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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 8, 2000
BHC COMMUNICATIONS, INC.
(Exact name of company as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
59-2104168
(I.R.S. Employer Identification No.)
767 Fifth Avenue
New York, NY 10153
(Address of principal executive offices) (Zip Code)
(212) 421-0200
(Company's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On February 8, 2000, the Company issued a press release announcing that
it had filed a complaint against Viacom Inc., certain subsidiaries of Viacom
Inc. and CBS Corporation.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
Exhibit
No. Description of Document
- -------- -----------------------
99.1 Press Release, dated February 8, 2000, relating to the filing
of the complaint.
99.2 Complaint dated February 8, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
BHC COMMUNICATIONS, INC.
DATE: February 14, 2000 BY: /s/ Brian C. Kelly
--------------------------------------------------
Name: Brian C. Kelly
Title: Senior Vice President and General Counsel
-1-
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INDEX OF EXHIBITS
Sequential
Exhibit No. Description of Document Page No.
- ----------- ----------------------- --------
99.1 Press Release, dated February 8, 2000,
relating to the filing of the complaint.
99.2 Complaint dated February 8, 2000.
-2-
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FROM: BHC COMMUNICATIONS, INC.
767 Fifth Avenue
New York, NY 10153
CONTACT: Brian C. Kelly
Senior Vice President and General Counsel
(212) 421-0200
BHC COMMUNICATIONS SUES TO ENJOIN MERGER OF VIACOM AND CBS
New York, NY, February 8, 2000 -- BHC Communications, Inc. (AMEX: BHC) announced
that it has today filed a lawsuit against Viacom Inc. and CBS Corporation in New
York State Supreme Court to enjoin their proposed merger.
BHC and Viacom are joint venture partners in UPN, the United Paramount Network.
The basis for the lawsuit is that the Viacom/CBS merger agreement violates the
non-compete term in the UPN joint venture agreement that prohibits Viacom from
"own[ing] any interest, financial or otherwise in", or "control[ling]" a
competing network, as well as breaching its fiduciary duties to its partner BHC.
BHC's lawsuit also seeks to enjoin Viacom's attempted use of the "buy-sell"
provision in the joint venture agreement on the basis that Viacom, having made a
deal with CBS in breach of the UPN agreement, cannot now invoke other provisions
of the agreement to try to terminate the joint venture. On February 3, 2000,
Viacom delivered a notice to BHC purporting to invoke the buy-sell, under which
BHC could either buy Viacom's interest in UPN, or sell its interest in UPN to
Viacom, in each case at a price which Viacom set at $5 million.
Until last week, BHC and its parent company, Chris-Craft Industries, Inc., were
in talks with Viacom to resolve this dispute. During the pendency of those
discussions, the parties entered into a "tolling agreement" preserving their
respective legal positions.
o0o
02/08/00
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- - - - - - - - - - - - - - - - - - - - - - x
BHC COMMUNICATIONS, INC.,
BHC NETWORK PARTNER, INC., :
BHC NETWORK PARTNER II, INC., :
BHC NETWORK PARTNER III, INC., and : Index No. ___________
BHC NETWORK PARTNER IV, :
: COMPLAINT
Plaintiffs, :
:
against :
:
VIACOM INC., VIACOM INTERNATIONAL :
INC., PCI NETWORK PARTNER INC., :
PCI NETWORK PARTNER II INC., and :
CBS CORPORATION, :
:
Defendants. :
- - - - - - - - - - - - - - - - - - - - - - x
Plaintiffs, by their undersigned attorneys, for their complaint against
defendants, allege as follows on knowledge as to themselves and otherwise upon
information and belief:
SUMMARY OF ACTION
1. This is an action to enjoin a merger between Viacom Inc. and
CBS Corporation because the merger breaches (i) explicit fundamental terms of
the Joint Venture Agreement between Viacom and Plaintiffs that created the
United Paramount Network, and (ii) fiduciary duties Viacom owes to Plaintiffs as
partners in the joint venture.
2. Plaintiffs and the Viacom Defendants (Defendants Viacom Inc.,
Viacom International Inc., PCI Network Partner Inc., and PCI Network Partner II
Inc.) agreed in 1994 to become partners in a joint venture to create the United
Paramount Network ("UPN") as a general entertainment broadcast television
network. Plaintiffs agreed to affiliate with the network their independent
television stations, including stations in the key New York and Los Angeles
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markets, and to share half of the very large initial losses which a start-up
network would inevitably incur. The Viacom Defendants, in addition to
affiliating their stations and sharing the losses, agreed to contribute the
resources and reputation of the Paramount organization to establish the
network's credibility.
