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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (VIA EDGAR) ON AUGUST 29,
1994
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
VIACOM INC.
(Exact name of registrant as specified in its charter)
------------------------
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
VIACOM INC.
Pursuant to Section 242 of the
Delaware General Corporation Law
The undersigned, being the Executive Vice President, General Counsel and
Chief Administrative Officer of Viacom Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware ("Viacom"), DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: At a meeting of the Board of Directors of Viacom duly called and
held on May 26, 1994, resolutions were duly adopted setting forth proposed
amendments (which are set forth herein in Articles SECOND and THIRD) to the
Restated Certificate of Incorporation of Viacom, declaring such amendments to be
advisable and directing that such amendments be submitted to the stockholders of
Viacom for approval at the Special Meeting of Stockholders to held on July 7,
1994.
SECOND: That Section 1(a) of Article IV of the Restated Certificate of
Incorporation of Viacom be, and the same hereby is, amended in full to read as
follows:
"(a) The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 1,400,000,000. The classes and the
aggregate number of shares of stock of each class which the Corporation shall
have authority to issue are as follows:
(i) 200,000,000 shares of Class A Common Stock, $0.01 par value
("Class A Common Stock").
(ii) 1,000,000,000 shares of Class B Common Stock, $0.01 par value
("Class B Common Stock").
(iii) 200,000,000 shares of Preferred Stock, $0.01 par value
("Preferred Stock")."
THIRD: That the first sentence of Section (2) of Article V of the Restated
Certificate of Incorporation of Viacom be, and the same hereby is, amended by
deleting the number "twelve" and replacing such number with the number "twenty".
FOURTH: That such amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, this Certificate has been executed by Philippe P.
Dauman, Executive Vice President, General Counsel and Chief Administrative
Officer of Viacom, and attested by Michael D. Fricklas, Assistant Secretary of
Viacom, this 7th day of July, 1994.
VIACOM INC.
By: /s/ Philippe P. Dauman
....................................
Title: Executive Vice President,
General Counsel and
Chief Administrative Officer
ATTEST:
/s/ Deborah Chapin
................................
Assistant Secretary
CUSIP No. 925524142
VIACOM INC.
No. Certificate for Variable Common Rights
This certifies that ,
or registered assigns (the "Holder"), is the owner of the number
of Variable Common Rights ("VCRs") of Viacom Inc., a Delaware
corporation (the "Company"), set forth above. Each VCR entitles
the Holder, subject to the provisions contained herein, to
convert such VCR into shares of the Class B Common Stock, par
value $.01 per share (the "Class B Common Stock"), of the Company
or any other capital stock of the Company into which the Class B
Common Stock may be converted or reclassified or that may be
issued in respect of, in exchange for, or in substitution of, the
Class B Common Stock. Such number of shares of Class B Common
Stock, if any, into which each VCR will convert shall be
determined by the Company pursuant to the provisions set forth on
the reverse hereof and written notice thereof shall be provided
to the Holders of the VCRs promptly after the VCR Conversion Date
(as defined below). The Company's determination of the number of
shares, if any, of Class B Common Stock into which each VCR will
convert shall be conclusive and binding absent manifest error.
Such conversion shall be made on _________ , 1995 (the "VCR
Conversion Date"). Under certain circumstances, as described on
the reverse hereof, the Holders of VCRs will not be entitled to
any additional shares of Class B Common Stock on the VCR
Conversion Date and this VCR Certificate and the VCRs represented
hereby will expire on the VCR Conversion Date.
The transfer of the VCRs represented by this VCR
Certificate is registerable on the Security Register of the
Company, upon surrender of this VCR Certificate for registration
of transfer at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York,
which initially shall be ____________, or at any other office or
agency maintained by the Company for such purpose, duly endorsed
by, or accompanied by a written instrument of transfer in form
satisfactory to the Company duly executed by, the Holder hereof
or his attorney duly authorized in writing, and thereupon one or
more new VCR Certificates, for the same number of VCRs, will be
issued to the designated transferee or transferees. In no case,
however, shall the Company be required to issue fractional VCRs.
Conversion of the VCRs represented hereby into shares
of Class B Common Stock, if any, pursuant to this VCR Certificate
shall be made only upon presentation and surrender of this VCR
Certificate by the Holder hereof, in person or by duly authorized
attorney, at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York,
or at any other office or agency maintained by the Company for
such purpose.
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This VCR Certificate and the rights evidenced hereby
are issued and held subject to the laws of the State of Delaware,
the Restated Certificate of Incorporation of the Company, as
amended to the date hereof and as the same may be further amended
and restated from time to time, and the By-Laws of the Company,
as amended to the date hereof and as the same may be further
amended and restated from time to time. Reference is hereby made
to the further provisions of this VCR Certificate set forth on
the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this VCR
Certificate to be executed and attested by the facsimile
signatures of its duly authorized officers under its corporate
seal.
Dated: VIACOM INC.
Attest: By
----------------------------
[SEAL]
------------------------------
Authorized Signature
REVERSE OF VCR CERTIFICATE
Each VCR represents the right to receive, subject to
the provisions contained herein, shares of Class B Common Stock
on the VCR Conversion Date. Such number of shares, if any, will
be determined by the Company in accordance with the provisions
herein and, under certain circumstances, as described below, the
Holders of VCRs will not be entitled to any additional shares of
Class B Common Stock and this VCR Certificate and the VCRs
represented hereby will expire on the VCR Conversion Date.
The number of shares of Class B Common Stock, if any,
into which each VCR shall be convertible will be calculated as
follows:
Determination of Conversion Value. Subject to the
limitation on conversion value described below, a value for
Viacom Class B Common Stock (the "Class B Value") will be
determined in the 90 qualified trading day period immediately
preceding the VCR Conversion Date (the "Alternative VCR Valuation
Period"). The Class B Value will equal the average closing price
on the American Stock Exchange (or such other exchange on which
shares of Class B Common Stock are then listed) for one share of
Class B Common Stock during any 30 consecutive qualified trading
days in the Alternative VCR Valuation Period which yield the
highest such average closing price.
The Class B Value will determine the number of shares, if any,
into which each VCR shall be converted (a "VCR Conversion
Value"), as set forth below:
Class B Value VCR Conversion Value
------------- --------------------
(expressed as a fraction of one share of
Class B Common Stock)
$0 to $35.99 . . . 0.13829
$35 to $40 . . . . 30 - 0.32 minus 0.08 minus 0.60615
---------------
Class B Value
$40.01 to $47.99 . 0.05929
$48 to $52 . . . . 36 - 0.32 minus 0.08 minus 0.60615
---------------
Class B Value
$52.01 and above . 0 (Zero)
The dollar amounts set forth in the above table under the caption
entitled "Class B Value" are each a "Class B Conversion Value".
The number of shares of Class B Common Stock issuable upon
conversion of the VCRs and collectively, the numbers in the
formula used to determine such amount, each as set forth under
the caption entitled "VCR Conversion Value" are each a "VCR
Conversion Value". Each such Class B Conversion Value and VCR
Conversion Value, as it may have been previously adjusted, shall
be adjusted upon each occurrence of an event described below
under "Adjustments".
Limitation on Conversion Value. Notwithstanding the
determination of VCR Conversion Value described above, if at any
time during the period from _______, 1994 (the
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"Issue Date") until the VCR Conversion Date the average closing
price for a share of Class B Common Stock on the American Stock
Exchange (or such other exchange on which shares of Class B
Common Stock are then listed) for any 30 qualified consecutive
trading days is: (a) above $40 (a "Class B Conversion Value"),
then the maximum conversion value for each VCR will equal 0.05929
(a "VCR Conversion Value") of one share of Class B Common Stock
or (b) above $52 (a "Class B Conversion Value"), then the VCRs
will have no value and will automatically terminate. Each such
Class B Conversion Value and VCR Conversion Value, as it may have
been previously adjusted, shall be adjusted upon each occurrence
of an event as described below under "Adjustments".
For the purposes of determining any period of qualified
trading days, a trading day is not qualified if (i) with respect
to a day during the first month following the Issue Date, fewer
than 400,000 shares of Class B Common Stock trade on such day,
(ii) with respect to a day during the second month following the
Issue Date, fewer than 300,000 shares of Class B Common Stock
trade on such day, (iii) with respect to a day during the third
month following the Issue Date, fewer than 250,000 shares of
Class B Common Stock trade on such day and (iv) with respect to a
day from and after the first day of the fourth month following
the Issue Date, fewer than 200,000 shares of Class B Common Stock
trade on such day. Otherwise, each trading day will be qualified.
