FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________________ TO ____________________
COMMISSION FILE NUMBER 1-977
PENNSYLVANIA 25-0877540
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(State of Incorporation) (I.R.S. Employer Identification No.)
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Indicate by checkmark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / /
COMMON STOCK 705,845,932 SHARES OUTSTANDING AT OCTOBER 31, 1999
PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income and Comprehensive Income 3
Condensed Consolidated Balance Sheet 4
Condensed Consolidated Statement of Cash Flows 5
Notes to the Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 15
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 6. Exhibits and Reports on Form 8-K 28
SIGNATURE 32
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CBS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(unaudited, in millions except per-share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
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Revenues $ 1,708 $ 1,581 $ 5,154 $ 5,014
Operating expenses (949) (980) (3,000) (3,240)
Marketing, administration and general expenses (318) (304) (915) (872)
Depreciation and amortization (150) (154) (451) (420)
Residual costs of discontinued businesses (45) (41) (130) (117)
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Operating profit 246 102 658 365
Other income, net (note 4) 10 12 4 29
Interest expense, net (46) (112) (143) (272)
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Income from Continuing Operations before income taxes,
minority interest in income of consolidated subsidiaries
and equity losses of unconsolidated affiliated companies 210 2 519 122
Income tax expense (126) (39) (302) (134)
Minority interest in income of consolidated subsidiaries (21) (1) (51) (3)
Equity losses of unconsolidated affiliated companies,
net of income taxes (note 3) (28) -- (28) --
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Income (loss) from Continuing Operations 35 (38) 138 (15)
Gain on disposal of Discontinued Operations,
net of income taxes (note 7) 12 -- 396 --
Extraordinary loss on early extinguishment of debt,
net of income taxes -- (5) (5) (5)
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Net income (loss) $ 47 $ (43) $ 529 $ (20)
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Basic earnings (loss) per common share (note 10):
Continuing Operations $ .05 $ (.05) $ .20 $ (.02)
Discontinued Operations .02 -- .57 --
Extraordinary item -- (.01) (.01) (.01)
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Basic earnings (loss) per common share $ .07 $ (.06) $ .76 $ (.03)
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Diluted earnings (loss) per common share (note 10):
Continuing Operations $ .05 $ (.05) $ .19 $ (.02)
Discontinued Operations .02 -- .56 --
Extraordinary item -- (.01) (.01) (.01)
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Diluted earnings (loss) per common share $ .07 $ (.06) $ .74 $ (.03)
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Cash dividends per common share $ -- $ -- $ -- $ .05
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Comprehensive income (loss):
Net income (loss) $ 47 $ (43) $ 529 $ (20)
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Other comprehensive income (loss), net of taxes (note 11):
Unrealized (losses) gains on marketable securities (7) (15) 16 3
Minimum pension liability adjustment 9 15 126 (37)
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Other comprehensive income (loss) 2 -- 142 (34)
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Comprehensive income (loss) $ 49 $ (43) $ 671 $ (54)
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See Notes to the Condensed Consolidated Financial Statements.
CBS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions except per-share amounts)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
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ASSETS:
Cash and cash equivalents $ 185 $ 798
Customer receivables (net of allowance for doubtful
accounts of $51 and $48, respectively) 1,227 1,180
Program rights 568 533
Deferred income taxes 243 138
Prepaid and other current assets 178 140
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Total current assets 2,401 2,789
Property and equipment, net 1,138 1,149
FCC licenses, net 4,282 4,308
Goodwill, net 10,637 10,357
Other intangible and noncurrent assets (note 5) 2,265 1,536
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Total assets $ 20,723 $ 20,139
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LIABILITIES AND SHAREHOLDERS' EQUITY:
Current maturities of long-term debt $ 6 $ 159
Accounts payable 337 336
Liabilities for talent and program rights 426 290
Other current liabilities (note 6) 1,040 820
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Total current liabilities 1,809 1,605
Long-term debt 2,346 2,506
Net liabilities of Discontinued Operations (note 7) 966 1,284
Pension liability 761 945
Postretirement benefit liability 1,008 1,046
Other noncurrent liabilities (note 6) 2,713 2,081
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Total liabilities 9,603 9,467
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Contingent liabilities and commitments (note 9)
Minority interest in equity of consolidated subsidiaries 1,490 1,618
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Shareholders' equity:
Preferred stock, $1.00 par value (25 shares authorized, no shares issued) -- --
Common stock, $1.00 par value (1,100 shares
authorized, 745 and 734 shares issued, respectively) 745 734
Capital in excess of par value 9,276 8,914
Retained earnings 1,957 1,428
Accumulated other comprehensive loss (note 11) (665) (807)
Common stock held in treasury, at cost (1,683) (1,215)
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Total shareholders' equity 9,630 9,054
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Total liabilities and shareholders' equity $ 20,723 $ 20,139
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See Notes to the Condensed Consolidated Financial Statements.
CBS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, in millions)
NINE MONTHS ENDED SEPTEMBER 30, 1999 1998
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Cash flows from operating activities of Continuing Operations:
Income (loss) from Continuing Operations $ 138 $ (15)
Adjustments to reconcile income from Continuing Operations to
net cash provided by operating activities:
Depreciation and amortization 451 420
Gain on asset dispositions (10) (6)
Other non-cash adjustments (59) (132)
Changes in assets and liabilities, net of effects of acquisitions and
divestitures of businesses:
Receivables, current and noncurrent (49) (101)
Accounts payable (15) 59
Deferred and current income taxes 347 8
Program rights 117 66
Pensions and postretirement benefits (152) (78)
Other assets and liabilities (92) 121
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Cash provided by operating activities of Continuing Operations 676 342
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Cash used by operating activities of Discontinued Operations (note 7) (162) (326)
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Cash flows from investing activities:
Business acquisitions and investments (372) (1,439)
Business divestitures and other asset liquidations 405 1,748
Capital expenditures - Continuing Operations (92) (89)
Capital expenditures - Discontinued Operations (4) (28)
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Cash provided (used) by investing activities (63) 192
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Cash flows from financing activities:
Bank revolver borrowings 250 3,674
Bank revolver repayments -- (3,635)
Issuance of senior notes -- 493
Net increase in short-term debt -- 159
Long-term debt repayments (577) (332)
Stock issued 226 324
Purchase of treasury stock (489) (777)
Purchase of treasury stock of subsidiary (439) --
Bank fees paid and other costs (6) (8)
Dividends paid -- (36)
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Cash used by financing activities (1,035) (138)
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Increase (decrease) in cash and cash equivalents (584) 70
Cash and cash equivalents at beginning of period for Continuing
and Discontinued Operations 825 67
Cash and cash equivalents at end of period for Continuing and
Discontinued Operations $ 241 $ 137
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Supplemental disclosure of cash flow information:
Interest paid - Continuing Operations $ 162 $ 244
Interest paid - Discontinued Operations 20 40
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Total interest paid $ 182 $ 284
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Total income taxes paid (refunded), net - Continuing and
Discontinued Operations $ (51) $ 122
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See Notes to the Condensed Consolidated Financial Statements.
CBS CORPORATION
1. GENERAL
The condensed consolidated financial statements include the accounts of CBS Corporation and its subsidiary companies (CBS or the Corporation) after elimination of intercompany accounts and transactions. When reading the financial information contained in this Quarterly Report, reference should be made to the consolidated financial statements, schedule and notes contained in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1998, as amended by Form 10-K/A. Reference also should be made to the Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999, as amended by Form 10-Q/A, and June 30, 1999. Certain prior period amounts have been reclassified for comparative purposes. In the opinion of management, the condensed consolidated financial statements include all material adjustments necessary to present fairly the Corporation's financial position, results of operations and cash flows. Such adjustments are of a normal recurring nature. The results for this interim period are not necessarily indicative of results for the entire year or any other interim period.
In June 1999, Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of Effective Date of FASB Statement No. 133," was issued. Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," standardizes the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, by requiring that an entity recognize those items as assets or liabilities in the statement of financial position and measure them at fair value. The issuance of Statement No. 137 delays the effective date for Statement No. 133 for one year, to fiscal years beginning after June 15, 2000. The Corporation's derivative and hedging transactions are not material and it is anticipated that adoption of this standard will not materially impact its financial results or disclosure when adopted January 1, 2001.
2. MERGERS AND ACQUISITIONS
On September 6, 1999, Viacom Inc. (Viacom) and CBS entered into an agreement and plan of merger, as amended. Pursuant to this merger agreement, each share of CBS common stock, par value $1.00 per share, that is issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive 1.085 shares of Viacom non-voting Class B common stock and each share of CBS series B preferred stock, par value $1.00 per share, will convert into the right to receive 1.085 shares of Viacom series C preferred stock. The merger will be accounted for by the purchase method of accounting. Consideration provided by Viacom in this merger includes: approximately $36.7 billion through the issuance of approximately 812 million shares of Viacom non-voting Class B common stock plus, approximately $833 million of cash consideration, net of approximately $556 million of deferred taxes, for the assumed settlement of certain historical CBS stock options and the assumption of approximately $200 million of CBS stock options by Viacom, both of which were granted prior to the date of the merger agreement, and approximately $3.5 billion for the assumption of debt. The merger is contingent upon, among other things, regulatory and CBS shareholder approval. This transaction is expected to close in the first half of 2000.
On May 27, 1999, Infinity Broadcasting Corporation (Infinity Broadcasting), a majority-owned subsidiary of the Corporation, entered into a definitive agreement to acquire Outdoor Systems, Inc., (Outdoor Systems) for approximately $8.7 billion, which includes the assumption of $1.9 billion in Outdoor Systems debt, at fair value. On November 4, 1999 the Outdoor Systems and Infinity Broadcasting shareholders approved the transaction which is expected to close during November 1999 subject to certain closing conditions as set forth in the merger agreement. The terms of the agreement call for each outstanding common share of Outdoor Systems to be exchanged for 1.25 shares of Infinity Broadcasting Class A common stock. The closing of this transaction will cause a dilution in the Corporation's ownership interest in Infinity Broadcasting from approximately 83 percent at September 30, 1999 to approximately 65 percent, excluding the dilutive effect of stock options. The Corporation's voting interest, on a fully diluted basis, will also decline from approximately 96 percent at September 30, 1999 to approximately 90 percent as a result of the transaction. This transaction will be accounted for by the purchase method of accounting.
On March 31, 1999, the Corporation entered into a definitive merger agreement with King World Productions, Inc. (King World) under which CBS will issue approximately $2.5 billion in common stock in exchange for all of the outstanding common stock of King World. Under the terms of the agreement, King World shareholders will receive 0.81 shares of CBS common stock for each share of King World common stock. The transaction will be accounted for by the purchase method of accounting. The transaction is expected to close immediately after King World shareholders approve the transaction at a meeting scheduled for November 15, 1999.
During 1999, the Corporation entered into definitive agreements to acquire two CBS affiliate television stations in Texas: KEYE-TV in Austin for $160 million in cash, which closed on August 31, 1999, and KTVT-TV in Dallas-Fort Worth for $485 million of CBS series B preferred stock, or 10,142 preferred shares, and approximately $4 million in cash, which closed on October 12, 1999. Each share of the CBS series B preferred stock is entitled to 1,000 votes per share and is convertible at the option of the holder into 1,000 shares of CBS common stock. Each share of series B preferred stock outstanding at the time of the CBS/Viacom merger will convert into 1.085 shares of Viacom series C preferred stock which will be entitled to 100 votes per share. Each Viacom series C preferred share will be convertible
into 1,000 shares of Viacom Class B common stock at the option of the holder. Both of the above transactions are being accounted for by the purchase method of accounting.
3. INVESTMENTS IN INTERNET BASED COMPANIES
Investments in joint ventures and other companies that the Corporation controls are consolidated in these condensed consolidated financial statements. Investments in joint ventures and other companies that the Corporation does not control but has the ability to exercise significant influence over operating and financial policies are accounted for by the equity method. Equity method investments are stated at their cost of acquisition adjusted for the Corporation's equity in undistributed net income (loss) since the date of acquisition. Investments that the Corporation does not control and does not have the ability to exercise significant influence over operating and financial policies are accounted for by the cost method. Cost method investments are carried at their cost of acquisition. Cost method investments in publicly traded companies are subsequently marked to market with unrealized gains and losses, net of income taxes, reported as a component of accumulated other comprehensive income (loss) within shareholders' equity in the condensed consolidated balance sheet.
During the nine months ended September 30, 1999 the Corporation closed on a number of strategic investments focused on growing its Internet based operations. These investments provided the Corporation with equity ownership interests in Internet based companies in exchange for $38 million in cash and commitments to provide $566 million of future advertising and promotional time. These advertising commitments will be met over a period of up to seven years. The Corporation has invested in three publicly traded Internet based companies: SportsLine USA, Inc., MarketWatch.com, Inc. and Medscape.com, Inc. Based upon quoted market prices at September 30, 1999, the aggregate market value of these investments would have exceeded their respective carrying values by approximately $177 million. Other Internet investments include Storerunnner, Inc., Office.com, Inc., Switchboard, Inc., ThirdAge Media, Inc., Wrenchead.com, Inc., Jobs.com, Inc., Women's Consumer Network LLC and Webvan Group, Inc., which completed its initial public offering on November 5, 1999. The Corporation also has a majority ownership interest in iWon, Inc., which is consolidated. The shares evidencing the Corporation's equity ownership interest typically contain restrictions that may limit the Corporation's ability to sell or otherwise dispose of its investment. The Corporation has also announced agreements to acquire a 20 percent ownership interest in Rx.com, Inc., which closed on October 13, 1999, and a 35 percent ownership interest in Big E Entertainment in exchange for future advertising and promotional time and cash.
At the date of acquisition, for equity investments with ownership interests ranging from 22 percent to 50 percent, the Corporation typically records its investment at an amount equal to the cash consideration paid plus the fair value of the advertising and promotional time to be provided. These investments that have closed are presented in other intangible and noncurrent assets (see note 5) in the condensed consolidated balance sheet. The associated obligation to provide future advertising and promotion is non-cash and is recorded as deferred revenue at an amount equal to the fair value of the advertising and promotional time to be provided. Deferred revenue is presented in other current and noncurrent liabilities (see note 6) in the condensed consolidated balance sheet. Barter revenue is then recognized as the related advertising and promotional time is delivered. No significant barter revenue has been recognized through September 30, 1999 as only limited advertising and promotional time has been delivered. A difference exists between CBS's initial investment and its proportionate share in the underlying net assets of these companies. This difference is $558 million of goodwill and is being amortized over a five year period. The Corporation's third quarter 1999 proportionate share of losses in these Internet based investments and the amortization totaled $28 million, net of taxes. This non-cash amount is presented as equity losses of unconsolidated affiliated companies, net of income taxes in the condensed consolidated statement of income.
Where an agreement provides the Corporation with a licensing fee based on a percentage of gross revenues earned by the Internet based company in exchange for a license to use the CBS name and logo, licensing revenues are recorded by the Corporation as the Internet based company earns the revenues on which the license fees are based.
Subsequent to the acquisition of an investment, the Corporation evaluates whether later events and circumstances indicate that the carrying amount of such investment is impaired. If a decline in fair value of the investment below its cost basis is judged to be other than temporary, the investment is considered to be impaired, and the carrying amount of the investment is written down to fair value as a new cost basis and recognized in equity losses of unconsolidated affiliated companies. The new cost basis is not changed for subsequent recovery, if any, in the fair value of the investment. The Corporation's future results of operations for a quarter or a year could be materially affected by a non-cash write down in the carrying amount of these investments to recognize an impairment loss due to an other than temporary decline in the value of these investments. The advertising and promotional agreements entered into in exchange for the Corporation's equity interest in these investees contain termination provisions in the event of failure or inability of the investee to perform. Generally, pursuant to these above termination provisions, the Corporation is released from delivering any remaining unfulfilled advertising commitments. Upon termination of the unfulfilled advertising and promotional commitments, the remaining deferred revenue, if any, recorded as a liability will be reversed and recognized as a component of equity losses of unconsolidated affiliated companies.
4. OTHER INCOME, NET
Other income, net during the three and nine months ended September 30, 1999 reflects income, net of expenses, of $10 million and $4 million, respectively, compared to $12 million and $29 million, respectively, for the same periods in 1998. Other income and expense items primarily include miscellaneous gains and losses on dispositions of non-strategic assets and income from royalties. Also included in the 1999 nine month results was a $24 million provision, as discussed below, and an $8 million gain on the disposal of a corporate aircraft.
In 1998, the Corporation divested a majority stake in TeleNoticias, its Spanish language cable news network. Financial difficulties have led TeleNoticias to file for Bankruptcy protection under Chapter 11. Because of these financial difficulties, it is probable that certain obligations that were assumed by the venture in connection with the divestiture will revert back to the Corporation. As a result, in the second quarter of 1999 the Corporation recorded a $24 million provision for these obligations.
5. OTHER INTANGIBLE AND NONCURRENT ASSETS (in millions)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
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Investments in Internet based companies (note 3) $ 772 $ 25
Cable license agreements 403 441
Other intangible assets 339 357
Noncurrent receivables 244 228
Recoverable costs of discontinued businesses (note 9) 168 180
Other investments 159 116
Program rights 118 93
Other 62 96
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Total other intangible and noncurrent assets $2,265 $1,536
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6. OTHER CURRENT AND NONCURRENT LIABILITIES (in millions)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
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OTHER CURRENT LIABILITIES
Accrued liabilities $ 310 $ 318
Retained liabilities of discontinued businesses (note 9) 296 254
Deferred revenue - Internet based investments (note 3) 113 --
Income taxes payable 106 24
Accrued restructuring cost 14 38
Other 201 186
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Total other current liabilities $1,040 $ 820
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OTHER NONCURRENT LIABILITIES
Deferred income taxes $ 952 $ 795
Retained liabilities of discontinued businesses (note 9) 768 766
Deferred revenue - Internet based investments (note 3) 485 --
Accrued liabilities 167 156
Liabilities for talent and program rights 139 119
Postemployment benefits 36 29
Accrued restructuring costs 7 28
Other 159 188
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Total other noncurrent liabilities $2,713 $2,081
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7. DISCONTINUED OPERATIONS
In recent years, the Corporation adopted various disposal plans that, in the aggregate, provide for the disposal of all of its industrial businesses and its financial services business. The assets and liabilities and the results of operations for these businesses are classified as Discontinued Operations for all periods presented, except for certain liabilities to be retained by the Corporation. See note 9.
During the first and second quarters of 1999 several businesses were sold for $250 million in cash plus the assumption, by the buyers, of liabilities and commitments totaling approximately $970 million, all in accordance with the terms of the divestiture agreements. The pre-tax and after-tax gains on these disposals totaled $520 million and $384 million, respectively, which were subsequently increased during the third quarter by $20 million and $12 million on a pre-tax and after-tax basis, respectively, due to the favorable resolution of a purchase price adjustment associated with a business divested in the second quarter of 1999.
At September 30, 1999, the remaining assets and liabilities of Discontinued Operations generally consist of a liability for estimated loss on disposal, portfolio investments and related debt, and other miscellaneous assets including surplus properties, that are expected to be divested. Those obligations that have been retained by the Corporation are separately presented in Continuing Operations as retained liabilities of discontinued businesses.
The assets and liabilities of Discontinued Operations have been classified on the consolidated balance sheet as "Net Liabilities of Discontinued Operations." A summary of these assets and liabilities follows:
NET LIABILITIES OF DISCONTINUED OPERATIONS
(in millions)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
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Total assets $ 811 $1,919
Less: total liabilities 1,777 3,203
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Net liabilities of Discontinued Operations $ 966 $1,284
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Total liabilities for Discontinued Operations consist primarily of the liability for the estimated loss on disposal of $1,284 million at September 30, 1999, and $1,309 million at December 31, 1998, which includes estimated losses and disposal costs associated with the divestiture transactions, the portfolio investments' estimated results of operations through the expected date of liquidation and certain contingencies related to the divestiture of the industrial businesses including the costs to dispose of surplus property held for sale, contractual indemnifications and unresolved purchase price adjustments. Generally, satisfaction of these liabilities is expected to occur over the next several years. The decrease in the estimated loss on disposal is the result of the settlement of certain working capital and purchase price adjustments associated with certain industrial businesses disposed of in 1999. Management believes that the liability for estimated loss on disposal at September 30, 1999, is adequate to cover these liabilities of Discontinued Operations. Portfolio related debt of $418 million and $428 million at September 30, 1999 and December 31, 1998, respectively, is also reflected in total liabilities as presented in the table above.
Total assets for Discontinued Operations consist primarily of the portfolio's direct financing and leveraged leases that totaled $574 million and $642 million at September 30, 1999 and December 31, 1998, respectively. Generally, these leases are expected to liquidate in accordance with their contractual terms, which extend to the year 2015. Cash inflows from contractual liquidation of the leasing portfolio are expected to be sufficient to repay the principal amount of the related debt as well as interest costs associated with the portfolio. Assets of Discontinued Operations also include cash and cash equivalents of $56 million and $27 million as of September 30, 1999 and December 31, 1998, respectively.
Prior to the disposition of its Energy Systems business, the Corporation had been defending various lawsuits brought by utilities claiming a substantial amount of damages in connection with alleged tube degradation in steam generators sold by the Energy Systems business as components of nuclear steam supply systems. Settlement agreements had been entered into resolving a number of the litigation claims, which generally required that the Corporation provide certain products and services at prices discounted at varying rates. In addition, the Corporation was a party to three tolling agreements with utilities or utility plant owners' groups that asserted steam generator claims. The obligations associated with these previous settlement agreements, the tolling agreements and such litigation were assumed by the buyer of the Energy Systems business, all in accordance with the terms of the divestiture agreement.
In accordance with Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations- Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the condensed consolidated financial statements reflect the operating results of Discontinued Operations separately from Continuing Operations. The operating results of the Corporation's Discontinued Operations as presented in the table below occurred after the measurement date and therefore have been charged to the liability for estimated loss on disposal.
OPERATING RESULTS OF DISCONTINUED OPERATIONS
(unaudited, in millions)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
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SALES OF PRE-TAX LOSS PRE-TAX LOSS
PRODUCTS AND AFTER MEASUREMENT SALES OF PRODUCTS AFTER MEASUREMENT
SERVICES DATE AND SERVICES DATE
1999 1998 1999 1998 1999 1998 1999 1998
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Industrial businesses $4 $465 $(2) $(11) $122 $1,861 $(22) $(200)
Financial Services 3 5 (7) (5) 9 18 (21) (14)
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Total $7 $470 $(9) $(16) $131 $1,879 $(43) $(214)
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Cash proceeds from the sale or liquidation of all assets of Discontinued Operations except for portfolio investments, as well as cash requirements to satisfy non-debt obligations of Discontinued Operations, will affect cash flows of Continuing Operations. Operating cash flows used by Discontinued Operations were $162 million and $326 million for the nine months ended September 30, 1999 and 1998, respectively. These cash outflows primarily relate to operating activities of the industrial businesses prior to their disposal dates and the liquidation of the portfolio's direct financing and leveraged leases. During 1999, the cash outflows also include expenditures to close the industrial businesses former corporate headquarters, costs to dispose of the industrial businesses surplus properties which are being held for sale and purchase price adjustments arising from the sale of its industrial businesses.
8. RESTRUCTURING
In recent years, the Corporation has restructured its corporate headquarters and certain of its businesses in an effort to reduce its cost structure and remain competitive in its markets. Restructuring activities primarily involve the separation of employees, termination of leases and other similar actions. Costs for restructuring activities are limited to incremental costs that directly result from restructuring activities and provide no future benefit to the Corporation.
Cash expenditures under the restructuring plans totaled $2 million and $21 million during the three and nine months ended September 30, 1999, respectively, and are estimated to approximate $10 million for the remainder of 1999 and approximately $11 million for 2000 and beyond. During the second quarter of 1999, the Corporation reversed a restructuring reserve of approximately $26 million and recorded a restructuring charge of approximately $2 million related to employee terminations. The reversal was the result of recent television programming changes and lower than expected severance costs because of higher voluntary employee terminations. This activity was reflected in the Television segment's results of operations.
9. CONTINGENT LIABILITIES AND COMMITMENTS
Certain litigation, environmental and other liabilities associated with the industrial businesses were not assumed by other parties in the divestiture transactions and, therefore, were retained by the Corporation. These liabilities include general litigation, environmental and other matters not involving active businesses. Accrued liabilities associated with these matters, which have been separately presented in Continuing Operations as retained liabilities of discontinued businesses, totaled $1.1 billion at September 30, 1999, including $559 million for accrued legal matters. Of the total liability of $1.1 billion, $768 million is classified as noncurrent. A separate asset of $216 million was recorded for estimated amounts recoverable from third parties, of which $168 million is classified as noncurrent.
LEGAL MATTERS
SECURITIES CLASS ACTIONS - FINANCIAL SERVICES
The Corporation has been defending class action lawsuits alleging federal securities law and common law violations arising out of purported misstatements or omissions contained in the Corporation's public filings and in a Prospectus and Registration Statement for a public offering of the Corporation's common stock in 1991, arising out of charges to earnings of $975 million in 1990 and $1,680 million in 1991. The Corporation and certain directors and former officers were also the subject of derivative litigation arising out of these same events. The district court dismissed both the derivative claim and the class action claims in their entirety. These dismissals were appealed. In July 1996, the United States Court of Appeals for the Third Circuit (the Circuit Court) affirmed the court's dismissal of the derivative claim. The Circuit Court also affirmed in part and reversed in part the dismissal of the class action claims. Those class action claims that were not dismissed by the Circuit Court were remanded to the lower court for further
proceedings. The parties to the class actions and a derivative action (which was refiled subsequent to its dismissal) reached an agreement to settle the matters for a total cost of approximately $67 million, funded in large part by the Corporation's liability insurers. On October 19, 1999, the district court approved the settlements.
ASBESTOS
The Corporation is a defendant in numerous lawsuits claiming various asbestos-related personal injuries, which allegedly occurred from use or inclusion of asbestos in certain of the Corporation's products supplied by its industrial businesses, generally in the pre-1970 time period. Typically, these lawsuits are brought against multiple defendants. The Corporation was neither a manufacturer nor a producer of asbestos and is oftentimes dismissed from these lawsuits on the basis that the Corporation has no relationship to the products in question or the claimant did not have exposure to the Corporation's product. At September 30, 1999, the Corporation had approximately 115,650 unresolved claims pending.
In court actions that have been resolved, the Corporation has prevailed in the majority of the asbestos claims and has resolved others through settlement. Furthermore, the Corporation has brought suit against certain of its insurance carriers with respect to these asbestos claims. Under the terms of a settlement agreement resulting from this suit, carriers that have agreed to the settlement are now reimbursing the Corporation for a substantial portion of its current costs and settlements associated with asbestos claims. The Corporation has recorded a liability for asbestos-related matters that is deemed probable and can be reasonably estimated and has separately recorded an asset equal to the amount of such estimated liability that will be recovered pursuant to agreements with insurance carriers.
Factors considered in evaluating this litigation include: claimed product involvement, alleged exposure to product, alleged disease, validity of medical claims, number of resolved claims, available insurance proceeds and status of litigation in multiple jurisdictions. The Corporation has not been able to reasonably estimate costs for unasserted asbestos claims. However, the Corporation reviews asbestos claims on an ongoing basis and adjusts its liability as appropriate.
GENERAL
Litigation is inherently uncertain and always difficult to predict. Substantial damages are sought in certain groupings of asbestos claims, and, although management believes a significant adverse judgment is unlikely, any such judgment could have a material adverse effect on the Corporation's results of operations for a quarter or a year. However, based on its understanding and evaluation of the relevant facts and circumstances, management believes that the Corporation has adequately provided for costs arising from resolution of these matters and that the litigation should not have a material adverse effect on the financial condition of the Corporation.
ENVIRONMENTAL MATTERS
Compliance with federal, state and local laws and regulations relating to the discharge of pollutants into the environment, the disposal of hazardous wastes and other related activities affecting the environment have had and will continue to have an impact on the Corporation. It is difficult to estimate the timing and ultimate costs to be incurred in the future due to uncertainties about the status of laws, regulations and technology; the adequacy of information available for individual sites; the extended time periods over which site remediation occurs; and the identification of new sites. The Corporation has, however, recognized an estimated liability, measured in current dollars, for those sites where it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Corporation recognizes changes in estimates as new remediation requirements are defined or as more information becomes available.
With regard to remedial actions under federal and state Superfund laws, the Corporation has been named a potentially responsible party at numerous sites located throughout the country. At many of these sites, the Corporation is either not a responsible party or its site involvement is very limited or de minimis. However, the Corporation may have varying degrees of cleanup responsibilities at approximately 70 sites. The Corporation believes that any liability incurred for cleanup at these sites will be satisfied over a number of years, and in many cases, the costs will be shared with other responsible parties. These sites include certain sites for which the Corporation, as part of an agreement for sale, has retained obligations for remediation of environmental contamination and for other Comprehensive Environmental Response Compensation and Liability Act issues.
Based on the costs associated with the most probable alternative remediation strategy for the above mentioned sites, the Corporation has an accrued liability of $371 million at September 30, 1999. Depending on the remediation alternatives ultimately selected, the actual costs related to these sites could differ from the amounts currently accrued. The accrued liability includes $272 million for site investigation and remediation, and $99 million for post closure and monitoring activities. Management anticipates that the majority of expenditures for site investigation and remediation will occur during the next five to ten years. Expenditures for post-closure and monitoring activities will be made over periods up to 30 years. In addition, included in Discontinued Operations as of September 30, 1999, are environmental liabilities for 20 additional sites totaling $45 million that directly relate to properties that are held for sale.
The Corporation is involved with several administrative actions alleging violations of federal, state, or local environmental regulations. For these matters, the Corporation has estimated its remaining reasonably possible costs and determined them to be immaterial.
Management believes, based on its best estimate, that the Corporation has adequately provided for its present environmental obligations and that complying with existing government regulations will not materially impact the Corporation's financial position, liquidity, or results of operations.
COMMITMENTS
The Corporation routinely enters into commitments to purchase the rights to broadcast programs, including feature films and sporting events. These contracts permit the broadcast of such programs for various periods. At September 30, 1999, the Corporation was committed to make payments under such broadcasting contracts, along with commitments for talent contracts, totaling $7.6 billion. In addition, the Corporation has received various equity ownership interests in Internet-based companies that commit the Corporation to provide advertising and promotional time over the next seven years (see note 3).
Other commitments that exist for the Corporation include commitments under operating and capital leases for certain facilities and equipment (including satellites), as well as commitments to pay for certain franchise rights entitling it to display advertising on buses, taxis, trains, bus shelters, terminals and phone kiosks.
10. EARNINGS PER COMMON SHARE
COMPUTATION OF EARNINGS PER COMMON SHARE - CONTINUING OPERATIONS
(unaudited, in millions except per-share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1999 1998 1999 1998
=====================================================================================================================
Income (loss) from Continuing Operations
applicable to common stockholders $ 35 $ (38) $ 138 $ (15)
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Average shares outstanding - basic 692 697 693 698
Diluted effect of stock option plans 17 -- 17 --
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Average shares outstanding - diluted 709 697 710 698
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Basic earnings (loss) per common share $ .05 $ (.05) $ .20 $ (.02)
Diluted earnings (loss) per common share $ .05 $ (.05) $ .19 $ (.02)
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For the three and nine months ended September 30, 1999, the average number of diluted common shares outstanding includes the impact of options to purchase shares of common stock. Shares of common stock issuable under deferred compensation arrangements approximating 3 million for the three and nine months ended September 30, 1999, were excluded from the computation of diluted earnings per common share because their inclusion would have been antidilutive. For the three and nine months ended September 30, 1998, options to purchase shares of common stock and shares issuable under deferred compensation arrangements approximating 17 million and 21 million, respectively, were excluded from the computation of diluted earnings per common share because their inclusion would have been antidilutive. Shares outstanding are expected to increase upon the closing of the Corporation's acquisitions of King World and KTVT-TV (see note 2).
11. SHAREHOLDERS' EQUITY
In 1998, the Board of Directors of the Corporation authorized a $3 billion multi-year stock repurchase program. The Corporation repurchased 4,773,600 and 11,466,500 shares of its common stock at a cost of $216 million and $489 million, respectively, during the three and nine months ended September 30, 1999, bringing the total shares repurchased under the program through September 30, 1999 to 39,808,208 at a cost of $1.3 billion. At September 30, 1999 and December 31, 1998, the Corporation held common stock in treasury of 53,933,184 shares and 43,204,174 shares, respectively.
Comprehensive income is used to describe all changes in equity from transactions and other events and circumstances, including net income, from nonowner sources. The following table presents the accumulated components of comprehensive income other than net income reflected within shareholders' equity at September 30, 1999 and December 31, 1998:
ACCUMULATED OTHER COMPREHENSIVE LOSS
(in millions)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
====================================================================================================================
Minimum pension liability $(682) $(808)
Unrealized gains on securities 17 1
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Total accumulated other comprehensive loss $(665) $(807)
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During the first half of 1999, the Corporation disposed of essentially all the remaining industrial businesses. The minimum pension liability declined during 1999 primarily as a result of the assumption of certain pension obligations by the buyers of the Corporation's industrial operations as well as the recognition of actuarial losses upon sale of the businesses.
Other comprehensive income for the three and nine months ended September 30, 1999 totaled $2 million and $142 million, respectively, net of income tax of less than $1 million and $78 million, respectively. During the same periods in 1998 other comprehensive income netted to zero and a loss of $34 million, respectively, net of income tax benefits of $2 million and $18 million, respectively.
12. SEGMENT INFORMATION
The Corporation's Continuing Operations are aligned into three reporting segments: Infinity, Television and Cable. These reporting segments are consistent with the Corporation's management of these businesses and its financial reporting structure and operating focus.