3. The partners understood that the new network could not succeed
without their total commitment and undivided loyalty for at least a substantial
period of time. Thus, an essential term of the partnership was a "non-compete"
agreement which provided that neither party would own an interest in or control
a competing network for a specified period of years - long enough so that the
new network could have the best opportunity to establish itself with the full
loyalty and support of its partners and without having to face competition from
them.
4. This non-compete provision was especially important to
Plaintiffs because, as a major studio, Paramount might have opportunities to
acquire interests in other networks, and Plaintiffs did not want to invest
several hundred million dollars without a commitment that Paramount would have a
strong, undiluted commitment to make the new network successful for the full
period of the non-compete.
5. The Joint Venture Agreement explicitly provides that neither
party can "(i) own any interest, financial or otherwise, in, or (ii) Control any
Competing Network." It also provides that this prohibition continues for a fixed
period, even if a party has withdrawn as a partner from the joint venture during
that period, thus ensuring that the network would not have to compete with
either party during that specified period. The Agreement defines a competing
network to include CBS and the term of the non-compete lasts until January 15,
2001.
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6. In reliance on these and other commitments by the Viacom
Defendants set forth in the Joint Venture Agreement, Plaintiffs to date have
invested more than $400 million in UPN.
7. On September 6, 1999, sixteen months before the non-compete
term was to expire, and in disregard of its obligations to the UPN joint
venture, Viacom entered into a merger agreement with CBS (the "Merger
Agreement"). Under the terms of that Merger Agreement, the Viacom Defendants now
own an interest in and control the CBS network in violation of the Joint Venture
Agreement. Defendants have made public statements making clear that nothing,
including the Viacom Defendants' commitments to UPN, will stand in the way of
Viacom's acquisition of CBS.
8. Despite their fiduciary duties to act at all times with
loyalty to the UPN partnership and in its best interests, the Viacom Defendants
executed the Merger Agreement without informing Plaintiffs and without
considering the interests of the partnership. Indeed, the Merger Agreement
compromises the Viacom Defendants' undivided loyalty to the network and puts
them in a position of competing with the network even though the non-compete
period is still in effect.
9. Shortly after the announcement of the merger agreement,
negotiations commenced to try to resolve Plaintiffs' claims of breach. To permit
those discussions, BHC, Viacom and CBS entered into a Tolling and Suspension
Agreement.
10. Suddenly, and in apparent recognition that its conduct is in
breach of its partnership obligations, on February 3, 2000, Viacom purported to
exercise a buy-sell provision set forth in the Joint Venture Agreement. Under
the terms of Viacom's buy-sell notice, BHC has
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45 days to choose either to buy Viacom's UPN interest, or to sell its own
interest, for the $5 million price set by Viacom; if BHC takes no action within
the 45 days, Viacom will assert that BHC has elected to sell its interest.
11. The transparent purpose for Viacom's buy-sell notice is to try
to cure its previous breaches of its contractual and fiduciary obligations and
to allow Viacom to consummate the CBS merger prior to the end of the non-compete
term. Viacom, however, cannot breach the non-compete provision of the Joint
Venture Agreement by acquiring a larger network, and then avoid the consequences
by initiating a buy-sell for $5 million as if nothing had happened. As a result
of its breach, Viacom is trying to put BHC in the difficult and unwarranted
position of either funding all the losses of UPN or giving up BHC's interest and
control altogether. Viacom's efforts to undo its prior breach and to sidestep
its fiduciary obligations are precluded by both law and the terms of the Joint
Venture Agreement. In addition to enjoining the Viacom/CBS merger as a clear
breach of the non-compete term, this action also seeks to declare unenforceable
and to enjoin Viacom's improper exercise of the buy-sell provision.
THE PARTIES
12. Plaintiff BHC Communications Inc., together with its
subsidiaries ("BHC" or the "BHC Group"), is one of the largest television
station groups in the country. The BHC Group owns ten television stations in
major markets, including New York and Los Angeles, the two largest markets in
the United States, and reaches over 20% of all American television households.