In the event that the Company determines that the VCRs
are not convertible into any shares of Class B Common Stock on
the VCR Conversion Date, the Company shall give to the Holders of
the VCRs notice of such determination. Upon making such
determination, absent manifest error, this VCR Certificate shall
terminate and become null and void and the Holder hereof shall
have no further rights with respect hereto. The failure to give
such notice or any defect therein shall not affect the validity
of such determination.
Prior to the time of due presentment of this VCR
Certificate for registration of transfer, the Company and any
agent of the Company may treat the person in whose name this VCR
Certificate is registered as the owner hereof for all purposes,
and neither the Company nor any agent of the Company shall be
affected by notice to the contrary.
The Company may, but shall not be required to, issue
fractional shares of Class B Common Stock on conversion of the
VCRs. In lieu of a fractional share, the Company may, at its
option, make a cash payment for the fraction based on the
average closing prices of the Class B Common Stock for the 15
consecutive trading day period, the first day of which shall be
the twentieth trading day prior to the conversion.
Except as set forth herein with respect to adjustments,
this VCR Certificate confers no rights with respect to any
dividends declared by the Company on the Class B Common Stock to
holders of record on a record date prior to the VCR Conversion
Date.
Adjustments
Each Class B Conversion Value will be reduced by a
percentage equal to any percentage decline in excess of 25% in
the Standard & Poor's 400 Index from the Issue Date until the VCR
Conversion Date.
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The Class B Conversion Values and the VCR Conversion
Values shall be subject to adjustment from time to time in
certain events, including (i) the payment of a dividend or other
distribution by the Company to its stockholders in shares of
Class B Common Stock, (ii) the sub-division (by stock split,
stock dividend or otherwise) or combination (by reverse stock
split or otherwise) of the outstanding Class B Common Stock or
(iii) the issuance by reclassification of shares of Class B
Common Stock. Upon each such event, the Company shall
appropriately adjust the Class B Conversion Values and VCR
Conversion Values. Whenever an adjustment is made as provided
herein, the Company shall (i) promptly prepare a certificate
setting forth such adjustment and a brief statement of the facts
accounting for such adjustment and (ii) mail a brief summary
thereof to each Holder of a VCR. Such adjustment, absent
manifest error, shall be final and binding on the Holder hereof.
Each outstanding VCR Certificate shall thereafter be deemed to be
amended to provide for the adjusted Class B Conversion Values and
VCR Conversion Values. No adjustment to the Class B Conversion
Values and VCR Conversion Values is required unless such
adjustment would require an increase or decrease of at least 1%
in such values, but any adjustments which are not required to be
made shall be carried forward and taken into account in any
subsequent adjustment.
THE COMPANY WILL FURNISH WITHOUT CHARGE, TO EACH HOLDER WHO
SO REQUESTS, THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF
STOCK OR SERIES THEREOF OF THE COMPANY, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
RESTRICTIONS ON TRANSFER AND VOTING OF COMMON STOCK: THE
RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED, OF
THE COMPANY PROVIDES THAT, SO LONG AS THE COMPANY OR ANY OF ITS
SUBSIDIARIES HOLDS ANY AUTHORIZATION FROM THE FEDERAL
COMMUNICATIONS COMMISSION (OR ANY SUCCESSOR THERETO), IF THE
COMPANY HAS REASON TO BELIEVE THAT THE OWNERSHIP, OR PROPOSED
OWNERSHIP, OF SHARES OF CAPITAL STOCK OF THE COMPANY BY ANY
STOCKHOLDER OR ANY PERSON PRESENTING ANY SHARES OF CAPITAL STOCK
OF THE COMPANY FOR TRANSFER INTO HIS NAME (A "PROPOSED
TRANSFEREE") MAY BE INCONSISTENT WITH, OR IN VIOLATION OF, ANY
PROVISION OF THE FEDERAL COMMUNICATIONS LAWS (AS HEREINAFTER
DEFINED), SUCH HOLDER OR PROPOSED TRANSFEREE, UPON REQUEST OF THE
COMPANY, SHALL FURNISH PROMPTLY TO THE COMPANY SUCH INFORMATION
(INCLUDING, WITHOUT LIMITATION, INFORMATION WITH RESPECT TO
CITIZENSHIP, OTHER OWNERSHIP INTERESTS AND AFFILIATIONS) AS THE
COMPANY SHALL REASONABLY REQUEST TO DETERMINE WHETHER THE
OWNERSHIP OF, OR THE EXERCISE OF ANY RIGHTS WITH RESPECT TO
SHARES OF CAPITAL STOCK OF THE COMPANY BY SUCH STOCKHOLDER OR
PROPOSED TRANSFEREE IS INCONSISTENT WITH, OR IN VIOLATION OF, THE
FEDERAL COMMUNICATIONS LAWS. AS USED HEREIN, THE TERM "FEDERAL
4
COMMUNICATIONS LAWS" SHALL MEAN ANY LAW OF THE UNITED STATES
NOW OR HEREAFTER IN EFFECT (AND ANY REGULATION THEREUNDER)
PERTAINING TO THE OWNERSHIP OF, OR THE EXERCISE OF RIGHTS OF
OWNERSHIP WITH RESPECT TO, CAPITAL STOCK OF CORPORATIONS HOLDING,
DIRECTLY OR INDIRECTLY, FEDERAL COMMUNICATIONS COMMISSION
AUTHORIZATIONS, INCLUDING, WITHOUT LIMITATION, THE COMMUNICATIONS
ACT OF 1934, AS AMENDED (THE "COMMUNICATIONS ACT"), AND
REGULATIONS THEREUNDER PERTAINING TO THE OWNERSHIP, OR THE
EXERCISE OF THE RIGHTS OF OWNERSHIP, OF CAPITAL STOCK OF
CORPORATIONS HOLDING, DIRECTLY OR INDIRECTLY, FEDERAL
COMMUNICATIONS COMMISSION AUTHORIZATIONS, BY (I) ALIENS, AS
DEFINED IN OR UNDER THE COMMUNICATIONS ACT, AS IT MAY BE AMENDED
FROM TIME TO TIME, (II) PERSONS OR ENTITIES HAVING INTERESTS IN
TELEVISION OR RADIO STATIONS, DAILY NEWSPAPERS AND CABLE
TELEVISION SYSTEMS OR (III) PERSONS OR ENTITIES, UNILATERALLY OR
OTHERWISE, SEEKING DIRECT OR INDIRECT CONTROL OF THE COMPANY, AS
CONSTRUED UNDER THE COMMUNICATIONS ACT, WITHOUT HAVING OBTAINED
ANY REQUISITE PRIOR FEDERAL REGULATORY APPROVAL OF SUCH CONTROL.
