-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IiLXoO1azwqxBZNxBOje28gU8e/grrBNbhmqtjJGogAH7D/yzqDJ97D24ih9z77N dGNpeJ+q2i0V3C6fwrXqbw== 0000950128-00-000600.txt : 20000411 0000950128-00-000600.hdr.sgml : 20000411 ACCESSION NUMBER: 0000950128-00-000600 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CBS CORP CENTRAL INDEX KEY: 0000106413 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 250877540 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-00977 FILM NUMBER: 583664 BUSINESS ADDRESS: STREET 1: 51 WEST 52ND STREET CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2129754321 MAIL ADDRESS: STREET 1: 51 WEST 52ND STREET CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: WESTINGHOUSE ELECTRIC CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WESTINGHOUSE ELECTRIC & MANUFACTURING CO DATE OF NAME CHANGE: 19710510 10-K 1 FORM 10-K CBS 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 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 CBS CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-0877540 - ------------------------------------------------ ------------------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) 51 WEST 52ND STREET NEW YORK, NEW YORK 10019 (212) 975-4321 - ------------------------------------------------ ------------------------------------------------ (Address of Principal Executive Offices) (Telephone No.)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - --------------------------------------------- ------------------------------------------------------------ Common Stock, par value $1.00 per Share New York Stock Exchange Boston Stock Exchange Pacific Stock Exchange Philadelphia Stock Exchange Chicago Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None 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 Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. CBS Corporation had 767,184,087 shares of common stock outstanding at February 29, 2000. As of that date, the aggregate market value of common stock held by non-affiliates was approximately $44 billion. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 The terms "we," "our," "us," "CBS" and "Corporation" as used in this Report on Form 10-K refer to CBS Corporation and its consolidated subsidiaries unless the context indicates otherwise. PART I ITEM 1. BUSINESS. GENERAL CBS Corporation is one of the largest radio and television broadcasters in the United States and operates the largest outdoor advertising business in North America. We operate our businesses primarily in the United States through our Infinity, Television, Cable and Internet Group business segments. The Infinity segment consists of radio stations and outdoor advertising businesses. The Television segment consists of 16 owned and operated television stations which are integrated with our television network and television syndication operations. Our television and radio stations are operated under licenses from the Federal Communications Commission (FCC). The Cable segment consists of cable networks, including The Nashville Network (TNN), Country Music Television (CMT) and two regional sports networks. The Internet Group segment, formerly referred to as the New Media segment, consists of our interests in Internet based companies, certain of which are consolidated and others accounted for under the cost or equity method of accounting. On September 6, 1999, we entered into an agreement and plan of merger, as amended, with Viacom Inc. (Viacom). Viacom is a diversified entertainment company with operations in six segments: Networks, Entertainment, Video, Parks, Publishing and Online. See note 2 to the financial statements. We have dramatically redefined our business portfolio and strategic direction in recent years. Through acquisitions and divestitures we have essentially transformed ourselves from an industrial company to a media company. A number of significant acquisitions in 1999 and in recent years contributed to the successful execution of our strategy. We acquired CBS Inc. in November 1995; the radio and outdoor advertising business of Infinity Media Corporation in December 1996; Gaylord Entertainment Company's two major cable networks, TNN and CMT, in September 1997; the radio broadcasting operations of American Radio Systems Corporation (American Radio) in June 1998; the television syndication operations of King World Productions, Inc. (King World) in November 1999; and, through our majority owned subsidiary, Infinity Broadcasting Corporation (Infinity Broadcasting), acquired Outdoor Systems, Inc. (Outdoor Systems), an outdoor advertising business, now known as Infinity Outdoor, Inc. (Infinity Outdoor), in December 1999. For information about significant mergers and acquisitions, see note 2 to the financial statements. We have also adopted various disposal plans that, in the aggregate, provide for the disposal or liquidation of all of our industrial and financial services businesses. The assets and liabilities and the results of operations for these businesses are classified as Discontinued Operations for all periods presented in our financial statements. At December 31, 1999, essentially all of the industrial businesses were divested, all in accordance with the terms of their respective agreements. See notes 12 and 19 to the financial statements. In August 1998, we formed a new company named Infinity Broadcasting comprising our radio and outdoor advertising businesses. In December 1998, Infinity Broadcasting issued approximately 18% of its common stock in an initial public offering (IPO). After giving effect to the offering, we beneficially owned approximately 82% of Infinity Broadcasting's equity, which represented 96% of its combined voting power. On December 7, 1999, Infinity Broadcasting exchanged 1.25 of its shares of Class A common stock for each outstanding common share of Outdoor Systems. The closing of this transaction caused a reduction in our ownership and voting interests in Infinity Broadcasting to approximately 65% and 90%, respectively, excluding the dilutive effect of stock options, at December 31, 1999. We were founded in 1886 and operate under a corporate charter granted by the Commonwealth of Pennsylvania in 1872. 2 CBS CORPORATION 3 BUSINESS SEGMENTS Financial and other information by segment is included in note 18 to the financial statements. Infinity The Infinity segment is comprised of the radio and outdoor advertising businesses of Infinity Broadcasting. The Infinity segment is characterized as out-of-home media because the majority of radio listening and virtually all viewing of outdoor advertising takes place in automobiles, transit systems, on the street and other locations outside the consumer's home, including listening to radio at work. Infinity Broadcasting acquired American Radio in June 1998 as part of its continued strategy of pursuing acquisitions in the top 50 markets. In December 1999, Infinity Broadcasting acquired Outdoor Systems. On March 3, 2000, Infinity Broadcasting entered into an asset purchase agreement to acquire 18 radio stations, located in the top 50 markets, from Clear Channel Communications, Inc. (Clear Channel Communications) for approximately $1.4 billion. This transaction is expected to close by year-end 2000 and is subject to regulatory reviews and approvals. In addition, on March 21, 2000, Infinity Broadcasting announced that it had entered into an agreement to purchase Giraudy, one of France's largest outdoor advertising companies, for approximately $425 million. This transaction is expected to close mid-year 2000. Infinity Broadcasting owns and operates 162 radio stations located in 34 markets. Sixty-two of these radio stations are in the nation's ten largest radio markets. We believe that the presence of Infinity's radio stations in large markets makes it attractive to advertisers and that the overall diversity of its stations reduces its dependence on any single station, local economy, or advertiser. These stations serve diverse target demographics through a broad range of programming formats, such as rock, oldies, news/talk, adult contemporary, sports/talk, and country, and include leading franchises in news, sports, and personality programming. Infinity Broadcasting also has a minority equity investment in Westwood One, Inc. (Westwood One), which it manages. Westwood One produces and distributes syndicated and network radio programming and also manages the CBS Radio Network. In order to take advantage of the growing opportunity in the internet market, the vast majority of the radio stations operate web sites. These web sites focus on the local markets, promoting the stations' talent and programming, and providing news, information and entertainment, as well as other services to the stations' listeners. Infinity Broadcasting operates the largest outdoor advertising business in North America through its wholly owned subsidiaries. Our outdoor advertising business sells advertising space throughout the United States, United Kingdom, Republic of Ireland, Canada, Mexico and the Netherlands on various media, including buses, trains, malls, train platforms and terminals throughout commuter rail systems, and on painted billboards, eight and thirty-sheet posters and phone kiosks. Television The Television segment consists of three integrated operations: the CBS television network; our owned and operated television stations; and our television syndication operations. In November 1999, we acquired King World, a leading syndicator of television programming. The CBS television network produces or acquires, and distributes a comprehensive schedule of news, public affairs, entertainment and sports programming, to our owned and operated television stations and more than 200 affiliates. Our owned and operated television stations and domestic affiliates serve, in the aggregate, all 50 states and the District of Columbia. The television network is responsible for sales of advertising time for the television network broadcasts of news, public affairs, sports and entertainment programming. We own and operate 16 television stations located in eight of the nation's ten largest markets and 12 of the nation's top 20 markets reaching approximately 34% of all U.S. television households. The CBS owned stations are: WCBS-TV New York, KCBS-TV Los Angeles, WBBM-TV Chicago, KYW-TV Philadelphia, KPIX-TV San Francisco, WBZ-TV Boston, KTVT-TV Dallas-Fort Worth, WWJ-TV Detroit, WCCO-TV Minneapolis, WFOR-TV Miami, KCNC-TV Denver, KDKA-TV Pittsburgh, WJZ-TV Baltimore, KUTV-TV Salt Lake City, KEYE-TV Austin and WFRV-TV Green Bay. The stations produce news and broadcast public affairs and other programming to serve their local markets and offer the CBS television network and syndicated programming. Many CBS CORPORATION 3 4 of our television stations currently operate web sites which promote the stations' talent and programming, and provide news, information and entertainment, as well as other services to the stations' viewers. Our programming also involves the production, distribution and marketing of first-run and off-network syndicated programming to television stations, cable, home video, in-flight and emerging media worldwide. Subsequent to year-end 1999, we approved a proposed plan to integrate the newly acquired operations of King World with the existing CBS syndication business to achieve synergies and eliminate redundant functions. See notes 2 and 13 to the financial statements. The success of our television segment is driven primarily by programming. Our network depends on our owned and operated television stations, our television syndication operations and the affiliates for distribution of the programming. In addition, the network provides the majority of programming aired at our owned and operated television stations. Cable The Cable segment primarily consists of our cable networks, including TNN, CMT and two regional sports networks. These networks are distributed by cable television and other multi-channel technologies. TNN is an advertiser-supported cable network featuring country lifestyle and entertainment programming. This network serves approximately 76 million U.S. homes. TNN offers a broad array of programming from original series to movies to country music concerts as well as motorsports, including the NASCAR Winston Cup Races, outdoor sports such as hunting and fishing, professional bull riding and sports entertainment such as wrestling. In April 2000, TNN is expected to be the primary network for the Arena Football League. Our rights to broadcast the NASCAR Winston Cup races were not renewed and expire during the year 2000. CMT is an advertiser-supported, 24-hour cable network with a country music video format. It reaches approximately 39 million U.S. homes. In addition, we own and operate the Midwest Sports Channel, a regional sports network in Minneapolis, and we are a majority owner of Home Team Sports, a regional sports network serving the mid-Atlantic states. Also part of the cable operations, Group W Network Services (GWNS) is a global provider of satellite services to broadcast, cable and corporate networks. Based in Stamford, Connecticut, GWNS provides transmission and other technical services to U.S. broadcast networks and to many major cable networks. Internet Group The Internet Group segment consists of our consolidated and nonconsolidated Internet businesses including CBS.com, Inc. the operator of two Internet sites--CBS.com and CBSNews.com. CBS.com, which launched in February 1998, offers a broad range of informational, entertainment, news and promotional content. In January 2000, CBS.com, Inc. launched CBSNews.com, a news and news related information web site. A majority of the television network affiliates currently participate in these web sites. In addition, during the second half of 1999, we closed on a number of strategic investments focused on growing our Internet based operations. We received an equity interest in these Internet companies, primarily in exchange for future advertising and promotion time on our television, radio, outdoor and cable media properties. In exchange for providing advertising and promotion time on its media properties, Infinity Broadcasting will be provided an economic interest in certain of these Internet investments. 4 CBS CORPORATION 5 The Internet based companies that comprise the Internet Group are as follows:
NAME OF COMPANY DESCRIPTION METHOD OF ACCOUNTING - ------------------------------------------------------------------------------------------------------ CBS.com, Inc. Offers a broad range of Consolidated informational, entertainment, news and promotional content through CBS.com and CBSNews.com; a majority of the television network affiliates currently participate in this web site - ------------------------------------------------------------------------------------------------------ iWon, Inc. Portal site that combines search, Consolidated content, and functionality with cash sweepstakes - ------------------------------------------------------------------------------------------------------ Hollywood.com, Inc.(a) Entertainment news and movie web Equity basis-publicly traded site - ------------------------------------------------------------------------------------------------------ Jobs.com, Inc. Online recruitment service for Equity basis posting or locating jobs - ------------------------------------------------------------------------------------------------------ Loudeye Technologies, Inc. Provides digital media solutions Cost basis-publicly traded (formerly encoding.com, Inc.)(b) - ------------------------------------------------------------------------------------------------------ MarketWatch.com, Inc. Publishes the web site Equity basis-publicly traded CBS.MarketWatch.com - ------------------------------------------------------------------------------------------------------ Medscape Inc. Publishes the web sites Equity basis-publicly traded Medscape.com and CBSHealthWatch.com - ------------------------------------------------------------------------------------------------------ Office.com, Inc. Destination site for small and Equity basis medium-sized businesses - ------------------------------------------------------------------------------------------------------ Rx.com, Inc. Provider of over-the-counter health Equity basis and wellness products over the Internet - ------------------------------------------------------------------------------------------------------ SportsLine.com, Inc. Publishes several sports web sites, Cost basis-publicly traded including CBS.SportsLine.com - ------------------------------------------------------------------------------------------------------ StoreRunner, Inc. Interactive online shopping mall Equity basis - ------------------------------------------------------------------------------------------------------ Switchboard, Inc.(b) Internet directory service Equity basis-publicly traded - ------------------------------------------------------------------------------------------------------ ThirdAge Media, Inc. "Baby boomer" lifestyle Internet Equity basis destination - ------------------------------------------------------------------------------------------------------ Women's Consumer Network, LLC A national membership-based online Equity basis consumer service geared toward women - ------------------------------------------------------------------------------------------------------ Wrenchead.com, Inc. Online auto parts superstore Equity basis - ------------------------------------------------------------------------------------------------------ Webvan Group, Inc. A full-service online grocery and Cost basis-publicly traded drug service - ------------------------------------------------------------------------------------------------------ Content Commerce, L.P.(c) Will publish the web site Equity basis Contentville.com, devoted to selling all types of content, including magazines, e-books, traditional books and transcripts - ------------------------------------------------------------------------------------------------------