Chris-Craft Industries, Inc. ("Chris-Craft") owns 80% of BHC's stock. Plaintiffs
BHC Network Partner, Inc., BHC Network Partner II, Inc. and BHC Network Partner
III, Inc. (collectively, the "BHC Corporate Partners"), are wholly-owned
subsidiaries of BHC. Plaintiff
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BHC Network Partner IV is a Delaware partnership controlled by its two general
partners, BHC Network Partner II, Inc. and BHC Network Partner III, Inc. (The
BHC Corporate Partners and BHC Network Partner IV are collectively referred to
as the "BHC Partners".) The BHC Corporate Partners are Delaware corporations and
BHC Network Partner IV is a Delaware general partnership, each with its
principal place of business in Los Angeles, California. BHC and Chris-Craft are
Delaware corporations with their principal places of business in New York, New
York.
13. Through the BHC Partners, BHC is a 50% owner of and partner in
United Paramount Network. Through its affiliate stations, which include the BHC
Group stations, UPN programming reaches into more than 175 markets covering well
over 90% of all television homes in the United States.
14. Defendant Viacom Inc. ("Viacom") and its wholly-owned
subsidiary Defendant Viacom International, Inc. ("Viacom International") are
diversified entertainment companies. Viacom International is successor by merger
to Paramount Communications Inc. and Paramount Pictures Corporation
(collectively, "Paramount"). Defendants PCI Network Partner Inc. and PCI Network
Partner II Inc. (the "Paramount Partners") are direct or indirect subsidiaries
of Viacom and are 50% owners of and partners with Plaintiffs in UPN, pursuant to
the Joint Venture Agreement with Plaintiffs. The "Viacom Defendants" (Viacom,
Viacom International, and the Paramount Partners) are Delaware corporations,
each of which maintains a principal office in New York, New York.
15. Defendant CBS Corporation ("CBS") owns and operates the CBS
television network, one of the five general entertainment broadcast television
networks with
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which UPN competes. CBS is a Pennsylvania corporation with its principal place
of business in New York, New York.
JURISDICTION AND VENUE
16. The Court has personal jurisdiction over each of the
Defendants in that each maintains offices in New York, systematically and
continuously does business in New York, and many of the wrongful acts that form
the basis of this Complaint occurred in New York.
17. Venue lies in this county pursuant to CPLR Sections 503 and
509.
BACKGROUND OF THE JOINT VENTURE AGREEMENT
18. UPN was formed in 1994 to solve significant business
challenges facing both Paramount, a leading independent television and movie
production company, and the BHC Group, a leading television station group, and
to provide both with a 50% stake in a valuable new "Fifth Network." Paramount
wanted to become a partner in the new network because, among other reasons, it
felt that demand for its programs would decline as existing networks looked to
produce more programming "in-house." The new network thus would provide
Paramount with an ongoing distribution outlet for its programming. For BHC, a
partnership in a new network would create a new, valuable, long-term asset and
would ensure access to new programming for its affiliated stations at a time in
which traditional program sources were either being consolidated into exclusive
arrangements with existing networks or diverted to cable channels. The new UPN
would enable BHC's television stations to compete better both against major
network affiliates and against cable channels.
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19. BHC and Paramount understood from the outset that the new
network would entail large start-up costs and years of substantial losses. A
full and undivided commitment by BHC and Paramount to their new network,
especially through the difficult start-up years, was essential for the network
to get off the ground and establish itself. Otherwise it would be impossible to
attract and maintain the confidence of station affiliates, who rely on the
network to provide quality programming, brand identity and promotional support;
advertisers, who need a sense of longevity to make an advertising program
worthwhile; and of writers, directors and producers, for whom the stability of
the network is an essential condition to have the possibility of a long-running
program.
20. The joint venture consequently was structured from the outset
so that the parties would dedicate their undivided loyalty to the new network,
and neither partner would compete with UPN. The non-compete provision and the
length of its term were of overriding importance to BHC and were fundamental to
securing BHC's agreement to the joint venture. Indeed, BHC sought to commit the
partners to UPN for the longest possible period to ensure the availability of
Paramount/Viacom's programming and other resources to the network and to BHC's
television stations.