IF ANY STOCKHOLDER OR PROPOSED TRANSFEREE FROM WHOM INFORMATION
IS REQUESTED AS DESCRIBED ABOVE SHOULD FAIL TO RESPOND TO SUCH
REQUEST OR THE COMPANY SHALL CONCLUDE THAT THE OWNERSHIP, OR THE
EXERCISE OF ANY RIGHTS OF OWNERSHIP WITH RESPECT TO, SHARES OF
CAPITAL STOCK OF THE COMPANY BY SUCH STOCKHOLDER OR PROPOSED
TRANSFEREE COULD RESULT IN ANY INCONSISTENCY WITH, OR VIOLATION
OF, THE FEDERAL COMMUNICATIONS LAWS, THE COMPANY MAY REFUSE TO
PERMIT THE TRANSFER OF SHARES OF CAPITAL STOCK OF THE COMPANY
TO SUCH PROPOSED TRANSFEREE, OR MAY SUSPEND THOSE RIGHTS OF STOCK
OWNERSHIP THE EXERCISE OF WHICH WOULD RESULT IN ANY INCONSISTENCY
WITH, OR VIOLATION OF, THE FEDERAL COMMUNICATIONS LAWS, SUCH
REFUSAL OF TRANSFER OR SUSPENSION TO REMAIN IN EFFECT UNTIL THE
REQUESTED INFORMATION HAS BEEN RECEIVED AND THE COMPANY HAS
DETERMINED THAT SUCH TRANSFER OR THE EXERCISE OF SUCH SUSPENDED
RIGHTS, AS THE CASE MAY BE, IS PERMISSIBLE UNDER THE FEDERAL
COMMUNICATIONS LAWS, AND THE COMPANY MAY EXERCISE ANY AND ALL
APPROPRIATE REMEDIES, AT LAW OR IN EQUITY, IN ANY COURT OF
COMPETENT JURISDICTION, AGAINST ANY SUCH STOCKHOLDER OR PROPOSED
TRANSFEREE, WITH A VIEW TOWARDS OBTAINING SUCH INFORMATION OR
PREVENTING OR CURING ANY SITUATION WHICH WOULD CAUSE ANY
INCONSISTENCY WITH, OR VIOLATION OF, ANY PROVISION OF THE FEDERAL
COMMUNICATIONS LAWS, AS USED HEREIN, THE WORD "PERSON" SHALL
INCLUDE NOT ONLY NATURAL PERSONS BUT PARTNERSHIPS, ASSOCIATIONS,
CORPORATIONS, JOINT VENTURES, AND OTHER ENTITIES AND THE
"REGULATION" SHALL INCLUDE NOT ONLY REGULATIONS BUT RULES,
PUBLISHED POLICIES AND PUBLISHED CONTROLLING INTERPRETATIONS BY
AN ADMINISTRATIVE AGENCY OR BODY
5
EMPOWERED TO ADMINISTER A STATUTORY PROVISION OF THE FEDERAL
COMMUNICATIONS LAWS.
[LETTERHEAD OF SHEARMAN & STERLING]
August 25, 1994
Viacom Inc.
200 Elm Street
Dedham, Massachusetts 02026
Ladies and Gentlemen:
We have acted as counsel for Viacom Inc., a Delaware
corporation (the "Company"), in connection with the Registration
Statement on Form S-4 (the "Registration Statement") filed with
the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Securities Act"), relating to the
solicitation of proxies in connection with the merger of Blockbuster
Entertainment Corporation ("Blockbuster") with and into the Company
(the "Merger") and to the registration under the Securities Act of
(i) 22,134,256 shares of the Company's Class A Common Stock, par
value $.01 per share (the "Class A Common Stock"), (ii) 205,970,317
shares of the Company's Class B Common Stock, par value $.01 per
share (the "Class B Common Stock"), which includes 38,261,828 shares
of Class B Common Stock (the "Additional Class B Common Stock")
which may become issuable pursuant to the Company's variable common
rights (the "VCRs") and (iii) 276,678,196 VCRs to be issued in the
Merger. Capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Registration Statement.
The VCRs will be governed by a certificate (the "VCR
Certificate") in the form included in the Registration Statement
as Exhibit 4.3.
In so acting, we have examined the Registration
Statement including the joint proxy statement/prospectus (the
"Joint Proxy Statement/Prospectus") contained therein and the VCR
Certificate. We have also examined and relied as to factual
matters upon the representations and warranties contained in
originals, or copies certified or otherwise identified to our
satisfaction, of such records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to
enable us to render the opinions expressed below. In such
examination, we have assumed the genuineness of all signatures,
the
Viacom Inc. 2 August 25, 1994
authenticity of all documents, certificates and instruments
submitted to us as originals and the conformity with originals of
all documents submitted to us as copies.
In connection with these opinions, we have assumed that
each of the following shall occur on or prior to the issuance of
the Class A Common Stock, the Class B Common Stock, the VCRs and
the Additional Class B Common Stock: (a) the holders of shares
of Viacom Class A Common Stock approve and adopt the Merger
Agreement (including the issuance of the Merger Consideration) at
the Viacom Special Meeting; (b) the holders of shares of
Blockbuster Common Stock approve and adopt the Merger Agreement
at the Blockbuster Special Meeting; and (c) there shall be filed
with the Secretary of State of the State of Delaware the
"Certificate of Merger Merging Blockbuster Entertainment
Corporation with and into Viacom Inc." in the form set forth in
Annex VIII to the Joint Proxy Statement/Prospectus.
The opinions expressed below are limited to the law of
the State of New York, the General Corporation Law of Delaware
and the federal law of the United States, and we do not express
any opinion herein concerning any other law.
Based upon the foregoing, and having regard for such
legal considerations as we have deemed relevant, we are of the
opinion that:
1. The Class A Common Stock and the Class B Common
Stock will be duly authorized by the Company and, when
issued by the Company in accordance with the terms of the
Merger Agreement, the Class A Common Stock and the Class B
Common Stock will be validly issued, fully paid and non-
assessable.
2. The VCRs will be duly authorized by the Company,
and when (a) the VCR Certificates have been duly executed
and delivered by the Company and (b) the VCRs have been duly
issued by the Company as contemplated by the Merger
Agreement in accordance with the provisions of the VCR
Certificates, the VCRs will be validly issued and will
constitute valid and binding obligations of the Company
enforceable against the Company in accordance with the terms
of the VCR Certificates.
3. The Additional Class B Common Stock will be duly
authorized by the Company and, when issued by the Company in
accordance with the provisions of the VCR Certificates, the
Additional Class B Common Stock will be validly issued,
fully paid and non-assessable.
The opinion set forth in paragraph 2 above is subject
to (i) the effect of any applicable bankruptcy, insolvency
(including, without limitation, all laws relating to
Viacom Inc. 3 August 25, 1994
fraudulent transfers), reorganization, moratorium or similar laws
affecting creditors' rights generally and (ii) the effect of
general principles of equity (regardless of whether considered in
a proceeding in equity or at law).
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to us
under the headings "The Merger -- Certain Federal Income Tax
Consequences" and "Experts -- Legal Opinions" contained in the
Joint Proxy Statement/Prospectus.
Very truly yours,
/s/ SHEARMAN & STERLING
TC/AS/SK/SG
[LETTERHEAD OF SHEARMAN & STERLING]
August 26, 1994
Viacom Inc.
200 Elm Street
Dedham, Massachusetts 02026
Merger of
Blockbuster Entertainment Corporation
with and into Viacom Inc.
----------------------------------------
Gentlemen:
We have acted as counsel to Viacom Inc. in connection
with (i) the proposed merger pursuant to the Agreement and Plan
of Merger, dated as of January 7, 1994, as amended as of June 15,
1994, between Viacom Inc., a Delaware corporation ("Viacom"), and
Blockbuster Entertainment Corporation, a Delaware corporation
("Blockbuster") and (ii) the preparation and filing of the Joint
Proxy Statement/Prospectus, dated August 29, 1994, of Viacom and
Blockbuster (the "Joint Proxy Statement/Prospectus"). Unless
otherwise defined, capitalized terms used herein have the
meanings assigned to them in the Merger Agreement.
The Merger Agreement provides that at the Effective
Time, Blockbuster will be merged with and into Viacom in
accordance with Delaware law. As a result of the Merger the
separate corporate existence of Blockbuster will cease and Viacom
will continue as the surviving corporation of the Merger. By
virtue of the Merger, each share of Blockbuster Common Stock
issued and outstanding immediately prior to the Effective Time
(other than shares of Blockbuster Common Stock held in the
treasury of Blockbuster, owned by Viacom or any direct or
indirect wholly-owned subsidiary of Viacom or of Blockbuster and
other than any Dissenting Shares) will be converted into the
right to receive (i) 0.08 of one share of Viacom Class A Common
Stock, (ii) 0.60615 of one share of Viacom Class B Common Stock
and (iii) up to an additional 0.13829 of one share of Viacom
Class B Common Stock, with such amount to be determined in
accordance with, and the right to receive such shares to be
evidenced by, one VCR.
In delivering our opinion, we have reviewed the Merger
Agreement and have assumed that the representations and
warranties therein are and will remain true, correct and
2
complete and that the parties have complied with and will continue to
comply with the covenants therein. In addition, we have reviewed
the Joint Proxy Statement/Prospectus and have assumed that the
statements therein are and will remain true, correct and
complete. We have also relied on the representations made by
Viacom and Blockbuster in letters to us dated August 25, 1994.