SEGMENT RESULTS OF OPERATIONS
(unaudited, in millions)
REVENUES OPERATING PROFIT (LOSS) EBITDA
----------------------- ----------------------- --------------------
THREE MONTHS ENDED SEPTEMBER 30, 1999 1998 1999 1998 1999 1998
=======================================================================================================================
Infinity $ 619 $ 534 $ 208 $ 157 $ 282 $ 230
Television 955 912 64 (6) 121 51
Cable 137 137 35 13 61 41
Corporate and Other (3) (2) (16) (21) (13) (13)
Residual costs of discontinued businesses -- -- (45) (41) (45) (41)
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Total Continuing Operations $1,708 $1,581 $ 246 $ 102 $ 406 $ 268
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REVENUES OPERATING PROFIT (LOSS) EBITDA
----------------------- ----------------------- --------------------
NINE MONTHS ENDED SEPTEMBER 30, 1999 1998 1999 1998 1999 1998
=======================================================================================================================
Infinity $1,690 $1,320 $ 497 $ 362 $ 717 $ 541
Television 3,047 3,287 231 138 398 317
Cable 423 412 104 41 157 120
Corporate and Other (6) (5) (44) (59) (29) (47)
Residual costs of discontinued businesses -- -- (130) (117) (130) (117)
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Total Continuing Operations $5,154 $5,014 $ 658 $ 365 $1,113 $ 814
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The Corporation evaluates its performance based on earnings before interest, taxes, minority interest, equity losses, depreciation and amortization (EBITDA). Management believes that EBITDA is an appropriate measure for evaluating the operating performance of the Corporation's businesses. EBITDA eliminates the effect of depreciation and amortization of tangible and intangible assets, most of which arises from acquisitions accounted for under the purchase method of accounting. The exclusion of amortization expense eliminates variations in results caused by the timing of acquisitions. However, EBITDA should be considered in addition to, not as a substitute for, operating profit, net income, cash flows and other measures of financial performance reported in accordance with generally accepted accounting principles. As EBITDA is not a measure of performance calculated in accordance with generally accepted accounting principles, this measure may not be comparable to similarly titled measures employed by other companies.
The Corporation's consolidated income from Continuing Operations before income taxes, minority interest and equity losses for the three and nine months ended September 30, 1999, totaled $210 million and $519 million, respectively, and $2 million and $122 million, respectively, during the same period in 1998. Consolidated EBITDA noted in the preceding table varies from the consolidated income from Continuing Operations before taxes, minority interest and equity losses because it excludes depreciation, amortization and interest expense, net.
The category "Corporate and Other" includes the results of operations that are not identifiable to a specific operating segment. These include certain intersegment eliminations, non-allocated income and costs related to interest, taxes and employee benefits as well as certain other headquarter related income and expenses. Intersegment sales and transfers are not material to the Corporation's Infinity, Television, or Cable segment results.
Residual costs of discontinued businesses primarily include certain costs, such as pension and post-retirement benefit costs, remaining from divestitures of the Corporation's industrial businesses.
During 1999 total assets for the Television segment increased, due to the completion of a number of strategic Internet based investments, from approximately $6.7 billion at December 31, 1998 to approximately $7.5 billion at September 30, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
CBS Corporation and its subsidiary companies (CBS or the Corporation) reported revenues for the three months ended September 30, 1999 of $1.7 billion, an 8 percent increase over the same period of the prior year. For the nine months ended September 30, 1999, revenues were $5.2 billion representing a slight increase over the nine months ended September 30, 1998, even though the 1998 results included the Winter Olympics. Excluding the effect of the Winter Olympics, revenues for the nine months ended September 30, 1999 increased 13 percent. Earnings before interest, taxes, minority interest, equity losses, depreciation and amortization (EBITDA) also increased, up approximately 40 percent for the nine months ended September 30, 1999 excluding the impact of the Winter Olympics and certain 1998 and 1999 special items discussed below.
Income from Continuing Operations totaled $35 million, or $0.05 per diluted share, and $138 million, or $0.19 per diluted share, for the three and nine months ended September 30, 1999, respectively. The Corporation reported net income, for the three and nine months ended September 30, 1999, of $47 million, or $0.07 per diluted share, and $529 million, or $0.74 per diluted share, respectively. Included in the 1999 net income results were gains on the disposal of Discontinued Operations of $12 million and $396 million, net of income tax, for the three and nine month periods, respectively.
On September 6, 1999, Viacom Inc. (Viacom) and CBS entered into an agreement and plan of merger, as amended. Pursuant to this merger agreement, each share of CBS common stock, par value $1.00 per share, that is issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive 1.085 shares of Viacom non-voting Class B common stock and each share of CBS series B preferred stock, par value $1.00 per share, will convert into the right to receive 1.085 shares of Viacom series C preferred stock. The merger will be accounted for by the purchase method of accounting. Consideration provided by Viacom in this merger includes: approximately $36.7 billion through the issuance of approximately 812 million shares of Viacom non-voting Class B common stock plus, approximately $833 million of cash consideration, net of approximately $556 million of deferred taxes, for the assumed settlement of certain historical CBS stock options and the assumption of approximately $200 million of CBS stock options by Viacom, both of which were granted prior to the date of the merger agreement, and approximately $3.5 billion for the assumption of debt. Viacom is a diversified entertainment company with operations in six segments: (1) Networks, (2) Entertainment, (3) Video, (4) Parks, (5) Publishing and (6) Online. The merger is contingent upon, among other things, regulatory and CBS shareholder approval. This transaction is expected to close in the first half of 2000. In connection with the planned merger of Viacom and CBS, the Corporation anticipates that a significant amount of merger related costs will be incurred commencing in the fourth quarter of 1999. These costs will be expensed as incurred.
On May 27, 1999, Infinity Broadcasting Corporation (Infinity Broadcasting), a majority-owned subsidiary of the Corporation, entered into a definitive agreement to acquire Outdoor Systems, Inc., (Outdoor Systems) for approximately $8.7 billion, which includes the assumption of $1.9 billion in Outdoor Systems debt, at fair value. On November 4, 1999 the Outdoor Systems and Infinity Broadcasting shareholders approved the transaction which is expected to close during November 1999 subject to certain closing conditions as set forth in the merger agreement. The terms of the agreement call for each outstanding common share of Outdoor Systems to be exchanged for 1.25 shares of Infinity Broadcasting Class A common stock. The closing of this transaction will cause a dilution in the Corporation's ownership interest in Infinity Broadcasting from approximately 83 percent at September 30, 1999 to approximately 65 percent, excluding the dilutive effect of stock options. The Corporation's voting interest, on a fully diluted basis, will also decline from approximately 96 percent at September 30, 1999 to approximately 90 percent as a result of the transaction. This transaction will be accounted for by the purchase method of accounting.
On March 31, 1999, the Corporation entered into a definitive merger agreement with King World Productions, Inc. (King World) under which CBS will issue approximately $2.5 billion in common stock in exchange for all of the outstanding common stock of King World. Under the terms of the agreement, King World shareholders will receive 0.81 shares of CBS common stock for each share of King World common stock. King World is the distributor of a number of shows which include "The Oprah Winfrey Show," "Wheel of Fortune," "Jeopardy!," and "Hollywood Squares." The transaction is expected to close immediately after King World shareholders approve the transaction at a meeting scheduled for November 15, 1999.
During 1999, the Corporation entered into definitive agreements to acquire two CBS affiliate television stations in Texas: KEYE-TV in Austin for $160 million in cash, which closed on August 31, 1999, and KTVT-TV in Dallas-Fort Worth for $485 million of CBS series B preferred stock, or 10,142 preferred shares, and approximately $4 million in cash, which closed on October 12, 1999. Each share of the CBS series B preferred stock is entitled to 1,000 votes per share and is convertible at the option of the holder into 1,000 shares of CBS common stock. Each share of series B preferred stock outstanding at the time of the CBS/Viacom merger will convert into 1.085 shares of Viacom series C preferred stock which will be entitled to 100 votes per share. Each Viacom series C preferred share will be convertible into 1,000 shares of Viacom Class B common stock at the option of the holder. Both of the above transactions are being accounted for by the purchase method of accounting.
During the nine months ended September 30, 1999 the Corporation closed on a number of strategic investments focused on growing its Internet based operations. These investments provided the Corporation with equity ownership interests in Internet based companies in exchange for $38 million in cash and commitments to provide $566 million of future advertising and promotional time. These advertising commitments will be met over a period of up to seven years. The Corporation has invested in three publicly traded Internet based companies: SportsLine USA, Inc., MarketWatch.com, Inc. and Medscape.com, Inc. Other Internet investments include Storerunnner, Inc., Office.com, Inc., Switchboard, Inc., ThirdAge Media, Inc., Wrenchead.com, Inc., Jobs.com, Inc., Women's Consumer Network LLC and Webvan Group, Inc., which completed its initial public offering on November 5, 1999. The Corporation also has a majority ownership interest in iWon, Inc., which is consolidated. The commitment to provide future advertising and promotional time is non-cash and has been recorded as deferred revenue in other current and noncurrent liabilities in the condensed consolidated balance sheet. Barter revenue is then recognized as the related advertising and promotional time is delivered. No significant barter revenue was recognized through September 30, 1999 as only limited advertising and promotion time has been delivered. The shares evidencing the Corporation's equity ownership interest typically contain restrictions that may limit the Corporation's ability to sell or otherwise dispose of its investment. The Corporation has also announced agreements to acquire a 20 percent ownership interest in Rx.com, Inc. which closed on October 13, 1999, and a 35 percent ownership interest in Big E Entertainment in exchange for future advertising and promotional time and cash. The majority of these Internet based investments represent newly formed enterprises that will require access to capital markets to fund their future start-up losses. There can be no assurance that these companies will be successful in raising the necessary capital to finance their operations and the Corporation has no obligation for future funding. These companies may also face intense competition as more traditional "brick-and-mortar" companies respond to changes in the market place, including launching their own Internet sites. As a result, the Corporation's future results of operations for a quarter or a year could be materially affected by a non-cash write down in the carrying amount of these investments to recognize an impairment loss due to an other than temporary decline in the value of these investments. The advertising and promotional agreements entered into in exchange for the Corporation's equity interest in these investees contain termination provisions in the event of failure or inability of the investee to perform. Generally, pursuant to these above termination provisions, the Corporation is released from delivering any remaining unfulfilled advertising commitments. Upon termination of the unfulfilled advertising and promotional commitments, the remaining deferred revenue, if any, recorded as a liability will be reversed and recognized as a component of equity losses of unconsolidated affiliated companies.
SEGMENT RESULTS OF OPERATIONS
The following table presents the segment results for the Corporation's Continuing Operations for the three and nine months ended September 30, 1999 and 1998. EBITDA is presented in the table because management believes that EBITDA is an appropriate measure for evaluating the operating performance of the Corporation's businesses. EBITDA eliminates the effect of depreciation and amortization of tangible and intangible assets, most of which were acquired in acquisitions accounted for under the purchase method of accounting. The exclusion of amortization expense eliminates variations in results among stations and other businesses caused by the timing of acquisitions. More recent acquisitions reflect higher amortization expense due to the increasing prices paid for Federal Communications Commissions (FCC) licenses, goodwill and other identifiable intangibles. However, EBITDA should be considered in addition to, not as a substitute for, operating profit, net income, cash flows and other measures of financial performance reported in accordance with generally accepted accounting principles. EBITDA differs from cash flows from operating activities primarily because it does not consider certain changes in assets and liabilities from period to period and it does not include cash flows for interest and taxes. As EBITDA is not a measure of performance calculated in accordance with generally accepted accounting principle, this measure may not be comparable to similarly titled measures employed by other companies.
SEGMENT RESULTS OF OPERATIONS - CONTINUING OPERATIONS
(unaudited, in millions)
REVENUES OPERATING PROFIT (LOSS) EBITDA
----------------------- ----------------------- --------------------
THREE MONTHS ENDED SEPTEMBER 30, 1999 1998 1999 1998 1999 1998
=======================================================================================================================
Infinity $ 619 $534 $208 $157 $282 $230
Television 955 912 64 (6) 121 51
Cable 137 137 35 13 61 41
Corporate and Other (3) (2) (16) (21) (13) (13)
Residual costs of discontinued businesses -- -- (45) (41) (45) (41)
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Total Continuing Operations $1,708 $1,581 $246 $102 $406 $268
=======================================================================================================================
REVENUES OPERATING PROFIT (LOSS) EBITDA
----------------------- ----------------------- --------------------
NINE MONTHS ENDED SEPTEMBER 30, 1999 1998 1999 1998 1999 1998
=======================================================================================================================
Infinity $1,690 $1,320 $497 $362 $717 $541
Television 3,047 3,287 231 138 398 317
Cable 423 412 104 41 157 120
Corporate and Other (6) (5) (44) (59) (29) (47)
Residual costs of discontinued businesses -- -- (130) (117) (130) (117)
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Total Continuing Operations $5,154 $5,014 $658 $365 $1,113 $814
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INFINITY
Certain discussions below provide a comparison of actual results with pro forma results. For the three and nine months ended September 30, 1999 and 1998 comparisons, pro forma results were determined as if the American Radio Systems Corporation (American Radio) acquisition and any related divestitures and exchanges of radio stations, as well as the acquisition of Alrecon, the outdoor advertising subsidiary of the Dutch national rail company, all had occurred on January 1, 1998.
Infinity Broadcasting is comprised of approximately 160 owned and operated radio stations and TDI Worldwide, Inc. (TDI), its outdoor advertising business (collectively the Infinity segment). Revenues, as reported, for the three and nine months ended September 30, 1999, increased over the prior year by $85 million, or approximately 16 percent, and $370 million, or approximately 28 percent, respectively. The increase for the three months was due to double-digit revenue growth at Infinity's existing operations. On a pro forma basis, revenues for the nine months ended September 30, 1999, increased over the prior year period by approximately 16 percent. This increase reflects strong revenue growth across the majority of Infinity's radio markets and TDI during 1999.
Operating profit and EBITDA for the three months ended September 30, 1999, increased over the prior year by $51 million, or approximately 32 percent, and $52 million, or approximately 23 percent, respectively. For the nine months ended September 30, 1999, operating profit and EBITDA increased $135 million, or approximately 37 percent, and $176 million, or approximately 33 percent, respectively, over the prior year period. For the three month period, the increases are due to higher revenues at Infinity's existing radio and outdoor advertising properties as well as management's continued focus on cost control. On a pro forma basis, operating profit and EBITDA for the nine months ended September 30, 1999 increased over the prior year period by approximately 35 percent and 23 percent, respectively. These increases in pro forma results are driven by the same factors impacting the three month period discussed above. The higher rate of growth in operating profit and EBITDA compared to the rate of growth in revenues is because a substantial portion of the Infinity segment costs are fixed.
TELEVISION
The Television segment consists of the Corporation's owned and operated television stations and the CBS television network. The segment's revenues for the three months ended September 30, 1999 increased $43 million, or approximately 5 percent, compared to the prior year third quarter. This increase is primarily attributable to higher advertising pricing in primetime as well as increased coverage of sporting events which generated higher revenues. Television revenues for the nine months ended September 30, 1999 decreased by $240 million compared to the prior year period which included the 1998 Winter Olympics. Excluding the impact of the 1998 Winter Olympics, revenues increased by approximately 7 percent. This increase is primarily attributable to strong scatter market pricing. Approximately 80 percent of CBS Television's 1999-2000 season up-front inventory was sold at low-double-digit price increases. Although, in general, broadcast television has experienced a decline in total viewership from increased competition, the Corporation believes it is still one of the few means that offers advertisers the ability to reach mass audiences.
Operating profit and EBITDA for the three months ended September 30, 1999 each increased $70 million compared to the prior year period. The third quarter 1998 results include a special charge of $63 million recognized for restructuring costs and asset impairments. Excluding the impact of the 1998 special charge, operating profit and EBITDA for the three-month period increased approximately 12 percent and 6 percent, respectively. These increases are primarily attributable to higher revenues, lower operating costs due to cost containment initiatives and the net impact of changes in network programming. The increases are partially offset by higher programming costs related to the increased coverage of certain sporting events. For the nine months ended September 30, 1999, operating profit and EBITDA increased $93 million and $81 million, respectively, compared to the prior year period. Excluding the impact of the 1998 Winter Olympics, the $63 million special charge in 1998 and the 1999 special items discussed below, operating profit and EBITDA for the nine-month period increased by approximately 86 percent and 29 percent, respectively. These increases are attributable to strong pricing, cost containment initiatives and the net impact of changes in network programming.
In the second quarter of 1999, the Corporation reversed approximately $26 million of the restructuring reserve it had established during the third quarter of 1998. This reversal was the result of recent television programming changes and lower than expected severance costs because of higher voluntary employee terminations. Also in the second quarter of 1999, the Corporation recorded restructuring charges of approximately $2 million associated with employee terminations.
CABLE
The Cable segment consists of the Corporation's cable networks, including The Nashville Network (TNN), Country Music Television (CMT), two regional sports networks and a minority interest in TeleNoticias, a Spanish language cable news network. These networks are distributed by cable television and other multichannel technologies. Revenues were flat for the three months ended September 30, 1999 compared to the prior year period. For the nine months ended September 30, 1999, revenues increased by $11 million, or approximately 3 percent compared to the prior year period. Excluding the impact of two cable divestitures, TeleNoticias and Eye on People, both of which were divested in late 1998, revenues increased by approximately 6 percent and 8 percent for the three and nine months ended September 30, 1999, respectively. These advances reflect revenue growth at the Company's cable network operations despite the continued increase in competition across the cable industry as the number of cable channels available continues to increase providing viewers with more options and placing more pressure on networks to attract and maintain their audiences. The Corporation has recently lost the rights to broadcast the NASCAR Winston Cup races in 2001. Unless these broadcast rights are replaced with similar revenue generating events, this overall positive trend in revenue may be adversely affected.
Operating profit and EBITDA increased over the prior year by $22 million, or approximately 169 percent, and $20 million, or approximately 49 percent, for the three months ended September 30, 1999, respectively. For the nine months ended September 30, 1999, operating profit and EBITDA increased $63 million, or approximately 154 percent, and $37 million, or approximately 31 percent, respectively, over the prior year period. These 1999 results include a $24 million special charge recorded in other income during the second quarter for certain obligations of TeleNoticias. TeleNoticias is a Spanish language cable news network that the Corporation divested a majority interest in during the latter portion of 1998. Financial difficulties led TeleNoticias to file for Bankruptcy protection under Chapter 11. Because of these financial difficulties, it is probable that certain obligations that were assumed by the venture in connection with the divestiture will revert back to the Corporation. Of the $24 million charge, $3 million was satisfied during the third quarter and the remaining balance is expected to be satisfied over the next few years. The 1998 results include a special charge related to a third quarter restructuring action and an asset impairment totaling $3 million. Excluding the impact of the special charges discussed above and the results of operations of the two cable divestitures, operating profit and EBITDA increased by approximately 46 percent and 12 percent, respectively, for the three months ended September 30, 1999, and approximately 40 percent and 18 percent, respectively, for the nine months ended September 30, 1999. These increases are driven by the results of the country music and regional sports cable television networks as well as certain cost containment efforts initiated during 1998. The decline in the third quarter EBITDA percentage increase is explained, in part, by lower ratings for TNN.
RESIDUAL COSTS OF DISCONTINUED BUSINESSES
The Corporation's results of operations are unfavorably affected by certain costs remaining from divestitures of its industrial businesses. Following those divestitures, certain liabilities arising from these businesses remained with the Corporation, such as pension and postretirement benefit obligations for inactive and retired employees and certain environmental and litigation-related liabilities. The pension and postretirement benefit costs associated with these former employees, as well as administration costs associated with managing the retained liabilities, have been presented separately in the condensed consolidated statement of income.
For the three and nine months ended September 30, 1999, residual costs of discontinued businesses were $45 million and $130 million, respectively, and were primarily comprised of pension and postretirement benefit costs which totaled $44 million and $125 million, respectively. For the same periods during 1998, the residual cost totaled $41
million and $117 million, respectively, of which the combined pension and postretirement benefit costs totaled $41 million and $115 million, respectively. The increase in costs during 1999 is a result of the sale of Power Generation in August 1998 and the retention of certain benefit obligations. In addition, following the 1999 first quarter sale of Energy Systems and Government Operations, the quarterly costs have increased by an additional $5 million. Prior to the sales, these costs were included in the respective businesses' results of operations which were reported in Discontinued Operations.
The Corporation's objective is to reduce this earnings constraint over the next few years by fully funding the pension plans and modifying postretirement benefits. However, management expects that these costs will continue to negatively affect operating results during future years.
OTHER INCOME, NET
Other income, net during the three and nine months ended September 30, 1999 decreased, compared to the prior year, by $2 million and $25 million, respectively. The decrease in the nine month period primarily reflects the previously discussed $24 million special charge recorded in the second quarter of 1999 for certain obligations associated with TeleNoticias and a reduction in income from various other sources. This decline was partially offset by a net gain of $8 million recognized during the first quarter of 1999 on the disposal of a corporate aircraft.
INTEREST EXPENSE, NET
Interest expense, net from Continuing Operations for the three and nine months ended September 30, 1999, decreased by $66 million, or 59 percent, and $129 million, or 47 percent, respectively. The decrease was driven by a reduction in 1999 average debt compared to 1998. Average debt was primarily affected by cash proceeds received from Infinity Broadcasting for the repayment of an intercompany note subsequent to its December 1998 initial public offering (IPO), which was used by CBS to pay down debt, the timing of major acquisitions and divestiture transactions and the repurchase of shares under the Corporation's and Infinity Broadcasting's stock repurchase programs.
During the nine month period ended September 30, 1999, the Corporation had only minimal levels of borrowings under its credit facility and reduced available borrowing capacity under its credit facility from $4.0 billion to $3.0 billion (see Revolving Credit Facility in Liquidity and Capital Resources). The Corporation also redeemed and purchased debt securities totaling approximately $577 million.
Future interest expense will be dependent on the Corporation's financing strategy in future acquisitions, additional activity under the Corporation's and Infinity Broadcasting's stock repurchase programs, use of proceeds from dispositions, and the funding of pension, postretirement benefit obligations, remaining divestiture costs and retained liabilities of discontinued businesses as well as the Corporation's performance.
INCOME TAXES
The Corporation's Continuing Operations effective tax rate was 60 percent and 58 percent for the three and nine months ended September 30, 1999, respectively, and during the same periods in 1998, the effective tax rate was in excess of 100 percent. The decrease in the effective tax rate is due to the Corporation's higher operating profit and lower interest expense. These rates are significantly higher than the US federal statutory rate of 35 percent primarily due to the amortization of non-deductible goodwill associated with the media acquisitions of recent years. Such permanent differences between book income and taxable income can significantly impact the provision and, depending upon the Corporation's level of income or loss and the effect of non-recurring transactions, can cause dramatic fluctuations in the Corporation's effective tax rate.
MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES
The increase in minority interest in income of consolidated subsidiaries is the result of the December 1998 IPO of Infinity Broadcasting, the Corporation's then wholly-owned radio and outdoor advertising business. The IPO reduced the Corporation's ownership interest in Infinity Broadcasting to approximately 82 percent. This results in the Corporation reflecting an offset in its consolidated financial statements for the minority interest holder's proportionate interest in post-IPO results of operations of Infinity Broadcasting. The Corporation's ownership interest subsequently increased to approximately 83 percent during the third quarter of 1999 as a result of Infinity Broadcasting's repurchase of its Class A common stock under a $500 million stock repurchase program announced late in the second quarter. The closing of the Outdoor Systems transaction will cause a dilution in the Corporation's ownership interest in Infinity Broadcasting from approximately 83 percent at September 30, 1999 to approximately 65 percent, excluding the dilutive effect of stock options.
EQUITY LOSSES OF UNCONSOLIDATED AFFILIATED COMPANIES
At the end of the second quarter and throughout the third quarter of 1999, the Corporation closed on a number of strategic investments focused on growing its Internet based operations. The Corporation received an equity interest in these Internet companies, in exchange for cash and future advertising and promotion time on CBS's and Infinity Broadcasting's media properties. During the third quarter of 1999, the Corporation recognized its proportionate share of losses in these Internet based companies and the amortization of the difference between CBS's investment in these entities and its proportionate ownership share in the underlying net assets of these companies, which totaled $28 million, net of taxes. See note 3. Future equity losses in Internet based companies the Corporation has invested in are expected to increase dramatically as the number of such equity investments expands and as the full year impact of such losses is recognized. Additionally, these Internet based companies will recognize marketing and promotional expenses as the Corporation delivers its advertising and promotional time. Therefore, future losses for the Internet based companies are expected to grow significantly, which in turn will increase the equity losses for which the Corporation must recognize its proportionate share. Because of the expected growing significance of these non-cash equity losses and amortization commencing in the third quarter 1999, the Corporation reported this amount as a separate line item in the condensed consolidated statement of income.
YEAR 2000
The Year 2000 issue results from the development of computer programs and computer chips using two digits rather than four digits to define the applicable year. Computer programs and/or equipment with time-sensitive software or computer chips may recognize the date using "00" as the year 1900 rather than the year 2000. This could result in system failure or miscalculations and cause disruptions to business operations.
To address the Year 2000 issue, the Corporation has undertaken efforts to identify, modify or replace and test systems that may not be Year 2000 compliant. The Corporation estimates its cost to achieve Year 2000 compliance to be approximately $36 million, of which $31 million has been incurred through September 30, 1999. Approximately 36% of the total expenditures relate to replacement of existing systems. The Corporation has and expects to continue funding these costs through its cash flows from operations and expense modification costs as incurred.
The Corporation's centrally managed mission-critical systems are essentially Year 2000 compliant with remediation and testing approximately 98 percent complete on all high-risk assets and systems and approximately 90 percent complete on all medium-risk assets and systems. The Corporation expects to have the remaining high-risk and medium-risk assets and systems tested and compliant before the end of 1999.
The Corporation believes that it will complete its Year 2000 effort and will be compliant on time. The Corporation has also developed formal contingency plans, implementation of which is substantially complete, to ensure continued business operations in case of Year 2000 related disruptions. The Corporation has established a center to monitor performance, identify and prioritize issues and communicate with its senior management team throughout the most critical crossover period. The Corporation also believes that, based on its current plan of identifying and scheduling the required personnel and its ability to secure access to additional equipment necessary to meet all mission-critical business processes, it will be adequately prepared for contingency measures if the need arises.
The Year 2000 effort also includes communication with all significant third party suppliers and customers to determine the extent to which the Corporation's systems are vulnerable to those parties' failures to reach Year 2000 compliance. There can be no guarantee that the Corporation's third party suppliers or customers will be Year 2000 compliant on a timely basis and that failure to achieve compliance would not have a material adverse impact on the Corporation's business operations.
Management believes that it is difficult to fully assess the risks of the Year 2000 problem due to numerous uncertainties surrounding the issue and that the primary risks are external to the Corporation and relate to the Year 2000 readiness of its suppliers and customers.
The inability of the Corporation or its suppliers or customers to adequately address the Year 2000 issues on a timely basis could result in a material financial risk, including loss of revenue, substantial unanticipated costs and service interruptions. Accordingly, the Corporation has devoted and continues to devote the resources it concludes are appropriate to address all significant Year 2000 issues in a timely manner.
DISCONTINUED OPERATIONS
Under various disposal plans adopted in recent years, the Corporation has essentially disposed of the remaining industrial businesses. These businesses have been classified as Discontinued Operations in accordance with Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual, and Infrequently Occurring Events and Transactions." During the first and second quarter several businesses were sold for $250 million in cash and the assumption by the buyer of liabilities and commitments totaling approximately $970 million, all in accordance with the terms of the
divestiture agreements. The pre-tax and after-tax gains on these disposals totaled $520 million and $384 million, respectively, which was subsequently increased during the third quarter by $20 million and $12 million on a pre-tax and after-tax basis, respectively, due to the favorable resolution of a purchase price adjustment associated with a business divested in the second quarter of 1999. See note 7.
Following the divestitures discussed above, net liabilities of Discontinued Operations declined. At September 30, 1999, assets primarily consist of the portfolio investments remaining from the 1992 decision to exit the financial services business. These portfolio investments, which consist primarily of the leasing portfolio, generally are expected to liquidate through the year 2015 in accordance with contractual terms. At September 30, 1999, liabilities of Discontinued Operations primarily consist of the liability for estimated loss on disposal of $1,284 million and debt of $418 million. Management believes that the liability for estimated loss on disposal of Discontinued Operations is adequate to provide for the portfolio investments' estimated results of operations through the expected date of liquidation and other obligations associated with the disposal of the industrial business including the costs to dispose of surplus property held for sale, contractual indemnifications and unresolved purchase price adjustments. During the fourth quarter of 1999 the Corporation expects to resolve the purchase price adjustments arising from the divestiture of its industrial businesses that were sold in the first quarter of 1999. The resolution of these adjustments will reduce the liability for estimated losses on disposals and is expected to use approximately $50 million to $125 million in cash flow from Continuing Operations in the fourth quarter of 1999. Debt of Discontinued Operations includes only the amount that will be repaid through the liquidation of the portfolio investments. Certain other divestiture costs and contingencies that related to the industrial businesses also will remain with the Corporation.
Except for cash flows related to the portfolio investments and the associated debt, all future cash inflows and outflows of Discontinued Operations will affect Continuing Operations liquidity and interest expense.
RESULTS OF OPERATIONS - DISCONTINUED OPERATIONS
(unaudited, in millions)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------- ------------------------------------
SALES OF
PRODUCTS AND OPERATING PROFIT SALES OF PRODUCTS OPERATING PROFIT
SERVICES (LOSS) AND SERVICES (LOSS)
1999 1998 1999 1998 1999 1998 1999 1998
=====================================================================================================================
Industrial businesses $4 $465 $(2) $(6) $122 $1,861 $(20) $(180)
Financial Services 3 5 (7) (5) 9 18 (21) (14)
---------------------------------------------------------------------------------------------------------------------
Total $7 $470 $(9) $(11) $131 $1,879 $(41) $(194)
=====================================================================================================================
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The results presented in the table above include sales and operating profit for the Corporation's industrial and financial services businesses after the measurement date and are charged directly to the liability for estimated loss on disposal.
Sales for the industrial businesses during the three and nine months ended September 30, 1999 declined $461 million and $1,739 million, respectively, compared to the same periods during 1998. These declines primarily reflect the sale of several of the Corporation's industrial operations throughout 1998 and 1999. Financial services sales reflect the continued liquidation of the remaining portfolio investments.
The divestiture of the industrial businesses also reduced the operating losses during the three and nine months ended September 30, 1999 compared to the same periods in 1998.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
In 1998, the Corporation formed Infinity Broadcasting, a new company comprising the Infinity segment of the Corporation. In December 1998, Infinity Broadcasting sold 18.2 percent of its common stock in an IPO, generating $3.2 billion of proceeds ($3.0 billion, net of offering costs). The Corporation, as the parent company of Infinity Broadcasting, received the benefit of nearly 90 percent of the proceeds from Infinity Broadcasting's stock offering through the payment by Infinity Broadcasting of an intercompany note and certain other intercompany transactions. These proceeds were used by the Corporation to repay its revolving credit borrowings and for general corporate purposes.
Because of the minority interest in Infinity Broadcasting following the stock offering, certain modifications have been made to the Corporation's cash management practices. Of the $185 million in cash and cash equivalents presented on the Corporation's condensed consolidated balance sheet, the Corporation, as the parent company of Infinity Broadcasting, has direct access to $56 million. The remaining cash balance is available to the Corporation if Infinity Broadcasting were to pay a dividend on all of its common stock. Infinity Broadcasting does not anticipate paying any
dividends in the near term. Additionally, under the terms of an intercompany agreement and a tax sharing agreement, Infinity Broadcasting reimburses the Corporation in cash for certain services provided and its standalone income tax liability. The tax payments to the Corporation will cease upon the deconsolidation of Infinity Broadcasting from the Corporation's consolidated U.S. federal tax return which would result upon the consummation of the Outdoor Systems merger. For the nine months ended September 30, 1999, Infinity Broadcasting paid to the Corporation approximately $200 million for its standalone income tax liability. Cash generated by Infinity Broadcasting's operations is expected to be retained by Infinity Broadcasting for use in its operations or for investing. Management does not believe that this segregation of cash will materially impact the Corporation's liquidity.
Management expects that the Corporation will have sufficient liquidity to meet its ordinary future business needs. Sources of liquidity generally available to the Corporation include cash from operations, proceeds from sales of investments and non-strategic assets, cash and cash equivalents, availability of debt under its credit facility, borrowings from other sources, including funds from capital markets, and issuance of additional capital stock of the Corporation.
OPERATING ACTIVITIES
The operating activities of Continuing Operations provided cash of $676 million during the nine months ended September 30, 1999 and $342 million during the nine months of 1998. This increase relates primarily to the improved operating results of the Infinity and Television segments during 1999.
Cash contributed to the Corporation's pension plans totaled $199 million during the first nine months of 1999 and $198 million during the same period in 1998. The Corporation's contribution level for 1999 is expected to approximate $270 million (including the $199 million contribution made in the first nine months of 1999) and is consistent with the Corporation's goal to fully fund its qualified pension plans over the next several years.
Over the next several years it is likely that a portion of the future advertising and promotion time exchanged for an equity interest in Internet based companies may displace advertising inventory that could otherwise be sold by the Corporation for cash.
The operating activities of Discontinued Operations used cash of $162 million during the first nine months of 1999 compared to $326 million during the same period in 1998. The cash flows during the first nine months of 1999 primarily reflect cash used in the operations of the Energy Systems and Government Operations businesses through their date of disposition in March 1999 while the cash flows during the same period in 1998 primarily reflect the cash used in the operations of its Power Generation business through its disposition in August 1998 as well as the Energy Systems and Government Operations businesses.
