the date of this Agreement, there are no outstanding
contractual material obligations of Viacom or any subsidiary to repurchase,
redeem or otherwise acquire any shares of capital stock of Viacom or any of its
subsidiaries or to provide material funds to, or make any material investment
(in the form of a loan capital contribution or otherwise) in, any person. The
Stockholder (as defined in the Parent Voting Agreements) is the holder of a
majority of the issued and outstanding shares of Viacom Class A Common Stock.
Section 4.04. Authority Relative to Agreement. Each of Viacom and Viacom/CBS
LLC has all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the Merger
and the other transactions contemplated hereby. The execution and delivery of
this Agreement by each of Viacom and Viacom/CBS LLC and the consummation by
each of Viacom and Viacom/CBS LLC of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of each of
Viacom and Viacom/CBS LLC are necessary to authorize the execution and delivery
of this Agreement or to consummate the Merger and the other transactions
contemplated hereby (other than, with respect to the Merger, the approval of
the Viacom Proposals by the holders of a majority of the then outstanding
shares of Viacom Class A Common Stock and the filing and recordation of
appropriate merger documents as required by Delaware Corporation Law or
Delaware LLC Law, as the case may be, and Pennsylvania Law). This Agreement has
been duly and validly executed and delivered by each of Viacom and Viacom/CBS
LLC and, assuming the due authorization, execution and delivery by CBS, this
Agreement constitutes a legal, valid and binding obligation of each of Viacom
and Viacom/CBS LLC, enforceable against each of Viacom and Viacom/CBS LLC in
accordance with its terms.
Section 4.05. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by each of Viacom and Viacom/CBS LLC do not, and
the performance of this Agreement by each of Viacom and Viacom/CBS LLC and the
performance by Parent of the Parent Voting Agreements will not, (i) conflict
with or violate the Certificate of Incorporation or By-laws (or similar
organization documents) of (A) Viacom, Viacom/CBS LLC or Blockbuster or (B) any
of Viacom's other subsidiaries, (ii) assuming the consents, approvals and
authorizations specified in Section 4.05(b) have been received and the waiting
periods referred to therein have expired, and any condition precedent to such
consent, approval, authorization, or waiver has been satisfied, conflict with
or violate any Law applicable to Viacom, Viacom/CBS LLC or any of Viacom's
other subsidiaries or by which any property or asset of Viacom, Viacom/CBS LLC
or any of Viacom's other subsidiaries is bound or affected or (iii) result in
any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any right of
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termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Viacom,
Viacom/CBS LLC or any of Viacom's other subsidiaries pursuant to, any note,
bond, mortgage, indenture or credit agreement, or, to Viacom's knowledge as of
the date of this Agreement, any other contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Viacom, Viacom/CBS
LLC or any of Viacom's other subsidiaries is a party or by which Viacom,
Viacom/CBS LLC or any of Viacom's other subsidiaries or any property or asset
of Viacom, Viacom/CBS LLC or any of Viacom's other subsidiaries is bound or
affected, except, in the case of clauses (i)(B), (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences of the type
referred to above which would not have a Viacom Material Adverse Effect or
would not prevent or materially delay the consummation of the Merger; provided,
however, that for purposes of this Section 4.05(a), the definition of Viacom
Material Adverse Effect shall be read so as not to include clause (iii) of the
definition thereof.
(b) The execution and delivery of this Agreement by each of Viacom and
Viacom/CBS LLC do not, and the performance of this Agreement by each of Viacom
and Viacom/CBS LLC and the performance by Parent of the Parent Voting
Agreements will not, require any consent, approval, authorization, waiver or
permit of, or filing with or notification to, any governmental or regulatory
authority, domestic, foreign or supranational, except for applicable
requirements of the Exchange Act, the Securities Act, Blue Sky Laws, the HSR
Act, such filings, approvals and waivers as may be required by the
Communications Act, applicable requirements of the Investment Canada Act of
1985 and the Competition Act (Canada), any other non-United States competition,
antitrust and investment law, filing and recordation of appropriate merger
documents as required by Delaware Corporation Law or Delaware LLC Law, as the
case may be, and Pennsylvania Law and the rules of the NYSE, and except where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not have a Viacom Material Adverse
Effect or would not prevent or materially delay the consummation of the Merger;
provided, however, that for purposes of this Section 4.05(b), the definition of
Viacom Material Adverse Effect shall be read so as not to include clause (iii)
of the definition thereof.
Section 4.06. Permits and Licenses; Contracts. (a) Each of Viacom and its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders necessary for Viacom or any of its subsidiaries to own,
lease and operate the properties of Viacom and its subsidiaries or to carry on
their business as it is now being conducted and contemplated to be conducted
(the "Viacom Permits"), and no suspension or cancellation of any of the Viacom
Permits is pending or, to the knowledge of Viacom, threatened, except where the
failure to have, or the suspension or cancellation of, any of the Viacom
Permits would not have a Viacom Material Adverse Effect. None of Viacom or any
of its subsidiaries is in conflict with, or in default or violation of (i) any
Laws applicable to Viacom or any of its subsidiaries or by which any property
or asset of Viacom or any of its subsidiaries is bound or affected, (ii) any of
the Viacom Permits, or (iii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Viacom or any of its subsidiaries is a party or by which Viacom or any
of its subsidiaries or any property or asset of Viacom or any of its
subsidiaries is bound or affected, except for any such conflicts, defaults or
violations that would not have a Viacom Material Adverse Effect.
(b) Except as would not have a Viacom Material Adverse Effect, and to the
knowledge of Viacom, except as would not have a material adverse effect on the
Surviving Corporation following the Effective Time, none of Viacom or any of
its subsidiaries is a party to any contracts or agreements that limits the
ability of Viacom or any of its subsidiaries to compete in any line of business
or with any person or engage in any business in any geographic area, in each
case except for competition in businesses that neither CBS nor Viacom are
currently engaged in or will reasonably foreseeably engage in.
(c) Viacom and its subsidiaries have operated the radio and television
stations and associated facilities for which Viacom or any of its subsidiaries
holds licenses from the FCC, in each case which are owned or operated by Viacom
and its subsidiaries (the "Viacom Licensed Facilities"), in material compliance
with the terms of the Viacom Permits issued by the FCC to Viacom and its
subsidiaries ("Viacom FCC Licenses"), and in material compliance with the
Communications Act, and Viacom and its subsidiaries have timely filed or
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made all applications, reports and other disclosures required by the FCC to be
filed or made with respect to the Viacom Licensed Facilities and have timely
paid all FCC regulatory fees with respect thereto, in each case except as would
not have a Viacom Material Adverse Effect. As of the date hereof, to Viacom's
knowledge, there is not now pending or threatened before the FCC any material
investigation, proceeding, notice of violation, order of forfeiture or
complaint against Viacom or any of its subsidiaries, relating to any of the
Viacom Licensed Facilities or FCC regulated services conducted by CBS that, if
adversely decided, would have a Viacom Material Adverse Effect.
Section 4.07. SEC Filings; Financial Statements. (a) Viacom and Blockbuster
have filed all forms, reports and documents required to be filed by it with the
SEC from December 31, 1996 to the date of this Agreement, including: (i) Annual
Reports on Form 10-K, (ii) Quarterly Reports on Form 10-Q and (iii) proxy
statements relating to Viacom's and Blockbuster's meetings of stockholders
(whether annual or special) (the forms, reports and other documents referred to
in clauses (i), (ii), (iii) and all other forms, reports and other registration
statements filed by Viacom or Blockbuster with the SEC as of the date of this
Agreement, including all amendments and supplements thereto filed with the SEC
as of the date of this Agreement, above being referred to herein, collectively,
as the "Viacom SEC Reports"). The Viacom SEC Reports, as well as all forms,
reports and documents to be filed by Viacom or Blockbuster with the SEC after
the date hereof and prior to the Effective Time, (i) were or will be prepared
in accordance with the requirements of the Securities Act, and the Exchange
Act, as the case may be, and the rules and regulations thereunder, (ii) did not
at the time they were filed, or will not at the time they are filed, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading, and (iii) did not at the time they were filed, or will not at the
time they are filed, omit any documents required to be filed as exhibits
thereto. No Viacom subsidiary, except Blockbuster, is subject to the periodic
reporting requirements of the Exchange Act.
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the Viacom SEC Reports and each of the financial
statements to be filed by Viacom or Blockbuster with the SEC after the date
hereof and prior to the Effective Time was or will be prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as may be indicated
in the notes thereto) and each fairly presented in all material respects or
will fairly present in all material respects the consolidated financial
position, results of operations and cash flows of Viacom and its subsidiaries
as at the respective dates thereof and for the respective periods indicated
therein in accordance with United States generally accepted accounting
principles (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments which were not and are not expected to be
material).
(c) Except as and to the extent set forth in the Viacom SEC Reports, Viacom
and its subsidiaries do not have any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise) other than liabilities and
obligations which, individually or in the aggregate, would not have a Viacom
Material Adverse Effect.
(d) Viacom has heretofore furnished to CBS complete and correct copies of
all material amendments and modifications that have not been filed by Viacom or
Blockbuster with the SEC to all agreements, documents and other instruments
that previously had been filed by Viacom or Blockbuster with the SEC and are
currently in effect.
Section 4.08. Absence of Certain Changes or Events. (a) Since December 31,
1998, except as disclosed in any Viacom SEC Report or as contemplated by this
Agreement, there has not been any change, event or circumstance which, when
taken individually or together with all other changes, events or circumstances,
has had or would have a Viacom Material Adverse Effect, and (b) since December
31, 1998 to the date of this Agreement, except as disclosed in any Viacom SEC
Reports (i) each of Viacom and its subsidiaries has conducted its businesses
only in the ordinary course and in a manner consistent with past practice and
(ii) there has not been (A) any material change by Viacom or any of its
subsidiaries in its material accounting policies, practices and procedures, (B)
any entry by Viacom or any of its subsidiaries into any
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commitment or transaction material to Viacom and its subsidiaries taken as a
whole other than in the ordinary course of business consistent with past
practice, (C) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Viacom or any of its
subsidiaries (other than cash dividends payable by any wholly owned subsidiary
to another subsidiary or Viacom), or (D) any increase in the compensation
payable or to become payable to any corporate officers or heads of divisions of
Viacom or any of its subsidiaries, except in the ordinary course of business
consistent with past practice.
Section 4.09. Absence of Litigation. Except as disclosed in any Viacom SEC
Report, there is no claim, action, proceeding or investigation pending or, to
the knowledge of Viacom, threatened against Viacom or any of its subsidiaries,
or any property or asset of Viacom or any of its subsidiaries, before any
court, arbitrator or Governmental Authority, in each case except as would not
have a Viacom Material Adverse Effect. As of the date of this Agreement, none
of Viacom, any of its subsidiaries nor any property or asset of Viacom or any
of its subsidiaries is subject to any order, writ, judgment, injunction,
decree, determination or award imposed by any court, arbitration or
Governmental Authority, in each case except as would not have a Viacom Material
Adverse Effect.
Section 4.10. Employee Benefit Plans. (a) With respect to each employee
benefit plan, program, arrangement and contract (including, without limitation,
any "employee benefit plan", as defined in Section 3(3) of ERISA), maintained
or contributed to by Viacom or any of its subsidiaries, or with respect to
which Viacom or any of its subsidiaries could incur liability under Section
4069 of ERISA, other than multiemployer plans within the meaning of Section
3(37) of ERISA (the "Viacom Benefit Plans"), Viacom will provide to CBS within
15 days of this Agreement a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) such Viacom Benefit Plan, (iii)
each trust agreement relating to such Viacom Benefit Plan, (iv) the most recent
summary plan description for each Viacom Benefit Plan for which a summary plan
description is required, (v) the most recent actuarial report or valuation
relating to a Viacom Benefit Plan subject to Title IV of ERISA, if any, and
(vi) the most recent determination letter, if any, issued by the IRS with
respect to any Viacom Benefit Plan qualified under Section 401(a) of the Code.
Viacom will promptly following the date of this Agreement request a copy of
each Viacom Benefit Plan that is a multiemployer plan within the meaning of
Section 3(37) of ERISA from the trustees of such multiemployer plan and Viacom
shall deliver such copy of the plan to CBS promptly upon its receipt thereof.
(b) Each Viacom Benefit Plan has been administered in accordance with its
terms, and in compliance with applicable laws, except as would not have a
Viacom Material Adverse Effect. Viacom and its subsidiaries have performed all
obligations required to be performed by them under, are not in any respect in
default under or in violation of, and have no knowledge of any default or
violation by any party to, any Viacom Benefit Plans, except as would not have a
Viacom Material Adverse Effect. With respect to the Viacom Benefit Plans, no
event has occurred and, to the knowledge of Viacom, there exists no condition
or set of circumstances, in connection with which Viacom or any of its
subsidiaries is reasonably likely to be subject to any liability under the
terms of such Viacom Benefit Plans, ERISA, the Code or any other applicable Law
except as would not have a Viacom Material Adverse Effect. Neither Viacom nor
any of its subsidiaries has any actual or contingent liability under Title IV
of ERISA (other than the payment of premiums to the Pension Benefit Guaranty
Corporation) except as would not have a Viacom Material Adverse Effect. Neither
Viacom nor any of its subsidiaries has any actual or contingent liability under
Title IV of ERISA (other than the payment of premiums to the Pension Benefit
Guaranty Corporation), including, without limitation, any liability in
connection with (i) the termination or reorganization of any employee benefit
plan subject to Title IV of ERISA or (ii) the withdrawal from any multiemployer
plan or multiple employer plan, and no fact or event exists which is reasonably
likely to give rise to any such liability, except as would not, individually or
in the aggregate, have a Viacom Material Adverse Effect.
(c) Viacom has made available to CBS (i) copies of all employment agreements
with the top five most highly compensated executive officers of Viacom or any
of its subsidiaries; (ii) copies of all material severance agreements, programs
and policies of Viacom or any of its subsidiaries with or relating to its or
its subsidiaries' employees; and (iii) copies of all material plans, programs,
agreements and other arrangements of Viacom or
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any of its subsidiaries with or relating to its or its subsidiaries' employees
which contain change in control provisions. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation, severance,
unemployment compensation, "golden parachute" or otherwise) becoming due to any
director, officer or employee of Viacom or any of its subsidiaries from Viacom
or any of its affiliates under any Viacom Benefit Plan or otherwise, which
payment is material in relation to the compensation previously provided to such
individual (other than payments resulting from a change in responsibilities or
reporting obligations of individual employees), (ii) materially increase any
benefits otherwise payable under any Viacom Benefit Plan, which increase is
material in relation to the benefits previously provided or (iii) result in any
acceleration of the time of payment or vesting of any material benefits.
(d) Each Viacom Benefit Plan that is intended to be qualified under Section
401(a) of the Code or Section 401(k) of the Code has timely received a
favorable determination letter from the IRS covering all of the provisions
applicable to the Plan for which determination letters are currently available
that the Viacom Benefit Plan is so qualified and each trust established in
connection with any Viacom Benefit Plan which is intended to be exempt from
federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that it is so exempt, and no fact or event
has occurred since the date of such determination letter or letters from the
IRS which is reasonably likely to adversely affect the qualified status of any
such Viacom Benefit Plan or the exempt status of any such trust.
Section 4.11. Labor Matters. There is no labor dispute, strike or work
stoppage against Viacom or any of its subsidiaries pending or, to the knowledge
of Viacom, threatened which would reasonably be expected to interfere with the
respective business activities of Viacom or any of its subsidiaries, except for
such disputes, strikes or work stoppages which would not have a Viacom Material
Adverse Effect. There is no charge or complaint against Viacom or any of its
subsidiaries by the National Labor Relations Board or any comparable state
agency pending or threatened in writing, except for such charges or complaints
(or related unfair labor practices) which would not have a Viacom Material
Adverse Effect.
Section 4.12. Environmental Matters. Except as would not, individually or in
the aggregate, have a Viacom Material Adverse Effect:
(a) Viacom and its subsidiaries (i) are in compliance with all, and are
not subject to any asserted liability or, to Viacom's knowledge, any
liability (including liability with respect to current or former
subsidiaries or operations), in each case with respect to any,
Environmental Laws (as defined below), (ii) hold or have applied for all
Environmental Permits (as defined below) and (iii) are in compliance with
their respective Environmental Permits;
(b) neither Viacom nor any Viacom subsidiary has received any written
notice, demand, letter, claim or request for information alleging that
Viacom or any of its subsidiaries is or may be in violation of, or liable
under, any Environmental Law;
(c) neither Viacom nor any of its subsidiaries (i) has entered into or
agreed to any consent decree or order or is subject to any judgment, decree
or judicial order relating to compliance with Environmental Laws,
Environmental Permits or the investigation, sampling, monitoring,
treatment, remediation, removal or cleanup of Hazardous Materials (as
defined below) and, to the knowledge of Viacom, no investigation,
litigation or other proceeding is pending or threatened in writing with
respect thereto, or (ii) is an indemnitor in connection with any threatened
or asserted claim by any third-party indemnitee for any liability under any
Environmental Law or relating to any Hazardous Materials; and
(d) none of the real property owned or leased by Viacom or any of its
subsidiaries is listed or, to the knowledge of Viacom, proposed for listing
on the "National Priorities List" under CERCLA, as updated through the date
hereof, or any similar state or foreign list of sites requiring
investigation or cleanup.
Section 4.13. Trademarks, Patents and Copyrights. Except as would not have a
Viacom Material Adverse Effect, Viacom and its subsidiaries own, or possess
adequate licenses or other valid rights to use, all
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material patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, copyrights, service marks, service mark rights, trade
secrets, applications to register, and registrations for, the foregoing
trademarks, service marks, know-how and other proprietary rights and
information used in connection with the business of Viacom and its subsidiaries
as currently conducted, and no assertion or claim has been made in writing
challenging the validity of any of the foregoing which would have a Viacom
Material Adverse Effect. To the knowledge of Viacom, the conduct of the
business of Viacom and its subsidiaries as currently conducted does not
conflict in any way with any patent, patent right, license, trademark,
trademark right, trade name, trade name right, service mark or copyright of any
third party, except for such conflicts which would not have a Viacom Material
Adverse Effect.
Section 4.14. Taxes. Except as would not have a Viacom Material Adverse
Effect, (a) each of Viacom and each of its subsidiaries has timely filed all
federal, state, local and foreign tax returns and reports (including
extensions) required to be filed by it and has paid and discharged all Taxes
shown as due thereon and has paid all of such other Taxes as are due, other
than such payments as are being contested in good faith by appropriate
proceedings, (b) neither the IRS nor any other taxing authority or agency,
domestic or foreign, is now asserting or, to the knowledge of Viacom after due
inquiry, threatening to assert against Viacom or any of its subsidiaries any
deficiency or claim for Taxes, (c) no waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any Tax has
been granted by Viacom or any of its subsidiaries, (d) the accruals and
reserves for Taxes reflected in the Viacom balance sheet included in its Annual
Report on Form 10-K for fiscal year 1998 and the most recent quarterly
financial statements are adequate to cover all Taxes accruable through the date
thereof in accordance with United States generally accepted accounting
principles, (e) no election under Section 341(f) of the Code has been made by
Viacom or any of its subsidiaries, (f) Viacom and each of its subsidiaries has
withheld or collected and paid over to the appropriate governmental authorities
or is properly holding for such payment all Taxes required by law to be
withheld or collected, (g) there are no liens for Taxes upon the assets of
Viacom or any of its subsidiaries, other than liens for Taxes that are being
contested in good faith by appropriate proceedings and (h) Viacom has not
constituted a "distributing corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code in the two years prior to the date of
this Agreement.
Section 4.15. Tax Matters. None of Viacom or any of its affiliates has taken
or agreed to take any action that would prevent the Merger from constituting a
transaction qualifying under Section 368(a) of the Code. None of Viacom or any
of its affiliates or agents is aware of any agreement, plan or other
circumstance that would prevent the Parent Merger, or, if the Tax Event occurs,
the LLC Merger from qualifying under Section 368(a) of the Code, that could
prevent them from providing representations required in Sections 7.02(c) or
7.03(c), or that could prevent the opinions described in such Sections from
being given and to the knowledge of Viacom, the Parent Merger, or, if the Tax
Event occurs, the LLC Merger will so qualify.
Section 4.16. Year 2000 Compliance. (a) Viacom has adopted a plan that it
believes will cause Viacom Systems (as defined below) to be Viacom Year 2000
Compliant (as defined below) (such plan, as it may be amended, modified or
supplemented from time to time being, the "Viacom Year 2000 Plan") in all
material respects. Viacom has taken, and between the date of this Agreement and
the Effective Time will continue to take, all reasonable steps to implement the
Viacom Year 2000 Plan with respect to the Viacom Systems. Notwithstanding
anything in this Section 4.16 to the contrary, Viacom does not represent or
warrant that Viacom Systems (or any other operations, systems, equipment or
software of Viacom or its subsidiaries or any of their respective affiliates)
are or will be Viacom Year 2000 Compliant at or prior to the Effective Time,
regardless of whether the Viacom Year 2000 Plan has or has not been implemented
or complied with.
(b) For purposes of this Section 4.16, (i) "Viacom Systems" shall mean all
computer, hardware, software, systems, and equipment (including embedded
microcontrollers in non-computer equipment) embedded within or required to
operate the current products of Viacom and its subsidiaries, and/or material to
or necessary for Viacom and its subsidiaries to carry on their respective
businesses as currently conducted; and (ii) "Viacom Year 2000 Compliant" means
that Viacom Systems will (A) manage, accept, process, store and output data
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involving dates reasonably expected to be encountered in the foreseeable future
and (B) accurately process date data from, into and between the 20th and 21st
centuries and each date during the years 1999 and 2000.
Section 4.17. Opinion of Financial Advisors. Viacom has received the written
opinion of Morgan Stanley Dean Witter & Co. (the "Viacom Financial Advisor") on
or prior to the date of this Agreement, to the effect that, as of the date of
such opinion, the Exchange Ratio is fair to the stockholders of Viacom, from a
financial point of view, and Viacom will deliver a copy of such opinion to CBS
promptly after the date of this Agreement.
Section 4.18. Vote Required. The affirmative vote of the holders of a
majority of the outstanding Viacom Class A Common Stock is the only vote of the
holders of any class or series of capital stock of Viacom necessary to approve
the transactions contemplated by this Agreement.
Section 4.19. Section 203 of Delaware Corporation Law. The Board of
Directors of Viacom has approved this Agreement and such Viacom approval is
sufficient to render inapplicable to this Agreement, the Parent Voting
Agreements and the transactions contemplated hereby and thereby the provisions
of Section 203 of Delaware Corporation Law.
Section 4.20. Brokers. No broker, finder or investment banker (other than
the Viacom Financial Advisor) is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger based upon arrangements made by
or on behalf of Viacom.
Section 4.21. Operations of Viacom/CBS LLC. All of the issued and
outstanding membership interest in Viacom/CBS LLC is owned by Viacom.
Viacom/CBS LLC was formed under Delaware LLC Law on November 4, 1999 solely for
the purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only
as contemplated by this Agreement. No election has been made to classify
Viacom/CBS LLC as a corporation for United States Federal income tax purposes
pursuant to Treas. Reg. Section 301.7701-3.
ARTICLE V
Conduct of Business Pending the Merger
Section 5.01. Conduct of Business by CBS Pending the Merger. CBS covenants
and agrees that, between the date of this Agreement and the Effective Time,
except (w) as contemplated by this Agreement or as set forth in Section 5.01 of
the CBS Disclosure Schedule, (x) as Viacom shall otherwise agree in advance in
writing, which agreement shall not be unreasonably withheld or delayed, (y) for
actions taken in connection with the consummation of the acquisitions of King
World, Outdoor Systems, Inc. and of the subsidiaries of Gaylord that own KTVT,
Dallas, Texas (the "Pending Transactions") on substantially the same terms that
have heretofore been agreed between such parties or on such other terms and
conditions which would not be reasonably likely to have an impact that is both
material and detrimental to CBS and its subsidiaries, taken as a whole, unless
Viacom shall have consented thereto, such consent not to be unreasonably
withheld or delayed, provided that CBS may not amend or otherwise modify the
terms of the CBS Series B Preferred Stock to be received by Gaylord pursuant to
the Gaylord Agreement, without the written consent of Viacom, and (z) for the
exercise of options, warrants and similar securities which would otherwise
expire prior to the Effective Time, or the exercise of any put rights, call
rights, rights of first refusal and other similar rights, in each case under
agreements in existence on the date of this Agreement and otherwise in
accordance with the terms of this Agreement, the business of CBS and its
subsidiaries shall be conducted only in, and CBS and its subsidiaries shall not
take any action except in, the ordinary course of business and in a manner
consistent with past practice; and CBS and its subsidiaries shall use their
reasonable best efforts to preserve substantially intact CBS's business
organization, to keep available the services of the current officers, employees
and consultants of CBS and its subsidiaries (provided that the foregoing
covenant to use reasonable best efforts shall not require CBS to offer
retention bonuses to such individuals) and to preserve the current
relationships of CBS and its
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subsidiaries with customers, distributors, dealers, suppliers and other persons
with which CBS and its subsidiaries have significant business relations. By way
of amplification and not limitation, between the date of this Agreement and the
Effective Time, CBS will not do, and will not permit any of its subsidiaries to
do, directly or indirectly, any of the following except in compliance with the
exceptions listed above:
(a) amend or otherwise change the Articles of Incorporation or By-laws
of CBS or any CBS subsidiary other than Infinity if such amendment or
change would have a CBS Material Adverse Effect;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any
shares of its or its subsidiaries' capital stock, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
its or its subsidiaries' capital stock or any other ownership interest
(including any phantom interest), of CBS or any of its subsidiaries (except
(A) for the issuance of Shares issuable pursuant to CBS Options or shares
of Infinity common stock pursuant to Infinity stock options outstanding on
the date hereof, (B) for the issuance of options, and other stock grants of
CBS or Shares which (other than as permitted under any severance
arrangement established by CBS in accordance with Section 6.16 hereof or
with respect to 1,200,000 options to be issued to two senior executives of
King World upon its acquisition by CBS) do not provide for accelerated
vesting in connection with the Merger and the other transactions
contemplated by this Agreement, (x) to purchase a maximum of 5,000,000
Shares, (y) to purchase a maximum of 17,200,000 Shares as set forth in
Section 5.01 of the CBS Disclosure Schedule and (z) to purchase a maximum
of 12,500,000 shares of Infinity common stock as set forth in Section 5.01
of the CBS Disclosure Schedule, in each case in the ordinary course of
business consistent with past practice and allocated to persons who are
officers, employees, directors, independent contractors and production
company writers and talent of CBS or Infinity, as applicable, or any of
their respective subsidiaries (including past practice of any such
subsidiary before its acquisition by CBS) and (C) the issuance of shares of
CBS and Infinity stock in connection with the Pending Transactions
(including the issuance of shares of CBS Series B Preferred Stock and the
issuance of shares of CBS Common Stock upon conversion of CBS Series B
Preferred Stock in accordance with its terms and the terms and conditions
of the Gaylord Agreement and other agreements and documents executed in
connection therewith), or (ii) any assets material to CBS and its
subsidiaries, taken as a whole, except for sales in the ordinary course of
business and in a manner consistent with past practice;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
or its subsidiaries' capital stock other than cash dividends payable by any
wholly owned CBS subsidiary to another CBS subsidiary or CBS and other than
dividends made or paid by Infinity, so long as the aggregate amount of such
dividends paid by Infinity shall not exceed $500,000,000;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its or its subsidiaries'
capital stock;
(e) (i) except in connection with the Pending Transactions and in
connection with acquisitions which individually do not exceed $200,000,000
and in the aggregate do not exceed $1,000,000,000 (A) acquire (including by
merger, consolidation, or acquisition of stock or assets), or otherwise
make any investment in, any corporation, partnership, limited liability
company, other business organization or any division thereof, or any
material amount of assets; or (B) incur any indebtedness for borrowed
money, issue any debt securities, assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of
any person, agree to amend or otherwise modify in any manner any agreement
or instrument pursuant to which CBS has incurred indebtedness, or make any
loans or advances, except in the ordinary course of business and consistent
with past practice, except the refinancing of existing indebtedness,
borrowings under commercial paper programs in the ordinary course of
business or borrowings under existing bank lines of credit in the ordinary
course of business, (ii) enter into any material contract, agreement or
transaction, other than (X) in the ordinary course of business, and (Y)
which would not be reasonably likely to prevent or materially delay the
consummation of the Merger,
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(iii) authorize any capital expenditures which are, in the aggregate, in
excess of the amounts currently budgeted for the fiscal year 1999
(including the applicable 1999 capital expenditures of the companies
subject to the Pending Transactions) and, with respect to fiscal year 2000,
10% in excess of such amount, in each case for CBS and its subsidiaries
taken as a whole or (iv) enter into or amend any contract, agreement,
commitment or arrangement which would require CBS to take any action
prohibited by this subsection (e) and will, or will cause Infinity to, not
amend in any material respect, or waive any material right or condition
under or relating to the definitive agreements relating to the Pending
Transactions, in each case except for any such amendment or waiver the
impact of which would not be reasonably likely to be both material and
detrimental to CBS and its subsidiaries, taken as a whole;
(f) except as permitted by Section 6.16 of this Agreement, (i) increase
the compensation payable or to become payable to its executive officers or
employees, except as required by Law or by the terms of any collective
bargaining agreement or other agreement currently in effect between CBS or
any subsidiary of CBS and any executive officer or employee thereof and
except for increases in the ordinary course of business in accordance with
past practices, (ii) grant any severance or termination pay to, or enter
into, extend or amend any employment or severance agreement with, any
director or executive officer of CBS or any of its subsidiaries, except
that CBS and any CBS subsidiary shall be permitted to grant any severance
or termination pay and to enter into, extend or amend any employment or
severance agreement in the ordinary course of business in accordance with
past practice with any current or new employee of CBS or any CBS
subsidiary, other than any director or executive officer of CBS, so long as
the amount of any retention bonus that is provided for in any such
agreement shall be applied toward the limitations on retention bonuses
applicable to CBS pursuant to Section 6.16 of this Agreement or (iii)
except as otherwise permitted by this Section 5.01(f), 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;
(g) change in any material respect (except as required by the SEC or
changes in United States generally accepted accounting principles which
become effective after the date of this Agreement) any accounting policies,
practices or procedures;
(h) make any tax election that, individually or in the aggregate, would
have a CBS Material Adverse Effect or settle or compromise any material Tax
liability; or
(i) enter into any contract, agreement, lease, license, permit,
franchise or other instrument or obligation which if in existence and known
to CBS prior to the date of this Agreement would have resulted in a breach
of Section 3.05, except to the extent the conflict, violation, breach,
default or occurrence of the type referred to therein giving rise to such
breach would not have a CBS Material Adverse Effect;
provided that Infinity shall not be prohibited from taking any action under
this Section 5.01 which the Board of Directors of Infinity determines is
required to be taken in the exercise of the Board's fiduciary duties to the
stockholders of Infinity (other than CBS).
Section 5.02. Conduct of Business by Viacom Pending the Merger. Viacom
covenants and agrees that, between the date of this Agreement and the Effective
Time, except (w) as contemplated by this Agreement or as set forth in Schedule
5.02 of the Viacom Disclosure Schedule, (x) as CBS shall otherwise agree in
advance in writing, which agreement shall not be unreasonably withheld or
delayed, (y) for the exercise of options, warrants and similar securities which
would otherwise expire prior to the Effective Time, or the exercise of any put
rights, call rights, rights of first refusal and other similar rights, in each
case under agreements in existence on the date of this Agreement and otherwise
in accordance with the terms of this Agreement and (z) an exchange offer of
Blockbuster shares owned by Viacom for shares of Viacom Class B Common Stock
owned by the stockholders of Viacom (the "Split-off") in accordance with the
procedures set forth in Section 5.02 of
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the Viacom Disclosure Schedule, the business of Viacom and its subsidiaries
shall be conducted only in, and Viacom and its subsidiaries shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice; and Viacom and its subsidiaries shall use their reasonable
best efforts to preserve substantially intact Viacom's business organization,
to keep available the services of the current officers, employees and
consultants of Viacom and its subsidiaries (provided that the foregoing
covenant to use reasonable best efforts shall not require Viacom to offer
retention bonuses to such individuals) and to preserve the current
relationships of Viacom and its subsidiaries with customers, distributors,
suppliers and other persons with which Viacom and its subsidiaries have
significant business relations. By way of amplification and not limitation,
between the date of this Agreement and the Effective Time, Viacom will not do,
and will not permit any of its subsidiaries to do, directly or indirectly, any
of the following, except in compliance with the exceptions listed above:
(a) amend or otherwise change the Certificate of Incorporation or By-
laws of Viacom or Blockbuster or any other Viacom subsidiary or the
Certificate of Formation or Limited Liability Company Agreement of
Viacom/CBS LLC, if such amendment or change would have a Viacom Material
Adverse Effect;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any
shares of its or its subsidiaries' capital stock, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
its or its subsidiaries' capital stock or any other ownership interest
(including any phantom interest), of Viacom or any of its subsidiaries
(except (A) for the issuance of Shares issuable pursuant to Viacom Options
outstanding on the date hereof and (B) for the issuance of options, which
do not provide for accelerated vesting or other consequences in connection
with the Merger and the other transactions contemplated by this Agreement,
to purchase a maximum of 6,000,000 shares of Viacom Class B Common Stock in
the ordinary course of business consistent with past practice and allocated
to persons who are officers, employees, directors, independent contractors
and production company writers and talent of Viacom or any of its
subsidiaries on a basis substantially consistent with past practice), or
(ii) any assets material to Viacom and its subsidiaries, taken as a whole,
except for sales in the ordinary course of business and in a manner
consistent with past practice;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
or its subsidiaries' capital stock other than cash dividends payable by any
wholly owned Viacom subsidiary to another Viacom subsidiary or Viacom,
other than dividends made or paid by Blockbuster, so long as the aggregate
amount of such dividends paid by Blockbuster shall not exceed $50,000,000;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its or its subsidiaries'
capital stock;
(e) (i) except in connection with acquisitions which individually do not
exceed $200,000,000 and in the aggregate do not exceed $1,000,000,000 (A)
acquire (including by merger, consolidation, or acquisition of stock or
assets), or otherwise make any investment in, any corporation, partnership,
limited liability company, other business organization or any division
thereof, or any material amount of assets; or (B) incur any indebtedness
for borrowed money, issue any debt securities, assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, agree to amend or otherwise modify in any manner
any agreement or instrument pursuant to which Viacom has incurred
indebtedness, or make any loans or advances, except in the ordinary course
of business and consistent with past practice, except the refinancing of
existing indebtedness, borrowings under commercial paper programs in the
ordinary course of business or borrowings under existing bank lines of
credit in the ordinary course of business, (ii) enter into any contract,
agreement or transaction, other than (X) in the ordinary course of
business, consistent with past practice and (Y) which would not be
reasonably likely to prevent or materially delay the consummation of the
Merger, (iii) authorize any capital expenditures which are, in the
aggregate, in excess of the amount currently budgeted therefor (and
previously disclosed to CBS) for the fiscal year ending December 31, 1999,
and, with respect to fiscal year December 31, 2000,
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10% in excess of such amount, in each case for Viacom and its subsidiaries
taken as a whole or (iv) enter into or amend any contract, agreement,
commitment or arrangement which would require Viacom to take any action
prohibited by this subsection (e);
(f) except as permitted by Section 6.16 of this Agreement, (i) increase
the compensation payable or to become payable to its executive officers or
employees, except as required by Law or by the terms of any collective
bargaining agreement or other agreement currently in effect between Viacom
or any subsidiary of Viacom and any executive officer or employee thereof
and except for increases in the ordinary course of business in accordance
with past practices, (ii) grant any severance or termination pay to, or
enter into, extend or amend any employment or severance agreement with, any
director or executive officer of Viacom or any of its subsidiaries, except
that Viacom and any Viacom subsidiary shall be permitted to grant any
severance or termination pay and to enter into, extend or amend any
employment or severance agreement in the ordinary course of business in
accordance with past practice with any current or new employee of Viacom or
any Viacom subsidiary, other than any director or executive officer of
Viacom, so long as the amount of any retention bonus that is provided for
in any such agreement shall be applied toward the limitations on retention
bonuses applicable to Viacom pursuant to Section 6.16 of this Agreement or
(iii) except as otherwise permitted pursuant to this Section 5.02(f),
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;
(g) change in any material respect (except as required by the SEC or
changes in United States generally accepted accounting principles which
become effective after the date of this Agreement) any accounting policies,
practices or procedures;
(h) make any tax election that, individually or in the aggregate, would
have a Viacom Material Adverse Effect or settle or compromise any material
Tax liability; or
(i) enter into any contract, agreement, lease, license, permit,
franchise or other instrument or obligation which if in existence and known
to Viacom prior to the date of this Agreement would have resulted in a
breach of Section 4.05, except to the extent the conflict, violation,
breach, default or occurrence of the type referred to therein giving rise
to such breach would not have a Viacom Material Adverse Effect;
provided that Blockbuster shall not be prohibited from taking any action under
this Section 5.02 which the Board of Directors of Blockbuster determines is
required to be taken in the exercise of the Board's fiduciary duties to the
stockholders of Blockbuster (other than Viacom).
Section 5.03. Other Actions. Except as required by Law, CBS, Viacom and
Viacom/CBS LLC shall not, and shall not permit any of their respective
subsidiaries to, take any action that would, or that is reasonably likely to,
result in any of the conditions to the Merger set forth in Article VII not
being satisfied.
ARTICLE VI
Additional Agreements
Section 6.01. Registration Statement; Joint Proxy Statement. (a) As promptly
as practicable after the date of this Agreement, (i) Viacom and CBS shall
cooperate in preparing and each shall cause to be filed with the SEC a joint
proxy statement (together with any amendments thereof or supplements thereto,
the "Proxy Statement") relating to the meetings of Viacom's and CBS's
stockholders to be held to consider approval and adoption of this Agreement and
the other Viacom Proposals and (ii) Viacom shall prepare and file with the SEC
a registration statement on Form S-4 (together with all amendments thereto, the
"RegistrationStatement'') in which the Proxy Statement shall be included as a
prospectus, in connection with the registration
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under the Securities Act of the shares of Viacom Class B Common Stock
(including such shares of Viacom Class B Common Stock into which the Viacom
Series C Preferred Stock is convertible) and the shares of Viacom Series C
Preferred Stock to be issued to the shareholders of CBS pursuant to the Merger.
Each of Viacom and CBS shall use its reasonable best efforts to cause the
Registration Statement to become effective as promptly as practicable, and,
prior to the effective date of the Registration Statement, Viacom shall use
reasonable best efforts to take all or any action required under any applicable
federal or state securities Laws in connection with the issuance of shares of
Viacom Class B Common Stock (including such shares of Viacom Class B Common
Stock into which the Viacom Series C Preferred Stock is convertible) and the
shares of Viacom Series C Preferred Stock pursuant to the Merger. Each of
Viacom and CBS shall furnish all information concerning it as may reasonably be
requested by such other party in connection with such actions and the
preparation of the Registration Statement and Proxy Statement. As promptly as
practicable after the Registration Statement shall have become effective, each
of Viacom and CBS shall mail the Proxy Statement to its stockholders and to its
shareholders, respectively. Each of Viacom and CBS shall also promptly file,
use reasonable best efforts to cause to become effective as promptly as
practicable and, if required, mail to its stockholders and shareholders,
respectively, any amendment to the Registration Statement or Proxy Statement
which may become necessary after the date the Registration Statement is
declared effective.
(b) (i) The Proxy Statement shall include the recommendation of the Board of
Directors of Viacom to the stockholders of Viacom in favor of approval of the
Viacom Proposals; provided, however, that the Board of Directors of Viacom may
take or disclose to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or make any disclosure required under
applicable Law and may, prior to the date of its Stockholders' Meeting,
withdraw, modify, or change any such recommendation to the extent that the
Board of Directors of Viacom determines in good faith that such withdrawal,
modification or change is required in order to comply with its fiduciary duties
to Viacom's stockholders under applicable Law after receiving advice from
independent legal counsel (who may be Viacom's regularly engaged outside legal
counsel).
(ii) The Proxy Statement shall include the recommendation of the Board of
Directors of CBS to the shareholders of CBS in favor of adoption of this
Agreement; provided, however, that the Board of Directors of CBS may take or
disclose to its shareholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or make any disclosure required under
applicable Law and may, prior to the date of its Stockholders' Meeting,
withdraw, modify, or change any such recommendation to the extent that the
Board of Directors of CBS determines in good faith that such withdrawal,
modification or change is required in order to comply with its fiduciary duties
under applicable Law after receiving advice from independent legal counsel (who
may be CBS's regularly engaged outside legal counsel).
(c) Notwithstanding any withdrawal, modification or change in any approval
or recommendation of the Board of Directors of CBS or Viacom, as the case may
be, each of CBS and Viacom agree to hold their respective Stockholders' Meeting
in accordance with the time period specified in Section 6.02.
(d) No amendment or supplement to the Proxy Statement or the Registration
Statement will be made by Viacom or CBS without the approval of such other
party, which shall not be unreasonably withheld or delayed. Each of Viacom and
CBS will advise the other, promptly after it receives notice thereof, of the
time when the Registration Statement has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of the Viacom Class B Common Stock or the Viacom Series C
Preferred Stock issuable in connection with the Merger for offering or sale in
any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement or the Registration Statement or comments thereon and responses
thereto or requests by the SEC for additional information.
(e) The information supplied by CBS for inclusion in the Registration
Statement and the Proxy Statement (including by incorporation by reference)
shall not, at (i) the time the Registration Statement is declared effective,
(ii) the time the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to the stockholders and shareholders of Viacom and
CBS, respectively, (iii) the time of each of the Stockholders'
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Meetings (as hereinafter defined), and (iv) the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading. If at any time prior to the Effective Time any event or
circumstance relating to CBS or any of its subsidiaries, or their respective
officers or directors, should be discovered by CBS which, pursuant to the
Securities Act or Exchange Act, should be set forth in an amendment or a
supplement to the Registration Statement or Proxy Statement, CBS shall promptly
inform Viacom. All documents that CBS is responsible for filing with the SEC in
connection with the Merger will comply as to form in all material respects with
the applicable requirements of the Securities Act and the Exchange Act.
(f) The information supplied by Viacom for inclusion in the Registration
Statement and the Proxy Statement (including by incorporation by reference)
shall not, at (i) the time the Registration Statement is declared effective,
(ii) the time the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to the stockholders of Viacom and the shareholders of
CBS, (iii) the time of each of the Stockholders' Meetings, and (iv) the
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading. If at any time prior to the
Effective Time any event or circumstance relating to Viacom or any of its
subsidiaries, or their respective officers or directors, should be discovered
by Viacom which, pursuant to the Securities Act or Exchange Act, should be set
forth in an amendment or a supplement to the Registration Statement or Proxy
Statement, Viacom shall promptly inform CBS. All documents that Viacom is
responsible for filing with the SEC in connection with the Merger will comply
as to form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act.
(g) Viacom and CBS each hereby (i) consents to the use of its name and, on
behalf of its subsidiaries and affiliates, the names of such subsidiaries and
affiliates and to the inclusion of financial statements and business
information relating to such party and its subsidiaries and affiliates (in each
case, to the extent required by applicable securities laws) in any registration
statement or proxy statement prepared by Viacom, CBS or any person or entity
with which Viacom or CBS, consistent with their obligations under this
Agreement, has entered into, or may prior to the Effective Time enter into, a
definitive acquisition agreement, (ii) agrees to use its reasonable best
efforts to obtain the written consent of any person or entity retained by it
which may be required to be named (as an expert or otherwise) in such
registration statement or proxy statement; provided that such party shall not
be required to make any material payment to such person or entity in connection
with such party's efforts to obtain any such consent, and (iii) agrees to
cooperate, and agrees to use its reasonable best efforts to cause its
subsidiaries and affiliates to cooperate, with any legal counsel, investment
banker, accountant or other agent or representative retained by any of the
parties specified in clause (i) in connection with the preparation of any and
all information required, as determined after consultation with each party's
counsel, to be disclosed by applicable securities laws in any such registration
statement or proxy statement.