We have also assumed, based upon discussions with the management
of Viacom or Blockbuster, as appropriate, that (i) neither Viacom
nor Blockbuster is an investment company within the meaning of
Section 368(a)(2)(F)(iii) of the Code; (ii) the sum of the amount
of cash, if any, paid to stockholders with respect to Dissenting
Shares and the value of the VCRs exchanged in the Merger will be
less than 50% of the total value of the Blockbuster Common Stock
outstanding as of the date of the Merger; (iii) the total
adjusted tax basis of the assets of Blockbuster transferred to
Viacom will equal or exceed the sum of the liabilities assumed by
Viacom plus the amount of the liabilities, if any, to which the
transferred assets are subject; and (iv) that the Merger will be
consummated in accordance with the Merger Agreement.
Based on the Internal Revenue Code of 1986, as amended
(the "Code"), the Treasury Regulations promulgated thereunder and
our consideration of other pertinent authorities, all as in
effect on the date hereof, we are of the opinion that the
discussion in the Joint Proxy Statement/Prospectus under the
caption "THE MERGER -- Certain Federal Income Tax Consequences,"
insofar as it relates to matters of federal income tax law, is a
fair and accurate summary of such matters. We express no opinion
(i) as to whether such description addresses all of the U.S.
federal income tax consequences of the Merger that may be
applicable to Viacom, Blockbuster or any particular Blockbuster
stockholder or (ii) as to the U.S. federal, state, local, foreign
or other tax consequences, other than as set forth in the Joint
Proxy Statement/Prospectus under the caption "THE MERGER --
Certain Federal Income Tax Consequences."
We consent to the filing of this opinion as an exhibit
to the Joint Proxy Statement/Prospectus and to the reference to
Shearman & Sterling under the caption "THE MERGER -- Certain
Federal Income Tax Consequences" in the Joint Proxy
Statement/Prospectus.
Very truly yours,
/s/ SHEARMAN & STERLING
EBH
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM]
August 26, 1994
Blockbuster Entertainment Corporation
One Blockbuster Plaza
Fort Lauderdale, Florida 33301
Gentlemen:
We have acted as counsel to Blockbuster Enter-
tainment Corporation ("Blockbuster"), a Delaware corpora-
tion, in connection with (i) the Merger, as defined and
described in the Agreement and Plan of Merger between
Viacom Inc. ("Viacom"), a Delaware corporation, and
Blockbuster, dated as of January 7, 1994, as amended as
of June 15, 1994 (the "Merger Agreement") and (ii) the
preparation and filing of the Joint Proxy State-
ment/Prospectus, filed with the Securities and Exchange
Commission on August 29, 1994 (the "Joint Proxy State-
ment/Prospectus"), under the Securities Act of 1933 and
the Securities Exchange Act of 1934, as amended. Unless
otherwise indicated, each defined term has the meaning
ascribed to it in the Merger Agreement.
In the Merger, each share of Common Stock, par
value $.10 per share, of Blockbuster (other than shares
held by Viacom, Blockbuster and, if appraisal rights are
available under Delaware Law, those holders who demand
and perfect appraisal rights) will be converted into the
right to receive 0.08 of a share of Class A Common Stock,
par value $.01 per share, of Viacom, 0.60615 of a share
of Class B common Stock, par value $.01 per share, of
Viacom and up to an additional 0.13829 of a share of
Viacom Class B Common Stock evidenced by one variable
common right of Viacom (a "VCR").
In connection with this opinion, we have exam-
ined and are familiar with originals and copies, certi-
Blockbuster Entertainment Corporation
One Blockbuster Plaza
Fort Lauderdale, Florida 33301
August 26, 1994
Page 2
fied or otherwise identified to our satisfaction, of (i)
the Joint Proxy Statement/Prospectus and (ii) such other
documents as we have deemed necessary or appropriate in
order to enable us to render the opinion below. In our
examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the
authenticity of all documents submitted to us as origi-
nals, the conformity to original documents of all docu-
ments submitted to us as certified or photostatic copies,
and the authenticity of the originals of such latter
documents.
We have assumed, based upon discussions with
Blockbuster management, that (i) neither Viacom nor Blockbuster
is an investment company within the meaning of Section 368(a)
(2)(F)(iii) of the Code, (ii) the sum of the amount of cash, if
any, paid to stockholders with respect to Dissenting Shares and
the value of VCRs exchanged in the Merger will be less than 50%
of the total value of the Blockbuster Common Stock outstanding
as of the date of the Merger, and (iii) the total adjusted tax
basis of the assets of Blockbuster transferred to Viacom will
equal or exceed the sum of the liabilities assumed by Viacom
plus the amount of liabilities, if any, to which the transferred
assets are subject. Based upon these assumptions and subject
to (i) the Merger being consummated in the manner de-
scribed in the Merger Agreement, (ii) the accuracy of the
facts concerning the Merger that have come to our atten-
tion during our engagement and (iii) certain representa-
tions made by Blockbuster and Viacom in connection with
the issuance of our opinion, including the representa-
tions contained in their respective letters to us, dated
August 25, 1994, we are of the opinion that the discus-
sion in the Joint Proxy Statement/Prospectus under the
heading "Certain Federal Income Tax Consequences," inso-
far as it relates to matters of federal income tax law
applicable to Blockbuster or to holders of Blockbuster
Common Stock, is a fair and accurate summary of such mat-
ters. We express no opinion as to whether such descrip-
tion addresses all of the U.S. federal income tax conse-
quences of the Merger that may be
Blockbuster Entertainment Corporation
One Blockbuster Plaza
Fort Lauderdale, Florida 33301
August 26, 1994
Page 3
applicable to any particular stockholder or Blockbuster. In
addition, we express no opinion as to the U.S. federal, state,
or local, or foreign or other tax consequences, other than
as set forth in the Joint Proxy Statement/Prospectus
under the heading "Certain Federal Income Tax Consequenc-
es."
This letter is furnished to you solely for use
in connection with the Merger, as described in the Merger
Agreement, and is not to be used, circulated, quoted, or
otherwise referred to for any other purposes without our
express written permission.
We hereby consent to the use of this opinion as
an exhibit to the Joint Proxy Statement/Prospectus and to
the reference to our firm under the heading "Certain
Federal Income Tax Consequences" in the Joint Proxy
Statement/Prospectus. In giving such consent, we do not
thereby admit that we are in the category of persons
whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM
=================================================================
----------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
----------------------------------------------------------
dated as of August 27, 1994
among
VIACOM INC.,
PARAMOUNT COMMUNICATIONS REALTY CORPORATION,
ITT CORPORATION,
RAINBOW GARDEN CORPORATION
and
MSG HOLDINGS, L.P.