With the completion of the sale of essentially all of the Corporation's remaining industrial operations in 1998 and 1999, future operating cash flows of Discontinued Operations will consist primarily of disposal and other costs associated with the industrial businesses. During the fourth quarter of 1999 the Corporation expects to resolve the purchase price adjustments arising from the divestiture of its industrial businesses that were sold in the first quarter of 1999. The resolution of these adjustments is expected to use approximately $50 million to $125 million in cash flow from Continuing Operations in the fourth quarter of 1999. Cash flows associated with the financial services business, including interest cost on debt of Discontinued Operations and the repayment of that debt, will be paid through the continued liquidation of portfolio investments and are not expected to impact future cash flows from Continuing Operations. Cash taxes arising from the liquidation of the Corporation's lease portfolio are expected to be funded by cash from Continuing Operations over the next 15 years.
As a result of the Corporation's recent investments in Internet based companies cash taxes paid are expected to increase because CBS is contributing services in exchange for its ownership interests. The Corporation is required to recognize taxable income equal to the fair value of the shares received. The Corporation is, however, exploring alternatives to reduce its cash taxes by accelerating tax deductions.
INVESTING ACTIVITIES
Investing activities used cash of $63 million and provided cash of $192 million during the first nine months of 1999 and 1998, respectively. Investing cash inflows from business divestitures and other asset liquidations totaled $405 million and $1.7 billion during the first nine months of 1999 and 1998, respectively. Asset liquidations in 1999 primarily relate to the sale of certain of the Corporation's industrial operations for approximately $250 million in cash. In addition, during 1999, approximately $59 million was received from the divestiture of several media properties. Investing cash outflows during 1999 primarily relate to the acquisition of three radio stations, a television station, two transit advertising companies and a radio dating service for $321 million, a portion of which was funded by deposits held in acquisition trust. In addition, investing cash outflows included payments for Internet based and other investments totaling approximately $70 million. For the same period during 1998, the Corporation had investing cash inflows primarily related to the sale of Power Generations for $1.2 billion and cash outflows related to the acquisition of American Radio for $1.4 billion in cash plus the assumption of debt.
The Corporation's capital expenditures for Continuing Operations during the first nine months of 1999 and 1998 totaled $92 million and $89 million, respectively. During the second quarter of 1999 the Corporation entered into a satellite service arrangement that requires an advance payment of approximately $65 million, which will become payable in October 2000. The Corporation has committed to contribute approximately $50 million to a fund aimed at providing minorities and women with access to capital to acquire and operate radio and television stations. With the sale of essentially all the remaining industrial businesses, future capital expenditures for Discontinued Operations will essentially be eliminated.
FINANCING ACTIVITIES
Cash used by financing activities during the first nine months of 1999 totaled $1,035 million compared to $138 million during the same period in 1998.
Total financing cash outflows during the first nine months of 1999 primarily reflect the repurchase or redemption of certain outstanding debt for $577 million as well as the purchase of 11,466,500 shares of CBS common stock for $489 million. During the same period in 1998 total financing outflows primarily reflect the purchase of 25,273,000 shares of CBS common stock for $777 million partially offset by the issuance of long-term debt. In addition, with Infinity Broadcasting's June 17, 1999 announcement of its $500 million stock repurchase plan, 16,561,200 shares of Infinity Broadcasting's Class A common stock for $453 million had been repurchased through September 30, 1999, of which $439 million was settled.
Funds utilized in connection with 1999 and 1998 debt repurchases and redemptions as well as the purchase of common stock were primarily derived from cash proceeds received from the December 1998 Infinity Broadcasting IPO, the Corporation's cash flow from operations and asset dispositions. Future purchases of common stock under the programs will be guided by financial policies that are consistent with maintaining an investment grade rating. In addition, financing cash outflows during the first nine months of 1998 reflect the Corporation's payment of a $36 million dividend on its common stock. Subsequent to March 1, 1998, the Corporation suspended dividend payments on its common stock so that cash could be used to better enhance shareholder value.
Cash inflows from financing activities during the first nine months of 1999 and 1998 primarily reflect the issuance of the Corporation's stock in connection with certain employee compensation and benefit plans totaling $226 million and $324 million, respectively.
The Corporation is considering various alternatives with respect to its Internet strategy, including pursuing a spin-off or creation of a tracking stock for its Internet interests.
REVOLVING CREDIT FACILITY
On March 15, 1999, the Corporation amended its revolving credit agreement reducing the total available borrowings from $4.0 billion to $3.0 billion of which, effective November 2, 1999, up to $1.5 billion was available to Infinity Broadcasting. The Corporation is in the process of amending its credit agreement to allocate $1.5 billion of the $3.0 billion facility to Infinity Broadcasting for its exclusive use. The amendment is generally not expected to modify the terms existing under the credit facility agreement. At September 30, 1999, borrowings under the credit facility totaled $250 million.
The credit facility provides for short-term money market loans and revolver borrowings. Borrowing rates under the facility are determined at the time of each borrowing and are based generally on a floating rate index, the London Interbank Offer Rate, plus a margin based on the Corporation's senior unsecured debt rating and leverage. The cost of the facility includes commitment fees, which are based on the unutilized facility and vary with the Corporation's debt ratings. For financial reporting purposes, revolver borrowings are classified as long term. There are no compensating balance requirements under the facility.
Borrowing availability under the credit agreement is subject to compliance with certain covenants, a maximum leverage ratio, minimum interest coverage ratio and minimum consolidated net worth. Certain of the financial covenants become more restrictive over the term of the agreement. At September 30, 1999, the Corporation was in compliance with the financial covenants.
REGULATORY MATTERS
Approval by the FCC of the Corporation's acquisitions of Old Infinity (formerly Infinity Media Corporation) in 1996 and American Radio in 1998 contained a number of temporary conditional waivers of the FCC's rules respecting the common ownership in the same market of radio and television stations (formerly known as the "one-to-a-market" rule). These waivers were granted subject to the outcome of then pending rulemaking in which a review of the one-to-a-market rule had been proposed.
The FCC recently issued its Report and Order with respect to the referenced rule as well as to the rule prohibiting common ownership of television stations with certain overlapping signals (the "television duopoly" rule). The Orders adopted a new radio/television cross-ownership rule allowing a single party to own in a market (a) up to two television stations (if permitted by the television duopoly rule) and up to six radio stations or (b) one television station and seven radio stations, in both instances under certain circumstances. With respect to the television duopoly rule, the Report and Order allows the common ownership of television stations located in different Designated Market Areas (DMAs) regardless of signal overlap and also permits ownership of two television stations in the same market, in both instances under certain circumstances.
Under the Report and Order, the Corporation is to submit within sixty days of the Order, a showing as to its compliance or non-compliance with the new radio/television cross-ownership rule in those markets where it currently has temporary conditional waivers. The Corporation anticipates being able to demonstrate compliance with the new rule in all markets other than Los Angeles, Chicago and Dallas-Fort Worth, in each of which the Corporation owns attributable interests in eight radio stations and one television station, and in Baltimore/Washington D.C. area where the Corporation has attributable interests in one television station and eleven radio stations. As to those four markets the Report and Order will continue temporary conditional waivers until 2004, at which time the FCC will review its radio/television cross-ownership rule, and the Corporation will have an opportunity to demonstrate that the continued ownership of an eighth radio station in these markets would serve the public interest.
In connection with the Viacom/CBS merger, FCC approval will be requested on November 16, 1999 for the transfer of control to Viacom of the television and radio station licenses currently controlled by the Corporation. The combined company will be required to divest some of its broadcasting assets in order to obtain such FCC approval. In particular, the television stations currently held by both entities together reach more of the maximum percentage of U.S. television households permitted by the FCC. Accordingly, in the absence of changes to this "national cap" rule, the combined company will have to reduce the overall audience reach, calculated for FCC purposes, from approximately 41 percent to less than 35 percent of U.S. television households.
In addition, the combined company would not be permitted to continue the temporary conditional waivers of the radio television cross-ownership rule until 2004, and the addition of certain Viacom television stations will obligate the combined company to divest additional radio stations. In total, subject to clarification of the radio television cross-ownership rule as it applies to circumstances in which radio stations are located in a separate DMA from a commonly-owned television station, which is the case in Baltimore and Sacramento, the combined company may be required to divest as many as ten radio stations (Los Angeles (1), Chicago (1), Dallas (2), Washington/Baltimore (4) and Sacramento (2)) in order to comply with the radio television cross-ownership rule.
The combined company would hold licenses for two television stations in six markets -- Philadelphia, Boston, Dallas, Detroit, Miami and Pittsburgh. In the event that the common ownership of two television stations in each of these markets does not comply with newly-adopted FCC rules permitting in-market TV duopolies in certain circumstances, the combined company could be required to divest a television station in one or more of these markets. The combined company may also be required to divest additional broadcast stations in the event that the Commission's recent relaxation of its multiple ownership restrictions fails to become effective, or is stayed, reconsidered or modified by the FCC or by a court. The combined company may also have to reduce or divest its interest in the United Paramount Network to comply with the rules limiting the common ownership of certain television networks.
In order to consummate the Viacom/CBS merger on an orderly and timely basis, Viacom and CBS may request deferred enforcement of FCC rules or seek other regulatory relief.
In April 1997, the FCC adopted a schedule under which broadcasters must build digital television transmission facilities and begin digital transmission. The FCC has not expressly stated what the consequences would be if a licensee fails to meet the adopted schedule. However, the FCC has indicated that it will grant an extension of the applicable deadline where a broadcaster has been unable to complete construction due to circumstances that are either
unforeseeable or beyond its control. Under the FCC's policy, two six-month extensions may be granted by the FCC staff pursuant to delegated authority, but subsequent extension requests must be referred to the full Commission.
Under the FCC's schedule, the Corporation was required to build digital facilities by May 1, 1999 for the eight stations it owns in the ten largest television markets, and by November 1, 1999 for the five television stations it owns in television markets 11-30. The Corporation has begun transmitting digital broadcasts in New York, San Francisco, Philadelphia, Los Angeles, Detroit and Dallas. The Corporation has pending applications for a second extension of its digital construction permits in Chicago and Boston, and applications for a first extension in Minneapolis, Miami, Denver, Pittsburgh and Baltimore. The Corporation's three television stations in markets below the largest 30 must construct digital facilities by May 1, 2002. Timely applications for construction permit have been filed with respect to those stations.
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations," contains both
historical and forward-looking statements. All statements other than statements
of historical fact are, or may be deemed to be, forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements are not based on historical facts but rather reflect
the Corporation's current expectations concerning future results and events. The
words "believes," "expects," "intends," "plans," "anticipates," "likely,"
"will," and similar expressions identify such forward-looking statements. These
forward-looking statements are subject to risks, uncertainties and other
factors, some of which are beyond the Corporation's control, that could cause
actual results to differ materially from those forecast or anticipated in such
forward-looking statements.
Such risks, uncertainties and factors include, but are not limited to: the timing, impact and other uncertainties related to future acquisitions by the Corporation; the Corporation's ability to develop and/or acquire television programming and to attract and retain advertisers; the impact of significant competition from both over-the-air broadcast stations and programming alternatives such as cable television, wireless cable, in-home satellite distribution services and pay-per-view and home video entertainment services; the impact of new technologies including the magnitude of equity losses and other uncertainties related to the Corporation's Internet based investments; the impact of the year 2000 transition; changes in Federal Communications Commission regulations; uncertainties related to certain litigation, environmental and other liabilities associated with the Corporation's former industrial businesses; and such other competitive and business risks as from time to time may be detailed in the Corporation's Securities and Exchange Commission reports.
Readers are cautioned not to place undue reliance on these forward-looking
statements which reflect management's view only as of the date of this Report on
Form 10-Q. The forward-looking statements included in this document are made
only as of the date of this document and the Corporation does not have any
obligation under Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, to publicly
update any forward-looking statements to reflect subsequent events or
circumstances.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
(a) The Corporation has been defending, in the USDC for the Western District of Pennsylvania (the District Court), consolidated class and derivative actions and an individual lawsuit brought by shareholders against the Corporation, Westinghouse Financial Services, Inc. (WFSI) and Westinghouse Credit Corporation (WCC), previously subsidiaries of the Corporation, and/or certain present and former directors and officers of the Corporation, as well as other unrelated parties. Together, these actions allege various federal securities law and common law violations arising out of alleged misstatements or omissions contained in the Corporation's public filings concerning the financial condition of the Corporation, WFSI, and WCC in connection with a $975 million charge to earnings announced on February 27, 1991; a public offering of the Corporation's common stock in May 1991; a $1,680 million charge to earnings announced on October 7, 1991; and alleged misrepresentations regarding the adequacy of internal controls at the Corporation, WFSI, and WCC. In July 1993, the court dismissed in its entirety the derivative claim and dismissed most of the class action claims with leave to replead certain claims in both actions. Both actions were subsequently repled. On January 20, 1995, the District Court again dismissed the derivative complaint in its entirety. Also on January 20, 1995, the court dismissed class action claims but granted plaintiffs the right to replead certain of the claims. Plaintiffs in the class action did not replead the claims, and on February 28, 1995, the court dismissed these claims in their entirety. Plaintiffs in both the derivative and class action suits appealed the rulings and dismissals of their claims by the District Court to the Third Circuit. (In the derivative action, the Third Circuit affirmed the dismissal of this action by the District Court.) In July 1996, the Third Circuit affirmed in part and reversed in part the class action claims. Pursuant to this ruling, the class action claims have been remanded to the District Court. In 1997, two similar class action suits were brought against the Corporation in the District Court. These cases allege similar facts and include the same defendants as in the previous class action complaint filed in the District Court. In November 1997, the District Court dismissed both of these actions. In March 1999, the attorneys who filed the derivative action described herein filed a new derivative action based on the same allegations previously asserted and dismissed. The parties to the class actions and a derivative action reached an agreement to settle the matters for a total cost of approximately $67 million, funded in large part by the Corporation's liability insurers. On October 19, 1999, the district court approved the settlements.
(b) On August 19, 1998, a former subsidiary of the Corporation known as Westinghouse International Services Corporation ("Westinghouse International") and others commenced an arbitration proceeding (the "Arbitration") against WAK Orient Power & Light Limited ("WAK"), a Pakistan corporation, in the International Court of Arbitration of the International Chamber of Commerce (the "ICC"). The Arbitration arose out of alleged WAK breaches of an engineering, procurement and construction contract (the "EPC Contract"), dated March 31, 1996 and matters connected with the related project. WAK has denied these claims and has filed counterclaims in the Arbitration. An evidentiary hearing on the merits of this dispute in arbitration is scheduled to begin on December 6, 1999.
On September 7, 1998, in contravention of its Arbitration obligations, WAK commenced an action in a court in Lahore, Pakistan (the "Lahore Court") reasserting its counterclaims from the Arbitration and now naming the Corporation, Westinghouse Power Generation ("Westinghouse Power") and Westinghouse International, and seeking 60 billion Pakistan rupees (approximately $1.3 billion). On May 7, 1999, without previously ruling on the Corporation's and other defendants' jurisdictional motions, the Lahore Court entered a default decree in the amount of 60 billion Pakistan rupees (approximately $1.3 billion) against Westinghouse Power and Westinghouse International and certain other defendants. The judgment entered in the Lahore Court does not name the Corporation.
The above two proceedings relate to the Corporation's sale of its Power Generation Business to Siemens Power Generation Corporation (the "Buyer"), which was completed on August 19, 1998. Pursuant to that sale and agreement, the Buyer assumed, and agreed to indemnify the Corporation with respect to liabilities relating to this dispute with WAK.
Between May 26, 1999 and June 10, 1999, WAK purported to register the judgment from Pakistan in the United States and execute upon the same against the Corporation and others in the amount of approximately $1.5 billion. On June 14, 1999, the Corporation and Westinghouse International filed an action in the United States District Court for the Eastern District of Pennsylvania (the "Federal Court") seeking, among other things, a declaration that the parties' disputes are subject to arbitration under the authority of the ICC and enjoining WAK from registering, levying based upon, or otherwise attempting to execute and enforce in any manner any levy or any other execution action taken under the default judgment entered by the Lahore Court. On June 16, 1999, the Federal Court entered an order restraining WAK from registering or otherwise seeking to enforce any judgment based upon the judgment entered by the Lahore Court. Also, on June 17, 1999, the Lahore High Court, where the judgment is on appeal, entered an order suspending operation and enforcement of the judgment entered by the Lahore Court pending a hearing. On July 20, 1999, the Federal Court issued an order stating that its June 16,
1999 Order "remains in full force and effect until a further Order of this court." On September 15, 1999, a hearing was held before the Lahore High Court on the Corporation's appeal on the default judgement and plaintiff's appeal on the suspension of enforcement of the judgement. A ruling has not yet been issued.
Management believes that the Buyer has assumed all liabilities of the Corporation with respect to this matter and, that the Arbitration should take precedence over the Lahore Court Action.
(c) The Corporation and the individual members of its Board of Directors
have been named as defendants in actions filed in Pennsylvania in the
Philadelphia County Court of Common Pleas Trial Division and in New
York in the Supreme Court of New York County of New York in connection
with the contemplated merger of the Corporation with Viacom. The action
in Pennsylvania is entitled RYWELL V. CBS CORP. (No. 9909-0139, filed
September 7, 1999) and the action in New York is entitled ROBERT H.
SHENKER MONEY PURCHASE TRUST V. CONRADES (No. 99118708, filed September
7, 1999). Counsel for the plaintiffs in each of these actions has
advised the Court in Philadelphia that they intend to file an amended
complaint in that Court and to seek to stay the New York action. In
these proceedings, the plaintiffs, purportedly on behalf of themselves
and other shareholders of the Corporation, primarily assert that (i)
the individual members of the Corporation's Board of Directors have
failed to act to maximize shareholder value, including by failing to
properly consider or solicit other bids for the Corporation, to hold a
public auction for the Corporation or to conduct a market check, and
have acted according to their own personal interests, rather than to
their fiduciary obligations, and (ii) the merger of the Corporation
with Viacom does not provide sufficient value to the Corporation and
its shareholders, especially in light of the Corporation's current and
prospective financial condition and the trading prices for the
Corporation's common stock immediately prior to the announcement of the
merger of the Corporation into Viacom. The plaintiffs seek to enjoin
the merger with Viacom, unquantified damages, costs and disbursements,
and other remedies, and seek to have the defendants conduct an auction
to maximize shareholder value.
(d) On December 15, 1998, John F. Gritzer, along with six other individuals, brought suit against the Corporation and the Westinghouse Pension Plan (the "Plan") in the federal district court for the Western District of Pennsylvania (the "Court"). The suit alleges that the Corporation violated the terms of the Plan and breached its fiduciary duty as Plan Administrator. Plaintiffs were employees of the Corporation until the Corporation sold the division in which the plaintiffs were employed. Plaintiffs continued their employment with the buyer of the business until plaintiffs were involuntary terminated in 1995. Plaintiffs claim that as a result of their termination, they are entitled to special retirement benefits under the Plan by virtue of the terms of the Plan and a reciprocal service agreement contained in the asset purchase agreement between the Corporation and the buyer. On October 14, 1999, the Court certified as a class all persons in the Plan who were (i) transferred to another corporation in connection with a transfer of assets, (ii) under a purchase agreement that included a reciprocal service agreement, (iii) who were terminated through no fault of their own, and (iv) who met the requisite age-service combination for special early retirement pensions. The Corporation opposed class certification. The Court declined to grant class status with respect to the claims for breach of fiduciary duty. A case involving similar facts was recently tried before the Court. The Court in that case granted the Corporation's motion for a directed verdict.
Litigation is inherently uncertain and always difficult to predict. Substantial damages are sought in certain of the foregoing matters and although management believes a significant adverse judgment is unlikely, any such judgment could have a material adverse effect on the Corporation's results of operations for a quarter or a year. However, based on its understanding and evaluation of the relevant facts and circumstances, management believes that the Corporation has adequately provided for resolution of these matters described above. Management believes that the litigation should not have a material adverse effect on the financial condition of the Corporation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
(3) ARTICLES OF INCORPORATION AND BYLAWS
(a) The Restated Articles of Incorporation of the Corporation, as amended to October 27, 1999.
(b) The Bylaws of the Corporation, as amended to May 4, 1999, are incorporated by reference to Exhibit 3(b) to Form 10-Q for the quarter ended June 30, 1999.
(4) RIGHTS OF SECURITY HOLDERS
(a) There are no instruments with respect to long-term debt of the Corporation that involve securities authorized thereunder exceeding 10 percent of the total assets of the Corporation and its subsidiaries on a consolidated basis. The Corporation agrees to provide to the Securities and Exchange Commission, upon request, a copy of instruments defining the rights of holders of long-term debt of the Corporation and its subsidiaries.
(b) Rights Agreement is incorporated herein by reference to Exhibit 1 to Form 8-A filed with the Securities and Exchange Commission on January 9, 1996.
(10) MATERIAL CONTRACTS
(a*) The CBS Corporation 1998 Executive Annual Incentive Plan is incorporated herein by reference to Exhibit A to the Corporation's Definitive Proxy Statement for the Annual Meeting of Shareholders held on May 6, 1998, as filed with the Commission on March 25, 1998.
(b*) The CBS Corporation Annual Performance Plan, as amended to July 28, 1999, is incorporated herein by reference to Exhibit 10.19 to the report on Form 10-Q of Infinity Broadcasting Corporation for the quarter ended September 30, 1999.
(c*) The CBS Corporation 1993 Long-Term Incentive Plan, as amended to July 28, 1999, is incorporated herein by reference to Exhibit 10.16 to the report on Form 10-Q of Infinity Broadcasting Corporation for the quarter ended September 30, 1999.
(d*) The CBS Corporation 1991 Long-Term Incentive Plan, as amended to July 28, 1999, is incorporated herein by reference to Exhibit 10.15 to the report on Form 10-Q of Infinity Broadcasting Corporation for the quarter ended September 30, 1999.
(e*) The CBS Corporation 1984 Long-Term Incentive Plan, as amended to November 1, 1996, is incorporated herein by reference to Exhibit 10(c) to Form 10-Q for the quarter ended September 30, 1996.
(f*) Amended and Restated Infinity Broadcasting Corporation Stock Option Plan is incorporated herein by reference to Exhibit 4.4 to the Corporation's Registration Statement No. 333-13219 on Post-Effective Amendment No. 1 on Form S-8 to Form S-4 filed with the Securities and Exchange Commission on January 2, 1997.
(g*) The Westinghouse Executive Pension Plan, as amended as of July 28, 1999, is incorporated by reference to Exhibit 10.20 to the report on Form 10-Q of Infinity Broadcasting Corporation for the quarter ended September 30, 1999.
(h*) CBS Supplemental Executive Retirement Plan, as amended to April 1, 1999.
(i*) CBS Bonus Supplemental Executive Retirement Plan, as amended to April 1, 1999.
(j*) CBS Supplemental Employee Investment Fund, as amended as of January 1, 1998.
(k*) The CBS Corporation Deferred Compensation and Stock Plan for Directors, as amended as of July 28, 1999.
(l*) The Corporation's Director's Charitable Giving Program, as amended to April 30, 1996, is incorporated herein by reference to Exhibit 10(g) to Form 10-Q for the quarter ended June 30, 1996.
(m*) The Corporation's Advisory Director's Plan Termination Fee Deferral Terms and Conditions, dated April 30, 1996, is incorporated herein by reference to Exhibit 10(i) to Form 10-Q for the quarter ended June 30, 1996.
(n*) Employment Agreement between the Corporation and Mel Karmazin, made as of June 20, 1996 and effective as of December 31, 1996, is hereby incorporated by reference to Exhibit 10(s) to Form 10-Q for the quarter ended March 31, 1997.
(o*) Infinity Broadcasting Corporation Warrant Certificate No. 3 to Mel Karmazin is incorporated herein by reference to Exhibit 4.6 to the Corporation's Registration Statement No. 333-13219 on Post-Effective Amendment No. 1 on Form S-8 to Form S-4 filed with the Securities and Exchange Commission on January 2, 1997.
(p*) Employment agreement between a subsidiary of the Corporation, CBS Broadcasting Inc. (formerly CBS Inc.) and Leslie Moonves entered into as of May 17, 1995, and amended as of January 20, 1998, is incorporated herein by reference to Exhibit 10(u) to Form 10-K for the year ended December 31, 1997.
(q*) Amendment entered into as of July 5, 1999 to employment agreement between CBS Broadcasting Inc. and Leslie Moonves entered into as of May 17, 1995 as amended as of January 20, 1998.
(r*) Agreement between the Corporation and Fredric G. Reynolds dated March 2, 1999 is incorporated herein by reference to Exhibit 10(q) to Form 10-Q for the quarter ended March 31, 1999.
(s*) Agreement between the Corporation and Louis J. Briskman dated March 2, 1999 is incorporated by reference to Exhibit 10(r) to Form 10-Q for the quarter ended March 31, 1999.
(t*) The Infinity Broadcasting Corporation 1998 Long-Term Incentive Plan, as amended to April 1, 1999, is incorporated by reference to Exhibit 10.17 to the Infinity report on Form 10-Q for the quarter ended September 30, 1999.
(u*) The Infinity Broadcasting Corporation Executive Annual Incentive Plan is incorporated by reference to Exhibit 10.18 to the Infinity Registration Statement No. 333-63727 on Form S-1, Amendment No. 4 filed with the SEC on December 4, 1998.
(v) The $5.5 billion Credit Agreement among the Corporation, the Lenders parties thereto, NationsBank, N.A. and The Toronto-Dominion Bank as Syndication Agents, The Chase Manhattan Bank as Documentation Agent, and Morgan Guaranty Trust Company of New York as Administrative Agent, dated August 29, 1996, is incorporated herein by reference to Exhibit 10(l) to Form 10-Q for the quarter ended September 30, 1996.
(w) First Amendment, dated as of January 29, 1997 to the Credit Agreement, dated as of August 29, 1996, among CBS Corporation, the Lenders parties thereto, NationsBank, N.A. and The Toronto-Dominion Bank as Syndication Agents, The Chase Manhattan Bank as Documentation Agent, and Morgan Guaranty Trust Company of New York as Administrative Agent, is hereby incorporated by reference to Exhibit 10(p) to Form 10-Q for the quarter ended March 31, 1997.
(x) Second Amendment, dated as of March 21, 1997, to the Credit Agreement, dated as of August 29, 1996, as amended by the First Amendment thereto dated as of January 29, 1997, among the Corporation, the Subsidiary Borrowers parties thereto, the Lenders parties thereto, NationsBank, N.A. and The Toronto-Dominion Bank as Syndication Agents, The Chase Manhattan Bank as Documentation Agent, and Morgan Guaranty Trust Company of New York as Administrative Agent, is hereby incorporated by reference to Exhibit 10(q) to Form 10-Q for the quarter ended March 31, 1997.
(y) Third Amendment dated as of March 3, 1998, to the Credit Agreement dated as of August 29,
1996, as amended by the First Amendment thereto dated as of January 29, 1997, as amended by the Second Amendment thereto dated as of March 21, 1997 among the Corporation, the Subsidiaries Borrowers parties thereto, the Lenders parties thereto, NationsBank, N.A. and The Toronto-Dominion Bank as Syndication Agents, The Chase Manhattan Bank as Documentation Agent, and Morgan Guaranty Trust Company of New York as Administrative Agent is incorporated by reference to Exhibit 10(x) to Form 10-Q for the quarter ended March 31, 1998.
(z) Fourth Amendment, dated as of February 26, 1999, to the CBS Corporation Credit Agreement, dated as of August 29, 1996, as amended by the First, Second, and Third Amendments, dated January 29, 1997, March 21, 1997 and March 3, 1999, respectively, among CBS Corporation, the Subsidiary Borrowers parties thereto, the Lenders parties thereto, Nationsbank, N.A. and The Toronto-Dominion Bank as Syndication Agents, The Chase Manhattan Bank as Documentation Agent, and Morgan Guaranty Trust Company of New York as Administrative Agent is incorporated by reference to Exhibit 10.9 to Form 10-Q of Infinity Broadcasting Corporation for the quarter ended March 31, 1999.
(aa) Asset Purchase Agreement, dated June 25, 1998, between the Corporation and WGNH Acquisition, LLC, an entity owned 60 percent by Morrison Knudson Corporation and 40 percent by BNFL USA Group, Inc., relating to the Corporation's Energy Systems Business Unit is incorporated by reference to Exhibit 10(w) to Form 10-Q for the quarter ended June 30, 1998.
(bb) Asset Purchase Agreement, dated June 25, 1998, between the Corporation and WGNH Acquisition, LLC, an entity owned 60 percent by Morrison Knudson Corporation and 40 percent by BNFL USA Group, Inc., relating to the Corporation's Government and Environmental Services Company is incorporated by reference to Exhibit 10(x) to Form 10-Q for the quarter ended June 30, 1998.
(cc) Intercompany Agreement between the Corporation and Infinity Broadcasting Corporation dated as of December 15, 1998 is incorporated by reference to Exhibit 10(x) to Form 10-K for the year ended December 31, 1998.
(dd) Tax Sharing Agreement between the Corporation and Infinity Broadcasting Corporation dated as of December 15, 1998 is incorporated by reference to Exhibit 10(y) to Form 10-K for the year ended December 31, 1998.
(ee) Agreement and Plan of Merger, dated as of March 31, 1999, by and among King World Productions, Inc., the Corporation and K Acquisition Corp. is incorporated herein by reference to Exhibit 2.1 to the report on Form 8-K of King World Productions, Inc. filed with the SEC on April 1, 1999.
(ff) Amendment No. 1, dated as of September 8, 1999, to the Agreement and Plan of Merger, dated as of March 31, 1999, by and among King World Productions, Inc., the Corporation and K Acquisition Corp., is incorporated herein by reference to Exhibit 2.1 to the report on Form 8-K filed with the SEC on September 15, 1999.
(gg) Stockholders Agreement dated as of March 31, 1999, among the Corporation and the stockholders named therein, is incorporated by reference to the Registration Statement No. 333-84761 on Form S-4 filed with the SEC on August 9, 1999.
(hh) Amendment No. 1, dated as of June 1, 1999, to the Stockholders Agreement dated as of March 31, 1999, among the Corporation and the stockholders named therein, is incorporated by reference to the Registration Statement No. 333-84761 on Form S-4 filed with the SEC on August 9, 1999.
(ii) Amendment No. 2, dated as of October 5, 1999, to the Stockholders Agreement dated as of March 31, 1999, among the Corporation and the stockholders named therein, is incorporated by reference to Post-Effective Amendment No. 1 to the Registration Statement No. 333-84761 on Form S-4 filed with the SEC on November 5, 1999.
(jj) Voting Agreement, dated as of September 6, 1999, between National Amusements, Inc. and the Corporation, is incorporated by reference to Exhibit 99.2 to the report on Form 8-K filed with the SEC on September 8, 1999.
(kk) Stockholder Agreement, dated as of September 6, 1999, between National Amusements, Inc. and the Corporation, is incorporated by reference to Exhibit 99.3 to the report on Form 8-K filed with the SEC on September 8, 1999.
(ll) Agreement and Plan of Merger, dated as of May 27, 1999, among Infinity Broadcasting Corporation, Burma Acquisition Corp. and Outdoor Systems, Inc., is incorporated herein by reference to Exhibit 99.1 to the report on Form 8-K of Outdoor Systems, Inc., filed with the SEC on June 3, 1999.
(mm) Amendment No. 1, dated as of June 16, 1999, to the Agreement and Plan of Merger, dated as of May 27, 1999, among Infinity Broadcasting Corporation, Burma Acquisition Corp. and Outdoor Systems, Inc., is incorporated herein by reference to Exhibit 99.2 to Infinity Broadcasting Corporation's report on Form 8-K, filed with the SEC on June 25, 1999.
(nn) Stockholders Agreement, dated as of May 27, 1999, among Infinity Broadcasting Corporation, William S. Levine, Arturo R. Moreno, Carole D. Moreno, Levine Investments Limited Partnership and BRN Properties Limited Partnership, is incorporated herein by reference to Exhibit 99.2 to the report on Form 8-K of Outdoor Systems, Inc., filed with the SEC on June 3, 1999.
(oo) Amendment No. 1, dated July 15, 1999, to the Stockholders Agreement dated May 27, 1999 among the Corporation and the stockholders named in the agreement is incorporated by reference to Exhibit 24 to Registration Statement No. 333-88363 on Form S-4 filed by Infinity Broadcasting Corporation with the SEC on October 4, 1999.
(pp) Voting Agreement, dated as of May 27, 1999, between CBS Broadcasting Inc. and Outdoor Systems, Inc., is incorporated herein by reference to Exhibit 99.3 to the report on Form 8-K of Outdoor Systems, Inc., filed with the SEC on June 3, 1999.
(qq) Amended and Restated Agreement and Plan of Merger dated as of October 8, 1999 between the Corporation and Viacom Inc. is incorporated herein by reference to Exhibit 2 to Form 8-K dated October 12, 1999.
(rr*) Letter Agreement, dated as of September 6, 1999, between Viacom Inc. and Mel Karmazin, is incorporated by reference to Exhibit 99.4 to the report on Form 8-K filed with the SEC on September 8, 1999.
(27) FINANCIAL DATA SCHEDULE
B) REPORTS ON FORM 8-K
A Current Report on Form 8-K (Items 5 and 7), filed with the Securities and Exchange Commission on July 30, 1999, filing a press release announcing the election of Leslie Moonves to the Board of Directors, effective July 28, 1999.
A Current Report on Form 8-K (Items 5 and 7), filed with the Securities and Exchange Commission on August 4, 1999, filing a press release concerning the Corporation's earnings for the second quarter of 1999 and financial information for the three months ended June 30, 1999.
A Current Report on Form 8-K (Items 5 and 7), filed with the Securities and Exchange Commission on September 8, 1999, filing an Agreement and Plan of Merger between Viacom Inc., and CBS Corporation.
A Current Report on Form 8-K (Items 5 and 7), filed with the Securities and Exchange Commission on September 15, 1999, filing Amendment No. 1 to an Agreement and Plan of Merger between King World Productions, Inc. and CBS Corporation.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 12th day of November 1999.