21. After BHC and Paramount had agreed to establish UPN, Paramount
was acquired by Viacom in March 1994. This and other transactions left Viacom
highly leveraged, and Viacom requested that Plaintiffs fund all of the
substantial early losses that the new network was certain to incur. In exchange
for an option to acquire a 50% interest in the new network, Viacom/Paramount
would commit to satisfy other needs of the joint venture, including making
Paramount's production skills, reputation, knowledge and talent available to the
new network,
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and licensing to the new network its eagerly anticipated next "Star Trek"
series, Star Trek: Voyager. BHC agreed to fund all of the very substantial
network start-up costs and losses in return for the Viacom Defendants' full and
undivided commitment to UPN.
22. This agreement was embodied in an Option Agreement dated as of
July 19, 1994. Article 8 of the Option Agreement expressly prohibited the Viacom
Defendants from obtaining any interest in a competing network for a full four
years after the UPN launch date. Under the Option Agreement, even if Viacom did
not exercise the option to become a partner, the Viacom Defendants could not
take an interest in a competing network during the entire non-compete period.
Both parties thus would have an incentive to keep their full attention on the
success of UPN. In related Guaranty agreements, Paramount separately agreed to
be bound by the non-compete provisions.
23. In December 1996, the Viacom Defendants gave notice of their
intent to exercise their option to become a full partner in UPN by reimbursing
BHC for half of the start-up costs. At that time, BHC had expended approximately
$300 million in start-up costs. Shortly thereafter, the BHC Partners and
Paramount Partners signed the Joint Venture Agreement, dated as of January 15,
1997. The Joint Venture Agreement continues to govern the rights and duties of
the parties.
THE JOINT VENTURE AGREEMENT
24. Section 2.2 of the Joint Venture Agreement sets forth the
scope and purpose of the UPN Partnership:
The purpose of the Partnership shall be to develop, operate and exploit
a "Fifth Network," i.e., a multi-day part, national . . . General
Entertainment network program service targeted primarily for the
broadcast television market, engaging in activities similar to
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the network operations of ABC, CBS, NBC and/or Fox Broadcasting and
such other activities as may be related to the operation thereof . . .
25. The Joint Venture Agreement extends the UPN partners'
commitment that UPN would be the sole and exclusive vehicle through which they
would participate in a general entertainment broadcast television network.
Section 11.1 of the Joint Venture Agreement expressly prohibits the parties from
participating in any competing network other than through their joint venture:
During the Non-Compete Term, no Partner nor any of its respective
Affiliated Persons or successors (the "COVERED PARTIES") may (i) own
any interest, financial or otherwise, in, or (ii) Control any Competing
Network.
26. The "Non-Compete Term" is a defined term in the Joint Venture
Agreement, and lasts until "the fourth anniversary" of its execution, or January
15, 2001 (Joint Venture Agreement, Art. 1, p. 9). CBS is a Competing Network
under Article 1 of the Joint Venture Agreement.
27. Section 11.2 further limits the ability of the Viacom
Defendants to support any other network by prohibiting Viacom from taking any
act or entering into any agreement that would identify "the Paramount name" with
any "Competing Network."
28. Section 11.4 provides a procedure for any partner who "desires
to acquire or develop an interest in a Competing Network during the Non-Compete
Term" to pursue that interest, but only if "the full interest" is "offered to
the Partnership." The Viacom Defendants never offered any interest in CBS to UPN
or to the BHC Group.
29. The Covenant Not to Compete binds not only Paramount Partners
but all Affiliated Persons, defined as
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any other Person which, directly or indirectly, is Controlled by, is in
Control of, or is under common Control with that Person.... (Joint
Venture Agreement, Art. 1, p. 2)
30. Since March 1994 when Viacom acquired 50.1% of Paramount,
Viacom and Viacom International have been "Affiliated Persons" of the Paramount
Partners within the meaning of the Joint Venture Agreement.
31. Section 13.2 of the Joint Venture Agreement allows either
partner, beginning on January 1, 1999, to initiate a buy-sell transaction by
providing to the other partner a Buy-Sell Notice of the price at which the
initiating partner is prepared to sell its interest or purchase the other
partner's interest in UPN. After receipt of the Notice, the non-initiating
partner has 45 days to choose whether to buy or sell; if the non-initiating
partner fails to act within 45 days, Section 13.2.2 deems the non-initiating
partner to have elected to sell its partnership interest at the price set forth
in the Notice.