(h) CBS and Viacom will use their best efforts to complete the pro forma
financial statements with respect to the Merger, in a form suitable for filing
in connection with a registration statement under the Securities Act, as soon
as possible, and in any event within 10 days after the execution of this
Agreement.
(i) CBS shall consult with Viacom, and provide Viacom reasonable opportunity
to review and comment on, and CBS and Viacom will use their respective
reasonable best efforts to agree on, CBS's and Infinity's accounting for the
Pending Transactions.
Section 6.02. Stockholders' Meetings. (a) Each of Viacom and CBS shall call
and hold a meeting of its stockholders or shareholders, respectively
(collectively, the "Stockholders' Meetings"), as promptly as practicable for
the purpose of voting upon, in the case of Viacom, the Viacom Proposals, and,
in the case of CBS, the adoption of this Agreement, and CBS and Viacom shall
hold the Stockholders' Meeting as soon as practicable after the date on which
the Registration Statement becomes effective and will use reasonable best
efforts to hold the Stockholders' Meetings on the same day. Each of Viacom and
CBS shall use its reasonable best efforts to solicit from its stockholders
proxies in favor of the adoption of this Agreement, in the case of CBS, and the
Viacom Proposals, in the case of Viacom, and shall take all other action
necessary or advisable to
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secure the vote of its stockholders and shareholders, respectively, required by
the NYSE, Pennsylvania Law or Delaware Corporation Law or Delaware LLC Law, as
the case may be, in each case as applicable, to obtain such approvals;
provided, however, that Viacom or CBS, as applicable, shall not be obligated to
solicit proxies in favor of the adoption of this Agreement, in the case of CBS,
or in favor of the Viacom Proposals, in the case of Viacom, at its
Stockholders' Meeting to the extent that the Board of Directors of Viacom or
CBS, as applicable, determines in good faith that such failure to solicit
proxies is required in order to comply with its fiduciary duties under
applicable Law after receiving advice to such effect from independent legal
counsel (who may be such party's regularly engaged outside legal counsel);
provided further, however, that notwithstanding anything to the contrary in the
foregoing, each of CBS and Viacom shall hold its Stockholders' Meeting in
accordance with the time periods specified in the first sentence of this
Section 6.02.
(b) Notwithstanding anything in this Agreement to the contrary, Viacom shall
be permitted, upon receipt of approval from the NYSE, to obtain shareholder
approval for the Viacom Proposals by written consent in lieu of holding a
Stockholders' Meeting. In the event Viacom elects to obtain shareholder
approval by written consent, (1) each reference in this Agreement to a vote of
stockholders at Viacom's Stockholders' Meeting or the holding thereof shall
mean and be a reference to obtaining the written consent of Viacom's
stockholders, (2) each reference to the date of the Viacom Stockholders'
Meeting shall mean and be a reference to the end of the period during which
consents are solicited from the Viacom stockholders and (3) each reference to
the solicitation of proxies from Viacom's stockholders shall mean and be a
reference to the solicitation of written consents therefrom.
Section 6.03. Appropriate Action; Consents; Filings. (a) Each of the parties
hereto shall (i) make promptly its respective filings, and thereafter make any
other required submissions under the HSR Act with respect to the transactions
contemplated herein and (ii) make promptly filings with or applications to the
FCC with respect to the transactions contemplated herein. The parties hereto
will use their respective best efforts, and will take all actions necessary, to
consummate and make effective the transactions contemplated herein and to cause
the conditions to the Merger set forth in Article VII to be satisfied
(including using best efforts, and taking all actions necessary, to obtain all
licenses, permits, consents, approvals, authorizations, waivers, qualifications
and orders of Governmental Authorities as are necessary for the consummation of
the transactions contemplated herein), and will do so in a manner designed to
obtain such regulatory clearance and the satisfaction of such conditions as
expeditiously as possible.
(b) CBS and Viacom each agree to take promptly any and all steps necessary
to avoid or eliminate each and every impediment and obtain all consents or
waivers under any antitrust, competition or communications or broadcast Law
that may be asserted by any U.S. federal, state and local and non-United States
antitrust or competition authority, or by the FCC or similar authority, so as
to enable the parties to close the transactions contemplated by this Agreement
as expeditiously as possible, including committing to or effecting, by consent
decree, hold separate orders, trust, or otherwise, the sale or disposition of
such of its assets or businesses as are required to be divested in order to
obtain the consent of the FCC to or avoid the entry of, or to effect the
dissolution of, any decree, order, judgment, injunction, temporary restraining
order or other order in any suit or proceeding, that would otherwise have the
effect of preventing or materially delaying the consummation of the Merger and
the other transactions contemplated by this Agreement. In addition, each of CBS
and Viacom agree to take promptly any and all steps necessary to obtain any
consent or to vacate or lift any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority (each, an "Order") relating to antitrust or communications or
broadcast matters that would have the effect of making any of the transactions
contemplated by this Agreement illegal or otherwise prohibiting or materially
delaying their consummation. The parties will expeditiously agree on a complete
plan for compliance with applicable FCC ownership requirements for inclusion in
the FCC filings and will expeditiously make such filings (including such agreed
plan) with the FCC following the date of this Agreement.
(c) Each of Viacom and CBS shall give (or shall cause its respective
subsidiaries to give) any notices to third parties, and Viacom and CBS shall
use, and cause each of its subsidiaries to use, its reasonable best efforts to
obtain any third party consents, necessary, proper or advisable to consummate
the Merger. Each of the
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parties hereto will furnish to the other such necessary information and
reasonable assistance as the other may request in connection with the
preparation of any required governmental filings or submissions and will
cooperate in responding to any inquiry from a Governmental Authority, including
immediately informing the other parties of such inquiry, consulting in advance
before making any presentations or submissions to a Governmental Authority, and
supplying each other with copies of all material correspondence, filings or
communications between any party and any Governmental Authority with respect to
this Agreement.
Section 6.04. Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, to the extent permitted by applicable Law and
contracts, Viacom will provide to CBS (and its officers, directors, employees,
accountants, consultants, legal counsel, agents and other representatives,
collectively, "Representatives") access to all information and documents which
CBS may reasonably request regarding the business, assets, liabilities,
employees and other aspects of Viacom.
(b) From the date hereof to the Effective Time, to the extent permitted by
applicable Law and contracts, CBS will provide to Viacom and its
Representatives access to all information and documents which Viacom may
reasonably request regarding the business, assets, liabilities, employees and
other aspects of CBS.
(c) The parties shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Confidentiality Agreement dated August 27, 1999 (the "Confidentiality
Agreement") between CBS and Viacom.
(d) No investigation pursuant to this Section 6.04 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
Section 6.05. No Solicitation of Competing Transactions. (a) CBS shall not,
directly or indirectly, through any officer, director, agent or otherwise,
initiate, solicit or knowingly encourage (including by way of furnishing non-
public information), or take any other action knowingly to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Competing Transaction (as defined below), or enter
into or maintain or continue discussions or negotiate with any person or entity
in furtherance of such inquiries or to obtain a Competing Transaction, or agree
to or endorse any Competing Transaction, or authorize any of the officers,
directors or employees of CBS or any investment banker, financial advisor,
attorney, accountant or other agent or representative of CBS to take any such
action, and CBS shall notify Viacom as promptly as practicable of all of the
relevant material details relating to all inquiries and proposals which CBS or
any such officer, director, employee, investment banker, financial advisor,
attorney, accountant or other agent or representative may receive relating to
any of such matters, provided, however, that prior to the adoption of this
Agreement by the shareholders of CBS, nothing contained in this Section 6.05
shall prohibit the Board of Directors of CBS from (i) furnishing information
to, or entering into and engaging in discussions or negotiations with, any
person that makes a bona fide unsolicited written proposal that the Board of
Directors of CBS determines in good faith, after consultation with CBS's
financial advisors and independent legal counsel, can be reasonably expected to
result in a CBS Superior Proposal; provided that prior to furnishing such
information to, or entering into discussions or negotiations with, such person,
CBS (1) provides notice to Viacom to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such person
and provides in any such notice to Viacom in reasonable detail the identity of
the person making such proposal and the material terms and conditions of such
proposal, (2) provides Viacom with all information regarding CBS provided or to
be provided to such person which Viacom has not previously been provided, and
provided further that CBS shall keep Viacom informed, on a prompt basis, of the
status and material terms of any such proposal and the status of any such
discussions and negotiations and (3) receives from such person or entity an
executed confidentiality agreement containing customary terms (which need not
contain "standstill" or similar provisions), (ii) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer or
making any disclosure required under applicable Law or (iii) failing to make or
withdrawing or modifying its recommendation referred to in Section 6.01
following the making of a CBS Superior Proposal if, solely in the case of this
clause (iii), the Board of
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Directors of CBS, after consultation with and based upon the advice of
independent legal counsel, determines in good faith that such action is
necessary for the Board of Directors of CBS to comply with its fiduciary duties
under applicable law.
(b) For purposes of this Agreement, "Competing Transaction" shall mean any
of the following involving CBS: (i) any merger, consolidation, share exchange,
business combination, issuance or purchase of securities or other similar
transaction other than transactions specifically permitted pursuant to Section
5.01 of this Agreement; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of the assets of CBS in a single transaction or
series of related transactions; (iii) any tender offer or exchange offer for
CBS securities or the filing of a registration statement under the Securities
Act in connection with any such exchange offer; in the case of clause (i), (ii)
or (iii) above, which transaction would result in a third party (or its
shareholders) acquiring more than 35% of the voting power of the Shares then
outstanding or more than 35% of the assets of CBS and its subsidiaries, taken
as a whole; or (iv) any public announcement of an agreement, proposal, plan or
intention to do any of the foregoing, either during the effectiveness of this
Agreement or at any time thereafter.
(c) For purposes of this Agreement, a "CBS Superior Proposal" means any
proposal made by a third party which would result in such party (or in the case
of a parent-to-parent merger, its stockholders) acquiring, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, share exchange, business combination, share purchase, asset
purchase, recapitalization, liquidation, dissolution, joint venture or similar
transaction, more than 50% of the voting power of the Shares then outstanding
or all or substantially all the assets of CBS and its subsidiaries, taken as a
whole, for consideration which the Board of Directors of CBS determines in its
good faith judgment to be more favorable to CBS's shareholders than the Merger.
Section 6.06. Directors' and Officers' Indemnification and Insurance. (a)
The Certificate of Incorporation and By-Laws of the Surviving Corporation shall
contain the provisions with respect to indemnification set forth in the
Certificate of Incorporation and By-laws of Viacom on the date of this
Agreement, which provisions shall not be amended, repealed or otherwise
modified after the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at any time prior to the Effective Time
were directors or officers of CBS in respect of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), unless such modification is
required by law.
(b) The Surviving Corporation shall maintain in effect for six years from
the Effective Time directors' and officers' liability insurance covering those
persons who are currently covered by CBS's directors' and officers' liability
insurance policy on terms comparable to such existing insurance coverage;
provided, however, that in no event shall the Surviving Corporation be required
to expend pursuant to this Section 6.06 more than an amount per year equal to
300% of current annual premiums paid by CBS for such insurance; and provided
further that if the annual premiums exceed such amount, Viacom shall be
obligated to obtain a policy with the greatest coverage available for an annual
cost not exceeding such amount.
(c) This Section 6.06 shall survive the consummation of the Merger, is
intended to benefit each indemnified party, shall be binding, jointly and
severally, on all successors and assigns of the Surviving Corporation, and
shall be enforceable by the indemnified parties and their successors.
Section 6.07. Notification of Certain Matters. CBS shall give prompt notice
to Viacom, and Viacom shall give prompt notice to CBS, of (i) the occurrence,
or nonoccurrence, of any event the occurrence, or nonoccurrence, of which would
be likely to cause (x) any representation or warranty contained in this
Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(ii) any failure of CBS or Viacom, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.07 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
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Section 6.08. Tax Treatment. (a) The Agreement is intended to constitute a
"plan of reorganization" within the meaning of Section 1.368-2(g) of the income
tax regulations promulgated under the Code.
(b) Between the date of this Agreement and the Effective Time, neither CBS
nor Viacom nor their affiliates shall directly or indirectly take any action
that could prevent the Merger from qualifying as a reorganization under Section
368(a) of the Code, that could prevent each of them from providing
representations required from them in Sections 7.02(c) or 7.03(c), or that
could prevent the opinions described in such Sections from being provided. Each
of them shall use all reasonable efforts to cause the opinions described in
such Sections to be provided, and to cause similar opinions to be provided at
the date of filing of the Registration Statement.
(c) None of CBS, Viacom or Viacom/CBS LLC shall (without the consent of the
others) take any action, except as specifically contemplated by this Agreement,
that could adversely affect the intended tax treatment of the Pending
Transactions.
Section 6.09. Stock Exchange Listing. Viacom shall as promptly as reasonably
practicable prepare and submit to NYSE a listing application covering the
shares of Viacom Class B Common Stock to be issued in the Merger, the shares of
Viacom Class B Common Stock underlying the CBS Options outstanding immediately
prior to the Effective Time and the shares of Viacom Class B Common Stock
issuable upon conversion of the Viacom Series C Preferred Stock and shall use
its best efforts to cause such shares to be approved for listing on the NYSE
prior to the Effective Time.
Section 6.10. Public Announcements. Viacom and CBS shall consult with each
other before issuing any press release or otherwise making any public
statements with respect to this Agreement and shall not issue any such press
release or make any such public statement without the prior consent of the
other (which consent shall not be unreasonably withheld or delayed), except as
may be required by Law or any listing agreement with the NYSE to which Viacom
or CBS is a party. The parties have agreed on the text of a joint press release
by which Viacom and CBS will announce the execution of this Agreement.
Section 6.11. Viacom's Directors. The Board of Directors of Viacom shall
take all such action as may be necessary to cause the number of directors on
the Board of Directors of Viacom to be increased to eighteen as of the
Effective Time and to cause to be appointed to the Board of Directors of Viacom
as of the Effective Time eight designees of CBS, one of whom shall be Mel
Karmazin (unless Mel Karmazin shall no longer be available to serve in such
capacity) and the other seven of whom shall consist of CBS directors designated
in writing by CBS to Viacom prior to the Effective Time as set forth in Exhibit
A-1 hereto.
Section 6.12. Rights Agreement. The Board of Directors of CBS shall take
such action as is necessary to render the Rights inapplicable to the Merger and
the other transactions contemplated by this Agreement.
Section 6.13. Assumption of Debt and Leases. (a) With respect to debt issued
by CBS under indentures qualified under the Trust Indenture Act of 1939, and
any other debt of CBS the terms of which require the Surviving Corporation to
assume such debt in order to avoid default thereunder (collectively, the "CBS
Indentures"), the Surviving Corporation shall execute and deliver to the
trustees or other representatives in accordance with the terms of the
respective CBS Indentures, Supplemental Indentures, in form satisfactory to the
respective trustees or other representatives, expressly assuming the
obligations of CBS with respect to the due and punctual payment of the
principal of (and premium, if any) and interest, if any, on all debt securities
issued by CBS under the respective Indentures and the due and punctual
performance of all the terms, covenants and conditions of the respective CBS
Indentures to be kept or performed by CBS and shall deliver such Supplemental
Indentures to the respective trustees or other representatives under the CBS
Indentures.
(b) The Surviving Corporation shall, promptly upon the reasonable request of
CBS, provide CBS with a letter which states that it agrees that, as the
Surviving Corporation in the Merger, as of and following the Effective Time, it
will succeed to, honor, and satisfy all obligations and liabilities of CBS.
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Section 6.14. Affiliates of CBS. CBS represents and warrants to Viacom that
prior to the date of the CBS Stockholders' Meeting CBS will deliver to Viacom a
letter identifying all persons who may be deemed affiliates of CBS under Rule
145 of the Securities Act, including, without limitation, all directors and
executive officers of CBS, and CBS represents and warrants to Viacom that CBS
has advised the persons identified in such letter of the resale restrictions
imposed by applicable securities laws. CBS shall use its reasonable best
efforts to obtain from each person identified in such letter a written
agreement, substantially in the form of Exhibit 6.14. CBS shall use its
reasonable best efforts to obtain as soon as practicable from any person who
may be deemed to have become an affiliate of CBS after CBS's delivery of the
letter referred to above and prior to the Effective Time, a written agreement
substantially in the form of Exhibit 6.14.
Section 6.15. Prior Service. With respect to any medical and dental benefits
provided to Continuing Employees as of or following the Effective Time under
Viacom's benefit plans, Viacom agrees that it will waive waiting periods and
pre-existing condition requirements under such plans (to the extent waived
under CBS's plans), and will give Continuing Employees credit for any co-
payments and deductibles actually paid by such employees under CBS's medical
and dental plans during the calendar year in which the Effective Time occurs.
In addition, service with CBS shall be recognized for all purposes under
Viacom's compensation and benefit plans, programs, policies and arrangements,
except where crediting such service would result in a duplication of benefits.
Without limiting the generality of the foregoing, Viacom shall honor all
vacation, personal and sick days accrued by Continuing Employees under CBS's
plans, policies, programs and arrangements immediately prior to the Effective
Time.
Section 6.16. Employee Matters. (a) Viacom may establish retention and
severance arrangements for its and its subsidiaries' officers or employees
consistent with the terms and conditions set forth in Section 6.16 of the
Viacom Disclosure Schedule (the "Viacom Employee Arrangements").
(b) CBS may establish retention and severance and other compensation
arrangements for its and its subsidiaries' officers or employees; provided that
the aggregate amount expended pursuant to such arrangements does not materially
exceed the estimated value of the Viacom Employee Arrangements.
(c) Each of CBS and Viacom shall consult with the other on the design and
implementation of the retention arrangements described in this Section 6.16 and
the allocations of the payments thereunder.
Section 6.17. Gaylord. CBS shall, if permitted under the terms of the
Gaylord Proxy, exercise its rights under the Gaylord Proxy to vote the shares
of CBS Series B Preferred Stock held by Gaylord in favor of adoption of this
Agreement at the CBS Stockholders' Meeting, or any adjournment or postponement
thereof, and shall not waive or transfer to any person its rights under the
Gaylord Proxy.
Section 6.18. Gaylord Tax Matters. CBS covenants and agrees that, between
October 8, 1999 and the Effective Time, CBS shall not, without Viacom's
consent, take any action or permit any action to be taken that would cause
Viacom to be in violation of any provision of the First Amendment to the
Amended and Restated Tax Matters Agreement (as referred to in the Gaylord
Agreement), at the time such amendment is executed in the form attached as
Annex A to the Amended and Restated Tax Matters Agreement.
Section 6.19. Obligations of Viacom/CBS LLC. Viacom shall take all necessary
actions to cause Viacom/CBS LLC to perform its obligations under this Agreement
and to consummate the Merger on the terms and subject to the conditions set
forth in this Agreement.
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ARTICLE VII
Conditions to the Merger
Section 7.01. Conditions to the Obligations of Each Party. The obligations
of CBS, Viacom and Viacom/CBS LLC to consummate the Merger are subject to the
satisfaction or waiver of the following conditions:
(a) (i) this Agreement shall have been adopted by the affirmative vote
of a majority of the votes cast by all shareholders entitled to vote at the
CBS Stockholders' Meeting in accordance with Pennsylvania Law and CBS's
Articles of Incorporation and (ii) the applicable Viacom Proposals shall
have been approved by the affirmative vote of the holders of a majority of
the Viacom Class A Common Stock;
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated;
(c) no Governmental Authority or court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any Law, rule,
regulation, executive order or Order which is then in effect and has the
effect of making the Merger illegal or otherwise prohibiting consummation
of the Merger;
(d) the Registration Statement shall have been declared effective, and
no stop order suspending the effectiveness of the Registration Statement
shall be in effect and no proceedings for such purpose shall be pending
before or threatened by the SEC;
(e) (i) all authorizations, consents, waivers, orders or approvals for
the Merger required to be obtained and all conditions precedent to such
authorizations, consents, waivers, orders or approvals shall have been
satisfied, and all filings, notices or declarations required to be made, by
Viacom and CBS prior to the consummation of the Merger and the transactions
contemplated hereunder, shall have been obtained from, and made with, the
FCC and competition and antitrust Governmental Authorities in Canada and
either the European Union or the United Kingdom, as applicable, and (ii)
all other authorizations, consents, waivers, orders or approvals for the
Merger required to be obtained, and all other filings, notices or
declarations required to be made, by Viacom and CBS prior to the
consummation of the Merger and the transactions contemplated hereunder,
shall have been obtained from, and made with, all required Governmental
Entities, except for such authorizations, consents, waivers, orders,
approvals, filings, notices or declarations the failure to obtain or make
which would not have a material adverse effect, at or after the Effective
Time, on the business, results of operations or financial condition of CBS
and its subsidiaries and Viacom and its subsidiaries, collectively taken as
a whole; and
(f) the shares of Viacom Class B Common Stock issuable to CBS's
shareholders in the Merger, to holders of CBS Options outstanding
immediately prior to the Effective Time and upon conversion of the Viacom
Series C Preferred Stock shall have been authorized for listing on the
NYSE, subject to official notice of issuance.
Section 7.02. Conditions to the Obligations of Viacom and Viacom/CBS
LLC. The obligations of Viacom and Viacom/CBS LLC to consummate the Merger are
subject to the satisfaction or waiver of the following further conditions:
(a) each of the representations and warranties of CBS contained in this
Agreement shall be true and correct as of the Effective Time as though made
on and as of the Effective Time (except to the extent expressly made as of
an earlier date, in which case as of such date), except where the failure
to be so true and correct would not have, individually or in the aggregate,
a CBS Material Adverse Effect, and Viacom shall have received a certificate
of an officer of CBS to such effect;
(b) CBS shall have performed or complied in all material respects with
all material agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time, and
Viacom shall have received a certificate of an officer of CBS to that
effect; and
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(c) Viacom shall have received the opinion of Paul, Weiss, Rifkind,
Wharton & Garrison, in form and substance reasonably satisfactory to
Viacom, to the effect that the Merger will be treated for federal income
tax purposes as a reorganization qualifying under the provisions of Section
368(a) of the Code, and Viacom and CBS will each be a party to the
reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinion, counsel may require and rely upon representations
contained in certificates of officers of CBS, Viacom and Viacom/CBS LLC, as
the case may be.
Section 7.03. Conditions to the Obligations of CBS. The obligations of CBS
to consummate the Merger are subject to the satisfaction or waiver of the
following further conditions:
(a) each of the representations and warranties of Viacom contained in
this Agreement shall be true and correct as of the Effective Time as though
made on and as of the Effective Time (except to the extent expressly made
as of an earlier date, in which case as of such date), except where failure
to be so true and correct would not have, individually or in the aggregate,
a Viacom Material Adverse Effect, and CBS shall have received a certificate
of an officer of Viacom to such effect;
(b) Viacom and Viacom/CBS LLC shall have performed or complied in all
material respects with all material agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, and CBS shall have received a certificate of an officer of
Viacom to that effect; and
(c) CBS shall have received the opinion of Cravath, Swaine & Moore, in
form and substance reasonably satisfactory to CBS, to the effect that the
Merger will be treated for federal income tax purposes as a reorganization
qualifying under the provisions of Section 368(a) of the Code, and Viacom
and CBS will each be a party to such reorganization within the meaning of
Section 368(b) of the Code. In rendering such opinion, counsel may require
and rely upon representations contained in certificates of officers of
Viacom, CBS and Viacom/CBS LLC, as the case may be.
ARTICLE VIII
Termination, Amendment and Waiver
Section 8.01. Termination . This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of this Agreement, as follows:
(a) by mutual written consent duly authorized by the Boards of Directors
of each of Viacom and CBS;
(b) by either Viacom or CBS, if the Effective Time shall not have
occurred on or before August 31, 2000; provided, however, that the right to
terminate this Agreement under this Section 8.01(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Effective Time to
occur by such time;
(c) by CBS upon delivery to Viacom of written notice that a Competing
Proposal constitutes a CBS Superior Proposal; provided, however, that such
termination pursuant to this subsection (c) shall not be effective until
two business days have elapsed following delivery to Viacom of such written
notice (which written notice will inform Viacom of the material terms and
conditions of the CBS Superior Proposal); provided further, however, that
such termination under this subsection (c) shall not be effective until CBS
has made payment to Viacom of the amounts required to be paid pursuant to
Section 8.05;
(d) by either CBS or Viacom, if this Agreement shall fail to receive the
requisite vote for adoption at the CBS Stockholders' Meeting;
(e) by CBS, upon a breach of any representation, warranty, covenant or
agreement on the part of Viacom or Viacom/CBS LLC set forth in this
Agreement, or if any representation or warranty of Viacom
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shall have become untrue, in either case such that the conditions set forth
in Sections 7.03(a) or (b) are not capable of being satisfied on or before
August 31, 2000 (a "Terminating Viacom Breach");
(f) by Viacom, upon breach of any representation, warranty, covenant or
agreement on the part of CBS set forth in this Agreement, or if any
representation or warranty of CBS shall have become untrue, in either case
such that the conditions set forth in Sections 7.02(a) or (b) are not
capable of being satisfied on or before August 31, 2000 ("Terminating CBS
Breach"); or
(g) by either Viacom or CBS, if any Governmental Authority shall have
issued an Order or taken any other action permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such Order or other action shall have become final and
nonappealable.
Section 8.02. Effect of Termination. Subject to Section 8.05 hereof, in the
event of termination of this Agreement pursuant to Section 8.01, this Agreement
shall forthwith become void, there shall be no liability under this Agreement
on the part of Viacom, CBS, Viacom/CBS LLC or any of their respective officers
or directors and all rights and obligations of each party hereto shall cease;
provided, however, that nothing herein shall relieve any party from liability
for the willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
Section 8.03. Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after the approval
and adoption of this Agreement by either the stockholders of Viacom or
shareholders of CBS, there shall not be any amendment that by Law requires
further approval by the stockholders of Viacom or shareholders of CBS without
the further approval of such stockholders or such shareholders. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
Section 8.04. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto
and (c) subject to the proviso of Section 8.03, waive compliance with any
agreement or condition contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties
to be bound thereby.
Section 8.05. Expenses. (a) Except as set forth in this Section 8.05, all
Expenses (as defined below) incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the party
incurring such expenses, whether or not the Merger or any other transaction is
consummated, except that CBS and Viacom each shall pay one-half of all Expenses
relating to (i) printing, filing and mailing the Registration Statement and the
Proxy Statement and all SEC and other regulatory filing fees incurred in
connection with the Registration Statement and the Proxy Statement, (ii) any
filing with the FCC or similar authority and (iii) any filing with antitrust
authorities. "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Registration Statement and the Proxy Statement, the solicitation of
stockholder and shareholder approvals, the filing of any required notices under
the HSR Act or other similar regulations and all other matters related to the
closing of the Merger and the other transactions contemplated by this
Agreement.
(b) CBS agrees that:
(i) if CBS shall terminate this Agreement pursuant to Section 8.01(c);
or
(ii) if (A) Viacom or CBS shall terminate this Agreement pursuant to
Section 8.01(d) due to the failure of CBS's shareholders to approve this
Agreement, (B) at or prior to the time of such failure to so approve this
Agreement a Competing Transaction with respect to CBS shall have been made
public and
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(C) within twelve months after such termination (i) a Competing Transaction
is consummated or (ii) a binding agreement to enter into a Competing
Transaction is entered into by CBS (solely for purposes of this Section
8.05(b)(ii), the term "Competing Transaction" shall have the meaning
assigned to such term in Section 6.05(b) except that references to "35%" in
the definition of "Competing Transaction" in Section 6.05(b) shall be
deemed to be references to 50%),
then CBS shall pay to Viacom an amount equal to $1,000,000,000 (the "CBS
Alternative Transaction Fee").
(c) Each of CBS and Viacom agrees that the agreements contained in Section
8.05(b) are an integral part of the transactions contemplated by this
Agreement.
(d) All payments to Viacom under this Section 8.05 shall be made by wire
transfer of immediately available funds to an account designated by Viacom.
ARTICLE IX
General Provisions
Section 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
and any certificate delivered pursuant hereto by any person shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to
Section 8.01, as the case may be, except that this Section 9.01 shall not limit
any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time or after termination of this Agreement.
Section 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by facsimile, by courier service or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.02):
if to Viacom or Viacom/CBS LLC:
Viacom Inc.
1515 Broadway
New York, New York 10036
Telecopier: (212) 258-6099
Attention: Michael D. Fricklas, Senior Vice President,
General Counsel and Secretary
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier No.: (212) 848-7179
Attention: Creighton O'M. Condon, Esq. and
Stephen R. Volk, Esq.
if to CBS:
CBS Corporation
51 West 52nd Street
35th Floor
New York, New York 10019
Telecopier No.: (212) 597-4031
Attention: Louis J. Briskman, Esq.
Executive Vice President and
General Counsel
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with copies to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Telecopier No.: (212) 474-3700
Attention: Allen Finkelson, Esq. and
Scott A. Barshay, Esq.
Section 9.03. Interpretation, Certain Definitions. When a reference is made
in this Agreement to an Article, Section or Exhibit, such reference shall be to
an Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings for this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. Any
statute defined or referred to herein or in any agreement or instrument that is
referred to herein means such statute as from time to time amended, modified or
supplemented, including (in the case of statutes) by succession of comparable
successor statutes. References to a person are also to its permitted successors
and assigns.
For purposes of this Agreement, the term:
(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;
(b) "beneficial owner" with respect to any shares means a person who
shall be deemed to be the beneficial owner of such shares (i) which such
person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates or any person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any such
shares;
(c) "business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "Governmental Authority" means any United States (federal, state or
local) or foreign government, or governmental, regulatory or administrative
authority, agency or commission;
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(f) "knowledge" means the actual knowledge of the following officers and
employees of CBS and Viacom, without benefit of an independent
investigation of any matter, as to (i) CBS: Mel Karmazin, Leslie Moonves,
Louis Briskman and Robert Freedline, and (ii) Viacom: Sumner Redstone,
Philippe Dauman, Thomas Dooley, Michael Fricklas, George Smith and Susan
Gordon;
(g) "person" means an individual, corporation, limited liability
company, partnership, limited partnership, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the
Exchange Act), trust, association or entity or government, political
subdivision, agency or instrumentality of a government; and
(h) "subsidiary" or "subsidiaries" of any person means any corporation,
partnership, joint venture or other legal entity of which such person
(either above or through or together with any other subsidiary), owns,
directly or indirectly, more than 50% of the stock or other equity
interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity.
Section 9.04. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the Merger be consummated as originally contemplated to the fullest extent
possible.
Section 9.05. Entire Agreement; Assignment. This Agreement (including the
Exhibits, the CBS Disclosure Schedule and the Viacom Disclosure Schedule which
are hereby incorporated herein and made a part hereof for all purposes as if
fully set forth herein), the Parent Voting Agreements and the Confidentiality
Agreement constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof. The parties agree to comply with all covenants and
agreements set forth on the CBS Disclosure Schedule and the Viacom Disclosure
Schedule as if such covenants and agreements were fully set forth in this
Agreement. This Agreement shall not be assigned by operation of law or
otherwise.
Section 9.06. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Article II and Section 6.06 (which are intended
to be for the benefit of the persons covered thereby and may be enforced by
such persons).
Section 9.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
Section 9.08. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, except for such
provisions where Pennsylvania Law is mandatorily applicable, which provisions
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
Section 9.09. Consent to Jurisdiction. (a) Each of Viacom, CBS and
Viacom/CBS LLC hereby irrevocably submits to the exclusive jurisdiction of the
courts of the State of Delaware and to the jurisdiction of the United States
District Court for the State of Delaware, for the purpose of any action or
proceeding arising out of or relating to this Agreement and each of Viacom, CBS
and Viacom/CBS LLC hereby irrevocably agrees
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that all claims in respect to such action or proceeding may be heard and
determined exclusively in any Delaware state or federal court. Each of Viacom,
CBS and Viacom/CBS LLC agrees that a final judgment in any action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
(b) Each of Viacom, CBS and Viacom/CBS LLC irrevocably consents to the
service of the summons and complaint and any other process in any other action
or proceeding relating to the transactions contemplated by this Agreement, on
behalf of itself or its property, by personal delivery of copies of such
process to such party. Nothing in this Section 9.09 shall affect the right of
any party to serve legal process in any other manner permitted by law.
Section 9.10. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
Section 9.11. WAIVER OF JURY TRIAL. EACH OF VIACOM, CBS AND VIACOM/CBS LLC
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF VIACOM, CBS OR VIACOM/CBS LLC
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Viacom, CBS and Viacom/CBS LLC have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
VIACOM INC.
By: /s/ Michael D. Fricklas
--------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President,
General Counsel and
Secretary
CBS CORPORATION
By: /s/ Fredric G. Reynolds
--------------------------------
Name: Fredric G. Reynolds
Title: Executive Vice President,
Chief Financial Officer
VIACOM/CBS LLC
By: VIACOM INC., as sole member
By: /s/ Michael D. Fricklas
--------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President,
General Counsel and Secretary
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EXHIBIT 6.14
FORM OF AFFILIATE LETTER
Viacom Inc.
1515 Broadway
New York, New York 10036
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of CBS Corporation, a Pennsylvania corporation (the "Company"),
as the term "affiliate" is defined for purposes of paragraphs (c) and (d) of
Rule 145 of the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). Pursuant to the terms of the Agreement and
Plan of Merger dated as of September 6, 1999, as amended and restated on
October 8, 1999, and as again amended and restated as of November 23, 1999 (the
"Agreement"), between Viacom Inc., a Delaware corporation ("Viacom"), and the
Company, the Company will be merged with and into Viacom (the "Merger").
As a result of the Merger, I may receive (i) shares of Class B common stock,
par value $.01 per share, of Viacom (the "Viacom Class B Common Stock"), (ii)
an option (a "Substituted Option") to purchase a number of shares of Viacom
Class B Common Stock, or (iii) shares of Viacom Series C Preferred Stock, par
value $.01 per share (the "Viacom Series C Preferred Stock," with the Viacom
Class B Common Stock, Substituted Options and the Viacom Series C Preferred
Stock collectively referred to as the "Viacom Securities"). In respect of
shares of Viacom Class B Common Stock, I would receive such shares in exchange
for shares owned by me of common stock, par value $1.00 per share, of the
Company (the "Company Common Stock"). In respect of the Substituted Options, I
would receive such options in exchange for options to purchase Company Common
Stock held by me under the CBS Stock Option Plans (as defined in the
Agreement). In respect of the Viacom Series C Preferred Stock, I would receive
such shares in exchange for shares owned by me of the Company's Series B
Participating Preferred Stock, par value $1.00 per share.
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 action necessary in order to make
compliance with an exemption from such registration available solely as a
result of the Merger.
<PAGE>
E. I also understand that there will be placed on the certificates for
the Viacom Securities issued to me, or any substitutions therefor, a legend
stating in substance:
"THE [SHARES] [OPTIONS] REPRESENTED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE [SHARES] [OPTIONS]
REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED BETWEEN
THE REGISTERED HOLDER HEREOF AND VIACOM, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF VIACOM."
F. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement, Viacom reserves the right to put the following legend on the
certificates issued to my transferee:
"THE [SHARES] [OPTIONS] REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE
ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE [SHARES] [OPTIONS] HAVE BEEN ACQUIRED BY THE HOLDER
NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and F
above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to Viacom a copy of a letter
from the staff of the Commission, or an opinion of counsel reasonably
satisfactory to Viacom in form and substance reasonably satisfactory to Viacom,
to the effect that such legend is not required for purposes of the Act.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter, or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
Name:
Accepted this day of
, , by
Viacom Inc.
By: _________________________________
Name:
Title:
<PAGE>
ANNEX B
RESTATED CERTIFICATE OF INCORPORATION
OF
VIACOM INC.
(Originally incorporated on November 10, 1986 under the name Arsenal
Holdings, Inc.)
ARTICLE I
Name
The name of this Corporation is Viacom Inc.
ARTICLE II
Registered Office and Agent for Service
The registered office of the Corporation in the State of Delaware is
located at 1013 Centre Road, City of Wilmington, County of New Castle. The
name and address of the Corporation's registered agent for service of process
in Delaware is:
Corporation Service Company
1013 Centre Road
Wilmington, Delaware 19805-1297
ARTICLE III
Corporate Purposes
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
the State of Delaware.
ARTICLE IV
Capital Stock
(1) Shares, Classes and Series Authorized.
(a) The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 3,525,000,000 shares. The
classes and the aggregate number of shares of stock of each class which the
Corporation shall have authority to issue are as follows:
(i) 500,000,000 shares of Class A Common Stock, $0.01 par value
("Class A Common Stock").
(ii) 3,000,000,000 shares of Class B Common Stock, $0.01 par value
("Class B Common Stock").
(iii) 25,000,000 shares of Preferred Stock, $0.01 par value
("Preferred Stock").
(b) The number of authorized shares of Class B Common Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote.
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(2) Powers and Rights of the Class A Common Stock and the Class B Common
Stock.
Except as otherwise expressly provided in this Restated Certificate of
Incorporation, all issued and outstanding shares of Class A Common Stock and
Class B Common Stock shall be identical and shall entitle the holders thereof
to the same rights and privileges.
A. Voting Rights and Powers. Except as otherwise provided in this
Restated Certificate of Incorporation or required by law, with respect to
all matters upon which stockholders are entitled to vote, the holders of
the outstanding shares of Class A Common Stock shall vote together with the
holders of any other outstanding shares of capital stock of the Corporation
entitled to vote, without regard to class, and every holder of outstanding
shares of Class A Common Stock shall be entitled to cast thereon one vote
in person or by proxy for each share of Class A Common Stock standing in
his name. The holders of shares of Class A Common Stock shall have the
relevant class voting rights set forth in Article IX. Except as otherwise
required by law, the holders of outstanding shares of Class B Common Stock
shall not be entitled to any votes upon any questions presented to
stockholders of the Corporation, including but not limited to, whether to
increase or decrease (but not below the number of shares then outstanding)
the number of authorized shares of Class B Common Stock.
B. Dividends. Subject to the rights and preferences of the Preferred
Stock set forth in this Article IV and in any resolution or resolutions
providing for the issuance of such stock as set forth in Section (3) of
this Article IV, the holders of Class A Common Stock and Class B Common
Stock shall be entitled to receive ratably such dividends as may from time
to time be declared by the Board of Directors out of funds legally
available therefor.
C. Distribution of Assets Upon Liquidation. In the event the Corporation
shall be liquidated, dissolved or wound up, whether voluntarily or
involuntarily, after there shall have been paid or set aside for the
holders of all shares of the Preferred Stock then outstanding the full
preferential amounts to which they are entitled under Section 5 of this
Article IV or the resolutions, as the case may be, authorizing the issuance
of such Preferred Stock, the net assets of the Corporation remaining
thereafter shall be divided ratably among the holders of Class A Common
Stock and Class B Common Stock.
D. Split, Subdivision or Combination. If the Corporation shall in any
manner split, subdivide or combine the outstanding shares of Class A Common
Stock or Class B Common Stock, the outstanding shares of the other class of
Common Stock shall be proportionally split, subdivided or combined in the
same manner and on the same basis as the outstanding shares of the other
class of Common Stock have been split, subdivided or combined.
E. Conversion. So long as there are 10,000 shares of Class A Common
Stock outstanding, each record holder of shares of Class A Common Stock and
Class B Common Stock may convert any or all of such shares into an equal
number of shares of Class B Common Stock by surrendering the certificates
for such shares, accompanied by payment of documentary, stamp or similar
issue or transfer taxes, if any, along with a written notice by such record
holder to the Corporation stating that such record holder desires to
convert such shares into the same number of shares of Class B Common Stock
and requesting that the Corporation issue all of such Class B Common Stock
to the persons named therein, setting forth the number of shares of Class B
Common Stock to be issued to each such person and the denominations in
which the certificates therefor are to be issued.
(3) Powers and Rights of the Preferred Stock.
Subject to Article XIII of this Restated Certificate of Incorporation, the
Preferred Stock may be issued from time to time in one or more series, with
such distinctive serial designations as may be stated or expressed in the
resolution or resolutions providing for the issue of such stock adopted from
time to time by the Board of Directors; and in such resolution or resolutions
providing for the issuance of shares of each particular series, the Board of
Directors is also expressly authorized to fix: the right to vote, if any; the
consideration for which the shares of such series are to be issued; the number
of shares constituting such series, which number may be
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<PAGE>
increased (except as otherwise fixed by the Board of Directors) or decreased
(but not below the number of shares thereof then outstanding) from time to time
by action of the Board of Directors; the rate of dividends upon which and the
times at which dividends on shares of such series shall be payable and the
preference, if any, which such dividends shall have relative to dividends on
shares of any other class or classes or any other series of stock of the
Corporation; whether such dividends shall be cumulative or noncumulative, and,
if cumulative, the date or dates from which dividends on shares of such series
shall be cumulative; the rights, if any, which the holders of shares of such
series shall have in the event of any voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets, dissolution or winding
up of the affairs of the Corporation; the rights, if any, which the holders of
shares of such series shall have to convert such shares into or exchange such
shares for shares of any other class or classes or any other series of stock of
the Corporation or for any debt securities of the Corporation and the terms and
conditions, including, without limitation, price and rate of exchange, of such
conversion or exchange; whether shares of such series shall be subject to
redemption, and the redemption price or prices and other terms of redemption,
if any, for shares of such series including, without limitation, a redemption
price or prices payable in shares of Class A Common Stock or Class B Common
Stock; the terms and amounts of any sinking fund for the purchase or redemption
of shares of such series; and any and all other powers, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereof pertaining to shares of such series
permitted by law.
(4) Issuance of Class A Common Stock, Class B Common Stock and Preferred
Stock.
Subject to Article XIII of this Restated Certificate of Incorporation, the
Board of Directors of the Corporation may from time to time authorize by
resolution the issuance of any or all shares of Class A Common Stock, Class B
Common Stock and Preferred Stock herein authorized in accordance with the terms
and conditions set forth in this Restated Certificate of Incorporation for such
purposes, in such amounts, to such persons, corporations, or entities, for such
consideration, and in the case of the Preferred Stock, in one or more series,
all as the Board of Directors in its discretion may determine and without any
vote or other action by any of the stockholders of the Corporation, except as
otherwise required by law.
(5) Series C Preferred Stock
(a) Designation and Amount. The shares of this series shall be designated as
"Series C Preferred Stock" (the "Series C Preferred Stock"). The par value of
each share of Series C Preferred Stock shall be $.01. The number of shares
constituting the Series C Preferred Stock shall initially be the Preferred
Exchange Ratio (as defined in the Amended and Restated Agreement and Plan of
Merger dated as of September 6, 1999, as amended and restated as of October 8,
1999, as it may be further amended from time to time, among the Corporation and
CBS (as defined in Article XIII of this Restated Certificate of
Incorporation)(the "Merger Agreement")) multiplied by the number of shares of
CBS Series B Participating Preferred Stock, par value $1.00 per share, issued
and outstanding immediately prior to the Effective Time (as defined in the
Merger Agreement). The Corporation is authorized to issue fractional shares of
Series C Preferred Stock to 1/1000th of a share in accordance with the terms
herein. All references herein to shares of Series C Preferred Stock shall be
deemed to include, if applicable, references to such fractional shares.
(b). Dividends and Distributions.