CBS CORPORATION
By: /s/ ROBERT G. FREEDLINE
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ROBERT G. FREEDLINE
VICE PRESIDENT AND
CONTROLLER
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CBS
EXHIBIT 3(a)
CBS CORPORATION
RESTATED ARTICLES OF INCORPORATION
(As amended through October 27, 1999)
FIRST: The name of the corporation (hereinafter called the "Company")
is CBS CORPORATION.
SECOND: The location and post office address of the current registered office of the Company in the Commonwealth of Pennsylvania is Westinghouse Building, Gateway Center, Pittsburgh, Allegheny County, Pennsylvania 15222.
THIRD: The Company is subject to the Act of the General Assembly of the Commonwealth of Pennsylvania, known as the "Business Corporation Law," approved May 5, 1933, and any act amendatory thereof, supplementary thereto or substituted therefor, and the purposes for which the Company is organized are:
(1) To develop, build, manufacture, process and otherwise produce, to purchase, lease, exchange and otherwise acquire, and to hold, own, use, operate, repair, sell, lease, assign, distribute and otherwise deal in and dispose of structures, machinery, equipment, apparatus, appliances, devices, products, materials, articles, processes and systems for any application or purpose, whether for use for industrial, utility, transportation, broadcasting, communication, home, defense, consumer or other purposes or applications, or combinations thereof, whatsoever, including but not limited to the following: for the generation, conversion, transmission, utilization, storage and control of any form of energy whatsoever (including but not limited to electrical, mechanical, chemical, atomic, nuclear, steam, thermal, mineral, gas, water and solar); for the handling, conditioning, heating, cooling, treatment, application or use of air and other gases, liquids and solids; for aerial, nautical, terrestrial, spatial or celestial operations, applications or navigation; for radio, television and all other forms of transmission, reception or communication; and for incorporation into or use in, on or about any establishment, building or structure of any kind or nature whatsoever; and any and all related engines, turbines, motors, parts, tools, accessories and improvements thereof and supplies or materials pertaining or incidental to any of the above structures, machinery, equipment, apparatus, appliances, devices, products, materials, articles, processes and systems, of any kind or nature whatsoever.
(2) To develop, build, manufacture, process and otherwise produce, to purchase, lease, exchange and otherwise acquire, and to hold, own, use, operate, repair, sell, lease, assign, distribute and otherwise deal in and dispose of structures,
machinery, equipment, apparatus, appliances, devices, products, materials, articles, processes, systems, goods, wares and merchandise of every kind, nature and description, and to engage in any industrial, manufacturing, mining, mercantile, broadcasting, trading or other lawful business of any kind or character whatsoever.
(3) To conduct and carry on research work in, and to engage in any activity pertaining or incidental to, any scientific, technical or other field or fields, and to render services of a scientific, technical or other nature to any person, association, firm, corporation, country, state, municipality or other governmental division or subdivision.
(4) To purchase, lease, exchange and otherwise acquire all, or any part of, or any interest in, the properties, assets, business and goodwill of any one or more persons, associations, firms or corporations; to pay for the same in cash, property or its own or other securities; to hold, own, use, operate, reorganize and otherwise manage such properties, assets, business and goodwill; to sell, lease, assign, distribute, liquidate and otherwise deal in and dispose of the whole or any part thereof; and in connection therewith, to assume or guarantee performance of any liabilities, obligations or contracts of such persons, associations, firms or corporations.
(5) To develop, apply for, register, take licenses in respect of, purchase, lease, exchange and otherwise acquire, and to hold, own, use, operate, sell, lease, assign, grant licenses in respect of, manufacture under, exercise and otherwise deal in and dispose of any and all inventions, devices, formulae, technical or business information, including trade secrets, know-how, processes, improvements and modifications thereof, letters patent and all rights connected therewith or appertaining thereto, copyrights, trademarks, trade names, trade symbols and other indications of origin and ownership, franchises, licenses, concessions or other rights granted by or recognized under the laws of any country, state, municipality or other governmental division or subdivision.
(6) To purchase, exchange and otherwise acquire, and to hold, own, sell, assign, transfer, reissue, cancel and otherwise deal in and dispose of its own shares and securities, to such extent and in such manner and upon such terms as it may determine; provided that the Company shall not use its funds or property for the purchase of its own shares when such purchase shall be prohibited by law; and provided that shares of its capital stock which belong to the Company shall not be voted directly or indirectly.
(7) To enter into, make, perform and carry out contracts and agreements of every kind and description which may be necessary, appropriate, convenient or advisable in carrying out the purposes of the Company, with any person, association, firm, corporation, country, state, municipality or other governmental division or subdivision.
(8) To carry out any of or all the foregoing purposes as principal or agent and alone or with associates; and to execute from time to time such general or special powers of attorney to such person or persons as it may determine, granting to such
person or persons such powers as it may deem proper, and to revoke such powers of attorney as and when it may desire; and to conduct its business in any and all of its branches at one or more offices in the Commonwealth of Pennsylvania and elsewhere.
(9) To do everything necessary, suitable, convenient or proper for, or in connection with, or incident to, the accomplishment of any of the purposes herein enumerated, or which shall at any time appear conducive to or expedient for the accomplishment of any of such purposes, not inconsistent with the laws of the Commonwealth of Pennsylvania.
Except as otherwise expressly provided in this Article THIRD, none of the purposes set forth above in this Article THIRD shall be in any way limited or restricted by reference to, or inference from, any other of the purposes therein set forth, and each of said purposes shall be regarded as a separate and independent purpose.
The purposes set forth above shall be construed as powers as well as purposes; but the enumeration herein of certain powers is not intended to be exclusive of, or a waiver of, but shall be in addition to, the powers, rights or privileges granted or conferred by said "Business Corporation Law" and any other laws of the Commonwealth of Pennsylvania applicable to the Company that may now or hereafter be in force. Without limiting the generality of the foregoing, the Company shall have and may exercise the general powers which are now or may hereafter be enumerated in Section 302 of said "Business Corporation Law," or any act amendatory thereof, supplemental thereto or substituted therefor, to the same extent as if such powers were set forth in full herein.
Except as otherwise provided by law or these Restated Articles of Incorporation or the By-laws, the powers of the Company shall be exercised by its Board of Directors.
Nothing herein contained shall authorize or be construed as intended to authorize the Company to carry on any business or exercise any powers in any commonwealth, state, territory, or country which a business corporation organized under the laws of such commonwealth, state, territory or country could not carry on or exercise, except to the extent permitted or authorized by the laws of such commonwealth, state, territory or country; and notwithstanding any provision herein, the Company shall not be deemed to have the power to carry on or exercise within the Commonwealth of Pennsylvania any business whatsoever the carrying on or exercising of which would prevent the Company from being classified as a business corporation under said "Business Corporation Law," or any act amendatory thereof, supplemental thereto or substituted therefor.
FOURTH: The term of existence of Company shall be perpetual.
FIFTH: A. The total number of shares of all classes of stock which the Company shall have authority to issue is 1,125,000,000 consisting of: (1) 25,000,000 shares of Preferred
Stock, par value $1.00 per share ("Preferred Stock"), and (2) 1,100,000,000 shares of Common Stock, par value $1.00 per share ("Common Stock").
B. The Board of Directors is hereby expressly authorized to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock. Before any share of any such series is issued, the Board shall fix, and hereby is expressly empowered to fix, the following provisions of the shares thereof:
(1) the terms of such series, the number of shares to constitute such series and the stated value thereof if different from the par value thereof;
(2) whether the shares of such series shall have voting rights in addition to any voting rights provided by law and, if so, the terms of such voting rights, which may be general or limited;
(3) the dividends, if any, payable on such series, whether any such dividends shall be cumulative and, if so, from what dates, the conditions and dates upon which such dividends shall be payable, the preference or relation which such dividends shall bear to the dividends payable on any shares of stock of any other class or any other series of Preferred Stock;
(4) whether the shares of such series shall be subject to redemption at the election of the Company or the holders of such series and, if so, the times, prices and other conditions of such redemption;
(5) the amount or amounts payable upon shares of such series upon, and the rights of the holders of such series in the event of, voluntary or involuntary liquidation, dissolution or winding up, or upon any distribution of the assets of the Company;
(6) whether the shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or other corporate purposes and the terms and provisions relative to the operation thereof;
(7) whether the shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or any other series of Preferred Stock or any other securities and, if so, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of conversion or exchange;
(8) the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or the making of other distributions on, or upon the purchase, redemption or other acquisition by the Company of, the Common Stock or shares of stock of any other class or any other series of Preferred Stock;
(9) the conditions or restrictions, if any, upon the creation of indebtedness of the Company or upon the issue of any additional stock, including additional shares of any other series of Preferred Stock or of any other class of stock; and
(10) any other powers, preferences and relative, participating, optional and other special rights, and any qualifications, limitations and restrictions thereof.
C. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series of Preferred Stock at any time outstanding. All shares of any one series of Preferred Stock shall be identical in all respects with all other shares of such series, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative.
D. Subject to the provisions of this Article FIFTH and actions taken by the Board of Directors pursuant to this Article FIFTH:
(1) such dividends (whether in cash, stock or otherwise) as may be determined by the Board of Directors may be declared and paid on the Common Stock from time to time in accordance with the laws of the Commonwealth of Pennsylvania; and the holders of the Preferred Stock shall not be entitled to participate in any such dividends whether payable in cash, stock or otherwise;
(2) voting power shall be exclusively vested in the Common Stock;
(3) dividends upon shares of any class of the Company shall be payable only out of assets legally available for the payment of such dividends, and the rights of the holders of the Preferred Stock of all series and of the holders of the Common Stock in respect of dividends shall at all times be subject to the power of the Board of Directors, which is hereby expressly vested in said Board, from time to time to set aside such reserves and to make such other provisions, if any, as said Board shall deem to be necessary or advisable for working capital, for additions, improvements and betterments to plant and equipment, for expansion of the Company's business (including the acquisition of real and personal property for that purpose), for plans for maintaining employment at the plants of the Company and also for other plans for the benefit of employees generally, and for any other purposes of the Company whether or not similar to those herein mentioned;
(4) holders of Preferred Stock and holders of Common Stock shall not have any preemptive, preferential or other right to subscribe for or purchase or acquire any shares of any class or any other securities of the Company, whether now or hereafter authorized, and whether or not convertible into, or evidencing or carrying the right to purchase, shares of any class or any other securities now or hereafter authorized, and whether the same shall be issued for cash, services or property, or by way of dividend or otherwise, other than such right, if any, as the Board of Directors in its discretion from
time to time may determine. If the Board of Directors shall offer to the holders of the Preferred Stock or the holders of the Common Stock, or any of them, any such shares or other securities of the Company, such offer shall not in any way constitute a waiver or release of the right of the Board of Directors subsequently to dispose of other portions of said shares or securities without so offering the same to said holders;
(5) the shares of Preferred Stock and the shares of Common Stock may be issued for such consideration and for such corporate purposes as the Board of Directors may from time to time determine;
(6) subject to the provisions of the By-laws of the Company as from time to time amended, with respect to the closing of the transfer books or the fixing of a record date for the determination of shareholders entitled to vote, each holder of record of shares of any class of the Company shall be entitled to one vote, on each matter submitted to a vote at a meeting of shareholders and in respect of which shares of such class shall be entitled to be voted, for every share of such class standing in his name on the books of the Company;
(7) in each election of directors no shareholder shall have any right to cumulate his votes and cast them for one candidate or distribute them among two or more candidates.
E. 1. DESIGNATION AND AMOUNT. The shares of this series shall be designated as "Series A Participating Preferred Stock" (the "Series A Preferred Stock"). The par value of each share of Series A Preferred Stock shall be $1.00. The number of shares constituting the Series A Preferred Stock initially shall be 5,000,000; PROVIDED, HOWEVER, that, if more than a total of 5,000,000 shares of Series A Preferred Stock shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of December 28, 1995, between the Company and First Chicago Trust Company of New York, as Rights Agent (as such agreement may be amended from time to time, the "Rights Agreement"), the Board of Directors of the Company, pursuant to Section 1914(c) and/or Section 1522(b) of the Pennsylvania Business Corporation Law of 1988, as amended (the "Pennsylvania BCL"), and in accordance with the provisions of Article FIFTH of the Restated Articles of Incorporation, shall adopt a resolution or resolutions increasing the previously determined total number of shares of Series A Preferred Stock authorized to be issued (to the extent that the Restated Articles of Incorporation then permit) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights and directing that a statement or articles of amendment with respect to such increase in authorized shares for the Series A Preferred Stock be executed and filed with the Department of State of the Commonwealth of Pennsylvania.
2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the provisions for adjustment hereinafter set forth, the holders of outstanding shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, (i) a cash
dividend in an amount per share (rounded to the nearest cent) equal to 100 times the aggregate per share amount of each cash dividend declared or paid on the Common Stock, $1.00 par value per share, of the Company (the "Common Stock") and any other security ranking junior to the Series A Preferred Stock, and (ii) a preferential cash dividend (the "Preferential Dividends"), if any, in preference to the holders of Common Stock and any other security ranking junior to the Series A Preferred Stock, on the first day of March, June, September and December of each year (each a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, payable in an amount (except in the case of the first Quarterly Dividend Payment if the date of the first issuance of Series A Preferred Stock is a date other than a Quarterly Dividend Payment date, in which case such payment shall be a prorated amount of such amount) equal to $1.00 per share of Series A Preferred Stock less the per share amount of all cash dividends declared on the Series A Preferred Stock pursuant to clause (i) of this sentence since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In addition, in the event the Company shall, at any time after the issuance of any share or fraction of a share of Series A Preferred Stock, pay any dividend or make any distribution on the shares of Common Stock of the Company, whether by way of a dividend or a reclassification of stock, a recapitalization, reorganization or partial liquidation of the Company or otherwise, which is payable in cash or any debt security, debt instrument, real or personal property or any other property (other than (x) cash dividends subject to the immediately preceding sentence, (y) a distribution of shares of Common Stock or other capital stock of the Company or (z) a distribution of rights or warrants to acquire any such shares, including as such a right any debt security convertible into or exchangeable for any such shares, at a price less than the Fair Market Value (as hereinafter defined) of such shares on the date of issuance of such rights or warrants), then, and in each such event, the Company shall simultaneously pay on each then outstanding share of Series A Preferred Stock a distribution, in like kind, of 100 times such distribution paid on a share of Common Stock (subject to the provisions for adjustment hereinafter set forth). The dividends and distributions on the Series A Preferred Stock to which holders thereof are entitled pursuant to clause (i) of the first sentence of this paragraph and pursuant to the second sentence of this paragraph are hereinafter referred to as "Dividends" and the multiple of such cash and non-cash dividends and distributions on the Common Stock applicable to the determination of the Dividends, which shall be 100 initially but shall be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Dividend Multiple." In the event the Company shall at any time after January 9, 1996 declare or pay any dividend or make any distribution on Common Stock payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the Dividend Multiple thereafter applicable to the determination of the amount of Dividends which holders of shares of Series A Preferred Stock shall be entitled to receive shall be the Dividend Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) The Company shall declare each Dividend at the same time it declares any cash or non-cash dividend or distribution on the Common Stock in respect of which a Dividend is required to be paid. No cash or non-cash dividend or distribution on the Common Stock in respect of which a Dividend is required to be paid shall be paid or set aside for payment on the Common Stock unless a Dividend in respect of such dividend or distribution on the Common Stock shall be simultaneously paid, or set aside for payment, on the Series A Preferred Stock.
(c) Preferential Dividends shall begin to accrue on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issuance of such shares of Series A Preferred Stock. Accrued but unpaid Preferential Dividends shall cumulate but shall not bear interest.
(d) Any dividend payment made on shares of the Series A Preferred Stock shall first be credited against the earliest accrued but unpaid Preferential Dividend due with respect to shares of the Series A Preferred Stock.
(e) All dividends paid with respect to shares of the Series A Preferred Stock pursuant to this paragraph 2 shall be paid pro rata on a share-by-share basis to the holders entitled thereto.
(f) The holders of shares of Series A Preferred Stock shall not be entitled to receive any dividends or distributions except as provided herein.
3. VOTING RIGHTS. The holders of record of outstanding shares of Series A Preferred Stock shall have the following voting rights:
(a) Subject to the provisions for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the holders of the Common Stock. The number of votes which a holder of a share of Series A Preferred Stock is entitled to cast, as the same may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Vote Multiple." In the event the Company shall at any time after January 9, 1996 declare or pay any dividend on Common Stock, payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the Vote Multiple thereafter applicable to the determination of the number of votes per share to which holders of shares of Series A Preferred Stock shall be entitled after such event shall be the Vote Multiple immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in the Restated Articles of Incorporation, in the By-laws, or as otherwise provided by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Company.
(c) In the event that the Preferential Dividends payable to the holders of Series A Preferred Stock are in arrears and unpaid for the equivalent of six quarterly periods, the Board of Directors will be increased by two directors and the holders of Series A Preferred Stock, together with the holders of all other outstanding series of the Preferred Stock in respect of which such a default in payment of dividends as described hereinabove exists and is entitled to vote thereon, voting as a single class without regard to series, will be entitled to elect two directors of the expanded Board of Directors. Such entitlement shall continue until such time as all dividends in arrears on all of the Series A Preferred Stock at the time outstanding have been paid or declared and set aside for payment, whereupon such voting rights of the holders of the Series A Preferred Stock shall cease (and, unless holders of shares of other series of Preferred Stock shall still have the right to elect such directors, the respective terms of the two additional directors shall thereupon expire and the number of directors constituting the full board be decreased by two) subject to being again revived from time to time upon the reoccurrence of the conditions described in this paragraph (3)(c) as giving rise thereto.
At any time when the rights of holders of Series A Preferred Stock to elect two additional directors shall have so vested, the Company shall, upon the written request of the holders of record of not less than 10% of the Series A Preferred Stock then outstanding (or 10% of all of the shares of Preferred Stock having the right to vote for such directors in case holders of shares of other series of Preferred Stock shall also have the right to elect directors in such circumstances), call a special meeting of holders of the Series A Preferred Stock (and other series of Preferred Stock, if applicable) for the election of directors. In the case of a written request, the special meeting shall be held within 60 days after the delivery of the request, upon the notice provided by law and in the By-laws of the Company; except that the Company shall not be required to call such a special meeting if the request is received less than 120 days before the date fixed for the next ensuing annual meeting of shareholders of the Company.
Whenever the number of directors of the Company shall have been increased by two as provided in this paragraph (3)(c), the number as so increased may thereafter be further increased or decreased in such manner as may be permitted by the By-laws and without the vote of the holders of Series A Preferred Stock. No such action shall impair the right of the holders of Series A Preferred Stock to elect and to be represented by two directors as provided in this paragraph (3)(c).
The two directors elected as provided in this paragraph (3)(c) shall serve until the next annual meeting of shareholders of the Company and until their respective successors shall be elected and qualified or the earlier expiration of their terms as provided in this paragraph (3)(c). No such director may be removed without the vote of holders of a majority of shares of Series A Preferred Stock (or holders of a majority of shares of Preferred Stock having the right to vote in the election of such director in case holders of shares of other series of Preferred Stock shall also have the right to elect such director). If, prior to the expiration of the term of any such director, a vacancy in the office of such director shall occur, such vacancy shall, until the expiration of such term, in each case be filled by the remaining director elected as provided in this paragraph (3)(c) or, if none remains in office, by vote of the holders of record of a majority of the outstanding shares of Series A Preferred Stock (or holders of a majority of
shares of Preferred Stock who are then entitled to participate in the election of such directors in case holders of shares of other series of Preferred Stock shall also have the right to elect such director).
(d) Except as otherwise required by the Articles of Incorporation or By-laws or set forth in this paragraph 3 or in paragraph 13 or as otherwise provided by law, holders of Series A Preferred Stock shall have no other special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for the taking of any corporate action.
4. CERTAIN RESTRICTIONS.
(a) Whenever Preferential Dividends or Dividends are in arrears or the Company shall be in default of payment thereof, thereafter and until all accrued and unpaid Preferential Dividends and Dividends, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid or set irrevocably aside for payment in full, and in addition to any and all other rights which any holder of shares of Series A Preferred Stock may have in such circumstances, the Company shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity as to dividends with the Series A Preferred Stock, unless dividends are paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled if the full dividends accrued thereon were to be paid;
(iii) except as permitted by subparagraph (iv) of this paragraph
4(a), redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for
shares of any stock of the Company ranking junior (both as to dividends
and upon liquidation, dissolution or winding up) to the Series A
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock (either as to dividends or upon liquidation, dissolution or winding up), except as permitted by subparagraph (iii) of this paragraph 4(a) or in accordance with a purchase offer made to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b) The Company shall not permit any Subsidiary (as hereinafter defined) of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under subparagraph (a) of this paragraph 4, purchase or otherwise acquire such shares at such time and in such manner. A "Subsidiary" of the Company shall mean any corporation or other entity of which securities or other ownership interests entitled to cast at least a majority of the votes that would be entitled to be cast in an election of the board of directors of such corporation or other entity or other persons performing similar functions are beneficially owned, directly or indirectly, by the Company or by any corporation or other entity that is otherwise controlled by the Company.
(c) The Company shall not issue any shares of Series A Preferred Stock except upon exercise of Rights issued pursuant to the Rights Agreement, a copy of which is on file with the Secretary of the Company at its principal executive office and shall be made available to shareholders of record without charge upon written request therefor addressed to said Secretary. Notwithstanding the foregoing sentence, nothing contained in the provisions of this Article FIFTH (E) shall prohibit or restrict the Company from issuing for any purpose any series of Preferred Stock with rights and privileges similar to, different from, or greater than, those of the Series A Preferred Stock or, subject to the limitations set forth in paragraph 13, from creating other securities senior to, junior to or on a parity with the Series A Preferred Stock.
5. REACQUIRED SHARES. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares upon their retirement and cancellation shall become authorized but unissued shares of Preferred Stock, without designation as to series, and such shares may be redesignated and reissued as part of any series of the Preferred Stock.
6. LIQUIDATION, DISSOLUTION OR WINDING UP; FAIR VALUE FOR PURPOSES OF PENNSYLVANIA ANTI-TAKEOVER STATUTE.
(a) Upon any voluntary or involuntary liquidation, dissolution
or winding up of the Company, no distribution shall be made (i) to the holders
of shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless the holders of
shares of Series A Preferred Stock outstanding shall have received out of the
assets of the Company available for distribution to its shareholders after
payment or provision for payment of any securities ranking senior to the Series
A Preferred Stock, for each share of Series A Preferred Stock, subject to
adjustment as hereinafter provided, (A) $100.00 plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment or, (B) if greater than the amount specified in clause
(i)(A) of this sentence, an amount equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, as the same may be adjusted as
hereinafter provided, and (ii) to the holders of stock ranking on a parity upon
liquidation, dissolution or winding up with the Series A Preferred Stock, unless
simultaneously therewith distributions are made
ratably on the Series A Preferred Stock and all other shares of such parity stock in proportion to the total amounts to which the holders of shares of Series A Preferred Stock are entitled under clause (i)(A) of this sentence and to which the holders of such parity shares are entitled, in each case upon such liquidation, dissolution or winding up. The amount to which holders of Series A Preferred Stock may be entitled upon liquidation, dissolution or winding up of the Company pursuant to clause (i)(B) of the foregoing sentence is hereinafter referred to as the "Participating Liquidation Amount" and the multiple of the amount to be distributed to holders of shares of Common Stock upon the liquidation, dissolution or winding up of the Company applicable pursuant to said clause to the determination of the Participating Liquidation Amount, as said multiple may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Liquidation Multiple." In the event the Company shall at any time after January 9, 1996 declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then, in each such case, the Liquidation Multiple thereafter applicable to the determination of the Participating Liquidation Amount to which holders of Series A Preferred Stock shall be entitled after such event shall be the Liquidation Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Except as provided in this paragraph 6(a), holders of Series A Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the Company.
(b) For the purposes of this paragraph 6, none of the following shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Company:
(i) the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company;
(ii) the consolidation or merger of the Company with or into one or more other corporations or other associations;
(iii) the consolidation or merger of one or more corporations or other associations with or into the Company;
(iv) the participation by the Company in a share exchange;
(v) the division of the Company pursuant to sections 1951 through 1957 of the Pennsylvania BCL;
(vi) the conversion of the Company pursuant to sections 1961 through 1966 of the Pennsylvania BCL;
(c) Notwithstanding anything to the contrary in this Article FIFTH (E), in case any Controlling Person or Group (as defined from time to time in Section 2543 of the Pennsylvania
BCL) shall be required to purchase any shares of Series A Preferred Stock pursuant to Sections 2541 through 2548 of the Pennsylvania BCL, as in effect from time to time, the amount that is determined to represent the "fair value" (as that term is used in such Section 2542 of the Pennsylvania BCL) of such shares shall be an amount per share equal to the Liquidation Multiple then in effect times the aggregate amount per share that such Controlling Person or Group is required to pay to purchase any share of Common Stock pursuant to such Sections 2541 through 2548 of the Pennsylvania BCL.
7. CERTAIN RECLASSIFICATIONS AND OTHER EVENTS.
(a) In the event that holders of shares of Common Stock of the Company receive after January 9, 1996 in respect of their shares of Common Stock any share of capital stock of the Company (other than any share of Common Stock of the Company), whether by way of reclassification, recapitalization, reorganization, dividend or other distribution or otherwise (a "Transaction"), then, and in each such event, the dividend rights, voting rights and rights upon the liquidation, dissolution or winding up of the Company of the shares of Series A Preferred Stock shall be adjusted so that after such event the holders of Series A Preferred Stock shall be entitled, in respect of each share of Series A Preferred Stock held, in addition to such rights in respect thereof to which such holder was entitled immediately prior to such adjustment, to (i) such additional dividends as equal the Dividend Multiple in effect immediately prior to such Transaction multiplied by the additional dividends which the holder of a share of Common Stock shall be entitled to receive by virtue of the receipt in the Transaction of such capital stock, (ii) such additional voting rights as equal the Vote Multiple in effect immediately prior to such Transaction multiplied by the additional voting rights to which the holder of a share of Common Stock shall be entitled by virtue of the receipt in the Transaction of such capital stock and (iii) such additional distributions upon liquidation, dissolution or winding up of the Company as equal the Liquidation Multiple in effect immediately prior to such Transaction multiplied by the additional amount which the holder of a share of Common Stock shall be entitled to receive upon liquidation, dissolution or winding up of the Company by virtue of the receipt in the Transaction of such capital stock, as the case may be, all as provided by the terms of such capital stock.
(b) In the event that holders of shares of Common Stock of the Company receive after January 9, 1996 in respect of their shares of Common Stock any right or warrant to purchase Common Stock (including as such a right, for all purposes of this paragraph 7(b), any security convertible into or exchangeable for Common Stock) at a purchase price per share less than the Fair Market Value of a share of Common Stock on the date of issuance of such right or warrant, then and in each such event the dividend rights, voting rights and rights upon the liquidation, dissolution or winding up of the Company of the shares of Series A Preferred Stock shall each be adjusted so that after such event the Dividend Multiple, the Vote Multiple and the Liquidation Multiple shall each be the product of the Dividend Multiple, the Vote Multiple and the Liquidation Multiple, as the case may be, in effect immediately prior to such event multiplied by a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately before such issuance of rights or warrants plus the maximum number of shares of Common Stock which could be acquired upon exercise in full of all such rights or warrants and the denominator of which shall be the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the number of shares of Common Stock which could be purchased, at the Fair Market Value of the Common Stock at the time of such issuance, by the maximum aggregate consideration payable upon exercise in full of all such rights or warrants.
(c) In the event that holders of shares of Common Stock of the
Company receive after January 9, 1996 in respect of their shares of Common Stock
any right or warrant to purchase capital stock of the Company (other than shares
of Common Stock), including as such a right, for all purposes of this paragraph
7(c), any security convertible into or exchangeable for capital stock of the
Company (other than Common Stock), at a purchase price per share less than the
Fair Market Value of a share of such capital stock on the date of issuance of
such right or warrant, then and in each such event the dividend rights, voting
rights and rights upon liquidation, dissolution or winding up of the Company of
the shares of Series A Preferred Stock shall each be adjusted so that after such
event each holder of a share of Series A Preferred Stock shall be entitled, in
respect of each share of Series A Preferred Stock held, in addition to such
rights in respect thereof to which such holder was entitled immediately prior to
such event, to receive (i) such additional dividends as equal the Dividend
Multiple in effect immediately prior to such event multiplied, first, by the
additional dividends to which the holder of a share of Common Stock shall be
entitled upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise, and multiplied again by the Discount
Fraction (as hereinafter defined), (ii) such additional voting rights as equal
the Vote Multiple in effect immediately prior to such event multiplied, first,
by the additional voting rights to which the holder of a share of Common Stock
shall be entitled upon exercise of such right or warrant by virtue of the
capital stock which could be acquired upon such exercise, and multiplied again
by the Discount Fraction and (iii) such additional distributions upon
liquidation, dissolution or winding up of the Company as equal the Liquidation
Multiple in effect immediately prior to such event multiplied, first, by the
additional amount which the holder of a share of Common Stock shall be entitled
to receive upon liquidation, dissolution or winding up of the Company upon
exercise of such right or warrant by virtue of the capital stock which could be
acquired upon such exercise, and multiplied again by the Discount Fraction. For
purposes of this paragraph, the "Discount Fraction" shall be a fraction the
numerator of which shall be the difference between the Fair Market Value of a
share of the capital stock subject to a right or warrant distributed to holders
of shares of Common Stock of the Company as contemplated by this paragraph 7(c)
immediately after the distribution thereof and the purchase price per share for
such share of capital stock pursuant to such right or warrant and the
denominator of which shall be the Fair Market Value of a share of such capital
stock immediately after the distribution of such right or warrant.
(d) For purposes of this Article FIFTH (E), the "Fair Market Value" of a share of capital stock of the Company (including a share of Common Stock) on any date shall be deemed to be the average of the daily closing price per share thereof over the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; PROVIDED, HOWEVER, that in the event that such Fair Market Value of any such share of capital stock is determined during a period which includes any date that is within 30 Trading Days after (i) the ex-dividend date for a dividend or distribution on stock payable in shares of such stock or securities convertible into shares of such stock, or (ii) the effective date of any subdivision, split,
combination, consolidation, reverse stock split or reclassification of such stock or division of the Company pursuant to Sections 1951 through 1957 of the Pennsylvania BCL, then, and in each such case, the Fair Market Value shall be appropriately adjusted by the Board of Directors of the Company to take into account ex-dividend or post-effective date trading. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way (in either case, as reported in the applicable transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange), or, if the shares are not listed or admitted to trading on the New York Stock Exchange, as reported in the applicable transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares are listed or admitted to trading or, if the shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by The Nasdaq Stock Market or such other system then in use, or if on any such date the shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the shares selected by the Board of Directors of the Company. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares are listed or admitted to trading is open for the transaction of business or, if the shares are not listed or admitted to trading on any national securities exchange, on which the New York Stock Exchange or such other national securities exchange as may be selected by the Board of Directors of the Company is open. If the shares are not publicly held or not so listed or traded on any day within the period of 30 Trading Days applicable to the determination of Fair Market Value thereof as aforesaid, "Fair Market Value" shall mean the fair market value thereof per share as determined in good faith by the Board of Directors of the Company. In either case referred to in the foregoing sentence, the determination of Fair Market Value shall be described in a statement filed with the Secretary of the Company.
8. CONSOLIDATION, MERGER, ETC. In case the Company shall enter into any consolidation, merger, division, share exchange, combination, sale of all or substantially all of the Company's assets, or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each outstanding share of Series A Preferred Stock shall at the same time be similarly exchanged for or changed into the aggregate amount of stock, securities, cash and/or other property (payable in like kind), as the case may be, for which or into which each share of Common Stock is changed or exchanged multiplied by the highest of the Vote Multiple, the Dividend Multiple or the Liquidation Multiple in effect immediately prior to such event; PROVIDED, HOWEVER, no fractional share or scrip representing fractional shares of any other stock or securities shall be issued. Instead of any fractional interest in a share of such other stock or securities which would otherwise be deliverable pursuant to this paragraph 8, the Company will pay to the holder thereof an amount in cash (computed to the nearest cent) equal to the same fraction of the Fair Market Value of a share of such other stock or security.
9. EFFECTIVE TIME OF ADJUSTMENTS.
(a) Adjustments to the Series A Preferred Stock required by the provisions hereof shall be effective as of the time at which the event requiring such adjustments occurs.
(b) The Company shall give prompt written notice to each holder of a share of outstanding Series A Preferred Stock of the effect of any adjustment to the voting rights, dividend rights or rights upon liquidation, dissolution or winding up of the Company of such shares required by the provisions hereof. Notwithstanding the foregoing sentence, the failure of the Company to give such notice shall not affect the validity of or the force or effect of or the requirement for such adjustment.
10. NO REDEMPTION. The shares of Series A Preferred Stock shall not be redeemable at the option of the Company or any holder thereof. Notwithstanding the foregoing sentence of this paragraph, the Company may acquire shares of Series A Preferred Stock in any other manner permitted by law, the provisions hereof and the Restated Articles of Incorporation.
11. RANKING. The Series A Preferred Stock shall rank senior to the Common Stock and, unless otherwise provided in a Statement with Respect to Shares or an amendment to the Restated Articles of Incorporation relating to the determination of a subsequent series of preferred stock of the Company, the Series A Preferred Stock shall rank junior to all other series of the Company's preferred stock as to the payment of dividends and the distribution of assets on liquidation, dissolution or winding up.
12. LIMITATIONS. Except as may otherwise be required by law, the shares of Series A Preferred Stock shall not have any powers, preferences or relative, participating, optional or other special rights other than those specifically set forth in this Article FIFTH (E) (as such may be amended from time to time) or otherwise in the Restated Articles of Incorporation.