(a) Transaction completed effective January 3, 2000; formerly Big Entertainment, Inc. (b) IPO completed March 2000. (c) Transaction completed February 2000. COMPETITION The broadcast environment and the outdoor advertising industry are highly competitive. The Telecommunications Act of 1996 (the Act) has provided both new opportunities and potential new competition for us. By deregulating station ownership limits, the Act has allowed us to pursue strategic growth in our businesses. CBS CORPORATION 5 6 Our out-of-home media business competes for audiences and advertising revenues directly with other radio stations and outdoor advertising companies, as well as with other media, such as broadcast television, newspapers, magazines, cable television, the Internet and direct mail, within their respective markets. The radio and outdoor advertising industry is also subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable television systems, by satellite and by terrestrial delivery of digital audio broadcasting. The FCC has recently authorized spectrum for the use of a new technology, satellite digital audio radio services, to deliver audio programming. The FCC has adopted licensing and operating rules for this service and awarded two licenses. Satellite digital audio radio service may provide a medium for the delivery by satellite of multiple new audio programming formats to local and national audiences. Digital technology also may be used in the future by existing radio broadcast stations either on existing (a so-called "in-band on-channel" approach) or alternate broadcasting frequencies. The FCC has begun a proceeding to explore the authorization of a digital radio service. The FCC also recently issued a Report and Order creating a new "low power" FM radio service which could open up opportunities for low cost "neighborhood" service. The radio industry is challenging this FCC ruling through legal and legislative action. For the sale of advertising time, the CBS television network, television stations and the cable operations compete for audiences with other television networks, television stations and cable networks, as well as with other media, including satellite television services, videocassettes and the Internet. The CBS television network, television stations and the cable operations also compete with other video media for distribution rights to television programming leading to escalating costs for the program rights to broadcast marquee events. In addition, the CBS television network competes with other television networks to secure affiliations with independently owned television stations in markets across the country, which are necessary to ensure the effective distribution of network programming to a nationwide audience. Broadcast television, including CBS, has experienced a decline in total audience viewership in recent years. And, among the major networks, CBS delivers an audience that has an older demographic. An older demographic may result in lower revenue for an advertising spot. An extended conversion to digital television broadcasting has begun. Current and future technological developments may affect competition within the television marketplace. Developing technology to compress digital signals will increasingly permit the same broadcast, cable, or satellite channel to carry multiple video and data services which could result in an expanded field of competing services. Television broadcasters will continue to operate their current stations while gradually building and operating digital facilities concurrently on separate channels. This transition is expected to continue well into this decade. The FCC's expanded television duopoly rule, which is defined in Regulatory Matters on page 26, permits common ownership of two television stations without regard to signal contour overlap provided they are located in separate markets referred to as designated market areas (DMA's). In larger DMA's, common ownership of up to two television stations is permitted so long as at least eight independently owned and operating full-power television stations remain in the market at the time of acquisition and at least one of the two commonly owned stations is not among the top four-ranked stations in the market based on audience share. In addition, without regard to numbers of remaining or independently owned television stations, the FCC will permit television duopolies within the same DMA so long as certain signal contours of the stations involved do not overlap. Satellite stations that simply rebroadcast the programming of a "parent" station will continue to be exempt from the duopoly rule if located in the same DMA as the "parent" station. The duopoly rule also applies to same-market local marketing agreements involving more than 15% of the brokered station's program time, although current local marketing agreements will be exempt from the television duopoly rule for a limited period of time of either two or five years, depending on the date of the adoption of the local marketing agreement. Further, the FCC may grant a waiver of the television duopoly rule if one of the two television stations is a "failed" or "failing" station, or the proposed transaction would result in the construction of a new television station. Following consummation of the Viacom/CBS merger, and exclusive of other acquisitions, the combined company could potentially have duopolies in the following six television markets: Philadelphia, Boston, Dallas, Miami, Detroit, and Pittsburgh. 6 CBS CORPORATION 7 TRADEMARKS AND PATENTS CBS has a worldwide trademark portfolio that we consider important in the marketing of our products and services, including, among others, the trademarks "CBS" and the CBS "Eye" logo. We believe that our rights in these trademarks are adequately protected and of unlimited duration. We also have rights to the trademarks "WESTINGHOUSE" and the "CIRCLE W" logo from our former industrial businesses. ENVIRONMENTAL MATTERS Information with respect to environmental matters is incorporated herein by reference to Management's Discussion and Analysis--Environmental Matters and in note 19 to the financial statements. RESEARCH AND DEVELOPMENT Our operations do not engage in any material research and development activities. EMPLOYEE RELATIONS At December 31, 1999, we employed approximately 28,900 people, of whom approximately 27,500 were located in the United States. Approximately 16,400 are full-time and 12,500 are part-time. At December 31, 1999, approximately 11,300 domestic employees were represented in collective bargaining by approximately 17 labor organizations. ITEM 2. PROPERTIES. Our corporate headquarters is located at 51 West 52nd Street, New York, New York, where we currently own approximately 900,000 square feet of floor space, which is utilized for executive and certain operating division offices or is leased to third parties. The majority of other properties used by our media businesses consists of both owned and leased office space, studio facilities, transmitter equipment, antenna sites and outdoor advertising throughout the United States and in 17 countries around the world. As of December 31, 1999, we owned or leased 658 U.S. properties totaling 10,445,583 square feet of floor area and 85 foreign locations totaling 668,808 square feet. Domestic locations comprised approximately 94% of the total space. Leased facilities in the United States accounted for approximately 35% of the total space occupied, while facilities leased in foreign countries accounted for approximately 3% of the total space occupied. No individual lease was material. The physical properties described above are adequate and suitable, with an appropriate level of utilization, for the conduct of our businesses in the future. ITEM 3. LEGAL PROCEEDINGS. (a) On February 27, 1996, suit was brought against us in the United States District Court (USDC) for the District of New Jersey by Public Service Electric & Gas Company, PECO Energy Company, Atlantic City Electric Company, and Delaware Power & Light Company, the owners of the Salem Generating Station. The suit alleges counts under the Racketeer Influenced and Corrupt Organization Act (RICO) for fraud, negligent misrepresentation, and breach of contract in connection with our supply of steam generators and for service orders in 1993 and 1995 related to these steam generators. On October 1, 1997, we filed a motion for summary judgment in this case. On November 6, 1998, the USDC granted our motion for summary judgment based on the statute of limitations with respect to plaintiffs' RICO claims and dismissed the RICO claims (with prejudice) and plaintiffs' state claims, i.e., fraud, negligent misrepresentation and breach of contract (without prejudice). Plaintiffs appealed the dismissal of the RICO claims to the United States Court of Appeals for the Third Circuit (Third Circuit) and have refiled their state claims in New Jersey Superior Court. On January 27, 2000, a settlement was entered into resolving all claims associated with this matter. (b) In August 1988, the Pennsylvania Department of Environmental Resources (PDER) filed a complaint against us alleging violations of the Pennsylvania Clean Streams Law at our Gettysburg, Pennsylvania elevator plant. PDER requested that the Environmental Hearing Board assess a penalty in the amount of $9 million. We denied these allegations. In November 1996, the Board assessed a civil penalty of approximately $5.5 million. We appealed the Board's decision to the Commonwealth Court. On January 2, 1998, the Commonwealth Court upheld the Board's CBS CORPORATION 7 8 findings with respect to violations of the Pennsylvania Clean Streams Law but not with respect to the amount of the penalty assessed. The Commonwealth Court returned the matter to the Board for a reassessment of the penalty. Our application for a rehearing before the Commonwealth Court was denied, as well as our petition for a rehearing before the Pennsylvania Supreme Court. Oral arguments before the Board were completed in February 1999. In March, 1999, the Board reduced the penalty to approximately $3.3 million. In February, 2000, the Commonwealth Court entered an order affirming the Board's decision to reduce the penalty. On February 28, 2000, we paid this amount plus interest. (c) We have 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 CBS, Westinghouse Financial Services, Inc. (WFSI) and Westinghouse Credit Corporation (WCC), previously subsidiaries of CBS, and/or certain present and former directors and officers of CBS, 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 our public filings concerning the financial condition of CBS, WFSI, and WCC in connection with a $975 million charge to earnings announced on February 27, 1991; a public offering of our 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 CBS, 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 us 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 our liability insurers. On October 19, 1999, the District Court approved the settlements and our share was paid in 1999. The parties await the entry of a final order by the District Court. (d) On August 19, 1998, a former subsidiary of ours 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 breaches by WAK 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 arbitration proceeding on the merits of this dispute was held on December 6, 1999. The parties await the decision. 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 CBS, 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 our 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 CBS. The above two proceedings relate to the sale of our Power Generation Business to Siemens Power Generation Corporation (Buyer), which was completed on August 19, 1998. 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 us and others in the amount of approximately $1.5 billion. On June 14, 8 CBS CORPORATION 9 1999, we and Westinghouse International filed an action in the USDC 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 our appeal on the default judgment and plaintiff's appeal on the suspension of enforcement of the judgment. A ruling has not yet been issued. We believe that the Buyer has assumed all liabilities of CBS with respect to this matter and that the Arbitration should take precedence over the Lahore Court Action. (e) On December 15, 1998, John F. Gritzer, along with six other individuals, brought suit against CBS and the Westinghouse Pension Plan (the "Plan") in the Federal District Court for the Western District of Pennsylvania (the "Court"). The suit alleges that we violated the terms of the Plan and breached our fiduciary duty as Plan Administrator. Plaintiffs were employees of CBS until CBS sold the division in which the plaintiffs were employed. Plaintiffs continued their employment with the buyer of the business until plaintiffs were involuntarily terminated in 1995. Plaintiff's 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 CBS and the buyer. On October 14, 1999, the Court certified as a class all persons in the Plan who (i) were transferred to another corporation in connection with a transfer of assets, (ii) were under a purchase agreement that included a reciprocal service agreement, (iii) were terminated through no fault of their own, and (iv) met the requisite age-service combination for special early retirement pensions. We opposed class certification. The Court declined to grant class status with respect to the claims for breach of fiduciary duty. The parties have until June 30, 2000 to complete discovery. No trial date has been set. A case involving similar facts was recently tried before the Court. The Court in that case granted our motion for a directed verdict. (f) In September 1999, CBS and the individual members of the Board of Directors were 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 CBS with Viacom. The action in Pennsylvania is entitled Rywell vs. CBS Corp. (filed September 7, 1999) ("Rywell") and the action in New York is entitled Robert H. Shenker Money Purchase Trust vs. Conrades (filed September 7, 1999) (the "New York action"). The parties to the New York action stipulated on November 30, 1999, that the time to move against or answer the New York complaint would be extended until 60 days after the plaintiffs served defendants with a copy of the final disposition in Rywell. On November 30, 1999, plaintiffs served defendants with a Consolidated Class Action Complaint in the Rywell action. In their Consolidated Complaint, the plaintiffs, purportedly on behalf of themselves and other shareholders of CBS, primarily assert that (i) the individual members of CBS's Board of Directors have failed to act to maximize shareholder value, including by failing to properly consider or solicit other bids for CBS, to hold a public auction for CBS to conduct a market check, or to negotiate for an adequate premium, and have acted according to their own personal interests, rather than to their fiduciary obligations, (ii) the individual members of CBS's Board of Directors have deprived plaintiff of an alleged informed right to vote through misleading disclosures in the Proxy Statement sent the CBS shareholders on November 26, 1999, and (iii) the merger of CBS with Viacom does not provide sufficient value to CBS and its shareholders. 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. We have filed Preliminary Objections to Plaintiffs' complaint in the Philadelphia court. Briefing on the Preliminary Objections has been completed. Oral argument on the Preliminary Objections is scheduled for March 30, 2000. (g) We are a defendant in numerous lawsuits claiming various asbestos-related personal injuries, which allegedly occurred from use or inclusion of asbestos in certain of our products supplied by its industrial businesses, generally in the pre-1970 time period. Typically, these lawsuits are brought against multiple defendants. We were neither a CBS CORPORATION 9 10 manufacturer nor a producer of asbestos and are oftentimes dismissed from these lawsuits on the basis that we have no relationship to the products in question or the claimant was not exposed to our products. At December 31, 1999, we had approximately 121,000 unresolved claims pending against us. In court actions that have been resolved, we have prevailed in many of the asbestos claims and have resolved others through settlement. Furthermore, we have brought suit against certain of our 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 us for a substantial portion of our current costs and settlements associated with asbestos claims. A number of the asbestos-related cases pending against us, including those in Louisiana, Mississippi, Pennsylvania, and West Virginia, are consolidated or purported class action cases. In consolidated cases, the claims of a group of plaintiffs are tried together, and oftentimes limited findings with respect to common issues of fact and punitive damages are decided with respect to a representative grouping of plaintiffs and then applied to other individuals in the group. However, for us to be liable for damages to any particular claimant, that individual claimant must prove that he or she developed an asbestos-related disease, that he or she was exposed to a product manufactured or supplied by us, and that this exposure was a substantial factor in the development of the disease. Litigation is inherently uncertain and always difficult to predict. Substantial damages are sought in certain of the foregoing matters and although we believe a significant adverse judgment is unlikely, any such judgment could have a material adverse effect on our results of operations for a quarter or a year. However, based on our understanding and evaluation of the relevant facts and circumstances, we believe that we have meritorious defenses to the litigation described in items (c) through (g) above, and that we have adequately provided for resolution of these matters. We believe that the litigation should not have a material adverse effect on our financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. (a) A special meeting of shareholders of the Corporation was held on December 29, 1999. (b) The following matter was submitted to a vote of the shareholders at the special meeting with the following results: Adoption of the Agreement and Plan of Merger, dated as of September 6, 1999, as amended and restated as of October 8, 1999 and as of November 23, 1999, among CBS Corporation, Viacom Inc. and Viacom/CBS LLC was submitted to a vote of the shareholders at the special meeting with the following results: 575,963,542 votes were cast for; 7,400,261 votes were cast against; and 2,644,747 abstentions were recorded in connection with the adoption of this proposal. 10 CBS CORPORATION 11 EXECUTIVE OFFICERS The names, ages, offices, and positions held during the past five years by each of our executive officers as of February 19, 2000, are listed below. Officers are elected annually. There are no family relationships among any of our directors and executive officers.
AGE AT FEBRUARY 19, NAME, OFFICES, AND POSITIONS 2000 - -------------------------------------------------------------------------- Mel Karmazin--President and Chief Executive Officer since 56 January 1999; President and Chief Operating Officer from April 1998 to January 1999; Chairman and Chief Executive Officer of CBS Station Group from May 1997 to January 1999; Chairman and Chief Executive Officer of CBS Radio from December 1996 to May 1997; President and Chief Executive Officer, Infinity Media Corporation from 1981 to December 1996. Mr. Karmazin also currently serves as Chairman, President, and Chief Executive Officer of Infinity Broadcasting Corporation, a subsidiary of ours since September 1998. Louis J. Briskman--Executive Vice President and General 51 Counsel since April 1998; Senior Vice President and General Counsel from January 1993 to April 1998. Robert G. Freedline--Vice President and Controller since May 42 1998; Director, Corporate Reporting, Policies and Business Planning from June 1996 to May 1998; Director, Corporate Audit from March 1995 to June 1996; Manager, Corporate Reporting and Policies, Zurn Industries from November 1992 to March 1995. Leslie Moonves--President and Chief Executive Officer, CBS 50 Television, since April 1998; President, CBS Television from August 1997 to April 1998; President, CBS Entertainment Division from May 1995 to August 1997; President, Warner Bros. Television from July 1993 to May 1995. Fredric G. Reynolds--Executive Vice President and Chief 49 Financial Officer since March 1994. Farid Suleman--Senior Vice President, Finance since August 48 1998 and Treasurer since May 1999; Senior Vice President and Chief Financial Officer of CBS Radio from January 1997 and of the CBS Station Group from June 1997; Executive Vice President, Finance, and Chief Financial Officer, Infinity Media Corporation, from 1986 to December 1996; Mr. Suleman also currently serves as the Executive Vice President, Chief Financial Officer and Treasurer of Infinity Broadcasting Corporation since September 1998 and as Executive Vice President, Chief Financial Officer and Secretary of Westwood One, Inc., an equity investment of Infinity Broadcasting Corporation, since February 1994. - --------------------------------------------------------------------------
CBS CORPORATION 11 12 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The principal markets for CBS's common stock are identified on page 1 of this report. As of February 29, 2000, there were approximately 100,600 shareholders of record. In February 1998, we announced that we would suspend dividend payments on our common stock after payment of the March 1, 1998 dividend. The remaining information required by this item appears on page 59 of this report and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. The information required by this item appears on page 60 of this report and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this item appears on pages 13 through 28 of this report and is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information required by this item appears on page 25 of this report and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this item, together with the report of KPMG LLP dated January 25, 2000, except as to note 20, which is as of March 21, 2000, appears on pages 30 through 59 of this report and is incorporated herein by reference.