(1) Subject to the provisions for adjustment hereinafter set forth, the
holders of outstanding shares of Series C Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, a cash dividend in an amount per share
(rounded to the nearest cent) equal to 1000 times the aggregate per share
amount of each cash dividend declared or paid on the Class B Common Stock. In
addition, in the event the Corporation shall, at any time after the issuance of
any share or fraction of a share of Series C Preferred Stock, pay any dividend
or make any distribution on the shares of Class B Common Stock of the
Corporation, whether by way of a dividend or a reclassification of stock, a
recapitalization, reorganization or partial liquidation of the Corporation or
otherwise, which is payable in cash or any debt security, debt instrument, real
or personal property or any other property (other than (x) cash dividends
subject to the immediately preceding sentence, (y) a distribution of shares of
Class B Common Stock
B-3
<PAGE>
or other capital stock of the Corporation subject to paragraph (h)(1) below or
(z) a distribution of rights or warrants to acquire any such shares subject to
paragraph (h)(3) or (h)(5) below, including as such a right any debt security
convertible into or exchangeable for any such shares, at a price less than the
Fair Market Value (as hereinafter defined) of such shares on the date of
issuance of such rights or warrants), then, and in each such event, the
Corporation shall simultaneously pay on each then outstanding share of Series C
Preferred Stock a distribution, in like kind, of 1000 times such distribution
paid on a share of Class B Common Stock (subject to the provisions for
adjustment hereinafter set forth). The dividends and distributions on the
Series C Preferred Stock to which holders thereof are entitled pursuant to the
first and second sentences of this paragraph (b)(1) are hereinafter referred to
as "Dividends" and the multiple of such cash and non-cash dividends and
distributions on the Class B Common Stock applicable to the determination of
the Dividends, which shall be 1000 initially but shall be adjusted from time to
time as hereinafter provided, is hereinafter referred to as the "Dividend
Multiple." In the event the Corporation shall, at any time after the issuance
of any share or fraction of a share of Series C Preferred Stock, declare or pay
any dividend or make any distribution on Class B Common Stock payable in shares
of Class B Common Stock, or effect a subdivision or split or a combination,
consolidation or reverse split of the outstanding shares of Class B Common
Stock into a greater or lesser number of shares of Class B Common Stock, then
in each such case the Dividend Multiple thereafter applicable to the
determination of the amount of Dividends which holders of shares of Series C
Preferred Stock shall be entitled to receive shall be the Dividend Multiple
applicable immediately prior to such event multiplied by a fraction the
numerator of which is the number of shares of Class B Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Class B Common Stock that were outstanding immediately prior to such
event.
(2) The Corporation shall declare each Dividend at the same time it declares
any cash or non-cash dividend or distribution on the Class B Common Stock in
respect of which a Dividend is required to be paid. No cash or non-cash
dividend or distribution on the Class B Common Stock in respect of which a
Dividend is required to be paid shall be paid or set aside for payment on the
Class B Common Stock unless a Dividend in respect of such dividend or
distribution on the Class B Common Stock shall be simultaneously paid, or set
aside for payment, on the Series C Preferred Stock.
(3) All Dividends paid with respect to shares of the Series C Preferred
Stock shall be paid pro rata on a share-by-share basis to the holders entitled
thereto.
(4) The holders of shares of Series C Preferred Stock shall not be entitled
to receive any dividends or distributions except as provided herein.
(c) Voting Rights. The holders of record of outstanding shares of Series C
Preferred Stock shall have the following voting rights:
(1) Subject to the provisions for adjustment hereinafter set forth, each
share of Series C Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the holders of the Common
Stock. The number of votes which a holder of a share of Series C Preferred
Stock is entitled to cast, as the same may be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Vote Multiple." In
the event the Corporation shall, at any time after the issuance of any
share or fraction of a share of Series C Preferred Stock, declare or pay
any dividend on Class A Common Stock, payable in shares of Class A Common
Stock, or effect a subdivision or split or a combination, consolidation or
reverse split of the outstanding shares of Class A Common Stock into a
greater or lesser number of shares of Class A Common Stock, then in each
such case the Vote Multiple thereafter applicable to the determination of
the number of votes per share to which holders of shares of Series C
Preferred Stock shall be entitled after such event shall be the Vote
Multiple applicable immediately prior to such event multiplied by a
fraction the numerator of which is the number of shares of Class A Common
Stock outstanding immediately after such event and the denominator of which
is the number of shares of Class A Common Stock that were outstanding
immediately prior to such event.
B-4
<PAGE>
(2) Except as otherwise provided in this Restated Certificate of
Incorporation or required by law, the holders of shares of Series C
Preferred Stock and the holders of shares of Class A Common Stock shall
vote together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(3) Except as otherwise provided in this Restated Certificate of
Incorporation or required by law, holders of Series C Preferred Stock shall
have no other special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Class A
Common Stock as set forth herein) for the taking of any corporate action.
(d) Conversion. The shares of Series C Preferred Stock shall be convertible
as follows:
(1) Each share of Series C Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of
such share at the office of the Corporation or any transfer agent for the
Series C Preferred Stock. Subject to the provisions for adjustment
hereinafter set forth, each share of Series C Preferred Stock shall be
convertible into 1000 shares of Class B Common Stock. The number of shares
of Class B Common Stock into which each share of Series C Preferred Stock
may be converted is hereinafter referred to as the "Conversion Rate." In
the event the Corporation shall, at any time after the issuance of any
share or fraction of a share of Series C Preferred Stock, declare or pay
any dividend or make any distribution on Class B Common Stock payable in
shares of Class B Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of
Class B Common Stock into a greater or lesser number of shares of Class B
Common Stock, then in each such case the Conversion Rate thereafter
applicable shall be the Conversion Rate applicable immediately prior to
such event multiplied by a fraction the numerator of which is the number of
shares of Class B Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Class B Common Stock
that were outstanding immediately prior to such event.
(2) No fractional shares of Class B Common Stock shall be issued upon
conversion of the Series C Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation
shall pay cash equal to such fraction multiplied by the then Fair Market
Value per share of the Class B Common Stock. For such purpose, all shares
of Series C Preferred Stock being converted by a holder shall be
aggregated, and any resulting fractional share of Class B Common Stock
shall be paid in cash. Before any holder of shares of Series C Preferred
Stock shall be entitled to convert the same into full shares of Class B
Common Stock, and to receive certificates therefor, the holder shall
surrender the certificate or certificates representing the shares of Series
C Preferred Stock, duly endorsed, at the office of the Corporation or of
any transfer agent for the Series C Preferred Stock, and shall give written
notice to the Corporation at such office that such holder elects to convert
the same.
The Corporation shall, as soon as practicable after such delivery, issue
and deliver at such office to such holder of Series C Preferred Stock a
certificate or certificates for the number of shares of Class B Common
Stock to which such holder shall be entitled and a check payable to such
holder in the amount of any cash amount payable as the result of a
conversion into fractional shares of Class B Common Stock, plus any
declared and unpaid dividends on the converted Series C Preferred Stock.
Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of receipt of such surrender of the shares of
Series C Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Class B Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or
holders of such shares of Class B Common Stock on such date.
(3) The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Class B Common Stock, solely for the
purpose of effecting the conversion of the shares of Series C Preferred
Stock, such number of shares of Class B Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of
Series C Preferred Stock.
(4) Any notice required by the provisions of this Section 4 to be given
to the holders of shares of Series C Preferred Stock or to the Corporation
shall be given via facsimile transmission or via certified or registered
U.S. mail or via private overnight delivery service, if to the holder, at
(615) 316-6570 or such
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<PAGE>
holder's address appearing on the books of the Corporation, and if to the
Corporation, at 1515 Broadway, New York, NY 10036, attention General
Counsel, facsimile no.: 212-258-6134, or such other facsimile number or
address as the holder or the Corporation shall notify the other of in
accordance with the notice provisions set forth in this paragraph (d)(5).
Notice shall be deemed to have been given on the date of facsimile
transmission (if the notice is faxed) or five days after mailing (if the
notice is mailed) or the day after the notice is given to the delivery
service (if sent by overnight courier).
(e) Certain Restrictions.
(1) Whenever Dividends are in arrears or the Corporation shall be in
default on payment thereof, thereafter and until all accrued and unpaid
Dividends, whether or not declared, on shares of Series C Preferred Stock
outstanding shall have been paid or set irrevocably aside for payment in
full, and in addition to any and all other rights which any holder of
shares of Series C Preferred Stock may have in such circumstances, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration, any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity as to dividends with the Series
C Preferred Stock, unless dividends are paid ratably on the Series C
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled if the full dividends
accrued thereon were to be paid;
(iii) except as permitted by subparagraph (iv) of this paragraph
(e)(1), redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series C Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for
shares of any stock of the Corporation ranking junior (both as to
dividends and upon liquidation, dissolution or winding up) to the
Series C Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series C Preferred Stock, or any shares of stock ranking on a parity
with the Series C Preferred Stock (either as to dividends or upon
liquidation, dissolution or winding up) except as permitted by
subparagraph (iii) of this paragraph (e)(1) or in accordance with a
purchase offer made to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(2) The Corporation shall not permit any Subsidiary (as hereinafter
defined) of the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the Corporation
could, under subparagraph (1) of this paragraph (e), purchase or otherwise
acquire such shares at such time and in such manner. A "Subsidiary" of the
Corporation shall mean any corporation or other entity of which securities
or other ownership interests entitled to cast at least a majority of the
votes that would be entitled to be cast in an election of the board of
directors of such corporation or other entity or other persons performing
similar functions are beneficially owned, directly or indirectly, by the
Corporation or by any corporation or other entity that is otherwise
controlled by the Corporation.
(3) The Corporation shall not issue any shares of Series C Preferred
Stock except pursuant to the Merger Agreement, a copy of which is on file
with the Secretary of the Corporation at its principal executive offices
and shall be made available to holders of Series C Preferred Stock without
charge upon written request therefor addressed to the Secretary of the
Corporation at the address set forth in paragraph (d)(4) above.
Notwithstanding the foregoing sentence, nothing contained in the provisions
of this Article IV shall prohibit or restrict the Corporation from issuing
for any purpose any series of Preferred Stock with rights and privileges
similar to, different from, or greater than, those of the Series C
Preferred Stock
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<PAGE>
or, subject to the limitations set forth in paragraph (n), from creating
other securities senior to, junior to or on a parity with the Series C
Preferred Stock.
(f) Reacquired Shares. Any shares of Series C Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares upon their
retirement and cancellation shall become authorized but unissued shares of
Preferred Stock, without designation as to series, and such shares may be
redesignated and reissued as part of any series of Preferred Stock.
(g) Liquidation, Dissolution or Winding Up.
(1) Upon any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, no distribution shall be made (i) to the holders of shares
of stock ranking junior (upon liquidation, dissolution or winding up) to the
Series C Preferred Stock unless the holders of shares of Series C Preferred
Stock outstanding shall have received out of the assets of the Corporation
available for distribution to its shareholders after payment or provision for
payment of any securities ranking senior to the Series C Preferred Stock, for
each share of Series C Preferred Stock, subject to adjustment as hereinafter
provided, (A) $.01 plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment or,
(B) if greater than the amount specified in clause (i)(A) of this sentence, an
amount equal to 1000 times the aggregate amount to be distributed per share to
holders of Class B Common Stock, as the same may be adjusted as hereinafter
provided, and (ii) to the holders of stock ranking on a parity upon
liquidation, dissolution or winding up with the Series C Preferred Stock,
unless simultaneously therewith distributions are made ratably on the Series C
Preferred Stock and all other shares of such parity stock in proportion to the
total amounts to which the holders of shares of Series C Preferred Stock are
entitled under clause (i)(A) of this sentence and to which the holders of such
parity shares are entitled, in each case upon such liquidation, dissolution or
winding up. The amount to which holders of Series C Preferred Stock may be
entitled upon liquidation, dissolution or winding up of the Corporation
pursuant to clause (i)(B) of the foregoing sentence is hereinafter referred to
as the "Participation Liquidation Amount" and the multiple of the amount to be
distributed to holders of shares of Class B Common Stock upon the liquidation,
dissolution or winding up of the Corporation applicable pursuant to said clause
to the determination of the Participating Liquidation Amount, as said multiple
may be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Liquidation Multiple". In the event the Corporation shall,
at any time after the issuance of any share or fraction of a share of Series C
Preferred Stock, declare or pay any dividend or make any distribution on Class
B Common Stock payable in shares of Class B Common Stock, or effect a
subdivision or split or a combination, consolidation or reverse split of the
outstanding shares of Class B Common Stock into a greater or lesser number of
shares of Class B Common Stock, then in each such case the Liquidation Multiple
thereafter applicable to the determination of the Participating Liquidation
Amount to which holders of Series C Preferred Stock shall be entitled after
such event shall be the Liquidation Multiple applicable immediately prior to
such event multiplied by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. Except as provided in this
paragraph (g)(1), holders of Series C Preferred Stock shall not be entitled to
any distribution in the event of liquidation, dissolution or winding up of the
Corporation.
(2) For the purposes of this paragraph (g), none of the following shall be
deemed to be a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation:
(i) the voluntary sale, conveyance, lease, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Corporation;
(ii) the consolidation or merger of the Corporation with or into one or
more other corporations or other associations;
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(iii) the consolidation or merger of one or more corporations or other
associations with or into the Corporation; or
(iv) the participation by the Corporation in a share exchange.
(h) Certain Reclassifications and Other Events.
(1) In the event that holders of shares of Class B Common Stock receive,
after the issuance of any share or fraction of a share of Series C Preferred
Stock, in respect of their shares of Class B Common Stock any share of capital
stock of the Corporation (other than any share of Class B Common Stock),
whether by way of reclassification, recapitalization, reorganization, dividend
or other distribution or otherwise (a "Class B Transaction"), then, and in each
such event, the dividend rights, conversion rights and rights upon the
liquidation, dissolution or winding up of the Corporation of the shares of
Series C Preferred Stock shall be adjusted so that after such Transaction the
holders of Series C Preferred Stock shall be entitled, in respect of each share
of Series C Preferred Stock held, in addition to such rights in respect thereof
to which such holder was entitled immediately prior to such adjustment, (i) to
such additional dividends as equal the Dividend Multiple in effect immediately
prior to such Class B Transaction multiplied by the additional dividends which
the holder of a share of Class B Common Stock shall be entitled to receive by
virtue of the receipt in the Class B Transaction of such capital stock, (ii)
upon surrender of shares of Series C Preferred Stock for conversion, to the
aggregate number and kind of shares of capital stock of the Corporation which,
if such shares of Series C Preferred Stock had been converted immediately prior
to such Class B Transaction, such holder would have been entitled to receive by
virtue of such Class B Transaction and (iii) to such additional distributions
upon liquidation, dissolution or winding up of the Corporation as equal the
Liquidation Multiple in effect immediately prior to such Class B Transaction
multiplied by the additional amount which the holder of a share of Class B
Common Stock shall be entitled to receive upon liquidation, dissolution or
winding up of the Corporation by virtue of the receipt in the Class B
Transaction of such capital stock, as the case may be, all as provided by the
terms of such capital stock.
(2) In the event that holders of shares of Class A Common Stock receive,
after the issuance of any share or fraction of a share of Series C Preferred
Stock, in respect of their shares of Class A Common Stock any share of capital
stock of the Corporation (other than any share of Class A Common Stock),
whether by way of reclassification, recapitalization, reorganization, dividend
or other distribution or otherwise (a "Class A Transaction"), then, and in each
such event, the voting rights of the shares of Series C Preferred Stock shall
be adjusted so that after such Class A Transaction the holders of Series C
Preferred Stock shall be entitled, in respect of each share of Series C
Preferred Stock held, in addition to such rights in respect thereof to which
such holder was entitled immediately prior to such adjustment, to such
additional voting rights as equal the Vote Multiple in effect immediately prior
to such Class A Transaction multiplied by the additional voting rights to which
the holder of a share of Class A Common Stock shall be entitled by virtue of
the receipt in the Class A Transaction of such capital stock.
(3) In the event that holders of shares of Class B Common Stock receive,
after the issuance of any share or fraction of a share of Series C Preferred
Stock, in respect of their shares of Class B Common Stock any right or warrant
to purchase Class B Common Stock (including as such a right, for all purposes
of this paragraph (h)(3), any security convertible into or exchangeable for
Class B Common Stock) at a purchase price per share less than the Fair Market
Value of a share of Class B Common Stock on the date of issuance of such right
or warrant, then and in each such event the dividend rights, conversion rights
and rights upon the liquidation, dissolution or winding up of the Corporation
of the shares of Series C Preferred Stock shall each be adjusted so that after
such event the Dividend Multiple, the Conversion Rate and the Liquidation
Multiple shall each be the product of the Dividend Multiple, the Conversion
Rate and the Liquidation Multiple, as the case may be, in effect immediately
prior to such event multiplied by a fraction the numerator of which shall be
the number of shares of Class B Common Stock outstanding immediately before
such issuance of rights or warrants plus the maximum number of shares of Class
B Common Stock which could be acquired upon exercise in full of all such rights
or warrants and the denominator of which shall be the number of shares of Class
B Common Stock
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outstanding immediately before such issuance of rights or warrants plus the
number of shares of Class B Common Stock which could be purchased, at the Fair
Market Value of the Class B Common Stock at the time of such issuance, by the
maximum aggregate consideration payable upon exercise in full of all such
rights or warrants.
(4) In the event that holders of shares of Class A Common Stock receive,
after the issuance of any share or fraction of a share of Series C Preferred
Stock, in respect of their shares of Class A Common Stock any right or warrant
to purchase Class A Common Stock (including as such a right, for all purposes
of this paragraph (h)(4), any security convertible into or exchangeable for
Class A Common Stock) at a purchase price per share less than the Fair Market
Value of a share of Class A Common Stock on the date of issuance of such right
or warrant, then and in each such event the voting rights of the shares of
Series C Preferred Stock shall be adjusted so that after such event the Vote
Multiple shall be the product of the Vote Multiple in effect immediately prior
to such event multiplied by a fraction the numerator of which shall be the
number of shares of Class A Common Stock outstanding immediately before such
issuance of rights or warrants plus the maximum number of shares of Class A
Common Stock which could be acquired upon exercise in full of all such rights
or warrants and the denominator of which shall be the number of shares of Class
A Common Stock outstanding immediately before such issuance of rights or
warrants plus the number of shares of Class A Common Stock which could be
purchased, at the Fair Market Value of the Class A Common Stock at the time of
such issuance, by the maximum aggregate consideration payable upon exercise in
full of all such rights or warrants.
(5) In the event that holders of shares of Class B Common Stock of the
Corporation receive, after the issuance of any share or fraction of a share of
Series C Preferred Stock, in respect of their shares of Class B Common Stock
any right or warrant to purchase capital stock of the Corporation (other than
shares of Class B Common Stock), including as such a right, for all purposes of
this paragraph (h)(5), any security convertible into or exchangeable for
capital stock of the Corporation (other than Class B Common Stock) at a
purchase price per share less than the Fair Market Value of a share of such
capital stock on the date of issuance of such right or warrant, then and in
each such event the dividend rights, conversion rights and rights upon
liquidation, dissolution or winding up of the Corporation of the shares of
Series C Preferred Stock shall each be adjusted so that after such event each
holder of a share of Series C Preferred Stock shall be entitled, in respect of
each share of Series C Preferred Stock held, in addition to such rights in
respect thereof to which such holder was entitled immediately prior to such
event, to receive (i) such additional dividends as equal the Dividend Multiple
in effect immediately prior to such event multiplied, first, by the additional
dividends to which the holder of a share of Class B Common Stock shall be
entitled upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise, and multiplied again by the
Discount Fraction (as hereinafter defined), (ii) such additional conversion
rights as equal the Conversion Rate in effect immediately prior to such event
multiplied by a fraction the numerator of which shall be the Fair Market Value
per share of Class B Common Stock on the date of such event less the Fair
Market Value of the portion of the right or warrant so distributed applicable
to one share of Class B Common Stock and the denominator of which shall be the
Fair Market Value per share of Class B Common Stock on the date of such event
and (iii) such additional distributions upon liquidation, dissolution or
winding up of the Corporation as equal the Liquidation Multiple in effect
immediately prior to such event multiplied, first, by the additional amount
which the holder of a share of Class B Common Stock shall be entitled to
receive upon liquidation, dissolution or winding up of the Corporation upon
exercise of such right or warrant by virtue of the capital stock which could be
acquired upon such exercise, and multiplied again by the Discount Fraction. For
purposes of this paragraph, the "Discount Fraction" shall be a fraction the
numerator of which shall be the difference between the Fair Market Value of a
share of the capital stock subject to a right or warrant distributed to holders
of shares of Class B Common Stock of the Corporation as contemplated by this
paragraph (h)(5) immediately after the distribution thereof and the purchase
price per share for such share of capital stock pursuant to such right or
warrant and the denominator of which shall be the Fair Market Value of a share
of such capital stock immediately after the distribution of such right or
warrant.
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(6) In the event that holders of shares of Class A Common Stock of the
Corporation receive, after the issuance of any share or fraction of a share of
Series C Preferred Stock, in respect of their shares of Class A Common Stock
any right or warrant to purchase capital stock of the Corporation (other than
shares of Class A Common Stock), including as such a right, for all purposes of
this paragraph (h)(6), any security convertible into or exchangeable for
capital stock of the Corporation (other than Class A Common Stock) at a
purchase price per share less than the Fair Market Value of a share of such
capital stock on the date of issuance of such right or warrant, then and in
each such event the voting rights of the shares of Series C Preferred Stock
shall be adjusted so that after such event each holder of a share of Series C
Preferred Stock shall be entitled, in respect of each share of Series C
Preferred Stock held, in addition to such rights in respect thereof to which
such holder was entitled immediately prior to such event, to receive such
additional voting rights as equal the Vote Multiple in effect immediately prior
to such event multiplied, first, by the additional voting rights to which the
holder of a share of Class A Common Stock shall be entitled upon exercise of
such right or warrant by virtue of the capital stock which could be acquired
upon such exercise, and multiplied again by the Voting Discount Fraction (as
hereinafter defined). For purposes of this paragraph, the "Voting Discount
Fraction" shall be a fraction the numerator of which shall be the difference
between the Fair Market Value of a share of the capital stock subject to a
right or warrant distributed to holders of shares of Class A Common Stock of
the Corporation as contemplated by this paragraph (h)(6) immediately after the
distribution thereof and the purchase price per share for such share of capital
stock pursuant to such right or warrant and the denominator of which shall be
the Fair Market Value of a share of such capital stock immediately after the
distribution of such right or warrant.]
(7) For purposes of this Section 5 of Article IV, the "Fair Market Value" of
a share of capital stock of the Corporation on any date shall be deemed to be
the average of the daily closing price per share thereof over the 15
consecutive Trading Days (as hereinafter defined) immediately prior to such
date; provided, however, that in the event the Fair Market Value of any such
share of capital stock is determined during a period which includes any date
that is within 15 Trading Days after (i) the ex-dividend date for a dividend or
distribution on stock payable in shares of such stock or securities convertible
into shares of such stock, or (ii) the effective date of any subdivision,
split, combination, consolidation, reverse stock split or reclassification of
such capital stock, then, and in each such case, the Fair Market Value shall be
appropriately adjusted by the Board of Directors of the Corporation to take
into account ex-dividend or post-effective date trading. The closing price for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way (in either case, as reported in the applicable transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange), or, if the shares are not listed or admitted to
trading on the New York Stock Exchange, as reported in the applicable
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the shares are listed or admitted to
trading or, if the shares are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported
by The Nasdaq Stock Market or such other system then in use, or if on any such
date the shares are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the shares selected by the Board of Directors of the Corporation.
The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the shares are listed or admitted to trading is
open for the transaction of business or, if the shares are not listed or
admitted to trading on any national securities exchange, on which the New York
Stock Exchange or such other national securities exchange as may be selected by
the Board of Directors of the Corporation is open. If the shares are not
publicly held or not so listed or traded on any day within the 15 Trading Day
period applicable to the determination of Fair Market Value thereof as
aforesaid, "Fair Market Value" shall mean the fair market value thereof per
share as determined in good faith by the Board of Directors of the Corporation.
In either case referred to in the foregoing sentence, the determination of Fair
Market Value shall be described in a statement filed with the Secretary of the
Corporation.
(i) Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, division, share exchange, combination, sale of all or
substantially all of the Corporation's assets, or other
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transaction in which the shares of Class B Common Stock are exchanged for or
changed into other securities, cash and/or any other property, then in any such
case each outstanding share of Series C Preferred Stock shall at the same time
be similarly exchanged for or changed into the aggregate amount of securities,
cash and/or other property (payable in like kind), as the case may be, for
which or into which each share of Class B Common Stock is changed or exchanged
multiplied by the highest of the Dividend Multiple, the Conversion Rate or the
Liquidation Multiple in effect immediately prior to such event; provided,
however, that no fractional share or scrip representing fractional shares of
any other securities shall be issued. Instead of any fractional interest in a
share of such other securities which would otherwise be deliverable pursuant to
this paragraph (i), the Corporation will pay to the holder thereof an amount in
cash (computed to the nearest cent) equal to the same fraction of the Fair
Market Value of a share of such other security or such other amount as may be
set forth in the agreement governing the related consolidation, division, share
exchange, combination, sale of all or substantially all of the Corporation's
assets or other transactions.
(j) Effective Time of Adjustments.
(1) Adjustments to the Series C Preferred Stock required by the provisions
hereof shall be effective as of the time at which the event requiring such
adjustments occurs.
(2) The Corporation shall give prompt written notice to each holder of a
share of outstanding Series C Preferred Stock of the effect of any adjustment
to the voting rights, dividend rights, conversion rights or rights upon
liquidation, dissolution or winding up of the Corporation of such shares
required by the provisions hereof. Notwithstanding the foregoing sentence, the
failure of the Corporation to give such notice shall not affect the validity or
the force or effect of, or the requirement for, such adjustment.
(k) No Redemption. The shares of Series C Preferred Stock shall not be
redeemable at the option of the Corporation or any holder thereof.
Notwithstanding the foregoing sentence of this paragraph (11), the Corporation
may acquire shares of Series C Preferred Stock in any other manner permitted by
law, the provisions of this Restated Certificate of Incorporation.
(l) Ranking. Unless otherwise provided in this Restated Certificate of
Incorporation or in any certificate of designation relating to the
determination of a subsequent series of Preferred Stock, the Series C Preferred
Stock shall rank senior to the Class B Common Stock and the Class A Common
Stock and the Series C Preferred Stock shall rank junior to all other series of
Preferred Stock as to the payment of dividends and the distribution of assets
on liquidation, dissolution or winding up.
(m) Limitations. Except as may otherwise be required by law, the shares of
Series C Preferred Stock shall not have any powers, preferences or relative,
participating, optional or other special rights other than those specifically
set forth in this Article IV (as such may be amended from time to time) or
otherwise in the Restated Certificate of Incorporation.
(n) Amendment. So long as any shares of the Series C Preferred Stock are
outstanding, the Corporation shall not amend this Article IV or the Restated
Certificate of Incorporation in any manner which would alter or change the
rights, preferences or limitations of the Series C Preferred Stock so as to
affect such rights, preferences or limitations in any material respect
prejudicial to the holders of the Series C Preferred Stock without, in addition
to any other vote of shareholders required by law, the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Series C Preferred
Stock, voting together as a single class either in writing or by resolution
adopted at an annual or special meeting called for the purpose; provided,
however, that the creation of another series of Preferred Stock ranking senior
to or on a parity with the Series C Preferred Stock as to the payment of
dividends or the distribution of assets on liquidation, dissolution or winding
up, or which has equivalent or greater voting rights than the Series C
Preferred Stock, in each case shall not be deemed to be prejudicial to the
holders of the Series C Preferred Stock for the purposes of this paragraph (n).
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ARTICLE V
Directors
(1) Power of the Board of Directors. Subject to Article XIII of this
Restated Certificate of Incorporation, the property and business of the
Corporation shall be controlled and managed by or under the direction of its
Board of Directors. In furtherance, and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized, subject in all cases to Article XIII of this Restated
Certificate of Incorporation:
(a) To make, alter, amend or repeal the By-Laws of the Corporation;
provided that no By-Laws hereafter adopted shall invalidate any prior act
of the Directors that would have been valid if such By-Laws had not been
adopted;
(b) To determine the rights, powers, duties, rules and procedures that
affect the power of the Board of Directors to manage and direct the
property, business and affairs of the Corporation, including, without
limitation, the power to designate and empower committees of the Board of
Directors, to elect, appoint and empower the officers and other agents of
the Corporation, and to determine the time and place of, and the notice
requirements for Board meetings, as well as the manner of taking Board
action; and
(c) To exercise all such powers and do all such acts as may be exercised
by the Corporation, subject to the provisions of the laws of the State of
Delaware, this Restated Certificate of Incorporation, and the By-Laws of
the Corporation.
(2) Number and Qualifications of Directors. The number of directors
constituting the entire Board of Directors shall be fixed from time to time by
resolution of the Board of Directors but shall not be less than three nor more
than twenty. Directors shall be elected to hold office for a term of one year.
As used in this Restated Certificate of Incorporation, the term "entire Board
of Directors" means the total number of Directors fixed in the manner provided
in this Article V Section (2) and in the By-Laws.
ARTICLE VI
Indemnification Of Directors,
Officers and Others
(1) Action Not By or on Behalf of Corporation. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a
Director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent
(including, without limitation, a trustee) of another corporation, partnership,
joint venture, trust or other enterprise, against judgments, fines, amounts
paid in settlement and expenses (including, without limitation, attorneys'
fees), actually and reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the Corporation, and
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(2) Action By or on Behalf of Corporation. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a
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director, officer, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise against expenses (including, without
limitation, attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability and in view of all
of the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the court shall deem proper.
(3) Successful Defense. To the extent that a present or former Director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Section 1 or 2 of this Article VI, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including, without
limitation, attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(4) Determination of Right to Indemnification in Certain Circumstances. Any
indemnification under Section 1 or 2 of this Article VI (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the present or former Director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in Section 1 or 2 of this Article
IV. Such determination shall be made, with respect to a person who is a
Director or officer at the time of such determination, (1) by a majority vote
of the Directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such Directors designated
by a majority vote of such Directors, even though less than a quorum, or (3) if
there are no such Directors, or if such Directors so direct, by independent
legal counsel in a written opinion, or (4) by the stockholders of the
Corporation entitled to vote thereon.
(5) Advance Payment of Expenses.
(a) Expenses (including attorneys' fees) incurred by a Director or
officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Director or officer, to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article.
(b) Expenses (including attorneys' fees) incurred by any other employee
or agent in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon such terms and
conditions, if any, as the Corporation deems appropriate.
(6) Not Exclusive. The indemnification and advancement of expenses provided
by, or granted pursuant to, the other sections of this Article VI shall not be
deemed exclusive of any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under any statute, by-law,
agreement, vote of stockholders or disinterested Directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office. Without limiting the foregoing, the Corporation is
authorized to enter into an agreement with any Director, officer, employee or
agent of the Corporation providing indemnification for such person against
expenses, including, without limitation, attorneys' fees, judgments, fines and
amounts paid in settlement that result from any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative
or investigative, including, without limitation, any action by or in the right
of the Corporation, that arises by reason of the fact that such person is or
was a Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, to the full extent allowed by law, except that no such agreement
shall provide for indemnification for any actions that constitute fraud, actual
dishonesty or willful misconduct.
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(7) Insurance. The Corporation may purchase and maintain insurance on behalf
of any person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving as the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
(8) Certain Definitions. For the purposes of this Article VI, (A) any
Director, officer, employee or agent of the Corporation who shall serve as a
director, officer, employee or agent of any other corporation, joint venture,
trust or other enterprise of which the Corporation, directly or indirectly, is
or was a stockholder or creditor, or in which the Corporation is or was in any
way interested, or (B) any director, officer, employee or agent of any
subsidiary corporation, joint venture, trust or other enterprise wholly owned
by the Corporation, shall be deemed to be serving as such director, officer,
employee or agent at the request of the Corporation, unless the Board of
Directors of the Corporation shall determine otherwise. In all other instances
where any person shall serve as a director, officer, employee or agent of
another corporation, joint venture, trust or other enterprise of which the
Corporation is or was a stockholder or creditor, or in which it is or was
otherwise interested, if it is not otherwise established that such person is or
was serving as such director, officer, employee or agent at the request of the
Corporation, the Board of Directors of the Corporation may determine whether
such service is or was at the request of the Corporation, and it shall not be
necessary to show any actual or prior request for such service. For purposes of
this Article VI, references to a corporation include all constituent
corporations absorbed in a consolidation or merger as well as the resulting or
surviving corporation so that any person who is or was a director, officer,
employee or agent of such a constituent corporation or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article VI with respect
to the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity. For purposes of this
Article VI, references to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries, and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article VI.
(9) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VII
Director Liability to the Corporation
(a) A Director's liability to the Corporation for breach of duty to the
Corporation or its stockholders shall be limited to the fullest extent
permitted by Delaware law as now in effect or hereafter amended. In particular
no Director of the Corporation shall be liable to the Corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the Director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, as the same
exists or hereafter may be amended, or (iv) for any transaction from which the
Director derived an improper personal benefit.
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(b) Any repeal or modification of the foregoing paragraph (a) by the
stockholders of the Corporation entitled to vote thereon shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification.
(c) If the General Corporation Law of the State of Delaware is amended to
authorize corporate action further eliminating or limiting the liability of
directors, then a director of the Corporation, in addition to the circumstances
in which he is not now liable, shall be free of liability to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended.
ARTICLE VIII
Reservation of Right to Amend
Certificate of Incorporation
Subject to Article XIII of this Restated Certificate of Incorporation, the
Corporation reserves the right to amend, alter, change or repeal any provision
contained in this Restated Certificate of Incorporation in the manner now or
hereafter prescribed by law, and all the provisions of this Restated
Certificate of Incorporation and all rights and powers conferred in this
Restated Certificate of Incorporation on stockholders, directors and officers
are subject to this reserved power.
Each reference in the Restated Certificate of Incorporation to "the Restated
Certificate of Incorporation," "hereunder," "hereof," or words of like import
and each reference to the Restated Certificate of Incorporation set forth in
any amendment to the Restated Certificate of Incorporation shall mean and be a
reference to the Restated Certificate of Incorporation as supplemented and
amended through such amendment to the Restated Certificate of Incorporation.
ARTICLE IX
Voting Rights
(1) Class A Common Stock. In addition to any other approval required by law
or by this Restated Certificate of Incorporation, the affirmative vote of a
majority of the then outstanding shares of Class A Common Stock, voted
separately as a class, shall be necessary to approve any consolidation of the
Corporation with another corporation, any merger of the Corporation into
another corporation or any merger of any other corporation into the Corporation
pursuant to which shares of Common Stock are converted into or exchanged for
any securities or any other consideration.
(2) Preferred Stock. Subject to Article XIII of this Restated Certificate of
Incorporation, in addition to any other approval required by law or by this
Restated Certificate of Incorporation, each particular series of any class of
Preferred Stock shall have such right to vote, if any, as shall be fixed in the
resolution or resolutions, adopted by the Board of Directors, providing for the
issuance of shares of such particular series.
ARTICLE X
Stock Ownership
and the Federal Communications Laws
(1) Requests for Information. So long as the Corporation or any of its
subsidiaries holds any authorization from the Federal Communications Commission
(or any successor thereto), if the Corporation has reason to believe that the
ownership, or proposed ownership, of shares of capital stock of the Corporation
by any stockholder or any person presenting any shares of capital stock of the
Corporation for transfer into his name (a "Proposed Transferee") may be
inconsistent with, or in violation of, any provision of the Federal
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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. For purposes of this Article
X, the term "Federal Communications Laws" shall mean any law of the United
States now or hereafter in effect (and any regulation thereunder) pertaining to
the ownership of, or the exercise of the rights of ownership with respect to,
capital stock of corporations holding, directly or indirectly, Federal
Communications Commissions authorizations, including, without limitation, the
Communications Act of 1934, as amended (the "Communications Act"), and
regulations thereunder pertaining to the ownership, or the exercise of the
rights of ownership, of capital stock of corporations holding, directly or
indirectly, Federal Communications Commission authorizations, by (i) aliens, as
defined in or under the Communications Act, as it may be amended from time to
time, (ii) persons and entities having interests in television or radio
stations, daily newspapers and cable television systems or (iii) persons or
entities, unilaterally or otherwise, seeking direct or indirect control of the
Corporation, as construed under the Communications Act, without having obtained
any requisite prior Federal regulatory approval to such control.
(2) Denial of Rights, Refusal to Transfer. If any stockholder or Proposed
Transferee from whom information is requested should fail to respond to such
request pursuant to Section (1) of this Article or the Corporation shall
conclude that the ownership of, or the exercise of any rights of ownership with
respect to, shares of capital stock of the Corporation, by such stockholder or
Proposed Transferee, could result in any inconsistency with, or violation of,
the Federal Communications Laws, the Corporation may refuse to permit the
transfer of shares of capital stock of the Corporation to such Proposed
Transferee, or may suspend those rights of stock ownership the exercise of
which would result in any inconsistency with, or violation of, the Federal
Communications Laws, such refusal of transfer or suspension to remain in effect
until the requested information has been received and the Corporation has
determined that such transfer, or the exercise of such suspended rights, as the
case may be, is permissible under the Federal Communications Laws, and the
Corporation may exercise any and all appropriate remedies, at law or in equity,
in any court of competent jurisdiction, against any such stockholder or
Proposed Transferee, with a view towards obtaining such information or
preventing or curing any situation which would cause any inconsistency with, or
violation of, any provision of the Federal Communications Laws.
(3) Legends. The Corporation may note on the certificates of its capital
stock that the shares represented by such certificates are subject to the
restrictions set forth in this Article.
(4) Certain Definitions. For purposes of this Article, the word "person"
shall include not only natural persons but partnerships, associations,
corporations, joint ventures and other entities, and the word "regulation"
shall include not only regulations but rules, published policies and published
controlling interpretations by an administrative agency or body empowered to
administer a statutory provision of the Federal Communications Laws.
ARTICLE XI
Transactions with Directors And Officers
No contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the
director or officer is present at or participates in the meeting of the board
or committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose if (a) the material
facts as to his relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the committee, and the
Board of Directors
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or the committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum, or (b) the material facts as to
his relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of such
stockholders, or (c) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of
Directors, a committee thereof, or the stockholders entitled to vote thereon.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
ARTICLE XII
Compromise and Reorganization
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions
of Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agrees to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
ARTICLE XIII
Governance of the Corporation
During Specified Period
(1) Definitions. As used in this Article XIII, the following terms shall
have the following meanings:
(a) "CBS" shall mean CBS Corporation, a Pennsylvania corporation,
immediately prior to the Effective Time.
(b) "CBS Directors" shall mean (i) eight (8) of those directors serving
as members of the Board of Directors of CBS on September 6, 1999 (or any
Independent Directors elected or appointed prior to the Effective Time to
serve as a CBS Director) who are designated as such by the Board of
Directors of CBS prior to the Effective Time and (ii) any Replacement CBS
Director (as defined in Section 2(b) of this Article XIII).
(c) "CEO" shall mean the Chief Executive Officer.
(d) "COO" shall mean the President and Chief Operating Officer.
(e) "Effective Time" shall mean the time of filing of the Certificate of
Merger to which this Certificate of Incorporation is attached.
(f) "Independent Director" shall mean a disinterested, independent
person (determined in accordance with customary standards for independent
directors applicable to U.S. public companies).
(g) "NAI" shall mean National Amusements, Inc., a Maryland corporation,
and its successors or assigns.
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(h) "Specified Independent Directors" shall mean the directors of the
Corporation first elected after 1993 and who are not management of the
Corporation or NAI (together with any replacements of such persons).
(i) "Specified Period" shall mean the period of three years commencing
at the Effective Time.
(j) "Stockholder Agreement" shall mean the Stockholder Agreement dated
as of September 6, 1999, by and between NAI and CBS, relating to
Corporation governance matters.
(k) "Viacom Directors" shall mean the ten (10) directors of the
Corporation serving as the Board of Directors of the Corporation
immediately prior to the Effective Time (including the Specified
Independent Directors).
(2) Directors.
(a) Effective immediately at the Effective Time, the Board of Directors
shall consist of eighteen (18) directors. The number of directors may be fixed
by resolution of the Board from time to time, provided, however, that the size
of the Board of Directors may not be changed during the Specified Period
without the approval of at least fourteen (14) directors. At the Effective
Time, ten (10) directors shall be Viacom Directors and eight (8) directors
shall be CBS Directors.
(b) Until the expiration of the Specified Period, the Board of Directors
(subject to the fiduciary duties of the directors) shall take all action
necessary to ensure that any seat on the Board of Directors held by (i) a CBS
Director which becomes vacant is filled promptly by a person qualifying as an
Independent Director and designated to fill such seat by a majority of the CBS
Directors remaining on the Board of Directors (a "Replacement CBS Director")
and (ii) a Specified Independent Director which becomes vacant is filled
promptly by an Independent Director who is the chief executive officer, chief
operating officer or chief financial officer or former chief executive officer
of a Fortune 500 company or a non-U.S. public company of comparable size.
(c) During the Specified Period, all committees of the Board of Directors
(other than the Compensation Committee and the Officers Nominating Committee)
shall have such number of CBS Directors as equals the total number of members
of the Committee multiplied by a fraction, the numerator of which is eight (8)
and the denominator of which is eighteen (18), rounded to the closest whole
number; provided that in no event shall any committee have (x) fewer than one
(1) CBS Director or (y) less than a majority of Viacom Directors.
(d) During the Specified Period, the Board of Directors shall not take any
action or fail to take any action which would have the effect of eliminating,
limiting, restricting, avoiding or otherwise modifying the effect of the
provisions set forth in this Article XIII (e.g., by creating a holding company
structure if the certificate of incorporation or similar document of such
holding company does not contain equivalent provisions).
(3) Chairman and Chief Executive Officer.
(a) At the Effective Time, Sumner Redstone shall remain the Chairman and
CEO. In the event that Sumner Redstone is not the CEO at the Effective Time or
ceases to be the CEO at any time during the Specified Period, then Mel
Karmazin, if he is COO at such time, shall succeed to the position of CEO for
the remainder of the Specified Period. During any such period of succession,
Mel Karmazin shall continue to exercise the powers, rights, functions and
responsibilities of the COO in addition to exercising those of the CEO.
(b) The Chairman shall chair all meetings of the Board of Directors and
stockholders at which he is present.
(c) The CEO shall be responsible, in consultation with the COO, for
corporate policy and strategy and the COO shall consult on all major decisions
with, and shall report directly to, the CEO, during the Specified
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Period; provided, however, that the CEO shall not exercise any powers, rights,
functions or responsibilities of the COO unless Mel Karmazin is the CEO.
(4) President and Chief Operating Officer.
(a) At the Effective Time, the President and Chief Operating Officer of the
Corporation shall be Mel Karmazin. During the Specified Period, Mel Karmazin
may not be terminated or demoted from the position of COO (or, in the event
that Sumner Redstone is not the CEO, from the position of CEO) and no COO
Functions (as defined below) may be changed without the affirmative vote of at
least fourteen (14) directors.
(b) Subject to the requirement that the COO consult with the CEO on all
major decisions, the powers, rights, functions and responsibilities of the COO
(collectively, the "COO Functions") shall include, without limitation, the
following:
(i) supervising, coordinating and managing the Corporation's business,
operations, activities, operating expenses and capital allocation;
(ii) matters relating to officers (other than the Chairman, CEO and COO)
and employees, including, without limitation, hiring (subject to (A) the
specific Board of Directors authority described below with respect to the
CFO, the General Counsel and the Controller and (B) Section 5 below),
terminating, changing positions and allocating responsibilities of such
officers and employees; and
(iii) substantially all of the powers, rights, functions and
responsibilities typically exercised by a chief operating officer.
All officers (other than the Chairman, CEO and COO) will report, directly or
indirectly, to the COO (this reporting relationship will be deemed a COO
Function).
(c) In the event that Mel Karmazin is not COO or CEO, the Board may
terminate the COO's employment, eliminate the COO position and the Officers
Nominating Committee and reallocate the COO Functions without regard to the
other provisions of this Article XVIII.
(5) Officers Nominating Committee; Compensation Committee.
(a) Subject to the powers of the Compensation Committee set forth below,
during the Specified Period, all powers of the Board of Directors, including,
without limitation, the right to hire, elect, terminate, change positions,
allocate responsibilities or determine non-equity compensation, with respect to
officers and employees, shall be exercised, subject to clauses (b) and (c)
below, by, and delegated to, the Officers Nominating Committee of the Board of
Directors. The Officers Nominating Committee shall consist solely of the member
of the Board of Directors who is the COO, except that in the event Mel Karmazin
succeeds to the position of CEO, the sole member of the Officers Nominating
Committee shall be the member of the Board of Directors who is the CEO.