13. AMENDMENT. So long as any shares of the Series A Preferred Stock are outstanding, the Company shall not amend this Article FIFTH (E) or the Restated Articles of Incorporation in any manner which would alter or change the rights, preferences or limitations of the Series A Preferred Stock so as to affect such rights, preferences or limitations in any material respect prejudicial to the holders of the Series A Preferred Stock without, in addition to any other vote of shareholders required by law, the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series A Preferred Stock, voting together as a single class; PROVIDED, HOWEVER, that the creation of another series of the Preferred Stock ranking senior to or on a parity with the Series A Preferred Stock as to the payment of dividends or the distribution of assets or liquidation, dissolution or winding up shall not be deemed to be prejudicial to the holders of the Series A Preferred Stock for the purposes of this paragraph 13.
F. 1. DESIGNATION AND AMOUNT. The shares of this series shall be designated as "Series B Participating Preferred Stock" (the "Series B Preferred Stock"). The par value of each share of Series B Preferred Stock shall be $1.00. The number of shares constituting the Series B Preferred Stock shall initially be 10,150. The Company is authorized to issue fractional shares of Series B Preferred Stock to 1/1000th of a share in accordance with
the terms herein. All references herein to shares of Series B Preferred Stock shall be deemed to include, if applicable, references to such fractional shares.
2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the provisions for adjustment hereinafter set
forth, the holders of outstanding shares of Series B Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, a cash dividend in an amount per share
(rounded to the nearest cent) equal to 1000 times the aggregate per share amount
of each cash dividend declared or paid on the Common Stock, $1.00 par value per
share, of the Company (the "Common Stock"). In addition, in the event the
Company shall, at any time after the issuance of any share or fraction of a
share of Series B Preferred Stock, pay any dividend or make any distribution on
the shares of Common Stock of the Company, whether by way of a dividend or a
reclassification of stock, a recapitalization, reorganization or partial
liquidation of the Company or otherwise, which is payable in cash or any debt
security, debt instrument, real or personal property or any other property
(other than (x) cash dividends subject to the immediately preceding sentence,
(y) a distribution of shares of Common Stock or other capital stock of the
Company subject to paragraph 8(a) below or (z) a distribution of rights or
warrants to acquire any such shares subject to paragraph 8(b) or (c) below,
including as such a right any debt security convertible into or exchangeable for
any such shares, at a price less than the Fair Market Value (as hereinafter
defined) of such shares on the date of issuance of such rights or warrants),
then, and in each such event, the Company shall simultaneously pay on each then
outstanding share of Series B Preferred Stock a distribution, in like kind, of
1000 times such distribution paid on a share of Common Stock (subject to the
provisions for adjustment hereinafter set forth). The dividends and
distributions on the Series B Preferred Stock to which holders thereof are
entitled pursuant to the first and second sentences of this paragraph 2(a) are
hereinafter referred to as "Dividends" and the multiple of such cash and
non-cash dividends and distributions on the Common Stock applicable to the
determination of the Dividends, which shall be 1000 initially but shall be
adjusted from time to time as hereinafter provided, is hereinafter referred to
as the "Dividend Multiple." In the event the Company shall, at any time after
the issuance of any share or fraction of a share of Series B Preferred Stock,
declare or pay any dividend or make any distribution on Common Stock payable in
shares of Common Stock, or effect a subdivision or split or a combination,
consolidation or reverse split of the outstanding shares of Common Stock into a
greater or lesser number of shares of Common Stock, then in each such case the
Dividend Multiple thereafter applicable to the determination of the amount of
Dividends which holders of shares of Series B Preferred Stock shall be entitled
to receive shall be the Dividend Multiple applicable immediately prior to such
event multiplied by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(b) The Company shall declare each Dividend at the same time it declares any cash or non-cash dividend or distribution on the Common Stock in respect of which a Dividend is required to be paid. No cash or non-cash dividend or distribution on the Common Stock in respect of which a Dividend is required to be paid shall be paid or set aside for
payment on the Common Stock unless a Dividend in respect of such dividend or distribution on the Common Stock shall be simultaneously paid, or set aside for payment, on the Series B Preferred Stock.
(c) All Dividends paid with respect to shares of the Series B Preferred Stock shall be paid pro rata on a share-by-share basis to the holders entitled thereto.
(d) The holders of shares of Series B Preferred Stock shall not be entitled to receive any dividends or distributions except as provided herein.
3. VOTING RIGHTS. The holders of record of outstanding shares of Series B Preferred Stock shall have the following voting rights:
(a) Subject to the provisions for adjustment hereinafter set forth, each share of Series B Preferred Stock shall entitle the holder thereof to 1000 votes on all matters submitted to a vote of the holders of the Common Stock. The number of votes which a holder of a share of Series B Preferred Stock is entitled to cast, as the same may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Vote Multiple." In the event the Company shall, at any time after the issuance of any share or fraction of a share of Series B Preferred Stock, declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the Vote Multiple thereafter applicable to the determination of the number of votes per share to which holders of shares of Series B Preferred Stock shall be entitled after such event shall be the Vote Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in the Restated Articles of Incorporation, in the By-laws or as otherwise provided by law, the holders of shares of Series B Preferred Stock, the holders of shares of Series A Participating Preferred Stock, par value $1.00 per share, of the Company (the "Series A Preferred Stock"), if any, and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Company.
(c) Except as otherwise required by the Restated Articles of Incorporation or the By-laws or set forth in this paragraph 3 or in paragraph 14 or as otherwise provided by law, holders of Series B Preferred Stock shall have no other special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for the taking of any corporate action.
4. CONVERSION. The shares of Series B Preferred Stock shall be convertible as follows:
(a) Each share of Series B Preferred Stock shall be convertible, at the option of
the holder thereof, at any time after the date of issuance of such share at the office of the Company or any transfer agent for the Series B Preferred Stock. Subject to the provisions for adjustment hereinafter set forth, each share of Series B Preferred Stock shall be convertible into 1000 shares of Common Stock. The number of shares of Common Stock into which each share of Series B Preferred Stock may be converted is hereinafter referred to as the "Conversion Rate." In the event the Company shall, at any time after the issuance of any share or fraction of a share of Series B Preferred Stock, declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the Conversion Rate thereafter applicable shall be the Conversion Rate applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) If the Merger Agreement (as hereinafter defined) is terminated in accordance with its terms, all outstanding shares of Series B Preferred Stock shall, at the option of the Company, be mandatorily converted into shares of Common Stock at the Conversion Rate applicable immediately prior to such termination.
(c) No fractional shares of Common Stock shall be issued upon conversion of the Series B Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash equal to such fraction multiplied by the then Fair Market Value per share of the Common Stock. For such purpose, all shares of Series B Preferred Stock held by each holder shall be aggregated, and any resulting fractional share of Common Stock shall be paid in cash. Before any holder of shares of Series B Preferred Stock shall be entitled to convert the same into full shares of Common Stock, and to receive certificates therefor, the holder shall surrender the certificate or certificates representing the shares of Series B Preferred Stock, duly endorsed, at the office of the Company or of any transfer agent for the Series B Preferred Stock, and shall give written notice to the Company at such office that such holder elects to convert the same; PROVIDED, HOWEVER, that in connection with a conversion pursuant to paragraph 4(b) above, the conversion shall be deemed effective immediately upon the Company's election thereunder.
The Company shall, as soon as practicable after such delivery, issue and deliver at such office to such holder of Series B Preferred Stock a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled and a check payable to such holder in the amount of any cash amount payable as the result of a conversion into fractional shares of Common Stock, plus any declared and unpaid dividends on the converted Series B Preferred Stock. Subject to the proviso in the last sentence of the immediately preceding paragraph, such conversion shall be deemed to have been made immediately prior to the close of business on the date of receipt of such surrender of the shares of Series B Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.
(d) The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series B Preferred Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series B Preferred Stock.
(e) Any notice required by the provisions of this Section 4 to be given to the holders of shares of Series B Preferred Stock or to the Company shall be given via facsimile transmission or via certified or registered U.S. mail or via private overnight delivery service, if to the holder, at (615) 316-6570 or such holder's address appearing on the books of the Company, and if to the Company, at (212) 597-4031 or 51 West 52nd Street, New York, NY 10019, attention General Counsel, or such other facsimile number or address as the holder or the Company shall notify the other of in accordance with the notice provisions set forth in this paragraph 4(e). Notice shall be deemed to have been given on the date of facsimile transmission (if the notice is faxed) or five days after mailing (if the notice is mailed) or the day after the notice is given to the delivery service (if sent by overnight courier).
5. CERTAIN RESTRICTIONS.
(a) Whenever Dividends are in arrears or the Company shall be in default on payment thereof, thereafter and until all accrued and unpaid Dividends, whether or not declared, on shares of Series B Preferred Stock outstanding shall have been paid or set irrevocably aside for payment in full, and in addition to any and all other rights which any holder of shares of Series B Preferred Stock may have in such circumstances, the Company shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity as to dividends with the Series B Preferred Stock, unless dividends are paid ratably on the Series B Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled if the full dividends accrued thereon were to be paid;
(iii) except as permitted by subparagraph (iv) of this paragraph
5(a), redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred
Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for
shares of any stock of the Company ranking junior (both as to dividends
and upon liquidation, dissolution or winding up) to the Series B
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series B
Preferred Stock, or any shares of stock ranking on a parity with the Series B Preferred Stock (either as to dividends or upon liquidation, dissolution or winding up) except as permitted by subparagraph (iii) of this paragraph 5(a) or in accordance with a purchase offer made to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b) The Company shall not permit any Subsidiary (as hereinafter defined) of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under subparagraph (a) of this paragraph 5, purchase or otherwise acquire such shares at such time and in such manner. A "Subsidiary" of the Company shall mean any corporation or other entity of which securities or other ownership interests entitled to cast at least a majority of the votes that would be entitled to be cast in an election of the board of directors of such corporation or other entity or other persons performing similar functions are beneficially owned, directly or indirectly, by the Company or by any corporation or other entity that is otherwise controlled by the Company.
(c) The Company shall not issue any shares of Series B Preferred Stock except pursuant to the Agreement and Plan of Merger dated as of April 9, 1999, as it may be amended from time to time, among Gaylord Entertainment Company, Gaylord Television Company, Gaylord Communications, Inc., the Company, CBS Dallas Ventures, Inc. and CBS Dallas Media, Inc., a copy of which is on file with the Secretary of the Company at its principal executive offices and shall be made available to holders of Series B Preferred Stock without charge upon written request therefor addressed to the Secretary of the Company at the address set forth in paragraph 4(e) above. Notwithstanding the foregoing sentence, nothing contained in the provisions of this Article FIFTH (F) shall prohibit or restrict the Company from issuing for any purpose any series of Preferred Stock with rights and privileges similar to, different from, or greater than, those of the Series B Preferred Stock or, subject to the limitations set forth in paragraph 14, from creating other securities senior to, junior to or on a parity with the Series B Preferred Stock.
6. REACQUIRED SHARES. Any shares of Series B Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares upon their retirement and cancelation shall become authorized but unissued shares of Preferred Stock, without designation as to series, and such shares may be redesignated and reissued as part of any series of Preferred Stock.
7. LIQUIDATION, DISSOLUTION OR WINDING UP; FAIR VALUE FOR PURPOSES OF PENNSYLVANIA ANTI-TAKEOVER STATUTE.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, no distribution shall be made (i) to the holders of shares of stock ranking junior (upon liquidation, dissolution or winding up) to the Series B Preferred Stock unless the holders of shares of Series B Preferred Stock outstanding shall have received out of the assets of the
Company available for distribution to its shareholders after payment or provision for payment of any securities ranking senior to the Series B Preferred Stock, for each share of Series B Preferred Stock, subject to adjustment as hereinafter provided, (A) $1.00 plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment or, (B) if greater than the amount specified in clause (i)(A) of this sentence, an amount equal to 1000 times the aggregate amount to be distributed per share to holders of Common Stock, as the same may be adjusted as hereinafter provided, and (ii) to the holders of stock ranking on a parity upon liquidation, dissolution or winding up with the Series B Preferred Stock, unless simultaneously therewith distributions are made ratably on the Series B Preferred Stock and all other shares of such parity stock in proportion to the total amounts to which the holders of shares of Series B Preferred Stock are entitled under clause (i)(A) of this sentence and to which the holders of such parity shares are entitled, in each case upon such liquidation, dissolution or winding up. The amount to which holders of Series B Preferred Stock may be entitled upon liquidation, dissolution or winding up of the Company pursuant to clause (i)(B) of the foregoing sentence is hereinafter referred to as the "Participation Liquidation Amount" and the multiple of the amount to be distributed to holders of shares of Common Stock upon the liquidation, dissolution or winding up of the Company applicable pursuant to said clause to the determination of the Participating Liquidation Amount, as said multiple may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Liquidation Multiple". In the event the Company shall, at any time after the issuance of any share or fraction of a share of Series B Preferred Stock, declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the Liquidation Multiple thereafter applicable to the determination of the Participating Liquidation Amount to which holders of Series B Preferred Stock shall be entitled after such event shall be the Liquidation Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Except as provided in this paragraph 7(a), holders of Series B Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the Company.
(b) For the purposes of this paragraph 7, none of the following shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Company:
(i) the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company;
(ii) the consolidation or merger of the Company with or into one or more other corporations or other associations;
(iii) the consolidation or merger of one or more corporations or other associations with or into the Company;
(iv) the participation by the Company in a share exchange;
(v) the division of the Company pursuant to Sections 1951 through 1957 of the Pennsylvania Business Corporation Law (the "Pennsylvania BCL"); or
(vi) the conversion of the Company pursuant to Sections 1961 through 1966 of the Pennsylvania BCL.
(c) Notwithstanding anything to the contrary in this Article FIFTH (F), in case any Controlling Person or Group (as defined from time to time in Section 2543 of the Pennsylvania BCL) shall be required to purchase any shares of Series B Preferred Stock pursuant to Sections 2541 through 2548 of the Pennsylvania BCL, as in effect from time to time, the amount that is determined to represent the "fair value" (as that term is used in Section 2542 of the Pennsylvania BCL) of such shares shall be an amount per share equal to the Liquidation Multiple then in effect times the aggregate amount per share that such Controlling Person or Group is required to pay to purchase any share of Common Stock pursuant to such Sections 2541 through 2548 of the Pennsylvania BCL.
8. CERTAIN RECLASSIFICATIONS AND OTHER EVENTS.
(a) In the event that holders of shares of Common Stock receive, after the issuance of any share or fraction of a share of Series B Preferred Stock, in respect of their shares of Common Stock any share of capital stock of the Company (other than any share of Common Stock), whether by way of reclassification, recapitalization, reorganization, dividend or other distribution or otherwise (a "Transaction"), then, and in each such event, the dividend rights, voting rights, conversion rights and rights upon the liquidation, dissolution or winding up of the Company of the shares of Series B Preferred Stock shall be adjusted so that after such Transaction the holders of Series B Preferred Stock shall be entitled, in respect of each share of Series B Preferred Stock held, in addition to such rights in respect thereof to which such holder was entitled immediately prior to such adjustment, (i) to such additional dividends as equal the Dividend Multiple in effect immediately prior to such Transaction multiplied by the additional dividends which the holder of a share of Common Stock shall be entitled to receive by virtue of the receipt in the Transaction of such capital stock, (ii) to such additional voting rights as equal the Vote Multiple in effect immediately prior to such Transaction multiplied by the additional voting rights to which the holder of a share of Common Stock shall be entitled by virtue of the receipt in the Transaction of such capital stock, (iii) upon surrender of shares of Series B Preferred Stock for conversion, to the aggregate number and kind of shares of capital stock of the Company which, if such shares of Series B Preferred Stock had been converted immediately prior to such Transaction, such holder would have been entitled to receive by virtue of such Transaction and (iv) to such additional distributions upon liquidation, dissolution or winding up of the Company as equal the Liquidation Multiple in effect immediately prior to such Transaction multiplied by the additional amount which the holder of a share of Common Stock shall be entitled to receive upon liquidation, dissolution or winding up of the Company by virtue of the receipt in the Transaction of such capital stock, as the case may be, all as provided by the terms of such capital stock.
(b) In the event that holders of shares of Common Stock receive, after the
issuance of any share or fraction of a share of Series B Preferred Stock, in respect of their shares of Common Stock any right or warrant to purchase Common Stock (including as such a right, for all purposes of this paragraph 8(b), any security convertible into or exchangeable for Common Stock) at a purchase price per share less than the Fair Market Value of a share of Common Stock on the date of issuance of such right or warrant, then and in each such event the dividend rights, voting rights, conversion rights and rights upon the liquidation, dissolution or winding up of the Company of the shares of Series B Preferred Stock shall each be adjusted so that after such event the Dividend Multiple, the Vote Multiple, the Conversion Rate and the Liquidation Multiple shall each be the product of the Dividend Multiple, the Vote Multiple, the Conversion Rate and the Liquidation Multiple, as the case may be, in effect immediately prior to such event multiplied by a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately before such issuance of rights or warrants plus the maximum number of shares of Common Stock which could be acquired upon exercise in full of all such rights or warrants and the denominator of which shall be the number of shares of Common Stock outstanding immediately before such issuance of rights or warrants plus the number of shares of Common Stock which could be purchased, at the Fair Market Value of the Common Stock at the time of such issuance, by the maximum aggregate consideration payable upon exercise in full of all such rights or warrants.
(c) In the event that holders of shares of Common Stock of the
Company receive, after the issuance of any share or fraction of a share of
Series B Preferred Stock, in respect of their shares of Common Stock any right
or warrant to purchase capital stock of the Company (other than shares of Common
Stock), including as such a right, for all purposes of this paragraph 8(c), any
security convertible into or exchangeable for capital stock of the Company
(other than Common Stock) but excluding, for all purposes of this paragraph
8(c), any rights issuable under the Company's Rights Agreement dated as of
December 28, 1995, with First Chicago Trust Company of New York, as it may be
amended from time to time, at a purchase price per share less than the Fair
Market Value of a share of such capital stock on the date of issuance of such
right or warrant, then and in each such event the dividend rights, voting
rights, conversion rights and rights upon liquidation, dissolution or winding up
of the Company of the shares of Series B Preferred Stock shall each be adjusted
so that after such event each holder of a share of Series B Preferred Stock
shall be entitled, in respect of each share of Series B Preferred Stock held, in
addition to such rights in respect thereof to which such holder was entitled
immediately prior to such event, to receive (i) such additional dividends as
equal the Dividend Multiple in effect immediately prior to such event
multiplied, first, by the additional dividends to which the holder of a share of
Common Stock shall be entitled upon exercise of such right or warrant by virtue
of the capital stock which could be acquired upon such exercise, and multiplied
again by the Discount Fraction (as hereinafter defined), (ii) such additional
voting rights as equal the Vote Multiple in effect immediately prior to such
event multiplied, first, by the additional voting rights to which the holder of
a share of Common Stock shall be entitled upon exercise of such right or warrant
by virtue of the capital stock which could be acquired upon such exercise, and
multiplied again by the Discount Fraction, (iii) such additional conversion
rights as equal the Conversion Rate in effect immediately prior to such event
multiplied by a fraction the numerator of which shall be the Fair Market Value
per share of Common Stock on the date of such event less the Fair Market Value
of the portion of the right or warrant so distributed applicable to one share of
Common Stock and the denominator of
which shall be the Fair Market Value per share of Common Stock on the date of such event and (iv) such additional distributions upon liquidation, dissolution or winding up of the Company as equal the Liquidation Multiple in effect immediately prior to such event multiplied, first, by the additional amount which the holder of a share of Common Stock shall be entitled to receive upon liquidation, dissolution or winding up of the Company upon exercise of such right or warrant by virtue of the capital stock which could be acquired upon such exercise, and multiplied again by the Discount Fraction. For purposes of this paragraph, the "Discount Fraction" shall be a fraction the numerator of which shall be the difference between the Fair Market Value of a share of the capital stock subject to a right or warrant distributed to holders of shares of Common Stock of the Company as contemplated by this paragraph 8(c) immediately after the distribution thereof and the purchase price per share for such share of capital stock pursuant to such right or warrant and the denominator of which shall be the Fair Market Value of a share of such capital stock immediately after the distribution of such right or warrant.
(d) For purposes of this Article FIFTH (F), the "Fair Market Value" of a share of capital stock of the Company (including a share of Common Stock) on any date shall be deemed to be the average of the daily closing price per share thereof over the 15 consecutive Trading Days (as hereinafter defined) immediately prior to such date; PROVIDED, HOWEVER, that in the event the Fair Market Value of any such share of capital stock is determined during a period which includes any date that is within 15 Trading Days after (i) the ex-dividend date for a dividend or distribution on stock payable in shares of such stock or securities convertible into shares of such stock, or (ii) the effective date of any subdivision, split, combination, consolidation, reverse stock split or reclassification of such capital stock or division of the Company pursuant to Sections 1951 through 1957 of the Pennsylvania BCL, then, and in each such case, the Fair Market Value shall be appropriately adjusted by the Board of Directors of the Company to take into account ex-dividend or post-effective date trading. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way (in either case, as reported in the applicable transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange), or, if the shares are not listed or admitted to trading on the New York Stock Exchange, as reported in the applicable transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares are listed or admitted to trading or, if the shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by The Nasdaq Stock Market or such other system then in use, or if on any such date the shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the shares selected by the Board of Directors of the Company. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares are listed or admitted to trading is open for the transaction of business or, if the shares are not listed or admitted to trading on any national securities exchange, on which the New York Stock Exchange or such other national securities exchange as may be selected by the Board of Directors of the Company is open. If the shares are not publicly held or not so listed or traded on any day within the 15 Trading Day period applicable to the determination of Fair Market Value thereof as aforesaid, "Fair Market Value" shall mean the fair market value thereof per share as determined in good faith by the Board of
Directors of the Company. In either case referred to in the foregoing sentence, the determination of Fair Market Value shall be described in a statement filed with the Secretary of the Company.
9. CONSOLIDATION, MERGER, ETC. In case the Company shall enter into any consolidation, merger, division, share exchange, combination, sale of all or substantially all of the Company's assets, or other transaction in which the shares of Common Stock are exchanged for or changed into other securities, cash and/or any other property, then in any such case each outstanding share of Series B Preferred Stock shall at the same time be similarly exchanged for or changed into the aggregate amount of securities, cash and/or other property (payable in like kind), as the case may be, for which or into which each share of Common Stock is changed or exchanged multiplied by the highest of the Vote Multiple, the Dividend Multiple, the Conversion Rate or the Liquidation Multiple in effect immediately prior to such event; PROVIDED, HOWEVER, that no fractional share or scrip representing fractional shares of any other securities shall be issued; PROVIDED FURTHER, HOWEVER, that upon consummation of the merger contemplated in the Amended and Restated Agreement and Plan of Merger dated as of October 8, 1999, as it may be amended from time to time (the "Merger Agreement"), between the Company and Viacom Inc. ("Viacom"), each outstanding share of Series B Preferred Stock shall be converted into the aggregate number of shares of Series C Preferred Stock, par value $.01 per share, of Viacom Inc. (the "Viacom Preferred Stock") into which each share of Series B Preferred Stock is convertible pursuant to the Merger Agreement, and each share of Viacom Preferred Stock shall have substantially identical preferences, limitations and special rights as the Series B Preferred Stock except that such Viacom Preferred Stock shall, subject to adjustment (i) be convertible at any time into 1,000 shares of non-voting Class B Common Stock, par value $.01 per share, of Viacom (the "Viacom Class B Stock") and (ii) possess the voting power of 100 shares of Class A Common Stock, par value $.01 per share, of Viacom. Instead of any fractional interest in a share of such other securities which would otherwise be deliverable pursuant to this paragraph 9, the Company will pay to the holder thereof an amount in cash (computed to the nearest cent) equal to the same fraction of the Fair Market Value of a share of such other security or such other amount as may be set forth in the Merger Agreement.
10. EFFECTIVE TIME OF ADJUSTMENTS.
(a) Adjustments to the Series B Preferred Stock required by the provisions hereof shall be effective as of the time at which the event requiring such adjustments occurs.
(b) The Company shall give prompt written notice to each holder of a share of outstanding Series B Preferred Stock of the effect of any adjustment to the voting rights, dividend rights, conversion rights or rights upon liquidation, dissolution or winding up of the Company of such shares required by the provisions hereof. Notwithstanding the foregoing sentence, the failure of the Company to give such notice shall not affect the validity or the force or effect of, or the requirement for, such adjustment.
11. NO REDEMPTION. The shares of Series B Preferred Stock shall not be redeemable at the option of the Company or any holder thereof. Notwithstanding the foregoing
sentence of this paragraph 11, the Company may acquire shares of Series B Preferred Stock in any other manner permitted by law, the provisions hereof or the Restated Articles of Incorporation.
12. RANKING. The Series B Preferred Stock shall rank senior to the Common Stock, pari passu with the Series A Preferred Stock (except with respect to Preferential Dividends, in which case the Series B Preferred Stock shall rank junior to the Series A Preferred Stock) and, unless otherwise provided in a Statement with Respect to Shares or an amendment to the Restated Articles of Incorporation relating to the determination of a subsequent series of Preferred Stock, the Series B Preferred Stock shall rank junior to all other series of Preferred Stock as to the payment of dividends and the distribution of assets on liquidation, dissolution or winding up.
13. LIMITATIONS. Except as may otherwise be required by law, the shares of Series B Preferred Stock shall not have any powers, preferences or relative, participating, optional or other special rights other than those specifically set forth in this Article FIFTH (F) (as such may be amended from time to time) or otherwise in the Restated Articles of Incorporation.
14. AMENDMENT. So long as any shares of the Series B Preferred Stock are outstanding, the Company shall not amend this Article FIFTH (F) or the Restated Articles of Incorporation in any manner which would alter or change the rights, preferences or limitations cf the Series B Preferred Stock so as to affect such rights, preferences or limitations in any material respect prejudicial to the holders of the Series B Preferred Stock without, in addition to any other vote of shareholders required by law, the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series B Preferred Stock, voting together as a single class either in writing or by resolution adopted at an annual or special meeting called for the purpose; PROVIDED, HOWEVER, that the creation of another series of Preferred Stock ranking senior to or on a parity with the Series B Preferred Stock as to the payment of dividends or the distribution of assets on liquidation, dissolution or winding up shall not be deemed to be prejudicial to the holders of the Series B Preferred Stock for the purposes of this paragraph 14.
SIXTH: A. A higher than majority shareholder vote for certain Business Combinations (as defined below) shall be required as follows:
(1) In addition to any affirmative vote required by law or these Restated Articles of Incorporation or the terms of any series of Preferred Stock or any other securities of the Company and except as otherwise expressly provided in Section B. of this Article SIXTH:
(a) any merger or consolidation of the Company or any Subsidiary with (i) any Interested Stockholder or with (ii) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Stockholder;
(b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions whether or not related) to an Interested Stockholder (or an Affiliate or Associate of an Interested Stockholder) of any assets of the Company or of a Subsidiary having an aggregate Fair Market Value of $10,000,000 or more;
(c) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions whether or not related) to or with the Company or a Subsidiary of any assets of an Interested Stockholder (or an Affiliate or Associate of an Interested Stockholder) having an aggregate Fair Market Value of $10,000,000 or more;
(d) the issuance or sale by the Company or any Subsidiary (in one transaction or a series of transactions whether or not related) of any securities of the Company or of any Subsidiary to any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder in exchange for cash, securities or other consideration (or a combination thereof) having an aggregate Fair Market Value of $10,000,000 or more except an issuance of securities upon conversion of convertible securities of the Company or of a Subsidiary which were not acquired by such Interested Stockholder (or such Affiliate or Associate) from the Company or a Subsidiary;
(e) the adoption of any plan or proposal for the liquidation or dissolution of the Company proposed by or on behalf of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(f) any reclassification of securities (including any reverse stock split), or recapitalization of the Company, or any merger or consolidation of the Company with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity securities or securities convertible into equity securities of the Company or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; shall require the affirmative vote of (i) the holders of at least eighty percent (80%) of the combined voting power of the then outstanding shares of capital stock of the Company entitled to vote generally in an annual election of directors (the "Voting Stock") and (ii) the holders of at least a majority of the combined voting power of the then outstanding Voting Stock held by Disinterested Stockholders, in each case voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law, by any other provisions of these Restated Articles of Incorporation or by the terms of any series of Preferred Stock or any other securities of the Company;
(2) The term "Business Combination" as used in this Article SIXTH shall mean any transaction which is referred to in any one or more of clauses (a) through (f) of paragraph (1) of Section A. of this Article SIXTH.
B. The provisions of Section A. of this Article SIXTH shall not be applicable to any Business Combination, and such Business Combination shall require only such affirmative vote (if any) as is required by law, any other provision of these Restated Articles of Incorporation or the terms of any class or series of capital stock of the Company entitled to a preference over the Common Stock as to dividends or upon liquidation, or the terms of any other securities of the Company, if all of the conditions specified in either of the following paragraphs (1) or (2) are met:
(1) The Business Combination shall have been approved by a majority of the Disinterested Directors or
(2) All the following six conditions shall have been met -
(a) The transaction constituting the Business Combination shall provide for a consideration to be received by holders of Common Stock in exchange for their Common Stock, and the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the highest of the following:
(i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of Common Stock beneficially owned by the Interested Stockholder which were acquired (x) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date") or (y) in the transaction in which it became an Interested Stockholder, whichever is higher;
(ii) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder (the "Determination Date"), whichever is higher; and
(iii) (if applicable) the price per share equal to the Fair Market Value per share of Common Stock determined pursuant to clause (ii) immediately preceding, multiplied by the ratio of (x) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of Common Stock beneficially owned by the Interested Stockholder which were acquired within the two-year period immediately prior to the Announcement Date to
(y) the Fair Market Value per share of Common Stock on the first day in such two-year period on which the Interested Stockholder beneficially owned any shares of Common Stock, whether or not such Stockholder was an Interested Stockholder on that day.
(b) If the transaction constituting the Business Combination shall provide for a consideration to be received by holders of any class of outstanding Voting Stock other than Common Stock, the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of such Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this clause (2)(b) shall be required to be met with respect to every class of outstanding Voting Stock other than Institutional Voting Stock, whether or not the Interested Stockholder beneficially owns any shares of a particular class of Voting Stock):
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid in order to acquire any shares
of such class of Voting Stock beneficially owned by the
Interested Stockholder which were acquired (x) within the
two-year period immediately prior to the Announcement Date or
(y) in the transaction in which it became an Interested
Stockholder, whichever is higher;
(ii) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company;
(iii) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher; and
(iv) (if applicable) the price per share equal to the Fair Market Value per share of such class of Voting Stock determined pursuant to clause (iii) immediately preceding, multiplied by the ratio of (x) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of such class of Voting Stock beneficially owned by the Interested Stockholder which were acquired within the two-year period immediately prior to the Announcement Date to (y) the Fair Market Value per share of such class of Voting Stock on the first day in such two-year period on which the Interested Stockholder beneficially owned any shares of such class of Voting Stock, whether or not such Stockholder was an Interested Stockholder on that day.
(c) The consideration to be received by holders of a
particular class of Voting Stock (including Common Stock) shall
be in cash or in the same form as was previously paid in order to
acquire shares of such class of Voting Stock which are
beneficially owned by the Interested Stockholder and, if the
Interested Stockholder beneficially owns shares of any class of
Voting Stock which were acquired with varying forms of
consideration, the form of consideration to be received by
holders of such class of Voting Stock shall be either cash or the
form used to acquire the largest number of shares of such class
of Voting Stock beneficially owned by it. The prices determined
in accordance with clauses (a) and (b) of paragraph (2) of this
Section B. shall be subject to an appropriate adjustment in the
event of any stock dividend, stock split, subdivision,
combination of shares or similar event.
(d) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination:
(i) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock or other capital stock entitled to a preference over the Common Stock as to dividends or upon liquidation;
(ii) except as approved by a majority of the Disinterested Directors, there shall have been (x) no reduction in the annual amount of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock) and (y) no failure to increase the annual amount of dividends as necessary to prevent any such reduction in the event of any reclassification (including any reverse stock split), recapitalization, reorganization or similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock;
(iii) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction in which it became an Interested Stockholder; and
(iv) there shall have always been at least three Disinterested Directors on the Board of Directors.
e) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Company, whether in anticipation of or in connection with such Business Combination or otherwise.
(f) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to shareholders at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions).
C. For the purposes of this Article SIXTH:
(1) A "person" shall mean any individual, a partnership, a corporation, an association, a trust or other entity.
(2) "Interested Stockholder" at any particular time shall mean any person (other than the Company or any Subsidiary) who or which:
(a) is at such time the beneficial owner, directly or indirectly, of five percent (5%) or more of the voting power of the Voting Stock;
(b) is an Affiliate of the Company and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of five percent (5%) or more of the voting power of the Voting Stock; or
(c) is at such time an assignee of or has otherwise succeeded to the beneficial ownership of any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder (as defined in C.(2)(a) and (b) above), if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933.
(3) "Disinterested Stockholder" shall mean a shareholder of the Company who is not an Interested Stockholder or an Affiliate or an Associate of an Interested Stockholder.
(4) A person shall be a "beneficial owner" of any shares of Voting Stock:
(a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly;
(b) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether or not such right is exercisable immediately) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding; or
(c) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock.
(5) For the purpose of determining whether a person
is an Interested Stockholder pursuant to paragraph (2) of this
Section C., the number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned by an Interested
Stockholder through application of paragraph (4) of this Section
C. but shall not include any other shares of Voting Stock which
may be issuable pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise.
(6) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1984 (the term "registrant" in such Rule 12b-2 meaning in this case the Company).
(7) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Company; PROVIDED, HOWEVER, that for the purposes of the definition of Interested Stockholder set forth in paragraph (2) of this Section C. the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Company.