=================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms . . . . . . . . . . . . . . 1
ARTICLE II
THE MERGER
2.01. The Merger . . . . . . . . . . . . . . . . . . . 5
2.02. Effective Time of the Merger . . . . . . . . . . 5
2.03. The Closing . . . . . . . . . . . . . . . . . . . 5
2.04. Conversion of Shares; Payment of Merger
Consideration . . . . . . . . . . . . . . . . . 6
2.05. Post-Closing Adjustment . . . . . . . . . . . . . 6
2.06. Organization . . . . . . . . . . . . . . . . . . 8
2.07. Merger of Subsidiaries . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VIACOM AND THE SELLER
3.01. Incorporation and Authority of Viacom and the
Seller . . . . . . . . . . . . . . . . . . . . 8
3.02. Incorporation and Qualification of MSG . . . . . 9
3.03. Capital Stock of MSG . . . . . . . . . . . . . . 9
3.04. Subsidiaries and Equity Interests . . . . . . . . 9
3.05. No Conflict . . . . . . . . . . . . . . . . . . . 10
3.06. Consents and Approvals . . . . . . . . . . . . . 10
3.07. Financial Information . . . . . . . . . . . . . . 11
3.08. Absence of Undisclosed Liabilities . . . . . . . 11
3.09. Absence of Certain Changes or Events . . . . . . 11
3.10. Absence of Litigation . . . . . . . . . . . . . . 13
3.11. Compliance with Laws . . . . . . . . . . . . . . 14
3.12. Licenses and Permits . . . . . . . . . . . . . . 14
3.13. Real Property . . . . . . . . . . . . . . . . . . 14
3.14. Employee Benefit Matters . . . . . . . . . . . . 15
3.15. Taxes . . . . . . . . . . . . . . . . . . . . . . 16
3.16. Brokers . . . . . . . . . . . . . . . . . . . . . 17
3.17. Labor Matters . . . . . . . . . . . . . . . . . . 17
3.18. Material Contracts and Assets . . . . . . . . . . 18
3.19. Intellectual Property . . . . . . . . . . . . . . 18
(ii)
Page
----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
AND EACH PARENT
4.01. Incorporation and Authority of the Purchaser . . 19
4.02. Incorporation and Authority of Each Parent . . . 19
4.03. No Conflict . . . . . . . . . . . . . . . . . . . 20
4.04. Consents and Approvals . . . . . . . . . . . . . 20
4.05. Absence of Litigation . . . . . . . . . . . . . . 20
4.06. Financing . . . . . . . . . . . . . . . . . . . . 21
4.07. Brokers . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Conduct of Business Prior to the Closing . . . . 21
5.02. Access to Information . . . . . . . . . . . . . . 23
5.03. Confidentiality . . . . . . . . . . . . . . . . . 23
5.04. Regulatory and Other Authorizations; Consent;
Yankee Guaranty . . . . . . . . . . . . . . . . 24
5.05. Investigation . . . . . . . . . . . . . . . . . . 25
5.06. Asset Transfer . . . . . . . . . . . . . . . . . 26
5.07. Intercompany Accounts . . . . . . . . . . . . . . 26
5.08. Provision of Tickets . . . . . . . . . . . . . . 26
5.09. Insurance . . . . . . . . . . . . . . . . . . . . 26
5.10. Rights to the Use of Certain Intellectual
Property . . . . . . . . . . . . . . . . . . . 27
5.11. Post-Closing Services . . . . . . . . . . . . . . 27
5.12. Christmas Show . . . . . . . . . . . . . . . . . 28
5.13. Further Action . . . . . . . . . . . . . . . . . 28
ARTICLE VI
EMPLOYEE MATTERS
6.01. Employees . . . . . . . . . . . . . . . . . . . . 28
6.02. Employment Related Matters . . . . . . . . . . . 29
6.03. Multiemployer Plans . . . . . . . . . . . . . . . 30
6.04. Paramount Communications Inc. Retirement Plan . . 30
6.05. Paramount Communications Inc. Savings Plan . . . 31
6.06. MSG Union Sponsored Pension Plans . . . . . . . . 32
6.07. Retiree Medical and Retiree Life Insurance . . . 32
6.08. Indemnity . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII
TAX MATTERS
7.01. Tax Indemnities . . . . . . . . . . . . . . . . . 33
7.02. Refunds and Tax Benefits . . . . . . . . . . . . 34
7.03. Contests . . . . . . . . . . . . . . . . . . . . 35
7.04. Preparation of Tax Returns . . . . . . . . . . . 36
7.05. Allocation of Merger Consideration . . . . . . . 36
(iii)
Page
----
7.06. Cooperation and Exchange of Information . . . . . 37
7.07. Conveyance and Sales Taxes . . . . . . . . . . . 37
7.08. Tax Treatment of Merger . . . . . . . . . . . . . 38
7.09. Miscellaneous . . . . . . . . . . . . . . . . . . 38
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. Conditions to Obligations of Viacom and the
Seller . . . . . . . . . . . . . . . . . . . . 38
8.02. Conditions to Obligations of the Purchaser and
Each Parent . . . . . . . . . . . . . . . . . . 39
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.01. Termination . . . . . . . . . . . . . . . . . . . 40
9.02. Effect of Termination . . . . . . . . . . . . . . 41
9.03. Waiver . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE X
GENERAL PROVISIONS
10.01. Survival of Representations and Warranties . . . 41
10.02. Expenses . . . . . . . . . . . . . . . . . . . . 42
10.03. Notices . . . . . . . . . . . . . . . . . . . . 42
10.04. Public Announcements . . . . . . . . . . . . . . 43
10.05. Headings . . . . . . . . . . . . . . . . . . . . 43
10.06. Severability . . . . . . . . . . . . . . . . . . 43
10.07. Entire Agreement . . . . . . . . . . . . . . . . 43
10.08. Assignment . . . . . . . . . . . . . . . . . . . 44
10.09. No Third-Party Beneficiaries . . . . . . . . . . 44
10.10. Amendment . . . . . . . . . . . . . . . . . . . 44
10.11. Governing Law . . . . . . . . . . . . . . . . . 44
10.12. Counterparts . . . . . . . . . . . . . . . . . . 44
EXHIBITS
3.07 Reference Balance Sheet
8.01(d) STB Opinion
8.02(f) S&S Opinion
AGREEMENT AND PLAN OF MERGER, dated as of August 27,
1994, among VIACOM INC., a Delaware corporation ("Viacom"),
------
PARAMOUNT COMMUNICATIONS REALTY CORPORATION, a Delaware
corporation and an indirect wholly owned subsidiary of Viacom
(the "Seller"), ITT CORPORATION, a Delaware corporation ("ITT"),
------ ---
RAINBOW GARDEN CORPORATION, a Delaware corporation ("Rainbow",
-------
and together with ITT, each a "Parent" and collectively, the
------
"Parents"), and MSG HOLDINGS, L.P., a Delaware limited
-------
partnership (the "Purchaser").
---------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Seller owns all the issued and outstanding
shares of common stock, no par value (the "Shares"), of Madison
------
Square Garden Corporation, a Delaware corporation ("MSG");
---
WHEREAS, the Parents indirectly own all of the
partnership interests in the Purchaser; and
WHEREAS, subject to the terms and conditions of this
Agreement, the Board of Directors of each of the Seller and
Viacom, and the Board of Directors of each Parent and the general
partner of the Purchaser, have adopted resolutions approving this
Agreement pursuant to which, among other things, MSG shall be
merged with and into the Purchaser (the "Merger");
------
NOW, THEREFORE, in consideration of the premises and of
the mutual agreements and covenants hereinafter set forth, each
Parent, the Purchaser, Viacom and the Seller hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
---------------------
Agreement, the following terms shall have the following meanings:
"Agreement" means this Agreement and Plan of Merger,
---------
dated as of August 27, 1994, among Viacom, the Seller, each
Parent and the Purchaser (including the Disclosure Schedule and
all exhibits attached hereto) and all amendments hereto made in
accordance with Section 10.10.
"Business" means the business of MSG and the
--------
Subsidiaries as conducted as of the date of this Agreement.
"Business Day" means any day that is not a Saturday, a
------------
Sunday or other day on which banks are required or authorized by
law to be closed in the City of New York.
2
"Certificate of Merger" has the meaning specified in
---------------------
Section 2.02.
"Closing" has the meaning specified in Section 2.03(a).
-------
"Closing Date" has the meaning specified in Section
------------
2.03(a).
"Confidentiality Agreement" has the meaning specified
-------------------------
in Section 5.03.
"Contest" has the meaning specified in Section 7.03(b).
-------
"Continuation Period" has the meaning specified in
-------------------
Section 6.01(a).
"Covered Affiliate" means any affiliate which has
-----------------
revenues or assets (in the case of such assets, valued at fair
market value) in excess of $100 million or, in the case of
Rainbow, (i) Rainbow Programming Holdings, Inc. or any
programming affiliate of Rainbow Programming Holdings, Inc. that
serves in excess of 1,200,000 subscribers, (ii) Cablevision
Systems Corporation or any cable television affiliate of
Cablevision Systems Corporation which serves more than 50,000
subscribers, (iii) Rainbow Advertising Sales Corporation, and
(iv) the entity which controls News 12 Long Island.
"Delaware Law" has the meaning specified in
------------
Section 2.01.
"Disclosure Schedule" means the Disclosure Schedule
-------------------
dated as of the date of this Agreement delivered to the Purchaser
by the Seller and Viacom.
"Effective Time" has the meaning specified in
--------------
Section 2.02.
"Environmental Laws" means all applicable federal,
------------------
state and local statutes, rules, regulations and ordinances
relating in any manner to contamination, pollution or protection
of the environment.
"Equity Interest" means any interest in the voting
---------------
stock or other equity securities of any corporation, partnership,
joint venture, association or other entity which is held by MSG
directly or indirectly through one or more intermediaries.
"ERISA" means the Employee Retirement Income Security
-----
Act of 1974, as amended.