(b) The Officers Nominating Committee shall have no powers with respect to
the Chairman, CEO and COO, and shall not have the power to fill the positions
of Chief Financial Officer, Controller or General Counsel of the Corporation
without the approval of the Board of Directors; provided that this provision
shall in no way affect the other powers and authorities of the Officers
Nominating Committee with respect to the Chief Financial Officer, Controller
and General Counsel positions, including, without limitation, the power to
terminate employment of persons holding such positions.
(c) The Compensation Committee shall not be required to, or have any power
to, approve the annual compensation of (i) any employee if the total value of
such employee's annual cash compensation (assuming for this purpose that the
actual bonus of each officer and employee is equal to his or her target bonus)
is less than $1 million or (ii) talent (as such term is commonly used in the
media or entertainment industries), in each such case which power shall be
delegated to the Officers Nominating Committee. The annual compensation of
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all other officers and employees and any equity or equity-based compensation of
any officer or employee must be approved by the Compensation Committee.
(d) The Compensation Committee shall consist of three CBS Directors who are
Independent Directors and three non-CBS Directors, two of whom will be the
Specified Independent Directors and the other of whom will be an Independent
Director.
(e) Any decision or determination of the Officers Nominating Committee may
be reversed or overridden by (and only by) the affirmative vote of at least
fourteen (14) directors.
(6) Stockholder Agreement.
The Stockholder Agreement may not be amended, and no provision thereof may
be modified or waived, except with the approval of at least fourteen (14)
directors.
(7) Issuance of Voting Stock.
During the Specified Period, in addition to any other approval required by
law or by this Restated Certificate of Incorporation, the Corporation may not
issue (i) additional shares of Class A Common Stock or (ii) any shares of
Preferred Stock or any other class or series of stock or securities, in each
case with, or convertible into or exchangeable or exercisable for stock or
other securities with, the right to vote on any matter on which stockholders
are entitled to vote if the result would be that parties bound by the
Stockholder Agreement could fail to own at least a majority of the outstanding
shares of voting stock of the Corporation.
(8) Voting.
During the Specified Period, except for those actions set forth on Annex I
to this Restated Certificate of Incorporation, which shall require the approval
of the Board of Directors, all action by the Board of Directors shall require
the affirmative vote of at least fourteen (14) directors. At all meetings of
the Board of Directors a majority of the full Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority
of the Directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute or this Restated Certificate of Incorporation. If a quorum shall not
be present at any meeting of the Board of Directors, the Directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
(9) Amendment.
Until the expiration of the Specified Period the provisions of any Article
of this Restated Certificate which refer to this Article XIII, the provisions
of this Article XIII, and the provisions of Article VIII of the by-laws of the
Corporation, may not be amended, altered, repealed or waived in any respect
without the approval of at least fourteen (14) directors.
(10) Successors.
During the Specified Period, the provisions of this Article XIII shall be
applicable to (i) any successor to the Corporation as the result of a merger,
consolidation or other business combination, whether or not the Corporation is
the surviving company in such transaction, or otherwise and (ii) any
corporation or other entity with respect to which the Corporation or its
successor is or becomes a direct or indirect subsidiary, the Board of Directors
shall not permit the Corporation to be a party to any transaction which would
not comply with the foregoing without the approval of at least fourteen (14)
directors.
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(11) Subsidiaries.
The Board of Directors shall have the right, following consultation with the
COO or, if Mel Karmazin is the CEO, the CEO, with respect to any public company
which is a subsidiary of the Corporation, to take such steps as the Board of
Directors reasonably determines are necessary to implement corporate governance
arrangements applicable to such subsidiary in a manner as consistent as
practicable with the provisions contained in this Restated Certificate of
Incorporation; provided that any such steps shall not vest in the Board of
Directors greater power or provide the COO with fewer rights than those
provided for in this Restated Certificate of Incorporation.
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ANNEX I
TO VIACOM INC. RESTATED
CERTIFICATE OF INCORPORATION
The provisions of this Annex I shall form a part of, and be incorporated in
all respects in, the Restated Certificate of Incorporation to which this Annex
I is attached. The following actions shall require the approval of a majority
of the directors:
A. Acquisitions, Divestitures, Joint Ventures, Guarantees
. Any acquisition, equity investment or joint venture (each an
"Acquisition") by the Corporation or any of its subsidiaries for more
than $25 million.
. Any divestiture or other sale of assets (each a "Divestiture") (not in
the ordinary course) by the Corporation or any of its subsidiaries for
more than $25 million (based on purchase price or net book value of
assets).
. Any real estate purchase, sale or lease by the Corporation or any of its
subsidiaries for more than $25 million.
. Any guarantee by the Corporation or any of its subsidiaries of an
obligation of a third party where the obligation guaranteed is more than
$25 million.
. Notwithstanding the above, any Acquisition or Divestiture by the
Corporation or any of its subsidiaries of (a) internet or internet
related businesses for more than $25 million but less than $100 million,
with the value thereof represented by multi-year commitments for
advertising, promotion and content licensing, is excluded, so long as the
aggregate of such Acquisitions or Divestitures, in each case, does not
exceed $550 million and (b) radio or outdoor advertising businesses for
more than $25 million but less than $100 million, is excluded, so long as
the aggregate of such Acquisitions or Divestitures, in each case, does
not exceed $300 million; provided that (i) any Divestiture of shares of a
publicly traded internet or internet related business with a value of up
to $75 million is excluded and shall not be included in the calculation
of any of the threshold amounts set forth above, (ii) Board approval may
be secured (but is not required) for any transaction of more than $25
million but less than $100 million where the regular meeting schedule of
the Board so permits (and shall not otherwise be required), (iii) the
Board will be provided with information about and a status report on such
transactions completed without Board approval and (iv) this limit of
authority will be reviewed in 12 months from the Effective Time (as
defined in Article XIII of the Restated Certificate) and may be amended
only with the approval of 14 members of the Board of Directors.
. Any contract of the Corporation or any of its subsidiaries not in the
ordinary course with a value in excess of $25 million.
. Notwithstanding the above, any of the foregoing transactions that is
approved by the Board shall not be included in the calculation of any of
the threshold amounts set forth above.
B. Employee Matters
. Employee benefit plans (at the Corporation or a subsidiary): (a) creating
a new plan, (b) suspending or terminating an existing plan, (c) any
amendment that materially increases cost to the Corporation or
subsidiary.
. Entering into any modifications or amendments to the employment
agreements with the CEO or the COO.
C. General
. The Annual Report on Form 10-K.
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. Proxy statement and notice of meeting (including annual or special
meeting date, location, record date for voting).
. Any issuance of Corporation stock, or options, warrants or other similar
rights (including stock appreciation rights) or debt or other securities
convertible into or exchangeable for Corporation stock.
. Any issuance of debt unless such debt is short term and is within the
spending limits of the annual operating budget or is replacing existing
debt.
. Annual capital expenditure and annual operating budgets and individual
capital expenditure transactions in excess of $25 million for the
Corporation or any of its subsidiaries.
. Any Corporation or subsidiary pays a dividend or repurchases stock from
a third party.
. Review and approve any action or transaction where Board action is
required by law (other than (S) 141(a) of the Delaware General
Corporation Law) or by the terms of the transaction (in all cases other
than as specifically set forth in the Restated Certificate of
Incorporation).
. Review and approve Board minutes.
. Subject to Article XIII of the Restated Certificate of Incorporation,
determine Board administration, including number of directors, meeting
schedule, nominees, committees, director compensation, D&O insurance
authorization, internal investigations and retention of advisors in
connection therewith, and decisions regarding indemnification of
individuals.
. Subject to Article XIII of the Restated Certificate of Incorporation,
amendments to the Restated Certificate of Incorporation and by-laws of
the Corporation.
. Commencement and settlement of major litigation.
. Selection of independent auditors.
. All matters on which the Corporation Board of Directors has historically
taken action other than (1) matters relating to the subject matters
addressed in this Annex I and not requiring approval of the Board of
Directors hereunder and (2) those matters delegated to the COO,
including all of the COO Functions (as defined in Article XIII of this
Restated Certificate of Incorporation).
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ANNEX C
VIACOM INC.
AMENDED AND RESTATED
BY-LAWS
ARTICLE I
Offices
Section 1. The registered office shall be in the City of Wilmington, County
of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places both
within and without the state of Delaware as the board of directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. Meetings of stockholders may be held at such time and place,
within or without the State of Delaware, as shall be stated in the notice of
the meeting or in a duly executed waiver of notice thereof. The annual meeting
of stockholders may be held at such place, within or without the State of
Delaware, as shall be designated by the board of directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. The annual meeting of stockholders for the purpose of electing
directors and for the transaction of such other business as may properly come
before the meeting shall be held at such date and hour as shall be determined
by the board of directors or, in the absence of such determination, on the
third Thursday of the ninth month after the month end most nearly coinciding
with the close of the fiscal year of the Corporation.
Section 3. Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the Corporation
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. The list shall
also be produced and kept open at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Restated Certificate
of Incorporation, may be called by the affirmative vote of a majority of the
board of directors, the Chairman of the Board, the Chief Executive Officer, the
Vice Chairman of the Board or the President and Chief Operating Officer and
shall be called by the Chairman of the Board, the Chief Executive Officer, the
Vice Chairman of the Board, the President and Chief Operating Officer or
Secretary at the request in writing of the holders of record of at least 50.1%
of the aggregate voting power of
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all outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of Directors, acting together as a single class. Such
request shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the aggregate voting power of the
shares of the capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
at all meetings of the stockholders for the transaction of business except as
otherwise provided by statute or by the Restated Certificate of Incorporation.
If, however, such quorum shall not be present or represented at any meeting of
the stockholders, the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have the power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally notified. If the adjournment
is for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the holders
of a majority of the aggregate voting power of the shares of the capital stock
having voting power present in person or represented by proxy shall decide any
question brought before such meeting, unless the question is one upon which, by
provision of applicable law or of the Restated Certificate of Incorporation, a
different vote is required in which case such express provision shall govern
and control the decision of such question.
Section 10. At every meeting of the stockholders, each stockholder shall be
entitled to vote, in person or by proxy executed in writing by the stockholder
or his duly authorized attorney-in-fact, each share of the capital stock having
voting power held by such stockholder in accordance with the provisions of the
Restated Certificate of Incorporation and, if applicable, the certificate of
designations relating thereto, but no proxy shall be voted or acted upon after
three years from its date, unless the proxy provides for a longer period.
Section 11. Any action required to be taken at any annual or special meeting
of stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by stockholders representing not less than
the minimum number of votes that would be necessary to authorize or take such
actions at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of such action without a meeting by less
than unanimous written consent shall be given to those stockholders who have
not consented in writing. The Secretary shall file such consents with the
minutes of the meetings of the stockholders.
Section 12. At all meetings of stockholders, the chairman of the meeting
shall have absolute authority over matters of procedure, and there shall be no
appeal from the ruling of the chairman.
Section 13. Attendance of a stockholder, in person or by proxy, at any
meeting shall constitute a waiver of notice of such meeting, except where the
stockholder, in person or by proxy, attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened.
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ARTICLE III
Directors
Section 1. The number of directors which shall constitute the entire Board
of Directors shall be fixed as set forth in Article XIII of the Restated
Certificate of Incorporation, and shall not be less than three nor more than
eighteen. Directors shall have such qualifications as may be prescribed by
these by-laws. Directors need not be stockholders. If required by regulations
of the Federal Communications Commission, each director shall be a citizen of
the United States of America.
Section 2. Subject to the rights of the holders of any series of Preferred
Stock or any other class of capital stock of the corporation then outstanding
(other than the Common Stock), and subject to Article XIII of the Restated
Certificate of Incorporation, vacancies in the board of directors for any
reason, including by reason of an increase in the authorized number of
directors, shall, if occurring prior to the expiration of the term of office in
which the vacancy occurs, be filled by a majority of the directors then in
office, though less than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual meeting of
stockholders of the Corporation or until their successors are duly elected and
shall qualify, unless sooner displaced. Subject to Article XIII of the Restated
Certificate of Incorporation, if there are no directors in office, then an
election of directors may be held in the manner provided by statute.
Section 3. The property and business of the Corporation shall be controlled
and managed in accordance with the terms of the Restated Certificate of
Incorporation by its board of directors which may, subject to Article XIII of
the Restated Certificate of Incorporation, exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Restated Certificate of Incorporation or by these by-laws directed or
required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the Corporation, or any committees
thereof, may hold meetings, both regular and special, either within or without
the State of Delaware.
Section 5. A regular annual meeting of the board of directors, including
newly elected directors, shall be held immediately after each annual meeting of
stockholders at the place of such stockholders' meeting, and no notice of such
meeting to the directors shall be necessary in order legally to constitute the
meeting, provided a quorum shall be present. If such meeting is held at any
other time or place, notice thereof must be given or waived as hereinafter
provided for special meetings of the board of directors.
Section 6. Additional regular meetings of the board of directors shall be
held on such dates and at such times and at such places as shall from time to
time be determined by the board of directors.
Section 7. The Chairman of the Board, the Chief Executive Officer, Vice
Chairman of the Board or the President and Chief Operating Officer of the
Corporation and the Secretary may call a special meeting of the board of
directors at any time by giving notice, specifying the business to be
transacted at and the purpose or purposes of the meeting, to each member of the
board at least twenty-four (24) hours before the time appointed.
Section 8. At all meetings of the board a majority of the full board of
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute, the Restated Certificate of Incorporation or
these by-laws. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
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Section 9. Any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting if all members of the board or committee, as the case may be, consent
thereto in writing, setting forth the action so taken, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the Restated Certificate of
Incorporation or these by-laws, members of the board of directors, or any
committee thereof, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment whereby all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
COMMITTEES OF DIRECTORS
Section 11. Designation of Committees. Subject to Article XIII of the
Restated Certificate of Incorporation, the board of directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. Subject to Article XIII of the Restated Certificate of
Incorporation, the board of directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee.
Section 12. Vacancies. Subject to Article XIII of the Restated Certificate
of Incorporation, in the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member.
Section 13. Powers. Subject to Article XIII of the Restated Certificate of
Incorporation, any such committee, to the extent provided in the resolution of
the board of directors, shall have and may exercise all the powers and
authority of the board of directors to the extent provided by Section 141(c) of
the General Corporation Law of the State of Delaware as it exists now or may
hereafter be amended.
Section 14. Each committee of the board of directors shall keep regular
minutes of its meetings and report the same to the board of directors when
required.
COMPENSATION OF DIRECTORS
Subject to Article XIII of the Restated Certificate of Incorporation:
Section 15. Unless otherwise restricted by the Restated Certificate of
Incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. All directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors, and directors
who are not full-time employees of the Corporation may be paid a fixed sum for
attendance at each meeting of the board of directors and/or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation and expenses
for attending committee meetings.
REMOVAL OF DIRECTORS
Subject to Article XIII of the Restated Certificate of Incorporation:
Section 16. Subject to the rights of the holders of any series of Preferred
Stock or any other class of capital stock of the Corporation (other than the
Common Stock) then outstanding, (a) any director, or the entire
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board of directors, may be removed from office at any time prior to the
expiration of his term of office, with or without cause, only by the
affirmative vote of the holders of record of outstanding shares representing at
least a majority of all of the aggregate voting power of outstanding shares of
capital stock of the Corporation then entitled to vote generally in the
election of directors, voting together as a single class at a special meeting
of stockholders called expressly for that purpose; provided that, any director
may be removed from office by the affirmative vote of a majority of the entire
board of directors, at any time prior to the expiration of his term of office,
as provided by law, in the event a director fails to meet the qualifications
stated in these by-laws for election as a director or in the event such
director is in breach of any agreement between such director and the
Corporation relating to such director's service as a director or employee of
the Corporation.
INDEMNIFICATION OF DIRECTORS
Section 17. The Corporation shall have the right to indemnify directors,
officers and agents of the Corporation to the fullest extent permitted by the
General Corporation Law of Delaware and by the Restated Certificate of
Incorporation, as both may be amended from time to time.
ARTICLE IV
Notices
Section 1. Whenever, under the provisions of applicable law or of the
Restated Certificate of Incorporation or of these by-laws, notice is required
to be given to any director or stockholder, it shall be construed to mean
written or printed notice given either personally or by mail or wire addressed
to such director or stockholder, at his address as it appears on the records of
the Corporation, with postage or other charges thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail or at the appropriate office for transmission by wire.
Notice to directors may also be given by telephone.
Section 2. Whenever any notice is required to be given under the provisions
of applicable law or of the Restated Certificate of Incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
Section 3. Attendance at a meeting shall constitute a waiver of notice
except where a director or shareholder attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened.
Section 4. Neither the business to be transacted at, nor the purpose of, any
regular meeting of the board of directors need be specified in the notice or
waiver of notice of such meeting.
ARTICLE V
Officers
Subject to Article XIII of the Restated Certificate of Incorporation:
Section 1. The officers of the Corporation shall be elected by the board of
directors at its first meeting after each annual meeting of the stockholders
and shall be a President and Chief Operating Officer, a Treasurer and a
Secretary. The board of directors may also elect a Chairman of the Board, a
Chief Executive Officer, one or more Vice Chairmen of the Board and Vice
Presidents and one or more Assistant Treasurers and Assistant Secretaries. Any
number of offices may be held by the same person, except that the offices of
President and Chief Operating Officer and Secretary shall not be held by the
same person. Vice Presidents may be given distinctive designations such as
Executive Vice President or Senior Vice President. Every officer shall be a
citizen of the United States of America.
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Section 2. The board of directors may elect such other officers and agents
as it shall deem necessary who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the board of directors.
Section 3. The officers of the Corporation shall hold office until their
successors are elected or appointed and qualify or until their earlier
resignation or removal. Any officer elected or appointed by the board of
directors may be removed at any time with or without cause by the affirmative
vote of a majority of the whole board of directors. Any vacancy occurring in
any office of the Corporation shall be filled by the board of directors.
CHAIRMAN OF THE BOARD
Section 4. The Chairman of the Board, if any shall be elected, shall preside
at all meetings of the board of directors and the stockholders and shall have
such other powers and perform such other duties as may from time to time be
assigned to him by the board of directors.
VICE CHAIRMAN OF THE BOARD
Section 5. The Vice Chairman of the Board, if any shall be elected, or if
there be more than one, the Vice Chairmen of the Board in order of their
election, shall, in the absence of the Chairman of the Board, or in the case
the Chairman of the Board shall resign, retire, become deceased or otherwise
cease or be unable to act, perform the duties and exercise the powers of the
Chairman of the Board. In addition, the Vice Chairman of the Board shall have
such other powers and perform such other duties as may from time to time be
assigned to him by the board of directors.
THE CHIEF EXECUTIVE OFFICER
Section 6. The Chief Executive Officer shall be responsible, in consultation
with the President and Chief Operating Officer, for corporate policy and
strategy. The President and Chief Operating Officer shall consult on all major
decisions with, and shall report directly to, the Chief Executive Officer;
provided, however, that the Chief Executive Officer shall not exercise any
powers, rights, functions or responsibilities of the President and Chief
Operating Officer unless Mel Karmazin is the Chief Executive Officer.
THE PRESIDENT AND CHIEF OPERATING OFFICER
Section 7. Subject to Article XIII of the Restated Certificate of
Incorporation and to the requirement that the President and Chief Operating
Officer consult with the Chief Executive Officer on all major decisions, the
President and Chief Operating Officer shall be responsible for:
(i) supervising, coordinating and managing the Corporation's business,
operations and activities, operating expenses and capital allocation;
(ii) matters relating to officers (other than the Chairman, the Chief
Executive Officer and the President and Chief Operating Officer) and
employees, including, without limitation, hiring, terminating, changing
positions and allocation of responsibilities of such officers and
employees;
(iii) substantially all of the powers, rights, functions and
responsibilities typically exercised by a chief operating officer; and
(iv) all officers (other than the Chairman, the Chief Executive Officer
and the President and Chief Operating Officer) will report, directly or
indirectly, to the President and Chief Operating Officer.
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THE VICE-PRESIDENTS
Section 8. The Vice-Presidents shall have such powers and perform such
duties as may from time to time be assigned to them by the board of directors
or the President and Chief Operating Officer.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary shall attend all meetings of the board of directors
and all meetings of the stockholders and record all the proceedings of the
meetings of the Corporation and of the board of directors in a book to be kept
for that purpose and shall perform like duties for the standing committees of
the board of directors when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the
board of directors or the President and Chief Operating Officer, under whose
supervision he shall be. He shall have custody of the corporate seal of the
Corporation and he, or an Assistant Secretary, shall have authority to affix
the same to any instrument requiring it and when so affixed, it may be attested
by his signature or by the signature of such Assistant Secretary. The board of
directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his signature.
Section 10. The Assistant Secretary, if any shall be elected, or if there be
more than one, the Assistant Secretaries in the order determined by the board
of directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall have such other powers and perform such other duties as may
from time to time be assigned to them by the board of directors or the
President and Chief Operating Officer.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The Treasurer, under the supervision of the President and Chief
Operating Officer, shall have charge of the corporate funds and securities and
shall keep or cause to be kept full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositaries as may be designated by or at the direction of
the board of directors.
Section 12. The Treasurer shall disburse or cause to be disbursed the funds
of the Corporation as may be ordered by or at the direction of the President
and Chief Operating Officer or the board of directors, taking proper vouchers
for such disbursements, and subject to the supervision of the President and
Chief Operating Officer, shall render to the board of directors, when they or
either of them so require, an account of his transactions as Treasurer and of
the financial condition of the Corporation.
Section 13. If required by the board of directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 14. The Assistant Treasurer, if any shall be elected, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall have such other powers and perform such other duties as may
from time to time be assigned to them by the board of directors.
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Section 15. In addition to the corporate officers elected by the board of
directors pursuant to this Article V, the President and Chief Operating Officer
may, from time to time, appoint one or more other persons as appointed officers
who shall not be deemed to be corporate officers, but may, respectively, be
designated with such titles as the President and Chief Operating Officer may
deem appropriate. The President and Chief Operating Officer may prescribe the
powers to be exercised and the duties to be performed by each such appointed
officer, may designate the term for which each such appointment is made, and
may, from time to time, terminate any or all of such appointments. Such
appointments and termination of appointments shall be reported to the board of
directors.
ARTICLE VI
Certificates of Stock
Section 1. Every holder of shares of capital stock in the Corporation shall
be entitled to have a certificate sealed with the seal of the Corporation and
signed by, or in the name of the Corporation by, the Chairman of the Board, the
Chief Executive Officer, Vice Chairman of the Board or the President and Chief
Operating Officer and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Corporation, certifying the number
of shares owned by him in the Corporation. If the Corporation shall be
authorized to issue more than one class of stock or more than one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock,
provided that, except as otherwise provided in section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each stockholder who so requests the
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 2. Any or all of the signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of capital stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
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FIXING RECORD DATE
Section 5. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution, or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days before the date
of such meetings, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for
the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
General Provisions
Dividends
Section 1. Dividends upon the capital stock of the Corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property or in shares of the capital stock,
subject to the provisions of any statute, the Restated Certificate of
Incorporation and these by-laws.
Section 2. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purposes as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting, and
at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
CHECKS
Section 4. All checks or demands for money of the Corporation shall be
signed by such officer or officers or such other person or persons as the board
of directors may from time to time designate.
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FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be as specified by the
board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
CONTRACTS
Section 7. An Officer of the Corporation may sign any note, bond, or
mortgage of the Corporation in furtherance of the Corporation's ordinary
business and in order to implement any action authorized by these by-laws.
ARTICLE VIII
Restated Certificate of Incorporation
In addition to all other provisions of the Restated Certificate of
Incorporation, and notwithstanding that these by-laws may contain any provision
contrary thereto, these by-laws shall be subject in all respects to Article
XIII of the Restated Certificate of Incorporation.
ARTICLE IX
Amendments
In furtherance of and not in limitation of the powers conferred by statute,
the board of directors of the Corporation from time to time may make, amend,
alter, change or repeal the by-laws of the Corporation; provided, that any by-
laws made, amended, altered, changed or repealed by the board of directors or
the stockholders of the Corporation may be amended, altered, changed or
repealed, and that any by-laws may be made, by the stockholders of the
Corporation. Notwithstanding any other provisions of the Restated Certificate
of Incorporation of the Corporation or these by-laws (and notwithstanding the
fact that a lesser percentage may be specified by law, the Restated Certificate
of Incorporation or these by-laws), the affirmative vote of not less than a
majority of the aggregate voting power of all outstanding shares of capital
stock of the Corporation then entitled to vote generally in this election of
Directors, voting together as a single class, shall be required for the
stockholders of the Corporation to amend, alter, change, repeal or adopt any
by-laws of the Corporation.
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ANNEX D
VOTING AGREEMENT
By
NATIONAL AMUSEMENTS, INC.
(Stockholder)
and
CBS CORPORATION
Dated as of September 6, 1999
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VOTING AGREEMENT
VOTING AGREEMENT, dated as of September 6, 1999 (this "Agreement"), by
NATIONAL AMUSEMENTS, INC., a Maryland corporation (the "Stockholder"), to and
for the benefit of CBS CORPORATION, a Pennsylvania corporation ("CBS").
WHEREAS, as of the date hereof, the Stockholder owns of record and
beneficially 93,658,988 shares of Class A Common Stock (the "Viacom Class A
Common Stock"; such shares, together with any shares of Viacom Class A Common
Stock and any other shares of voting stock of Viacom acquired by the
Stockholder prior to the termination of this Agreement being referred to herein
as the "Stockholder's Shares"), par value $.01 per share, of VIACOM, INC., a
Delaware corporation ("Viacom");
WHEREAS, concurrently with the execution of this Agreement, CBS and Viacom
are entering into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"; capitalized terms used and not otherwise defined
herein shall have the respective meanings assigned to them in the Merger
Agreement), pursuant to which, upon the terms and subject to the conditions
thereof, CBS will be merged with and into Viacom (the "Merger"); and
WHEREAS, as a condition to the willingness of Viacom and CBS to enter into
the Merger Agreement, CBS has requested the Stockholder to agree, and in order
to induce CBS to enter into the Merger Agreement, the Stockholder is willing to
agree, to vote in favor of the Viacom Proposals (as defined in the Merger
Agreement), upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree as follows:
Section 1. Voting of Stockholder's Shares. Until the termination of this
Agreement in accordance with the terms hereof, the Stockholder hereby agrees
that, at the Viacom Stockholders' Meeting or any other meeting of the
stockholders of Viacom, however called, and in any action by written consent of
the stockholders of Viacom, the Stockholder will vote all of the Stockholder's
Shares (i) in favor of the Viacom Proposals and (ii) against any action,
proposal or agreement that would or could reasonably be expected to result in a
breach of any covenant, representation or warranty or any other obligation or
agreement of Viacom under the Merger Agreement or which would or could
reasonably be expected to result in any of the conditions to the Merger
Agreement not being fulfilled.
Section 2. No Inconsistent Agreements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
the Stockholder shall not enter into any voting agreement or grant a proxy or
power of attorney with respect to the Stockholder's Shares which is
inconsistent with this Agreement.
Section 3. Transfer of Stockholder's Shares. The Stockholder hereby
covenants and agrees that the Stockholder shall not transfer record or
beneficial ownership of any of the Stockholder's Shares unless the transferee
unconditionally agrees in writing to be bound by the terms and conditions of
this Agreement.
Section 4. Representations and Warranties of Stockholder. The Stockholder
hereby represents and warrants to CBS as follows:
(a) Authority Relative to This Agreement. The Stockholder has all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of the Stockholder, and no other corporate proceedings on the
part of the Stockholder are necessary to authorize this Agreement or to
consummate such transactions. This Agreement has been duly and validly
executed and delivered by the Stockholder and, assuming the due
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authorization, execution and delivery by CBS, constitutes a legal, valid
and binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms.
(b) No Conflict. (i) The execution and delivery of this Agreement by the
Stockholder do not, and the performance of this Agreement by the
Stockholder shall not, (A) conflict with or violate the Certificate of
Incorporation or By-laws or equivalent organizational documents of the
Stockholder, (B) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Stockholder or by which the
Stockholder's Shares are bound or affected or (C) result in any breach of
or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the Stockholder's Shares
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which the Stockholder is a party or by which the Stockholder or the
Stockholder's Shares are bound or affected, except, in the case of clauses
(B) and (C), for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent or delay the performance by the
Stockholder of its obligations under this Agreement.
(ii) The execution and delivery of this Agreement by the Stockholder do
not, and the performance of this Agreement by the Stockholder shall not,
require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Entity except for applicable
requirements, if any, of the Securities Exchange Act of 1934, as amended,
and except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent or delay the performance by the Stockholder of its obligations
under this Agreement.
(c) Title to the Shares. As of the date hereof, the Stockholder is the
record and beneficial owner of 93,658,988 shares of Viacom Class A Common
Stock. The Stockholder's Shares are all the voting securities of Viacom
owned, either of record or beneficially, by the Stockholder. The
Stockholder's Shares are owned free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Stockholder's voting rights, charges and other
encumbrances of any nature whatsoever. The Stockholder has not appointed or
granted any proxy, which appointment or grant is still effective, with
respect to the Stockholder's Shares.
Section 5. Termination. This Agreement shall terminate upon the earlier to
occur of (a) the Effective Time and (b) the termination of the Merger Agreement
in accordance with the terms thereof. No such termination of this Agreement
shall relieve any party hereto from any liability for any breach of this
Agreement prior to termination.
Section 6. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by facsimile, by courier service or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 6):
if to the Stockholder:
National Amusements, Inc.
200 Elm Street
Dedham, Massachusetts 02026
Telecopier No.: (781) 461-1412
Attention: General Counsel
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<PAGE>
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier No.: (212) 848-7179
Attention: Creighton O'M. Condon, Esq. and
Stephen R. Volk, Esq.
if to CBS:
CBS Corporation
51 West 52nd Street
35th Floor
New York, New York 10019
Telecopier No.: (212) 597-4031
Attention: Louis J. Briskman, Esq.
Executive Vice President and
General Counsel
with copies to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Telecopier No.: (212) 474-3700
Attention: Allen Finkelson, Esq. and
Scott A. Barshay, Esq.
Section 7. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law, or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the transactions contemplated by this Agreement be consummated as originally
contemplated to the fullest extent possible.
Section 8. Entire Agreement; Assignment. This Agreement and the Merger
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by either of the parties hereto without the
prior written consent of the other party hereto. Any purported assignment in
violation of this Section 8 shall be void. Subject to the preceding sentences
of this Section 8, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties hereto and their respective successors
and assigns.
Section 9. Parties in Interest; Certain Events. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of the
Stockholder's Shares shall pass, whether by operation of law or otherwise. In
the event of any stock split, stock dividend, merger, reorganization,
recapitalization or other change in the capital structure of Viacom
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affecting the capital stock of Viacom, or the acquisition of additional shares
of Viacom Class A Common Stock or other voting securities of Viacom by the
Stockholder, the number of Stockholder's Shares shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any additional
shares of Viacom Class A Common Stock or other voting securities of Viacom
issued to or acquired by the Stockholder.
Section 10. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
Section 11. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to any
principles of conflicts of laws of such State.
Section 12. Consent to Jurisdiction. (a) Each of the Stockholder and CBS
hereby irrevocably submits to the exclusive jurisdiction of the courts of the
State of Delaware and to the jurisdiction of the United States District Court
for the State of Delaware, for the purpose of any action or proceeding arising
out of or relating to this Agreement and each of CBS and the Stockholder hereby
irrevocably agrees that all claims in respect to such action or proceeding
shall be heard and determined exclusively in any Delaware state or federal
court. Each of CBS and the Stockholder agrees that a final judgment in any
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of CBS and the Stockholder irrevocably consents to the service of
the summons and complaint and any other process in any other action or
proceeding relating to the transactions contemplated by this Agreement, on
behalf of itself or its property, by personal delivery of copies of such
process to such party. Nothing in this Section 12 shall affect the right of any
party to serve legal process in any other manner permitted by law.
Section 13. Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 14. Amendments. This Agreement may be amended or modified, and the
terms and conditions hereof may be waived, only by a written instrument signed
by the parties hereto or, in the case of a waiver, by each party waiving
compliance.
Section 15. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
Section 16. WAIVER OF JURY TRIAL. EACH OF CBS AND THE STOCKHOLDER HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF CBS AND THE STOCKHOLDER IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
National Amusements, Inc.
/s/ Sumner M. Redstone
By___________________________________
Name: Sumner M. Redstone
Title: Chairman, President
& Chief Executive Officer
CBS Corporation
/s/ Fredric G. Reynolds
By___________________________________
Name: Fredric G. Reynolds
Title: Executive Vice President,
Chief Financial Officer
D-6
<PAGE>
ANNEX E
STOCKHOLDER AGREEMENT
By
NATIONAL AMUSEMENTS, INC.
(Stockholder)
and
CBS CORPORATION
Dated as of September 6, 1999
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STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of September 6, 1999 (this "Agreement"), by
NATIONAL AMUSEMENTS, INC., a Maryland corporation (the "Stockholder"), to and
for the benefit of CBS CORPORATION, a Pennsylvania corporation ("CBS"), and its
assigns by operation of law.
WHEREAS, as of the date hereof, the Stockholder owns of record and
beneficially 93,658,988 shares of Class A Common Stock (the "Viacom Class A
Common Stock"; such shares, together with any shares of Viacom Class A Common
Stock and any other shares of voting stock of Viacom (together with the Viacom
Class A Common Stock, the "Voting Stock") acquired by the Stockholder during
the Specified Period (as defined in Section 1 of this Agreement) being
collectively referred to herein as the "Stockholder's Shares"), par value $.01
per share, of VIACOM INC., a Delaware corporation ("Viacom");
WHEREAS, concurrently with the execution of this Agreement, CBS and Viacom
are entering into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"; capitalized terms used and not otherwise defined
herein shall have the respective meanings assigned to them in the Merger
Agreement), pursuant to which, upon the terms and subject to the conditions
thereof, CBS will be merged with and into Viacom (the "Merger"); and
WHEREAS, as a condition to the willingness of Viacom and CBS to enter into
the Merger Agreement, CBS has requested the Stockholder to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree as follows:
Section 1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "CBS Directors" shall mean (i) eight (8) of those directors serving
as members of the Board of Directors of CBS on the date of this Agreement
(or any Independent Directors elected or appointed prior to the Effective
Time to serve as a CBS Director) who are designated as such by the Board of
Directors of CBS prior to the Effective Time and (ii) any Replacement CBS
Director.
(b) "Independent Director" shall mean a disinterested, independent
person (determined in accordance with customary standards for independent
directors applicable to U.S. public companies).
(c) "Replacement CBS Director" shall mean a person qualifying as an
Independent Director and designated by a majority of the CBS Directors
remaining on the Board of Directors of Viacom to fill a seat on the Board
of Directors of Viacom vacated by a CBS Director or such a seat with
respect to which a CBS Director does not seek reelection.
(d) "Specified Independent Directors" shall mean the directors of Viacom
first elected after 1993 and who are not management of Viacom or the
Stockholder (together with any replacements of such persons).
(e) "Specified Period" shall mean the period of three years commencing
at the Effective Time.
Section 2. Covenants of the Stockholder.
(a) The Stockholder shall cause to be nominated and elected each CBS
Director, including any Replacement CBS Director, so that there are eight
CBS Directors on the Board of Directors of Viacom at all times;
(b) the Stockholder shall take all action necessary to ensure that any
seat on the Board of Directors of Viacom vacated by a CBS Director or such
a seat with respect to which a CBS Director elects not to seek reelection
is filled by a Replacement CBS Director immediately following the
designation of such person as such and notice thereof to the Stockholder;
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<PAGE>
(c) the Stockholder shall take all action necessary to ensure that no
CBS Director is removed as a director of Viacom unless such removal is for
cause and is approved by at least 14 members of the Board of Directors of
Viacom;
(d) in the event that any Specified Independent Director shall resign,
vacate his directorship, fail to stand as a director, fail to be elected as
a director, or otherwise be removed as or for any reason cease to be a
director of Viacom, the Stockholder shall take all necessary action to
cause such Specified Independent Director to be replaced by an Independent
Director; provided that any such replacement Specified Independent Director
shall be the chief executive officer, chief operating officer or chief
financial officer or former chief executive officer of a Fortune 500
company or a non-U.S. public company of comparable size;
(e) unless approved by a vote of at least 14 members of the Board of
Directors of Viacom, the Stockholder shall not take any action to amend,
modify or repeal Article XIII of the Restated Certificate of Incorporation
of Viacom (in the form attached as Exhibit A-1 of the Merger Agreement) or
Article VIII of the By-laws of Viacom (in the form attached as Exhibit A-2
of the Merger Agreement), or otherwise vote in favor of or take any action
or fail to take any action which would have the effect of eliminating,
limiting, restricting, avoiding or otherwise modifying the effect of any
provision contained therein (e.g., by creating a holding company structure
if the certificate of incorporation or similar document of such holding
company does not contain equivalent provisions). Without limiting the
generality of the foregoing, the Stockholder further agrees to take all
necessary action to ensure that such provisions shall be applicable to (i)
any successor to Viacom as the result of a merger, consolidation or other
business combination, whether or not Viacom is the surviving corporation in
such transaction, or otherwise and (ii) any corporation or other entity
with respect to which Viacom or its successor is or becomes a direct or
indirect subsidiary, and the Stockholder shall take all necessary action to
ensure that Viacom shall not be a party to any transaction which would not
comply with the provisions of this paragraph (e) unless such transaction is
approved by a vote of at least 14 members of the Board of Directors of
Viacom;
(f) the Stockholder shall take all necessary action, including without
limitation by voting and/or holding the Stockholder's Shares, to ensure
that the Stockholder or transferees thereof (in accordance with Section 4
of this Agreement) owns, beneficially and of record, on an outstanding and
fully diluted basis, a majority of the shares of Voting Stock, at all times
(and refrain from taking any action that would have the opposite result);
and
(g) each of the CBS Directors are intended third-party beneficiaries of
this Agreement and shall have the right to enforce the provisions of this
Agreement.
Section 3. No Inconsistent Agreements. The Stockholder hereby covenants and
agrees that the Stockholder shall not enter into any voting agreement or grant
a proxy or power of attorney with respect to the Stockholder's Shares which is
inconsistent with this Agreement.
Section 4. Transfer of Stockholder's Shares. The Stockholder hereby
covenants and agrees that the Stockholder shall not transfer record or
beneficial ownership of any of the Stockholder's Shares unless the transferee
unconditionally agrees in writing to be bound by the terms and conditions of
this Agreement.
Section 5. Representations and Warranties of Stockholder. The Stockholder
hereby represents and warrants to CBS as follows:
(a) Authority Relative to This Agreement. The Stockholder has all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of the Stockholder, and no other corporate proceedings on the
part of the Stockholder are necessary to authorize this Agreement or to
consummate such transactions. This
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<PAGE>
Agreement has been duly and validly executed and delivered by the
Stockholder and, assuming the due authorization, execution and delivery by
CBS, constitutes a legal, valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.
(b) No Conflict. (i) The execution and delivery of this Agreement by the
Stockholder do not, and the performance of this Agreement by the
Stockholder shall not, (A) conflict with or violate the Certificate of
Incorporation or By-laws or equivalent organizational documents of the
Stockholder, (B) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Stockholder or by which the
Stockholder's Shares are bound or affected or (C) result in any breach of
or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of or result in the
creation of a lien or encumbrance on any of the Stockholder's Shares
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which the Stockholder is a party or by which the Stockholder or the
Stockholder's Shares are bound or affected, except, in the case of clauses
(B) and (C), for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent or delay the performance by the
Stockholder of its obligations under this Agreement.
(ii) The execution and delivery of this Agreement by the Stockholder do
not, and the performance of this Agreement by the Stockholder shall not,
require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Entity except for applicable
requirements, if any, of the Securities Exchange Act of 1934, as amended,
and except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent or delay the performance by the Stockholder of its obligations
under this Agreement.
(c) Title to the Shares. As of the date hereof, the Stockholder is the
record and beneficial owner of 93,658,988 shares of Viacom Class A Common
Stock. The Stockholder's Shares are all the voting securities of Viacom
owned, either of record or beneficially, by the Stockholder. The
Stockholder's Shares are owned free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Stockholders voting rights, charges and other
encumbrances of any nature whatsoever. The Stockholder has the sole right
to vote and transfer the Stockholder's Shares, and the Stockholder has not
appointed or granted any proxy, which appointment or grant is still
effective, with respect to the Stockholder's Shares.
Section 6. Effectiveness; Termination. This Agreement shall become effective
as of the date of this Agreement, provided that the Stockholder shall have no
obligation under Section 2(a), (b), (c) and (e) until the commencement of the
Specified Period. This Agreement shall terminate at the close of business on
the final day of the Specified Period.
Section 7. Notices. All notices, requests, claims, demand and other
communications under this Agreement shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in Person, by facsimile, by courier service or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 7):
if to Stockholder
National Amusements, Inc.
200 Elm Street
Dedham, MA 02026
Telecopier No.: (781) 461-1412
Attention: General Counsel
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<PAGE>
with copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier No.: (212) 848-7179
Attention: Creighton O'M. Condon, Esq. and
Stephen R. Volk, Esq.
if to CBS:
CBS Corporation
51 West 52nd Street
35th Floor
New York, New York 10019
Telecopier No.: (212) 597-4031
Attention: Louis J. Briskman, Esq.
Executive Vice President
and General Counsel
with copies to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Telecopier No.: (212) 474-3700
Attention: Allen Finkelson, Esq. and
Scott A. Barshay, Esq.
Section 8. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law, or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the transactions contemplated by this Agreement be consummated as originally
contemplated to the fullest extent possible.
Section 9. Entire Agreement; Assignment. This Agreement and the Merger
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned, in whole or in part, by
either of the parties hereto without the prior written consent of the other
party hereto, except that CBS may assign, its rights, interests and obligations
under this Agreement to Viacom by operation of law. Any purported assignment in
violation of this Section 9 shall be void.
Section 10. Parties in Interest; Certain Events. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement except as set forth in Section 2(g). The Stockholder
agrees that this Agreement and the obligations hereunder shall attach to the
Stockholder's Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of the Stockholder's Shares shall pass, whether
by operation of law or otherwise, including the Stockholder's heirs, guardians,
administrators or successors. In the event of any stock
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<PAGE>
split, stock dividend, merger, reorganization, recapitalization or other change
in the capital structure of Viacom affecting the capital stock of Viacom, or
the acquisition of additional shares of Viacom Class A Common Stock or other
voting securities of Viacom by the Stockholder, the number of Stockholder's
Shares shall be adjusted appropriately and this Agreement and the obligations
hereunder shall attach to any additional shares of Viacom Class A Common Stock
or other voting securities of Viacom issued to or acquired by the Stockholder.
Section 11. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
Section 12. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to any
principles of conflicts of laws of such State.
Section 13. Consent to Jurisdiction. (a) Each of the Stockholder and CBS
hereby irrevocably submits to the exclusive jurisdiction of the courts of the
State of Delaware and to the jurisdiction of the United States District Court
for the State of Delaware, for the purpose of any action or proceeding arising
out of or relating to this Agreement and each of CBS and the Stockholder hereby
irrevocably agrees that all claims in respect to such action or proceeding
shall be heard and determined exclusively in any Delaware state or federal
court. Each of CBS and the Stockholder agrees that a final judgment in any
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of CBS and the Stockholder irrevocably consents to the service of
the summons and complaint and any other process in any other action or
proceeding relating to the transactions contemplated by this Agreement, on
behalf of itself or its property, by personal delivery of copies of such
process to such party. Nothing in this Section 13 shall affect the right of any
party to serve legal process in any other manner permitted by law.