(8) "Disinterested Director" means any member of the Board of Directors who is unaffiliated with, and not a representative or nominee of, an Interested Stockholder and (a) was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, or (b) recommended to succeed a Disinterested Director by a majority of the Disinterested Directors then on the Board.
(9) "Fair Market Value" means: (a) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotation System or any other system then in use, or if no such quotations are available, the fair market value on
the date in question of a share of such stock as determined by a majority of the Disinterested Directors in good faith; and (b) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the Disinterested Directors in good faith.
(10) In the event of any Business Combination in which the Company survives, the phrase "consideration other than cash to be received" as used in paragraph (2) of Section B. of this Article SIXTH shall include the shares of Common Stock and the shares of any other class of outstanding Voting Stock retained by the holders of such shares.
(11) The term "class" of Voting Stock shall be deemed to refer to a series of Voting Stock where more than one series of Voting Stock is outstanding within a class of Voting Stock.
(12) "Institutional Voting Stock" shall mean any class of Voting Stock which was issued to and continues to be held solely by one or more insurance companies, pension funds, commercial banks, savings banks or similar financial institutions or institutional investors.
D. A majority of the Disinterested Directors of the Company shall have the power and duty to determine for the purposes of this Article SIXTH, on the basis of information known to them after reasonable inquiry, (1) whether a person is an Interested Stockholder, (2) the number of shares of Voting Stock beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another, (4) whether the requirements of Section B. of this Article SIXTH have been met with respect to any Business Combination, (5) whether a class of Voting Stock is Institutional Voting Stock and (6) whether the assets which are subject to any Business Combination have, or the consideration to be received for the issuance or transfer of securities by this Company or any subsidiary in any Business Combination has, an aggregate Fair Market Value of $10,000,000 or more. Any such determination made in good faith shall be binding and conclusive on all parties.
E. Nothing contained in this Article SIXTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law.
F. In addition to any requirements of law and any other provisions of these Restated Articles of Incorporation or the terms of any class or series of capital stock of the Company entitled to a preference over the Common Stock as to dividends or upon liquidation, or the terms of any other securities of the Company (and notwithstanding the fact that a lesser percentage may be specified by law, these Restated Articles of Incorporation or any such terms), the affirmative vote of
(1) the holders of eighty percent (80%) or more of the combined voting power of the Voting Stock, voting together as a single class, and
(2) a majority of the combined voting power of the Voting Stock held by the Disinterested Stockholders, voting together as a single class, shall be required to amend, alter or repeal, or adopt any provision inconsistent with, this Article SIXTH.
SEVENTH: A. Except as otherwise fixed by or pursuant to the terms of any class or series of capital stock of the Company entitled to a preference over the Common Stock as to dividends or upon liquidation, the number, qualification, terms of office, manner of election, time and place of meeting, compensation, powers and duties of the directors shall be fixed from time to time by or pursuant to the By-laws.
B. If the By-laws so provide, the members of the Board (other than those who may be elected by the holders of any class or series of capital stock having a preference over the Common Stock as to dividends or upon liquidation pursuant to the terms of these Restated Articles of Incorporation or of such class or series of stock) shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, having such terms and being elected in such manner as shall be specified in the By-laws.
EIGHTH: In furtherance and not in limitation of the powers conferred upon it by law, the Board of Directors is expressly authorized to:
(1) adopt any By-laws a majority of the entire Board of Directors may deem necessary or desirable for the efficient conduct of the affairs of the Company, including, but not limited to, provisions governing the conduct of, and the matters which may properly be brought before, meetings of the shareholders and provisions specifying the manner and extent to which prior notice shall be given of the submission of proposals to be considered at any such meeting or of nominations for the election of directors to be held at any such meeting; and
(2) repeal, alter or amend the By-laws by the vote of a majority of the entire Board of Directors.
NINTH: In addition to any requirements of law and any other provisions of these Restated Articles of Incorporation or the terms of any series of Preferred Stock or any other securities of the Company (and notwithstanding the fact that a lesser percentage may be specified by law, these Restated Articles of Incorporation or any such terms), the affirmative vote of the holders of eighty percent (80%) or more of the combined voting power of the then outstanding shares of capital stock of the Company entitled to vote generally in an annual election (the "Voting Stock"), voting together as a single class, shall be required to:
(1) remove a director without cause (For purposes of this Article (NINTH) "cause" shall mean the willful and continuous failure of a director to substantially perform such director's duties to the Company, other than any such failure resulting from incapacity
due to physical or mental illness, or the willful engaging by a director in gross misconduct materially and demonstrably injurious to the Company);
(2) adopt, amend, alter or repeal any provision of the By-laws, except that By-law XVI may be amended or altered by a majority vote of the Voting Stock if the majority of the entire Board of Directors has first recommended the amendment or alteration for approval by the shareholders;
(3) amend, alter or repeal or adopt any provision inconsistent with, Articles SEVENTH or EIGHTH or this Article NINTH; and
(4) amend, alter or repeal or adopt any provisions inconsistent with any provision, other than Articles SIXTH, SEVENTH or EIGHTH or this Article NINTH, contained in these Restated Articles of Incorporation, unless otherwise first recommended and approved by a majority of the entire Board of Directors or, if there is an Interested Stockholder (as defined in Article SIXTH), by a majority of the Disinterested Directors (as defined in Article SIXTH), in which cases a majority vote of the Voting Stock is required to amend, alter or repeal such other provisions of these Restated Articles of Incorporation.
TENTH: To the fullest extent that the law of the Commonwealth of Pennsylvania, as it exists on January 27, 1987, or as it may thereafter be amended, permits the elimination of the liability of directors, no director of the corporation shall be liable for monetary damages for any action taken, or any failure to take any action. This Article TENTH shall not apply to any breach of performance of duty or any failure of performance of duty by any director occurring prior to January 27, 1987. No amendment to or repeal of this Article TENTH shall apply to or have any effect on the liability or alleged liability of any director of the Company for or with respect to any act or failure to act on the part of such director occurring prior to such amendment or repeal.
ELEVENTH: The Company may, to the fullest extent permitted by applicable law as then in effect, indemnify any person who is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) and may take such steps as may be deemed appropriate by the Company, including purchasing and maintaining insurance, entering in to contracts (including, without limitation, contracts of indemnification between the Company and its directors and officers), creating a trust fund, granting security interests or using other means (including, without limitation, a letter of credit) to insure the payment of such amount as may be necessary to effect such indemnification. This Article shall apply to any action taken, or any failure to take any action, on or after January 27, 1987.
CBS
EXHIBIT 10(h)
CBS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As amended as of April 1, 1999)
1. PURPOSE The purpose of this Supplemental Executive Retirement Plan ("the Plan") (combining the former CBS Supplemental Executive Retirement Plan, SERP #2 and CBS Excess Benefit Plan ) is to provide to certain key employees of CBS Broadcasting Inc. ("CBS") a benefit supplemental to those retirement or termination benefits which they are entitled to receive under the CBS Pension Plan Document component of the CBS Combined Pension Plan (the "CBS Pension Plan") or CBS Cash Balance Plan and to benefit CBS by making it more attractive to such employees to remain with CBS.
2. ELIGIBILITY The persons eligible to participate in the Plan ("Participants") are those employees of CBS and its subsidiaries who are designated by the Deferred Additional Compensation Plan Subcommittee of the Retirement Plans Committee of the Board of Directors of CBS (the Committee), and whose benefit under the CBS Pension Plan, is limited by reason of the limitation on benefits or compensation which may be taken into account under Internal Revenue Code Section 415, or under Internal Revenue Code Section 401(a)(17), or any successor provision.
Effective April 1, 1999, the following additional participation rules shall apply:
A. Any participant under the CBS Cash Balance Plan whose benefit under such plan is limited by the operation of Internal Revenue Code Section 401(a)(17) or 415 shall be a Participant; and
B. Notwithstanding any other provision of the Plan to the contrary, no person who is hired or rehired after March 31, 1999 shall thereafter participate in or accrue any benefit under the Plan.
3. COMPUTATION OF BENEFIT The retirement or termination or death benefit payable to a Participant under the Plan shall be equal to the excess, if any, of (A) the Participant's retirement or termination or death benefit under the CBS Pension Plan or CBS Cash Balance Plan determined by disregarding the benefit or compensation limitation otherwise imposed by Internal Revenue Code Sections 415 and 401(a)(17), or any successor provisions, over (B) the Participant's retirement or termination or death benefit payable under the CBS Pension Plan or CBS Cash Balance Plan, taking into account such benefit or compensation limitations. In the case of any benefits payable to a Participant under this Plan, any amount payable other than at normal retirement age (as determined under the CBS Pension Plan or CBS Cash Balance Plan) shall be reduced in accordance with the provisions utilized under the CBS Pension Plan or CBS Cash Balance Plan. In no event shall a Participant's annual compensation in excess of $550,000 be taken into account for the purpose of determining the amount of any benefit under the Plan; provided, however, that this paragraph shall not apply to compensation earned in any calendar year ending prior to January 1, 1999.
4. PAYMENT OF BENEFIT Any benefit under the Plan, including any applicable death benefit, shall be paid to the Participant, or on behalf of such Participant, at the same time and in the same form and manner as the benefit under the CBS Pension Plan or CBS Cash Balance Plan, except:
A. no Participant shall be entitled to receive a lump-sum payment of a Plan benefit unless the monthly life annuity payment would be $50 or less, in which case the benefit shall be paid as a single sum cash payment. If the Participant has elected a lump sum option under the CBS Pension Plan or CBS Cash Balance Plan, the Participant must elect an alternative payment option under the Plan. A Participant may change this option at any time prior to retirement. If no option is elected, the Qualified Joint and Survivor Annuity option under the CBS Pension Plan or CBS Cash Balance Plan shall apply with respect to married Participants, and the Single Life Annuity option under the CBS Pension Plan or CBS Cash Balance Plan shall apply with respect to unmarried Participants, and
B. any active employee who has already attained age 70-1/2 prior to 1995, and has not yet begun to receive distributions under the Plan, shall begin receiving distributions on or before April 1, 1996, and must elect a payment option prior to January 1, 1996, in accordance with procedures established by the Committee.
C. If a Participant names as his beneficiary a trust, payments may be made to the trust/beneficiary solely in installment payments for one of the following periods: (i) 10 years; (ii) 15 years; or (iii) if the trust duration is expected to be less than 10 years, the duration of the trust. For the purpose of determining the amount of the annual installment payments to be made to the trust/beneficiary, any amounts due under the Plan shall first be determined as a lump sum value as of the participant's date of death, using the actuarial factors under the CBS Pension Plan or CBS Cash Balance Plan. Such amount then shall be converted to an actuarially equivalent installment amount at an assumed interest rate equal to the rate stated in Appendix A of the CBS Pension Plan or CBS Cash Balance Plan.
5. NONFORFEITURE OF BENEFIT The amount of the benefit accrued under the Plan by any Participant immediately before any (i) withdrawal of approval as a Participant by the Committee granted under Section 2 hereof or (ii) termination or amendment pursuant to Section 8 hereof shall not be reduced by reason of any such event.
6. NON ASSIGNABILITY OF BENEFITS Except as otherwise required by law, neither any benefit payable hereunder nor the right to receive any future benefit under this Plan may be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process, and if any attempt is made to do so, or a person eligible for any benefits under this Plan becomes bankrupt, the interest under this Plan of the person affected may be terminated by the Committee which, in its sole discretion may cause the same to be held or applied for the benefit of one or more of the dependents of such person or make any other disposition of such benefits that it deems appropriate.
7. FUNDING The Plan shall be maintained as an unfunded plan which is not intended to meet the qualification requirements of Section 401 of the Internal Revenue Code. Establishment of the Plan will not create, in favor of any Participant, any right or lien in or against any of the assets of CBS. Payments under the Plan shall be made in cash from the general funds of CBS and no special or separate fund shall be established and no segregation of assets shall be made to assure the payment of benefits hereunder. Nothing in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between CBS and any participant or any other person, and CBS's promise to make payments hereunder shall at all times remain unfunded as to any Participant.
8. TERMINATION; AMENDMENT CBS may, at any time, by resolution of its Board of Directors, terminate or amend the Plan in such respects as it shall deem advisable, provided, however, that except to the extent required to comply with any changes in applicable law, this Plan may not be suspended, amended, otherwise modified, or terminated without the consent of each affected Participant during the following periods of time: (i) a period of two years after the "Effective Time," as such term is defined under the Agreement and Plan of Merger among Westinghouse Electric Corporation, Group W Acquisition Corp. and CBS Inc., (ii) a period of five (5) years after the Effective Time for all Participants who have attained the age of fifty and who have not attained age fifty-five at the Effective Time, and (iii) at any time following the Effective Time for all Participants who have attained age fifty-five at the Effective Time.
9. OPERATION AND ADMINISTRATION The Plan shall be administered by the Committee. The Committee shall have the authority, in its absolute discretion, to exclude from the coverage of the Plan employees who would otherwise be eligible to be Participants, and to include in the coverage of the Plan employees who would not otherwise be eligible to be Participants. The Committee's decision in all matters involving the interpretation and application of the Plan shall be final and binding. The Committee will establish such procedures and requirement, as it shall deem necessary to administer the Plan.
10. APPLICABLE LAW All questions pertaining to the construction, validity, and effect of this Plan shall be determined in accordance with the laws of the State of New York, to the extent not pre-empted by Federal law.
11. LIMITATION OF RIGHTS This Plan is a voluntary undertaking on the part of CBS. Neither the establishment of the Plan nor the payment of any benefits hereunder, nor any action of CBS, the Committee, or its designee shall be held or construed to be a contract of employment between CBS and any Participant, or to confer upon any person any legal right to be continued in the employ of CBS. CBS expressly reserves the right to discharge, discipline, or otherwise terminate the employment of any Participant at any time. Participation in this Plan gives no right or claim to any benefits beyond those which are expressly provided herein and all rights and claims hereunder are limited as set forth in this Plan.
12. SEVERABILITY In the event any provision of this Plan shall be held illegal or invalid, or would serve to invalidate the Plan, that provision shall be deemed to be null and void, and the Plan shall be construed as if it did not contain that provision.
13. HEADING, GENDER AND NUMBER The headings to the Articles and Sections of this Plan are inserted for reference only, and are not to be taken as limiting or extending the provisions hereof. Unless the context clearly indicates to the contrary, in interpreting this Plan, the masculine shall include the feminine, and the singular shall include the plural.
CBS
EXHIBIT 10(i)
CBS BONUS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As amended as of April 1, 1999)
1. PURPOSE The purpose of this Supplemental Executive Retirement Plan ("the Plan") (formerly the CBS Supplemental Executive Retirement Plan, SERP #1) is to provide to certain key employees of CBS Broadcasting Inc. ("CBS") a benefit supplemental to those retirement or termination benefits which they are entitled to receive under the CBS Pension Plan Document component of the CBS Combined Pension Plan (the "CBS Pension Plan") or CBS Cash Balance Plan and to benefit CBS by making it more attractive to such employees to remain with CBS and by deterring such employees from engaging, after termination of employment, in activities competitive to those of CBS.
2. ELIGIBILITY The persons eligible to participate in the Plan ("Participants") are those employees of CBS and its subsidiaries who are Participants in the CBS Pension Plan and whose participation in the Plan has been expressly approved by the Deferred Additional Compensation Plan Subcommittee of the Retirement Plans Committee of the Board of Directors of CBS ("the Committee").
Effective April 1, 1999:
A. No employee who becomes a participant under the CBS Cash Balance Plan shall accrue any additional benefit under the Plan on or after the effective date of such participation;
B. No employee who is hired or rehired after March 31, 1999 shall be eligible to participate in the Plan; and
C. No individual other than an individual who is a Participant on March 31, 1999, and (i) is age 55 or older on March 31, 1999, or (ii) has 70 or more "Points" (as defined in the CBS Cash Balance Plan) on March 31, 1999 shall be eligible to accrue any additional benefits under the Plan after March 31, 1999.
3. COMPUTATION OF BENEFIT
A. The retirement or termination benefit payable to a
Participant under the Plan shall be equal to the accrual percentage
otherwise provided in Section 3.02(b) of the CBS Pension Plan (or any
successor provision), which, as of January 1, 1995 is 1.7 percent,
multiplied by the Eligible Amount, as defined in Subparagraph B of this
Section 3, and multiplied by the number of years of the Participant's
continuous employment period, up to a maximum of 35 years.
B. The Eligible Amount shall be:
(1) in the case of a Participant who has been designated by the CBS Board of Directors, 100 percent of such Participant's cash awards under an annual CBS Plan for additional compensation (currently the Executive Compensation Incentive Plan), and
(2) in the case of all other Participants, 50 percent of such Participant's cash awards under such an additional compensation plan.
C. In the case of any benefits payable to a Participant under this Plan, any amount payable other than at normal retirement age (as determined under the CBS Pension Plan) shall be reduced in accordance with the provisions utilized in the CBS Pension Plan (or, for participants in the CBS Cash Balance Plan, the provisions of such plan).
4. PAYMENT OF BENEFIT Any retirement or termination benefit under the Plan shall be paid to the Participant, and if applicable, the Participant's designated beneficiary, at the same time and in the same form and manner as the benefit under the CBS Pension Plan or CBS Cash Balance Plan, except:
A. No Participant shall be entitled to receive a lump sum payment of a Plan benefit unless the monthly life annuity payments would be $50 or less, in which case the benefit shall be paid as a single sum cash payment. If the Participant has elected the lump-sum option under the CBS Pension Plan or CBS Cash Balance Plan, the Participant must elect an alternative payment option under the Plan. A Participant may change this option at any time prior to retirement. If no option is elected, the Qualified Joint and Survivor Annuity option under the CBS Pension Plan or CBS Cash Balance Plan shall apply with respect to married Participants, and the Single Life Annuity option under the CBS Pension Plan or CBS Cash Balance Plan shall apply with respect to unmarried Participants.
B. Any active employee who has attained age 70-1/2 prior to 1995, and has not begun to receive distributions under the Plan, shall begin receiving distributions by April 1, 1996, and must elect a payment option prior to January 1, 1996, in accordance with procedures established by the Committee.
C. No benefit shall be payable from the Plan on account of the death of a Participant prior to his or her retirement or termination date.
D. If a Participant names as his beneficiary a trust, payments may be made to the trust/beneficiary solely in installment payments for one of the following periods: (i) 10 years; (ii) 15 years; or (iii) if the trust duration is expected to be less than 10 years, the duration of the trust. For the purpose of determining the amount of the annual installment payments to be made to the trust/beneficiary, any amounts due under the Plan shall first be determined as a lump sum value as of the participant's date of death, using the actuarial factors under the CBS Pension Plan or CBS Cash Balance Plan. Such amount then shall be converted to an actuarially equivalent installment amount at an assumed interest rate equal to the rate stated in Appendix A of the CBS Pension Plan or CBS Cash Balance Plan.
5. FORFEITURE OF BENEFIT Any retirement or termination benefit under the Plan shall be paid to
A. Any Participant who terminates employment with CBS prior to attaining age 55 with ten or more years of service, shall forfeit any benefit accrued under the Plan.
B. If, without the written consent of the Committee, any Participant, at any time during the period following the termination of his employment, engages in the operation or management of a business, whether as owner, partner, officer, employee, or otherwise, having a net worth in excess of $5,000,000, which at such time is in
competition with its subsidiaries, any and all amounts which otherwise thereafter would be due the Participant under the Plan shall be forfeited.
The determination as to whether a Participant is engaged in the operation or management of business having a net worth in excess of $5,000,000 and which is in competition with CBS or any of its subsidiaries shall be made by the Committee in its absolute discretion, and the decision of the Committee with respect thereto, including its determination of the time at which the participation in such competitive business commenced, shall be conclusive. In determining whether or not to give its consent under this section 6(B) the Committee shall give consideration to the circumstances under which the employment of the Participant terminated and, if such termination resulted primarily from circumstances not within the control of the Participant, the Committee shall grant such consent unless the Committee shall find that there are compelling reasons for not doing so.
No Participant shall be required to repay any benefits paid to him prior to the date on which the Participant shall have received written notice that the Committee shall have determined that the Participant has engaged in the operation or management of a business having a net worth in excess of $5,000,000 and which is in competition with CBS or any of its subsidiaries.
6. NONFORFEITURE OF BENEFIT The amount of the benefit accrued under the Plan by any Participant immediately before any (i) withdrawal of approval as a Participant by the Committee granted under Section 2 hereof, (ii) withdrawal of entitlement to 100 percent of a Participant's cash awards under an annual CBS plan for additional compensation granted under section 3(B)(1) hereof or (iii) termination or amendment pursuant to Section 10 hereof shall not be reduced by reason of any such event.
7. NONASSIGNABILITY OF BENEFITS Except as otherwise required by law, neither any benefit payable hereunder nor the right to receive any future benefit under this Plan may be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process, and if any attempt is made to do so, or a person eligible for any benefits under this Plan becomes bankrupt, the interest under this Plan of the person affected may be terminated by the Committee which, in its sole discretion, may cause the same to be held or applied for the benefit of one or more of the dependents of such person or make any other disposition of such benefits that it deems appropriate.
8. FUNDING The Plan shall be maintained as an unfunded plan which is not intended to meet the qualification requirements of Section 401 of the Internal Revenue Code. Establishment of the Plan will not create, in favor of any Participant, any right or lien in or against any of the assets of CBS. Payments under the Plan shall be made in cash from the general funds of CBS and no special or separate fund shall be established and no segregation of assets shall be made to assure the payment of benefits hereunder. Nothing in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between CBS and any Participant or any other person, and CBS's promise to make payments hereunder shall at all times remain unfunded as to any Participant.
9. TERMINATION; AMENDMENT CBS may, at any time, by resolution of its Board of Directors, terminate or amend the Plan in such respects as it shall deem advisable, provided, however, that except to the extent required to comply with any changes in applicable law, this Plan may not be suspended, amended, otherwise modified, or terminated without the consent of each affected Participant during the following periods of time: (i) a period of two years after the "Effective Time," as such term is defined under the
Agreement and Plan of Merger among Westinghouse Electric Corporation, Group W Acquisition Corp. and CBS Inc., (ii) a period of five (5) years after the Effective Time for all Participants who have attained the age of fifty and who have not attained age fifty-five at the Effective Time, and (iii) at any time following the Effective Time for all Participants who have attained age fifty-five at the Effective Time.
10. OPERATION AND ADMINISTRATION The Plan shall be administered by the Committee. The Committee shall have the authority, in its absolute discretion, to exclude from the coverage of the Plan employees who would not otherwise be eligible to be Participants, and to include in the coverage of the Plan employees who would not otherwise be eligible to be Participants. The Committee's decision in all matters involving the interpretation and application of the Plan shall be final and binding. The Committee shall establish such procedures and requirements as it shall deem necessary and appropriate to administer the Plan.
11. APPLICABLE LAW All questions pertaining to the construction, validity, and effect of this Plan shall be determined in accordance with the laws of the State of New York, to the extent not pre-empted by Federal law.
12. LIMITATION OF RIGHTS This Plan is a voluntary undertaking on the part of CBS. Neither the establishment of the Plan nor the payment of any benefits hereunder, nor any action of CBS, the Committee, or its designee shall be held or construed to be a contract of employment between CBS and any Participant, or to confer upon any person any legal right to be continued in the employ of CBS. CBS expressly reserves the right to discharge, discipline, or otherwise terminate the employment of any Participant at any time. Participation in this Plan gives no right or claim to any benefits beyond those which are expressly provided herein and all rights and claims hereunder are limited as set forth in this Plan.
13. SEVERABILITY In the event any provision of this Plan shall be held illegal or invalid, or would serve to invalidate the Plan, that provision shall be deemed to be null and void, and the Plan shall be construed as if it did not contain that provision.
14. HEADINGS, GENDER AND NUMBER The headings to the Articles and Sections of this Plan are inserted for reference only, and are not to be taken as limiting or extending the provisions hereof. Unless the context clearly indicates to the contrary, in interpreting this Plan, the masculine shall include the feminine, and the singular shall include the plural.
15. INCAPACITY If the Committee or its designee shall determine that a Participant, terminated Participant, or any other person entitled to a benefit under this Plan (the "Recipient") is unable to care for his affairs because of illness, accident, or mental or physical incapacity, or because the Recipient is a minor, the Committee or its designee may direct that any benefit payment due the Recipient be paid to his duly appointed legal representative; or if no such representative is appointed, to the Recipient's spouse, child, parent, or other blood relative, or to a person with whom the Recipient resides or who has incurred expense on behalf of the Recipient. Any such payment so made shall be a complete discharge of the liabilities of the Plan with respect to the Recipient.
16. BINDING EFFECT AND RELEASE All persons accepting benefits under this Plan shall be deemed to have consented to the terms of this Plan. Any final payment or distribution to any person entitled to benefits under the Plan shall be in full satisfaction of all claims against the Plan, the Committee or its designee and CBS arising by virtue of this Plan.
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CBS
EXHIBIT 10(j)
CBS SUPPLEMENTAL EMPLOYEE INVESTMENT FUND
(As amended as of January 1, 1998)
CBS Broadcasting Inc. hereby establishes the CBS Supplemental Employee Investment Fund, a nonqualified unfunded plan, for the exclusive benefit of select key management and highly compensated employees who participate in the CBS Employee Investment Fund.
ARTICLE I
INTRODUCTION
Section 1.1 NAME OF PLAN. The name of this Plan is the "CBS Supplemental Employee Investment Fund."
Section 1.2 EFFECTIVE DATE. The effective date of this Plan is January 1, 1995. This Plan shall not apply to any Participant who has retired or terminated from active service with CBS prior to the Effective Date.
Section 1.3 PURPOSE. The purpose of this Plan is to provide a means by which an Eligible Employee may be provided benefits which otherwise would be provided as pre-tax contributions, after-tax contributions, or Employer Matching Contributions under the Employee Investment Fund in the absence of certain restrictions imposed by applicable law on the dollar amount of Salary that can be taken into account under the Employee Investment Fund.
ARTICLE II
DEFINITIONS
Capitalized items which are not defined herein shall have the meaning ascribed to them in the Employee Investment Fund. Whenever reference is made herein to "this Plan," such reference shall be to this CBS Supplemental Employee Investment Fund.
Section 2.1 "Account" shall mean a Participant's individual account as described in Section 3.2 of this Plan.
Section 2.2 "Beneficiary" shall mean the person or persons designated by
the Participant to receive any payments provided for under
Section 3.8, and, if
and to the extent that such designation shall not be in force at the time of such payment, his spouse, or if he has no spouse, his executors or administrators.
Section 2.3 "Board" shall mean the Board of Directors of CBS Broadcasting Inc.
Section 2.4 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
Section 2.5 "Committee" shall mean the Committee established under
Section 4.1 of the Plan or its designee.
Section 2.6 "CBS" shall mean CBS Broadcasting Inc. and any of its affiliated companies as may be authorized to participate in this Plan by the Board.
Section 2.7 "Compensation Limitation" shall mean the limitation on Salary that is required to be taken into account in determining contributions under the Employee Investment Fund in accordance with Section 401(a)(17) of the Code and the regulations and other guidance issued thereunder for plan years beginning on and after January 1, 1994, as indexed for increases in the cost-of-living under Section 401(a)(17)(B) of the Code.
Section 2.8 "Eligible Employee" shall mean an employee of CBS who is designated by the Committee pursuant to Section 4.1 as eligible to participate in this Plan. Notwithstanding the foregoing, for periods after December 31, 1997, eligibility for participation in the Plan shall be restricted to those employees of CBS who are designated for participation and either (i) had an Account balance under the Plan as of December 31, 1997, or (ii) elected to participate in the Plan for all or any part of the 1997 Plan Year.
Section 2.9 "Employee Deferrals" shall mean the portion of a Participant's Salary which he elects to defer under the terms of this Plan and shall include Required Basic Deferrals and Voluntary Deferrals.
Section 2.10 "Employee Investment Fund" shall mean the CBS Employee Investment Fund as amended from time to time.
Section 2.11 "Employer Match" shall mean the amounts credited in accordance with Section 3.4 of this Plan.
Section 2.12 "Excess Salary" shall mean the amount of the Participant's Salary equal to the difference between: (i) his actual Salary for the Plan Year up to $235,840 (without regard to any cost-of-living adjustments); and (ii) his Salary for the Plan Year up to the Compensation Limitation.
Section 2.13 "Participant" shall mean an Eligible Employee who participates in this Plan pursuant to Article III. An Eligible Employee shall remain a Participant under this Plan until all amounts payable on his behalf from this Plan have been paid.
Section 2.14 "Plan Year" shall mean the calendar year.
Section 2.15 "Required Basic Contributions" shall mean the pre-tax contributions or after-tax contributions made to the Employee Investment Fund by or on behalf of a Participant as required basic contributions with respect to which Employer Matching Contributions under Employee Investment Fund are made.
Section 2.16 "Required Basic Deferrals" shall mean the deferrals made by a Participant under Section 3.3(A) hereunder with respect to which Employer Match amounts are credited under Section 3.4.
Section 2.17 "Targeted Investment Options" shall mean those investment options designed in Section 3.6 as measurements of the rate of return to be credited on amounts deferred hereunder.
Section 2.18 "Voluntary Deferrals" shall mean the deferrals made by a Participant under Section 3.3(B) hereunder, if any, after a Participant has elected to make Required Basic Deferrals.
Section 2.19 "Voluntary Supplemental Contributions" shall mean the pre-tax contributions or after-tax contributions made to the Employee Investment Fund by or on behalf of a Participant as voluntary supplemental contributions.
ARTICLE III
PARTICIPATION
Section 3.1 PARTICIPATION
(A) Employee Deferrals Participation: An Eligible Employee may elect to participate in the Required Basic Deferrals feature of the Plan for a Plan Year if he has elected to make the maximum allowable pre-tax Required Basic Contribution and pre-tax Voluntary Supplemental Contribution to the Employee Investment Fund for the Plan Year. An Eligible Employee who is eligible and elects to participate in the Required Basic Deferrals feature of the Plan may further elect to participate in the Voluntary Deferrals feature of the Plan. In order to participate in the foregoing features of the Plan, a Participant must file an election with the
Committee, in accordance with Section 3.3 and the rules and regulations established by the Committee.
(B) Employer Match Participation: An Eligible Employee will participate in the Employer Match feature of this Plan for a Plan year if: (i) he has elected to have the maximum allowable pre-tax Required Basic Contribution and pre-tax Voluntary Supplemental Contribution to the Employee Investment Fund for the Plan Year; (ii) as a result of the application of the Compensation Limitation, he loses the opportunity to be credited with Employer Matching Contributions under the Employee Investment Fund based on the amount of his Excess Salary; and (iii) he has elected to defer a Required Basic Deferral hereunder.
Section 3.2 ESTABLISHMENT OF PLAN ACCOUNTS. CBS shall establish an Account for each Participant. During each Plan Year, each Participant's Account will be credited with the amount of the Participant's Employee Deferrals elected under Section 3.3, if any, and the Employer Match with which the Participant is entitled to be credited with under Section 3.4, if any. Such amounts shall be credited, as a bookkeeping entry only, to the Participant's Account at such times as the Participant's Required Basic Contributions, Voluntary Supplemental Contributions, or Employer Matching Contributions would have been made to the Employee Investment Fund.
Section 3.3 EMPLOYEE DEFERRALS. Participants may make Employee Deferrals as described in Section 3.3(A) and Section 3.3(B) for any Plan Year, subject to the limitation in Section 3.5.
(A) AMOUNT OF EMPLOYEE REQUIRED BASIC DEFERRALS. A Participant who meets the requirements of Section 3.1(A) for a Plan Year may elect to have Required Basic Deferrals credited to his Account for such Plan Year. For each Plan Year, the amount of Required Basic Deferrals that may be credited to a Participant's Account shall equal the Participant's Required Basic Contribution percentage applicable under the Employee Investment Fund multiplied by the Participant's Excess Salary. If the Participant elects to make the Required Basic Deferral, he will be entitled to an Employer Match credited under Section 3.4 hereof.
(B) AMOUNT OF VOLUNTARY DEFERRALS. A Participant who meets the requirements of Section 3.1(A) and has elected to make a Required Basic Deferral under Section 3.3(A) for a Plan Year may then elect to have Voluntary Deferrals credited to his account for such Plan Year. For each Plan Year, a Participant may elect a Voluntary Deferral equal to any percentage of Excess Salary in one-half percent increments; provided, however, that the total amount of Required Basic Deferrals cannot exceed twelve and one-half percent of Excess Salary.
(C) ELECTION OF EMPLOYEE DEFERRALS. An election by a Participant to commence Employee Deferrals must be made prior to January 1 of a Plan Year to be effective for Employee Deferrals with respect to that Plan Year. The election will be effective on a prospective basis beginning with the payroll period that occurs as soon as administratively practicable following January 1 of that Plan Year. Notwithstanding the foregoing, if an Eligible Employee first becomes a Participant after January 1 of a Plan Year, his election to commence Employee Deferrals must be made within 30 days of his participation. The election will be effective on a prospective basis beginning with the payroll period that occurs as soon as administratively practicable following receipt of the election by the Committee. Any election previously made remains in effect unless the Eligible Employee amends or suspends such election as set forth in this Plan.
(D) AMENDMENT OR SUSPENSION OF ELECTION. A Participant may change his election under this Plan any time during the Plan Year by filing an election on a prescribed form. Any such change or new election will become effective as of the first payroll period in the calendar quarter which begins after the date such election is received by the Committee (or as soon as practicable thereafter). Participants may elect to suspend all their Employee Deferrals, if any, by filing a written election with the Committee on prescribed forms. Such a suspension election shall be effective as soon as practicable after it is received by the Committee. In order to resume such Employee Deferrals, a Participant must follow the procedure described in subsection (B) above as though he were a new Participant. A Participant will not be permitted to make up suspended Employee Deferrals.