"Extraordinary Material Adverse Effect" means any
-------------------------------------
extraordinary change in, or an event which has an extraordinary
3
effect on, the Business arising or occurring after the date of
this Agreement that is or is reasonably likely to be materially
adverse to the results of operations or the financial condition
of the Business, taken as a whole, except any such change or
effect resulting from, without limitation, (i) reasonably
foreseeable business risks in the operation or ownership of the
businesses and assets of the nature included in the Business,
(ii) changes in general economic, regulatory or political
conditions or changes that affect in general the business in
which MSG is engaged, (iii) this Agreement or the transactions
contemplated hereby or the announcement hereof or (iv) the
occurrence of any one or more of the matters listed or described
in Section 8.02(d) of the Disclosure Schedule.
"Final Net Worth" means the sum of (i) total
---------------
stockholders' equity as shown in the adjusted balance sheet
column of the Post-Closing Balance Sheet and (ii) one-half of the
depreciation and amortization for buildings, furniture and
equipment since June 30, 1994.
"Governmental Antitrust Authority" has the meaning
--------------------------------
specified in Section 5.04(b).
"HSR Act" means the Hart-Scott-Rodino Antitrust
-------
Improvements Act of 1976, as amended, and the rules and
regulations thereunder.
"Intellectual Property Assets" has the meaning
----------------------------
specified in Section 3.19.
"Internal Revenue Code" means the Internal Revenue Code
---------------------
of 1986, as amended.
"IRS" has the meaning specified in Section 3.14(a).
---
"Knicks Lease" has the meaning specified in
------------
Section 3.13(b).
"knowledge of the Seller" or "Seller's knowledge" means
----------------------- ------------------
the actual knowledge of any of the persons set forth in
Section 1.01(a) of the Disclosure Schedule.
"Leases" has the meaning specified in Section 3.13(b).
------
"Material Adverse Effect" means any change in, or
-----------------------
effect on, the Business that is or is reasonably likely to (i) be
materially adverse to the results of operations or the financial
condition of the Business, taken as a whole, or (ii) prevent
Viacom or the Seller from consummating the Merger.
"Merger" has the meaning specified in the recitals to
------
this Agreement.
4
"Merger Consideration" has the meaning specified in
--------------------
Section 2.04(a).
"MSG" has the meaning specified in the recitals to this
---
Agreement.
"Multiemployer Plan" has the meaning specified in
------------------
Section 3.14(b).
"Multiple Employer Plan" has the meaning specified in
----------------------
Section 3.14(b).
"NBA" means the National Basketball Association.
---
"NHL" means the National Hockey League.
---
"Parent" and "Parents" have the meanings specified in
------ -------
the preamble to this Agreement.
"PCI" means Paramount Communications Inc., a Delaware
---
corporation and a wholly owned subsidiary of Viacom.
"Plans" has the meaning specified in Section 3.14(a).
-----
"Post-Closing Balance Sheet" has the meaning specified
--------------------------
in Section 2.05(a).
"Post-Closing Date Tax Benefit" has the meaning
-----------------------------
specified in Section 7.02(b).
"Purchaser" has the meaning specified in the preamble
---------
to this Agreement.
"Purchaser's Accountants" means Arthur Andersen & Co.,
-----------------------
KPMG Peat Marwick or the internal accountants of the Purchaser.
"Rangers Lease" has the meaning specified in
-------------
Section 3.13(b).
"Reference Balance Sheet" has the meaning specified in
-----------------------
Section 3.07.
"Retirement Plan" has the meaning specified in Section
---------------
3.14(e).
"Savings Plan" has the meaning specified in Section
------------
3.14(e).
"Seller" has the meaning specified in the preamble to
------
this Agreement.
5
"Seller's Accountants" means either Price Waterhouse or
--------------------
the internal accountants of the Seller.
"Shares" has the meaning specified in the recitals to
------
this Agreement.
"Subsidiary" or "Subsidiaries" means any and all
---------- ------------
corporations, partnerships, joint ventures, associations, and
other entities in which the majority of voting common stock or
other equity interest is held by MSG directly or indirectly
through one or more intermediaries.
"Surviving Limited Partnership" has the meaning
-----------------------------
specified in Section 2.01.
"Tax" or "Taxes" means all income, gross receipts,
--- -----
sales, use, employment, franchise, profits, property, transfer or
other taxes, fees, stamp taxes and duties, assessments or charges
of any kind whatsoever (whether payable directly or by
withholding), together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing
authority with respect thereto.
"Transferred Employees" has the meaning specified in
---------------------
Section 6.01(a).
"Transferred Former Employees" has the meaning
----------------------------
specified in Section 6.01(a).
"Viacom" has the meaning specified in the preamble to
------
this Agreement.
"WARN" means the Worker Adjustment and Retraining
----
Notification Act of 1988.
"Yankee Guaranty" has the meaning specified in
---------------
Section 5.04(e).
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject
----------
to the conditions set forth in this Agreement, at the Effective
Time, MSG shall be merged with and into the Purchaser in
accordance with the General Corporation Law of the State of
Delaware and the Revised Uniform Limited Partnership Act of the
State of Delaware (collectively, "Delaware Law"). The Purchaser
------------
shall continue its existence as a limited partnership under the
laws of the State of Delaware and as the entity surviving the
Merger (the "Surviving Limited Partnership") and the separate
-----------------------------
6
corporate existence of MSG shall cease. The Merger shall have
the effects set forth in Delaware Law.
SECTION 2.02. Effective Time of the Merger. The
----------------------------
Merger shall become effective when a properly executed
certificate of merger (the "Certificate of Merger") is duly filed
---------------------
with the Secretary of State of the State of Delaware in
accordance with Delaware Law. When used in this Agreement, the
term "Effective Time" shall mean the date and time at which the
--------------
Certificate of Merger is so filed.
SECTION 2.03. The Closing. (a) Subject to the terms
-----------
and conditions of this Agreement, the closing (the "Closing") of
-------
the transactions contemplated by this Agreement shall take place
at 10:00 a.m., New York City time, on the later to occur of
(i) the third Business Day following the satisfaction or waiver
of all conditions to the obligations of the parties set forth in
Article VIII and (ii) the fifth Business Day following the
earlier to occur of (A) an overt threat of an action and (B) the
commencement of an action, in each case by any United States or
state governmental authority or other agency or commission,
seeking to enjoin the Closing, at the offices of Shearman &
Sterling, 599 Lexington Avenue, New York, New York, or at such
other time or on such other date or at such other place as the
Seller and the Purchaser may mutually agree upon in writing (the
day on which the Closing takes place being the "Closing Date").
------------
(b) On the Closing Date the Certificate of Merger with
respect to the Merger shall be filed with the Secretary of State
of the State of Delaware.
SECTION 2.04. Conversion of Shares; Payment of Merger
---------------------------------------
Consideration. (a) At the Effective Time, by virtue of the
-------------
Merger and without any action on the part of Viacom, the Seller,
MSG, either Parent or the Purchaser, all of the Shares shall be
cancelled and converted automatically into the right to receive
an aggregate of $1,075,000,000 in immediately available funds
(the "Merger Consideration"), subject to later adjustment as set
--------------------
forth in Section 2.05 of this Agreement. At the Closing, the
Purchaser shall deliver to the Seller the Merger Consideration by
wire transfer of immediately available funds to an account or
accounts designated at least two Business Days prior to the
Closing Date by the Seller in a written notice to the Purchaser.
(b) Each general and limited partnership interest in
the Purchaser issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding and shall not
be altered or changed by the Merger.
SECTION 2.05. Post-Closing Adjustment. The Merger
-----------------------
Consideration shall be subject to adjustment after the Closing as
specified in this Section 2.05:
7
(a) As promptly as practicable, but in any event
within 60 calendar days following the Closing Date, the Seller
shall deliver to the Purchaser a balance sheet as of the Closing
Date (the "Post-Closing Balance Sheet") prepared in the same
--------------------------
format as, and in accordance with the accounting principles and
procedures used in connection with the preparation of, the
Reference Balance Sheet, together with the calculation of the
Final Net Worth.
(b) (i) Subject to clause (ii) of this Section
2.05(b), the Post-Closing Balance Sheet delivered by the Seller
to the Purchaser shall be deemed to be and shall be final,
binding and conclusive on the parties hereto.