PAGE - ------------------------------------------------------------------ Report of Management 29 Independent Auditors' Report 30 Consolidated Statements of Income and Comprehensive Income for each of the three years in the period ended December 31, 1999 31 Consolidated Balance Sheet at December 31, 1999 and 1998 32 Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 1999 33 Consolidated Statement of Shareholders' Equity for each of the three years in the period ended December 31, 1999 34 Notes to the Financial Statements 35 Quarterly Financial Information (unaudited) 59 Five-Year Summary of Selected Financial Data (unaudited) 60 - ------------------------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There were no reportable events. 12 CBS CORPORATION 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW During 1999, we continued our record of growth and transformation. We have divested our remaining industrial businesses, grown our core business operations through strategic acquisitions, made investments in our newly created Internet Group and effectively positioned CBS for continued future growth through our pending merger with Viacom. PENDING MERGER On September 6, 1999, we entered into an agreement and plan of merger with Viacom. Pursuant to this merger agreement, as amended, each share of CBS common stock and each share of CBS Series B participating preferred stock 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 1.085 shares of Viacom Series C preferred stock, respectively. Each share of the CBS Series B participating 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 Viacom Series C preferred share will be entitled to 100 votes per share and will be convertible into 1,000 shares of Viacom non-voting Class B common stock at the option of the holder. On December 29, 1999, shareholders of both companies approved the merger. The merger is contingent upon, among other things, the approvals of the Department of Justice and the FCC. This transaction is expected to close in April 2000. As of December 31, 1999 merger related costs were not significant as they were largely reimbursable by Viacom. We anticipate our share of additional merger related costs for legal and investment banking fees to range from $8 million to $15 million. These costs will be expensed as incurred to the extent not reimbursable by Viacom in accordance with the merger agreement. See also Management's Discussion and Analysis--Regulatory Matters for potential impacts of the merger. ACQUISITIONS OF BUSINESSES On December 7, 1999, Infinity Broadcasting, our majority-owned subsidiary comprising our radio and outdoor advertising businesses, completed its acquisition of Outdoor Systems. In connection with the acquisition, Infinity Broadcasting issued $6.1 billion in Class A common stock in exchange for all of the outstanding common stock of Outdoor Systems, and assumed $1.9 billion in Outdoor Systems debt, at fair value and $670 million of Outdoor Systems stock options. The closing of this transaction caused a reduction in our ownership interest in Infinity Broadcasting from approximately 82% at December 31, 1998, to approximately 65%, excluding the dilutive effect of stock options. Our voting interest also declined from 96% at December 31, 1998, to approximately 90% at December 31, 1999, as a result of the transaction. On December 6, 1999, CBS, Infinity Broadcasting and Outdoor Systems (the Parties) entered into a final judgment with the United States in connection with Infinity Broadcasting's acquisition of Outdoor Systems. Under the terms of the final judgment, the Parties must divest certain outdoor advertising properties principally in the New York City area, all in accordance with the terms and conditions of the final judgment. We do not view these divestitures as material to our business. Any adjustments that may result from the disposal of Outdoor Systems' assets will be offset against goodwill and any gains or losses on disposal of existing Infinity Broadcasting assets will be recognized in operations. On November 15, 1999, we completed our acquisition of King World for approximately $2.7 billion which included $312 million for the fair value of King World stock options assumed. Under the terms of the agreement reached on March 31, 1999, King World shareholders received 0.81 shares of CBS common stock for each share of outstanding King World common stock equating to approximately 58 million shares of CBS common stock with a market price of $40.81 per share. King World is the distributor of a number of shows which include "The Oprah Winfrey Show," "Wheel of Fortune," "Jeopardy!," and "Hollywood Squares." Subsequent to December 31, 1999, we approved a proposed plan to integrate the operations of King World with the existing CBS syndication business. See Management's Discussion and Analysis--Consolidated Results of Operations-- Restructuring of Operations. During 1999, we also acquired two CBS affiliate television stations in Texas. KEYE-TV in Austin was acquired in August for approximately $160 million in cash. KTVT-TV in Dallas-Fort Worth was acquired in October for $485 million of CBS Series B participating preferred stock, or 10,142 preferred shares, and approximately $3 million in cash. CBS CORPORATION 13 14 INVESTMENTS IN INTERNET BASED COMPANIES During 1999, we closed on a number of strategic investments focused on growing our Internet based operations. These investments provided us with equity ownership interests in Internet based companies in exchange for $45 million in cash and $604 million in commitments to provide future advertising and promotion time. In general, these advertising commitments will be met over a period of seven years. In exchange for providing advertising and promotion time on its media properties, Infinity Broadcasting will be provided an economic interest in certain of these Internet investments. As of December 31, 1999, we had investments in four publicly traded Internet based companies: MarketWatch.com, Inc., Medscape Inc., SportsLine.com, Inc., and Webvan Group, Inc. Other Internet investments as of December 31, 1999 include: Jobs.com, Inc.; Loudeye Technologies, Inc.; Office.com, Inc.; Rx.com, Inc.; StoreRunner, Inc.; Switchboard, Inc.; ThirdAge Media, Inc.; Women's Consumer Network, LLC; and Wrenchead.com, Inc. Our investment in these nonconsolidated investments in Internet based companies totaled $836 million at December 31, 1999. Our commitment to provide future advertising and promotion time is non-cash in nature and has been recorded as deferred revenue in Other current and Other noncurrent liabilities in the Consolidated Balance Sheet and totaled $592 million at December 31, 1999. Barter revenue of $58 million was recognized in our consolidated financial statements through December 31, 1999 as the related advertising and promotion time was delivered. In addition, CBS.com, Inc. is a wholly owned subsidiary of CBS and we have an ownership interest in iWon, Inc., which is consolidated. DISPOSAL OF INDUSTRIAL BUSINESSES During 1999, we sold our Energy Systems, Government Operations, Machinery Apparatus Operations and Plant Apparatus Division businesses for approximately $250 million in cash plus the assumption by the buyers of liabilities, commitments and obligations of approximately $970 million, all in accordance with the terms of their respective agreements. With these sales, we have disposed of essentially all of our industrial businesses. See notes 12 and 19 to the financial statements. USE OF EBITDA We evaluate our operating performance based on several factors, of which the primary financial measure is earnings before interest, taxes, minority interest, equity losses, depreciation, and amortization (EBITDA). EBITDA eliminates the effect of depreciation and amortization of tangible and intangible assets, most of which were from acquisitions accounted for under the purchase method of accounting. However, EBITDA should be considered in addition to, not as a substitute for, operating earnings, net earnings, 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. EBITDA differs from cash flows from operating activities primarily because it does not consider changes in assets and liabilities from period to period, and it does not include cash flows for interest and taxes. CONSOLIDATED RESULTS OF OPERATIONS REVENUES increased $568 million or 8% in 1999. This increase includes the impact of the 1999 acquisitions of King World and Outdoor Systems, as well as the inclusion of the full-year results of American Radio which was acquired in June 1998. Partially offsetting these increases were the absences of revenues from the 1998 Winter Olympics and our 1998 divestitures of TeleNoticias and Eye on People. On a comparable basis, which was determined as if the June 1998 acquisition of American Radio and any related divestitures and exchanges had occurred on January 1, 1997 and excluding the impacts of the remaining aforementioned items, 1999 revenues increased $733 million or 11% driven primarily by advertising rate increases in our Infinity and Television segments. In 1998, revenues increased $1,438 million or 27%. On a comparable basis, excluding the impact of the 1998 Winter Olympics and the acquisition of American Radio, 1998 revenues increased $610 million or 10%, reflecting strong growth in the major radio markets as well as the inclusion of NFL American Football Conference games in our television broadcasts in the second half of 1998. OPERATING PROFIT increased $474 million or 98% in 1999. On a comparable basis, as defined above, operating profit increased $504 million or 115%. This increase resulted from higher advertising rates at our three largest segments and management's continued focus on cost control. In 1998, operating profit increased $229 million or 91%. The 1999 and 1998 results include special charges of $2 million and $62 million, respectively, recognized for restructuring costs. Due to television programming changes and 14 CBS CORPORATION 15 lower than expected severance costs in 1999, we reversed $26 million of the 1998 charge in 1999. In addition, 1999 operating profit includes a $7 million recovery of a previously written off receivable in the Cable segment. EBITDA increased $540 million or 49% in 1999. On a comparable basis, as defined above, 1999 EBITDA increased $480 million or 44%. This increase resulted from the higher advertising rates at our three largest segments and management's continued focus on cost control. In 1998, EBITDA increased $324 million or 42%. On a comparable basis, 1998 EBITDA increased $74 million or 8%. The 1999 and 1998 EBITDA include the special charges discussed above. In addition, 1999 EBITDA includes a special charge of $24 million recorded in other income related to obligations of TeleNoticias. See Management's Discussion and Analysis--Segment Results of Operations--Cable. DEPRECIATION AND AMORTIZATION expense increased $98 million in 1999 and $126 million in 1998 due to significant levels of amortization of FCC licenses and non-deductible goodwill arising from acquisitions. These costs will continue to increase due to 1999 acquisitions. RESIDUAL COSTS OF DISCONTINUED BUSINESSES primarily represent pension and postretirement benefit costs for benefit plans retained by us covering inactive and retired employees of previously divested industrial businesses. The pension and postretirement benefit costs amounted to $169 million in 1999, $161 million in 1998 and $142 million in 1997. Although our objective is to reduce this earnings constraint over the next few years by fully funding the pension plan and modifying postretirement benefits, management expects that these costs will continue to negatively affect operating results in future years. Residual costs increased $12 million in 1999 and $20 million in 1998. The increases resulted from the retention of benefit obligations related to our 1999 divested businesses as well as the full-year impact of those businesses divested in 1998 and 1997. Prior to the sales of these businesses, these costs were charged against the liability for estimated loss on disposal included in the net liabilities of Discontinued Operations. See note 12 to the financial statements. Residual costs are expected to increase in 2000 by approximately $20 million due to the full-year impact of 1999 divestitures. We are considering merging certain qualified pension plans in the second quarter of 2000. If such merger is completed as planned, the residual costs are expected to remain at 1999 levels. OTHER INCOME, NET includes miscellaneous gains and losses on dispositions of non-strategic assets and income from royalties. The decrease of $32 million in 1999 primarily relates to a $24 million charge recorded in 1999 for obligations associated with TeleNoticias, a Spanish language cable network. See Management's Discussion and Analysis--Business Segments--Cable. The decrease of $31 million in 1998 primarily relates to a $24 million gain recorded in 1997 on the sale of a partnership interest. INTEREST EXPENSE declined $166 million in 1999 due to lower debt levels resulting from the use of a significant portion of the cash proceeds received from Infinity Broadcasting subsequent to its December 1998 IPO as repayment of an intercompany note, to pay down CBS debt. In addition, during 1999 we purchased certain debt securities prior to their scheduled maturity. The decrease in interest expense of $16 million in 1998 was due to lower debt levels and lower interest rates. The lower debt levels resulted from the use of cash proceeds from divestitures to pay down debt and the purchase of certain debt securities prior to their scheduled maturity, partially offset by debt assumed in connection with our acquisition of American Radio in June 1998 totaling $1.3 billion. In conjunction with our December 1999 acquisition of Outdoor Systems, we assumed $1.9 billion in debt that will cause an increase in future interest expense. This expected increase will be slightly offset by a reduction in interest expense as a result of our recent debt extinguishments. See note 8 to the financial statements. Future interest expense will also depend on our financing strategy in future acquisitions, additional activity under the stock repurchase programs, payment of postretirement benefits and retained liabilities of discontinued businesses, as well as our overall performance. See note 20 to the financial statements. INCOME TAX EXPENSE was $461 million or 60% of pre-tax earnings for 1999 and $161 million or 104% of pre-tax earnings for 1998. The decrease in the effective tax rate in 1999 primarily relates to increased operating earnings. In 1997, income tax expense was $73 million despite a pre-tax loss of $59 million. The increase in the income tax provision from 1997 to 1998 is primarily related to increased operating earnings. Our tax provision is significantly higher than the U.S. federal statutory tax rate of 35% of pre-tax income. This higher tax provision results primarily from the amortization of non-deductible goodwill associated with our media acquisitions in recent years. Such CBS CORPORATION 15 16 permanent differences between book income and taxable income can significantly impact our tax provision, and depending upon our level of income or loss and the effect of non-recurring transactions, can cause dramatic fluctuations in our effective tax rate. Non-deductible amortization is expected to increase as a result of recent acquisitions. The components of our income tax provision (benefit) are set forth in note 10 to the financial statements. MINORITY INTEREST IN (INCOME) LOSS OF CONSOLIDATED SUBSIDIARIES increased $66 million to $72 million in 1999 and increased to $6 million in 1998 from a benefit of $1 million in 1997. The increase in 1999 primarily resulted from the full year impact of the December 1998 IPO of Infinity Broadcasting, our then wholly-owned radio and outdoor advertising business. The IPO reduced our ownership interest in Infinity Broadcasting to approximately 82%, excluding the dilutive effect of stock options. This results in an offset in our consolidated financial statements for the minority interest holder's proportionate interest in post-IPO results of operations of Infinity Broadcasting. The closing of the Outdoor Systems transaction in December 1999 caused a reduction in our ownership interest in Infinity Broadcasting from approximately 82% at December 31, 1998 to approximately 65% at December 31, 1999, excluding the dilutive effect of stock options. As a result of this reduced ownership interest, minority interest in (income) loss of consolidated subsidiaries is expected to increase. Future minority interest expense will also depend on Infinity Broadcasting's financing strategy for their future acquisitions and activity under their stock repurchase program. EQUITY LOSSES OF UNCONSOLIDATED AFFILIATED COMPANIES, NET OF INCOME TAXES are related to our equity method of accounting investments in Internet based companies. During the second half of 1999, we closed on a number of strategic investments focused on growing our Internet based operations. We received an equity interest in these Internet companies, in exchange for cash and future advertising and promotion time on CBS and Infinity Broadcasting media properties. We recognized our proportionate share of losses in these Internet based companies and the amortization of the difference between our initial investment in these entities and our proportionate ownership share in the underlying net assets of these companies, which totaled $73 million, net of tax benefit of $8 million. As of December 31, 1999, this difference of $596 million is being amortized over a five-year period. See note 3 to the financial statements. Future equity losses in Internet based companies 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 we deliver the advertising and promotion time. Therefore, future losses for the Internet based companies are expected to grow significantly, which in turn will increase the non-cash equity losses for which we must recognize our proportionate share and these losses are expected to be material to our consolidated results of operations. Because of the expected growing significance of these non-cash equity losses and amortization, we reported this amount as a separate line item in the Consolidated Statement of Income. The shares evidencing our equity ownership interests typically contain restrictions that may limit our ability to sell or otherwise dispose of our investments. 