32. Section 15.2 of the Joint Venture Agreement provides specific
additional remedies (in addition to those at law and equity) that a partner may
elect if there is a material breach by the other partner, including the option
to waive the breach or to initiate one of several transactions, including the
forced withdrawal of the defaulting partner, conversion of the general
partnership status of the defaulting partner to limited partner, or a sale of
the non-defaulting partner's interest to the breaching partner at fair market
value as determined by an independent investment banker.
33. The remedies provided to a non-defaulting party by Section
15.2 are not exclusive, but are rights provided the non-defaulting partner in
addition to those rights provided a non-breaching party at common law and
equity. Thus, Section 15.2 expressly states that "Nothing
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herein shall preclude any parties from exercising any remedies they may have in
law or equity in addition to those provided in this Agreement."
DEFENDANTS' BREACHES
34. On September 7, 1999, Viacom publicly announced that it had
entered into the Merger Agreement with CBS. Viacom's agreement to acquire CBS -
a direct competitor of UPN under the terms of the Joint Venture Agreement - is a
clear breach of the non-compete provision of the Joint Venture Agreement, which
states that the Viacom Defendants may not "(i) own any interest, financial or
otherwise, in, or (ii) Control any Competing Network." (Joint Venture Agreement
Section 11.1). The Viacom/CBS merger, which undermines the fundamental basis of
the UPN joint venture, also clearly breaches the Viacom Defendants' fiduciary
and other common law duties to Plaintiffs.
35. The Merger Agreement requires CBS to consummate the merger
except for very limited, standard "outs" and provides that CBS must pay Viacom
$1 billion if it otherwise aborts the Merger. This $1 billion provision itself
is a clear acknowledgment by Viacom and CBS that Viacom owns a substantial
interest in CBS in violation of Section 11.
36. Viacom also controls CBS in violation of Section 11. The Joint
Venture Agreement defines Control as the power to "direct or cause the direction
of the management or operation" of a Competing Network "whether ... by contract
or otherwise" (Joint Venture Agreement, Art. 1, p. 4). The Merger Agreement
gives the Viacom Defendants this power because CBS cannot undertake any
significant management and operational decisions without Viacom's approval.
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37. None of the Viacom Defendants gave Plaintiffs any prior notice
that Viacom was considering acquiring CBS. To the contrary, when BHC asked
Viacom about rumors of such an acquisition, Viacom assured BHC that such a
matter was not being considered. The rumors were truthful; Viacom was not. While
Viacom was denying the rumors, it was in fact negotiating a merger with CBS in
violation of the UPN Joint Venture Agreement.
38. CBS has aided and abetted the Viacom Defendants' breaches of
their fiduciary duties, and tortiously interfered with the contractual relations
between the Viacom Defendants and Plaintiffs, by, among other things, urging and
inducing Viacom to merge with CBS, and entering into the Merger Agreement with
knowledge that Viacom is prevented from merging with CBS by a non-competition
provision of a written contract with Plaintiffs.
39. In an interview in an influential trade publication, the head
of CBS, Mel Karmazin, was asked "how important is retaining UPN?" The answer by
Karmazin, who would be the Chief Operating Officer of the merged Viacom/CBS,
makes clear where UPN stands in their plans: "We believe we should be allowed to
do that, but if the [Federal Communications Commission's] rules say we can't,
then we won't. This is an $80 billion merger that's being done, and we can't let
one of those pieces stand in our way of doing the deal."
40. On October 6, 1999, Plaintiffs, Viacom, and CBS entered into a
Tolling and Suspension Agreement in which they each agreed, inter alia, to
"suspend and toll the running of any time limit under Article 15 of the Joint
Venture Agreement" for asserting any claim or giving notice in connection with
the proposed Viacom/CBS merger, and further agreed that "none of them will
assert any claim of laches, waiver or estoppel as a result of the failure . . .
to assert any claim or give notice under or related to the Joint Venture
Agreement or under common
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law." That Tolling and Suspension Agreement remains effective until 14 days
after a party gives notice of an intent to terminate.
41. After ignoring and breaching the terms of the Joint Venture
Agreement by entering into the Merger Agreement with CBS, on February 3, 2000,
Viacom purported to initiate a buy-sell transaction by sending BHC a buy-sell
notice.