(ii) The Purchaser may dispute any amounts reflected on
the Post-Closing Balance Sheet to the extent that the amounts
thereon were not arrived at in accordance with the accounting
principles and procedures used in connection with the preparation
of the Reference Balance Sheet; provided, however, that the
-------- -------
Purchaser shall have notified the Seller and the Seller's
Accountants in writing of each disputed item, specifying the
amount thereof in dispute and setting forth, in reasonable
detail, the basis for such dispute, within 40 Business Days after
the Seller's delivery of the Post-Closing Balance Sheet to the
Purchaser. In the event of such a dispute, the Purchaser's
Accountants and the Seller's Accountants shall attempt to
reconcile their differences, and any resolution by them as to any
disputed amounts shall be final, binding and conclusive on the
parties hereto. If any such resolution by the Seller's
Accountants and the Purchaser's Accountants leaves in dispute
amounts which in the aggregate would not be greater than
$1,000,000, all such amounts remaining in dispute shall then be
deemed to have been resolved in favor of the Post-Closing Balance
Sheet delivered by the Seller to the Purchaser. If the
Purchaser's Accountants and the Seller's Accountants are unable
to reach a resolution with such effect within 20 Business Days
after receipt by the Seller and the Seller's Accountants of the
Purchaser's written notice of dispute, the Purchaser's
Accountants and the Seller's Accountants shall submit the items
remaining in dispute for resolution to Deloitte & Touche (or, if
such firm shall decline or is unable to act or is not, at the
time of such submission, independent of the Purchaser and the
Seller, to another independent accounting firm of international
reputation mutually acceptable to the Seller and the Purchaser)
(either Deloitte & Touche or such other accounting firm being
referred to herein as the "Independent Accounting Firm"), which
---------------------------
shall, within 30 Business Days after such submission, determine
and report to the Seller and the Purchaser upon such remaining
disputed items, and such report shall be final, binding and
conclusive on the Purchaser and the Seller. The fees and
disbursements of the Independent Accounting Firm shall be
8
allocated between the Purchaser and the Seller in the same
proportion that the aggregate amount of such remaining disputed
items so submitted to the Independent Accounting Firm that is
unsuccessfully disputed by each such party (as finally determined
by the Independent Accounting Firm) bears to the total amount of
such remaining disputed items so submitted.
(iii) In acting under this Agreement, the Seller's
Accountants, the Purchaser's Accountants and the Independent
Accounting Firm shall be entitled to the privileges and
immunities of arbitrators.
(iv) No adjustment to the Merger Consideration pursuant
to Section 2.05(c) shall be made with respect to amounts disputed
by the Purchaser pursuant to this Section 2.05(b), unless the
amount successfully disputed by the Purchaser in the aggregate is
greater than $1,000,000.
(c) The Post-Closing Balance Sheet shall be deemed
final for the purposes of this Section 2.05 upon the earliest of
(A) the failure of the Purchaser to notify the Seller of a
dispute within 40 Business Days of the Seller's delivery of the
Post-Closing Balance Sheet to the Purchaser, (B) the resolution
of all disputes, pursuant to Section 2.05(b)(ii), by the Seller's
and the Purchaser's Accountants and (C) the resolution of all
disputes, pursuant to Section 2.05(b)(ii), by the Independent
Accounting Firm. Subject to the limitation set forth in Section
2.05(b)(iv), within three Business Days of the Post-Closing
Balance Sheet being deemed final, the Merger Consideration shall
be adjusted as follows:
(i) in the event that the Final Net Worth exceeds
$414,411,000, then the Merger Consideration shall be
adjusted upward in an amount equal to such excess and the
Purchaser shall pay to the Seller by wire transfer in
immediately available funds, the amount of such excess,
together with interest thereon from the Closing Date to the
date of payment at the rate of interest publicly announced
from time to time by Citibank as its "Base Rate"; or
(ii) in the event that the Final Net Worth is
less than $414,411,000, then the Merger Consideration shall
be adjusted downward in an amount equal to such shortfall
and the Seller shall pay to the Purchaser by wire transfer
in immediately available funds, the amount of such
shortfall, together with interest thereon from the Closing
Date to the date of payment at the rate of interest publicly
announced from time to time by Citibank as its "Base Rate".
SECTION 2.06. Organization. (a) Partnership
------------ -----------
Agreement; Certificate of Incorporation. The partnership
---------------------------------------
agreement and certificate of limited partnership of the Purchaser
9
as in effect immediately prior to the Effective Time shall be the
partnership agreement and certificate of limited partnership of
the Surviving Limited Partnership after the Effective Time unless
and until amended in accordance with its terms or, in the case of
the certificate of limited partnership, as provided by law. The
certificate of incorporation of MSG as in effect at the Effective
Time shall be of no further force and effect following the
Effective Time.
(b) By-Laws of MSG. The by-laws of MSG as in effect
--------------
at the Effective Time shall be of no further force and effect
following the Effective Time.
SECTION 2.07. Merger of Subsidiaries. Upon the terms
----------------------
and subject to the conditions set forth herein, immediately prior
to the Effective Time, the Seller shall cause those Subsidiaries
designated in writing by the Purchaser to be merged with and into
MSG in accordance with Delaware Law and the laws of the
jurisdictions in which such Subsidiaries are organized. Subject
to Section 2.01 of this Agreement, the Seller shall cause MSG to
continue its existence as a corporation under Delaware Law and as
the surviving corporation following such mergers and the separate
existence of each of such Subsidiaries shall cease.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VIACOM AND THE SELLER
Viacom and the Seller represent and warrant, jointly
and severally, to the Purchaser and each Parent as follows:
SECTION 3.01. Incorporation and Authority of Viacom
-------------------------------------
and the Seller. Viacom and the Seller are corporations duly
--------------
incorporated, validly existing and in good standing under the
laws of the State of Delaware and have all necessary corporate
power and authority to enter into this Agreement, to carry out
their obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by Viacom and the Seller, the performance by Viacom and
the Seller of their obligations hereunder and the consummation by
Viacom and the Seller of the transactions contemplated hereby
have been duly authorized by all requisite corporate action on
the part of Viacom and the Seller. This Agreement has been duly
executed and delivered by Viacom and the Seller, and (assuming
due authorization, execution and delivery by the Purchaser and
each Parent) this Agreement constitutes a legal, valid and
binding obligation of Viacom and the Seller enforceable against
Viacom and the Seller in accordance with its terms, subject to
the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to the effect
10
of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
SECTION 3.02. Incorporation and Qualification of MSG.
--------------------------------------
MSG is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the
corporate power and authority to own, operate or lease the
properties and assets now owned, operated or leased by MSG. MSG
is duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such
failures which, when taken together with all other such failures,
would not have a Material Adverse Effect.
SECTION 3.03. Capital Stock of MSG. The Shares
--------------------
constitute all the authorized, issued and outstanding shares of
capital stock of MSG. The Shares have been duly authorized and
validly issued and are fully paid and nonassessable and were not
issued in violation of any pre-emptive rights. There are no
options, warrants or rights of conversion or other rights,
agreements, arrangements or commitments relating to the capital
stock of MSG obligating MSG to issue or sell any of its shares of
capital stock. The Seller owns the Shares, free and clear of all
pledges, security interests and all other liens, encumbrances and
adverse claims. There are no voting trusts, stockholder
agreements, proxies or other agreements in effect with respect to
the voting or transfer of the Shares.
SECTION 3.04. Subsidiaries and Equity Interests.
---------------------------------
Section 3.04 of the Disclosure Schedule sets forth a true and
complete list, as of the date of this Agreement, of all
Subsidiaries and all Equity Interests, listing for each
Subsidiary and Equity Interest its name, type of entity, the
jurisdiction of its incorporation or organization, its authorized
capital stock, partnership capital or equivalent, the number and
type of its issued and outstanding shares of capital stock,
partnership interests or similar ownership interests and MSG's
current percentage ownership of such shares, partnership
interests or similar ownership interests. Each Subsidiary listed
in Section 3.04 of the Disclosure Schedule is duly organized and
validly existing under the laws of its respective jurisdiction of
organization and has the requisite power and authority to own,
operate or lease the properties and assets now owned, operated or
leased by such Subsidiary and to carry on its business in all
material respects as currently conducted by such Subsidiary,
except for such failures which, when taken together with all
other such failures, would not have a Material Adverse Effect and
subject to any mergers effected pursuant to Section 2.07 of this
Agreement. There are no options, warrants or rights of
conversion or other rights, agreements, arrangements or
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commitments relating to the capital stock or other equity
interests of the Subsidiaries obligating MSG or any of the
Subsidiaries to issue or sell any shares of capital stock,
partnership interests or similar ownership interests in the
Subsidiaries. MSG owns, directly or indirectly, the capital
stock, partnership interests and similar ownership interests in
the Subsidiaries and the Equity Interests free and clear of all
pledges, security interests, liens, encumbrances or adverse
claims. There are no voting trusts, stockholder agreements,
proxies or other agreements in effect to which MSG is a party
with respect to the voting of the capital stock, partnership
interests or similar ownership interests in the Subsidiaries or
the Equity Interests.