Section 14. Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 15. Amendments. This Agreement may be amended or modified, and the
terms and conditions hereof may be waived, only (i) by a written instrument
signed by the parties hereto or, in the case of a waiver, by each party waiving
compliance and (ii) after the Effective Time if any such amendment or waiver is
concurred in by at least 14 members of the Board of Directors of Viacom.
Section 16. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
Section 17. WAIVER OF JURY TRIAL. EACH OF CBS AND THE STOCKHOLDER HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF CBS AND THE STOCKHOLDER IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
National Amusements, Inc.
/s/ Sumner M. Redstone
by __________________________________
Name: Sumner M. Redstone
Title: Chairman, President
& Chief Executive Officer
CBS Corporation
/s/ Fredric G. Reynolds
by __________________________________
Name: Fredric G. Reynolds
Title: Executive Vice President,
Chief Financial Officer
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ANNEX F
VIACOM INC.
September 6, 1999
Sumner M. Redstone
The Carlyle Hotel
Suite 3201
35 East 76th Street
New York, New York 10021
Dear Mr. Redstone:
This is to confirm our agreement that, effective as of the Effective Time
(as defined in the Agreement and Plan of Merger (the "Merger Agreement")
between Viacom Inc. ("Viacom") and CBS Corporation ("CBS"), dated as of the
date hereof) (the "Effective Date"), you shall be paid the following
compensation by Viacom, in addition to any compensation, benefits and
perquisites you have heretofore received from Viacom.
As the sole compensation for services to be rendered by you in all
capacities to Viacom, its subsidiaries and affiliates, you will receive the
following compensation.
(a) Salary: For all the services rendered by you in any capacity to Viacom,
its subsidiaries and affiliates, Viacom agrees to pay you a base salary at the
rate of $1,000,000 per annum ("Salary"), payable in accordance with Viacom's
then effective payroll practices.
(b) Bonus Compensation: In addition to your Salary, you shall be entitled to
receive bonus compensation for each of the calendar years during your
employment with Viacom, determined and payable as follows ("Bonus"):
(i) Your Bonus for each of the calendar years during your employment
with Viacom will be based upon a measurement of performance against
objectives in accordance with Viacom's Short-Term Incentive Plan and its
Senior Executive Short-Term Incentive Plan, as the same may be amended from
time to time (collectively, the "STIP"), which objectives shall be no less
favorable to you than the objectives used to determine the amount of bonus
payable to any other executive of Viacom whose bonus is based in whole or
in part on corporate performance and who participates in the STIP.
(ii) Your Target Bonus and Maximum Bonus opportunity for each calendar
year (prorated for calendar year 2000 by multiplying such amount by a
fraction, the numerator of which is the number of days in 2000 following
the Effective Date, and the denominator of which is 365) during your
employment with Viacom shall be as follows:
<TABLE>
<CAPTION>
Year Target Maximum
---- ---------- -----------
<S> <C> <C>
2000.................................................. $5,000,000 $10,000,000
2001.................................................. $5,500,000 $11,000,000
2002.................................................. $6,050,000 $12,100,000
2003 and thereafter................................... $6,655,000 $13,310,000
</TABLE>
(iii) Your Bonus for any calendar year shall be payable by February 28
of the following year.
(c) Deferred Compensation: In addition to your Salary and Bonus, you shall
earn, in respect of calendar year 2000 and each calendar year thereafter during
your employment with Viacom, an additional amount ("Deferred Compensation"),
the payment of which (together with the return thereon as provided in this
paragraph (c)) shall be deferred until January of the first calendar year
following the year in which you cease to be an "executive officer" of Viacom,
as defined for purposes of the Securities Exchange Act of 1934, as
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<PAGE>
amended. The amount of Deferred Compensation for calendar year 2000 shall be
$2,000,000, prorated by multiplying such amount by a fraction, the numerator of
which is the number of days in 2000 following the Effective Date, and the
denominator of which is 365. The amount of Deferred Compensation for calendar
years 2001 through 2003 shall be subject to annual increases each January 1st,
commencing January 1, 2001, in an amount equal to 10% of the sum of your Salary
and Deferred Compensation for the preceding year. Deferred Compensation shall
be credited to a bookkeeping account maintained by Viacom on your behalf, the
balance of which account shall periodically be credited (or debited) with
deemed positive (or negative) return calculated in the same manner, and at the
same times, as the deemed return on your account under the excess 401(k) plan
of Viacom (as such plan may be amended from time to time) is determined or, if
you do not participate in such plan, with a return to be mutually agreed by the
Company and you. Viacom's obligation to pay the Deferred Compensation
(including the return thereon provided for in this paragraph (c)) shall be an
unfunded obligation to be satisfied from the general funds of Viacom.
(d) Grant: You will be awarded a grant (the "Grant") under Viacom's 1997
Long-Term Management Incentive Plan (the "1997 LTMIP") of stock options to
purchase 2,000,000 shares of Viacom's Class B Common Stock, effective as of the
Effective Date, with an exercise price equal to the fair-market value of
Viacom's Class B Common Stock on the date of the Grant. The Grant shall vest in
three equal installments on the first, second and third anniversaries of the
Effective Date. Such stock options shall be subject to terms identical in all
material respects to those applicable to the grant to be made to Mr. Karmazin
as of the Effective Date.
If you agree with the foregoing terms, please execute this letter in the
space provided below and return a copy to the undersigned.
VIACOM Inc.
/s/ Philippe P. Dauman
By: _________________________________
Philippe P. Dauman
Deputy Chairman
ACCEPTED AND AGREED:
/s/ Sumner M. Redstone
_____________________________________
Sumner M. Redstone
September 6, 1999
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ANNEX G
VIACOM INC.
September 6, 1999
Mel Karmazin
1 Central Park West
New York, New York 10023
Dear Mel:
Viacom Inc. ("Viacom"), having an address at 1515 Broadway, New York, New
York 10036, agrees to employ you and you agree to accept such employment upon
the following terms and conditions:
1. Term. The term of your employment hereunder shall commence on the
Effective Time (as defined in the Agreement and Plan of Merger between
Viacom and CBS Corporation ("CBS"), dated as of the date hereof (the
"Merger Agreement"), pursuant to which CBS shall merge with and into
Viacom) (the "Effective Date") and, unless terminated by Viacom or you
pursuant to paragraph 8 hereof, shall continue through and until December
31, 2003. The period from the Effective Date through December 31, 2003
shall hereinafter be referred to as the "Employment Term," notwithstanding
any earlier termination pursuant to paragraph 9. In the event that the
Merger Agreement is terminated or otherwise abandoned, this Agreement shall
be void ab initio.
2. Duties. During the Employment Term, you agree to devote your entire
business time, attention and energies to the business of Viacom and its
subsidiaries. This is not intended to prevent you from engaging in other
activities that do not conflict with or interfere with the performance of
your duties and responsibilities hereunder. You will be President and Chief
Operating Officer of Viacom reporting directly and solely to Sumner M.
Redstone, the Chairman of the Board and Chief Executive Officer of Viacom
(the "Chairman"), and, upon the termination of the Chairman's service as
Chief Executive Officer during the Employment Term, you shall be appointed
the Chief Executive Officer. You will perform such duties and have such
responsibilities set forth in Article XIII of the Amended and Restated
Certificate of Incorporation of Viacom to be effective as of the Effective
Date (the "Certificate of Incorporation"), a copy of which is attached
hereto as Exhibit A. You will have such authority as is necessary for the
performance of your obligations hereunder. You shall serve as a member of
the Boards of Directors of Viacom and Circular. Your principal place of
business shall be at Viacom's headquarters in the New York City
metropolitan area and you shall not be required to relocate outside of the
New York City metropolitan area. You shall be entitled to continue to serve
on the corporate, charitable and educational boards of which you are a
member as of the date hereof.
3. Compensation. As the sole compensation for services to be rendered by
you during the Employment Term in all capacities to Viacom, its
subsidiaries and affiliates, you will receive the following compensation.
(a) Salary: For all the services rendered by you in any capacity to
Viacom, its subsidiaries and affiliates, Viacom agrees to pay you a base
salary at the rate of $1,000,000 per annum ("Salary"), payable in
accordance with Viacom's then effective payroll practices.
(b) Bonus Compensation: In addition to your Salary, you shall be
entitled to receive bonus compensation for each of the calendar years
during the Employment Term, determined and payable as follows ("Bonus"):
(i) Your Bonus for each of the calendar years during the Employment
Term will be based upon a measurement of performance against objectives
in accordance with Viacom's Short-Term Incentive Plan and its Senior
Executive Short-Term Incentive Plan, as the same may be amended from
time to time
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(collectively, the "STIP"), which objectives shall be no less favorable
to you than the objectives used to determine the amount of bonus payable
to any other executive of Viacom whose bonus is based in whole or in
part on corporate performance and who participates in the STIP.
(ii) Your Target Bonus and Maximum Bonus opportunity for each
calendar year (prorated for calendar year 2000 by multiplying such
amount by a fraction, the numerator of which is the number of days in
2000 following the Effective Date, and the denominator of which is 365)
during the Employment Term shall be as follows:
<TABLE>
<CAPTION>
Year Target Maximum
---- ---------- -----------
<S> <C> <C>
2000............................................... $5,000,000 $10,000,000
2001............................................... $5,500,000 $11,000,000
2002............................................... $6,050,000 $12,100,000
2003............................................... $6,655,000 $13,310,000
</TABLE>
(iii) Your Bonus for any calendar year shall be payable by February
28 of the following year (even if not during the Employment Term).
(c) Deferred Compensation: In addition to your Salary and Bonus, you
shall earn, in respect of calendar year 2000 and each calendar year during
the Employment Term after 2000, an additional amount ("Deferred
Compensation"), the payment of which (together with the return thereon as
provided in this paragraph 3(c)) shall be deferred until January of the
first calendar year following the year in which you cease to be an
"executive officer" of Viacom, as defined for purposes of the Securities
Exchange Act of 1934, as amended. The amount of Deferred Compensation for
calendar year 2000 shall be $2,000,000, prorated by multiplying such amount
by a fraction, the numerator of which is the number of days in 2000
following the Effective Date, and the denominator of which is 365. The
amount of Deferred Compensation for calendar years 2001 through 2003 shall
be subject to annual increases each January 1st, commencing January 1,
2001, in an amount equal to 10% of the sum of your Salary and Deferred
Compensation for the preceding year. Deferred Compensation shall be
credited to a bookkeeping account maintained by Viacom on your behalf, the
balance of which account shall periodically be credited (or debited) with
deemed positive (or negative) return calculated in the same manner, and at
the same times, as the deemed return on your account under the excess
401(k) plan of Viacom (as such plan may be amended from time to time) is
determined (it being understood and agreed that if at any time during which
the Deferred Compensation remains payable your excess 401(k) account
balance is distributed in full to you, your Deferred Compensation account
shall continue to be credited or debited with a deemed return based on the
investment portfolio in which your excess 401(k) account was notionally
invested immediately prior to its distribution). Viacom's obligation to pay
the Deferred Compensation (including the return thereon provided for in
this paragraph 3(c)) shall be an unfunded obligation to be satisfied from
the general funds of Viacom.
(d) Grant: You will be awarded a grant (the "Grant") under Viacom's 1997
Long-Term Management Incentive Plan (the "1997 LTMIP") of stock options to
purchase 2,000,000 shares of Viacom's Class B Common Stock (such number to
be adjusted for any stock split, stock dividend or other similar
transaction that would result in an adjustment under the terms of the 1997
LTMIP if such options were granted on the date hereof), effective as of the
Effective Date, with an exercise price equal to the fair-market value of
Viacom's Class B Common Stock on the Effective Date. Except as provided
herein, the Grant shall be made in accordance with the standard terms of
stock option awards under the 1997 LTMIP (a copy of the standard form of
such stock option awards is attached hereto as Exhibit B), shall vest in
three equal installments on the first, second and third anniversaries of
the Effective Date and shall be for a ten-year term. In the event you cease
to be employed by the Company for any reason upon the expiration of the
Employment Term, you shall be able to exercise the Grant for two years
following such termination.
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<PAGE>
4. Benefits.
(a) You shall be entitled to participate in such medical, dental and life
insurance, 401(k), pension and other plans as Viacom may have or establish from
time to time and in which any other Viacom executives are eligible to
participate. The foregoing, however, shall not be construed to require Viacom
to establish any such plans or to prevent the modification or termination of
such plans once established, and no such action or failure thereof shall affect
this Agreement; provided, however, that no modification of any plans in which
you participate shall be made which results in treating you less favorably than
other senior executives of Viacom. It is further understood and agreed that all
benefits (including without limitation, Viacom's Pension and Excess Pension
Plans, short term disability program, Long-Term Disability program and any
supplement thereto, life insurance and any applicable death benefit) you may be
entitled to as an employee of Viacom shall be based upon your Salary and, your
Deferred Compensation, as set forth in paragraphs 3(a) and (c) hereof, and not
upon any bonus compensation due, payable or paid to you hereunder, except where
the benefit plan expressly provides otherwise. In addition, it is hereby
expressly agreed that you shall retain all benefits that you have accrued under
any compensation and benefit plans of CBS. You shall be entitled to four (4)
weeks vacation.
(b) Viacom shall provide you with no less than Five Million Dollars
($5,000,000) of term life insurance during the Employment Term. You shall have
the right to assign the policy for such life insurance to your spouse or issue
or to a trust or trusts primarily for the benefit of your spouse and/or issue.
(c) In addition to the benefits described in paragraphs 4(a) and (b) hereof,
Viacom agrees that you shall be credited for service accrued or deemed accrued
prior to the Effective Date with CBS or any of its subsidiaries or predecessors
for all purposes under any employee benefit plans, programs or arrangement
established or maintained by Viacom or any of its subsidiaries; provided,
however that such crediting of service shall not operate to duplicate any
benefit or the funding of any such benefit.
(d) Notwithstanding anything herein to the contrary, if it is determined
that any payment or benefit provided to you (whether hereunder or otherwise,
and including any payments or benefits resulting from the transactions
contemplated by the Merger Agreement) would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties with respect
to such excise tax (such excise tax, together with any interest or penalties
thereon, is herein referred to as an "Excise Tax"), then you shall be entitled
to an additional cash payment (a "Gross-Up Payment") in an amount that will
place you in the same after-tax economic position that you would have enjoyed
if the Excise Tax had not applied to the payment. The amount of the Gross-Up
Payment shall be determined by Viacom's regular independent auditors. No Gross-
Up Payments shall be payable hereunder if Viacom's auditors determine that such
payments are not subject to an Excise Tax. Viacom's auditors shall be paid by
Viacom for services performed hereunder.
5. Business Expenses. During the Employment Term, you shall be reimbursed
for such reasonable travel and other expenses incurred in the performance of
your duties hereunder as are customarily reimbursed to senior executives of
Viacom.
6. Perquisites. You shall be eligible for all perquisites made available by
Viacom from time to time during the Employment Term to other senior executives
of Viacom. Without limiting the generality of the foregoing, you shall be
entitled to (i) a car allowance and insurance in accordance with Viacom's
policy and (ii) use of a private airplane on a basis no less favorable than as
provided by CBS to you as of the date of execution of this Agreement, or, if
more beneficial to you, as provided by Viacom to any of its senior executives.
7. Exclusive Employment, Confidential Information, Etc.
(a) Non-Competition. You agree that your employment hereunder is on an
exclusive basis, and that during the period of your employment hereunder and,
in the event during the Employment Term, of (x) a termination of your
employment pursuant to paragraph 9(a) hereof or (y) your resignation without
Good Reason, for a period of eighteen (18) months following the date of such
termination or resignation, as the case
G-3
<PAGE>
may be (the "Non-Compete Period"), you will not engage in any other business
activity which is in conflict with your duties and obligations hereunder. You
agree that during the Non-Compete Period you shall not directly or indirectly
engage in or participate as an officer, employee, director, agent of or
consultant for any business directly competitive with that of Viacom, nor shall
you make any investments in any company or business competing with Viacom;
provided, however, that nothing herein shall prevent you from investing as less
than a two (2%) percent shareholder in the securities of any company listed on
a national securities exchange or quoted on an automated quotation system.
(b) Confidential Information. You agree that you shall not, during the
Employment Term or at any time thereafter, use for your own purposes, or
disclose to or for the benefit of any third party, any trade secret or other
confidential information of Viacom or any of its affiliates or predecessors
(except as may be required by law or in the performance of your duties
hereunder consistent with Viacom's policies) and that you will comply with any
confidentiality obligations of Viacom to a third party, whether under agreement
or otherwise. Notwithstanding the foregoing, confidential information shall be
deemed not to include information which (i) is or becomes generally available
to the public other than as a result of a disclosure by you or any other person
who directly or indirectly receives such information from you or at your
direction or (ii) is or becomes available to you on a non-confidential basis
from a source which is entitled to disclose it to you.
(c) No Employee Solicitation. You agree that, during the Employment Term and
for one (1) year thereafter, you shall not, directly or indirectly, engage,
employ, or solicit the employment of any person who is then or has been within
six (6) months prior thereto, an employee of Viacom or any of Viacom's
affiliates or predecessors.
(d) Viacom Ownership. The results and proceeds of your services hereunder,
including, without limitation, any works of authorship resulting from your
services during your employment with Viacom and/or any of its affiliates or
predecessors and any works in progress, shall be works-made-for-hire and Viacom
shall be deemed the sole owner throughout the universe of any and all rights of
whatsoever nature therein, whether or not now or hereafter known, existing,
contemplated, recognized or developed, with the right to use the same in
perpetuity in any manner Viacom determines in its sole discretion without any
further payment to you whatsoever. If, for any reason, any of such results and
proceeds shall not legally be a work-for-hire and/or there are any rights which
do not accrue to Viacom under the preceding sentence, then you hereby
irrevocably assign and agree to assign any and all of your right, title and
interest thereto, including, without limitation, any and all copyrights,
patents, trade secrets, trademarks and/or other rights of whatsoever nature
therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed to Viacom, and Viacom shall have the right to use the
same in perpetuity throughout the universe in any manner Viacom determines
without any further payment to you whatsoever. You shall, from time to time, as
may be requested by Viacom, do any and all things which Viacom may deem useful
or desirable to establish or document Viacom's exclusive ownership of any and
all rights in any such results and proceeds, including, without limitation, the
execution of appropriate copyright and/or patent applications or assignments.
To the extent you have any rights in the results and proceeds of your services
that cannot be assigned in the manner described above, you unconditionally and
irrevocably waive the enforcement of such rights. This paragraph 7(d) is
subject to, and shall not be deemed to limit, restrict, or constitute any
waiver by Viacom of any rights of ownership to which Viacom may be entitled by
operation of law by virtue of Viacom or any of its affiliates or predecessors
being your employer.
(e) Litigation. You agree that, during the Employment Term, for one (1) year
thereafter and, if longer, during the pendancy of any litigation or other
proceeding, (i) you shall not communicate with anyone (other than your own
attorneys and tax advisors and, except to the extent required by law or
necessary in the performance of your duties hereunder) with respect to the
facts or subject matter of any pending or potential litigation, or regulatory
or administrative proceeding involving any of Viacom's affiliates or
predecessors, other than any litigation or other proceeding in which you are a
party-in-opposition, without giving prior notice to Viacom or Viacom's counsel,
and (ii) in the event that any other party attempts to obtain information or
documents from you with respect to matters possibly related to such litigation
or other proceeding, you shall promptly so notify Viacom's counsel unless you
are prohibited from doing so under applicable law.
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<PAGE>
(f) No Right to Write Books, Articles, Etc. During the Employment Term,
except as authorized by Viacom, you shall not prepare or assist any person or
entity in the preparation of any books, articles, television or motion picture
productions or other creations, concerning Viacom or any of Viacom's affiliates
or predecessors or any of their officers, directors, agents, employees,
suppliers or customers.
(g) Return of Property. All documents, data, recordings, or other property,
whether tangible or intangible, including all information stored in electronic
form, obtained or prepared by or for you and utilized by you in the course of
your employment with Viacom or any of its affiliates or predecessors shall
remain the exclusive property of Viacom. In the event of the termination of
your employment for any reason, Viacom reserves the right, to the extent
permitted by law and in addition to any other remedy Viacom may have, to deduct
from any monies otherwise payable to you the following: (i) the full amount of
any debt you owe to Viacom or any of its affiliates or predecessors at the time
of or subsequent to the termination of your employment with Viacom, and (ii)
the value of the Viacom property which you retain in your possession after the
termination of your employment with Viacom. In the event that the law of any
state or other jurisdiction requires the consent of an employee for such
deductions, this Agreement shall serve as such consent.
(h) Non-Disparagement. You and, to the extent set forth in the next
sentence, Viacom agree that each party shall not, during the Employment Term
and for one (1) year thereafter criticize, ridicule or make any statement which
disparages or is derogatory of the other party in any communications with any
customer or client. Viacom's obligations under the preceding sentence shall be
limited to communications by its senior corporate executives having the rank of
Senior Vice President or above.
(i) Injunctive Relief. Viacom has entered into this Agreement in order to
obtain the benefit of your unique skills, talent, and experience. You
acknowledge and agree that any violation of paragraphs 7(a) through (k) hereof
will result in irreparable damage to Viacom, and, accordingly, Viacom may
obtain injunctive and other equitable relief for any breach or threatened
breach of such paragraphs, in addition to any other remedies available to
Viacom.
(j) Survival; Modification of Terms. Your obligations under paragraphs 7(a)
through (i) hereof shall remain in full force and effect for the entire period
provided therein notwithstanding the termination of the Employment Term
pursuant to paragraph 9 hereof or otherwise. You and Viacom agree that the
restrictions and remedies contained in paragraphs 7(a) through (k) are
reasonable and that it is your intention and the intention of Viacom that such
restrictions and remedies shall be enforceable to the fullest extent
permissible by law. If it shall be found by a court of competent jurisdiction
that any such restriction or remedy is unenforceable but would be enforceable
if some part thereof were deleted or the period or area of application reduced,
then such restriction or remedy shall apply with such modification as shall be
necessary to make it enforceable.
(k) No Selling of Viacom Stock without Board Consent. In consideration of
your employment hereunder, you hereunder agree that, except as otherwise
provided herein, during the period commencing on the date hereof and ending on
the third anniversary of the Effective Date, you shall not sell or dispose of
(nor exercise any limited rights or stock appreciation rights with respect to)
any shares of capital stock of CBS or Viacom held by you, your immediate family
members (which does not include your former spouse), or trusts or other
entities in which you or your immediate family members have a controlling
interest or are beneficiaries (together, the "Family Affiliates" and each, a
"Family Affiliate") that you or any Family Affiliate now hold, or in the future
may acquire, including, without limitation, shares that you or any Family
Affiliate receive pursuant to the transactions contemplated by the Merger
Agreement (whether in exchange for shares of CBS common stock or otherwise),
under any stock options or other equity-based compensation awards made to you
by CBS or by Viacom under this Agreement or under any other agreement awarding
you shares of capital stock of Viacom, without first obtaining the consent of
(i) if prior to the Effective Date, the Chairman, or (ii) if on or following
the Effective Date, fourteen of the eighteen members of the Board of Viacom.
This restriction shall lapse in the event that, during the Employment Term, you
are terminated without Cause, resign for Good Reason, die or become disabled.
Notwithstanding the foregoing, between the first anniversary of the Effective
Date and the second anniversary of the Effective Date you and the Family
Affiliates collectively may sell or
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dispose of a number of shares equal to up to 10% of the shares held by you and
the Family Affiliates on the Effective Date (including, for this purpose, the
shares underlying any equity-based compensation awards held by you on the
Effective Date, but not shares underlying any equity-based compensation awards
granted to you pursuant to paragraph 3(d) or at any time after the Effective
Date). Between the second anniversary of the Effective Date and the third
anniversary of the Effective Date, you and the Family Affiliates collectively
may sell or dispose of a number of shares equal to up to 10% of the shares held
by you and the Family Affiliates on the second anniversary of the Effective
Date (including, for this purpose, the shares underlying any equity-based
compensation awards held by you on the Effective Date, but not shares
underlying any equity-based compensation awards granted to you pursuant to
paragraph 3(d) or at any time after the Effective Date), plus any shares that
were not sold or disposed of by you and the Family Affiliates collectively
under the prior year's limits. Notwithstanding the foregoing, you may transfer
shares to Family Affiliates, but such shares shall remain subject to the
restrictions contained in this paragraph 7(k).
8. Incapacity. In the event you become totally medically disabled at any
time during the Employment Term and are not expected to be able to
substantially perform your duties for a six (6) consecutive month period, the
Chairman, at any time after such disability has in fact continued for 60
consecutive days, may determine that Viacom requires such duties and
responsibilities be performed by another executive. In the event you become
disabled, you will first receive benefits under Viacom's short-term disability
program for the first 26 weeks of consecutive absence. Thereafter, you will be
eligible to receive benefits under Viacom's Long-Term Disability ("LTD")
program or any supplement thereto, in accordance with its terms.
Upon receipt of benefits under the LTD program you will also be entitled to
receive, subject to applicable withholding taxes:
(i) a Target Bonus prorated for the portion of calendar year through the
date on which you become eligible to receive benefits under the LTD
program, payable at the time that the Bonus for such calendar year would
otherwise be paid;
(ii) prorated Deferred Compensation for the calendar year in which such
benefits commence and Deferred Compensation attributable to prior calendar
years, payable, together with the return thereon as provided in paragraph
3(c), prior to January 31 of the calendar year following the calendar year
in which such benefits commence;
(iii) stock options granted to you under the 1997 LTMIP which are
exercisable on or prior to the date as of which benefits commence under the
LTD program or that would have vested and become exercisable on or before
the last day of the Employment Term will be exercisable for two (2) years
after the date as of which such benefits commence or, if later, until
December 31, 2003, but in no event may such stock options be exercised
following the expiration date of such stock options; and
In the event that you thereafter become able to substantially perform your
duties, you will then be entitled to receive from Viacom your Salary and
Deferred Compensation at the rate being paid to you immediately prior to the
commencement of such disability, and your Bonus calculated pursuant to
paragraph 3(b) hereof, through the remainder of the Employment Term reduced by
any employment compensation earned by you for any work or service performed for
any other person.
9. Termination.
(a) Termination for Cause. Viacom may, at its option, terminate your
employment under this Agreement forthwith for "cause", and Viacom shall
thereafter have no further obligations under this Agreement, including, without
limitation, any obligation to pay Salary or Bonus or provide benefits under
this Agreement; provided, however, that Viacom may terminate this Agreement
pursuant to this paragraph only with the affirmative vote of fourteen of the
eighteen members of the Board of Viacom at a meeting called for such purpose at
which you and a counsel of your choosing shall have an opportunity to be heard.
For purposes of this Agreement, termination of this Agreement for "cause" shall
mean termination for embezzlement, fraud or other conduct
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which would constitute a felony, conviction of a felony, or willful
unauthorized disclosure of confidential information, or if you at any time
materially breach this Agreement (including, without limitation, your failure,
neglect of or refusal to substantially perform your obligations hereunder as
set forth in paragraphs 2, 7(k) and 12 hereof), except in the event of your
disability as set forth in paragraph 8. Anything herein to the contrary
notwithstanding, Viacom will give you written notice prior to terminating this
Agreement for your material breach setting forth the exact nature of any
alleged breach and the conduct required to cure such breach. Except for a
breach which by its nature cannot be cured, you shall have ten (10) business
days from the giving of such notice within which to cure and within which
period Viacom cannot terminate this Agreement for the stated reasons.
(b) Good Reason Termination. You may terminate your employment hereunder for
"Good Reason" at any time during the Employment Term by written notice to
Viacom not more than thirty (30) days after the occurrence of the event
constituting "Good Reason". Such notice shall state an effective date no
earlier than thirty (30) business days after the date it is given. Viacom shall
have ten (10) business days from the giving of such notice within which to
cure. Good Reason shall mean any of the following, without your prior written
consent, other than in connection with the termination of your employment for
"cause" (as defined above) or in connection with your permanent disability:
(i) the assignment to you by Viacom of duties substantially inconsistent
with your positions, duties, responsibilities, titles or offices, the
withdrawal of a material part of your responsibilities or a change in your
reporting relationship, as set forth in paragraph 2 or in Article XIII of
the Certificate of Incorporation as in effect on the Effective Date;
(ii) a reduction by Viacom in your Salary or Target Bonus as in effect
at the date hereof or as the same may be increased from time to time during
the Employment Term;
(iii) Viacom's requiring you to be based anywhere other than the New
York City metropolitan area, except for required travel on Viacom's
business to any extent substantially consistent with business travel
obligations of other senior executives of Viacom;
(iv) Viacom's violation of Article XIII of the Certificate of
Incorporation; or
(v) the material breach by Viacom of its obligations hereunder.
(c) Termination Without Cause. Viacom may terminate your employment under
this Agreement without "cause" (as defined above) at any time during the
Employment Term by written notice to you; provided, however, that Viacom may
terminate your employment pursuant to this paragraph only with the affirmative
vote of fourteen of the eighteen members of the Board of Viacom.
(d) Termination Payments, Etc. In the event that your employment terminates
pursuant to paragraph 9(b) or 9(c) hereof, you shall be entitled to receive,
subject to applicable withholding taxes:
(i) your Salary as provided in paragraph 3(a) until the end of the
Employment Term, payable in accordance with Viacom's then effective payroll
practices;
(ii) bonus compensation for each calendar year during the Employment
Term equal to your Target Bonus as set forth in paragraph 3(b);
(iii) Deferred Compensation for each calendar year during the Employment
Term as set forth in paragraph 3(c); Deferred Compensation attributable to
the calendar year in which the termination pursuant to paragraph 9(b) or
9(c) hereof occurs and to prior calendar years shall be payable, together
with the return thereon as provided in paragraph 3(c), prior to January 31
of the calendar year following such termination; and Deferred Compensation
attributable to subsequent calendar years shall be payable, together with
the return thereon as provided in paragraph 3(c), prior to January 31 of
each such following calendar year;
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(iv) your perquisites as provided in paragraph 6 until the end of the
Employment Term, payable in accordance with Viacom's then effective payroll
practices;
(v) medical and dental insurance coverage until the end of the
Employment Term or, if earlier, the date on which you become eligible for
medical and dental coverage from a third party employer; during this
period, Viacom will pay an amount equal to the applicable COBRA premiums
(or such other amounts as may be required by applicable law) (which amount
will be included in your income for tax purposes to the extent required by
applicable law); at the end of such period, you may elect to continue your
medical and dental insurance coverage at your own expense for the balance,
if any, of the period required by law;
(vi) life insurance coverage as set forth in paragraph 4(b) until the
end of the Employment Term (the amount of such insurance to be reduced by
the amount of any insurance provided by a new employer without cost to
you);
(vii) stock options granted to you under the 1997 LTMIP which are
exercisable on or prior to the date of the termination of your employment
under paragraph 9(b) or 9(c) or that would have vested and become
exercisable on or before the last day of the Employment Term will be
exercisable for two (2) years after the date of such termination or, if
later, until December 31, 2003, but in no event may such stock options be
exercised following the expiration date of such stock options;
(viii) a supplemental pension benefit calculated in accordance with the
terms of the Excess Pension Plan and paragraph 4(c) as though you were
employed through the end of the Employment Term; and
(ix) provision of an appropriate office and secretarial assistance for
up to six (6) months after the termination of your employment.
The payments provided for in (i) above are in lieu of any severance or
income continuation or protection under any Viacom plan that may now or
hereafter exist. The payments and benefits to be provided pursuant to this
paragraph 9(d) shall constitute liquidated damages, and shall be deemed to
satisfy and be in full and final settlement of all obligations of Viacom to you
under this Agreement.
(e) Termination of Benefits. Notwithstanding anything in this Agreement to
the contrary (except as otherwise provided in paragraph 9(d) with respect to
medical, dental and life insurance and Excess Pension Plan benefits or in
paragraphs 7 and 8 with respect to continued exercisability of options),
coverage under all Viacom benefit plans and programs (including, without
limitation, vacation, 401(k), excess 401(k) and pension plans, LTD and
accidental death and dismemberment and business travel and accident insurance)
will terminate upon the termination of your employment except to the extent
otherwise expressly provided in such plans or programs.
10. Death. If you die prior to the end of the Employment Term, your
beneficiary or estate shall be entitled to receive your Salary up to the date
on which the death occurs, a pro-rated Target Bonus and pro-rated Deferred
Compensation for the calendar year in which the death occurs and Deferred
Compensation attributable to prior calendar years payable, together with the
return thereon as provided in paragraph 3(c), prior to January 31 of the
following calendar year. In addition, the vesting of all stock options granted
under the 1997 LTMIP that are not exercisable as of the date on which the death
occurs shall be accelerated, and your beneficiary or estate shall be entitled
to exercise such stock options, together with all stock options that are
exercisable as of the date of your death, for two (2) years after the date of
death or, if later, until December 31, 2003, but in no event may such stock
options be exercised following the expiration date of such stock options.
11. Section 317 and 507 of the Federal Communications Act. You represent
that you have not accepted or given nor will you accept or give, directly or
indirectly, any money, services or other valuable consideration from or to
anyone other than Viacom for the inclusion of any matter as part of any film,
television program or other production produced, distributed and/or developed
by Viacom and/or any of its affiliates or predecessors.
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12. Equal Opportunity Employer. You acknowledge that Viacom is an equal
opportunity employer. You agree that you will comply with Viacom policies
regarding employment practices and with applicable federal, state and local
laws prohibiting discrimination on the basis of race, color, creed, national
origin, age, sex or disability.
13. Indemnification.
(a) Viacom shall indemnify and hold you harmless, to the maximum extent
permitted by law and by the Certificate of Incorporation and/or the By-laws of
Viacom, against judgments, fines, amounts paid in settlement of and reasonable
expenses incurred by you in connection with the defense of any action or
proceeding (or any appeal therefrom) in which you are a party by reason of your
position as President and Chief Operating Officer or any other office you may
hold with Viacom or its affiliates or by reason of any prior positions held by
you with Viacom or any of its affiliates or predecessors or for any acts or
omissions made by you in good faith in the performance of any of your duties as
an officer of Viacom.
(b) To the extent that Viacom maintains officers' and directors' liability
insurance, you will be covered under such policy.
14. Notices. All notices required to be given hereunder shall be given in
writing, by personal delivery or by mail at the respective addresses of the
parties hereto set forth above, or at such other address as may be designated
in writing by either party. Any notice given by mail shall be deemed to have
been given three days following such mailing.
15. Assignment. This is an Agreement for the performance of personal
services by you and may not be assigned by you or Viacom except that Viacom may
assign this Agreement to any affiliate of or any successor in interest to
Viacom.
16. New York Law, Etc. This Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of New York applicable to
contracts entered into and performed entirely therein. Any action to enforce
this Agreement shall be brought in the state or federal courts located in the
City of New York.
17. No Implied Contract. Nothing contained in this Agreement shall be
construed to impose any obligation on Viacom to renew this Agreement or any
portion thereof. The parties intend to be bound only upon execution of a
written agreement and no negotiation, exchange of draft or partial performance
shall be deemed to imply an agreement. Neither the continuation of employment
nor any other conduct shall be deemed to imply a continuing agreement upon the
expiration of this Agreement.
18. Entire Understanding. This Agreement contains the entire understanding
of the parties hereto relating to the subject matter herein contained, and can
be changed only by a writing signed by both parties hereto.
19. Void Provisions. If any provision of this Agreement, as applied to
either party or to any circumstances, shall be adjudged by a court to be void
or unenforceable, the same shall be deemed stricken from this Agreement and
shall in no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement.
20. Supersedes Previous Agreement. Effective as of the Effective Date, this
Agreement shall supersede and cancel all prior agreements relating to your
employment by Viacom or any of its affiliates and predecessors, including,
without limitation, the employment agreement with Westinghouse Electric
Corporation, dated as of June 20, 1996, and any amendments thereto.
Notwithstanding the preceding sentence, this Agreement is not intended, and
shall not be construed, to affect your rights in any compensation or benefits
that have been granted or accrued prior to the beginning of the Employment
Term.
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If the foregoing correctly sets forth our understanding, please sign one
copy of this letter and return it to the undersigned, whereupon this letter
shall constitute a binding agreement between us.
Very truly yours,
Viacom Inc.
/s/ Michael D. Fricklas
By: _________________________________
Michael D. Fricklas
Senior Vice President, General
Counsel and Secretary
ACCEPTED AND AGREED:
/s/ Mel Karmazin
_____________________________________
Mel Karmazin
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EXHIBIT A
Article XIII of the Amended and Restated Certificate of Incorporation
(attached)
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EXHIBIT B
Form of the Award Agreement
(attached)
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EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
VIACOM INC.
ARTICLE XIII
Governance of the Corporation
During Specified Period
(1) Definitions. As used in this Article XIII, the following terms shall
have the following meanings:
(a) "CBS" shall mean CBS Corporation, a Pennsylvania corporation,
immediately prior to the Effective Time.
(b) "CBS Directors" shall mean (i) eight (8) of those directors serving
as members of the Board of Directors of CBS on September 6, 1999 (or any
Independent Directors elected or appointed prior to the Effective Time to
serve as a CBS Director) who are designated as such by the Board of
Directors of CBS prior to the Effective Time and (ii) any Replacement CBS
Director (as defined in Section 2(b) of this Article XIII).
(e) "CEO" shall mean the Chief Executive Officer.
(d) "COO" shall mean the President and Chief Operating Officer.
(e) "Effective Time" shall mean the time of filing of the Certificate of
Merger to which this Certificate of Incorporation is attached.
(f) "Independent Director" shall mean a disinterested, independent
person (determined in accordance with customary standards for independent
directors applicable to U.S. public companies).
(g) "NAI" shall mean National Amusements, Inc., a Maryland corporation,
and its successors or assigns.
(h) "Specified Independent Directors" shall mean the directors of the
Corporation first elected after 1993 and who are not management of the
Corporation or NAI (together with any replacements of such persons).
(i) "Specified Period" shall mean the period of three years commencing
at the Effective Time.
(j) "Stockholder Agreement" shall mean the Stockholder Agreement dated
as of September 6, 1999, by and between NAI and CBS, relating to
Corporation governance matters.
(k) "Viacom Directors" shall mean the ten (10) directors of the
Corporation serving as the Board of Directors of the Corporation
immediately prior to the Effective Time (including the Specified
Independent Directors).
(2) Directors.
(a) Effective immediately at the Effective Time, the Board of Directors
shall consist of eighteen (18) directors. The number of directors may be fixed
by resolution of the Board from time to time, provided, however, that the size
of the Board of Directors may not be changed during the Specified Period
without the approval of at least fourteen (14) directors. At the Effective
Time, ten (10) directors shall be Viacom Directors and eight (8) directors
shall be CBS Directors.
(b) Until the expiration of the Specified Period, the Board of Directors
(subject to the fiduciary duties of the directors) shall take all action
necessary to ensure that any seat on the Board of Directors held by (i) a CBS
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Director which becomes vacant is filled promptly by a person qualifying as an
Independent Director and designated to fill such seat by a majority of the CBS
Directors remaining on the Board of Directors (a "Replacement CBS Director")
and (ii) a Specified Independent Director which becomes vacant is filled
promptly by an Independent Director who is the chief executive officer, chief
operating officer or chief financial officer or former chief executive officer
of a Fortune 500 company or a non-U.S. public company of comparable size.
(c) During the Specified Period, all committees of the Board of Directors
(other than the Compensation Committee and the Officers Nominating Committee)
shall have such number of CBS Directors as equals the total number of members
of the Committee multiplied by a fraction, the numerator of which is eight (8)
and the denominator of which is eighteen (18), rounded to the closest whole
number; provided that in no event shall any committee have (x) fewer than one
(1) CBS Director or (y) less than a majority of Viacom Directors.
(d) During the Specified Period, the Board of Directors shall not take any
action or fail to take any action which would have the effect of eliminating,
limiting, restricting, avoiding or otherwise modifying the effect of the
provisions set forth in this Article XIII (e.g., by creating a holding company
structure if the certificate of incorporation or similar document of such
holding company does not contain equivalent provisions).
(3) Chairman and Chief Executive Officer.
(a) At the Effective Time, Sumner Redstone shall remain the Chairman and
CEO. In the event that Sumner Redstone is not the CEO at the Effective Time or
ceases to be the CEO at any time during the Specified Period, then Mel
Karmazin, if he is COO at such time, shall succeed to the position of CEO for
the remainder of the Specified Period. During any such period of succession,
Mel Karmazin shall continue to exercise the powers, rights, functions and
responsibilities of the COO in addition to exercising those of the CEO.
(b) The Chairman shall chair all meetings of the Board of Directors and
stockholders at which he is present.
(c) The CEO shall be responsible, in consultation with the COO, for
corporate policy and strategy and the COO shall consult on all major decisions
with, and shall report directly to, the CEO, during the Specified Period;
provided, however, that the CEO shall not exercise any powers, rights,
functions or responsibilities of the COO unless Mel Karmazin is the CEO.
(4) President and Chief Operating Officer.
(a) At the Effective Time, the President and Chief Operating Officer of the
Corporation shall be Mel Karmazin. During the Specified Period, Mel Karmazin
may not be terminated or demoted from the position of COO (or, in the event
that Sumner Redstone is not the CEO, from the position of CEO) and no COO
Functions (as defined below) may be changed without the affirmative vote of at
least fourteen (14) directors.
(b) Subject to the requirement that the COO consult with the CEO on all
major decisions, the powers, rights, functions and responsibilities of the COO
(collectively, the "COO Functions") shall include, without limitation, the
following:
(i) supervising, coordinating and managing the Corporation's business,
operations, activities, operating expenses and capital allocation;
(ii) matters relating to officers (other than the Chairman, CEO and COO)
and employees, including, without limitation, hiring (subject to (A) the
specific Board of Directors authority described below with respect to the
CFO, the General Counsel and the Controller and (B) Section 5 below),
terminating, changing positions and allocating responsibilities of such
officers and employees; and
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(iii) substantially all of the powers, rights, functions and
responsibilities typically exercised by a chief operating officer.
All officers (other than the Chairman, CEO and COO) will report, directly or
indirectly, to the COO (this reporting relationship will be deemed a COO
Function).
(c) In the event that Mel Karmazin is not COO or CEO, the Board may
terminate the COO's employment, eliminate the COO position and the Officers
Nominating Committee and reallocate the COO Functions without regard to the
other provisions of this Article XVIII.
(5) Officers Nominating Committee; Compensation Committee.
(a) Subject to the powers of the Compensation Committee set forth below,
during the Specified Period, all powers of the Board of Directors, including,
without limitation, the right to hire, elect, terminate, change positions,
allocate responsibilities or determine non-equity compensation, with respect to
officers and employees, shall be exercised, subject to clauses (b) and (c)
below, by, and delegated to, the Officers Nominating Committee of the Board of
Directors. The Officers Nominating Committee shall consist solely of the member
of the Board of Directors who is the COO, except that in the event Mel Karmazin
succeeds to the position of CEO, the sole member of the Officers Nominating
Committee shall be the member of the Board of Directors who is the CEO.
(b) The Officers Nominating Committee shall have no powers with respect to
the Chairman, CEO and COO, and shall not have the power to fill the positions
of Chief Financial Officer, Controller or General Counsel of the Corporation
without the approval of the Board of Directors; provided that this provision
shall in no way affect the other powers and authorities of the Officers
Nominating Committee with respect to the Chief Financial Officer, Controller
and General Counsel positions, including, without limitation, the power to
terminate employment of persons holding such positions.
(c) The Compensation Committee shall not be required to, or have any power
to, approve the annual compensation of (i) any employee if the total value of
such employee's annual cash compensation (assuming for this purpose that the
actual bonus of each officer and employee is equal to his or her target bonus)
is less than $1 million or (ii) talent (as such term is commonly used in the
media or entertainment industries), in each such case which power shall be
delegated to the Officers Nominating Committee. The annual compensation of all
other officers and employees and any equity or equity-based compensation of any
officer or employee must be approved by the Compensation Committee.
(d) The Compensation Committee shall consist of three CBS Directors who are
Independent Directors and three non-CBS Directors, two of whom will be the
Specified Independent Directors and the other of whom will be an Independent
Director.