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 we have 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, our 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 promotion agreements entered into in exchange for our equity interests in these investees contain termination provisions in the event of failure or inability of the investee to perform. Generally, pursuant to these termination provisions, we are released from delivering any remaining unfulfilled advertising commitments. Upon termination of the unfulfilled advertising and promotion 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, net of income taxes. DISCONTINUED OPERATIONS, NET OF INCOME TAXES reflect the impact of our decision to divest our remaining industrial businesses. During 1999, we closed on the disposals of our Energy Systems, Government Operations, Machinery Apparatus Operations and Plant Apparatus Division businesses. These disposals as well 16 CBS CORPORATION 17 as purchase price resolutions related to businesses previously disposed of resulted in a gain on disposal of $628 million, net of income tax expense of $294 million. In 1997, we recognized a gain on disposal of $871 million, net of income tax expense of $779 million, related primarily to the sale of Thermo King. The Loss from Discontinued Operations includes the operating results of the industrial businesses prior to adoption of the related disposal plans. For the year ended December 31, 1997, this loss totaled $191 million, net of tax benefits of $112 million. All operating results after the measurement date are charged directly to the liability for estimated loss on disposal. Actual operating results have not varied significantly from the amounts estimated. See notes 12 and 19 to the financial statements. EXTRAORDINARY LOSSES, NET OF INCOME TAXES in 1999 and 1998 primarily reflect the write-off of debt issue costs in connection with the early extinguishment of debt. During 1999, we repurchased, at market value, debt securities with a face value of approximately $371 million. During 1998, we repurchased, at market value, debt securities with a face value of approximately $298 million. As a result of these early extinguishments and the write-off of debt issue costs, we recognized extraordinary losses of $5 million in 1999, and $9 million in 1998, net of tax benefits of $3 million and $6 million, respectively. NET INCOME (LOSS) changed significantly year-over-year in 1999 and 1998 due primarily to the absence in 1998 of the net gain on disposal of Discontinued Operations. Income (loss) from Continuing Operations in 1999 reflects improved results of $169 million to $157 million compared to a loss of $12 million. This improvement was due to strong operating profits in our Infinity, Television and Cable segments, as well as the lower interest expense. The decrease in the loss from Continuing Operations in 1998 of $119 million was primarily due to the increase in operating profit at our Infinity segment. RESTRUCTURING OF OPERATIONS We are committed to strengthening our businesses and improving our profitability through restructuring actions ranging from changes in business strategies to downsizing for process reengineering and productivity improvements. Cost reduction initiatives are undertaken when the expected benefits are substantial in relation to the cost of the programs and are realizable in the near term. During the last three years, these efforts have resulted in charges of $2 million in 1999, $62 million in 1998 and $15 million in 1997, primarily at our Television and Cable segments and our former and current corporate headquarters. The majority of the restructuring costs involve the elimination of positions and separation of employees. Due to television programming changes and lower than expected severance costs in 1999, we reversed $26 million of the restructuring reserve we established in 1998. Restructuring charges and the 1999 reversals are primarily reflected in Operating expenses in the Consolidated Statement of Income. The following is a reconciliation of restructuring liability: (in millions) Balance at January 1, 1997 $117 Provision for restructuring 15 Cash expenditures (83) Non-cash charges (8) - ----------------------------------------------------- Balance at December 31, 1997 41 Provision for restructuring 62 Cash expenditures (37) - ----------------------------------------------------- Balance at December 31, 1998 66 Provision for restructuring 2 Cash expenditures (27) Change in estimates (26) - ----------------------------------------------------- Balance at December 31, 1999 $ 15 - -----------------------------------------------------
The remaining $15 million principally relates to lease termination costs and to a lesser extent employee separation costs. See note 13 to the financial statements. Subsequent to December 31, 1999, we approved a proposed plan to integrate the newly acquired operations of King World with the existing CBS syndication business to achieve synergies and eliminate redundant functions. The plan is expected to result in a restructuring accrual in the range of $10 million to $14 million in 2000 and reflects primarily severance-related and relocation costs of the acquired business. Restructuring costs related to the historical operating activities of King World will increase goodwill and those costs incurred relating to the existing CBS syndication business will be charged to operations. The restructuring accrual includes severance-related and relocation costs of the acquired business for approximately 70 employees in redundant functions and are expected to be paid by year-end 2000. Terminations of employees are expected to be completed by year-end 2000. The restructuring is expected to generate about $13 million in savings in 2000, when fully realized. CBS CORPORATION 17 18 SEGMENT RESULTS OF OPERATIONS (in millions)
REVENUES OPERATING PROFIT EBITDA ------------------------ ---------------------- ----------------------- YEAR ENDED DECEMBER 31, 1999 1998 1997 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------- Infinity $2,449 $1,893 $1,480 $ 739 $ 542 $ 372 $1,067 $ 798 $ 575 Television 4,371 4,369 3,589 351 146 119 606 385 339 Cable 565 546 302 138 50 10 219 148 73 Internet Group 13 4 -- (35) (8) -- (37) (4) -- - --------------------------------------------------------------------------------------------------------------------- Total combined segments 7,398 6,812 5,371 1,193 730 501 1,855 1,327 987 Corporate and Other (25) (7) (4) (62) (85) (105) (44) (68) (72) Residual costs of discontinued businesses -- -- -- (175) (163) (143) (175) (163) (143) - --------------------------------------------------------------------------------------------------------------------- Total $7,373 $6,805 $5,367 $ 956 $ 482 $ 253 $1,636 $1,096 $ 772 - ---------------------------------------------------------------------------------------------------------------------
INFINITY Discussions below are provided on a comparable basis. Comparable basis was determined as if the June 1998 acquisition of American Radio and any related divestitures and exchanges of radio stations occurred on January 1, 1997. In addition, comparable results exclude the December 1999 operating results of Outdoor Systems. The Infinity segment is comprised of owned and operated radio stations and outdoor advertising businesses. Reported revenues in 1999 increased $556 million or 29% over the prior year. The reported results include the full-year impact of the June 1998 acquisition of American Radio and the one-month results of Outdoor Systems. On a comparable basis, revenues increased 17%, primarily driven by higher advertising rates at the majority of the radio stations and in the outdoor advertising business. The higher advertising rates reflect increased demand for advertising. Reported revenues in 1998 increased $413 million or 28% over the prior year. The reported results include the impact of the acquisition of American Radio. On a comparable basis, revenues increased 12%. This increase reflects strong growth primarily in the top 15 radio markets and double-digit growth at our outdoor advertising business in 1998. Radio revenues were 75% in 1999, 77% in 1998 and 75% in 1997 of total Infinity segment revenues. The percentage of outdoor revenues is expected to increase in 2000 due to the full-year impact of the December 1999 acquisition of Outdoor Systems. Reported operating profit and EBITDA in 1999 increased $197 million or 36% and $269 million or 34%, respectively, over the prior year. Reported operating profit and EBITDA in 1998 increased $170 million or 46% and $223 million or 39%, respectively, over the prior year. On a comparable basis, operating profit and EBITDA in 1999 increased 34% and 23%, respectively, over the prior year. On a comparable basis, operating profit and EBITDA in 1998 increased 36% and 21%, respectively, over the prior year. These increases were driven by the higher revenues discussed above and management's continued focus on cost control. The higher growth rate in operating profit and EBITDA compared to the growth rate in revenues results because a substantial portion of the Infinity segment's costs are fixed. As previously discussed, certain outdoor advertising assets are expected to be divested in connection with Infinity Broadcasting's acquisition of Outdoor Systems. See Management's Discussion and Analysis--Overview. On March 3, 2000, Infinity Broadcasting entered into an asset purchase agreement to acquire 18 radio stations, located in the top 50 markets, from Clear Channel Communications for approximately $1.4 billion. This transaction is expected to close by year-end 2000 and is subject to regulatory reviews and approvals. In addition, on March 21, 2000, Infinity Broadcasting announced that it had entered into an agreement to purchase Giraudy, one of France's largest outdoor advertising companies, for approximately $425 million. This transaction is expected to close mid-year 2000. TELEVISION The Television segment consists of three integrated operations: the CBS television network; our owned and operated television stations; and our television syndication operations. On November 15, 1999, we acquired the King World syndication operations which have been reflected in our reported amounts. Reported revenues in 1999 were level with those of the prior year. On a comparable basis, excluding $103 million in revenues associated with the 1999 acquisition of King World and the impact of the 1998 Winter Olympics, revenues would have increased by approximately 9%. This advance was driven by strong 18 CBS CORPORATION 19 up-front and scatter market advertising pricing, due in part to, increased advertising demand across the industry. Approximately 80% of CBS Television's 1999-2000 season up-front inventory was sold at double-digit price increases, subject to actual audience levels being achieved. Reported revenues in 1998 increased $780 million or 22% over 1997 primarily due to the broadcast of the Winter Olympics during the first quarter of 1998 and the broadcasts of the 1998 NFL American Football Conference games during the third and fourth quarters. Excluding the impact of the broadcast of the 1998 Winter Olympics and the NFL, revenues would have remained level with the prior year. During 1998 CBS signed an eight-year agreement, subject to rebid at the end of five years at the discretion of the NFL, to broadcast American Football Conference games. Reported operating profit and EBITDA increased $205 million or 140%, and $221 million or 57%, respectively in 1999. These increases are primarily attributable to higher 1999 advertising pricing, partially offset by increased programming costs, and the inclusion of operating profit of $6 million and EBITDA of $28 million associated with the recently completed King World acquisition. These 1999 increases also include a net benefit of $87 million resulting from the absence of a 1998 special charge of $63 million recognized for restructuring costs and asset impairment, the inclusion of a 1999 special charge of $2 million recognized for employee terminations, and the reversal of $26 million of the 1998 special charge during 1999. This reversal was the result of television programming changes and lower than expected severance costs. Partially offsetting these 1999 improvements is the impact of the broadcast of the 1998 Winter Olympics. On a comparable basis, excluding the net effect of these items, operating profit and EBITDA in 1999 would have increased approximately 170% and 55%, respectively. Reported operating profit and EBITDA in 1998 increased $27 million or 23%, and $46 million or 14%, respectively. These increases are due to the broadcast of the 1998 Winter Olympics partially offset by a $63 million restructuring and asset impairment charge recognized in the third quarter of 1998 and declines in profitability during the third and fourth quarters of 1998 due to higher costs for program rights. Excluding the net effect of these items, operating profit was flat while EBITDA increased slightly compared to the prior year. Comparable EBITDA margins were 13% in 1999 and 9% in both 1998 and 1997. See Management's Discussion and Analysis--Consolidated Results of Operations--Restructuring of Operations for discussion on the proposed plan to integrate the operations of King World with the existing CBS syndication business. In the fourth quarter of 1999, we entered into a new agreement with the National Collegiate Athletic Association (NCAA) for certain rights, including the right to broadcast the NCAA Division I Men's Basketball Tournament and other championship events. The contract provides for program rights payments of approximately $6.2 billion over an eleven-year period commencing with the 2003 season. This new contract represents a significant increase in costs, more than double the annual cost of the current eight-year contract of approximately $1.7 billion, but includes a significant expansion of our rights, including rights to cable, digital broadcasting, rights to produce and develop the NCAA official championship Internet site, rights to radio broadcasts, marketing, corporate sponsorship, home video, merchandising and licensing. It is anticipated that we will retain a substantial amount of the revenues generated from these rights in accordance with the terms of the agreement. The new contract's impact on operating profit, EBITDA and cash flows is significantly dependent upon a number of factors, including the strength of the advertising market and our ability to attract sufficient audience levels with respect to the NCAA programming. CABLE The Cable segment primarily consists of our cable networks, including TNN, CMT and two regional sports networks. These networks are distributed by cable television and other multichannel technologies. In December 1998 we divested Eye on People and in November 1998 we finalized a joint venture agreement pursuant to which 70% of the TeleNoticias cable channel business was sold. During 1999, TeleNoticias filed for bankruptcy protection and subsequently is being liquidated with certain obligations reverting back to us. Reported revenues in 1999 increased $19 million or 3% over the prior year. This increase was negatively impacted by the absence of revenues in 1999 related to Eye on People and TeleNoticias which were divested in late 1998. On a comparable basis, assuming the exclusion of the 1998 revenues of Eye on People and TeleNoticias, revenues would have increased 8%. This growth reflects our ability to increase advertising rates due to higher demand for CBS CORPORATION 19 20 advertising across the industry. The increase in advertising has occurred despite the continued increase in competition across the cable industry as the growing number of channels available continues to provide more options to viewers thereby placing more pressure on cable networks to attract and maintain their audiences. Reported revenues in 1998 increased by $244 million or 81% over the prior year. These increases were primarily attributable to the September 30, 1997 acquisition of TNN and CMT. We had previously owned a 33% interest in CMT. On a comparable basis, assuming the acquisition of TNN and CMT occurred on January 1, 1997, revenues for 1998 would have increased by approximately 10%. Our rights to broadcast the NASCAR Winston Cup races were not renewed and expire during the year 2000. Unless these broadcast rights are replaced with similar revenue generating events, the positive historical trend in revenues may be adversely affected. Reported operating profit in 1999 increased $88 million or 176% as compared to the prior year. On a comparable basis, assuming the exclusion of the 1998 operating losses of TeleNoticias and Eye on People, operating profit would have increased 50% due to the increased advertising rates, a $7 million recovery of a previously written off receivable and improved margins from restructuring and other cost containment efforts initiated in 1998. Reported EBITDA in 1999 increased $71 million or 48% over the prior year. On a comparable basis, excluding the 1998 impact of TeleNoticias and Eye on People, EBITDA increased 13%. This increase was driven by the improvement in operating profit, partially offset by a special charge of $24 million in the second quarter of 1999. This special charge was a direct result of the financial difficulties which led TeleNoticias to file for bankruptcy protection under Chapter 11, in the second quarter of 1999 and to ultimately be liquidated under Chapter 7. Because of these financial difficulties, it is probable that certain obligations that were assumed by the buyer will revert back to us. The $24 million special charge was recorded in Other income, net. Of the $24 million, $11 million was paid in the second half of 1999 and the remaining balance is expected to be satisfied over the next few years. On a comparable basis, excluding the impact of this special charge and the recovery of the receivable, EBITDA would have increased 22% and EBITDA margin would have increased to 42% in 1999 from 37% in 1998. In 1998, reported operating profit increased $40 million and reported EBITDA increased $75 million over last year. These increases were primarily attributable to the September 30, 1997 acquisition of TNN and CMT, partially offset by a 1997 gain on the sale of a partnership interest. On a comparable basis, assuming the acquisition of TNN and CMT occurred on January 1, 1997, 1998 operating profit increased approximately 80%; this increase was attributable to higher advertising sales. EBITDA on a comparable basis was flat compared to 1997 because of increased expenditures and a loss on disposal of a 70% interest in TeleNoticias. INTERNET GROUP The Internet Group segment consists of our consolidated Internet based companies, including CBS.com, Inc. and iWon, Inc., as well as our interests in Internet based companies accounted for under the cost or equity methods of accounting. However, the Internet Group segment results in the table on page 18 exclude the effect of changes in market value for our publicly traded cost method investments and the results of operations for our equity method of accounting Internet investments. Our proportionate share of losses and related amortization expense in our equity method investments are reported separately as Equity losses of unconsolidated affiliated companies, net of income taxes on the Consolidated Statement of Income and discussed in Management's Discussion and Analysis--Consolidated Results of Operations. The appreciation or depreciation in the stock prices on our publicly traded cost method Internet investments are recorded as a component of Accumulated other comprehensive loss in shareholders' equity. The discussion below reflects the results of the consolidated Internet based companies. See note 3 to financial statements. Revenues of $13 million were primarily contributed by CBS.com, Inc. which began operations in February 1998. Operating losses were $35 million with a negative EBITDA of $37 million. The losses were driven by iWon, Inc.'s aggressive advertising efforts to attract users to the web site through their cash sweepstakes campaign. Approximately $19 million of the losses recognized relate to advertising spots provided to consolidated Internet Group investments by our Infinity, Television and Cable segments. As discussed in Management's Discussion and Analysis--Overview, during 1999 we closed on a number of strategic investments focused on growing our Internet based operations. Future losses in these 20 CBS CORPORATION 21 companies are expected to increase dramatically due to their recognizing marketing and promotional expenses as we deliver our advertising and promotion time. Additionally, our losses will increase as the number of such investments expand and as full-year results are recognized. We expect future non-cash equity losses and amortization to be material to our consolidated results of operations. LIQUIDITY AND CAPITAL RESOURCES OVERVIEW During 1999, we generated $686 million in cash flow from operating activities from our Continuing Operations, which represents a $391 million increase over the prior year. These cash inflows were one of our major sources of liquidity during the year, and were primarily utilized along with cash and cash equivalents on hand at the beginning of the year to fund our stock repurchase programs, repay debt, complete business acquisitions, and fund the operations of our discontinued businesses through their dates of disposal. Additional 1999 sources of liquidity primarily include cash provided by business divestitures and assets liquidations of $479 million and the cash and cash equivalents acquired through the 1999 acquisitions of King World and Outdoor Systems which were funded by the issuance of CBS and Infinity Broadcasting common stock, respectively. Cash and cash equivalents and short-term investments acquired as of the closing date for these companies totaled $573 million and $353 million, respectively. As previously stated, during 1999, we completed a number of acquisitions for stock, cash and the assumptions of debt and stock options aggregating approximately $12.2 billion and made certain equity investments in Internet based businesses for cash and commitments to provide future advertising. In general, future commitments to provide advertising will be met over a period of seven years. The acquisitions and investments were primarily funded by the issuance of 233 million shares of Class A common stock by Infinity Broadcasting, the issuance of 58 million shares of CBS common stock, the issuance of approximately 10 thousand shares of CBS Series B participating preferred stock, the assumptions of $1.9 billion of debt at fair value and $982 million of stock options as well as commitments to provide future advertising for $604 million. In 1998, CBS formed Infinity Broadcasting, a new company comprising the Infinity segment. In December 1998, Infinity Broadcasting sold 18% of its common stock in an IPO, generating $3.2 billion of proceeds ($3.0 billion, net of offering costs). CBS received the benefit of nearly 90% of the proceeds from the IPO through the payment to CBS by Infinity Broadcasting of an intercompany note and certain other intercompany transactions. A significant portion of these proceeds were used by CBS to repay its revolving credit borrowings in 1998 and the remainder was used to reacquire our common stock, repay other outstanding debt and for general corporate purposes. Because of the minority interest in Infinity Broadcasting following the stock offering, certain modifications have been made to our cash management practices. Of the $194 million in cash and cash equivalents presented on our Consolidated Balance Sheet, CBS, as the parent company of Infinity Broadcasting, has direct access to $122 million. The remaining cash balance is available to CBS 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. 