IRREPARABLE HARM TO PLAINTIFFS
42. Section 22.5 of the Joint Venture Agreement provides that
breach of the covenant not to compete will constitute irreparable harm entitling
the non-breaching party to injunctive relief:
SPECIFIC ENFORCEMENT. The parties hereto recognize and agree that, in
the event that any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are
breached, immediate irreparable injury would be caused for which there
is no adequate remedy at law. It is accordingly agreed that in the
event of a failure of a party to perform its obligations under this
Agreement, the non-breaching party shall be entitled to specific
performance through injunctive relief to prevent breaches of the
provisions of this Agreement and to enforce specifically the provisions
of this Agreement in any action instituted in any court having subject
matter jurisdiction, in addition to any other remedy to which such
party may be entitled, at law or in equity.
43. The Viacom Defendants' undivided loyalty to the UPN network
was one of the most critical contract terms for which BHC bargained and for
which breach the parties understood required specific enforcement. The Merger
Agreement has put UPN in the position of a second-rate subsidiary of an
organization that is and will be focused principally on the success of CBS.
Plaintiffs, who have invested over $400 million and affiliated their television
stations with UPN, bargained for Viacom to focus its network interest and
investment solely in UPN.
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44. Unless enjoined, Viacom's merger with CBS will cause a
conflict of loyalty that no subsequent court order can unscramble or remedy. Mel
Karmazin, the person now in charge of the CBS network, will, following the
merger, also be responsible for Viacom's interest in the UPN network. As a 50%
partner in UPN, Karmazin and others at Viacom/CBS will have access to all of
UPN's competitive information and strategic plans, and will also have a veto
over UPN's actions. As Viacom will own 100% of CBS, and only 50% of UPN, it
necessarily follows that, in any conflict, Karmazin and Viacom will favor its
much larger investment in CBS than in UPN. It is inevitable that the two
networks will compete and have conflicting interests in such areas as obtaining
talent, retaining or acquiring affiliate stations, selling advertising, and
developing or acquiring programming. Thus, unless the merger is enjoined, UPN
will be subject to having its interests compromised by Viacom/CBS's knowledge of
all its plans and expectations relating to UPN, as well as Viacom/CBS's ability
to thwart those plans wherever they conflict with the interests of CBS.
45. The Merger undermines the stability and long-term viability of
UPN. The UPN network today is at a particularly critical stage; although it
continues to suffer substantial losses, its new programming is enjoying recent
success, and UPN needs to assure station affiliates, program suppliers and
advertisers that the network has a bright future. Recently, the Wall Street
Journal reported that UPN viewership in the current season is up 40%, a far
greater increase than any of its competitors. The same publication, however,
also noted the irony that, just as UPN's ratings are improving, Viacom has made
clear its intention to shut it down if it in any way impedes the CBS merger.
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46. Absent injunctive relief, Plaintiffs also will have to respond
to the improper exercise by Viacom of the buy-sell provision. By its $5 million
buy-sell proposal, after a total investment of over $400 million by Plaintiffs
to get UPN started, Viacom has clearly indicated that it does not care whether
it keeps UPN or not, now that, through its breach, Viacom is acquiring CBS. This
puts BHC to the difficult and unwarranted decision of buying UPN, losing
Viacom's substantial resources and absorbing Viacom's share of UPN's losses in
addition to its own - nearly $200 million for 1999 - or selling out, which means
BHC loses its oversight and participation in the direction of UPN and could
result in UPN being shut down. In short, if the 45-day provision of the buy-sell
is not stayed and the buy-sell is consummated, Plaintiffs will be denied
effective relief.
47. For all these reasons, Plaintiffs will suffer irreparable
damage unless the merger is enjoined.
AS AND FOR A FIRST CAUSE OF ACTION
(Against the Viacom Defendants for Declaratory Judgment
and Injunctive Relief for Breach of Contract)
48. Plaintiffs repeat and reallege the allegations of paragraphs 1
through 47 of this complaint as if fully set herein.
49. Under Section 11.1 of the Joint Venture Agreement, the Viacom
Defendants are obligated not to "(i) own any interest, financial or otherwise,
in, or (ii) Control any Competing Network."
50. Each of the Viacom Defendants is bound by Section 11.1 of the
Joint Venture Agreement.