SECTION 3.05. No Conflict. Assuming all consents,
-----------
approvals, authorizations and other actions described in Section
3.06 of this Agreement have been obtained and all filings and
notifications listed in Section 3.06 of the Disclosure Schedule
have been made, and except as may result from any facts or
circumstances relating solely to the Purchaser or either Parent
or as described in Section 3.05 of the Disclosure Schedule, the
execution, delivery and performance of this Agreement by Viacom
and the Seller do not and will not (a) violate or conflict with
the certificate of incorporation or by-laws of Viacom or the
Seller, (b) conflict with or violate any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award
applicable to Viacom, the Seller, MSG, the Business or any
Subsidiary, except as would not, individually or in the
aggregate, have a Material Adverse Effect or (c) result in any
breach of, or constitute a default (or event which with the
giving of 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 any lien or other encumbrance on the Shares or on any
of the assets or properties of MSG, any Subsidiary or any Equity
Interest pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other
instrument relating to such assets or properties to which Viacom,
the Seller, MSG or any Subsidiary is a party or by which any of
such assets or properties is bound or affected, except as would
not, individually or in the aggregate, have a Material Adverse
Effect.
SECTION 3.06. Consents and Approvals. The execution
----------------------
and delivery of this Agreement by Viacom and the Seller do not,
and the performance of this Agreement by Viacom and the Seller
will not, require any consent, approval, authorization or other
action by, or filing with or notification to, any governmental or
regulatory authority, except (a) as described in Section 3.06 of
the Disclosure Schedule, (b) the notification requirements of the
HSR Act, (c) those required from the New York State Liquor
Authority, (d) where failure to obtain such consent, approval,
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authorization or action, or to make such filing or notification,
would not prevent Viacom or the Seller from performing any of its
material obligations under this Agreement and would not have a
Material Adverse Effect and (e) as may be necessary as a result
of any facts or circumstances relating solely to the Purchaser or
either Parent.
SECTION 3.07. Financial Information. The unaudited
---------------------
consolidated balance sheet of MSG and the Subsidiaries as of
July 2, 1994 (the "Reference Balance Sheet"), the unaudited
-----------------------
consolidated balance sheet of MSG and the Subsidiaries as of
December 25, 1993, the related unaudited consolidated statements
of income of MSG and the Subsidiaries for the four- and eight-
month periods ended July 2, 1994 and December 25, 1993,
respectively, and the related unaudited consolidated statements
of cash flows of MSG and the Subsidiaries for the six- and
twelve-month periods ended July 2, 1994 and December 25, 1993,
respectively, (copies of each of which are attached as
Exhibit 3.07 to this Agreement) fairly present in all material
respects the consolidated financial condition and consolidated
results of operations of MSG and the Subsidiaries as of such
dates or for the periods covered thereby and were prepared in
accordance with generally accepted accounting principles, except
as set forth in Section 3.07 of the Disclosure Schedule, applied
on a basis consistent with the past practices of MSG.
SECTION 3.08. Absence of Undisclosed Liabilities. As
----------------------------------
of the Closing, there will be no liability of MSG or any
Subsidiary except liabilities (absolute, contingent or otherwise)
(i) disclosed in the Disclosure Schedule, (ii) addressed by any
of the representations, warranties, covenants or agreements made
by Viacom and the Seller in this Agreement and (A) not required
to be disclosed in the Disclosure Schedule by the terms of such
representation or warranty or (B) permitted to be incurred by the
terms of such covenant or agreement, as the case may be, (iii)
as, and to the extent, reflected in the Reference Balance Sheet,
(iv) recoverable under insurance, indemnification, contribution
or comparable arrangements (including funded workers compensation
programs), (v) with respect to Taxes (which shall be governed
solely by the terms of Section 3.15 and Article VII),
(vi) incurred in the ordinary course of business after the date
of this Agreement and prior to the Closing and which do not have
a Material Adverse Effect and (vii) incurred after the date of
this Agreement, other than in the ordinary course of business,
which do not have a Material Adverse Effect.
SECTION 3.09. Absence of Certain Changes or Events.
------------------------------------
(a) Since the date of the Reference Balance Sheet to the date of
this Agreement, except as disclosed in Section 3.09 of the
Disclosure Schedule, the Business has been conducted in the
ordinary course and consistent with past practice.
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(b) From the date of the Reference Balance Sheet to
the date of this Agreement and except as set forth in Section
3.09 of the Disclosure Schedule or as contemplated by this
Agreement, there has not been:
(i) any material damage, destruction or loss to any of
the assets or properties of MSG or any Subsidiary;
(ii) except for carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other similar liens arising in
the ordinary course of business, any pledge, lien, security
interest, mortgage, charge, adverse claim of ownership or
use, or other encumbrance of any kind created on any
properties or assets (whether tangible or intangible) of MSG
or any Subsidiary;
(iii) any establishment or increase in any bonus,
insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without
limitation, any grant of any stock options, stock
appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plans, or
other increase in the compensation payable or to become
payable to any officer or key employee of MSG or any
Subsidiary, except, in any case described above, as may be
required by law or applicable collective bargaining
agreement;
(iv) any employment or severance agreement entered into
with any of the employees of MSG or any Subsidiary;
(v) any dividend declared (whether in cash, stock or
other property) by MSG or any other distribution or
contribution made in respect of the capital stock or
otherwise of MSG;
(vi) any execution, amendment or termination of a
material contract, arrangement or commitment, including,
without limitation, any affiliation agreement relating to
Madison Square Garden Network or collective bargaining
agreement, by MSG or any Subsidiary;
(vii) any new line of business entered into by MSG
or any Subsidiary;
(viii) any incurrence of, or commitment to incur,
any capital expenditures in excess of $1,000,000 in the
aggregate by MSG or any Subsidiary;
(ix) other than with respect to the provision of
intercompany services in the ordinary course of business
consistent with past practices, any transaction or the
14
execution of any agreement, including, without limitation,
any purchase, sale, lease or exchange of property or the
rendering of any service, with Viacom or any affiliate of
Viacom;
(x) the commencement of any action or proceeding;
(xi) (A) any sale, assignment, transfer, lease or other
disposition or agreement to sell, assign, transfer, lease or
otherwise dispose of any of the fixed assets of MSG or any
Subsidiary having an aggregate value exceeding $1,000,000 or
(B) in the case of any fixed assets of MSG or any Subsidiary
having an aggregate value less than or equal to $1,000,000,
any sale, assignment, transfer, lease or other disposition
or agreement to sell, assign, transfer, lease or otherwise
dispose of such fixed assets, other than in exchange for
consideration believed in good faith to represent fair
consideration or (C) an amendment of any Lease in any
material respect;
(xii) (A) any acquisition by MSG or any Subsidiary
(by merger, consolidation, or acquisition of stock or
assets) of any corporation, partnership or other business
organization or division thereof or (B) any incurrence of
any indebtedness for borrowed money (other than intercompany
indebtedness owed to PCI) or issuance of any debt securities
or assumption, grant, guarantee or endorsement of, or other
accommodation or arrangement making MSG or any Subsidiary
responsible for, the obligations of any person, or any loans
or advances (other than by MSG to PCI or the Subsidiaries);
(xiii) any material change in any method of
accounting or accounting practice used by MSG or the
Subsidiaries;
(xiv) any issuance or sale of additional shares of
the capital stock of, or other equity interests in, MSG or
any Subsidiary, or securities convertible into or
exchangeable for such shares or equity interests, or
issuance or granting of any options, warrants, calls,
subscription rights or other rights of any kind to acquire
additional shares of such capital stock, such other equity
interests, or such securities;
(xv) any amendment to the charter or by-laws of MSG or
any Subsidiary;
(xvi) any Material Adverse Effect; or
(xvii) any agreement to take any actions specified
in this Section 3.09, except for this Agreement.