Section 3.4 CREDITING OF EMPLOYER MATCH. Subject to the limitation in
Section 3.5, for each Plan Year, the amount of Employer Match
that will be credited to the Account of a Participant who
meets the requirements of Section 3.1(B) shall equal the
product of such Participant's Required Basic Deferrals and
the rate (expressed as a percentage) at which employee
pre-tax contributions eligible for matching are matched under
the CBS Employee Investment Fund.
Section 3.5 OVERALL LIMITATION ON AMOUNTS CREDITED TO AN ACCOUNT.
Notwithstanding anything to the contrary in this Plan, in no
event shall the amounts credited to a Participant's Account
under Sections 3.3 and 3.4 with respect to a Plan Year, when
combined with all actual contributions made to the Employee
Investment Fund with respect to such Plan Year by or on
behalf of the Participant (to wit: Required Basic, Voluntary
Supplemental, Periodic Special, if any, and Employer Matching
Contributions) exceed
the dollar limitation amount referred to in Section 415(c) of
the Code (as indexed for cost-of-living increases for such
Plan Year). If amounts in excess of the foregoing combined
plan limitation are credited under this Plan for any
Participant, the overall amounts credited hereunder for the
affected Participant shall be reduced in the following order:
(i) reductions in future deferrals shall be made in the
following order to the extent necessary to meet the foregoing
limitation: Voluntary Deferrals under Section 3.3(B),
Required Basic Deferrals under Section 3.3(A), and Employer
Matches under Section 3.4; thereafter (ii) amounts already
credited under this Plan shall be forfeited in the following
order to the extent necessary to meet the foregoing
limitation: Employer Matches under Section 3.4, Voluntary
Deferrals under Section 3.3(B), and Required Basic Deferrals
under Section 3.3(A).
Section 3.6 CHANGES IN AMOUNTS CREDITED TO AN ACCOUNT. Additional amounts shall be credited to a Participant's Account to reflect the earnings that would have been earned had the deferred amounts been invested in the following Targeted Investment Options, as elected by the Participant: Supplemental Fund Q (AIM Value Fund), Supplemental Fund R (Franklin U.S. Government Securities Fund), or Supplemental Fund S (Merrill Lynch Capital Fund). Notwithstanding the foregoing, the Employer Match amounts credited under Section 3.4 shall be credited with additional amounts to reflect the earnings that would have been earned had the deferred amounts been invested entirely in CBS Corporation common stock. A Participant shall be notified of the amount credited as a bookkeeping entry to his Account as soon as practicable following the end of each Plan Year.
Section 3.7 VESTING OF AMOUNTS IN A PARTICIPANT'S ACCOUNT. Subject to
Section 3.5, a Participant shall be vested in the portion of
his Account attributable to any Employer Match to the same
extent as such Participant is vested in any Employer Matching
Contributions credited to his account under the Employee
Investment Fund. Subject to Section 3.5, a Participant shall
be fully vested in Employee Deferrals at all times.
Section 3.8 DISTRIBUTION OF AMOUNTS CREDITED TO A PARTICIPANT'S ACCOUNT.
Upon termination of employment for any reason, a Participant
shall be entitled to distribution of the vested portion of
his Account in the form of a single sum cash payment as soon
as practicable following the Participant's termination of
employment. If the Participant dies before the distribution
of his Account balance, the remaining balance of his vested
Account shall be paid in a single sum cash payment to the
Participant's Beneficiary as soon as practicable following
the Participant's Death.
ARTICLE IV
PLAN ADMINISTRATION
Section 4.1 COMMITTEE. The Plan shall be administered by a Committee consisting of the Administrative Managers (persons appointed by the Chief Executive Officer of CBS Corporation). The Committee or its designee shall have full authority in its discretion to administer and interpret this Plan, make payments to Participants, and maintain records hereunder, which authority shall include the discretionary authority to determine eligibility for benefits hereunder and the proper amounts to be credited to each Participant's Account. All decisions by the Committee shall be final and binding on all parties affected by the decisions.
Section 4.2 DELEGATED RESPONSIBILITIES. The Committee shall have the authority to delegate any or all of its responsibilities to the Plans Administration Committee.
Section 4.3 CLAIMS PROCEDURE. The Committee or its designee shall have the exclusive right in its discretion to interpret the Plan and to decide any and all matters arising thereunder. In the event of a claim by a Participant as to the amount of any distribution or method of payment under the Plan, such person will be given notice in writing of any denial within 90 days of the filing of such claim unless special circumstances require an extension of such period, which notice will set forth the reason for the denial, the Plan provisions on which the denial is based, an explanation of what other material or information, if any, is needed to perfect the claim, and an explanation of the claims review procedure. The Participant may request a review of such denial within 60 days of the date of receipt of such denial by filing notice in writing with the Committee or its designee. The Participant will have the right to review pertinent Plan documents and to submit issues and comments in writing. The Committee or its designee will respond in writing to a request for review within 60 days of receiving it, unless special circumstances require an extension of such period. The Committee or its designee, at its discretion, may request a meeting to clarify any matters deemed appropriate. All decisions by the Committee or its designee shall be final and binding on all parties affected by the decisions.
Section 4.4 AMENDMENT AND TERMINATION. The Administrative Managers and Financial Managers (persons appointed by the Chief Executive Officer of CBS Corporation) or the CBS Board of Directors may amend, modify, or terminate this Plan at any time provided, however, that no such amendment, modification, or termination shall reduce any benefit under this Plan to which a Participant or the Participant's Beneficiary is entitled
under Article III prior to the date of such amendment or termination, and in which such Participant or Beneficiary would have been vested if such benefit had been provided under the Employee Investment Fund, unless the Participant or Beneficiary becomes entitled to an amount equal to the actuarial value, to be determined in the sole discretion of the Administrative Managers and Financial Managers (persons appointed by the Chief Executive Officer of CBS Corporation) or the CBS Board of Directors, of such benefit under another plan, program, or practice adopted CBS. However, this Plan may not be suspended, amended, otherwise modified, or terminated within the two-year period following the "Effective Time" of the merger of CBS under the Agreement and Plan of Merger dated August 1, 1995, among Westinghouse Electric Corporation, Group W Acquisition Corp. and CBS without the written consent of each affected Participant.
Section 4.5 SOURCE OF PAYMENTS. CBS will pay all benefits arising under
the Plan and all costs, charges and expenses relating thereto
out of the trust established for this purpose pursuant to
Section 4.7, or out of its general assets.
Section 4.6 NONASSIGNABILITY OF BENEFITS. Except as otherwise required by law, neither any benefit payable hereunder nor the right to receive any future benefit under this Plan may be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process, and if any attempt is made to do so, or a person eligible for any benefits under this Plan becomes bankrupt, the interest under this Plan of the person affected may be terminated by the Plans Administration Committee which, in its sole discretion, may cause the same to be held or applied for the benefit of one or more of the dependents of such person or make any other disposition of such benefits that it deems appropriate.
Section 4.7 PLAN UNFUNDED. Nothing in this Plan shall be interpreted or construed to require CBS in any manner to fund any obligation to the Participants, terminated Participants, or Beneficiaries hereunder. Nothing contained in this Plan nor any action taken hereunder shall create, or be construed to create, a trust of any kind, or a fiduciary relationship between CBS and the Participants, terminated Participants, Beneficiaries, or any other persons. Any funds which may be accumulated in order to meet any obligation under this Plan shall, for all purposes, continue to be a part of the general assets of the CBS; provided, however, that CBS shall establish a trust to hold funds intended to provide benefits hereunder to the extent the assets of such trust become subject to the claim of the general creditors of CBS in the event of bankruptcy or insolvency of CBS. To the extent that any Participant, terminated Participant, or Beneficiary acquires a right to receive payments from CBS under this Plan, such rights shall be no greater than the rights of any unsecured general creditor of the CBS.
Section 4.8 APPLICABLE LAW. All questions pertaining to the construction, validity, and effect of this Plan shall be determined in accordance with the laws of the State of New York, to the extent not pre-empted by Federal Law.
Section 4.9 LIMITATION OF RIGHTS. This Plan is a voluntary undertaking on the part of CBS. Neither the establishment of the Plan nor the payment of any benefits hereunder, nor any action of CBS, the Committee, or its designee shall be held or construed to be a contract of employment between CBS and any Eligible Employee or to confer upon any person any legal right to be continued in the employ of CBS. CBS expressly reserves the right to discharge, discipline, or otherwise terminate the employment of any Eligible Employee at any time. Participation in this Plan gives no right or claim to any benefits beyond those which are expressly provided herein and all rights and claims hereunder are limited as set forth in this Plan.
Section 4.10 SEVERABILITY. In the event any provision of this Plan shall be held illegal or invalid, or would serve to invalidate the Plan, that provision shall be deemed to be null and void, and the Plan shall be construed as if it did not contain that provision.
Section 4.11 HEADINGS, GENDER AND NUMBER. The headings to the Articles and Sections of this Plan are inserted for reference only, and are not to be taken as limiting or extending the provisions hereof. Unless the context clearly indicates to the contrary, in interpreting this Plan, the masculine shall include the feminine, and the singular shall include the plural.
Section 4.12 INCAPACITY. If the Committee or its designee shall determine that a Participant, terminated Participant, or any other person entitled to a benefit under this Plan (the "Recipient") is unable to care for his affairs because of illness, accident, or mental or physical incapacity, or because the Recipient is a minor, the Committee or its designee may direct that any benefit payment due the Recipient be paid to his duly appointed legal representative; or if no such representative is appointed, to the Recipient's spouse, child, parent, or other blood relative, or to a person with whom the Recipient resides or who has incurred expense on behalf of the Recipient. Any such payment so made shall be a complete discharge of the liabilities of the Plan with respect to the Recipient.
Section 4.13 BINDING EFFECT AND RELEASE. All persons accepting benefits under this Plan shall be deemed to have consented to the terms of this Plan. Any final payment or distribution to any person entitled to benefits under the Plan shall be in full satisfaction of all claims against the Plan, the Committee or its designee and CBS arising by virtue of this Plan.
CBS
EXHIBIT 10(k)
CBS CORPORATION
DEFERRED COMPENSATION AND STOCK PLAN
FOR DIRECTORS
(AS AMENDED AS OF JULY 28, 1999)
SECTION 1. INTRODUCTION
1.1 ESTABLISHMENT. CBS Corporation, a Pennsylvania corporation formerly known as Westinghouse Electric Corporation (the "Company"), has established the Deferred Compensation and Stock Plan for Directors, as amended from time to time (the "Plan"), for those directors of the Company who are neither officers (other than non-executive officers) nor employees of the Company. The Plan provides, among other things, for the payment of specified portions of the Annual Director's Fee and the Annual Board Chairman's Fee, if applicable, in the form of Stock Options and Restricted Stock, the payment of the Annual Committee Chair's Fee in the form of Restricted Stock, the granting of Stock Options and Restricted Stock as additional Director compensation, and the opportunity for the Directors to defer receipt of all or a part of their cash compensation. Unless otherwise provided for herein, the term Company includes CBS Corporation and its subsidiaries.
1.2 PURPOSES. The purposes of the Plan are to encourage the Directors to own shares of the Company's stock and thereby to align their interests more closely with the interests of the other shareholders of the Company, to encourage the highest level of Director performance, and to provide a financial incentive that will help attract and retain the most qualified Directors.
SECTION 2. DEFINITIONS
2.1 DEFINITIONS. The following terms will have the meanings set forth below:
(a) "ANNUAL BOARD CHAIRMAN'S FEE" means the annual amount (which may be prorated) established from time to time by the Board as the annual fee to be paid to the Board Chairman, if any, for his or her services as Board Chairman.
(b) "ANNUAL COMMITTEE CHAIR'S FEE" means the annual amount (which may be prorated for a Director serving as a committee chair for less than a full year) established from time to time by the Board as the annual fee to be paid to Directors for their services as chairs of standing committees of the Board.
(c) "ANNUAL DIRECTOR'S FEE" means the annual amount (which may be prorated for a Director serving less than a full calendar year, as in the case of a Director who will be
retiring or not standing for reelection at the annual meeting of shareholders or a Director joining the Board (or otherwise first becoming a Director) after the beginning of the year) established from time to time by the Board as the annual fee to be paid to Directors for their services as directors.
(d) "ATTENDANCE PERCENTAGE" for a Director with respect to a particular Grant Year means the percentage of the aggregate of all meetings of the Board and committees of which the Director was a member held during the Grant Year (or, for Directors who join the Board or otherwise first become Directors after the beginning of the Grant Year, Directors who retire at the annual meeting of shareholders (as described in the Company's By-laws) held during the Grant Year, Directors who do not stand for reelection at the annual meeting of shareholders held during the Grant Year, or Directors who die during the Grant Year, the aggregate of all such meetings held for the portion of the Grant Year during which the Director served as a director), excluding any meeting(s) not attended because of illness, which were attended by the Director. Except as otherwise provided below, in the event that a Director ceases to be a director at any time during the Grant Year for any reason other than retirement at the annual meeting of shareholders, not standing for reelection at the annual meeting of shareholders, or death, all meetings held during the Grant Year of the Board and committees of which he was a member at the time of termination of service will continue to be included as meetings when calculating the Attendance Percentage.
(e) "BOARD" means the Board of Directors of the Company.
(f) "BOARD CHAIRMAN" means the director who is the non-employee, non-executive chairman of the Board, if any.
(g) "CASH ACCOUNT" means the account established by the Company in respect of each Director pursuant to Section 6.3(a) hereof and to which deferred cash compensation has been or will be credited pursuant to the Plan.
(h) "CAUSE" means any act of (i) fraud or intentional misrepresentation or (ii) embezzlement, misappropriation or conversion of assets or opportunities of the Company or any of its direct or indirect majority-owned subsidiaries.
(i) "CHANGE IN CONTROL" will have the meaning assigned to it in
Section 9.2 hereof.
(j) "COMMITTEE" means the Compensation Committee of the Board (or any subcommittee thereof) or any successor committee established by the Board, or any subcommittee thereof, in each case consisting of two or more members each of whom is a "non-employee director" as that term is defined by Rule 16b-3 under the Exchange Act, as such rule may be amended, or any successor rule.
(k) "COMMON STOCK EQUIVALENT" means a hypothetical share of Stock which will have a value on any date equal to the mean of the high and low prices of the Stock as
reported by the composite tape of the New York Stock Exchange on that date, except as otherwise provided under Section 9.1.
(l) "COMMON STOCK EQUIVALENT AWARD" means an award of Common Stock Equivalents granted to a Director pursuant to Section 5 of the Plan prior to its amendment as of April 26, 1995.
(m) "DEBENTURE" means a hypothetical debenture of the Company that has a face value of $100, bears interest at a rate equal to the ten-year U.S. Treasury Bond rate (prior to January 1, 1995, the seven-year U.S. Treasury Bond rate) in effect the week prior to the regular January meeting of the Board (or, if no such meeting is held, the week prior to the first trading day of the New York Stock Exchange in February) in the year in respect of which deferred amounts are earned, and is convertible into Stock at a conversion rate determined by dividing $100 by the mean of the high and low prices of the Stock as reported by the composite tape of the New York Stock Exchange on the date the Debenture is credited to the Deferred Debenture Account pursuant to Section 6.3 hereof.
(n) "DEFERRED DEBENTURE ACCOUNT" means the account established by the Company pursuant to Section 6.3(c) hereof in respect of each Director electing to defer cash compensation under the Plan for 1997 and/or for an earlier year or years and to which has been or will be credited Debentures and other amounts pursuant to the Plan.
(o) "DEFERRED STOCK ACCOUNT" means the account established by the Company in respect of each Director pursuant to Section 5.2 hereof and to which has been or will be credited Common Stock Equivalents pursuant to the Plan.
(p) "DIRECTOR" means a member of the Board who is neither an officer nor an employee of the Company. For purposes of the Plan, an employee is an individual whose wages are subject to the withholding of federal income tax under Section 3401 of the Internal Revenue Code, and an officer is an individual elected or appointed by the Board or chosen in such other manner as may be prescribed in the By-laws of the Company to serve as such, other than a non-executive officer (such as the Board Chairman).
(q) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time.
(r) "FAIR MARKET VALUE" means the mean of the high and low prices of the Stock as reported by the composite tape of the New York Stock Exchange (or such successor reporting system as the Committee may select) on the relevant date or, if no sale of the Stock has been reported for that day, the average of such prices on the next preceding day and the next following day for which there were reported sales.
(s) "GRANT DATE" means, as to a Stock Option Award, the date of grant pursuant to Section 7.1 and as to a Restricted Stock Award, the date of grant pursuant to Section 8.1.
(t) "GRANT YEAR" means, as to a particular award, the calendar year in which the award was granted.
(u) "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended from time to time.
(v) "OPTION VESTING DATE" will have the meaning assigned to it in
Section 7.2.
(w) "RESTRICTED STOCK" means shares of Stock awarded to a Director pursuant to Section 8 and subject to certain restrictions in accordance with the Plan.
(x) "RESTRICTED STOCK AWARD" means an award of shares of Restricted Stock granted to a Director pursuant to Section 8 of the Plan.
(y) "STOCK" means the common stock, $1.00 par value, of the Company.
(z) "STOCK OPTION" means a non-statutory stock option to purchase shares of Stock for a purchase price per share equal to the Exercise Price (as defined in Section 7.2(a)) in accordance with the provisions of the Plan.
(aa) "STOCK OPTION AWARD" means an award of Stock Options granted to a Director pursuant to Section 7 of the Plan.
(bb) "STOCK OPTION VALUE" means the value of a Stock Option for one share of Stock on the relevant date as determined by an outside firm selected by the Company.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context, the masculine gender will also include the feminine gender, and the definition of any term herein in the singular will also include the plural.
SECTION 3. PLAN ADMINISTRATION
(a) The Plan will be administered by the Committee. The members of the Committee will be members of the Board appointed by the Board, and any vacancy on the Committee will be filled by the Board or in a manner authorized by the Board.
The Committee will keep minutes of its meetings and of any action taken by it without a meeting. A majority of the Committee will constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present will be the acts of the Committee. Any action that may be taken at a meeting of the Committee may be taken without a meeting if a consent or consents in writing setting forth the action so taken is signed by all of the members of the Committee. The Committee will make appropriate reports to the Board concerning the operations of the Plan.
(b) Subject to the limitations of the Plan, the Committee and/or the Board, will have the sole and complete authority: (i) to impose such limitations, restrictions and
conditions upon such awards as it deems appropriate; (ii) to interpret the Plan and to adopt, amend and rescind administrative guidelines and other rules and regulations relating to the Plan; and (iii) to make all other determinations and to take all other actions necessary or advisable for the implementation and administration of the Plan. The Committee's or the Board's determinations on matters within its authority will be conclusive and binding upon the Company and all other persons.
(c) The Company will be the sponsor of the Plan. All expenses associated with the Plan will be borne by the Company.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. 600,000 shares of Stock are authorized for issuance under the Plan in accordance with the provisions of the Plan, subject to adjustment and substitution as set forth in this Section 4. This authorization may be increased from time to time by approval of the Board and, if such approval is required, by the shareholders of the Company. The Company will at all times during the term of the Plan retain as authorized and unissued Stock at least the number of shares from time to time required under the provisions of the Plan, or otherwise assure itself of its ability to perform its obligations hereunder.
4.2 OTHER SHARES OF STOCK. Any shares of Stock that are subject to a Common Stock Equivalent Award, a Stock Option Award, a Restricted Stock Award or a Debenture and which are forfeited, any shares of Stock that for any other reason are not issued to a Director, and any shares of Stock tendered by a Director to pay the Exercise Price of a Stock Option will automatically become available again for use under the Plan if Rule 16b-3 under the Exchange Act, as such rule may be amended, or any successor rule, and interpretations thereof by the Securities and Exchange Commission or its staff permit such share replenishment.
4.3 ADJUSTMENTS UPON CHANGES IN STOCK. If there is any change in the Stock of the Company, through merger, consolidation, division, share exchange, combination, reorganization, recapitalization, stock dividend, stock split, spin-off, split up, dividend in kind or other change in the corporate structure or distribution to the shareholders, appropriate adjustments may be made by the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) in the aggregate number and kind of shares subject to the Plan, and the number and kind of shares which may be issued under the Plan. Appropriate adjustments may also be made by the Committee in the terms of any awards or Debentures under the Plan to reflect such changes and to modify any other terms of outstanding awards on an equitable basis as the Committee in its discretion determines.
SECTION 5. COMMON STOCK EQUIVALENT AWARDS
5.1 GRANTS OF COMMON STOCK EQUIVALENT AWARDS. Common Stock Equivalents
equal to a fixed number of shares of Stock were granted automatically to
Directors on a formula basis under Section 5.1 of the Plan prior to its
amendment as of April 26, 1995. All Common Stock Equivalents granted pursuant to
Section 5.1 prior to its amendment as of April 26, 1995 are subject to
adjustment as provided in Section 4.3.
5.2 DEFERRED STOCK ACCOUNT. A Deferred Stock Account has been established for each Director elected prior to the annual meeting of shareholders held in 1995. The Deferred Stock Account consists of compensation in the form of Common Stock Equivalents which have been awarded to the Director hereunder by the Company plus Common Stock Equivalents credited to the Deferred Stock Account in respect of dividends and other distributions on the Stock pursuant to Sections 5.3 and 5.4.
5.3 HYPOTHETICAL INVESTMENT. Compensation awarded hereunder in the form of Common Stock Equivalents is assumed to be a hypothetical investment in shares of Stock, and is subject to adjustment to reflect stock dividends, splits and reclassifications and as otherwise set forth in Section 4.3.
5.4 HYPOTHETICAL DIVIDENDS. Dividends and other distributions on Common Stock Equivalents will be deemed to have been paid as if such Common Stock Equivalents were actual shares of Stock issued and outstanding on the respective record or distribution dates. Common Stock Equivalents will be credited to the Deferred Stock Account in respect of cash dividends and any other securities or property issued on the Stock in connection with reclassifications, spin-offs and the like on the basis of the value of the dividend or other asset distributed and the value of the Common Stock Equivalents on the date of the announcement of the dividend or asset distribution, all at the same time and in the same amount as dividends or other distributions are paid or issued on the Stock. Such Common Stock Equivalents are subject to adjustment as provided in Section 4.3. Fractional shares will be credited to a Director's Deferred Stock Account cumulatively but the balance of shares of Common Stock Equivalents in a Director's Deferred Stock Account will be rounded to the next highest whole share for any payment to such Director pursuant to Section 5.6.
5.5 STATEMENT OF ACCOUNT. A statement will be sent to each Director as to the balance of his Deferred Stock Account at least once each calendar year.
5.6 PAYMENT OF DEFERRED STOCK. Upon termination of services as a Director, the balance of the Director's Deferred Stock Account will be paid to such Director in Stock in January of the year following the year of termination of services as a director on the basis of one share of Stock for each Common Stock Equivalent in such Director's Deferred Stock Account.
5.7 PAYMENTS TO A DECEASED DIRECTOR'S ESTATE. In the event of a Director's death before the balance of his or her Deferred Stock Account is fully paid to the Director, payment of the balance of the Director's Deferred Stock Account will then be made to the beneficiary properly designated by the Director pursuant to Section 5.8, if any, or to his or her estate in the absence of such a beneficiary designation, in the time and manner selected by the Committee. The Committee may take into account the application of any duly appointed administrator or executor of a Director's estate and direct that the balance of the Director's Deferred Stock Account be paid to his or her estate in the manner requested by such application.
5.8 DESIGNATION OF BENEFICIARY. A Director may designate a beneficiary in the event of the Director's death in a form approved by the Company.
SECTION 6. DEFERRAL OF COMPENSATION
6.1 AMOUNT OF DEFERRAL. A Director may elect to defer receipt of all or a specified portion of the cash compensation otherwise payable to the Director for services rendered to the Company in any capacity as a director.
6.2 MANNER OF ELECTING DEFERRAL. A Director will make elections
permitted hereunder by giving written notice to the Company in a form approved
by the Committee and in compliance with Section 6.4. The notice will include:
(i) the percentage of cash compensation to be deferred, which amount must be
stated in whole increments of five percent; and (ii) the time as of which
deferral is to commence.
6.3 ACCOUNTS.
(a) CASH ACCOUNT. A Cash Account has been or will be established for each Director electing to defer hereunder. Each Cash Account will be credited with the amounts deferred on the date such compensation is otherwise payable and will be debited with the amount of any such compensation forfeited in accordance with applicable Board policy.
(b) INTEREST. Deferred amounts in the Cash Account will accrue interest from time to time as follows:
(1) PRE-1998. For deferred amounts credited to the Cash Account prior to January 1, 1998 (including but not limited to Annual Director's Fees for the calendar year 1997), such deferred amounts will accrue interest from time to time at a rate equal to the ten-year U.S. Treasury Bond rate (prior to January 1, 1995, the seven-year U.S. Treasury Bond rate) in effect the week prior to the regular January meeting of the Board (or, if no such meeting is held, the week prior to the first trading day of the New York Stock Exchange in February) in the year in respect of which such deferred amounts are earned until the last trading day of the New York Stock Exchange prior to the regular January meeting of the Board (or, if no such meeting is held, until the first trading day of February) in the year following the year in respect of which deferred amounts are earned, at which time such deferred amounts, including interest, will be invested in Debentures and credited to the Deferred Debenture Account. Deferred amounts will be credited to the Deferred Debenture Account only in $100 amounts. Fractional amounts of $100 will remain in the Cash Account and continue to accrue interest.
(2) 1998 AND THEREAFTER. For deferred amounts credited to the Cash Account on or after January 1, 1998 (and any fractional amounts remaining in the Cash Account from prior deferrals), unless otherwise determined by the Board or the Committee prior to the deferral date such deferred amounts will accrue interest from time to time at the Interest Credit Rate then in effect, compounded annually. The "Interest Credit Rate" will be reset by the Company on an annual
basis in January of the year, and will equal the then current one-year U.S. Treasury Bill rate or such other fixed rate as the Committee may from time to time determine.
(c) DEFERRED DEBENTURE ACCOUNT. A Deferred Debenture Account has been established for each Director electing to defer cash compensation hereunder for the calendar year 1997 and/or for an earlier year or years. Deferred amounts credited to the Cash Account prior to January 1, 1998 will be invested in Debentures and credited to the Deferred Debenture Account at the time and in the manner set forth in Section 6.3(b)(1). Deferred amounts credited to the Cash Account on or after January 1, 1998 will NOT be invested in Debentures but will remain in the Cash Account and accrue interest until payment hereunder.
6.4 TIME FOR ELECTING DEFERRAL. Any election to (i) defer cash compensation, (ii) alter the portion of such amounts deferred, or (iii) revoke an election to defer such amounts, must be made prior to the time such compensation is earned by the Director and otherwise in compliance with any deadline which the Company may from time to time impose and in the manner set forth in Section 6.2.
6.5 PAYMENT OF DEFERRED AMOUNTS. Payments from a Deferred Debenture Account and/or from a Cash Account will be made in five consecutive annual installments beginning in the January following the Director's termination of service.
Payments from a Deferred Debenture Account will consist of accumulated interest on the Debentures (which amount will only be payable in cash) plus the greater value of (i) the face value of the Debentures or (ii) the shares of Stock into which the Debentures are convertible. In the event the value of the payment is determined by the amount referred to in clause (i), payment will be made in cash. In the event such value is determined by clause (ii), such payment will be made in Stock, other than the value of fractional shares which will be paid in cash.
Payments from a Cash Account will consist of the deferred cash compensation and accumulated interest in said account and will be made in cash.
6.6 PAYMENTS TO A DECEASED DIRECTOR'S ESTATE. In the event of a Director's death before the balance of his or her Cash Account or Deferred Debenture Account is fully paid to the Director, payment of the balance of the Cash Account or Deferred Debenture Account will then be made to the beneficiary properly designated by the Director pursuant to Section 6.7, if any, or to his or her estate in the absence of such a beneficiary designation, in the time and manner selected by the Committee. The Committee may take into account the application of any duly appointed administrator or executor of a Director's estate and direct that the balance of the Director's Cash Account or Deferred Debenture Account be paid to his or her estate in the manner requested by such application.
6.7 DESIGNATION OF BENEFICIARY. A Director may designate a beneficiary in the event of the Director's death in a form approved by the Company.
SECTION 7. STOCK OPTION AWARDS
7.1 GRANTS OF STOCK OPTION AWARDS.
(a) For calendar year 1995, Stock Options for a fixed number of
shares of Stock were granted automatically to Directors on a formula basis under
Section 7.1(a) of the Plan.
(b) For calendar year 1995, Stock Options for a fixed number of shares of Stock were granted automatically on a formula basis under Section 7.1(b) of the Plan to Directors serving as chairs of standing committees of the Board.
(c) For calendar years 1996 and 1997, Stock Options were granted automatically under Section 7.1(c) of the Plan to Directors for one-fourth of the value of their Annual Director's Fees.
(d) ANNUAL DIRECTOR'S FEE GRANTS. Beginning with calendar year 1998, unless otherwise determined by the Board or the Committee each Director will receive 5/16ths (31.25%) of the value of his or her Annual Director's Fee in the form of a Stock Option Award. Such Stock Options will be granted automatically each year on the last Wednesday in January of such year to each Director in office on such Grant Date.
If a person joins the Board or otherwise first becomes a Director at any time after the last Wednesday in January of a given calendar year (beginning with 1998) but before the end of that calendar year, whether by action of the shareholders of the Company or the Board or otherwise, unless otherwise determined by the Board or the Committee such person upon becoming a Director will be granted automatically 5/16ths (31.25%) of the value of his or her Annual Director's Fee for that calendar year (which may be prorated) in the form of a Stock Option Award on the last Wednesday of the calendar month in which such person first becomes a Director (or in the next following calendar month if such person first becomes a Director after the last Wednesday of the month). The total number of shares of Stock subject to any such Stock Option Award will be the number of shares determined by dividing the amount of the Annual Director's Fee to be paid in the form of a Stock Option Award by the Stock Option Value on the Grant Date, rounded up to the nearest whole share.
(e) ANNUAL BOARD CHAIRMAN'S FEE GRANTS. Beginning with calendar year 1999, unless otherwise determined by the Board or the Committee, the Board Chairman, if any, will receive 5/16ths (31.25%) of the value of his or her Annual Board Chairman's Fee in the form of a Stock Option Award, and such Stock Options will be granted automatically each year on the last Wednesday in January of such year to the Board Chairman in office on such Grant Date, if any.
If a director becomes Board Chairman at any time after the last Wednesday in January of a given calendar year (beginning with calendar year 1999) but before the end of that calendar year, whether by action of the Board or otherwise, unless otherwise determined by the Board or the Committee such director upon so becoming the Board Chairman will be granted
automatically 5/16ths (31.25%) of the value of his or her Annual Board Chairman's Fee for that calendar year (which may be prorated) in the form of a Stock Option Award on the last Wednesday of the calendar month in which such person first becomes Board Chairman (or in the next following calendar month if such person first becomes Board Chairman after the last Wednesday of the month). The total number of shares of Stock subject to any such Stock Option Award will be the number of shares determined by dividing the amount of the Annual Board Chairman's Fee to be paid in the form of a Stock Option Award by the Stock Option Value on the Grant Date, rounded up to the nearest whole share.
(f) OTHER STOCK OPTION GRANTS. Beginning with calendar year 1999, the Board or the Committee may, from time to time, grant Stock Option Awards to one or more Directors or to the Board Chairman for such number of shares as the Board or the Committee may determine as additional compensation to such Director or Directors or to such Board Chairman for their services as such.
(g) All Stock Options granted pursuant to Section 7.1 are subject to adjustment as provided in Section 4.3.
7.2 TERMS AND CONDITIONS OF STOCK OPTIONS. Unless otherwise determined by the Board or the Committee, Stock Options granted under the Plan will be subject to the following terms and conditions:
(a) EXERCISE PRICE. Beginning with Stock Options granted in calendar year 1998 and thereafter, the purchase price per share at which a Stock Option may be exercised ("Exercise Price") will be equal to the Fair Market Value of a share of Stock on the Grant Date. Notwithstanding anything herein to the contrary, in no event may the Board or the Committee establish an Exercise Price that is less than the Fair Market Value of a share of Stock on the Grant Date.
For Stock Options granted in 1995, 1996 and 1997, the Exercise Price was determined as follows: on any Grant Date, (1) Stock Options for two-thirds of the option shares granted on the Grant Date had an Exercise Price per share equal to 100% of the Fair Market Value of a share of Stock on the Grant Date; and (2) Stock Options for the remaining one-third of the option shares granted on the Grant Date had an Exercise Price per share equal to 125% of the Fair Market Value of a share of Stock on the Grant Date.
(b) EXERCISABILITY. Subject to the terms and conditions of the Plan and of the agreement referred to in Section 7.2(j), a Stock Option may be exercised in whole or in part upon notice of exercise to the Company: (1) as to any Stock Option granted in calendar year 1995, commencing on the first day after the Grant Date and until it terminates; and (2) as to any Stock Option granted after January 1, 1996 that vests as provided in Section 7.2(c)(2), 7.2(c)(3) or 7.2(c)(4), commencing on January 1 of the calendar year next following the Grant Year (the "Option Vesting Date") or, if so provided in the relevant Stock Option Agreement, upon the occurrence of a Change in Control, if earlier, and until it terminates. During a Director's lifetime, a Stock Option may be exercised only by the Director or the Director's guardian or legal
representative. The Committee or the Board may at any time and from time to time accelerate the time at which all or any part of a Stock Option may be exercised.
(c) VESTING OF STOCK OPTION AWARDS.
(1) Stock Options granted in calendar year 1995 vested immediately on grant.
(2) ANNUAL DIRECTOR'S FEE GRANTS. Except as otherwise set forth in Section 7.1(c)(4), Stock Options granted as part of a Director's Annual Director's Fee after January 1, 1996 will vest on the Option Vesting Date if the Director has an Attendance Percentage of at least seventy-five percent (75%) for the Grant Year. The Committee or the Board may at any time or from time to time accelerate the vesting of all or any part of a Stock Option.