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51. By entering into the Merger Agreement, the Viacom Defendants
have breached their duties and obligations under Section 11.1 of the Joint
Venture Agreement.
52. Plaintiffs have performed all of the conditions of the Joint
Venture Agreement on their part to be performed.
53. A direct and proximate result of the Viacom Defendants' breach
of the Joint Venture Agreement is irreparable harm to Plaintiffs.
AS AND FOR A SECOND CAUSE OF ACTION
(Against the Viacom Defendants for Declaratory Judgment and
Injunctive Relief for Breach of Fiduciary Duty)
54. Plaintiffs repeat and reallege the allegations of paragraphs 1
through 47 of this complaint as if fully set forth herein.
55. At all relevant times, the Viacom Defendants are and have been
Plaintiffs' partners with respect to UPN.
56. As joint venture partners, the Viacom Defendants owe fiduciary
duties to Plaintiffs, including duties of utmost loyalty, care, disclosure and
fair dealing, the duty not to acquire or own an interest in a competing network
or otherwise compete with the Partnership, the duty not to deprive the
Partnership of the Viacom Defendants' resources relating to the business of the
Partnership, the duty not to avail themselves of Partnership opportunities or
information at the expense of the Partnership, the duty to use all of their
efforts for the benefit of the Partnership, and the duty not to harm the
Partnership by word or deed.
57. By entering into the Merger Agreement with CBS, and by their
public statements since entering into that Agreement, the Viacom Defendants have
breached these fiduciary duties.
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58. A direct and proximate result of the Viacom Defendants' breach
of their fiduciary duties is irreparable harm to Plaintiffs.
AS AND FOR A THIRD CAUSE OF ACTION
(Against the Viacom Defendants for Declaratory Judgment and Injunctive Relief
Precluding Viacom's Exercise of the Buy-Sell Provision)
59. Plaintiffs repeat and reallege the allegations of paragraphs 1
through 47 of the complaint as if fully set forth herein.
60. By negotiating and entering into the Merger Agreement, the
Viacom Defendants have breached the Joint Venture Agreement.
61. By entering into the Merger Agreement, and by their public
statements since entering into that Agreement, the Viacom Defendants have
breached fiduciary duties they owe Plaintiffs and have unclean hands.
62. The Viacom Defendants have purported to initiate the Buy-Sell
provision of the Joint Venture Agreement, Section 13.2, after their intentional
breaches of that Agreement and of their fiduciary duties.
63. As a result of their breach of the Joint Venture Agreement,
their breaches of fiduciary duty and their unclean hands, the Viacom Defendants
are precluded from initiating, exercising or enforcing other provisions of the
Joint Venture Agreement, including Section 13.2.
64. As a result of their breach of the Joint Venture, the Viacom
Defendants' purported exercise of the buy-sell provision is void because it
would otherwise nullify and render superfluous other material provisions of the
Joint Venture Agreement, including Sections 11.4 and 15.2.
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AS AND FOR A FOURTH CAUSE OF ACTION
(Against CBS, for Declaratory Judgment and Injunctive Relief for Tortious
Interference with Contract)
65. Plaintiffs repeat and reallege paragraphs 1 through 47 of this
complaint as if fully set forth herein.
66. At the time CBS and Viacom were conducting merger
negotiations, CBS knew of the non-compete provision contained in the Joint
Venture Agreement and of the Viacom Defendants' contractual obligations not to
own any interest in or control any competing network, as described above.
67. CBS knowingly and intentionally induced a breach by the Viacom
Defendants of their non-compete obligations under Section 11.1 of the Joint
Venture Agreement.
68. CBS's intentional conduct in tortiously interfering with
Viacom's obligations under the Joint Venture Agreement and the non-compete
clause was without justification and was a significant factor in causing a
breach of the Joint Venture Agreement.
69. Approximate result of the foregoing is irreparable harm to
Plaintiffs.
AS AND FOR A FIFTH CAUSE OF ACTION
(Against CBS, for Declaratory Judgment and Injunctive Relief for Aiding
Breach and Abetting Breach of Fiduciary Duties)
70. Plaintiffs repeat and reallege paragraphs 1 through 47 of the
complaint as if fully set forth herein.
71. At the time CBS and Viacom were conducting merger
negotiations, CBS knew of the existence of the partnership between Plaintiffs
and the Viacom Defendants with
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respect to UPN and that Viacom was prohibited by, inter alia, its duty of
loyalty to Plaintiffs, from owning an interest in or controlling any competitive
television network, including CBS.