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 our liquidity. Additionally, under the terms of an intercompany agreement and a tax sharing agreement, Infinity Broadcasting reimburses CBS in cash for certain services provided and its standalone income tax liability. Under the intercompany agreement, we provide to Infinity Broadcasting a number of services, including executive, human resources, legal, finance, information management, internal audit, tax, and treasury services. The costs of these services are allocated according to established methodologies determined on an annual basis. With the completion of the Outdoor Systems acquisition, our ownership interest in Infinity was reduced to approximately 65%, excluding the dilutive effect of stock options, and therefore, after December 7, 1999, Infinity Broadcasting can no longer be included in our consolidated U.S. federal and some state consolidated tax returns. During 1999 cash taxes paid to CBS by Infinity Broadcasting totaled $290 million while total net cash taxes paid by CBS, excluding a prior year tax refund of $109 million, was $164 million. This difference was due to the utilization of certain CBS deferred tax assets during 1999. During the next several years, consolidated cash taxes are expected to increase as a result of the de-consolidation of Infinity Broadcasting from our consolidated U.S. federal tax CBS CORPORATION 21 22 return since their taxable income can no longer be sheltered by our remaining deferred tax assets. We expect to have sufficient liquidity to meet our ordinary future business needs. Sources of liquidity generally available to us include cash from operations, proceeds from sales of investments and non-strategic assets, cash and cash equivalents, short-term investments, availability of debt under our credit facility, borrowings from other sources, including funds from capital markets, and issuance of additional capital stock of CBS. OPERATING ACTIVITIES The operating activities of Continuing Operations provided cash of $686 million during 1999 and $295 million during 1998. This increase in cash flow is primarily attributable to our improved operating results. The sources of funds identified as deferred and current income taxes are primarily related to the utilization of certain CBS deferred tax assets and the receipt of $109 million of prior year tax refunds in 1999. Cash paid for interest and taxes during 1999 also decreased significantly from 1998. During 1998 operating activities of Continuing Operations provided $295 million of cash while in 1997 used cash of $201 million. The $496 million improvement in operating cash flows in 1998 reflects significant improvements in our results of operations partially offset by the increase in customer receivables. The decline in cash outflows of other assets and liabilities is primarily due to the timing of payments in 1997. Over the next several years it is likely that a portion of the future non-cash advertising and promotion time provided by us in exchange for consolidated and non-consolidated Internet based investments of $51 million and $592 million, respectively, at December 31, 1999, will displace advertising inventory that could otherwise be sold for cash. During 1999, $58 million in non-cash advertising was provided to our nonconsolidated Internet investees and $19 million to our consolidated investees. In addition, as a result of our recent investments in these Internet based companies, cash taxes paid are expected to increase because CBS is contributing services in exchange for its ownership interests. We are required to recognize taxable income equal to the fair value of the shares received. Cash outflows for operating activities are expected to increase as a result of our NFL contract and our new NCAA contract. The new NCAA contract provides for program rights payments of approximately $6.2 billion over an eleven-year period commencing with the 2003 season. This new contract represents a significant increase in costs, more than double the annual cost of the current eight-year contract of approximately $1.7 billion, but includes a significant expansion of our rights, including rights to cable, digital broadcasting, rights to produce and develop the NCAA official championship Internet site, rights to radio broadcasts, marketing, corporate sponsorship, home video, merchandising and licensing. It is anticipated that we will retain a substantial amount of the revenues generated from these rights in accordance with terms of the agreement. Future liquidity may be significantly impacted by our ability to attract sufficient audience levels with respect to the NFL and NCAA programming. Cash contributed to our pension and postretirement plans totaled $366 million during 1999 and $393 million during 1998. Our contribution level for 2000 is expected to range between $210 million and $273 million and is consistent with our goal to fully fund our qualified pension plans over the next several years. The operating activities of Discontinued Operations used cash of $241 million during 1999 compared to $331 million during 1998. The cash outflows during 1999 primarily reflect cash used in the operations of the Energy Systems and Government Operations businesses through their date of disposition in March 1999 and resolution of certain working capital adjustments, while the cash outflows during 1998 primarily reflect the cash used in the operations of its Power Generation business through the date of 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 our remaining industrial operations in 1998 and 1999, future operating cash flows of Discontinued Operations will consist primarily of cash flows associated with certain remaining purchase price adjustments, indemnification obligations and the liquidation of financial services businesses. Cash flows associated with the financial services business, including interest cost on debt of Discontinued Operations and the repayment of that debt, will be satisfied through borrowings under the CBS revolver and cash from continuing operations which the cash inflows from contractual liquidation of the leasing portfolio are expected to be sufficient to repay, while cash requirements to satisfy non-debt obligations of Discontinued Operations will affect cash flows of Continuing Operations. Cash taxes arising from the liquidation of our lease portfolio are expected to be 22 CBS CORPORATION 23 funded by cash from Continuing Operations over the next 15 years. The operating activities of Discontinued Operations used $331 million of cash during 1998 compared to $437 million of cash during 1997. The cash flows in 1998 and 1997 primarily reflect cash used in the operations of the Power Generation and Energy Systems businesses. We will continue to make payments for postretirement benefits, pensions, divestiture costs and retained liabilities associated with the industrial businesses. In addition, over the next several years we expect to resolve certain tax contingencies related to the divestitures of our industrial businesses which may increase cash taxes paid. INVESTING ACTIVITIES Net cash flows from investing activities during 1999 remained relatively consistent with 1998, however a number of significant acquisitions and divestitures occurred during each of these periods which ultimately drove the results. Investing cash inflows of $422 million during 1999 are primarily attributable to $573 million of cash received in connection with the stock acquisitions of King World and Outdoor Systems, and $479 million of cash received from business divestitures and other asset liquidations which was partially offset by cash outflows of $341 million for non-Internet business acquisitions, $45 million for equity investments in Internet based companies acquired in 1999, $106 million for other investments and assets as well as $171 million for capital spending. Included in the 1999 capital spending is $16 million for consolidated Internet investments. A portion of the cash paid for 1999 business acquisitions was received from deposits held in acquisition trust. Business divestitures and asset liquidations during 1999 primarily include the sale of certain of our industrial businesses for approximately $250 million, the liquidation of our leasing portfolio for $109 million, cash received from the divestiture of several media properties totaling $59 million and proceeds of $47 million received from the sale of short-term investments. Cash outflows during 1999 for business acquisitions and investments primarily relate to the acquisition of three radio stations, a television station, two transit advertising companies, payments for Internet based and other investments, and the acquisition of a radio dating service for a total of $492 million. Cash flows provided from investing activities of $467 million during 1998 were primarily related to the cash received from divestiture of discontinued businesses, investments, and securities for approximately $2.2 billion, partially offset by cash outflows associated with the cash payment to acquire American Radio for $1.4 billion and 1998 capital expenditures for Continuing Operations of $139 million. Cash flows provided by investing activities declined $2.0 billion between 1998 and 1997. This decline in cash provided by investing activities is a reflection of increased cash payments for business acquisitions and investments and lower proceeds from divestitures in 1998. Cash inflows during 1997 primarily relate to the sale of one of our industrial businesses for $2.6 billion. We have taken a number of actions which will have a direct impact on our cash flows from investing activities. During 1999, we entered into a satellite service arrangement that requires an advance payment of approximately $65 million, which will become payable in October 2000. As a result of the satellite service payment and recent acquisitions, capital spending levels are expected to increase between $90 million to $120 million over 1999 levels. We have committed to contribute, upon request, approximately $55 million to a fund aimed at providing minorities and women with access to capital to acquire and operate radio and television stations. Over the next five years, based on our current projections, we expect to spend approximately $100 million for equipment and other capital assets to meet commitments for digital multichannel and high definition transmission capability. With the sale of essentially all the remaining industrial businesses, future capital expenditures for Discontinued Operations will essentially be eliminated. FINANCING ACTIVITIES Total cash flows from financing activities dramatically shifted to a net cash outflow during 1999 of $1.4 billion from a net cash inflow of $327 million during 1998. A number of significant actions taken during each of these years drove these results. Total financing cash outflows of $1.4 billion during 1999 primarily reflect the repurchase or redemption of certain outstanding debt for $683 million and the purchase of 11.5 million shares of CBS common stock for $489 million, bringing our total share repurchases to 39.8 million shares for $1,348 million. In addition, Infinity Broadcasting purchased 17.6 million shares of CBS CORPORATION 23 24 its Class A common stock for $485 million. Partially offsetting these outflows was cash generated of $266 million from stock issued for employee compensation and benefit plans. Cash inflows of $327 million during 1998, primarily relate to the net proceeds of $3.0 billion received from Infinity Broadcasting's IPO, $493 million received upon the issuance of Senior Notes due in 2005 and $351 million from CBS stock issued for employee benefit plans. These 1998 cash inflows were partially offset by cash outflows for net debt repayments totaling approximately $2.7 billion and cash outflows for the purchase of 28.3 million shares of CBS's common stock totaling $859 million. In February 1998, we announced that we would suspend dividend payments on our common stock after payment of the March 1, 1998 dividend. Cash used in 1999 and 1998 to repurchase and redeem debt as well as the purchase of common stock were primarily financed by cash proceeds received from Infinity Broadcasting subsequent to its December 1998 IPO, our cash flow from asset dispositions and operations. Future purchases of common stock under CBS's $3.0 billion multi-year stock repurchase program and Infinity Broadcasting's $1.0 billion multi-year stock repurchase program ($500 million announced in June 1999 and an additional $500 million announced in January 2000) will be guided by financial policies that are consistent with maintaining an investment grade rating. Subsequent to December 31, 1999 through March 20, 2000, Infinity Broadcasting purchased 4.7 million shares of its Class A common stock for $156 million and CBS purchased 3.5 million shares of its common stock for $200 million. As discussed above, financing activities during 1998 provided cash of $327 million while cash used during 1997 totaled $2.0 billion. The increase in net cash flows from financing activities is a reflection of the proceeds received from Infinity Broadcasting subsequent to its December 1998 IPO. Cash outflows during 1997 primarily include net debt repayments of $2.1 billion which was funded primarily by the $2.6 billion in proceeds received on the sale of one of our industrial businesses. We are considering various alternatives with respect to our Internet strategy, including pursuing a spin-off or creation of a tracking stock for our Internet interests. REVOLVING CREDIT FACILITY Our August 1996 five-year revolving credit facility, as amended and restated in December 1999, provides for $1.5 billion of credit available to CBS and our subsidiaries excluding Infinity Broadcasting and its subsidiaries, and an additional $1.5 billion of credit available for the exclusive use of Infinity Broadcasting and its subsidiaries. Infinity Broadcasting's borrowings under this facility are guaranteed by us. 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 (LIBOR), plus a margin based on our senior unsecured debt rating and leverage. The cost of the facility includes commitment fees, which are based on the unutilized portion of the facility and vary with our debt ratings. Revolver borrowings are classified as long-term. There are no compensating balance requirements under the facility. At December 31, 1999, Infinity Broadcasting had outstanding credit facility borrowings of $988 million, of which $38 million were short-term borrowings. These borrowings were primarily used to pay down Outdoor Systems' credit facility in conjunction with our acquisition of Outdoor Systems in December 1999. 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 December 31, 1999, we were in compliance with the financial covenants. As previously discussed, on March 3, 2000, Infinity Broadcasting entered into an asset purchase agreement to acquire 18 radio stations from Clear Channel Communications for approximately $1.4 billion. In addition, on March 21, 2000, Infinity Broadcasting announced that it had entered into an agreement to purchase Giraudy, one of France's largest outdoor advertising companies, for approximately $425 million. Infinity Broadcasting plans to finance these acquisitions with excess cash from operations and by executing a credit facility which will increase their borrowing availability by $2.0 billion. CONSOLIDATED BALANCE SHEET During 1999, with the consummation of the acquisitions of King World, Outdoor Systems, two television stations and various other media properties, we 24 CBS CORPORATION 25 continued our pursuit of identifying and obtaining accretive acquisitions. As a result of these acquisitions both total assets and liabilities increased dramatically. The increase in our assets resulted primarily from additional intangible assets of $9.7 billion, property and equipment of $1.9 billion and an increase of $811 million, year-over-year, in our investments in Internet based companies. The increase in our liabilities resulted primarily from incremental deferred tax liabilities of approximately $600 million recorded on identifiable intangibles acquired, debt assumed of approximately $1.9 billion from Outdoor Systems and deferred barter revenues of $592 million recorded in connection with our 1999 investments in Internet based companies. OTHER MATTERS YEAR 2000 We have not experienced any significant disruptions to our financial or operating activities caused by a failure of our computerized systems resulting from Year 2000 issues. In addressing this matter we had undertaken efforts to identify, modify or replace and then test systems to ensure Year 2000 compliance by December 31, 1999. Total expenditures of $33 million were necessary to achieve Year 2000 compliance, of which $18 million was incurred in 1999 and $15 million through December 31, 1998. Approximately 36% of these total expenditures related to the replacement of existing systems. These costs were funded through our cash flows from operations. All system modification costs were expensed as incurred. The Year 2000 effort also included communications with all significant third party suppliers and customers to determine the extent to which our systems were vulnerable to those parties' failures to reach Year 2000 compliance. There has been no significant loss of revenue, unanticipated costs or service interruptions. Management does not expect any future failure of our third party suppliers or customers to have a material adverse impact on our future business operations or financial results. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk from changes in interest rates and foreign exchange rates. To manage this exposure, we periodically enter into interest rate and currency exchange agreements. We do not use financial instruments for trading purposes and we are not a party to any leveraged derivatives. At December 31, 1999, our total long-term debt from Continuing Operations was $3,759 million, of which $2,799 million was fixed-rate debt. The fair value of our fixed-rate debt was $2,831 million. A 1% decrease in interest rates would increase the fair value of our fixed-rate debt by approximately $135 million. Based on the balance of variable-rate debt at December 31, 1999, a 1% increase in interest rates would increase annual interest expense by approximately $10 million. At December 31, 1998, our total long-term debt from Continuing Operations was $2,665 million, of which $2,634 million was fixed-rate debt. The fair value of our fixed-rate debt was $2,805 million. A 1% decrease in interest rates would increase the fair value of our fixed-rate debt by approximately $151 million. Based on the balance of variable-rate debt at December 31, 1998, a 1% increase in interest rates would have increased annual interest expense by approximately $0.3 million. At December 31, 1999, we had variable-to-fixed interest rate swap contracts outstanding with a notional value of $775 million. The swap contracts expire in less than three months. The fair value of these swaps at December 31, 1999 was not material. At December 31, 1998, no interest rate swap contracts were outstanding. We continually monitor our economic exposure to changes in foreign exchange rates and enter into foreign exchange forward contracts to hedge our transaction exposure where appropriate. The notional amount of our foreign currency forward contracts, which were hedging foreign currency denominated transactions at year-end 1999, was $99 million and at year-end 1998 was $5 million. The majority of these related to the Canadian Dollar. A 10% change in foreign exchange rates across all currencies in our portfolio would not be material. Our credit exposure under these agreements is limited to the cost of replacing an agreement in the event of non-performance by our counterparty. To minimize this risk, we select high credit quality counterparties. For further information regarding our debt and financial instruments, see notes 8 and 9 to the financial statements. 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 us. With regard to remedial actions under federal and state CBS CORPORATION 25 26 Superfund laws, we had been named a potentially responsible party at numerous sites located throughout the country. At many of these sites, we are either not a responsible party or our site involvement is very limited or de minimis. However, we may have varying degrees of cleanup responsibilities at approximately 74 sites. 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 majority of the environmental matters being addressed have arisen from past operation of our industrial businesses. Although all the industrial businesses were divested by year-end 1999, we have retained certain obligations relating to these past activities. At December 31, 1999, we had an accrued liability of $514 million reflected in Retained liabilities of discontinued businesses and presented in Other current and Other noncurrent liabilities in the Consolidated Balance Sheet. Of this amount, $397 million covers site investigation and remediation, and $117 million is for post-closure and monitoring activities for approximately 74 sites for which environmental responsibility remains with us. We anticipate 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. Should alternative remediation strategies be selected, the costs related to these sites could differ from the amounts currently accrued. We recognize changes in estimates as new remediation requirements are defined or as more information becomes available. We believe, based on our best estimate, that we have adequately provided for our present environmental obligations and that complying with existing government regulations will not materially impact our financial position, liquidity, or results of operations. REGULATORY MATTERS Certain of our media acquisitions in recent years were subject to a number of temporary conditional waivers of the FCC's rules respecting common ownership of radio and television stations in the same market (formerly known as the "one-to-a-market" rule). These waivers were granted subject to the outcome of pending rulemaking in which a review of the one-to-a-market rule had been proposed. Last August, the FCC revised the one-to-a-market rule and the rule prohibiting common ownership of television stations with certain overlapping signals (the "television duopoly" rule). The new radio/television cross-ownership rule allows 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 if sufficient market "voices," which include independently owned TV and radio stations, daily newspapers and cable television, exist. The new television duopoly rule allows the common ownership of television stations located in different DMAs regardless of signal overlap. The new rule also permits ownership of two television stations in the same market, if more than eight independently owned television stations are licensed to the DMA and at least one of the stations is not ranked among the top four in the DMA in audience share. We have demonstrated compliance with the new rule in all markets other than Los Angeles, Chicago and Dallas-Fort Worth, in each of which we own attributable interests in eight radio stations and one television station, and in Baltimore/Washington D.C. area where we have attributable interests in one television station and (depending on how the FCC interprets its new rule) either eight or eleven radio stations. As to those four markets, the temporary conditional waivers will continue until 2004, at which time the FCC will review its radio/television cross-ownership rule, and we will have an opportunity to demonstrate that the continued ownership of our media assets in these markets would serve the public interest. In connection with the pending Viacom/CBS merger, the combined company may be required to divest some of its broadcasting assets in order to obtain FCC approval. The combined company would not be in compliance with current FCC regulations in the following areas: - - television stations held by both entities reach 41% of U.S. television households which exceeds the 35% maximum currently permitted by the FCC, - - the combined company would not be permitted to continue the temporary conditional waivers of the radio/television cross-ownership rule until 2004, and with the addition of the Viacom television stations, the combined company may be required to divest as many as nine radio stations in certain markets, - - the combined company would hold licenses for two television stations in six markets and may be required to divest a television station in one of these markets under the television duopoly rule, 26 CBS CORPORATION 27 - - it is likely that 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, and - - the combined company may 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 have requested that the companies be afforded a period of twenty-four months to come into compliance with the 35% limitation and the dual network rule, and six months to come into compliance with the radio/television cross-ownership rule. In April 1997, the FCC adopted a schedule under which broadcasters must build digital television 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 Commission 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, we were required to build digital facilities by May 1, 1999 for the eight stations we own in the ten largest television markets, and by November 1, 1999 for the five television stations we own in television markets 11-30. We have begun transmitting digital broadcasts in New York, San Francisco, Philadelphia, Los Angeles, Detroit and Dallas, all of which are top ten markets. Applications for extension of construction permit have been granted with respect to our stations in Minneapolis, Miami, Denver, and Baltimore. In addition, an application for a second extension of construction permit has been granted in Boston and one is pending in Chicago, both of which are top ten markets. An application for a first extension remains pending in Pittsburgh. Our three television stations in markets below the largest 30 must construct digital facilities by May 1, 2002. Timely applications for construction permits have been filed with respect to those stations. All of our television and radio stations operate under licenses from the FCC, which is empowered by the Communications Act of 1934, as amended, to, among other things, license and regulate television and radio broadcasting stations. The FCC has authority to grant or renew broadcast licenses for a maximum statutory term of eight years if it determines that the "public convenience, interest, or necessity" will be served thereby. During a specified period after an application for renewal of a broadcast station license has been filed, persons objecting to the license renewal application may file petitions to deny. We have no reason to believe that the licenses will not be renewed in the ordinary course, although there can be no assurance to that effect. The non-renewal of a substantial number of or certain key licenses could have a material adverse effect on us. LEGAL MATTERS We are defending a number of lawsuits on various matters. See note 19 to the financial statements. We have provided for management's best estimate of costs associated with resolution of these matters. We are a defendant in numerous lawsuits claiming various asbestos-related personal injuries. We were neither a manufacturer nor a producer of asbestos and have often times been dismissed from these lawsuits on that basis. In court actions resolved, we have prevailed in the majority of these claims and have resolved others through settlement. We are reimbursed for a substantial portion of our current costs and settlements through our insurance carriers. We have an accrued liability for our share of estimated costs associated with outstanding claims. This liability is reflected in Retained liabilities of discontinued businesses and presented in Other current and Other noncurrent liabilities in the Consolidated Balance Sheet. 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. We have not been able to reasonably estimate costs for unasserted asbestos claims. However, we review asbestos claims on an ongoing basis and adjust our liability as appropriate. Litigation is inherently uncertain and always difficult to predict. Substantial damages are sought in certain of our pending cases and, although we believe a significant adverse judgment is unlikely, any such judgment could have a material adverse effect on our results of operations for a quarter or a year. However, based on our understanding and evaluation of the relevant facts and circumstances, we believe we have CBS CORPORATION 27 28 meritorious defenses to the litigation and we have adequately provided for costs arising from resolution of these matters. We believe that the litigation should not have a material adverse effect on our financial condition. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities." In June 1999, SFAS 133 was amended by SFAS 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of Effective Date of FASB Statement No. 133," which delays the effective date for adoption of SFAS No. 133 for one year, to fiscal years beginning after June 15, 2000. SFAS No. 133 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. Our derivative and hedging transactions are not material and it is anticipated that adoption of this standard will not materially impact our financial results when adopted on January 1, 2001. INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K, including Item 7--"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 our current expectations concerning future results and events. The words "believe," "expect," "intend," "plan," "anticipate," "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 our 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 acquisitions; our 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 our Internet based investments; changes in Federal Communications Commission regulations; uncertainties related to certain litigation, environmental and other liabilities associated with former industrial businesses; and such other competitive and business risks as from time to time may be detailed in our 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 Annual Report on Form 10-K. The forward-looking statements included in this document are made only as of the date of this document and we do 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. 28 CBS CORPORATION 29 REPORT OF MANAGEMENT We have prepared the consolidated financial statements and related financial information included in this report. Management has the primary responsibility for the financial statements and other financial information and for ascertaining that the data fairly reflect our financial position, results of operations, and cash flows. The financial statements were prepared in accordance with generally accepted accounting principles and necessarily include amounts that are based on best estimates and judgments with appropriate consideration given to materiality. Financial information included elsewhere in this report is presented on a basis consistent with the financial statements. We maintain a system of internal accounting controls, supported by adequate documentation, to provide reasonable assurance that assets are safeguarded and that our books and records reflect authorized transactions. Limitations exist in any system of internal accounting controls based on the recognition that the cost of the system should not exceed the benefits derived. We believe our system of internal accounting controls, augmented by the corporate audit function, appropriately balances the cost/benefit relationship. The independent auditors provide an objective assessment of the degree to which management meets its responsibility for fair financial reporting. They regularly evaluate elements of the internal control structure and perform such tests and procedures as they deem necessary to express an opinion on the fairness of the financial statements. The Board of Directors pursues its responsibility for our financial statements through its Audit Review Committee composed of directors who are not officers or employees of CBS. The Audit Review Committee meets regularly with the independent auditors, management, and the corporate auditors. The independent auditors and the corporate auditors have direct access to the Audit Review Committee, with and without the presence of management representatives, to discuss the scope and results of their audit work and their comments on the adequacy of internal accounting controls and the quality of financial reporting. We believe that our policies and procedures, including our system of internal accounting controls, provide reasonable assurance that the financial statements are prepared in accordance with the applicable securities laws and with a corresponding standard of business conduct. CBS CORPORATION 29 30 INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF CBS CORPORATION We have audited the accompanying consolidated balance sheet of CBS Corporation and subsidiaries as of December 31, 1999, and 1998, and the related consolidated statements of income and comprehensive income, cash flows, and shareholders' equity for each of the years in the three year period ended December 31, 1999. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CBS Corporation and subsidiaries as of December 31, 1999, and 1998, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 1999, in conformity with generally accepted accounting principles. /s/ KPMG LLP New York, New York January 25, 2000, except as to note 20, which is as of March 21, 2000 30 CBS CORPORATION 31 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (in millions except per share amounts)
YEAR ENDED DECEMBER 31, 1999 1998 1997 - ----------------------------------------------------------------------------------------------- Revenues $ 7,373 $ 6,805 $ 5,367 Operating expenses (4,281) (4,373) (3,483) Marketing, administration and general expenses (1,292) (1,216) (1,043) Depreciation and amortization (669) (571) (445) Residual costs of discontinued businesses (175) (163) (143) - ----------------------------------------------------------------------------------------------- Operating profit 956 482 253 Other income, net 11 43 74 Interest expense (204) (370) (386) - ----------------------------------------------------------------------------------------------- Income (loss) from Continuing Operations before income taxes, minority interest in income of consolidated subsidiaries and equity losses of unconsolidated affiliated companies 763 155 (59) Income tax expense (461) (161) (73) Minority interest in (income) loss of consolidated subsidiaries (72) (6) 1 Equity losses of unconsolidated affiliated companies, net of income taxes (73) -- -- - ----------------------------------------------------------------------------------------------- Income (loss) from Continuing Operations 157 (12) (131) - ----------------------------------------------------------------------------------------------- Discontinued Operations, net of income taxes: Loss from Discontinued Operations -- -- (191) Gain on disposal of Discontinued Operations 628 -- 871 - ----------------------------------------------------------------------------------------------- Income from Discontinued Operations 628 -- 680 Extraordinary item, net of income taxes: Loss on early extinguishment of debt (5) (9) -- - ----------------------------------------------------------------------------------------------- Net income (loss) $ 780 $ (21) $ 549 - ----------------------------------------------------------------------------------------------- Net income (loss) per common share--Basic: Continuing Operations $ .22 $ (.02) $ (.24) Discontinued Operations .89 -- 1.08 Extraordinary item (.01) (.01) -- - ----------------------------------------------------------------------------------------------- Net income (loss) per common share--Basic $ 1.10 $ (.03) $ .84 - ----------------------------------------------------------------------------------------------- Net income (loss) per common share--Diluted: Continuing Operations $ .22 $ (.02) $ (.24) Discontinued Operations .87 -- 1.08 Extraordinary item (.01) (.01) -- - ----------------------------------------------------------------------------------------------- Net income (loss) per common share--Diluted $ 1.08 $ (.03) $ .84 - ----------------------------------------------------------------------------------------------- Cash dividends per common share $ -- $ .05 $ .20 - ----------------------------------------------------------------------------------------------- COMPREHENSIVE INCOME (LOSS) Net income (loss) $ 780 $ (21) $ 549 - ----------------------------------------------------------------------------------------------- Other comprehensive income (loss): Minimum pension liability adjustment, net of tax (expense) benefit of $(176), $19 and $(14) 331 (37) 25 Unrealized gains on marketable securities, net of tax expense of $47 in 1999 and $1 in 1998 72 1 -- Foreign currency translation adjustment (13) -- -- - ----------------------------------------------------------------------------------------------- Other comprehensive income (loss) 390 (36) 25 - ----------------------------------------------------------------------------------------------- Comprehensive income (loss) $ 1,170 $ (57) $ 574 - -----------------------------------------------------------------------------------------------