In the event that a Director has an Attendance Percentage of less than seventy-five percent (75%) for a Grant Year, Stock Options granted in that Grant Year for a number of shares equal to the Director's Attendance Percentage for that year multiplied by the total number of option shares granted for that year (rounded up to the nearest whole share) will vest on the Option Vesting Date, and Stock Options granted in that Grant Year as to the remaining option shares will be forfeited and will terminate as of the Option Vesting Date.
(3) ANNUAL BOARD CHAIRMEN'S FEE GRANTS AND OTHER GRANTS. Except as otherwise set forth in Section 7.1(c)(4), Stock Options granted as part of an Annual Board Chairman's Fee, if any, or granted to a Director or to the Board Chairman, if any, pursuant to Section 7.1(f) will vest on the Option Vesting Date.
(4) Notwithstanding anything to the contrary herein, (i) in the event that a director is removed for Cause from office as a director of the Company (and/or, in the case of Stock Options granted to a director in his or her capacity as Board Chairman, from office as Board Chairman, if applicable), all outstanding Stock Options will be forfeited immediately as of the time the grantee is so removed from office, and (ii) if so provided in the relevant Stock Option Agreement or if the Committee or the Board so determines with respect to a Stock Option or Options, upon the occurrence of a Change in Control, all such outstanding Stock Options will vest and become immediately exercisable.
(d) MANDATORY HOLDING OF STOCK. Except as otherwise provided in
Section 7.5 or Section 10 or unless waived by the Committee or the Board, any
Stock acquired on exercise of a Stock Option must be held by the grantee for a
minimum of: (1) three years from the date of exercise; (2) two years from the
date the grantee ceases to be a director of the Company; or (3) if so provided
in the relevant Stock Option Agreement or if the Committee or the Board so
determines with respect to a Stock Option or Options, until the occurrence of a
Change in Control, whichever first occurs (the "Option Shares Holding Period").
(e) OPTION TERM. The term of a Stock Option (the "Option Term") will be the shorter of: (1) the period of ten years from its Grant Date; (2) the period from the Grant Date
until the Option Vesting Date for a Stock Option that does not vest and is
terminated on said date as provided in Section 7.2(c)(2), if applicable (or with
respect to any portion of a Stock Option that does not vest on the Option
Vesting Date and is terminated as provided in Section 7.2(c)(2), if applicable);
(3) the period from the Grant Date until the time the Stock Option is forfeited
as provided in Section 7.2(c)(4)(i) in the event a director is removed from
office as a director of the Company and/or as Board Chairman, if applicable, for
Cause; or (4) the period from the Grant Date until the date the Stock Option
ceases to be exercisable as provided in Section 7.2(h).
(f) PAYMENT OF EXERCISE PRICE. Stock purchased on exercise of a Stock Option must be paid for as follows: (1) in cash or by check (acceptable to the Company), bank draft or money order payable to the order of the Company, (2) through the delivery of shares of Stock which are then outstanding and which have a Fair Market Value on the date of exercise equal to the Exercise Price per share multiplied by the number of shares as to which the Stock Option is being exercised (the "Aggregate Exercise Price"); (3) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the Aggregate Exercise Price, or (4) by a combination of the permissible forms of payment; PROVIDED, HOWEVER, that any portion of the Exercise Price representing a fraction of a share must be paid in cash and no share of Stock held for less than six months may be delivered in payment of the Aggregate Exercise Price.
(g) RIGHTS AS A SHAREHOLDER. The holder of a Stock Option will not have any of the rights of a shareholder with respect to any shares of Stock subject to the Stock Option until such shares are issued by the Company following the exercise of the Stock Option.
(h) TERMINATION OF ELIGIBILITY. If a grantee ceases to be a director and/or ceases to be Board Chairman, if applicable, for any reason, any outstanding Stock Options will be exercisable according to the following provisions:
(1) If a grantee ceases to be a director and/or ceases to be Board Chairman, if applicable, for any reason other than removal for Cause or death, any outstanding Stock Options held by such grantee which are vested or which thereafter vest will be exercisable by the grantee in accordance with their terms at any time prior to the expiration of the Option Term;
(2) If a grantee is removed from office as a director of the Company and/or as Board Chairman, if applicable, for Cause, any outstanding vested Stock Options held by such grantee will be exercisable by the grantee in accordance with their terms at any time prior to the earlier of (a) the time the grantee is so removed from office and (b) the expiration of the Option Term; and
(3) Following the death of a grantee while a director and/or while Board Chairman, if applicable, or after the grantee ceased to be a director and/or ceased to be Board Chairman, if applicable, for any reason other than removal for Cause, any Stock Options that are outstanding and exercisable by such grantee at the time of death or which thereafter vest will be exercisable in accordance with their terms by the person or persons entitled to do so under the grantee's will, by a beneficiary properly designated by the director in the event of death pursuant to Section 7.4, if any, or by the person or persons entitled to do so under the applicable laws of
descent and distribution at any time prior to the earlier of (a) the expiration of the Option Term and (b) two years after the date of death.
(i) TERMINATION OF STOCK OPTION. A Stock Option will terminate on the earlier of (1) exercise of the Stock Option in accordance with the terms of the Plan, and (2) expiration of the Option Term as specified in Sections 7.2(e) and 7.2(h).
(j) STOCK OPTION AGREEMENT. All Stock Options will be confirmed by an agreement, or an amendment thereto, which will be executed on behalf of the Company by the Chief Executive Officer, the President or any Vice President and by the grantee.
(k) GENERAL RESTRICTIONS.
(1) The obligation of the Company to issue Stock pursuant to Stock Options under the Plan will be subject to the condition that, if at any time the Company determines that (a) the listing, registration or qualification of shares of Stock upon any securities exchange or under any state or federal law, or (b) the consent or approval of any government or regulatory body is necessary or desirable, then such Stock will not be issued unless such listing, registration, qualification, consent or approval has been effected or obtained free from any conditions not acceptable to the Company.
(2) Shares of Stock for use under the provisions of this Section 7 will not be issued until they have been duly listed, upon official notice of issuance, upon the New York Stock Exchange and such other exchanges, if any, as the Board may determine, and a registration statement under the Securities Act of 1933 with respect to such shares has become, and is, effective.
Subject to the foregoing provisions of this Section 7.2 and the other provisions of the Plan, any Stock Option granted under the Plan will be subject to such restrictions and other terms and conditions, if any, as the Board and/or the Committee may determine, in its or their discretion, and as are set forth in the agreement referred to in Section 7.2(j), or an amendment thereto; PROVIDED, HOWEVER, that in no event will the Committee or the Board have any power or authority which would cause transactions pursuant to the Plan to cease to be exempt from the provisions of Section 16(b) of the Exchange Act pursuant to Rule 16b-3, as such rule may be amended, or any successor rule.
7.3 ANNUAL STATEMENT. A statement will be sent to each Director as to the status of his or her Stock Options at least once each calendar year.
7.4 DESIGNATION OF A BENEFICIARY. A Director may designate a beneficiary to hold and exercise outstanding Stock Options in accordance with the Plan in the event of the Director's death in a form approved by the Company.
7.5 HOLDING PERIOD APPLICABLE TO A DECEASED GRANTEE'S ESTATE. As long as at least six months have elapsed since the Grant Date, a beneficiary properly designated by the Director pursuant to Section 7.4, if any, or a person holding a Stock Option under a deceased grantee's
will or under the applicable laws of descent or distribution, exercising a Stock Option in accordance with Section 7.2(h) will not be subject to the Holding Period with respect to shares of Stock received on exercise of a Stock Option.
SECTION 8. RESTRICTED STOCK AWARDS.
8.1 GRANTS OF RESTRICTED STOCK AWARDS.
(a) ANNUAL DIRECTOR'S FEE GRANTS. For calendar years 1996 and 1997, each Director received one-fourth of the value of his or her Annual Director's Fee in the form of a Restricted Stock Award.
Beginning with calendar year 1998, unless otherwise determined by the Board or the Committee each Director will receive 5/16ths (31.25%) of the value of his or her Annual Director's Fee in the form of a Restricted Stock Award, and such Restricted Stock will be granted automatically each year on the last Wednesday in January of such year to each Director in office on such Grant Date.
If a person joins the Board or otherwise first becomes a Director at any time after the last Wednesday in January of a given calendar year (beginning with 1998) but before the end of that calendar year, whether by action of the shareholders of the Company or the Board or otherwise, unless otherwise determined by the Board or the Committee such person upon becoming a Director will be granted automatically 5/16ths (31.25%) of the value of his or her Annual Director's Fee for that calendar year (which may be prorated) in the form of a Restricted Stock Award on the last Wednesday in the calendar month in which such person first becomes a Director (or in the next following calendar month if said person first becomes a Director after the last Wednesday of the month).
(b) ANNUAL COMMITTEE CHAIR'S FEE GRANTS. Beginning with calendar year 1996, unless otherwise determined by the Board or the Committee each Director who is the chair of a standing committee of the Board will receive the full value of his or her Annual Committee Chair's Fee in the form of a Restricted Stock Award, and such Restricted Stock will be granted automatically each year immediately following the annual meeting of shareholders and the organization meeting of the Board related to such annual meeting of shareholders, beginning with the annual meeting of shareholders and related organization meeting held in 1996, to each Director who is elected at such organization meeting to serve as the chair of a standing committee of the Board.
Beginning after the 1998 organization meeting of the Board, if a
Director is elected to serve as the chair of a standing committee of the Board
at any time after the organization meeting of the Board held in connection with
the annual meeting of shareholders for a given year but before the next
organization meeting of the Board is held, unless otherwise determined by the
Board or the Committee such Director will, upon so becomming a committee chair,
receive the value of his or her Annual Committee Chair's Fee for that year
(which may be prorated) in the form of a Restricted Stock Award on the later of:
(1) the last Wednesday in the calendar month in which such Director becomes a
standing committee chair (or in the next following calendar
month if said Director becomes a standing committee chair after the last Wednesday of the month); and (2) January 27, 1999.
(c) ANNUAL BOARD CHAIRMAN'S FEE GRANTS. Beginning with calendar year 1999, unless otherwise determined by the Board or the Committee, the Board Chairman, if any, will receive 5/16ths (31.25%) of the value of his or her Annual Board Chairman's Fee in the form of a Restricted Stock Award, and such Restricted Stock will be granted automatically each year on the last Wednesday in January of such year to the Board Chairman in office on such Grant Date, if any.
If a director becomes Board Chairman at any time after the last Wednesday in January of a given calendar year (beginning with calendar year 1999) but before the end of that calendar year, whether by action of the Board or otherwise, unless otherwise determined by the Board or the Committee such director upon so becoming the Board Chairman will receive 5/16ths (31.25%) of the value of his or her Annual Board Chairman's Fee for that year (which may be prorated) in the form of a Restricted Stock Award on the last Wednesday in the calendar month in which such director becomes the Board Chairman (or in the next following calendar month if said director becomes Board Chairman after the last Wednesday of the month.
(d) The total number of shares of Stock representing any such Restricted Stock Award will be the number of shares determined by dividing the amount of the Annual Director's Fee, the Annual Committee Chair's Fee or the Annual Board Chairman's Fee, as the case may be, to be paid in the form of a Restricted Stock Award by the Fair Market Value of a share of Stock on the Grant Date, rounded up to the nearest whole share.
(e) OTHER RESTRICTED STOCK GRANTS. Beginning with calendar year 1999, the Board or the Committee may, from time to time, grant Restricted Stock Awards to one or more Directors or to the Board Chairman for such number of shares of Restricted Stock as the Board or the Committee may determine as additional compensation to such Director or Directors or to such Board Chairman for their services as such.
(f) Restricted Stock granted pursuant to Section 8.1 is subject to adjustment as provided in Section 4.3.
8.2 TERMS AND CONDITIONS OF RESTRICTED STOCK. Unless otherwise determined by the Board or the Committee, Restricted Stock granted under the Plan will be subject to the following terms and conditions:
(a) RESTRICTION PERIOD. Restricted Stock will be subject to a Restriction Period ("Restriction Period") beginning on the Grant Date and continuing through December 31 of the Grant Year.
(b) VESTING.
(1) ANNUAL DIRECTOR'S FEE GRANTS. Except as set forth in Section 8.2(b)(3), a Director's right to ownership in shares of Restricted Stock granted to a Director pursuant to Section 8.1(a) will vest on the January 1 immediately following the expiration of the Restriction Period for such shares (the "Restricted Stock Vesting Date") if the Director has an Attendance Percentage of at least seventy-five percent (75%) for the Grant Year. The Committee or the Board may at any time or from time to time waive the Restriction Period or accelerate the vesting of shares of Restricted Stock.
In the event that a Director has an Attendance Percentage of less than
seventy-five percent (75%) for a Grant Year, a number of shares of Restricted
Stock equal to the Director's Attendance Percentage for the Grant Year
multiplied by the total number of shares of Restricted Stock granted pursuant to
Section 8.1(a) during the Grant Year (rounded up to the nearest whole share)
will vest on the Restricted Stock Vesting Date and the remaining shares of
Restricted Stock granted pursuant to Section 8.1(a) during the Grant Year will
be forfeited as of the Restricted Stock Vesting Date.
(2) ANNUAL COMMITTEE CHAIR'S FEE GRANTS, ANNUAL BOARD CHAIRMAN'S FEE GRANTS, AND OTHER GRANTS. Except as set forth in Section 8.2(b)(3) below, a Director's right to ownership in shares of Restricted Stock granted to a Director pursuant to Section 8.1(e), to a committee chair pursuant to Section 8.1(b), or to the Board Chairman, if any, pursuant to Section 8.1(c) will vest on the Restricted Stock Vesting Date.
(3) Notwithstanding anything to the contrary herein, (i) in the event that a director is removed for Cause from office as a director of the Company (and/or in the case of Restricted Stock granted to a director in his or her capacity as Board Chairman, from office as Board Chairman, if applicable) prior to the Restricted Stock Vesting Date, all of said Director's shares of Restricted Stock that have not yet vested will be forfeited immediately as of the time the grantee is so removed from office and the Company will have the right to complete the blank stock power described below with respect to such shares, and (ii) if so provided in the relevant Restricted Stock Agreement or if the Committee or the Board so determines with respect to a share or shares of Restricted Stock, upon the occurrence of a Change in Control, all such shares of Restricted Stock that have not yet vested will immediately vest.
(c) ISSUANCE OF SHARES. On or about the Grant Date, a certificate
representing the shares of Restricted Stock will be registered in the Director's
name and deposited by the Director, together with a stock power endorsed in
blank, with the Company. Subject to the transfer restrictions set forth in
Section 8.2(d) and to the last sentence of this Section 8.2(c), the Director as
owner of shares of Restricted Stock will have the rights of the holder of such
Restricted Stock during the Restriction Period. On the Restricted Stock Vesting
Date following expiration of the Restriction Period, vested shares of Restricted
Stock will be redelivered by the Company to the Director, and non-vested shares
of Restricted Stock will be forfeited and the Company will have the right to
complete the blank stock power with respect to such non-vested shares; PROVIDED,
HOWEVER, with respect to shares of Restricted Stock granted in
1996 prior to shareholder approval of an amendment to the Plan on April 24, 1996, no certificates were issued, such shares were not issued and outstanding, and the Directors did not have any of the rights of an owner of the shares until the date such shareholder approval occurred.
(d) TRANSFER RESTRICTIONS; MANDATORY HOLDING OF STOCK. Except as otherwise provided in Section 8.5 or Section 10, shares of Restricted Stock are not transferable during the Restriction Period. Once the Restriction Period lapses and shares vest, except as otherwise provided in Section 8.5 or Section 10 or unless waived by the Committee or the Board, shares acquired as a Restricted Stock Award must be held by the grantee for a minimum of: (1) three years from the Grant Date; (2) two years from the date the grantee ceases to be a director of the Company; or (3) if so provided in the relevant Restricted Stock Agreement or if the Committee or the Board so determines with respect to a share or shares of Restricted Stock, until the occurrence of a Change of Control, whichever first occurs (the "Restricted Shares Holding Period").
(e) RESTRICTED STOCK AGREEMENT. All Restricted Stock Awards will be confirmed by an agreement, or an amendment thereto, which will be executed on behalf of the Company by the Chief Executive Officer, the President or any Vice President and by the grantee.
(f) GENERAL RESTRICTION.
(1) The obligation of the Company to issue shares of Restricted Stock under the Plan will be subject to the condition that if, at any time, the Committee determines that (a) the listing, registration or qualification of shares of Restricted Stock upon any securities exchange or under any state or federal law or (b) the consent or approval of any government or regulatory body is necessary or desirable, then such Restricted Stock will not be issued unless such listing, registration, qualification, consent or approval has been effected or obtained free from any conditions not acceptable to the Company.
(2) Shares of Stock for use under the provisions of this Section 8 will not be issued until they have been duly listed, upon official notice of issuance, upon the New York Stock Exchange and such other exchanges, if any, as the Board may determine, and a registration statement under the Securities Act of 1933 with respect to such shares has become, and is, effective.
Subject to the foregoing provisions of this Section 8.2 and the other provisions of the Plan, any shares of Restricted Stock granted under the Plan will be subject to such restrictions and other terms and conditions, if any, as the Board or the Committee may be determine, in its discretion, and as are set forth in the agreement referred to in Section 8.2(e), or an amendment thereto; PROVIDED, HOWEVER, that in no event will either the Committee or the Board have any power or authority which would cause transactions pursuant to the Plan to cease to be exempt from the provisions of Section 16(b) of the Exchange Act under Rule 16b-3, as such rule may be amended, or any successor rule.
8.3 ANNUAL STATEMENT. A statement will be sent to each Director as to the status of his or her Restricted Stock at least once each calendar year.
8.4 DESIGNATION OF A BENEFICIARY. A Director may designate a beneficiary to hold shares of Restricted Stock in accordance with the Plan in the event of the Director's death in a form approved by the Company.
8.5 HOLDING PERIOD APPLICABLE TO A DECEASED GRANTEE'S ESTATE. As long as at least six months have elapsed since the Grant Date, a beneficiary properly designated by the Director pursuant to Section 8.4 in the event of death, if any, or a person holding shares of Restricted Stock under a deceased grantee's will or under the applicable laws of descent or distribution, will not be subject to the Restricted Shares Holding Period with respect to such shares of Restricted Stock.
SECTION 9. CHANGE IN CONTROL
9.1 SETTLEMENT OF COMPENSATION. In the event of a Change in Control of
the Company as defined herein: (a) with respect to awards and other benefits
made or granted pursuant to the Plan prior to July 28, 1999, to the extent not
already vested, all Stock Option Awards, Restricted Stock Awards and other
benefits hereunder will be vested immediately (provided, however, that with
respect to awards and other benefits made or granted pursuant to the Plan on or
after July 28, 1999, the occurrence of a Change in Control will have no effect
on such outstanding awards or benefits pursuant to the Plan unless otherwise
provided in an agreement governing the award or other benefit or unless the
Committee or the Board determines otherwise); and (b) the value of all unpaid
Common Stock Equivalents and deferred amounts (whether deferred before or after
July 28, 1999) will be paid in cash to PNC Bank, National Association, the
trustee pursuant to a trust agreement dated as of June 22, 1995, as amended from
time to time, or any successor trustee, or otherwise on such terms as the
Committee may prescribe or permit. For purposes of this Section 9.1: the value
of unpaid Common Stock Equivalents and deferred amounts will be equal to the sum
of (i) the value of all Common Stock Equivalent Awards then held in such
Director's Deferred Stock Account (the value of which will be based upon the
highest price of the Stock as reported by the composite tape of the New York
Stock Exchange during the 30 days immediately preceding the Change in Control),
(ii) the value of the Director's Cash Account, and (iii) the greater value of
(x) the cash amount equal to the face value of the Debentures in the Director's
Deferred Debenture Account plus cash equal to accrued interest on the Debentures
or (y) the number of shares of Stock into which the Debentures in the Director's
Deferred Debenture Account are convertible (the value of which will be based
upon the highest price of the Stock as reported by the composite tape of the New
York Stock Exchange during the 30 days immediately preceding the Change in
Control), plus cash equal to accrued interest on the Debentures.
9.2 DEFINITION OF CHANGE IN CONTROL. A Change in Control will mean the occurrence of one or more of the following events:
(a) there shall be consummated (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to
which shares of the Company's Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company; or
(b) the shareholders of the Company shall approve of any plan or proposal for the liquidation or dissolution of the Company; or
(c) (i) any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity shall purchase any Stock of the Company (or securities convertible into the Company's Stock) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, unless, prior to the making of such purchase of Stock (or securities convertible into Stock), the Board shall determine that the making of such purchase shall not constitute a Change in Control, or (ii) any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity (other than the Company or any benefit plan sponsored by the Company or any of its subsidiaries) shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty percent or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from any rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) in the case of rights to acquire any such securities), unless, prior to such person so becoming such beneficial owner, the Board shall determine that such person so becoming such beneficial owner shall not constitute a Change in Control; or
(d) at any time during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board shall cease for any reason to constitute at least a majority thereof, unless the election or nomination for election of each new director during such two-year period is approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period.
SECTION 10. ASSIGNABILITY
10.1 The right to receive payments or distributions hereunder (including any "derivative security" issued pursuant to the Plan, as such term is defined by the rules promulgated under Section 16 of the Exchange Act), any shares of Restricted Stock granted hereunder during the Restriction Period, and any Stock Options granted hereunder will not be transferable or assignable by a Director other than by will, by the laws of descent and distribution, to a beneficiary properly designated by the Director pursuant to the appropriate section of the Plan in the event of death, if any, or pursuant to a domestic relations order as defined by Section 414(p)(1)(B) of the Internal Revenue Code or the rules thereunder that satisfies Section 414(p)(1)(A) of the Internal Revenue Code or the rules thereunder.
10.2 In addition, Stock acquired on exercise of a Stock Option will not be transferable prior to the end of the applicable Option Shares Holding Period, if any, set forth in Sections
7.2(d) and 7.5, and Stock acquired as Restricted Stock will not be transferable prior to the end of the applicable Restricted Shares Holding Period, if any, set forth in Sections 8.2(d) and 8.5, in either case other than by will, by transfer to a beneficiary properly designated by the Director pursuant to the appropriate section of the Plan in the event of death, if any, by the applicable laws of descent and distribution, or pursuant to a domestic relations order as defined by Section 414(p)(1)(B) of the Internal Revenue Code or the rules thereunder that satisfies Section 414(p)(1)(A) of the Internal Revenue Code or the rules thereunder.
SECTION 11. RETENTION; WITHHOLDING OF TAX
11.1 RETENTION. Nothing contained in the Plan or in any Stock Option Award or Restricted Stock Award granted under the Plan will interfere with or limit in any way the right of the Company to remove any director from the Board or to remove the Board Chairman, if any, from office as such pursuant to the Restated Articles of Incorporation and the By-laws of the Company, nor confer upon any Director any right to continue in the service of the Company.
11.2 WITHHOLDING OF TAX. To the extent required by applicable law and regulation, each Director must arrange with the Company for the payment of any federal, state or local income or other tax applicable to any payment or any delivery of Stock hereunder before the Company will be required to make such payment or issue (or, in the case of Restricted Stock, deliver) such shares under the Plan.
SECTION 12. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time to time may amend or modify the Plan, PROVIDED, HOWEVER, that no amendment or modification may become effective without approval of the amendment or modification by the shareholders if shareholder approval is required to enable the Plan to satisfy any applicable statutory or regulatory requirements.
SECTION 13. REQUIREMENTS OF LAW
13.1 FEDERAL SECURITIES LAW REQUIREMENTS. Implementation and interpretations of, transactions pursuant to, the Plan will be subject to all conditions required under Rule 16b-3, as such rule may be amended, or any successor rule, to qualify such transactions for any exemption from the provisions of Section 16(b) of the Exchange Act available under that rule, or any successor rule.
13.2 GOVERNING LAW. The Plan and all agreements hereunder will be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania.
SECTION 14. OTHER COMPENSATION
Nothing contained in the Plan will be deemed to limit or restrict the right of the Company to compensate directors for their services in any capacity in whole or in part under separate compensation or deferral plans or programs for directors or under other compensation arrangements.
CBS
EXHIBIT 10(q)
[CBS Letterhead]
As of July 5, 1999
Mr. Leslie Moonves
1045 North Bundy Drive
Los Angeles, CA 90049
Re: STAFF EMPLOYMENT AGREEMENT
Dear Mr. Moonves:
Reference is hereby made to the Agreement dated as of May 17, 1995, as amended as of June 29, 1995, October 16, 1995 and January 20, 1998 (collectively the "Agreement") between you and us, in connection with your services for CBS.
You and we have agreed, and do hereby agree, to amend the Agreement as follows, effective as of July 5, 1999:
1. Subparagraph 1(a) of the Agreement shall be amended by extending the "Employment Term", as defined in the Agreement, so that it shall continue through and end on July 16, 2004 (in lieu of July 16, 2000, as previously provided for in the Agreement). Each Contract Year of the Term, as hereby extended, shall commence July 17 and continue through July 16 of the applicable Contract Year. Said subparagraph is further amended by deleting any reference therein to the "CBS Committee."
2. Subparagraph 1(b) of the Agreement is hereby deleted and, in lieu thereof, is replaced with the following:
"(b) Executive shall report directly and only to the person who is Chief Executive Officer of CBS Corporation (currently, Mel Karmazin)."
3. Subparagraph 1(c) of the Agreement is hereby amended by modifying the last proviso of the first sentence of that subparagraph to provide as follows:
Mr. Leslie Moonves
As of July 5, 1999
"And, in addition to such authority and responsibility to run CED, Executive shall, beginning July 9, 1999, have full authority and responsibility to run the CBS Television Network (the "Network"), the CBS Television Stations (the "Stations"), and all related operations of the Network and the Stations, including full authority and responsibility for CBS Enterprises and all of its units, CBS Productions and King World, all in accordance with CBS policies and practices."
4. The current subparagraph 1(d) of the Agreement is hereby deleted and, in lieu thereof, is replaced with the following:
"So long as this Agreement is not terminated pursuant to paragraph 7 below and Executive is rendering services hereunder, Executive shall provide executive services to CBS in the manner determined by the person who is Chief Executive Officer of CBS Corporation (currently, Mel Karmazin)."
5. Subparagraph 2(a) of the Agreement is hereby amended to provide that, commencing July 5, 1999, and continuing through the remainder of the fourth Contract Year (i.e., through July 16, 1999) and thereafter through each of the remaining Contract Years (i.e., through the end of the Term), the base salary payable to Executive shall be $3,000,000 per annum.
6. Subparagraph 2(b) of the Agreement (which shall hereinafter be subparagraph 2(b)(i)) is hereby amended to provide that the bonus payment payable to Executive pursuant to the Agreement shall be increased to $2,500,000 per annum in each remaining Contract Year of the Employment Term, commencing with the fifth Contract Year (i.e., the Contract Year commencing July 17, 1999). The remainder of subparagraph 2(b), with respect to any bonus payments, shall remain unchanged.
7. The Agreement is hereby amended by adding the following subparagraph
2(b)(ii) (which together with subparagraph 2(b)(i) shall collectively be
referred to as subparagraph 2(b)):
"In addition to the base salary and bonus payments payable pursuant to subparagraphs 2(a) and 2(b)(i) of the Agreement, CBS hereby agrees that the "Committee" as defined under the
Mr. Leslie Moonves
As of July 5, 1999
CBS Corporation 1998 Executive Annual Incentive Plan (the "Plan") will establish an annual incentive award opportunity for Executive under the Plan for each Contract Year, at a target amount of $2,000,000, based on achievement of financial and other goals as determined by the Compensation Committee of the CBS Board of Directors."
8. Paragraph 3 of the Agreement is hereby amended to provide that Executive acknowledges that CBS has recently made changes in the pension plans for the various business units of CBS, and that he shall participate in any such pension plans in accordance with the provisions of the plans as they have been modified and as they may be further modified during the Term (with the understanding that he shall be eligible to participate in and receive benefits under any plan offered by CBS, other than those that are offered exclusively to a particular business unit or units). Executive shall be eligible to participate in the CBS Fund the Future Plan, in accordance with the provisions of that Plan as it may be modified from time to time. CBS agrees to provide to such person as may be designated by Executive a description of all pension plans applicable to Executive, including a description of all modifications, deletions and/or additions to the plans since the inception of Executive's employment with CBS and including all pertinent information relating to the Fund the Future Plan. Executive has designated George Savitsky (Executive's business manager) as the person to whom such information should be sent.
9. Paragraph 6 of the Agreement is hereby amended to provide that Executive acknowledges that he has been furnished with a copy of the CBS Corporate Directive on Personal Conflicts of Interest, dated June 1, 1999 ("Conflicts Policy"), and that all references to "Conflicts Policy" in paragraph 6 shall hereinafter be deemed to refer to the CBS Corporate Directive on Personal Conflicts of Interest, dated June 1, 1999. All references in said paragraph 6 to the "CBS Policy Summary" shall be deleted.
10. Paragraph 7 of the Agreement is hereby amended by deleting, in the second and third grammatical paragraphs of said paragraph 7, the references to paragraph 11 of the Agreement. Said paragraph 7 is further amended to reflect that the insurance obtained by CBS to cover Executive shall provide coverage of $10,000,000, on terms and conditions currently in effect, during the Employment Term, as herein amended.
11. Paragraph 11 of the Agreement is hereby deleted in full, and will
Mr. Leslie Moonves
As of July 5, 1999
hereinafter have no further force or effect whatsoever.
12. Paragraph 15 of the Agreement is hereby amended by deleting, in the second sentence of said paragraph, the reference to "Peter Keegan, Executive Vice President and Chief Financial Officer," and, in lieu thereof, inserting "Frederic G. Reynolds, Executive Vice President and Chief Financial Officer" and by deleting the reference to "Ellen Oran Kaden, Executive Vice President, General Counsel and Secretary," and, in lieu thereof, inserting "Louis J. Briskman, Executive Vice President and General Counsel". The remainder of said paragraph (including said second sentence) shall remain unchanged.
13. Paragraph 16 of the Agreement is hereby amended by adding the following and additional grammatical paragraphs at the end of said paragraph 16:
"Executive hereby acknowledges that on or about January 27, 1999, he was granted non-qualified stock options to purchase an aggregate of 250,000 shares of common stock of CBS Corporation under the Plan, as defined above in this paragraph 16. Such stock option grant is reflected in and governed by a stock option agreement executed by CBS Corporation and Executive, whose terms shall be amended to be consistent with the terms of the stock option agreement referred to in the grammatical paragraph immediately below."
"In addition to the foregoing, CBS has granted to Executive non-qualified stock options to purchase an aggregate of 1,000,000 shares of common stock of CBS Corporation under the Plan. Such option for 1,000,000 shares shall have an exercise price per share of $41.6875, the fair market value (as defined in the Plan) of the CBS Corporation common stock on the grant date for said options (June 14, 1999). Thirty-three and one-third percent of such options (i.e., 333,333 shares of such options) shall vest at the end of each of the next following two years, commencing on June 15, 2000, with the final one-third (i.e., 333,334 shares) vesting on June 15, 2002. The options will expire on June 13, 2009. Such stock option grant shall be reflected in and governed by a stock option agreement, whose terms shall be consistent with the terms of the stock option agreements applicable to the prior grants by CBS to Executive of 500,000 options on June 17, 1997 and 290,000 options on July 28, 1997, to be executed by CBS Corporation and provided to Executive upon his execution of this agreement."
Mr. Leslie Moonves
As of July 5, 1999
14. Paragraph 17 of the Amendment is hereby amended to acknowledge that CBS no longer owns or leases airplanes. CBS has nevertheless agreed that it shall provide chartered airplanes for Executive's use, consistent with prior practice.
15. The Agreement shall be further amended to provide that whenever any
notice is sent to Executive, a copy shall also be sent to Del, Shaw, Blye &
Moonves, 2029 Century Park East, Suite 33910, Los Angeles, CA 90067, Attention:
Ernest Del, Esq.
Except as expressly provided hereinabove in this amendatory letter agreement, all of the other terms and conditions of the Agreement, as amended (including by the Amendment) shall remain unchanged and are hereby in all respects ratified and confirmed.
Please indicate your agreement to the foregoing by signing in the space provided below and delivering a copy of this amendatory letter agreement, bearing your signature, to Anthony Ambrosio at CBS.
Very truly yours,
CBS Broadcasting Inc.
By /s/ Mel Karmazin ----------------- Accepted and Agreed: /s/ Leslie Moonves ------------------- Leslie Moonves |
26951
| ARTICLE 5 |
| MULTIPLIER: 1,000,000 |
| PERIOD TYPE | 9 MOS |
| FISCAL YEAR END | JAN 01 1999 |
| PERIOD END | SEP 30 1999 |
| CASH | 185 |
| SECURITIES | 0 |
| RECEIVABLES | 1,278 |
| ALLOWANCES | 51 |
| INVENTORY | 0 |
| CURRENT ASSETS | 2,401 |
| PP&E | 1,716 |
| DEPRECIATION | 578 |
| TOTAL ASSETS | 20,723 |
| CURRENT LIABILITIES | 1,809 |
| BONDS | 2,352 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 745 |
| OTHER SE | 8,885 |
| TOTAL LIABILITY AND EQUITY | 20,723 |
| SALES | 5,154 |
| TOTAL REVENUES | 5,154 |
| CGS | 3,000 |
| TOTAL COSTS | 3,000 |
| OTHER EXPENSES | 1,496 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 143 |
| INCOME PRETAX | 519 |
| INCOME TAX | 302 |
| INCOME CONTINUING | 138 |
| DISCONTINUED | 396 |
| EXTRAORDINARY | (5) |
| CHANGES | 0 |
| NET INCOME | 529 |
| EPS BASIC | 0.76 |
| EPS DILUTED | 0.74 |