72. CBS knew that by entering into a merger agreement with Viacom
it would aid and abet Viacom Defendants' breach of their fiduciary duties to
Plaintiffs, including their duty of loyalty, their duty not to compete with UPN,
and their duty not to harm UPN by word or deed.
73. In public announcements, CBS stated that its intention in
entering into the merger with Viacom was to strengthen its competitive position
as a television network. Specifically, CBS intended to gain an advantage over
all other television networks, including UPN. CBS knew that for BHC, the value
of the joint venture with Viacom was based on Viacom's exclusive relationship
with UPN and that the merger between CBS and Viacom would deprive UPN of this
exclusive relationship. By merging with Viacom, CBS knew that it would be
weakening UPN's competitive position.
74. CBS induced the above-described breaches of duty by the Viacom
Defendants by first initiating and then actively pursuing a merger agreement
with Viacom. In addition and/or alternatively, CBS substantially and knowingly
aided and abetted the Viacom Defendants' breaches of these duties.
75. A proximate result of the foregoing is irreparable harm to
Plaintiffs.
WHEREFORE, Plaintiffs pray for judgment against the Defendants as
follows:
a. On the First Cause of Action:
i. declaring and decreeing pursuant to CPLR Section 3001
that the Viacom Defendants are in breach of the Joint Venture Agreement;
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ii. permanent injunctive relief terminating the Merger
Agreement and prohibiting the Viacom Defendants or any of them from
consummating the Merger;
iii. permanent injunctive relief prohibiting the Viacom
Defendants or any of them from disclosing to or using for the benefit of CBS
any competitive information or strategic plans of UPN;
b. On the Second Cause of Action:
i. declaring and decreeing pursuant to CPLR Section 3001
that the Viacom Defendants are in breach of their fiduciary duties to
plaintiffs;
ii. permanent injunctive relief terminating the Merger
Agreement and prohibiting the Viacom Defendants or any of them from
consummating the Merger;
iii. permanent injunctive relief prohibiting the Viacom
Defendants or any of them from disclosing to or using for the benefit of CBS
any competitive information or strategic plans of UPN;
c. On the Third Cause of Action:
i. declaring and decreeing pursuant to CPLR Section 3001
that the Viacom Defendants are precluded from exercising and seeking to
enforce any rights granted by the Joint Venture Agreement;
ii. declaring and decreeing pursuant to CPLR Section 3001
that the Viacom Defendants' purported initiation of the Buy-Sell provision
of the Joint Venture Agreement, Section 13.2, is void and of no effect;
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iii. permanent injunctive relief barring the Viacom
Defendants from initiating or seeking to enforce the Buy-Sell provision of
the Joint Venture Agreement;
d. On the Fourth Cause of Action:
i. declaring and decreeing pursuant to CPLR Section 3001
that CBS has tortiously interfered and is tortiously interfering with
Plaintiffs' rights under the Joint Venture Agreement;
ii. permanent injunctive relief terminating the Merger
Agreement and prohibiting CBS from consummating the Merger;
iii. permanent injunctive relief prohibiting CBS from
using any competitive information or strategic plans of UPN;
e. On the Fifth Cause of Action:
i. declaring and decreeing pursuant to CPLR Section 3001
that CBS has aided and abetted the Viacom Defendants' breach of their
fiduciary duties owed to Plaintiffs;
ii. permanent injunctive relief terminating the Merger
Agreement and prohibiting CBS from consummating the Merger;
iii. permanent injunctive relief prohibiting CBS from
using any competitive information or strategic plans of UPN;
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f. Granting such other and further relief as to the Court may
deem just and proper.
Dated: February 8, 2000
New York, New York
Respectfully submitted,
KAYE, SCHOLER, FIERMAN,
HAYS & HANDLER, LLP
By: s/
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Peter M. Fishbein
425 Park Avenue
New York, New York 10022
(212) 836-8000
COVINGTON & BURLING
1330 Avenue of the Americas
New York, New York 10019
(212) 841-1000
Attorneys for Plaintiffs BHC Communications,
Inc., BHC Network Partner, Inc., BHC Network
Partner II, Inc., BHC Network Partner III,
Inc, and BHC Network Partner IV
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