(e) Any decision or determination of the Officers Nominating Committee may
be reversed or overridden by (and only by) the affirmative vote of at least
fourteen (14) directors.
(6) Stockholder Agreement.
The Stockholder Agreement may not be amended, and no provision thereof may
be modified or waived, except with the approval of at least fourteen (14)
directors.
(7) Issuance of Voting Stock.
During the Specified Period, in addition to any other approval required by
law or by this Restated Certificate of Incorporation, the Corporation may not
issue (i) additional shares of Class A Common Stock or (ii) any shares of
Preferred Stock or any other class or series of stock or securities, in each
case with, or convertible into or exchangeable or exercisable for stock or
other securities with, the right to vote on any
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matter on which stockholders are entitled to vote if the result would be that
parties bound by the Stockholder Agreement could fail to own at least a
majority of the outstanding shares of voting stock of the Corporation.
(8) Voting.
During the Specified Period, except for those actions set forth on Annex I
to this Restated Certificate of Incorporation, which shall require the approval
of the Board of Directors, all action by the Board of Directors shall require
the affirmative vote of at least fourteen (14) directors. At all meetings of
the Board of Directors a majority of the full Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority
of the Directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute or this Restated Certificate of Incorporation. If a quorum shall not
be present at any meeting of the Board of Directors, the Directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
(9) Amendment.
Until the expiration of the Specified Period the provisions of any Article
of this Restated Certificate which refer to this Article XIII, the provisions
of this Article XIII, and the provisions of Article VIII of the by-laws of the
Corporation, may not be amended, altered, repealed or waived in any respect
without the approval of at least fourteen (14) directors.
(10) Successors.
During the Specified Period, the provisions of this Article XIII shall be
applicable to (i) any successor to the Corporation as the result of a merger,
consolidation or other business combination, whether or not the Corporation is
the surviving company in such transaction, or otherwise and (ii) any
corporation or other entity with respect to which the Corporation or its
successor is or becomes a direct or indirect subsidiary, the Board of Directors
shall not permit the Corporation to be a party to any transaction which would
not comply with the foregoing without the approval of at least fourteen (14)
directors.
(11) Subsidiaries.
The Board of Directors shall have the right, following consultation with the
COO or, if Mel Karmazin is the CEO, the CEO, with respect to any public company
which is a subsidiary of the Corporation, to take such steps as the Board of
Directors reasonably determines are necessary to implement corporate governance
arrangements applicable to such subsidiary in a manner as consistent as
practicable with the provisions contained in this Restated Certificate of
Incorporation; provided that any such steps shall not vest in the Board of
Directors greater power or provide the COO with fewer rights than those
provided for in this Restated Certificate of Incorporation.
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EXHIBIT B
Form of Agreement Under the
Viacom Inc.
1997 Long-Term Management Incentive Plan
for the 1999 Stock Option Grant
AGREEMENT, dated as of , by and between Viacom Inc., a Delaware
corporation (the "Company"), and (the "Participant"), with respect to
the 1999 grant of stock options under the Company's 1997 Long-Term Management
Incentive Plan, as amended (the "Plan").
This Agreement, together with the Memorandum dated and the agreements
delivered under the Plan in connection with each grant of stock options under
the Plan, constitutes the prospectus covering the shares of Class B Common
Stock subject to the Plan. The Participant can receive additional copies of his
or her Plan agreements and the Memorandum upon request to the Administrator,
Long-Term Incentive Plans, Viacom Inc., 1515 Broadway, New York, New York
10036.
WITNESSETH:
WHEREAS, the Participant is now employed by the Company or one of its
subsidiaries in a key capacity and the Company desires to reward the
Participant, in accordance with the terms hereof, for the Participant's
contributions to the financial success of the Company by awarding the
Participant stock options to purchase shares of Class B Common Stock;
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
Terms of Stock Options
Section 1.1 Grant of Stock Options. Subject to the terms and conditions
contained herein and in the Plan, the terms of which are hereby incorporated by
reference, the Company hereby awards to the Participant, effective as of
(the "Date of Grant"), a grant of stock options (the "Stock Options")
to purchase shares of Class B Common Stock at an exercise price of
$ for each share (the "Exercise Price"). The capitalized terms used in
this Agreement which are not otherwise defined herein shall have the meanings
assigned to them in Article III hereof. The Stock Options granted hereunder are
not intended to be, or qualify as, "Incentive Stock Options" within the meaning
of Section 422 of the Code.
Section 1.2 Terms of Stock Options.
(a) Vesting. The Stock Options shall be exercisable only to the extent the
Participant is vested therein. The Stock Options shall vest in one-third
increments on and .
(b) Option Period. Except as provided in Section 1.2(c) hereof, the period
during which the Stock Options may be exercised shall expire on the tenth
anniversary of the Date of Grant (the "Expiration Date").
(c) Exercise in the Event of Termination of Employment, Retirement, Death or
Permanent Disability.
(i) Termination other than for Cause, Retirement, Death or Permanent
Disability. In the event that (A) the Participant ceases to be an employee
of the Company or any of its subsidiaries by reason of the voluntary
termination by the Participant or the termination by the Company or any of
its subsidiaries other than for Cause, the Participant may exercise his or
her Outstanding Stock Options to the extent then
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exercisable until the earlier of six months after the date of such
termination (or such longer period, not in excess of the second anniversary
of the Date of Grant of such Stock Options, as may be determined by the
Committee, in its discretion) or the Expiration Date, (B) the Participant
ceases to be an employee of the Company or any of its subsidiaries by
reason of the Participant's Retirement, the Participant may exercise his or
her Outstanding Stock Options to the extent then exercisable until the
earlier of two years after such date or the Expiration Date, (C) the
Participant dies during a period during which his or her Stock Options
could have been exercised by him or her, his or her Outstanding Stock
Options may be exercised to the extent exercisable at the date of death by
the person who acquired the right to exercise such Stock Options by will or
the laws of descent and distribution until the earlier of one year after
such death (or such longer period as may be determined by the Committee, in
its discretion, prior to the expiration of such one-year period) or the
Expiration Date, or (D) the Permanent Disability of the Participant occurs,
the Participant may exercise his or her Outstanding Stock Options to the
extent exercisable upon the onset of such Permanent Disability until the
earlier of one year after such date (or such longer period not in excess of
two years after such date as may be determined by the Committee in its
discretion) or the Expiration Date. Upon the occurrence of an event
described in clauses (A), (B), (C) or (D) of this Section 1.2(c)(i), all
rights with respect to Stock Options that are not vested as of such event
will be relinquished.
(ii) Termination for Cause. If the Participant's employment with the
Company or any of its subsidiaries ends because of a Termination for Cause,
all Outstanding Stock Options, whether or not then vested, shall terminate
effective as of the date of such termination.
Section 1.3 Exercise of Stock Options.
(a) Whole or Partial Exercise. Subject to the restrictions of Section 1.2(b)
hereof, the Participant may exercise all vested Stock Options granted hereunder
at one time or in installments of 100 Stock Options (or in the whole number of
unexercised Stock Options in which the Participant is vested, if such number is
less than 100) by written notice to the Administrator, Long-Term Incentive
Plans, Viacom Inc., 1515 Broadway, New York, New York 10036. Such notice shall
(i) state the number of full Stock Options being exercised (ii) be signed by
the person or persons so exercising the Stock Options and, in the event the
Stock Options are being exercised (pursuant to Section 1.2(c)(i) hereof) by any
person or persons other than the Participant accompanied by proof satisfactory
to the Company's counsel of the right of such person or persons to exercise the
Stock Options, and (iii) be accompanied by full payment as set forth in Section
1.3(b) hereof.
(b) Payment of Aggregate Option Price. The written notice of exercise
described above must be accompanied by full payment of the aggregate Exercise
Price which shall be determined by multiplying the number of Stock Options
being exercised by the Exercise Price. Such Exercise Price shall be paid in
cash (e.g. personal bank check, certified check or official bank check). In
addition, in accordance with Section 4.3 hereof, the Participant shall make an
arrangement acceptable to the Company to pay to the Company an amount
sufficient to satisfy the combined Federal, state and local withholding tax
obligations which arise in connection with the exercise of such Stock Options.
(c) Issuance of Share Certificates. Upon satisfaction of the conditions set
forth in Section 1.3(b) hereof, the Company shall deliver (or cause to be
delivered) a certificate or certificates for the shares of Class B Common Stock
issued pursuant to the exercise of the Stock Options to the Participant.
ARTICLE II
Effect of Certain Corporate Changes
In the event of a merger, consolidation, stock split, dividend,
distribution, combination, reclassification or recapitalization that changes
the character or amount of the Class B Common Stock, the Committee shall make
such adjustments to the number of shares of Class B Common Stock subject to the
Stock Options or the exercise price of the Stock Options, in each case, as it
deems appropriate. Such determinations shall be conclusive and binding for all
purposes.
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ARTICLE III
Definitions
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Class B Common Stock" shall mean shares of Class B Common Stock,
par value $0.01 per share, of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended,
including any successor law thereto.
(d) "Committee" shall mean the Senior Executive Compensation Committee
of the Board (or such other Committee as may be appointed by the Board)
except that (i) the number of directors on the Committee shall not be less
than two and (ii) each member of the Committee shall be a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, including any successor law thereto.
(f) "Fair Market Value" of a share of Class B Common Stock on a given
date shall be the closing price of a share of Class B Common Stock on the
New York Stock Exchange or such other national securities exchange as may
be designated by the Committee or, in the event that the Class B Common
Stock is not listed for trading on a national securities exchange but is
quoted on an automated quotation system, the average closing bid price per
share of the Class B Common Stock on such automated quotation system or, in
the event that the Class B Common Stock is not quoted on any such system,
the average of the closing bid prices per share of the Class B Common Stock
as furnished by a professional marketmaker making a market in the Class B
Common Stock designated by the Committee.
(g) "Outstanding Stock Option" shall mean a Stock Option granted to the
Participant which has not yet been exercised and which has not yet expired
in accordance with its terms.
(h) "Permanent Disability" shall have the same meaning as such term or a
similar term has in the long-term disability policy maintained by the
Company or a subsidiary thereof for the Participant and in effect on the
date of the onset of the Participant's Permanent Disability.
(i) "Retirement" shall mean the resignation or termination of employment
after attainment of an age and years of service required for payment of an
immediate pension pursuant to the terms of any qualified retirement plan
maintained by the Company or a subsidiary in which the Participant
participates; provided, however, that no resignation or termination prior
to a Participant's 60th birthday shall be deemed a retirement unless the
Committee so determines in its sole discretion.
(j) "Termination for Cause" shall mean a termination of employment with
the Company or any of its subsidiaries which, as determined by the
Committee, is by reason of (i) "cause" as such term or a similar term is
defined in any employment agreement applicable to the Participant, or (ii)
if there is no such employment agreement or if such employment agreement
contains no such term, (x) dishonesty, conviction of a felony, or willful
unauthorized disclosure of confidential information, (y) failure, neglect
of or refusal by the Participant to substantially perform the duties of the
Participant's employment, or (z) any other act or omission which is
materially injurious to the financial condition or business reputation of
the Company of any subsidiary thereof.
(k) To "vest" a Stock Option held by the Participant shall mean to
render such Stock Option exercisable, subject to the terms of the Plan,
except where the Participant's employment ends because of a Termination for
Cause.
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ARTICLE IV
Miscellaneous
Section 4.1 No Rights to Continued Employment. Neither this Agreement, the
Plan nor any action taken in accordance with such documents shall be construed
as giving the Participant any right to be retained by the Company or any of its
subsidiaries.
Section 4.2 Restriction on Transfer. The rights of the Participant with
respect to the Stock Options shall not be transferable by the Participant
except (i) by will or the laws of descent and distribution or (ii) subject to
the prior approval of the Committee, for transfers to members of the
Participant's immediate family or trusts whose beneficiaries are members of the
Participant's immediate family, in each case subject to the condition that the
Committee shall be satisfied that such transfer is being made for estate and/or
tax planning purposes without consideration being received therefor and subject
to such other conditions as the Committee may impose.
Section 4.3 Tax Withholding. As a condition to the exercise of the Stock
Options, the Participant shall make a payment (or an arrangement acceptable to
the Company for the withholding of such payment) sufficient to satisfy the
combined Federal, state and local withholding tax obligations which arise in
connection with the exercise of such Stock Options.
Section 4.4 Stockholder Rights. The grant of Stock Options under this
Agreement shall not entitle the Participant or any permitted transferee to any
rights of a holder of shares of common stock of the Company, other than when
and until share certificates are delivered to the Participant upon exercise of
a Stock Option.
Section 4.5 No Restriction on Right of Company to Effect Corporate
Changes. This Agreement shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalization, reorganization or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issue of stock or of options, warrants or rights to purchase stock or of
bonds, debentures, preferred or prior preference stocks whose rights are
superior to or affect the Class B Common Stock or the rights thereof or which
are convertible into or exchangeable for Class B Common Stock, or the
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
Section 4.6 Amendment. Other than as provided in Article II hereof, this
Agreement may not be modified, amended or waived in any manner except by an
instrument in writing signed by both parties hereto. The waiver by either party
of compliance with any provision of this Agreement by the other party shall not
operate or be construed as a waiver of any other provision of this Agreement,
or of any subsequent breach by such party of a provision of this Agreement.
Section 4.7 Stockholder Approval. The grant of Stock Options under this
Agreement is subject to the approval of the stockholders of the Company, at the
next annual or special meeting of stockholders, to the extent that the number
of shares of Class B Common Stock subject to the Plan is insufficient to cover
the number of shares of Class B Common Stock subject to Stock Options awarded
under this Agreement.
Section 4.8 Notices. Every notice or other communication relating to this
Agreement shall be in writing, and shall be mailed to or delivered to the party
for whom it is intended at such address as may from time to time be designated
by such party in a notice mailed or delivered to the other party as herein
provided. If no such address has been specified by the Participant, such
notices or communications shall be sent to the Participant's address as
specified in the records of the Company.
Section 4.9 Headings. The headings of sections and subsections herein are
included solely for convenience of reference and shall not affect the meaning
of any of the provisions of this Agreement.
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Section 4.10 Receipt of Copy of Plan. By executing this Agreement, the
Participant acknowledges receipt of a copy of the Plan.
Section 4.11 Governing Law. This Agreement and all rights hereunder shall be
construed in accordance with and governed by the laws of the State of Delaware.
Viacom Inc.
By: _________________________________
Senior Vice President,
Human Resources and
Administration
_____________________________________
Participant
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<PAGE>
ANNEX H
September 6, 1999
Board of Directors
Viacom Inc.
1515 Broadway
New York, NY 10036
Members of the Board:
We understand that CBS Corporation ("CBS" or the "Company") and Viacom Inc.
("Viacom") have entered into an Agreement and Plan of Merger, dated as of
September 6, 1999 (the "Merger Agreement"), which provides, among other
things, for the merger of CBS with and into Viacom (the "Merger"). Pursuant to
the Merger, each issued and outstanding share of common stock, par value $1.00
per share, of CBS ("CBS Common Stock") shall be converted into the right to
receive 1.085 shares (the "Exchange Ratio") of Class B Common Stock, par value
$0.01 per share (the "Viacom Class B Common Stock") of Viacom. The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to Viacom.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of CBS and Viacom, respectively;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning CBS and Viacom prepared by the respective
managements of CBS and Viacom;
(iii) discussed the past and current operations and financial condition
and the prospects of CBS and Viacom with senior executives of CBS and
Viacom;
(iv) analyzed certain internal financial statements and other financial
operating data concerning CBS and Viacom prepared by the respective
managements of CBS and Viacom;
(v) discussed the past and current operations and financial condition
and the prospects of Viacom with senior executives of Viacom including
their estimates of the strategic and operational benefits of the Merger,
and analyzed the pro forma impact of the Merger on Viacom's financial
ratios;
(vi) reviewed the reported prices and trading activity for the CBS
Common Stock and the Viacom Class B Common Stock;
(vii) compared the financial performance of CBS and Viacom and the
prices and trading activity of CBS and Viacom with that of certain other
comparable publicly-traded companies and their securities;
(viii) participated in discussions and negotiations among
representatives of CBS and Viacom and their financial and legal advisors;
(ix) reviewed the Merger Agreement, the Voting Agreement dated as of
September 6, 1999 between CBS and certain shareholders of Viacom and
certain related documents; and
(x) performed such other analyses and considered such other factors as
we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes
of this opinion. With respect to the financial projections, including
information relating to certain strategic and operational benefits of the
Merger, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
H-1
<PAGE>
financial performance of CBS and Viacom, respectively. We have not made any
independent valuation or appraisal of the assets or liabilities of CBS and
Viacom, nor have we been furnished with any such appraisals. We have assumed
that the Merger will be consummated in accordance with the terms set forth in
the Merger Agreement. Our opinion is necessarily based on economic, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
We have acted as financial advisor to the Board of Directors of Viacom in
connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for CBS and Viacom and have received
fees for the rendering of these services. In the ordinary course of business,
Morgan Stanley may from time to time trade in the securities of CBS and Viacom
for its own account, the accounts of investment funds under the management of
Morgan Stanley and for the accounts of its customers and, accordingly, may at
any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of Viacom and may not be used for any other purpose without our prior
written consent, except that this opinion may be included in its entirety in
any filing made by CBS or Viacom in respect of the Merger with the Securities
and Exchange Commission. In addition, this opinion does not in any manner
address the prices at which Viacom Class B Common Stock will trade following
the consummation of the Merger, and Morgan Stanley expresses no opinion or
recommendation as to how the stockholders of CBS and Viacom should vote at the
respective stockholders' meetings held in connection with the Merger.
Based on and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to Viacom.
Very truly yours,
Morgan Stanley & Co. Incorporated
/s/ Paul J. Taubman
By: _________________________________
Paul J. Taubman
Managing Director
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<PAGE>
ANNEX I
September 6, 1999
Board of Directors
CBS Corporation
51 West 52nd Street
New York, NY 10019
Members of the Board of Directors:
We understand that CBS Corporation ("CBS") has entered into an Agreement and
Plan of Merger dated as of September 6, 1999, by and between Viacom Inc.
("Viacom") and CBS (the "Merger Agreement"). Pursuant to the Merger Agreement,
CBS will merge with and into Viacom (the "Merger") and each outstanding share
of CBS Common Stock, par value $1.00 per share (the "CBS Common Stock"), will
be converted into the right to receive 1.085 shares of Viacom Class B Common
Stock, par value $0.01 per share ("Viacom Class B Common Stock"), with the
number of shares of Viacom Class B Common Stock to be received for each share
of CBS Common Stock being referred to herein as the exchange ratio (the
"Exchange Ratio").
You have asked us for our opinion as to whether the Exchange Ratio is fair,
from a financial point of view, to the holders of CBS Common Stock.
In connection with rendering our opinion, we have, among other things:
(i) analyzed certain publicly available financial statements and other
information relating to CBS and Viacom;
(ii) analyzed certain internal financial statements and other non-public
financial and operating data concerning CBS, which were prepared by and
furnished to us or reviewed for us by the management of CBS, and concerning
Viacom, which were prepared by and furnished to us or reviewed for us by
the management of Viacom;
(iii) analyzed certain financial projections concerning CBS, which were
prepared by the management of CBS, and concerning Viacom, which were
prepared by the management of Viacom;
(iv) discussed the past and current operations and financial condition
and the prospects of CBS with the management of CBS;
(v) discussed the past and current operations and financial condition
and the prospects of Viacom with the management of Viacom;
(vi) reviewed the reported prices and trading activity of the CBS Common
Stock and Viacom Class B Common Stock;
(vii) compared the market valuation and financial performance of CBS and
Viacom to that of certain other comparable publicly-traded companies;
(viii) reviewed the financial terms to the extent available of certain
comparable acquisition transactions;
(ix) participated in discussions and negotiations among representatives
of CBS, Viacom, and their financial and legal advisers;
(x) reviewed the Merger Agreement and the related exhibits and schedules
in the form provided to us and have assumed that the final form of such
Merger Agreement, exhibits and schedules will not vary in any respect
material to our analysis;
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<PAGE>
(xi) reviewed certain information concerning cost savings and
combination benefits ("Synergies") expected to result from the Merger that
was provided to us or reviewed for us by the managements of CBS and Viacom;
and
(xii) performed such other analyses and examinations and considered such
other factors as we have in our sole judgment deemed appropriate.
For purposes of our analysis and opinion, we have assumed and relied,
without independent verification, upon the accuracy and completeness of the
information reviewed by us or reviewed for us for purposes of this opinion.
With respect to the financial projections of CBS and Viacom and the underlying
analysis concerning the potential Synergies which were furnished to us or
reviewed for us by the managements of CBS and Viacom, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the future competitive, operating and
regulatory environments and related financial performance of CBS and Viacom. We
have not made nor assumed any responsibility for making any independent
valuation or appraisal of the assets or liabilities of CBS or Viacom, nor have
we been furnished with any such appraisals. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information and
Agreements made available to us as of, the date hereof. We have, with your
approval, assumed the Merger will qualify as a tax-free reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986, as amended.
Our opinion does not address CBS's underlying business decision to effect the
Merger nor constitute a recommendation to any CBS shareholder as to how such
holder should vote with respect to the Merger. Furthermore, we express no
opinion as to the price or range of prices at which the shares of Viacom Class
B Common Stock will trade subsequent to the consummation of the Merger.
For purposes of rendering our opinion, we have assumed, in all respects
material to our analysis, that the representations and warranties of each party
contained in the Merger Agreement are true and correct, that each party will
perform all the covenants and agreements required under the Merger Agreement,
and that all conditions to the consummation of the Merger will be satisfied
without waiver thereof.
We have acted as financial advisor to the Board of Directors of CBS in
connection with the Merger and will receive a fee for our services upon the
rendering of this opinion. In the past, Evercore Partners Inc. has provided
financial advisory services for CBS and has received fees for the rendering of
these services.
It is understood that this letter and the opinion expressed herein is for
the information of the Board of Directors of CBS and may not be quoted or
referred to or relied upon or used for any other purpose without our prior
written consent except as we and our affiliates have otherwise agreed with CBS
in writing.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to the
holders of CBS Common Stock.
Very truly yours,
Evercore Group Inc.
/s/ David G. Offensend
By: _________________________________
David G. Offensend
Vice Chairman
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<PAGE>
ANNEX J
VIACOM INC.
1997 LONG-TERM MANAGEMENT INCENTIVE PLAN
(as amended and restated through July 29, 1999
and as further amended and restated through September 6, 1999)
ARTICLE I
GENERAL
Section 1.1 Purpose.
The purpose of the Viacom Inc. 1997 Long-Term Management 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 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 Senior Executive Compensation Committee of
the Board (or such other Committee as may be appointed by the Board) except
that (i) the number of directors on the Committee shall be not less than two
and (ii) each member of the Committee shall be a "non-employee director" within
the meaning of Rule 16b-3 under the Exchange Act.
(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.
(i) "Effective Date" shall have the meaning set forth in Article IX.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, including any successor law thereto.
<PAGE>
(k) "Fair Market Value" of a share of Class B Common Stock on a given date
shall be the closing price of a share of Class B Common Stock on the New York
Stock Exchange or such other national securities exchange as may be designated
by the Committee, or, in the event that the Class B Common Stock is not listed
for trading on a national securities exchange but is quoted on an automated
quotation system, the average closing bid 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.
(l) "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.
(m) "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.
(n) "Outstanding Phantom Share" shall mean a Phantom Share granted to a
Participant for which the Valuation Date has not yet occurred.
(o) "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.
(p) "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.
(q) "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.
(r) "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.
(s) "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.
(t) "Retirement" shall mean the resignation or termination of employment
after attainment of an age and years of service required for payment of an
immediate pension pursuant to the terms of any qualified retirement plan
maintained by the Company or a subsidiary in which the Participant
participates; provided, however, that no resignation or termination prior to a
Participant's 60th birthday shall be deemed a retirement unless the Committee
so determines in its sole discretion.
(u) "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.
(v) "Stock Option" shall mean a contractual right granted to a Participant
pursuant to Article II, to purchase shares of 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 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.
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(w) "Termination for Cause" shall mean a termination of employment with the
Company or any of its subsidiaries which, as determined by the Committee, is by
reason of (i) "cause" as such term or a similar term is defined in any
employment agreement applicable to the Participant, or (ii) if there is no such
employment agreement or if such employment agreement contains no such term, (x)
dishonesty, conviction of a felony, or willful unauthorized disclosure of
confidential information, (y) failure, neglect of or refusal by a Participant
to substantially perform the duties of such Participant's employment, 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.
(x) "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.
(y) 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.
(z) To "vest" a Stock Option, Stock Appreciation Right, Restricted Stock or
Phantom Share held by a Participant shall mean, with respect to a Stock Option
or Stock Appreciation Right, to render such Stock Option or Stock Appreciation
Right exercisable, subject to the terms of the Plan, and, in the case of a
Restricted Share or Phantom Share, to render such 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 as 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. The Committee shall also have the authority to amend the
terms of any outstanding Grant; provided, however, that no amendment shall
impair the rights of the holder thereof.
Section 1.4 Eligible Persons.
Grants may be awarded to any employee of the Company or any of its
subsidiaries selected by the Committee.
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
50,000,000, subject to adjustment pursuant to Article V hereof. The shares of
Class B Common Stock shall be made available from authorized but unissued Class
B Common Stock or from Class
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B Common 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 canceled without being
exercised or are otherwise terminated or, in the case of Stock Appreciation
Rights, are exercised for cash, 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 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 to any Participant
during the five-year period starting on the Effective Date of the Plan is
10,000,000.
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 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 V 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) Latest Exercise Date. No Stock Option granted under the Plan shall
be exercisable after the tenth anniversary of the Date of Grant thereof.
(ii) 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. Except as otherwise provided in this Section 2.3, in the event
that (A) the Participant ceases to be an employee of the Company or any of
its subsidiaries by reason of the voluntary termination by the Participant
or the termination by the Company or any of its subsidiaries other than for
Cause, his Outstanding Stock Options may be exercised to the extent then
exercisable until the earlier of six months after the date of such
termination (or such longer period as may be determined by the Committee,
in its discretion) or the expiration of such Stock Options, (B) the
Participant ceases to be an employee of the Company or any of its
subsidiaries by reason of the Participant's Retirement, the Participant may
exercise (x) his Outstanding Stock Options granted prior to August 1, 1999
to the extent exercisable on the date of Retirement until the earlier of
six months after such date (or such longer period, not in excess of the
second anniversary of the Date of Grant of such Stock Options, as may be
determined by the Committee, in its discretion) or the expiration of such
Stock Options, and (y) his Outstanding Stock Options granted effective as
of August 1, 1999 or thereafter to the extent exercisable on the date of
Retirement until the earlier of two years after such date or the expiration
of such Stock Options, (C) 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 or permitted transfer 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 (D) the
Permanent Disability of the Participant occurs, his Outstanding Stock
Options may be exercised to the extent exercisable upon date of the onset
of such Permanent Disability until the earlier of one year after such date
(or such longer period not in excess of two years after such date as may be
determined by the Committee, in its discretion) or the expiration of such
Stock Options. Upon the occurrence of an event described in clauses (A),
(B), (C) or (D) of this Section 2.3(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,
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determines otherwise, all Outstanding Stock Options, whether or not then
vested, shall terminate effective as of the date of such termination.
(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
designated 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 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 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.
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.
6
<PAGE>
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 Class B 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.
7
<PAGE>
(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 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. Except as otherwise provided in this
Section 4.5, 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'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
In the event of a merger, consolidation, stock split, dividend,
distribution, combination, reclassification or recapitalization that changes
the character or amount of the Class B Common Stock, the Committee shall make
such adjustments to the number of shares of Class B Common Stock subject to any
Stock Options or Stock Appreciation Rights or the number of Restricted Shares
or Phantom Shares granted to each Participant, the exercise price of any
Outstanding Stock Options or Stock Appreciation Rights or the Initial Value of
any Outstanding Phantom Shares, and the maximum number of shares of Class B
Common Stock referred to in Section 1.5 and Section 1.6 of the Plan, in each
case, as it deems appropriate. Such determinations shall be conclusive and
binding for all purposes.
8
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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, except (i) by will or
the laws of descent and
distribution or (ii) with respect to Non-Qualified Stock Options, subject to
the prior approval of the Committee, for transfers to members of the
Participant's immediate family or trusts whose beneficiaries are members of the
Participant's immediate family, in each case subject to the condition that the
Committee shall be satisfied that such transfer is being made for estate and/or
tax planning purposes without consideration being received therefor and subject
to such other conditions as the Committee may impose.
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 an additional amount be paid in cash equal to the
amount of any Federal, state or local taxes owed as a result of such exercise.
Section 6.4 Stockholder Rights.
No Grant under the Plan shall entitle a Participant or Beneficiary or
permitted transferee to any rights of a holder of shares of common stock of the
Company, except as provided in Article III with respect to Restricted Shares or
when and until share certificates are delivered upon exercise of a Stock Option
or when and until share certificates are delivered 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 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 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 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.
9
<PAGE>
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 any 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 stockholders 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 stockholder 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 became effective as of March 27, 1997 (the "Effective Date"). The
first amendment and restatement thereof became effective as of July 29, 1999.
The second amendment and restatement shall be effective as of September 6,
1999; provided, however, that it shall be a condition to the effectiveness of
the increase in the number of shares of Class B Common Stock authorized to be
issued under the Plan from 40,000,000 to 50,000,000 reflected in the second
amendment and restatement of the Plan that a majority of the stockholders of
the Company consent to such increase on or before December 29, 1999. In the
event that stockholder approval is not obtained on or before such date, the
increase in the number of shares of Class B Common Stock authorized to be
issued under the Plan from 40,000,000 to 50,000,000 reflected in the second
amendment and restatement of the Plan shall be void ab initio and of no effect.
J-10
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Officers And Directors
Section 102(b)(7) of the Delaware General Corporation Law ("DGCL") allows a
corporation to include in its certificate of incorporation a provision
eliminating the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except in cases where the director breached his or her duty of loyalty to the
corporation or its stockholders, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of the law, willfully or
negligently authorized the unlawful payment of a dividend or approved an
unlawful stock redemption or repurchase or obtained an improper personal
benefit. The registrant's Restated Certificate of Incorporation (the "Viacom
Charter") contain provisions that eliminates directors' personal liability, in
certain circumstances, as set forth above.
Section 1 of Article VI of the Viacom Charter provides that the registrant
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 registrant) by reason of the fact that he or she is
or was a director, officer, employee or agent of the registrant, or is or was
serving at the request of the registrant as a director, officer, employee or
agent (including trustee) of another corporation, partnership, joint venture,
trust or other enterprise, against judgments, fines, amounts paid in settlement
and expenses (including attorneys' fees), actually and reasonably incurred by
him in connection with such action, suit or proceedings if he acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the registrant, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the registrant, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2 of Article VI of the Viacom Charter provides that the registrant
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 registrant to procure a judgment in its favor by reason of the fact that
he or she is or was a director, officer, employee or agent of the registrant,
or is or was serving at the request of the registrant 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 or her 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 registrant,
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
registrant unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability and in view of all of the circumstances of the case,
such person is fairly and reasonably entitled to indemnify for such expenses
which the court shall deem proper.
Section 4 of Article VI of the Viacom Charter provides that any
indemnification made pursuant to the above provisions (unless ordered by a
court) shall be made by the registrant only as authorized in the specific case
upon a determination that indemnification of the present or former director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct as set forth above. Such determination shall
be made, with respect to a person who is a director or officer at the time of
such determination, (1) by a majority vote of the directors who are not parties
to such action, suit or proceedings, even though less than a quorum, or (2) by
a committee of such directors designated by a majority vote of such directors,
even though less than a quorum, or (3) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion, or
(4) by the stockholders of the registrant entitled to vote thereon.
II-1
<PAGE>
The Viacom Charter provides that to the extent that a present or former
director, officer, employee or agent of the registrant has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
above, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by that person in connection therewith. The indemnification
and advancement of expenses provided by, or granted pursuant to, the
indemnification provisions of the Viacom Charter 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 that
person's official capacity and as to action in another capacity while holding
such office. Without limiting the foregoing, the registrant is authorized to
enter into an agreement with any director, officer, employee or agent of the
registrant providing indemnification for such person against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement that
result from any threatened pending or completed actions, suit, or proceeding,
whether civil, criminal, administrative or investigative, including any action
by or in the right of the registrant, that arises by reason of the fact that
such person is or was a director, officer, employee or agent of the registrant,
or is or was serving at the request of the registrant 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.
The registrant may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the registrant, or is
or was serving at the request of the registrant 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
registrant would have the power to indemnify him against such liability under
the provisions of Article VI of the Viacom Charter.
Pursuant to Section 7 of Article VI of the Viacom Charter, the registrant
has purchased certain liability insurance for its officers and directors as
permitted by Section 145(g) of the DGCL.
ITEM 21. Exhibits and Financial Statement Schedules
(a) The following documents are exhibits to the Registration Statement.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
*2.1 Agreement and Plan of Merger, dated as of September 6, 1999, as
amended and restated as of October 8, 1999 and as of November 23,
1999, among Viacom Inc., CBS Corporation and Viacom/CBS LLC (attached
as Annex A to the Joint Proxy Statement/Prospectus**)
*3.1 Restated Certificate of Incorporation of Viacom Inc. (attached as
Annex B to the Joint Proxy Statement/Prospectus**)
*3.2 By-laws of Viacom Inc. (attached as Annex C to the Joint Proxy
Statement/Prospectus**)
4.1 Specimen certificate representing 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 Specimen certificate representing Viacom Inc. Series C Preferred Stock
*5.1 Opinion of Michael D. Fricklas, Senior Vice President, General Counsel
and Secretary of Viacom Inc., as to the legality of the securities
being registered
*8.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to the material
United States federal income tax consequences of the Merger
*8.2 Opinion of Cravath Swaine & Moore as to the material United States
federal income tax consequences of the Merger
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
*10.1 Voting Agreement, dated September 6, 1999, between National
Amusements, Inc. and CBS Corporation (attached as Annex D to the Joint
Proxy Statement/Prospectus**)
*10.2 Stockholder Agreement, dated September 6, 1999, between National
Amusements, Inc. and CBS Corporation (attached as Annex E to the Joint
Proxy Statement/Prospectus**)
*10.3 Employment Letter Agreement, dated as of September 6, 1999, between
Viacom Inc. and Sumner Redstone (attached as Annex F to the Joint
Proxy Statement/Prospectus**)
*10.4 Employment Letter Agreement, dated as of September 6, 1999, between
Viacom Inc. and Mel Karmazin (attached as Annex G to the Joint Proxy
Statement/Prospectus**)
10.5 Agreement, dated as of September 6, 1999, between Viacom Inc. and
Philippe Dauman (incorporated by reference to the Report on Form 8-K
filed by Viacom Inc. on September 7, 1999)
10.6 Agreement, dated as of September 6, 1999, between Viacom Inc. and
Thomas Dooley (incorporated by reference to the Report on Form 8-K
filed by Viacom Inc. on September 7, 1999)
*10.7 Voting Agreement, dated as of November 9, 1999, between National
Amusements, Inc. and Viacom Inc.
10.8 Viacom Inc. 1989 Long-Term Management Incentive Plan (as amended and
restated through April 23, 1990, as further amended and restated
through April 27, 1995, and as further amended and restated through
November 1, 1996) (incorporated by reference to Exhibit 10(a) to the
Annual Report on Form 10-K of Viacom Inc. for the fiscal year ended
December 31, 1996) (File No. 1-9553)
10.9 Viacom Inc. 1994 Long-Term Management Incentive Plan (as amended and
restated through April 27, 1995 and as further amended and restated
through November 1, 1996) (incorporated by reference to Exhibit 10(b)
to the Annual Report on Form 10-K of Viacom Inc. for the fiscal year
ended December 31, 1996) (File No. 1-9553)
*10.10 Viacom Inc. 1997 Long-Term Management Incentive Plan (as amended July
29, 1999 and as further amended September 6, 1999) (attached as Annex
J to the Joint Proxy Statement/Prospectus)
10.11 Viacom Inc. Senior Executive Short-Term Incentive Plan (as amended and
restated through March 27, 1996 and as further amended and restated
through March 18, 1999) (incorporated by reference to Exhibit B to the
Definitive Proxy Statement filed by Viacom Inc. on April 10, 1999)
10.12 Viacom Inc. Long-Term Incentive Plan (Divisional) (incorporated by
reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of
Viacom Inc. for the quarter ended June 30, 1993) (File No. 1-9553)
10.13 Viacom International Inc. Deferred Compensation Plan for Non-Employee
Directors (as amended and restated through December 17, 1992)
(incorporated by reference to Exhibit 10(e) 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)
10.14 Viacom Inc. and Viacom International Inc. Retirement Income Plan for
Non-Employee Directors (incorporated by reference to Exhibit 10(f) to
the Annual Report on Form 10-K of Viacom Inc., for the fiscal year
ended December 31, 1989) (File No. 1-9553)
10.15 Viacom Inc. Stock Option Plan for Outside Directors (incorporated by
reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of
Viacom Inc. for the quarter ended June 30, 1993) (File No. 1-9553)
10.16 Viacom Inc. 1994 Stock Option Plan for Outside Directors (incorporated
by reference to Exhibit B to Viacom Inc.'s Definitive Proxy Statement
dated April 28, 1995)
10.17 Viacom Inc. Excess Investment Plan (incorporated by reference to
Exhibit 4.1 to the Viacom Inc. Registration Statement on Form S-8)
(File No. 1-9553)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
10.18 Excess Pension Plan for Certain Key Employees of Viacom International
Inc. (incorporated by reference to Exhibit 10(i) to the Annual Report
on Form 10-K of Viacom Inc. for the fiscal year ended December 31,
1990) (File No. 1-9553)
10.19 Agreement, dated as of January 1, 1996, between Viacom Inc. and
Michael D. Fricklas, as amended by an Agreement dated March 31, 1998,
and as further amended by an Agreement dated October 12, 1998
(incorporated by reference to Exhibit 10(n) to the Annual Report on
Form 10-K of Viacom Inc. for the fiscal year ended December 31, 1998)
10.20 Agreement, dated as of April 1, 1995, between Viacom Inc. and George
S. Smith, Jr., as amended by an Agreement dated as of March 30, 1998
(incorporated by reference to Exhibit 10(o) to the Annual Report on
Form 10-K of Viacom Inc. for the fiscal year ended December 31, 1997)
(File No. 1-9553)
10.21 Service Agreement, dated as of March 1, 1994, between George S.
Abrams and Viacom Inc. (incorporated by reference to Exhibit 10(q) to
the Annual Report on Form 10-K of Viacom Inc. for the fiscal year
ended December 31, 1994) (File No. 1-9553)
10.22 Viacom Inc. Executive Severance Plan for Senior Vice Presidents
(Effective as of September 6, 1999) (incorporated by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q of Viacom Inc. for
the quarter ended September 30, 1999)
10.23 Blockbuster Entertainment Corporation ("BEC") stock option plans
assumed by Viacom Inc. after the Blockbuster Merger consisting of the
following:
(i) BEC's 1989 Stock Option Plan (incorporated by reference to BEC's
Proxy Statement dated March 31, 1989)
(ii) Amendments to BEC's 1989 Stock Option Plan (incorporated by
reference to BEC's Proxy Statement dated April 3, 1991)
(iii) BEC's 1990 Stock Option Plan (incorporated by reference to
BEC's Proxy Statement dated March 29, 1990)
(iv) Amendments to BEC's 1990 Stock Option Plan (incorporated by
reference to BEC's Proxy Statement dated April 15, 1991)
(v) BEC's 1991 Employee Director Stock Option Plan (incorporated by
reference to BEC's Proxy Statement dated April 15, 1991)
(vi) BEC's 1991 Non-Employee Director Stock Option Plan (incorporated
by reference to BEC's Proxy Statement dated April 15, 1991)
(vii) BEC's 1994 Stock Option Plan (incorporated by reference to
Exhibit 10.35 to the Annual Report on Form 10-K of BEC for the
fiscal year ended December 31, 1993) (File No. 0-12700)
10.24 Parents Agreement dated as of July 24, 1995 among Viacom Inc., Tele-
Communications, Inc. and TCI Communications, Inc. (incorporated by
reference to Exhibit 10.1 to the Registration Statement on Form S-4
filed by Viacom International Inc.) (File No. 33-64467)
10.25 Implementation Agreement dated as of July 24, 1995 between Viacom
International Inc. and Viacom International Services Inc.
(incorporated by reference to Exhibit 10.2 to the Registration
Statement on Form S-4 filed by Viacom International Inc.) (File No.
33-64467)
10.26 Subscription Agreement dated as of July 24, 1995 among Viacom
International Inc., Tele-Communications, Inc. and TCI Communications,
Inc. (incorporated by reference to Exhibit 10.3 to the Registration
Statement on Form S-4 filed by Viacom International Inc.) (File No.
33-64467)
10.27 Stock Purchase Agreement, dated as of February 16, 1997, between
Viacom International Inc. and Evergreen Media Corporation of Los
Angeles (incorporated by reference to Exhibit 10(u) to the Annual
Report on Form 10-K of Viacom Inc. for the fiscal year ended December
31, 1996) (File No. 1-9553)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
10.28 Stock Purchase Agreement, dated as of May 17, 1998, among Viacom
International Inc., Pearson Inc., and Pearson plc (incorporated by
reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of
Viacom Inc. for the quarter ended June 30, 1998) (File No. 1-9553), as
amended by Amendment No. 1 dated as of November 25, 1998 (filed
herewith)
10.29 Agreement and Plan of Merger among Viacom International Inc., VSEG
Acquisition Inc. and Spelling Entertainment Group Inc., dated as of
May 17, 1999 (incorporated by reference to the report filed on Form 8-
K by Viacom Inc. on May 18, 1999)
10.30 Amendment No. 3, dated as of May 21, 1999, to the Amended and Restated
Credit Agreement, dated as of March 26, 1997, as amended, among Viacom
Inc., the Bank parties thereto from time to time, The Bank of New
York, as a Managing Agent and as the Documentation Agent, Citibank,
N.A., as a Managing Agent and as the Administrative Agent, Morgan
Guaranty Trust Company of New York, as a Managing Agent, Bank of
America NT&SA, as a Managing Agent, The Chase Manhattan Bank, as a
Managing Agent, JP Morgan Securities Inc., as a Syndication Agent,
Bancamerica Robertson Stephens (formerly known as Bancamerica
Securities, Inc.), as Syndication Agent, the Banks identified as
Agents on the signature pages thereof, as Agents, and the Banks
identified as Co-Agents on the signature pages thereof, as Co-Agents
(incorporated by reference to Exhibit 10.1 to the Quarterly Report
filed on Form 10-Q of Viacom Inc. for the quarter ended March 31,
1999)
10.31 Amendment No. 1, dated as of May 21, 1999, to the Amended and Restated
VII Credit Agreement, dated as of March 26, 1997, among Viacom
International Inc., the Bank parties thereto from time to time, The
Bank of New York, as a Managing Agent and as the Documentation Agent,
Citibank, N.A., as a Managing Agent and as the Administrative Agent,
Morgan Guaranty Trust Company of New York, as a Managing Agent, Bank
of America NT&SA, as a Managing Agent, The Chase Manhattan Bank, as a
Managing Agent, JP Morgan Securities Inc., as a Syndication Agent,
Bancamerica Robertson Stephens (formerly known as Bancamerica
Securities, Inc.), as Syndication Agent, the Banks identified as
Agents on the signature pages thereof, as Agents, and the Banks
identified as Co-Agents on the signature pages thereof, as Co-Agents
(incorporated by reference to Exhibit 10.2 to the Quarterly Report
filed on Form 10-Q of Viacom Inc. for the quarter ended March 31,
1999)
21.1 Subsidiaries of Viacom Inc. (incorporated by reference to Exhibit 21
to the Annual Report on Form 10-K of Viacom Inc. for the fiscal year
ended December 31, 1998) (File No. 1-9553)
*23.1 Consent of PricewaterhouseCoopers LLP
*23.2 Consent of KPMG LLP
*23.3 Consent of Arthur Andersen
23.4 Consent of Michael D. Fricklas, Senior Vice President, General Counsel
and Secretary of Viacom Inc. (included in his opinion in Exhibit 5.1)
23.5 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in its
opinion in Exhibit 8.1)
23.6 Consent of Cravath, Swaine & Moore (included in its opinion in Exhibit
8.2)
*23.7 Consent of Morgan Stanley & Co. Incorporated
*23.8 Consent of Evercore Group Inc.
*24.1 Powers of Attorney
*99.1 Form of consent card for the Shareholders of Viacom Inc.
*99.2 Form of proxy card for the Special Meeting of Shareholders CBS
Corporation
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
*99.3 Form of Chairman Letter to the Shareholders of Viacom Inc.
*99.4 Form of Chairman Letter to the Shareholders of CBS Corporation
*99.5 Form of Notice of Consent Solicitation of Shareholders of Viacom Inc.
*99.6 Form of Notice of Special Meeting of Shareholders of CBS Corporation
*99.7 Opinion of Morgan Stanley & Co. Incorporated (attached as Annex H to
the Joint Proxy Statement/Prospectus)
*99.8 Opinion of Evercore Group Inc. (attached as Annex I to the Joint Proxy
Statement/Prospectus)
</TABLE>
- --------
* Filed herewith.
** Schedules referred to in the Agreement and Plan of Merger are omitted from
this filing. The Registrant agrees to furnish supplementally a copy of any
omitted schedule to the Commission upon request, in accordance with Item
601(b)(2) of Regulation S-K.
(b) Not applicable.
(c) The respective opinions of Morgan Stanley & Co. Incorporated and
Evercore Group Inc. are included as Annex H and Annex I, respectively, to this
joint proxy statement/prospectus which is part of this registration statement.
ITEM 22. Undertakings
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) 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.
(b) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports
to meet the requirements of section 10(a)(3) of the Securities Act and
is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the Securities
Act, each such post-effective amendment 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.
(c) 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 SEC such indemnification
is against public policy as expressed in the Securities 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,
II-6
<PAGE>
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 Securities Act and will be governed by the final adjudication
of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Joint Proxy
Statement/Prospectus pursuant to Item 4, 10(b), 11, or 13 of this Form S-4,
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.
(e) 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.
II-7
<PAGE>
SIGNATURES OF VIACOM INC.
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the County of
New York, State of New York, on this 24th day of November, 1999.
Viacom Inc.
/s/ Sumner M. Redstone
By: _________________________________
Sumner M. Redstone
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Sumner M. Redstone Chairman of the Board of November 24, 1999
______________________________________ Directors, Chief
Sumner M. Redstone Executive Officer and
Director (Principal
Executive Officer)
/s/ George S. Smith, Jr. Senior Vice President and November 24, 1999
______________________________________ Chief Financial Officer
George S. Smith, Jr. (Principal Financial
Officer)
/s/ Susan C. Gordon Vice President, Controller November 24, 1999
______________________________________ and Chief Accounting
Susan C. Gordon Officer (Principal
Accounting Officer)
* Director
______________________________________
George S. Abrams
* Director
______________________________________
Philippe P. Dauman
* Director
______________________________________
Thomas E. Dooley
* Director
______________________________________
Ken Miller
* Director
______________________________________
Brent D. Redstone
* Director
______________________________________
Shari Redstone
* Director
______________________________________
Frederic V. Salerno
* Director
______________________________________
William Schwartz
* Director
______________________________________
Ivan Seidenberg
/s/ Michael D. Fricklas November 24, 1999
*By __________________________________
Michael D. Fricklas
Attorney-in-Fact
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
*2.1 Agreement and Plan of Merger, dated as of September 6, as amended and
restated as of October 8, 1999 and as of November 23, 1999, among
Viacom Inc., CBS Corporation and Viacom/CBS LLC (attached as Annex A
to the Joint Proxy Statement/Prospectus**)
*3.1 Restated Certificate of Incorporation of Viacom Inc. (attached as
Annex B to the Joint Proxy Statement/Prospectus**)
*3.2 By-laws of Viacom Inc. (attached as Annex C to the Joint Proxy
Statement/Prospectus**)
4.1 Specimen certificate representing 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 Specimen certificate representing Viacom Inc. Series C Preferred Stock
*5.1 Opinion of Michael D. Fricklas, Senior Vice President, General Counsel
and Secretary of Viacom Inc., as to the legality of the securities
being registered
*8.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to the material
United States federal income tax consequences of the Merger
*8.2 Opinion of Cravath Swaine & Moore as to the material United States
federal income tax consequences of the Merger
*10.1 Voting Agreement, dated September 6, 1999, between National
Amusements, Inc. and CBS Corporation (attached as Annex D to the Joint
Proxy Statement/Prospectus**)
*10.2 Stockholder Agreement, dated September 6, 1999, between National
Amusements, Inc. and CBS Corporation (attached as Annex E to the Joint
Proxy Statement/Prospectus**)
*10.3 Employment Letter Agreement, dated as of September 6, 1999, between
Viacom Inc. and Sumner Redstone (attached as Annex F to the Joint
Proxy Statement/Prospectus**)
*10.4 Employment Letter Agreement, dated as of September 6, 1999, between
Viacom Inc. and Mel Karmazin (attached as Annex G to the Joint Proxy
Statement/Prospectus**)
10.5 Agreement, dated as of September 6, 1999, between Viacom Inc. and
Philippe Dauman (incorporated by reference to the Report on Form 8-K
filed by Viacom Inc. on September 7, 1999)
10.6 Agreement, dated as of September 6, 1999, between Viacom Inc. and
Thomas Dooley (incorporated by reference to the Report on Form 8-K
filed by Viacom Inc. on September 7, 1999)
*10.7 Voting Agreement, dated as of November 9, 1999, between National
Amusements, Inc. and Viacom Inc.
10.8 Viacom Inc. 1989 Long-Term Management Incentive Plan (as amended and
restated through April 23, 1990, as further amended and restated
through April 27, 1995, and as further amended and restated through
November 1, 1996) (incorporated by reference to Exhibit 10(a) to the
Annual Report on Form 10-K of Viacom Inc. for the fiscal year ended
December 31, 1996) (File No. 1-9553)
10.9 Viacom Inc. 1994 Long-Term Management Incentive Plan (as amended and
restated through April 27, 1995 and as further amended and restated
through November 1, 1996) (incorporated by reference to Exhibit 10(b)
to the Annual Report on Form 10-K of Viacom Inc. for the fiscal year
ended December 31, 1996) (File No. 1-9553)
*10.10 Viacom Inc. 1997 Long-Term Management Incentive Plan (as amended on
July 29, 1999 and as further amended on September 6, 1999) (attached
as Annex J to the Joint Proxy Statement/Prospectus)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
10.11 Viacom Inc. Senior Executive Short-Term Incentive Plan (as amended
and restated through March 27, 1996 and as further amended and
restated through March 18, 1999) (incorporated by reference to
Exhibit B to the Definitive Proxy Statement filed by Viacom Inc. on
April 10, 1999)
10.12 Viacom Inc. Long-Term Incentive Plan (Divisional) (incorporated by
reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of
Viacom Inc. for the quarter ended June 30, 1993) (File No. 1-9553)
10.13 Viacom International Inc. Deferred Compensation Plan for Non-Employee
Directors (as amended and restated through December 17, 1992)
(incorporated by reference to Exhibit 10(e) 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)
10.14 Viacom Inc. and Viacom International Inc. Retirement Income Plan for
Non-Employee Directors (incorporated by reference to Exhibit 10(f) to
the Annual Report on Form 10-K of Viacom Inc., for the fiscal year
ended December 31, 1989) (File No. 1-9553)
10.15 Viacom Inc. Stock Option Plan for Outside Directors (incorporated by
reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of
Viacom Inc. for the quarter ended June 30, 1993) (File No. 1-9553)
10.16 Viacom Inc. 1994 Stock Option Plan for Outside Directors
(incorporated by reference to Exhibit B to Viacom Inc.'s Definitive
Proxy Statement dated April 28, 1995)
10.17 Viacom Inc. Excess Investment Plan (incorporated by reference to
Exhibit 4.1 to the Viacom Inc. Registration Statement on Form S-8)
(File No. 1-9553)
10.18 Excess Pension Plan for Certain Key Employees of Viacom International
Inc. (incorporated by reference to Exhibit 10(i) to the Annual Report
on Form 10-K of Viacom Inc. for the fiscal year ended December 31,
1990) (File No. 1-9553)
10.19 Agreement, dated as of January 1, 1996, between Viacom Inc. and
Michael D. Fricklas, as amended by an Agreement dated March 31, 1998,
and as further amended by an Agreement dated October 12, 1998
(incorporated by reference to Exhibit 10(n) to the Annual Report on
Form 10-K of Viacom Inc. for the fiscal year ended December 31, 1998)
10.20 Agreement, dated as of April 1, 1995, between Viacom Inc. and George
S. Smith, Jr., as amended by an Agreement dated as of March 30, 1998
(incorporated by reference to Exhibit 10(o) to the Annual Report on
Form 10-K of Viacom Inc. for the fiscal year ended December 31, 1997)
(File No. 1-9553)
10.21 Service Agreement, dated as of March 1, 1994, between George S.
Abrams and Viacom Inc. (incorporated by reference to Exhibit 10(q) to
the Annual Report on Form 10-K of Viacom Inc. for the fiscal year
ended December 31, 1994) (File No. 1-9553)
10.22 Viacom Inc. Executive Severance Plan for Senior Vice Presidents
(Effective as of September 6, 1999) (incorporated by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q of Viacom Inc. for
the quarter ended September 30, 1999)
10.23 Blockbuster Entertainment Corporation ("BEC") stock option plans
assumed by Viacom Inc. after the Blockbuster Merger consisting of the
following:
(i) BEC's 1989 Stock Option Plan (incorporated by reference to BEC's
Proxy Statement dated March 31, 1989)
(ii) Amendments to BEC's 1989 Stock Option Plan (incorporated by
reference to BEC's Proxy Statement dated April 3, 1991)
(iii) BEC's 1990 Stock Option Plan (incorporated by reference to
BEC's Proxy Statement dated March 29, 1990)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
(iv) Amendments to BEC's 1990 Stock Option Plan (incorporated by
reference to BEC's Proxy Statement dated April 15, 1991)
(v) BEC's 1991 Employee Director Stock Option Plan (incorporated by
reference to BEC's Proxy Statement dated April 15, 1991)
(vi) BEC's 1991 Non-Employee Director Stock Option Plan (incorporated
by reference to BEC's Proxy Statement dated April 15, 1991)
(vii) BEC's 1994 Stock Option Plan (incorporated by reference to
Exhibit 10.35 to the Annual Report on Form 10-K of BEC for the
fiscal year ended December 31, 1993) (File No. 0-12700)
10.24 Parents Agreement dated as of July 24, 1995 among Viacom Inc., Tele-
Communications, Inc. and TCI Communications, Inc. (incorporated by
reference to Exhibit 10.1 to the Registration Statement on Form S-4
filed by Viacom International Inc.) (File No. 33-64467)
10.25 Implementation Agreement dated as of July 24, 1995 between Viacom
International Inc. and Viacom International Services Inc.
(incorporated by reference to Exhibit 10.2 to the Registration
Statement on Form S-4 filed by Viacom International Inc.) (File No.
33-64467)
10.26 Subscription Agreement dated as of July 24, 1995 among Viacom
International Inc., Tele-Communications, Inc. and TCI Communications,
Inc. (incorporated by reference to Exhibit 10.3 to the Registration
Statement on Form S-4 filed by Viacom International Inc.) (File No.
33-64467)
10.27 Stock Purchase Agreement, dated as of February 16, 1997, between
Viacom International Inc. and Evergreen Media Corporation of Los
Angeles (incorporated by reference to Exhibit 10(u) to the Annual
Report on Form 10-K of Viacom Inc. for the fiscal year ended December
31, 1996) (File No. 1-9553)
10.28 Stock Purchase Agreement, dated as of May 17, 1998, among Viacom
International Inc., Pearson Inc., and Pearson plc (incorporated by
reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of
Viacom Inc. for the quarter ended June 30, 1998) (File No. 1-9553), as
amended by Amendment No. 1 dated as of November 25, 1998 (filed
herewith)
10.29 Agreement and Plan of Merger among Viacom International Inc., VSEG
Acquisition Inc. and Spelling Entertainment Group Inc., dated as of
May 17, 1999 (incorporated by reference to the report filed on Form 8-
K by Viacom Inc. on May 18, 1999)
10.30 Amendment No. 3, dated as of May 21, 1999, to the Amended and Restated
Credit Agreement, dated as of March 26, 1997, as amended, among Viacom
Inc., the Bank parties thereto from time to time, The Bank of New
York, as a Managing Agent and as the Documentation Agent, Citibank,
N.A., as a Managing Agent and as the Administrative Agent, Morgan
Guaranty Trust Company of New York, as a Managing Agent, Bank of
America NT&SA, as a Managing Agent, The Chase Manhattan Bank, as a
Managing Agent, JP Morgan Securities Inc., as a Syndication Agent,
Bancamerica Robertson Stephens (formerly known as Bancamerica
Securities, Inc.), as Syndication Agent, the Banks identified as
Agents on the signature pages thereof, as Agents, and the Banks
identified as Co-Agents on the signature pages thereof, as Co-Agents
(incorporated by reference to Exhibit 10.1 to the Quarterly Report
filed on Form 10-Q of Viacom Inc. for the quarter ended March 31,
1999)
10.31 Amendment No. 1, dated as of May 21, 1999, to the Amended and Restated
VII Credit Agreement, dated as of March 26, 1997, among Viacom
International Inc., the Bank parties thereto from time to time, The
Bank of New York, as a Managing Agent and as the Documentation Agent,
Citibank, N.A., as a Managing Agent and as the Administrative Agent,
Morgan Guaranty Trust Company of New York, as a Managing Agent, Bank
of America NT&SA, as a Managing Agent, The Chase Manhattan Bank, as a
Managing Agent, JP Morgan Securities Inc., as a Syndication Agent,
Bancamerica Robertson Stephens (formerly known as Bancamerica
Securities, Inc.), as Syndication Agent, the Banks identified as
Agents on the signature pages thereof, as Agents, and the Banks
identified as Co-Agents on the signature pages thereof, as Co-Agents
(incorporated by reference to Exhibit 10.2 to the Quarterly Report
filed on Form 10-Q of Viacom Inc. for the quarter ended March 31,
1999)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
21.1 Subsidiaries of Viacom Inc. (incorporated by reference to Exhibit 21
to the Annual Report on Form 10-K of Viacom Inc. for the fiscal year
ended December 31, 1998) (File No. 1-9553)
*23.1 Consent of PricewaterhouseCoopers LLP
*23.2 Consent of KPMG LLP
*23.3 Consent of Arthur Andersen
23.4 Consent of Michael D. Fricklas, Senior Vice President, General Counsel
and Secretary of Viacom Inc. (included in his opinion in Exhibit 5.1)
23.5 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in its
opinion in Exhibit 8.1)
23.6 Consent of Cravath, Swaine & Moore (included in its opinion in Exhibit
8.2)
*23.7 Consent of Morgan Stanley & Co. Incorporated
*23.8 Consent of Evercore Group Inc.
*24.1 Powers of Attorney
*99.1 Form of consent card for the Shareholders of Viacom Inc.
*99.2 Form of proxy card for the Special Meeting of Shareholders of CBS
Corporation
*99.3 Form of Chairman Letter to the Shareholders of Viacom Inc.
*99.4 Form of Chairman Letter to the Shareholders of CBS Corporation
*99.5 Form of Notice of Consent Solicitation of Shareholders of Viacom Inc.
*99.6 Form of Notice of Special Meeting of Shareholders of CBS Corporation
*99.7 Opinion of Morgan Stanley & Co. Incorporated (attached as Annex H to
the Joint Proxy Statement/Prospectus)
*99.8 Opinion of Evercore Group Inc. (attached as Annex I to the Joint Proxy
Statement/Prospectus)
</TABLE>
- --------
* Filed herewith.
** Schedules referred to in the Agreement and Plan of Merger are omitted from
this filing. The Registrant agrees to furnish supplementally a copy of any
omitted schedule to the Commission upon request, in accordance with Item
601(b)(2) of Regulation S-K.
<PAGE>
EXHIBIT 4.2
Incorporated under the Laws of the State of Delaware
Number VIACOM INC. Shares
Series C Preferred Stock
THIS CERTIFIES THAT Viacom Inc. is the registered holder of ( )
fully paid and nonassessable shares, par value $0.01 per share, of the Series C
Preferred Stock of Viacom Inc. (hereinafter and on the reverse hereof called
the "Corporation"), transferable on the books of the Corporation only upon
request of the holder hereof in person or of such holder's attorney, therunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, and upon surrender of this Certificate properly endorsed or
accompanied by a stock power duly executed.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed
by its duly authorized officers this th day of , .
- -------------------------------------
Name: -------------------------------------
Title: President Name:
Title: Secretary
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
SECTION FIVE OF ARTICLE FOUR OF VIACOM INC.'S CERTIFICATE OF
INCORPORATION, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF VIACOM INC. AND MAY BE AVAILABLE UPON
REQUEST AND IS ATTACHED HERETO.
FOR VALUE RECEIVED,___________________________________________________ does
hereby sell, assign and transfer unto___________________________________________
(Please print or type name and address of
assignee)
___________________________Shares evidenced by the within Certificate, and does
hereby irrevocably constitute and appoint attorney to transfer the
said Shares on the books of the within-named Corporation, with full power of
substitution in the premises.
Dated _________________________
In presence of: _________________________________
- -------------------------------
<PAGE>
SECTION FIVE OF ARTICLE FOUR OF VIACOM INC.'S CERTIFICATE OF INCORPORATION
(5) Series C Preferred Stock
(a) Designation and Amount. The shares of this series shall be designated as
"Series C Preferred Stock" (the "Series C Preferred Stock"). The par value of
each share of Series C Preferred Stock shall be $.01. The number of shares
constituting the Series C Preferred Stock shall initially be the Preferred
Exchange Ratio (as defined in the Amended and Restated Agreement and Plan of
Merger dated as of September 6, 1999, as amended and restated as of October 8,
1999, as it may be further amended from time to time, among the Corporation and
CBS (as defined in Article XIII of this Restated Certificate of
Incorporation)(the "Merger Agreement")) multiplied by the number of shares of
CBS Series B Participating Preferred Stock, par value $1.00 per share, issued
and outstanding immediately prior to the Effective Time (as defined in the
Merger Agreement). The Corporation is authorized to issue fractional shares of
Series C Preferred Stock to 1/1000th of a share in accordance with the terms
herein. All references herein to shares of Series C Preferred Stock shall be
deemed to include, if applicable, references to such fractional shares.
(b) Dividends and Distributions.
(1) Subject to the provisions for adjustment hereinafter set forth, the
holders of outstanding shares of Series C Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, a cash dividend in an amount per share
(rounded to the nearest cent) equal to 1000 times the aggregate per share
amount of each cash dividend declared or paid on the Class B Common Stock. In
addition, in the event the Corporation shall, at any time after the issuance of
any share or fraction of a share of Series C Preferred Stock, pay any dividend
or make any distribution on the shares of Class B Common Stock of the
Corporation, whether by way of a dividend or a reclassification of stock, a
recapitalization, reorganization or partial liquidation of the Corporation or
otherwise, which is payable in cash or any debt security, debt instrument, real
or personal property or any other property (other than (x) cash dividends
subject to the immediately preceding sentence, (y) a distribution of shares of
Class B Common Stock or other capital stock of the Corporation subject to
paragraph (h)(1) below or (z) a distribution of rights or warrants to acquire
any such shares subject to paragraph (h)(3) or (h)(5) below, including as such
a right any debt security convertible into or exchangeable for any such shares,
at a price less than the Fair Market Value (as hereinafter defined) of such
shares on the date of issuance of such rights or warrants), then, and in each
such event, the Corporation shall simultaneously pay on each then outstanding
share of Series C Preferred Stock a distribution, in like kind, of 1000 times
such distribution paid on a share of Class B Common Stock (subject to the
provisions for adjustment hereinafter set forth). The dividends and
distributions on the Series C Preferred Stock to which holders thereof are
entitled pursuant to the first and second sentences of this paragraph (b)(1)
are hereinafter referred to as "Dividends" and the multiple of such cash and
non-cash dividends and distributions on the Class B Common Stock applicable to
the determination of the Dividends, which shall be 1000 initially but shall be
adjusted from time to time as hereinafter provided, is hereinafter referred to
as the "Dividend Multiple." In the event the Corporation shall, at any time
after the issuance of any share or fraction of a share of Series C Preferred
Stock, declare or pay any dividend or make any distribution on Class B Common
Stock payable in shares of Class B Common Stock, or effect a subdivision or
split or a combination, consolidation or reverse split of the outstanding
shares of Class B Common Stock into a greater or lesser number of shares of
Class B Common Stock, then in each such case the Dividend Multiple thereafter
applicable to the determination of the amount of Dividends which holders of
shares of Series C Preferred Stock shall be entitled to receive shall be the
Dividend Multiple applicable immediately prior to such event multiplied by a
fraction the numerator of which is the number of shares of Class B Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Class B Common Stock that were outstanding immediately
prior to such event.
(2) The Corporation shall declare each Dividend at the same time it declares
any cash or non-cash dividend or distribution on the Class B Common Stock in
respect of which a Dividend is required to be paid. No cash or non-cash
dividend or distribution on the Class B Common Stock in respect of which a
Dividend is
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required to be paid shall be paid or set aside for payment on the Class B
Common Stock unless a Dividend in respect of such dividend or distribution on
the Class B Common Stock shall be simultaneously paid, or set aside for
payment, on the Series C Preferred Stock.
(3) All Dividends paid with respect to shares of the Series C Preferred
Stock shall be paid pro rata on a share-by-share basis to the holders entitled
thereto.
(4) The holders of shares of Series C Preferred Stock shall not be entitled
to receive any dividends or distributions except as provided herein.
(c) Voting Rights. The holders of record of outstanding shares of Series C
Preferred Stock shall have the following voting rights:
(1) Subject to the provisions for adjustment hereinafter set forth, each
share of Series C Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the holders of the Common
Stock. The number of votes which a holder of a share of Series C Preferred
Stock is entitled to cast, as the same may be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Vote Multiple." In
the event the Corporation shall, at any time after the issuance of any
share or fraction of a share of Series C Preferred Stock, declare or pay
any dividend on Class A Common Stock, payable in shares of Class A Common
Stock, or effect a subdivision or split or a combination, consolidation or
reverse split of the outstanding shares of Class A Common Stock into a
greater or lesser number of shares of Class A Common Stock, then in each
such case the Vote Multiple thereafter applicable to the determination of
the number of votes per share to which holders of shares of Series C
Preferred Stock shall be entitled after such event shall be the Vote
Multiple applicable immediately prior to such event multiplied by a
fraction the numerator of which is the number of shares of Class A Common
Stock outstanding immediately after such event and the denominator of which
is the number of shares of Class A Common Stock that were outstanding
immediately prior to such event.
(2) Except as otherwise provided in this Restated Certificate of
Incorporation or required by law, the holders of shares of Series C
Preferred Stock and the holders of shares of Class A Common Stock shall
vote together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(3) Except as otherwise provided in this Restated Certificate of
Incorporation or required by law, holders of Series C Preferred Stock shall
have no other special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Class A
Common Stock as set forth herein) for the taking of any corporate action.
(d) Conversion. The shares of Series C Preferred Stock shall be convertible
as follows:
(1) Each share of Series C Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of
such share at the office of the Corporation or any transfer agent for the
Series C Preferred Stock. Subject to the provisions for adjustment
hereinafter set forth, each share of Series C Preferred Stock shall be
convertible into 1000 shares of Class B Common Stock. The number of shares
of Class B Common Stock into which each share of Series C Preferred Stock
may be converted is hereinafter referred to as the "Conversion Rate." In
the event the Corporation shall, at any time after the issuance of any
share or fraction of a share of Series C Preferred Stock, declare or pay
any dividend or make any distribution on Class B Common Stock payable in
shares of Class B Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of
Class B Common Stock into a greater or lesser number of shares of Class B
Common Stock, then in each such case the Conversion Rate thereafter
applicable shall be the Conversion Rate applicable immediately prior to
such event multiplied by a fraction the numerator of which is the number of
shares of Class B Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Class B Common Stock
that were outstanding immediately prior to such event.
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(2) No fractional shares of Class B Common Stock shall be issued upon
conversion of the Series C Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation
shall pay cash equal to such fraction multiplied by the then Fair Market
Value per share of the Class B Common Stock. For such purpose, all shares
of Series C Preferred Stock being converted by a holder shall be
aggregated, and any resulting fractional share of Class B Common Stock
shall be paid in cash. Before any holder of shares of Series C Preferred
Stock shall be entitled to convert the same into full shares of Class B
Common Stock, and to receive certificates therefor, the holder shall
surrender the certificate or certificates representing the shares of Series
C Preferred Stock, duly endorsed, at the office of the Corporation or of
any transfer agent for the Series C Preferred Stock, and shall give written
notice to the Corporation at such office that such holder elects to convert
the same.
The Corporation shall, as soon as practicable after such delivery, issue
and deliver at such office to such holder of Series C Preferred Stock a
certificate or certificates for the number of shares of Class B Common
Stock to which such holder shall be entitled and a check payable to such
holder in the amount of any cash amount payable as the result of a
conversion into fractional shares of Class B Common Stock, plus any
declared and unpaid dividends on the converted Series C Preferred Stock.
Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of receipt of such surrender of the shares of
Series C Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Class B Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or
holders of such shares of Class B Common Stock on such date.
(3) The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Class B Common Stock, solely for the
purpose of effecting the conversion of the shares of Series C Preferred
Stock, such number of shares of Class B Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of
Series C Preferred Stock.
(4) Any notice required by the provisions of this Section 4 to be given
to the holders of shares of Series C Preferred Stock or to the Corporation
shall be given via facsimile transmission or via certified or registered
U.S. mail or via private overnight delivery service, if to the holder, at
(615) 316-6570 or such holder's address appearing on the books of the
Corporation, and if to the Corporation, at 1515 Broadway, New York, NY
10036, attention General Counsel, facsimile no.: 212-258-6134, or such
other facsimile number or address as the holder or the Corporation shall
notify the other of in accordance with the notice provisions set forth in
this paragraph (d)(5). Notice shall be deemed to have been given on the
date of facsimile transmission (if the notice is faxed) or five days after
mailing (if the notice is mailed) or the day after the notice is given to
the delivery service (if sent by overnight courier).
(e) Certain Restrictions.
(1) Whenever Dividends are in arrears or the Corporation shall be in
default on payment thereof, thereafter and until all accrued and unpaid
Dividends, whether or not declared, on shares of Series C Preferred Stock
outstanding shall have been paid or set irrevocably aside for payment in
full, and in addition to any and all other rights which any holder of
shares of Series C Preferred Stock may have in such circumstances, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration, any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity as to dividends with the Series
C Preferred Stock, unless dividends are paid ratably on the Series C
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled if the full dividends
accrued thereon were to be paid;
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(iii) except as permitted by subparagraph (iv) of this paragraph
(e)(1), redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series C Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for
shares of any stock of the Corporation ranking junior (both as to
dividends and upon liquidation, dissolution or winding up) to the
Series C Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series C Preferred Stock, or any shares of stock ranking on a parity
with the Series C Preferred Stock (either as to dividends or upon
liquidation, dissolution or winding up) except as permitted by
subparagraph (iii) of this paragraph (e)(1) or in accordance with a
purchase offer made to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(2) The Corporation shall not permit any Subsidiary (as hereinafter
defined) of the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the Corporation
could, under subparagraph (1) of this paragraph (e), purchase or otherwise
acquire such shares at such time and in such manner. A "Subsidiary" of the
Corporation shall mean any corporation or other entity of which securities
or other ownership interests entitled to cast at least a majority of the
votes that would be entitled to be cast in an election of the board of
directors of such corporation or other entity or other persons performing
similar functions are beneficially owned, directly or indirectly, by the
Corporation or by any corporation or other entity that is otherwise
controlled by the Corporation.
(3) The Corporation shall not issue any shares of Series C Preferred
Stock except pursuant to the Merger Agreement, a copy of which is on file
with the Secretary of the Corporation at its principal executive offices
and shall be made available to holders of Series C Preferred Stock without
charge upon written request therefor addressed to the Secretary of the
Corporation at the address set forth in paragraph (d)(4) above.
Notwithstanding the foregoing sentence, nothing contained in the provisions
of this Article IV shall prohibit or restrict the Corporation from issuing
for any purpose any series of Preferred Stock with rights and privileges
similar to, different from, or greater than, those of the Series C
Preferred Stock or, subject to the limitations set forth in paragraph (n),
from creating other securities senior to, junior to or on a parity with the
Series C Preferred Stock.
(f) Reacquired Shares. Any shares of Series C Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares upon their
retirement and cancellation shall become authorized but unissued shares of
Preferred Stock, without designation as to series, and such shares may be
redesignated and reissued as part of any series of Preferred Stock.
(g) Liquidation, Dissolution or Winding Up.
(1) Upon any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, no distribution shall be made (i) to the holders of shares
of stock ranking junior (upon liquidation, dissolution or winding up) to the
Series C Preferred Stock unless the holders of shares of Series C Preferred
Stock outstanding shall have received out of the assets of the Corporation
available for distribution to its shareholders after payment or provision for
payment of any securities ranking senior to the Series C Preferred Stock, for
each share of Series C Preferred Stock, subject to adjustment as hereinafter
provided, (A) $.01 plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment or,
(B) if greater than the amount specified in clause (i)(A) of this sentence, an
amount equal to 1000 times the aggregate amount to be distributed per share to
holders of Class B Common Stock, as the same may be adjusted as hereinafter
provided, and (ii) to the holders of stock ranking on a parity upon
liquidation, dissolution or winding up with the Series C Preferred Stock,
unless simultaneously therewith distributions are made ratably on the Series C
Preferred Stock and all other shares of such parity stock in proportion to the
total
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amounts to which the holders of shares of Series C Preferred Stock are entitled
under clause (i)(A) of this sentence and to which the holders of such parity
shares are entitled, in each case upon such liquidation, dissolution or winding
up. The amount to which holders of Series C Preferred Stock may be entitled
upon liquidation, dissolution or winding up of the Corporation pursuant to
clause (i)(B) of the foregoing sentence is hereinafter referred to as the
"Participation Liquidation Amount" and the multiple of the amount to be
distributed to holders of shares of Class B Common Stock upon the liquidation,
dissolution or winding up of the Corporation applicable pursuant to said clause
to the determination of the Participating Liquidation Amount, as said multiple
may be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Liquidation Multiple". In the event the Corporation shall,
at any time after the issuance of any share or fraction of a share of Series C
Preferred Stock, declare or pay any dividend or make any distribution on Class
B Common Stock payable in shares of Class B Common Stock, or effect a
subdivision or split or a combination, consolidation or reverse split of the
outstanding shares of Class B Common Stock into a greater or lesser number of
shares of Class B Common Stock, then in each such case the Liquidation Multiple
thereafter applicable to the determination of the Participating Liquidation
Amount to which holders of Series C Preferred Stock shall be entitled after
such event shall be the Liquidation Multiple applicable immediately prior to
such event multiplied by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. Except as provided in this
paragraph (g)(1), holders of Series C Preferred Stock shall not be entitled to
any distribution in the event of liquidation, dissolution or winding up of the
Corporation.
(2) For the purposes of this paragraph (g), none of the following shall be
deemed to be a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation:
(i) the voluntary sale, conveyance, lease, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Corporation;
(ii) the consolidation or merger of the Corporation with or into one or
more other corporations or other associations;
(iii) the consolidation or merger of one or more corporations or other
associations with or into the Corporation; or
(iv) the participation by the Corporation in a share exchange.
(h) Certain Reclassifications and Other Events.
(1) In the event that holders of shares of Class B Common Stock receive,
after the issuance of any share or fraction of a share of Series C Preferred
Stock, in respect of their shares of Class B Common Stock any share of capital
stock of the Corporation (other than any share of Class B Common Stock),
whether by way of reclassification, recapitalization, reorganization, dividend
or other distribution or otherwise (a "Class B Transaction"), then, and in each
such event, the dividend rights, conversion rights and rights upon the
liquidation, dissolution or winding up of the Corporation of the shares of
Series C Preferred Stock shall be adjusted so that after such Transaction the
holders of Series C Preferred Stock shall be entitled, in respect of each share
of Series C Preferred Stock held, in addition to such rights in respect thereof
to which such holder was entitled immediately prior to such adjustment, (i) to
such additional dividends as equal the Dividend Multiple in effect immediately
prior to such Class B Transaction multiplied by the additional dividends which
the holder of a share of Class B Common Stock shall be entitled to receive by
virtue of the receipt in the Class B Transaction of such capital stock, (ii)
upon surrender of shares of Series C Preferred Stock for conversion, to the
aggregate number and kind of shares of capital stock of the Corporation which,
if such shares of Series C Preferred Stock had been converted immediately prior
to such Class B Transaction, such holder would have been entitled to receive by
virtue of such Class B Transaction and (iii) to such additional distributions
upon liquidation, dissolution or winding up of the Corporation as equal the
Liquidation Multiple in effect immediately prior to such Class B Transaction
multiplied by the additional amount which the holder of a share
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of Class B Common Stock shall be entitled to receive upon liquidation,
dissolution or winding up of the Corporation by virtue of the receipt in the
Class B Transaction of such capital stock, as the case may be, all as provided
by the terms of such capital stock.
(2) In the event that holders of shares of Class A Common Stock receive,
after the issuance of any share or fraction of a share of Series C Preferred
Stock, in respect of their shares of Class A Common Stock any share of capital
stock of the Corporation (other than any share of Class A Common Stock),
whether by way of reclassification, recapitalization, reorganization, dividend
or other distribution or otherwise (a "Class A Transaction"), then, and in each
such event, the voting rights of the shares of Series C Preferred Stock shall
be adjusted so that after such Class A Transaction the holders of Series C
Preferred Stock shall be entitled, in respect of each share of Series C
Preferred Stock held, in addition to such rights in respect thereof to which
such holder was entitled immediately prior to such adjustment, to such
additional voting rights as equal the Vote Multiple in effect immediately prior
to such Class A Transaction multiplied by the additional voting rights to which
the holder of a share of Class A Common Stock shall be entitled by virtue of
the receipt in the Class A Transaction of such capital stock.
(3) In the event that holders of shares of Class B Common Stock receive,
after the issuance of any share or fraction of a share of Series C Preferred
Stock, in respect of their shares of Class B Common Stock any right or warrant
to purchase Class B Common Stock (including as such a right, for all purposes
of this paragraph (h)(3), any security convertible into or exchangeable for
Class B Common Stock) at a purchase price per share less than the Fair Market
Value of a share of Class B Common Stock on the date of issuance of such right
or warrant, then and in each such event the dividend rights, conversion rights
and rights upon the liquidation, dissolution or winding up of the Corporation
of the shares of Series C Preferred Stock shall each be adjusted so that after
such event the Dividend Multiple, the Conversion Rate and the Liquidation
Multiple shall each be the product of the Dividend Multiple, the Conversion
Rate and the Liquidation Multiple, as the case may be, in effect immediately
prior to such event multiplied by a fraction the numerator of which shall be
the number of shares of Class B Common Stock outstanding immediately before
such issuance of rights or warrants plus the maximum number of shares of Class
B Common Stock which could be acquired upon exercise in full of all such rights
or warrants and the denominator of which shall be the number of shares of Class
B Common Stock outstanding immediately before such issuance of rights or
warrants plus the number of shares of Class B Common Stock which could be
purchased, at the Fair Market Value of the Class B Common Stock at the time of
such issuance, by the maximum aggregate consideration payable upon exercise in
full of all such rights or warrants.
(4) In the event that holders of shares of Class A Common Stock receive,
after the issuance of any share or fraction of a share of Series C Preferred
Stock, in respect of their shares of Class A Common Stock any right or warrant
to purchase Class A Common Stock (including as such a right, for all purposes
of this paragraph (h)(4), any security convertible into or exchangeable for
Class A Common Stock) at a purchase price per share less than the Fair Market
Value of a share of Class A Common Stock on the date of issuance of such right
or warrant, then and in each such event the voting rights of the shares of
Series C Preferred Stock shall be adjusted so that after such event the Vote
Multiple shall be the product of the Vote Multiple in effect immediately prior
to such event multiplied by a fraction the numerator of which shall be the
number of shares of Class A Common Stock outstanding immediately before such
issuance of rights or warrants plus the maximum number of shares of Class A
Common Stock which could be acquired upon exercise in full of all such rights
or warrants and the denominator of which shall be the number of shares of Class
A Common Stock outstanding immediately before such issuance of rights or
warrants plus the number of shares of Class A Common Stock which could be
purchased, at the Fair Market Value of the Class A Common Stock at the time of
such issuance, by the maximum aggregate consideration payable upon exercise in
full of all such rights or warrants.
(5) In the event that holders of shares of Class B Common Stock of the
Corporation receive, after the issuance of any share or fraction of a share of
Series C Preferred Stock, in respect of their shares of Class B Common Stock
any right or warrant to purchase capital stock of the Corporation (other than
shares of Class B Common Stock), including as such a right, for all purposes of
this paragraph (h)(5), any security convertible
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into or exchangeable for capital stock of the Corporation (other than Class B
Common Stock) at a purchase price per share less than the Fair Market Value of
a share of such capital stock on the date of issuance of such right or warrant,
then and in each such event the dividend rights, conversion rights and rights
upon liquidation, dissolution or winding up of the Corporation of the shares of
Series C Preferred Stock shall each be adjusted so that after such event each
holder of a share of Series C Preferred Stock shall be entitled, in respect of
each share of Series C Preferred Stock held, in addition to such rights in
respect thereof to which such holder was entitled immediately prior to such
event, to receive (i) such additional dividends as equal the Dividend Multiple
in effect immediately prior to such event multiplied, first, by the additional
dividends to which the holder of a share of Class B Common Stock shall be
entitled upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise, and multiplied again by the
Discount Fraction (as hereinafter defined), (ii) such additional conversion
rights as equal the Conversion Rate in effect immediately prior to such event
multiplied by a fraction the numerator of which shall be the Fair Market Value
per share of Class B Common Stock on the date of such event less the Fair
Market Value of the portion of the right or warrant so distributed applicable
to one share of Class B Common Stock and the denominator of which shall be the
Fair Market Value per share of Class B Common Stock on the date of such event
and (iii) such additional distributions upon liquidation, dissolution or
winding up of the Corporation as equal the Liquidation Multiple in effect
immediately prior to such event multiplied, first, by the additional amount
which the holder of a share of Class B Common Stock shall be entitled to
receive upon liquidation, dissolution or winding up of the Corporation upon
exercise of such right or warrant by virtue of the capital stock which could be
acquired upon such exercise, and multiplied again by the Discount Fraction. For
purposes of this paragraph, the "Discount Fraction" shall be a fraction the
numerator of which shall be the difference between the Fair Market Value of a
share of the capital stock subject to a right or warrant distributed to holders
of shares of Class B Common Stock of the Corporation as contemplated by this
paragraph (h)(5) immediately after the distribution thereof and the purchase
price per share for such share of capital stock pursuant to such right or
warrant and the denominator of which shall be the Fair Market Value of a share
of such capital stock immediately after the distribution of such right or
warrant.
(6) In the event that holders of shares of Class A Common Stock of the
Corporation receive, after the issuance of any share or fraction of a share of
Series C Preferred Stock, in respect of their shares of Class A Common Stock
any right or warrant to purchase capital stock of the Corporation (other than
shares of Class A Common Stock), including as such a right, for all purposes of
this paragraph (h)(6), any security convertible into or exchangeable for
capital stock of the Corporation (other than Class A Common Stock) at a
purchase price per share less than the Fair Market Value of a share of such
capital stock on the date of issuance of such right or warrant, then and in
each such event the voting rights of the shares of Series C Preferred Stock
shall be adjusted so that after such event each holder of a share of Series C
Preferred Stock shall be entitled, in respect of each share of Series C
Preferred Stock held, in addition to such rights in respect thereof to which
such holder was entitled immediately prior to such event, to receive such
additional voting rights as equal the Vote Multiple in effect immediately prior
to such event multiplied, first, by the additional voting rights to which the
holder of a share of Class A Common Stock shall be entitled upon exercise of
such right or warrant by virtue of the capital stock which could be acquired
upon such exercise, and multiplied again by the Voting Discount Fraction (as
hereinafter defined). For purposes of this paragraph, the "Voting Discount
Fraction" shall be a fraction the numerator of which shall be the difference
between the Fair Market Value of a share of the capital stock subject to a
right or warrant distributed to holders of shares of Class A Common Stock of
the Corporation as contemplated by this paragraph (h)(6) immediately after the
distribution thereof and the purchase price per share for such share of capital
stock pursuant to such right or warrant and the denominator of which shall be
the Fair Market Value of a share of such capital stock immediately after the
distribution of such right or warrant.]
(7) For purposes of this Section 5 of Article IV, the "Fair Market Value" of
a share of capital stock of the Corporation on any date shall be deemed to be
the average of the daily closing price per share thereof over the 15
consecutive Trading Days (as hereinafter defined) immediately prior to such
date; provided, however, that in the event the Fair Market Value of any such
share of capital stock is determined during a period which includes any date
that is within 15 Trading Days after (i) the ex-dividend date for a dividend or
distribution on stock
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payable in shares of such stock or securities convertible into shares of such
stock, or (ii) the effective date of any subdivision, split, combination,
consolidation, reverse stock split or reclassification of such capital stock,
then, and in each such case, the Fair Market Value shall be appropriately
adjusted by the Board of Directors of the Corporation to take into account ex-
dividend or post-effective date trading. The closing price for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way (in either
case, as reported in the applicable transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange),
or, if the shares are not listed or admitted to trading on the New York Stock
Exchange, as reported in the applicable transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the shares are listed or admitted to trading or, if the shares are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by The Nasdaq Stock Market
or such other system then in use, or if on any such date the shares are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
shares selected by the Board of Directors of the Corporation. The term "Trading
Day" shall mean a day on which the principal national securities exchange on
which the shares are listed or admitted to trading is open for the transaction
of business or, if the shares are not listed or admitted to trading on any
national securities exchange, on which the New York Stock Exchange or such
other national securities exchange as may be selected by the Board of Directors
of the Corporation is open. If the shares are not publicly held or not so
listed or traded on any day within the 15 Trading Day period applicable to the
determination of Fair Market Value thereof as aforesaid, "Fair Market Value"
shall mean the fair market value thereof per share as determined in good faith
by the Board of Directors of the Corporation. In either case referred to in the
foregoing sentence, the determination of Fair Market Value shall be described
in a statement filed with the Secretary of the Corporation.
(i) Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, division, share exchange, combination, sale of all or
substantially all of the Corporation's assets, or other transaction in which
the shares of Class B Common Stock are exchanged for or changed into other
securities, cash and/or any other property, then in any such case each
outstanding share of Series C Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of securities,
cash and/or other property (payable in like kind), as the case may be, for
which or into which each share of Class B Common Stock is changed or exchanged
multiplied by the highest of the Dividend Multiple, the Conversion Rate or the
Liquidation Multiple in effect immediately prior to such event; provided,
however, that no fractional share or scrip representing fractional shares of
any other securities shall be issued. Instead of any fractional interest in a
share of such other securities which would otherwise be deliverable pursuant to
this paragraph (i), the Corporation will pay to the holder thereof an amount in
cash (computed to the nearest cent) equal to the same fraction of the Fair
Market Value of a share of such other security or such other amount as may be
set forth in the agreement governing the related consolidation, division, share
exchange, combination, sale of all or substantially all of the Corporation's
assets or other transactions.
(j) Effective Time of Adjustments.
(1) Adjustments to the Series C Preferred Stock required by the provisions
hereof shall be effective as of the time at which the event requiring such
adjustments occurs.
(2) The Corporation shall give prompt written notice to each holder of a
share of outstanding Series C Preferred Stock of the effect of any adjustment
to the voting rights, dividend rights, conversion rights or rights upon
liquidation, dissolution or winding up of the Corporation of such shares
required by the provisions hereof. Notwithstanding the foregoing sentence, the
failure of the Corporation to give such notice shall not affect the validity or
the force or effect of, or the requirement for, such adjustment.
(k) No Redemption. The shares of Series C Preferred Stock shall not be
redeemable at the option of the Corporation or any holder thereof.
Notwithstanding the foregoing sentence of this paragraph (11), the Corporation
may acquire shares of Series C Preferred Stock in any other manner permitted by
law, the provisions of this Restated Certificate of Incorporation.
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(l) Ranking. Unless otherwise provided in this Restated Certificate of
Incorporation or in any certificate of designation relating to the
determination of a subsequent series of Preferred Stock, the Series C Preferred
Stock shall rank senior to the Class B Common Stock and the Class A Common
Stock and the Series C Preferred Stock shall rank junior to all other series of
Preferred Stock as to the payment of dividends and the distribution of assets
on liquidation, dissolution or winding up.
(m) Limitations. Except as may otherwise be required by law, the shares of
Series C Preferred Stock shall not have any powers, preferences or relative,
participating, optional or other special rights other than those specifically
set forth in this Article IV (as such may be amended from time to time) or
otherwise in the Restated Certificate of Incorporation.
(n) Amendment. So long as any shares of the Series C Preferred Stock are
outstanding, the Corporation shall not amend this Article IV or the Restated
Certificate of Incorporation in any manner which would alter or change the
rights, preferences or limitations of the Series C Preferred Stock so as to
affect such rights, preferences or limitations in any material respect
prejudicial to the holders of the Series C Preferred Stock without, in addition
to any other vote of shareholders required by law, the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Series C Preferred
Stock, voting together as a single class either in writing or by resolution
adopted at an annual or special meeting called for the purpose; provided,
however, that the creation of another series of Preferred Stock ranking senior
to or on a parity with the Series C Preferred Stock as to the payment of
dividends or the distribution of assets on liquidation, dissolution or winding
up, or which has equivalent or greater voting rights than the Series C
Preferred Stock, in each case shall not be deemed to be prejudicial to the
holders of the Series C Preferred Stock for the purposes of this paragraph (n).
10
<PAGE>
EXHIBIT 5.1
[VIACOM LETTERHEAD]
November 24, 1999
Viacom Inc.
1515 Broadway
New York, New York 10036
Ladies and Gentlemen:
This letter sets forth my opinion regarding the legality of the securities
being registered by Viacom, Inc., a Delaware corporation (the "Company"), in
connection with the filing by the Company with the Securities and Exchange
Commission of a Joint Proxy Statement/Registration Statement on Form S-4 (No.
333-88613), as amended (the "Joint Proxy Statement/Registration Statement"),
and the prospectus contained in the Joint Proxy Statement/Registration
Statement (the "Prospectus"), covering the registration under the Securities
Act of 1933, as amended (the "Act"), of 907,746,991 shares of the Class B
common stock, par value $.01 per share, and 11,003 shares of Series C Preferred
Stock, par value $.01 per share, to be issued by the Company (collectively, the
"Shares") pursuant to the Amended and Restated Agreement and Plan of Merger
among Viacom Inc., CBS Corporation and Viacom/CBS LLC, dated as of September 6,
1999, as amended and restated as of October 8, 1999 and as of November 23, 1999
(the "Merger Agreement"). The Shares are described in the Joint Proxy
Statement/Registration Statement, to which this opinion is an exhibit.
In connection with the foregoing, I have examined the originals, or copies
certified or otherwise identified to my satisfaction, of such records,
documents, certificates and other instruments as in my judgment are necessary
or appropriate to enable me to render the opinion expressed below. In my
examination, I have assumed the genuineness of all signatures, the authenticity
of all documents submitted to me as originals and the conformity with the
originals of all documents submitted to us as copies. I have also assumed that
the Merger Agreement is amended and restated on November 23, 1999 in the form
attached to the Joint Proxy Statement/Registration Statement as Annex A
thereto.
Based upon the foregoing, I am of the opinion that the Shares to which the
Prospectus relates have been duly authorized and, when issued as contemplated
by the Merger Agreement, will be validly issued, fully paid and non-assessable.
My opinion expressed above is limited to the General Corporation Law of the
state of Delaware and I do not express any opinion herein concerning any other
law.
I hereby consent to the use of this opinion as Exhibit 5.1 to the Joint
Proxy Statement/Registration Statement and to the use of my name under the
caption "LEGAL MATTERS" contained in the Prospectus. In giving this consent, I
do not thereby concede that I come within the category of persons whose consent
is required by the Act or the general rules and regulations promulgated
thereunder.
Very truly yours,
/s/ Michael D. Fricklas
-------------------------------------
Michael D. Fricklas
Senior Vice President, General
Counsel and Secretary
<PAGE>
EXHIBIT 8.1
[Letterhead of Paul, Weiss, Rifkind, Wharton & Garrison.]
November 24, 1999
Viacom, Inc.
1515 Broadway
New York, NY 10036
Ladies and Gentlemen:
We have acted as tax counsel for Viacom Inc., a Delaware corporation
("Viacom"), in connection with the proposed merger (the "Merger") of CBS
Corporation, a Pennsylvania corporation ("CBS"), with and into Viacom pursuant
to an Agreement and Plan of Merger dated as of September 6, 1999, as amended
and restated as of October 8, 1999 and as of November 23, 1999 (the "Merger
Agreement") among Viacom, CBS and Viacom/CBS LLC, a Delaware limited liability
company, under which each issued and outstanding share of the capital stock of
CBS will be converted into capital stock of Viacom. Any capitalized term used
but not defined herein shall have the meaning given to such term in the Merger
Agreement.
In that connection, you have requested our opinion regarding certain United
States federal income tax consequences of the Merger. In providing our opinion,
we have examined the Merger Agreement, the Joint Proxy Statement/ Prospectus of
CBS and Viacom dated as of November 24, 1999 (the "Proxy
Statement/Prospectus"), and such other documents, instruments and corporate
records as we have deemed necessary or appropriate for purposes of our opinion.
In addition, we have assumed that (i) the Merger will be consummated as a
direct merger of CBS with and into Viacom and otherwise in the manner
contemplated by the Proxy Statement/Prospectus and in accordance with the
provisions of the Merger Agreement, (ii) the statements concerning the Merger
set forth in the Merger Agreement and the Proxy Statement/Prospectus are and
will remain true, correct and complete, (iii) the factual representations made
to us by CBS and Viacom in their respective letters to us each dated as of the
date hereof and delivered to us for purposes of this opinion are and will
remain true, correct and complete (such letters, the "Representation Letters"),
and (iv) any representations made in the Representation Letters or in the
Merger Agreement "to the best knowledge of" or similarly qualified are true,
correct and complete without such qualification.
In our examination of documents, we have assumed, with your consent, that
(i) all documents submitted to us are authentic originals, or if submitted as
photocopies, that they faithfully reproduce the originals thereof; (ii) all
such documents have been or will be duly executed to the extent required; (iii)
all representations and statements set forth in such documents are true and
correct; (iv) any representation or statement made as a belief or made "to the
knowledge of," or similarly qualified is correct and accurate without such
qualification; and (v) all obligations imposed by any such documents on the
parties thereto have been or will be performed or satisfied in accordance with
their terms.
If any of the above-described assumptions are untrue for any reason or if
the Merger is consummated in a manner that is inconsistent with the manner in
which it is described in the Merger Agreement and Proxy Statement/Prospectus,
our opinions as expressed below may be adversely affected and may not be relied
upon.
Based upon the foregoing, in our opinion, for United States federal income
tax purposes, (i) the Merger will qualify as a reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and each
of Viacom and CBS will be a party to such reorganization within the meaning of
Section
<PAGE>
368(b) of the Code, (ii) except for any payment received in lieu of fractional
shares and to the extent that any payment by Viacom of transfer taxes is
treated as taxable consideration received by the CBS shareholders, a CBS
shareholder will not recognize any income, gain or loss as a result of the
receipt of shares of Viacom Class B Common Stock or Viacom Series C Preferred
Stock in the Merger, (iii) a CBS shareholder's tax basis for the shares of
Viacom Class B Common Stock or Viacom Series C Preferred Stock received in the
Merger, including any fractional share interest for which payment is received,
will equal each such shareholder's tax basis in the shares of CBS Common Stock
or CBS Series B Preferred Stock exchanged therefor, and (iv) a CBS
shareholder's holding period for the shares of Viacom Class B Common Stock or
Viacom Series C Preferred Stock received in the Merger will include the period
during which the shares of CBS Common Stock or CBS Series B Preferred Stock
exchanged therefor were held.
The opinions expressed herein are based upon existing statutory, regulatory
and judicial authority, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or the facts and
circumstances surrounding the Merger, or any inaccuracy in the statements,
facts, assumptions or representations upon which we have relied, may affect the
continuing validity of our opinions as set forth herein. We assume no
responsibility to inform you of any such change or inaccuracy that may occur or
come to our attention. Our opinion is also subject to the other conditions and
qualifications described in the Proxy Statement/Prospectus under the heading
"The Merger--Federal Income Tax Consequences." Finally, our opinions are
limited to the tax matters specifically covered hereby, and we have not been
asked to address, nor have we addressed, any other tax consequences of the
Merger or any other transaction.
This opinion is being provided for the benefit of Viacom so that Viacom may
comply with its obligation under the federal securities laws. We consent to the
filing of this opinion as an exhibit to the Registration Statement and to the
reference to our firm name therein. In giving this consent, we do not admit
that we are within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules or
regulations of the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Paul, Weiss, Rifkind, Wharton &
Garrison
-------------------------------------
Paul, Weiss, Rifkind, Wharton &
Garrison
2
<PAGE>
EXHIBIT 8.2
[Letterhead of Cravath, Swaine & Moore.]
November 24, 1999
Ladies and Gentlemen:
We have acted as tax counsel for CBS Corporation, a Pennsylvania corporation
("CBS"), in connection with the proposed merger (the "Merger") of CBS with and
into Viacom, Inc., a Delaware corporation ("Viacom"), pursuant to an Agreement
and Plan of Merger dated as of September 6, 1999, as amended and restated as of
October 8, 1999 and as of November 23, 1999 (the "Merger Agreement") among
Viacom, CBS and Viacom/CBS LLC, a Delaware limited liability company, under
which each issued and outstanding share of the capital stock of CBS will be
converted into capital stock of Viacom. Any capitalized term used but not
defined herein shall have the meaning given to such term in the Merger
Agreement.
In that connection, you have requested our opinion regarding certain United
States federal income tax consequences of the Merger. In providing our opinion,
we have examined the Merger Agreement, the Joint Proxy Statement/Prospectus of
CBS and Viacom dated as of November 24, 1999 (the "Proxy
Statement/Prospectus"), and such other documents, instruments and corporate
records as we have deemed necessary or appropriate for purposes of our opinion.
In addition, we have assumed that (i) the Merger will be consummated as a
direct merger of CBS with and into Viacom and otherwise in the manner
contemplated by the Proxy Statement/Prospectus and in accordance with the
provisions of the Merger Agreement, (ii) the statements concerning the Merger
set forth in the Merger Agreement and the Proxy Statement/Prospectus are and
will remain true, correct and complete, (iii) the factual representations made
to us by CBS and Viacom in their respective letters to us each dated as of the
date hereof and delivered to us for purposes of this opinion are and will
remain true, correct and complete (such letters, the "Representation Letters"),
and (iv) any representations made in the Representation Letters or in the
Merger Agreement "to the best knowledge of" or similarly qualified are true,
correct and complete without such qualification.
In our examination of documents, we have assumed, with your consent, that
(i) all documents submitted to us are authentic originals, or if submitted as
photocopies, that they faithfully reproduce the originals thereof; (ii) all
such documents have been or will be duly executed to the extent required; (iii)
all representations and statements set forth in such documents are true and
correct; (iv) any representation or statement made as a belief or made "to the
knowledge of," or similarly qualified is correct and accurate without such
qualification; and (v) all obligations imposed by any such documents on the
parties thereto have been or will be performed or satisfied in accordance with
their terms.
If any of the above-described assumptions are untrue for any reason or if
the Merger is consummated in a manner that is inconsistent with the manner in
which it is described in the Merger Agreement and Proxy Statement/Prospectus,
our opinions as expressed below may be adversely affected and may not be relied
upon.
Based upon the foregoing, in our opinion, for United States federal income
tax purposes, (i) the Merger will qualify as a reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and each
of Viacom and CBS will be a party to such reorganization within the meaning of
Section
<PAGE>
368(b) of the Code, (ii) except for any payment received in lieu of fractional
shares and to the extent that any payment by Viacom of transfer taxes is
treated as taxable consideration received by the CBS shareholders, a CBS
shareholder will not recognize any income, gain or loss as a result of the
receipt of shares of Viacom Class B Common Stock or Viacom Series C Preferred
Stock in the Merger, (iii) a CBS shareholder's tax basis for the shares of
Viacom Class B Common Stock or Viacom Series C Preferred Stock received in the
Merger, including any fractional share interest for which payment is received,
will equal each such shareholder's tax basis in the shares of CBS Common Stock
or CBS Series B Preferred Stock exchanged therefor, and (iv) a CBS
shareholder's holding period for the shares of Viacom Class B Common Stock or
Viacom Series C Preferred Stock received in the Merger will include the period
during which the shares of CBS Common Stock or CBS Series B Preferred Stock
exchanged therefor were held.
The opinions expressed herein are based upon existing statutory, regulatory
and judicial authority, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or the facts and
circumstances surrounding the Merger, or any inaccuracy in the statements,
facts, assumptions or representations upon which we have relied, may affect the
continuing validity of our opinions as set forth herein. We assume no
responsibility to inform you of any such change or inaccuracy that may occur or
come to our attention. Our opinion is also subject to the other conditions and
qualifications described in the Proxy Statement/Prospectus under the heading
"The Merger--Federal Income Tax Consequences." Finally, our opinions are
limited to the tax matters specifically covered hereby, and we have not been
asked to address, nor have we addressed, any other tax consequences of the
Merger or any other transaction.
This opinion is being provided for the benefit of CBS so that CBS may comply
with its obligation under the federal securities laws. We consent to the filing
of this opinion as an exhibit to the Registration Statement and to the
reference to our firm name therein. In giving this consent, we do not admit
that we are within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules or
regulations of the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Cravath, Swaine & Moore
-------------------------------------
Cravath, Swaine &
Moore
CBS Corporation
51 West 52nd Street
New York, NY 10019
2
<PAGE>
EXHIBIT 10.7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VOTING AGREEMENT
By
NATIONAL AMUSEMENTS, INC.
(Stockholder)
and
VIACOM INC.
Dated as of November 9, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT, dated as of November 9, 1999 (this "Agreement"), by
NATIONAL AMUSEMENTS, INC., a Maryland corporation (the "Stockholder"), to and
for the benefit of VIACOM INC., a Delaware corporation ("Viacom").
WHEREAS, as of the date hereof, the Stockholder owns of record and
beneficially 93,658,828 shares of Class A Common Stock (the "Viacom Class A
Common Stock"; such shares, together with any of Viacom Class A Common Stock
and any other shares of voting stock of Viacom acquired by the Stockholder
prior to the termination of this Agreement being referred to herein as the
"Stockholder's Shares"), par value $.01 per share, of Viacom;
WHEREAS, on September 6, 1999, CBS CORPORATION, a Pennsylvania corporation
("CBS"), and Viacom entered into an Agreement and Plan of Merger, which
agreement was amended and restated October 8, 1999 (as amended, the "Merger
Agreement") pursuant to which, upon the terms and subject to the conditions
thereof, CBS will be merged with and into Viacom;
WHEREAS, on July 29, 1999 and September 6, 1999, the Viacom Board of
Directors amended the Viacom 1997 Long-Term Management Incentive Plan (the
"1997 Plan") to increase the number of shares of Viacom Class B common stock
(the "Viacom Class B Common Stock") authorized for issuance under the 1997 Plan
by an additional 10 million shares to a total of 50 million shares of Viacom
Class B Common Stock (the "1997 Plan Proposal"); and
WHEREAS, Viacom intends to submit the 1997 Plan Proposal for approval by the
affirmative vote of the holders of a majority of the shares of the Viacom Class
A Common Stock at the Viacom Stockholders' Meeting (as defined in the Merger
Agreement), however called, or in any action by written consent of the
stockholders of Viacom;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree as follows:
Section 1. Voting of Stockholder's Shares. Until the termination of this
Agreement in accordance with the terms hereof, the Stockholder hereby agrees
that, at the Viacom Stockholders' Meeting or any other meeting of the
stockholders of Viacom, however called, and in any action by written consent of
the stockholders of Viacom, the Stockholder will vote all of the Stockholder's
Shares in favor of the 1997 Plan Proposal.
Section 2. No Inconsistent Agreements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
the Stockholder shall not enter into any voting agreement or grant a proxy or
power of attorney with respect to the Stockholder's Shares which is
inconsistent with this Agreement.
Section 3. Termination. This Agreement shall terminate upon the earlier to
occur of (a) the approval of the 1997 Plan Proposal by the Viacom stockholders
and (b) the first anniversary of the date hereof. No such termination of this
Agreement shall relieve any party hereto from any liability for any breach of
this Agreement prior to termination.
Section 4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by facsimile, by courier service or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 6):
<PAGE>
if to the Stockholder:
National Amusements, Inc.
200 Elm Street
Dedham, Massachusetts 02026
Telecopier No.: (781) 461-1412
Attention: General Counsel
if to Viacom:
Viacom Inc.
1515 Broadway
New York, New York 10036
Telecopier No.: (212) 258-6099
Attention: Michael D. Fricklas, Senior Vice President,
General Counsel and Secretary
Section 5. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the transactions contemplated by this Agreement be consummated as originally
contemplated to the fullest extent possible.
Section 6. Entire Agreement; Assignment. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof.
This Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and assigns.
Section 7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
Section 8. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
Section 9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to any
principles of conflicts of laws of such State.
Section 10. Consent to Jurisdiction. (a) Each of the Stockholder and Viacom
hereby irrevocably submits to the exclusive jurisdiction of the courts of the
State of Delaware and to the jurisdiction of the United States District Court
for the State of Delaware, for the purpose of any action or proceeding arising
out of or relating to this Agreement and each of Viacom and the Stockholder
hereby irrevocably agrees that all claims in respect to such action or
proceeding shall be heard and determined exclusively in any Delaware state or
federal court. Each of Viacom and the Stockholder agrees that a final judgment
in any action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
2
<PAGE>
(b) Each of Viacom and the Stockholder irrevocably consents to the service
of the summons and complaint and any other process in any other action or
proceeding relating to the transactions contemplated by this Agreement, on
behalf of itself or its property, by personal delivery of copies of such
process to such party. Nothing in this Section 10 shall affect the right of any
party to serve legal process in any other manner permitted by law.
Section 11. Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 12. Amendments. This Agreement may be amended or modified, and the
terms and conditions hereof may be waived, only by a written instrument signed
by the parties hereto or, in the case of a waiver, by each party waiving
compliance.
Section 13. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
NATIONAL AMUSEMENTS, INC.
/s/ Sumner M. Redstone
By ________________________________
Name: Sumner M. Redstone
Title:Chairman, President and
Chief Executive Officer
VIACOM INC.
/s/ Michael D. Fricklas
By ________________________________
Name: Michael D. Fricklas
Title:Senior Vice President,
General Counsel and
Secretary
3
<PAGE>
EXHIBIT 23.1
PricewaterhouseCoopers
PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York NY 10019-6013
Telephone (212) 259 1000
Facsimile (212) 259 1301
Consent of Independent Accountants
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Viacom Inc. of our report dated February 8, 1999,
except for the first paragraph of Note 2, which is as of February 25, 1999,
relating to the financial statements and financial statement schedule appearing
in Viacom Inc.'s Annual Report on Form 10-K for the year ended December 31,
1998. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
/s/ PricewaterhouseCoopers LLP
New York, New York
November 22, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated January 27, 1999, appearing on
page 21 of CBS Corporation's Form 10-K/A and page 55 of CBS Corporation's Form
10-K for the year ended December 31, 1998, incorporated by reference in this
Proxy Statement/Prospectus of Viacom Inc., and the reference to our firm under
the heading "Experts" in this Proxy Statement/Prospectus.
/s/ KPMG LLP
New York, New York
November 22, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated
November 18, 1999, with respect to the consolidated balance sheets of King
World Productions, Inc. as of August 31, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the years in the three year period ended August 31, 1999, which report
appears in the Form 8-K of CBS Corporation.
/s/ Arthur Andersen LLP
New York, New York
November 18, 1999
<PAGE>
EXHIBIT 23.7
November 24, 1999
Viacom Inc.
1515 Broadway
New York, NY 10026
Dear Sirs and Mesdames:
We hereby consent to the inclusion in Amendment No. 3 to the Registration
Statement on Form S-4, dated November 24, 1999, relating to the proposed merger
of CBS Corporation with and into Viacom Inc., of our opinion letter appearing
as Annex H to the Joint Proxy Statement / Prospectus which is a part of the
Registration Statement, and to the references to our firm name therein. In
giving such consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended (the "Securities Act"), or the rules and regulations adopted
by the Securities and Exchange Commission (the "Commission") thereunder, nor do
we 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 or the rules and regulations of the Commission thereunder.
Very truly yours,
Morgan Stanley & Co. Incorporated
By: /s/ Paul J. Taubman
----------------------------------
Paul J. Taubman
Managing Director
<PAGE>
EXHIBIT 23.8
CONSENT OF EVERCORE GROUP INC.
Board of Directors
CBS Corporation
51 West 52nd Street
New York, New York 10019
We hereby consent to the inclusion of our opinion letter, dated as of
September 6, 1999, to the Board of Directors of CBS Corporation ("CBS") as
Annex I to the Joint Proxy Statement/Prospectus which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of CBS and
Viacom Inc. and to the references therein to Evercore Group Inc. and Evercore
Partners Inc. under the captions "Summary--Fairness Opinions of Financial
Advisors," "The Merger--Background to the Merger," "The Merger--Reason for the
Merger and Board Recommendations," and "The Merger--Opinions of Financial
Advisors." In giving such consent, we do not admit 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, not 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, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Evercore Group Inc.
By: [Signature appears here]
__________________________________
New York, New York
September 30, 1999
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
The undersigned Directors of Viacom Inc. (the "Company") hereby constitute
and appoint Michael D. Fricklas and Philippe P. Dauman, each in an individual
capacity, as true and lawful attorneys-in-fact for the undersigned, with full
power of substitution and resubstitution, for and in the name, place and stead
of the undersigned, to sign and file with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), the Company's Registration Statement on Form S-4 relating to
the proposed merger with CBS Corporation and any and all amendments (including
post-effective amendments) and exhibits thereto with the Commission, any
related registration statement and its amendments and exhibits filed pursuant
to Rule 462(b) under the Securities Act and any and all applications and other
documents to be filed with the Commission pertaining to the registration of the
securities covered thereby or under any related registration statement or any
amendment thereto, with full power and authority to do and perform each and
every act and thing requisite and necessary or desirable, hereby ratifying and
confirming all that such attorney-in-fact or its substitute shall lawfully do
or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ George S. Abrams Director October 4, 1999
___________________________________________
George S. Abrams
/s/ Philippe P. Dauman Director October 4, 1999
___________________________________________
Philippe P. Dauman
/s/ Thomas E. Dooley Director October 4, 1999
___________________________________________
Thomas E. Dooley
/s/ Ken Miller Director October 4, 1999
___________________________________________
Ken Miller
/s/ Brent D. Redstone Director October 4, 1999
___________________________________________
Brent D. Redstone
/s/ Shari Redstone Director October 4, 1999
___________________________________________
Shari Redstone
/s/ Sumner M. Redstone Director October 4, 1999
___________________________________________
Sumner M. Redstone
/s/ Frederic V. Salerno Director October 4, 1999
___________________________________________
Frederic V. Salerno
/s/ William Schwartz Director October 4, 1999
___________________________________________
William Schwartz
/s/ Ivan Seidenberg Director October 4, 1999
___________________________________________
Ivan Seidenberg
</TABLE>
<PAGE>
EXHIBIT 99.1
Form of Consent Card
[LOGO OF VIACOM]
1515 Broadway
New York, New York 10036
November 24, 1999
To the holders of Viacom Class A common stock,
The enclosed materials seek your consent in connection with the Agreement
and Plan of Merger, dated as of September 6, 1999, as amended and restated as
of October 8, 1999 and as of November 23, 1999, among Viacom, CBS Corporation,
a Pennsylvania corporation, and Viacom/CBS LLC, a Delaware limited liability
company, a copy of which is attached as Annex A to the joint proxy
statement/prospectus that accompanies this consent card. The merger agreement
provides for the merger of CBS with and into Viacom (or, under specified
circumstances, a wholly owned subsidiary of Viacom), the issuance of shares of
Viacom Class B common stock, par value $.01 per share, and shares of Viacom
Series C preferred stock, par value $.01 per share, in the merger and the
adoption of the proposed new Restated Certificate of Incorporation for Viacom.
If the merger agreement is adopted and the merger is consummated, each issued
and outstanding share of CBS common stock, par value $1.00 per share, will be
converted into the right to receive 1.085 shares of Viacom Class B common
stock and each issued and outstanding share of CBS Series B preferred stock,
par value $1.00 per share, will be converted into the right to receive 1.085
shares of Viacom Series C preferred stock.
Holders of record of Viacom Class A common stock at the close of business on
November 12, 1999 will be entitled to submit consent cards.
Detailed information concerning the merger, the merger agreement, related
agreements, Viacom's proposed new Restated Certificate of Incorporation and
other important information is contained in the attached joint proxy
statement/prospectus and its annexes. Please read this information carefully.
If you hold Viacom Class A common stock, please complete, sign, date and
mail your signed written consent card in the enclosed return envelope. In
order for it to count, we must receive your properly completed and executed
consent card no later than 12:00 noon, New York City time, on December 29,
1999. You may revoke your written consent in the manner described in the joint
proxy statement/prospectus at any time prior to 12:00 noon, New York City
time, on December 29, 1999.
By Order of the Board of Directors,
/s/ MICHAEL D. FRICKLAS
Michael D. Fricklas
Secretary
YOUR CONSENT IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR CONSENT CARD.
Detach Consent Card Here
- -------------------------------------------------------------------------------
----
----
Pursuant to Section 228 of the Delaware General Corporation Law,
as to all of the shares held by the undersigned, or, if this
consent card is being submitted by a custodian, trustee or other
nominee for more than one beneficial owner of shares, as to the
number of shares held by the undersigned indicated below the
signature boxes appearing below with respect to the proposals set
forth below, the undersigned hereby consents to:
<TABLE>
<C> <S> <C> <C> <C>
1. If the merger is structured as a merger of CBS into
Viacom, the adoption of the merger agreement: FOR [_] AGAINST [_] ABSTAIN [_]
2. If the merger is structured as a merger of CBS into
Viacom/CBS LLC, the adoption of the proposed new Restated
Certificate of Incorporation of Viacom: FOR [_] AGAINST [_] ABSTAIN [_]
3. If the merger is structured as a merger of CBS into
Viacom/CBS LLC, the issuance of up to 907,746,991 shares
of Viacom Class B common stock to the holders of CBS
common stock and up to 11,003 shares of Viacom Series C
preferred stock to the holders of CBS Series B preferred
stock in the merger, in accordance with the terms set
forth in the merger agreement: and FOR [_] AGAINST [_] ABSTAIN [_]
4. The amendment to increase the number of shares of Viacom
Class B common stock authorized to be issued under the
Viacom incentive plan by an additional 10 million shares: FOR [_] AGAINST [_] ABSTAIN [_]
Change of Address
and/or
Comments Mark Here [_]
</TABLE>
Please sign exactly
as your name(s)
appear hereon. 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: ________ , 1999
SIGNED: ______________
_____________________
Votes MUST be
indicated (x) in
Black or Blue
ink__________.[X]
(Please sign, date and return this proxy in the enclosed postage prepaid
envelope.)
Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning It in the Enclosed Envelope
- -------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
VIACOM INC.
1515 Broadway
New York, New York 10036
The Board of Directors of Viacom has declared that
the merger agreement is advisable and has unanimously
approved the merger agreement and unanimously
recommends that shareholders consent to the adoption of
the merger agreement. The Board of Directors of Viacom
has also unanimously approved the issuance of Viacom
Class B common stock and Viacom Series C preferred
stock in connection with the merger and declared
advisable and approved the proposed new Restated
Certificate of Incorporation, and unanimously
recommends that you consent to the issuance of Viacom
Class B common stock and Viacom Series C preferred
stock in connection with the merger and to the adoption
of the proposed new Restated Certificate of
Incorporation. In addition, the Board of Directors has
approved the amendment to increase the number of shares
of Viacom Class B common stock authorized to be issued
under the Viacom incentive plan and unanimously
recommends that you consent to the amendment.
VIACOM INC.
P.O. BOX 11033
NEW YORK, N.Y. 10203-0033
(Continued, and to be signed and dated on the reverse side.)
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.2
[LOGO OF CBS Corporation]
CBS CORPORATION
Proxy solicited by the Board of Directors for Special Meeting of
Shareholders, December 29, 1999
(See Joint Proxy Statement/Prospectus for discussion of item 1.)
The undersigned hereby appoints David T. McLaughlin, Mel Karmazin and Louis
J. Briskman and each of them, jointly and severally, as proxies, with power of
substitution, to vote all shares of CBS Corporation common stock which the
undersigned is entitled to vote on all matters which may properly come before
the Special Meeting of Shareholders of CBS Corporation or any adjournment
thereof. Attendance of the undersigned at the meeting or any adjourned session
of the meeting will not be deemed to revoke this proxy unless the undersigned
affirmatively indicates the intention of the undersigned to vote the shares
represented by this proxy in person before the exercise of this proxy.
If you are a participant in an employee savings plan (or 401(k) Plan)
through which you own an interest in CBS common stock, this proxy card will
also constitute your voting instructions to the trustee of that plan.
(change of address)
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
If you have written in the above
space, please mark the corresponding
box on the reverse side of this card.
PRELIMINARY PROXY MATERIALS
Detach Proxy Card Here
- -------------------------------------------------------------------------------
----
----
- --------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
- --------------------------------------------------------------------
<TABLE>
<C> <S> <C> <C> <C>
1. To adopt the Agreement and Plan of Merger, dated as of
September 6, 1999, as amended and restated as of October
8, 1999 and as of November 23, 1999, among CBS
Corporation, Viacom Inc., and Viacom/CBS LLC. FOR [_] AGAINST [_] ABSTAIN [_]
</TABLE>
The shares represented by this Proxy Card will be voted as
specified above, but if no specification is made they will be
voted FOR Item 1. They will be voted at the discretion of the
proxies on any other matter that may properly come before the
meeting.
Please sign, date and return promptly in the accompanying
envelope.
Note: Please sign
exactly as name
appears hereon. Joint
owners should each
sign. When signing as
attorney, executor,
administrator,
trustee or guardian,
give full name and
title as such.
DATED: ________ , 1999
______________________
Signature of Share
Owner(s)
______________________
--- Signature of Share
Owner(s)
Votes MUST be
indicated (x) in
black or blue
ink__________.[_]
To change your
address, mark
this box and
correct on
reverse side__[_].
If you plan to
attend the
Special Meeting,
please check
this box______[_].
(Please sign, date and return this proxy in the enclosed postage prepaid
envelope.)
Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning It in the Enclosed Envelope
- -------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CBS CORPORATION
P. O. BOX 11009
NEW YORK, N.Y. 10203-0009
You are encouraged to specify your choice by marking
the appropriate box on the reverse side. The proxies
cannot vote your shares unless you sign and return this
proxy card.
CBS CORPORATION
P. O. BOX 11009
NEW YORK, N.Y. 10203-0009
(Continued, and to be signed and dated on the reverse side.)
<PAGE>
VIACOM [LOGO]
1515 Broadway
New York, New York 10036
November 26, 1999
Dear Viacom Shareholder,
As you no doubt have heard, Viacom and CBS have agreed to a merger. The new
company, which will retain the Viacom name, will be the largest seller of
advertising across the media landscape, with extraordinary assets in broadcast
and cable television, a leading radio and outdoor media company, a preeminent
motion picture studio, a world-class consumer publishing group, a leading
regional theme park operation and a growing portfolio of Internet ventures.
This merger advances the vision we share with CBS of building the preeminent
global media and entertainment company. The new Viacom will have exceptional
content and a portfolio of some of the world's most powerful brands.
Viacom is soliciting consents from holders of Viacom Class A common stock in
connection with this merger.
Under the terms of the merger, holders of CBS common stock will have the
right to receive 1.085 shares of Viacom Class B common stock for each share of
CBS common stock that they own and holders of CBS Series B preferred stock will
have the right to receive 1.085 shares of newly created Viacom Series C
preferred stock for each share of CBS Series B preferred stock that they own.
Both Viacom Class A and Class B common stock and CBS common stock are primarily
traded on the New York Stock Exchange.
National Amusements, Inc., which owns approximately 68% of Viacom's Class A
common stock, has agreed to consent to the merger and the other proposals
described in this joint proxy statement/prospectus. Therefore, approval of
these proposals by the shareholders of Viacom is assured.
If you hold Viacom Class A common stock, please complete, sign, date and
mail your signed written consent card in the enclosed return envelope. Approval
of these matters by Viacom's shareholders will occur when the holders of a
majority of the outstanding Viacom Class A common stock deliver dated and
properly executed consents to Viacom. National Amusements is expected to
deliver its consent at 12:00 noon, New York City time, on December 29, 1999.
Therefore, for your consent to be counted, we must receive it, dated and
properly executed, no later than 12:00 noon, New York City time, on December
29, 1999. You may revoke your written consent in the manner described in this
document at any time prior to the time that sufficient consents are delivered
to Viacom.
Detailed information concerning the merger, the merger agreement, related
agreements, Viacom's proposed new Restated Certificate of Incorporation and
other important information is contained in the attached joint proxy
statement/prospectus and its annexes. Please read this information carefully.
Sincerely,
/s/ Sumner M. Redstone
----------------------
Sumner M. Redstone
Chairman and Chief Executive Officer
For a discussion of risk factors which you should consider in evaluating the
merger, see "Risk Factors" beginning on page 18.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the securities to be
issued in the merger or determined whether this joint proxy
statement/prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
This joint proxy statement/prospectus is dated November 24, 1999, and is
first being mailed to shareholders on or about November 26, 1999.
<PAGE>
[LOGO OF CBS CORPORATION]
CBS CORPORATION
51 West 52nd Street
New York, New York 10019
November 26, 1999
Dear CBS Shareholder,
You are cordially invited to attend a special meeting of shareholders of CBS
Corporation to be held on December 29, 1999 at the Sheraton New York Hotel, 811
Seventh Avenue, New York, New York 10019, commencing at 10:00 a.m., eastern
standard time.
At the special meeting, you will be asked to consider and vote upon a
proposal to adopt the Agreement and Plan of Merger, dated as of September 6,
1999, as amended and restated as of October 8, 1999 and as of November 23,
1999, among CBS, Viacom Inc. and Viacom/CBS LLC, which provides for the merger
of CBS and Viacom or, under specified circumstances, Viacom/CBS LLC, a wholly
owned subsidiary of Viacom. Under the terms of the merger agreement, each
issued and outstanding share of CBS common stock will be converted into the
right to receive 1.085 shares of Viacom non-voting Class B common stock and
each issued and outstanding share of CBS Series B preferred stock will be
converted into the right to receive 1.085 shares of Viacom Series C preferred
stock. Both Viacom's Class B common stock and CBS' common stock are listed and
traded on the New York Stock Exchange.
The merger agreement advances the vision we share with Viacom of building
the preeminent global media and entertainment company. The combination of our
companies, our powerful brands and our highly complementary businesses will
create a company we believe is uniquely qualified to capitalize on new
opportunities domestically and around the world.
Your participation in the special meeting, in person or by proxy, is
important. Even if you anticipate attending in person, we urge you to mark,
sign and return the enclosed proxy card promptly in the enclosed postage-paid
envelope to ensure that your shares of CBS common stock and CBS Series B
preferred stock will be represented at the special meeting. If you do attend in
person, you will be entitled to vote your shares in person.
The joint proxy statement/prospectus that accompanies this letter contains
information about Viacom and CBS and describes in detail the merger and related
matters. Attached to the joint proxy statement/prospectus is a copy of the
merger agreement, related agreements and other important information.
Thank you, and we look forward to seeing you at the special meeting.
Very truly yours,
/s/ David T. McLaughlin /s/ Mel Karmazin
David T. McLaughlin Mel Karmazin
Chairman of the Board President and Chief Executive Officer
For a discussion of risk factors which you should consider in evaluating the
merger, see "Risk Factors" beginning on page 18.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued in the
merger or determined whether this joint proxy statement/prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
This joint proxy statement/prospectus is dated November 24, 1999, and is
first being mailed to shareholders on or about November 26, 1999.
<PAGE>
[VIACOM LOGO]
1515 Broadway
New York, New York 10036
NOTICE OF CONSENT SOLICITATION
To the Shareholders of Viacom:
The enclosed materials seek your consent in connection with the Agreement
and Plan of Merger, dated as of September 6, 1999, as amended and restated as
of October 8, 1999 and as of November 23, 1999, among Viacom, CBS Corporation,
a Pennsylvania corporation, and Viacom/CBS LLC, a Delaware limited liability
company, a copy of which is attached as Annex A to the joint proxy
statement/prospectus that accompanies this notice. The merger agreement
provides for the merger of CBS with and into Viacom or, under specified
circumstances, with and into Viacom/CBS LLC, a wholly owned subsidiary of
Viacom, the issuance of shares of Viacom Class B common stock, par value $.01
per share, and shares of Viacom Series C preferred stock, par value $.01 per
share, in the merger, and the adoption of the proposed new Restated Certificate
of Incorporation for Viacom. If the merger agreement is adopted and the merger
is consummated, each issued and outstanding share of CBS common stock, par
value $1.00 per share, will be converted into the right to receive 1.085 shares
of Viacom Class B common stock and each issued and outstanding share of CBS
Series B preferred stock, par value $1.00 per share, will be converted into the
right to receive 1.085 shares of Viacom Series C preferred stock.
Viacom's Class A shareholders are requested to take action by written
consent to approve all of the following:
1. if the merger is structured as a merger of CBS into Viacom, the
adoption of the merger agreement;
2. if the merger is structured as a merger of CBS into Viacom/CBS LLC,
the adoption of the proposed new Restated Certificate of
Incorporation of Viacom;
3. if the merger is structured as a merger of CBS into Viacom/CBS LLC,
the issuance of up to 907,746,991 shares of Viacom Class B common
stock to the holders of CBS common stock and up to 11,003 shares of
Viacom Series C preferred stock to the holders of CBS Series B
preferred stock in the merger, in accordance with the terms set
forth in the merger agreement; and
4. the amendment to increase the number of shares of Viacom Class B
common stock authorized to be issued under the Viacom incentive plan
by an additional 10 million shares.
Holders of record of Viacom Class A common stock at the close of business on
November 12, 1999 will be entitled to take action by written consent concerning
these proposals.
The Board of Directors of Viacom has declared that the merger agreement is
advisable and has unanimously approved the merger agreement and unanimously
recommends that shareholders approve the adoption of the merger agreement. The
Board of Directors of Viacom has also unanimously approved the issuance of
Viacom Class B common stock and Viacom Series C preferred stock in connection
with the merger and declared advisable and approved the proposed new Restated
Certificate of Incorporation, and unanimously recommends that you approve the
issuance of Viacom Class B common stock and Viacom Series C preferred stock in
connection with the merger and the adoption of the proposed new Restated
Certificate of Incorporation. In addition, the Board of Directors has approved
the amendment to increase the number of shares of Viacom Class B common stock
authorized to be issued under the Viacom incentive plan and unanimously
recommends that you approve the amendment.
<PAGE>
Detailed information concerning the merger, the merger agreement, related
agreements, Viacom's proposed new Restated Certificate of Incorporation and
other important information is contained in the attached joint proxy
statement/prospectus and its annexes. Please read this information carefully.
If you hold Viacom Class A common stock, please complete, sign, date and
mail your signed written consent card in the enclosed return envelope. Approval
of these matters by Viacom's shareholders will occur when the holders of a
majority of the outstanding Viacom Class A common stock deliver dated and
properly executed consents to Viacom. National Amusements is expected to
deliver its consent at 12:00 noon, New York City time, on December 29, 1999.
Therefore, for your consent to count, we must receive it, dated and properly
executed, no later than 12:00 noon, New York City time, on December 29, 1999.
You may revoke your written consent in the manner described in this document at
any time prior to the time that sufficient consents are delivered to Viacom.
By Order of the Board of Directors,
/s/ Michael D. Fricklas
Michael D. Fricklas
Secretary
November 26, 1999
YOUR CONSENT IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR CONSENT CARD.
<PAGE>
[LOGO OF CBS CORPORATION]
CBS CORPORATION
51 West 52nd Street
New York, New York 10019
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held December 29, 1999
To the Shareholders of CBS:
A special meeting of shareholders of CBS Corporation, a Pennsylvania
corporation, will be held on December 29, 1999 at 10:00, a.m., eastern standard
time, at the Sheraton New York Hotel, 811 Seventh Avenue, New York, New York
10019, to consider and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated as of September 6, 1999, as amended and restated as of October 8,
1999 and as of November 23, 1999, among CBS, Viacom Inc., a Delaware
corporation, and Viacom/CBS LLC, a Delaware limited liability company, a copy
of which is attached as Annex A to the joint proxy statement/prospectus that
accompanies this notice. The merger agreement provides for the merger of CBS
with and into Viacom or, under specified circumstances, with and into
Viacom/CBS LLC, a wholly owned subsidiary of Viacom. If the merger agreement is
adopted and the merger is consummated each issued and outstanding share of CBS
common stock, par value $1.00 per share, will be converted into the right to
receive 1.085 shares of Viacom non-voting Class B common stock, par value $.01
per share, and each issued and outstanding share of CBS Series B preferred
stock, par value $1.00 per share, will be converted into the right to receive
1.085 shares of Viacom Series C preferred stock, par value $.01 per share.
Holders of record of CBS common stock and CBS Series B preferred stock at
the close of business on November 17, 1999, will be entitled to vote at the
special meeting or any adjournments or postponements of the special meeting.
The Board of Directors of CBS has determined that the merger is in the best
interests of CBS and its shareholders, has unanimously approved the merger and
the merger agreement and unanimously recommends that shareholders vote to adopt
the merger agreement.
Detailed information concerning the merger, the merger agreement, related
agreements and other related matters is contained in the attached joint proxy
statement/prospectus and its annexes. Please read this information carefully.
The vote of each CBS shareholder is important. We urge you to mark, sign and
return your proxy card promptly in the enclosed postage-paid envelope to ensure
that your shares of CBS common stock and CBS Series B preferred stock will be
represented at the special meeting. If you attend the special meeting in
person, you will be entitled to vote your shares in person.
<PAGE>
If you plan to attend the special meeting, please keep the admission ticket
that is attached to your proxy card, and also check the appropriate box on your
proxy card. Shareholders who own shares through banks or brokers and who plan
to attend must send a written notification, along with proof of ownership, such
as a bank or brokerage firm account statement, to the Secretary's Office, CBS
Corporation, 51 West 52nd Street, New York, New York 10019. The names of those
shareholders indicating they plan to attend will be placed on an admission list
held at the entrance to the meeting. Admission tickets will not be mailed in
advance of the meeting.
On behalf of the Board of Directors,
/s/ Angeline C. Straka
Angeline C. Straka
Secretary
New York, New York
November 26, 1999
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
HOLDERS OF CBS COMMON STOCK AND CBS SERIES B PREFERRED STOCK
SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
2