The Notes to the Financial Statements are an integral part of these financial statements. CBS CORPORATION 31 32 CONSOLIDATED BALANCE SHEET (in millions except per share amounts)
AT DECEMBER 31, 1999 1998 - ---------------------------------------------------------------------------------- ASSETS: Cash and cash equivalents $ 194 $ 798 Short-term investments 306 -- Customer receivables (net of allowance for doubtful accounts of $74 and $48) 1,676 1,180 Program rights 623 533 Prepaid expenses and other current assets 373 140 Deferred income taxes 200 138 - ---------------------------------------------------------------------------------- Total current assets 3,372 2,789 Property and equipment, net 3,070 1,149 Intangibles, net 24,917 15,463 Other noncurrent assets 1,766 738 - ---------------------------------------------------------------------------------- Total assets $33,125 $20,139 - ---------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY: Short-term debt $ 38 $ -- Current maturities of long-term debt 6 159 Accounts payable 377 336 Liabilities for talent and program rights 401 290 Other current liabilities 1,142 820 - ---------------------------------------------------------------------------------- Total current liabilities 1,964 1,605 Long-term debt 3,753 2,506 Pensions, postretirement and postemployment benefits 1,440 2,020 Deferred income taxes 1,717 795 Other noncurrent liabilities 2,590 2,541 - ---------------------------------------------------------------------------------- Total liabilities 11,464 9,467 - ---------------------------------------------------------------------------------- Contingent liabilities and commitments (note 19) Minority interest in equity of consolidated subsidiaries 5,514 1,618 - ---------------------------------------------------------------------------------- Shareholders' equity: Preferred stock, $1.00 par value (25 shares authorized): Series B participating preferred stock (.01 and zero shares issued) -- -- Common stock, $1.00 par value (1,100 shares authorized, 805 and 734 shares issued) 805 734 Capital in excess of par value 15,234 8,914 Retained earnings 2,208 1,428 Accumulated other comprehensive loss (417) (807) - ---------------------------------------------------------------------------------- 17,830 10,269 Less: Treasury stock, at cost (54 and 43 shares held) (1,683) (1,215) - ---------------------------------------------------------------------------------- Total shareholders' equity 16,147 9,054 - ---------------------------------------------------------------------------------- Total liabilities and shareholders' equity $33,125 $20,139 - ----------------------------------------------------------------------------------
The Notes to the Financial Statements are an integral part of these financial statements. 32 CBS CORPORATION 33 CONSOLIDATED STATEMENT OF CASH FLOWS (in millions)
YEAR ENDED DECEMBER 31, 1999 1998 1997 - ----------------------------------------------------------------------------------------------- Cash flows from operating activities of Continuing Operations: Income (loss) from Continuing Operations $ 157 $ (12) $ (131) Adjustments to reconcile income (loss) from Continuing Operations to net cash provided (used) by operating activities: Depreciation and amortization 669 571 445 Gains on asset dispositions (10) (5) (39) Barter revenue--Internet (58) -- -- Equity losses of unconsolidated affiliated companies 73 -- -- Minority interest in (income) loss of consolidated subsidiaries 72 6 (1) Other non-cash adjustments (75) (150) (81) Changes in assets and liabilities, net of effects of acquisitions and divestitures of businesses: Receivables, current and noncurrent (207) (178) (144) Program rights (9) 72 (79) Accounts payable (60) 94 14 Deferred and current income taxes 403 10 5 Pensions, postretirement and postemployment benefits (165) (57) 121 Other assets and liabilities (104) (56) (311) - ----------------------------------------------------------------------------------------------- Cash provided (used) by operating activities of Continuing Operations 686 295 (201) - ----------------------------------------------------------------------------------------------- Cash used by operating activities of Discontinued Operations (241) (331) (437) - ----------------------------------------------------------------------------------------------- Cash flows from investing activities: Acquisitions of businesses, net of cash acquired, assets and investments 118 (1,522) (59) Business divestitures and other asset liquidations 479 2,168 2,752 Capital expenditures--Continuing Operations (171) (139) (121) Capital expenditures--Discontinued Operations (4) (40) (85) - ----------------------------------------------------------------------------------------------- Cash provided by investing activities 422 467 2,487 - ----------------------------------------------------------------------------------------------- Cash flows from financing activities: Bank revolver borrowings 1,551 4,129 2,970 Bank revolver repayments (1,655) (6,161) (4,555) Net increase (reduction) in other short-term debt 38 (89) (406) Issuance of senior notes -- 493 -- Repayments of long-term debt (683) (539) (153) Stock issued 266 351 287 Issuance of subsidiary stock 21 3,047 -- Purchase of treasury stock (489) (859) -- Purchase of treasury stock by subsidiary (485) -- -- Dividends paid -- (36) (148) Other financing activities (7) (9) (10) - ----------------------------------------------------------------------------------------------- Cash (used) provided by financing activities (1,443) 327 (2,015) - ----------------------------------------------------------------------------------------------- (Decrease) increase in cash and cash equivalents (576) 758 (166) Cash and cash equivalents at beginning of period for Continuing and Discontinued Operations 825 67 233 - ----------------------------------------------------------------------------------------------- Cash and equivalents at end of period for Continuing and Discontinued Operations $ 249 $ 825 $ 67 - ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Schedule of non-cash investing and financing activities: Fair value of assets acquired and investments made $13,421 $ 3,550 $ 1,889 Fair value of liabilities assumed (7,548) (2,028) (281) Cash paid, net of cash acquired of $573, $18 and $8 118 (1,522) (59) - ----------------------------------------------------------------------------------------------- Impact on CBS shareholders' equity $ 5,991 $ -- $ 1,549 - ----------------------------------------------------------------------------------------------- Interest paid--Continuing Operations $ 212 $ 373 $ 395 Interest paid--Discontinued Operations 38 51 95 - ----------------------------------------------------------------------------------------------- Total interest paid $ 250 $ 424 $ 490 - ----------------------------------------------------------------------------------------------- Income taxes paid, net of refunds $ 55 $ 145 $ 68 - -----------------------------------------------------------------------------------------------
The Notes to the Financial Statements are an integral part of these financial statements. CBS CORPORATION 33 34 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (in millions)
ACCUMULATED COMMON CAPITAL IN OTHER PREFERRED STOCK AT EXCESS OF RETAINED COMPREHENSIVE TREASURY STOCK PAR VALUE PAR VALUE EARNINGS INCOME (LOSS) STOCK TOTAL - ----------------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1997 $ 4 $609 $ 5,376 $1,084 $(796) $ (546) $ 5,731 Series C preferred shares converted (4) 32 (28) -- Shares issued under various compensation and benefit plans, net of taxes 18 333 15 366 Shares issued under dividend reinvestment plan 7 1 8 Shares issued for acquisition 59 1,490 1,549 Comprehensive income: Minimum pension liability adjustment, net of deferred taxes 25 25 Net income 549 549 Dividends paid (148) (148) - ----------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1997 $ -- $718 $ 7,178 $1,485 $(771) $ (530) $ 8,080 Gain on issuance of subsidiary stock 1,439 1,439 Shares issued under various compensation and benefit plans, net of taxes 16 293 174 483 Shares issued under dividend reinvestment plan 4 4 Shares repurchased (859) (859) Comprehensive income: Minimum pension liability adjustment, net of deferred taxes (37) (37) Unrealized gain on marketable securities, net of deferred taxes 1 1 Net loss (21) (21) Dividends paid (36) (36) - ----------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 $ -- $734 $ 8,914 $1,428 $(807) $(1,215) $ 9,054 Gain on issuance of subsidiary stock 2,836 2,836 Shares issued under various compensation and benefit plans, net of taxes 13 387 21 421 Shares issued for acquisitions 58 3,097 3,155 Shares repurchased (489) (489) Comprehensive income: Minimum pension liability adjustment, net of deferred taxes 331 331 Unrealized gain on marketable securities, net of deferred taxes 72 72 Foreign currency translation adjustment (13) (13) Net income 780 780 - ----------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 $ -- $805 $15,234 $2,208 $(417) $(1,683) $16,147 - -----------------------------------------------------------------------------------------------------------------------------
The Notes to the Financial Statements are an integral part of these financial statements. 34 CBS CORPORATION 35 NOTES TO THE FINANCIAL STATEMENTS (tabular dollars and shares in millions unless otherwise noted, except per share amounts) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to litigation, environmental liabilities, program rights, Internet investments, contracts, pensions, income taxes, and Discontinued Operations, based on currently available information. Changes in facts and circumstances may result in revised estimates. Certain previously reported amounts have been reclassified to conform to the 1999 presentation. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of CBS Corporation and its subsidiary companies. Intercompany accounts and transactions have been eliminated. Investments in joint ventures and other companies we control are consolidated in these financial statements. Investments in companies we do not control but have 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 our equity in undistributed net income (loss) since the date of acquisition. Investments that we do not control and do not have the ability to exercise significant influence over the 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 loss within shareholders' equity in the Consolidated Balance Sheet. REVENUE RECOGNITION Revenues are primarily derived from the sale of advertising spots and are recognized when spots are broadcast. We also receive revenues from syndication on sales of owned programming, cable license fees from distribution of our cable networks, and advertising revenues on the sale of outdoor advertising space and the sale of banner advertisements on our web sites. Revenues from syndication are recognized when the programming is available to telecast and certain other conditions are met. Revenues from cable license fees are recorded in the period that service is provided. Revenues on outdoor advertising space are recognized proportionately over the contract term. Advertising revenues on banner contracts are recognized over the period in which the advertisement is displayed. ENVIRONMENTAL COSTS We record liabilities when environmental assessments or remedial efforts are probable and the costs can be reasonably estimated. Such estimates are adjusted if necessary as new remediation requirements are defined or as more information becomes available. CASH AND CASH EQUIVALENTS All investment securities with an original maturity of three months or less when acquired are considered to be cash equivalents. All cash and temporary investments are placed with high credit quality financial institutions and the amount of credit exposure to any one financial institution is limited. Following the December 1998 public stock offering of Infinity Broadcasting Corporation (Infinity Broadcasting), our majority owned subsidiary, certain modifications were made to our cash management practices. At December 31, 1999, CBS, as the parent company of Infinity Broadcasting, has direct access to $122 million of the $194 million in cash and cash equivalents presented in the Consolidated Balance Sheet. The remaining cash balance is available to us only if Infinity Broadcasting pays a dividend on all of its common stock. Infinity Broadcasting does not anticipate paying any dividends in the near term. SHORT-TERM INVESTMENTS Short-term investments are primarily comprised of available-for-sale securities and reported at fair value, with unrealized gains and losses, net of income taxes reported in Accumulated other comprehensive loss within shareholders' equity in the Consolidated Balance Sheet. The cost of debt securities is adjusted for the amortization of premiums and the accretion of CBS CORPORATION 35 36 discounts through maturity. Such amortization, interest income, realized gains and losses, and declines in value judged to be other than temporary are included in Other income, net in the Consolidated Statement of Income. The cost of securities sold is based on specific identification. PROGRAM RIGHTS Costs incurred in connection with the production of programming or the purchase of rights to programs, that are available to be broadcast within one year are capitalized and classified as current assets while costs of programs to be broadcast after one year are considered noncurrent and are classified as other noncurrent assets in the Consolidated Balance Sheet. Program costs are amortized as the respective programs are broadcast. Program rights are carried at the lower of unamortized cost or net realizable value. PROPERTY AND EQUIPMENT Property and equipment assets are recorded at cost and depreciated over their estimated useful lives. Depreciation is generally computed on the straight-line method based on useful lives as follows:
ASSET CATEGORY DEPRECIATION PERIOD - ----------------------------------------------------------- Buildings and leasehold improvements 25 to 60 years Advertising structures 5 to 20 years Land improvements 20 years Equipment and fixtures 3 to 12 years - -----------------------------------------------------------
Leasehold improvements are amortized over the shorter of their useful life or the term of the lease. Expenditures for additions and improvements are capitalized, and costs for repairs and maintenance are charged to operations as incurred. INTANGIBLE ASSETS Intangible assets primarily arise from the allocation of the purchase price of businesses acquired. Amounts assigned to identifiable intangibles are based on independent appraisals or internal estimates. Goodwill represents the residual purchase price after allocation to all identifiable net assets including identifiable intangibles. Identifiable intangible assets primarily include Federal Communications Commission (FCC) licenses, which are limited as to availability and have historically appreciated in value with the passage of time, as well as cable license agreements, show contracts, distribution networks, tradenames and transit franchise agreements. Intangible assets are amortized using the straight-line method over their estimated lives ranging from 7 to 40 years. RECOVERABILITY OF LONG-LIVED ASSETS Intangible assets and all other long-lived assets are evaluated whenever events and circumstances indicate that the remaining estimated useful life of the assets may warrant revision or the remaining carrying value of such asset may not be recoverable. When factors indicate that an asset should be evaluated for possible impairment, we use an estimate of the related asset's undiscounted future cash flows over the remaining life of that asset in measuring recoverability. If identifiable cash flows are not available for the specific asset, we evaluate recoverability of the specific business to which the asset relates. If the undiscounted cash flows are less than the carrying value of the asset, an impairment has in fact occurred. The carrying value of the asset is written down to its estimated fair value and a charge is recognized in operating expenses in the Consolidated Statement of Income. In the case of an equity investment in an Internet based company, the impairment charge to reduce the carrying value of the investment to its estimated fair value will be reflected in Equity losses of unconsolidated affiliated companies, net of income taxes, in the Consolidated Statement of Income. Estimated fair value is generally measured by discounting estimated future cash flows or an active market price for the asset. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are used, from time to time, to manage interest rate and foreign currency exchange risks. We do not use financial instruments for trading or speculative purposes and we are not a party to any leveraged derivatives. Under interest rate swap contracts, the differentials to be received or paid are recognized as an adjustment to interest expense over the life of the contract. Gains and losses on terminations of swap contracts are recognized as interest expense when terminated in conjunction with the termination of the hedged transaction, or to the extent that such hedged transaction remains outstanding, deferred and amortized to interest expense over the remaining life of the hedged transaction. Forward exchange contracts are used to hedge the currency fluctuations on transactions denominated in foreign currencies. Gains and losses on forward exchange contracts and the offsetting losses and gains on hedged transactions are recorded currently in Other 36 CBS CORPORATION 37 income, net in the Consolidated Statement of Income. Forward exchange contracts are carried at fair value and are reflected in Other current assets or Other current liabilities, as appropriate in the Consolidated Balance Sheet. SUBSIDIARY STOCK TRANSACTIONS Gains and losses on stock transactions by our subsidiaries and equity investees are recognized directly in shareholders' equity through an increase or decrease to capital in excess of par value in the period in which the transaction occurs. STOCK-BASED COMPENSATION We measure compensation cost for stock-based awards using the intrinsic value based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." The pro forma net income and pro forma earnings per share disclosures using the fair value based method defined in Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," are provided in note 17 to the financial statements. NEW ACCOUNTING PRONOUNCEMENT In June 1998, the Financial Accounting Standards Board issued SFAS No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities." In June 1999, SFAS 133 was amended by SFAS 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of Effective Date of FASB Statement No. 133," which delays the effective date for adoption of SFAS No. 133 for one year, to fiscal years beginning after June 15, 2000. SFAS No. 133 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. Our derivative and hedging transactions are not material and it is anticipated that adoption of this standard will not materially impact our financial results when adopted on January 1, 2001. NOTE 2: MERGERS AND ACQUISITIONS PENDING MERGER On September 6, 1999, we entered into an agreement and plan of merger with Viacom Inc. (Viacom). Pursuant to this merger agreement, as amended, each share of CBS common stock and each share of CBS Series B participating preferred stock 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 1.085 shares of Viacom Series C preferred stock, respectively. Each share of the CBS Series B participating 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 Viacom Series C preferred stock will be entitled to 100 votes per share. Each Viacom Series C preferred share will be convertible into 1,000 shares of Viacom non-voting Class B common stock at the option of the holder. The merger will be accounted for by the purchase method of accounting. On December 29, 1999, shareholders of both companies approved the merger. The merger is contingent upon, among other things, the approvals of the Department of Justice and the FCC. This transaction is expected to close in April 2000. ACQUISITIONS OF BUSINESSES During 1999, we completed the acquisitions of several businesses, the most significant of which are discussed below, aggregating approximately $12.2 billion. These acquisitions were primarily funded by the issuance of 58 million shares of CBS common stock, by the issuance of 233 million shares of Class A common stock by Infinity Broadcasting, which led to the reduction of our ownership interest, the issuance of 10,142 shares of CBS Series B participating preferred stock, and the assumptions of $1.9 billion of debt at fair value and $982 million of stock options. In addition, $341 million of cash was paid in these transactions. These transactions primarily included acquisitions in outdoor advertising businesses in the U.S. and internationally, television syndication operations and television and radio stations. The acquisitions were all accounted for under the purchase method. The purchase prices have been preliminarily allocated based on the estimated fair value of the assets acquired and liabilities assumed. The preliminary allocations were determined using management's best estimates based on currently available information. We are in the process of obtaining independent appraisals of the assets acquired and expect this process to be complete by the end of the second quarter of 2000. As additional information becomes available, these estimates will be adjusted and the allocations finalized. The excess purchase prices over the preliminary estimated fair values of the net assets acquired, of approximately $7.9 billion, was allocated to goodwill. CBS CORPORATION 37 38 The results of operations of all acquisitions are included in the consolidated financial statements from their respective dates of acquisition. On December 7, 1999, Infinity Broadcasting completed its acquisition of Outdoor Systems, Inc., (Outdoor Systems) for approximately $8.7 billion, which included the assumption of $1.9 billion in debt, at fair value and $670 million of Outdoor Systems stock options. The agreement to acquire Outdoor Systems was reached May 27, 1999 and called for the exchange of each outstanding common share of Outdoor Systems for 1.25 shares of Infinity Broadcasting Class A common stock equating to approximately 233 million shares of common stock with a market value of $26 per share. The closing of this transaction resulted in a reduction in our ownership interest in Infinity Broadcasting from approximately 82% at December 31, 1998 to approximately 65% at December 31, 1999, excluding the dilutive effect of stock options. Our voting interest also declined from approximately 96% at December 31, 1998 to approximately 90% at December 31, 1999 as a result of the transaction. The excess purchase price over the estimated fair value of the net assets acquired of approximately $6.5 billion was preliminarily allocated to goodwill and is being amortized on a straight-line basis over 30 years. On December 6, 1999, CBS, Infinity Broadcasting and Outdoor Systems (the Parties) entered into a final judgment with the United States in connection with Infinity Broadcasting's acquisition of Outdoor Systems. Under the terms of the final judgment, the Parties must divest certain outdoor advertising properties principally in the New York City area, all in accordance with the terms and conditions of the final judgment. We do not view these divestitures as material to our business. Any adjustments that may result from the disposal of Outdoor Systems' assets will be offset against goodwill and any gains or losses on disposal of existing Infinity Broadcasting assets will be recognized in operations. On November 15, 1999, we completed our acquisition of King World Productions, Inc. (King World) for approximately $2.7 billion which includes $312 million for the estimated fair value of King World stock options assumed. Under the terms of the agreement reached on March 31, 1999, King World shareholders received 0.81 shares of CBS common stock for each share of outstanding King World common stock equating to approximately 58 million shares of CBS common stock with a market price of $40.81 per share. The purchase price was preliminarily allocated to assets acquired and liabilities assumed, identifiable intangibles of $1.1 billion and deferred taxes of $435 million with the excess purchase price over the fair value of the net assets acquired of approximately $989 million allocated to goodwill - which is being amortized on a straight-line basis over 15 years. Subsequent to December 31, 1999, we approved a proposed plan to integrate the operations of King World with those of the existing CBS syndication business. The plan is expected to result in a restructuring accrual in the range of $10 million to $14 million in 2000. Restructuring costs related to the historical operating activities of King World will increase goodwill and those costs incurred relating to the existing CBS syndication business will be charged to operations. See note 13 to the financial statements. We also completed our acquisitions of two CBS affiliate television stations in Texas: KEYE-TV in Austin closed on August 31, 1999 for $160 million in cash and KTVT-TV in Dallas-Fort Worth closed on October 12, 1999 for $485 million of CBS Series B participating preferred stock, or 10,142 preferred shares, and approximately $3 million in cash. The purchase prices were preliminarily allocated to FCC licenses of $478 million and to goodwill of $304 million. FCC licenses and goodwill are amortized on a straight-line basis over 40 years. Deferred tax liabilities of $143 million were recorded on the identifiable intangibles. During 1998, we completed acquisitions of radio stations and outdoor advertising businesses aggregating approximately $2.8 billion for $1.5 billion in cash and the assumption of debt of $1.3 billion. The most significant was our acquisition of the radio broadcasting operations of American Radio Systems Corporation (American Radio) on June 4, 1998, for $1.4 billion in cash plus the assumption of debt with a fair value of approximately $1.3 billion. The acquisition was accounted for under the purchase method. The purchase price was primarily allocated to FCC licenses of $2.3 billion with the excess purchase price over the estimated fair value of net assets acquired of approximately $825 million allocated to goodwill and amortized on a straight-line basis over 40 years. Deferred tax liabilities of $928 million were recorded on the identifiable intangibles. During 1997, we made acquisitions of cable networks, radio stations and transit advertising assets aggregating $1.6 billion funded by the issuance of CBS common stock and cash of $59 million. The most significant was our acquisition on September 30, 1997, of The Nashville Network (TNN) and the remaining interest in Country Music Television (CMT) from the 38 CBS CORPORATION 39 Gaylord Entertainment Company. We had previously owned a 33% interest in CMT. The total purchase price for these cable networks of $1.6 billion was paid through the issuance of 59 million shares of CBS's common stock. The acquisition was accounted for under the purchase method. The purchase price was allocated to cable license agreements of $506 million with the excess of the purchase price over the estimated fair value of net assets acquired of $1.2 billion allocated to goodwill and amortized on a straight-line basis over 40 years. Deferred tax liabilities of $200 million were recorded on the identifiable intangibles. Prior to the acquisition, we provided certain services to TNN and CMT for which we received a commission. PRO FORMA RESULTS (unaudited) The following unaudited pro forma information combines our consolidated results of operations on a continuing basis with those of Outdoor Systems, King World and American Radio as if these acquisitions had occurred on January 1, 1998. The aggregate impact of other acquisitions was not material to our revenue, income (loss) or income (loss) per share. The pro forma results give effect to certain adjustments, including amortization expense from goodwill and other identifiable intangible assets, interest expense from acquisition debt, the effect to minority interest participation, all related income tax effects and the issuance of additional shares.
YEAR ENDED DECEMBER 31, 1999 1998 - --------------------------------------------------------- Revenues $8,751 $8,369 Income (loss) from Continuing Operations 34 (209) Income (loss) per common share-Basic .05 (.28) Income (loss) per common share-Diluted .04 (.28) - ---------------------------------------------------------
This pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the operating results that actually would have occurred had the Outdoor Systems, King World and American Radio transactions been consummated on January 1, 1998. In addition, these results are not intended to be a projection of future results and do not reflect any synergies that might be achieved from the combined operations. NOTE 3: INVESTMENTS IN INTERNET BASED COMPANIES During 1999, we closed on 12 investments focused on growing our Internet based operations. These investments provided us with equity ownership interests in Internet based companies primarily in exchange for commitments to provide future advertising and promotion time. In general, these advertising commitments will be met over a period of seven years. In exchange for providing advertising and promotion time on its media properties, Infinity Broadcasting will be provided an economic interest in certain of these Internet investments. We obtained equity ownership interests during 1999, ranging from 22% to 50%, in nine Internet based companies in exchange for $29 million in cash and $604 million in commitments to provide future advertising and promotion time. These investments are accounted for under the equity method of accounting and comprise the following: Jobs.com, Inc.; Medscape Inc.; Office.com, Inc.; Rx.com, Inc.; StoreRunner, Inc.; Switchboard, Inc.; ThirdAge Media, Inc.; Women's Consumer Network, LLC; and Wrenchead.com, Inc. In January 2000, we completed the acquisition of a 30% ownership interest in Hollywood.com, Inc. (formerly Big Entertainment, Inc.) which will also be accounted for as an equity method investment in exchange for $100 million in future advertising and promotion time and television content as well as cash of $5 million. We obtained approximately 1% ownership interests in Webvan Group, Inc. and Loudeye Technologies, Inc. (formerly encoding.com, Inc.). Both of these investments are accounted for using the cost method of accounting. We also acquired a majority ownership interest in iWon, Inc. in exchange for $6 million in cash, net of related transactions, and $70 million in future advertising and promotion time, which is accounted for as a consolidated subsidiary. These 1999 Internet based investments added to our existing portfolio of investments in Internet based companies: MarketWatch.com, Inc. our equity method of accounting investment; SportsLine.com, Inc. our cost method of accounting investment; and CBS.com, Inc. our consolidated Internet business. Additionally, subsequent to December 31, 1999, we obtained a 35% equity ownership interest in Content Commerce, L.P. in exchange for a commitment to provide $40 million in future advertising and promotion time. CBS CORPORATION 39 40 The shares evidencing our equity ownership interest typically contain restrictions that may limit our ability to sell or otherwise dispose of our investments. At the date of acquisition, for nonconsolidated equity investments in Internet based companies we typically record our investment at an amount equal to the cash consideration paid plus the fair value of the advertising and promotion time to be provided. The associated obligation to provide future advertising and promotion time is non-cash and is recorded as deferred revenue at an amount equal to the fair value of the advertising and promotion time to be provided. The December 31, 1999 investment balance of $836 million is reflected in Other noncurrent assets and any related deferred revenue balance is presented in Other current and Other noncurrent liabilities in the Consolidated Balance Sheet. See note 7 to the financial statements. Deferred revenue is relieved and barter revenue is recognized as the related advertising and promotion time is delivered. Barter revenue of $58 million has been recognized on a consolidated basis in 1999. Where an agreement provides us 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 revenue is recorded by us as the Internet based company earns the revenues on which the license fees are based. No significant license fee income has been recognized in 1999. For equity method investments, a difference typically exists between our initial investment and our proportionate share in the underlying net assets of these companies. As of December 31, 1999, this difference of $596 million is being amortized over a five-year period. Our 1999 proportionate share of losses in these Internet based companies and the related amortization expense of our initial basis difference totaled $73 million, net of income tax benefit of $8 million and represents the recording of operating results generally using a one quarter lag. This non-cash amount is presented as Equity losses of unconsolidated affiliated companies, net of income taxes in the Consolidated Statement of Income. The following summarized unaudited financial information of our Internet equity investees reflects their results of operations for the first three quarters in 1999 and fourth quarter in 1998 or from inception. Balance sheet information is as of September 30, 1999. For many of these companies, 1998 information is not meaningful or not available since they were newly formed.
1999 - -------------------------------------------------------- STATEMENT OF OPERATIONS DATA: Revenues $ 39 Gross profit 15 Loss from Continuing Operations (112) Net loss (112) - -------------------------------------------------------- BALANCE SHEET DATA: Current assets $ 174 Noncurrent assets 196 - -------------------------------------------------------- Total assets $ 370 - -------------------------------------------------------- Current liabilities $ 46 Noncurrent liabilities 24 - -------------------------------------------------------- Total liabilities $ 70 - --------------------------------------------------------
We had $199 million in cost basis Internet investments at December 31, 1999. The 1999 mark-to-market adjustments in fair value for the publicly traded cost method investments in Internet based companies recognized through other comprehensive income totaled a $67 million gain, net of deferred taxes. The majority of our 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 we have 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. Therefore, our 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. This write down would be recognized in Equity losses of unconsolidated affiliated companies, net of income taxes in the Consolidated Statement of Income. The advertising and promotion agreements entered into in exchange for our 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, we are released from delivering any remaining unfulfilled advertising commitments. Upon termination of the unfulfilled advertising and promotion commitments, the remaining deferred revenue, if any, recorded as a liability will be reversed and recognized as an adjustment to Equity losses of unconsolidated 40 CBS CORPORATION 41 affiliated companies, net of income taxes in the Consolidated Statement of Income. As of December 31, 1999, our investments include four publicly traded Internet based companies: MarketWatch.com, Inc., Medscape Inc., SportsLine.com, Inc., and Webvan Group, Inc. Based upon quoted market prices at December 31, 1999, the aggregate market value of these investments would have exceeded their respective aggregate carrying values by approximately $253 million. NOTE 4: INCOME (LOSS) PER COMMON SHARE--CONTINUING OPERATIONS In 1997, we adopted SFAS No. 128, "Earnings per Share," which establishes standards for computing and disclosing basic and diluted income (loss) per common share. The following is the computation of basic and diluted income (loss) per common share from Continuing Operations:
YEAR ENDED DECEMBER 31, 1999 1998 1997 - ---------------------------------------------------------- Income (loss) from Continuing Operations $ 157 $ (12) $(131) Less: preferred stock dividends -- -- (23) - ---------------------------------------------------------- Income (loss) from Continuing Operations applicable to common shareholders $ 157 $ (12) $(154) - ---------------------------------------------------------- Average shares outstanding-basic 702 696 629 Dilutive effect of stock option plans and convertible preferred stock 19 -- -- - ---------------------------------------------------------- Average shares outstanding-diluted 721 696 629 - ---------------------------------------------------------- Income (loss) per common share-basic and diluted $ .22 $(.02) $(.24) - ----------------------------------------------------------
Options to purchase shares of common stock of 15 million in 1998 and 27 million in 1997 were excluded in the computation of income (loss) per common share-diluted, because their inclusion would be anti-dilutive. Shares of common stock issuable under deferred compensation arrangements of 3 million in 1999, 5 million in 1998 and 6 million in 1997 were also excluded in the computation of income (loss) per common share-diluted, because their inclusion would be anti-dilutive. See note 17 to the financial statements for additional information on stock options. NOTE 5: PROPERTY AND EQUIPMENT
AT DECEMBER 31, 1999 1998 - --------------------------------------------------------- Land and land improvements $ 308 $ 246 Buildings and leasehold improvements 449 366 Advertising structures 1,780 13 Equipment and fixtures 1,059 920 Construction in progress 105 77 - --------------------------------------------------------- Property and equipment, at cost 3,701 1,622 Accumulated depreciation (631) (473) - --------------------------------------------------------- Property and equipment, net $3,070 $1,149 - ---------------------------------------------------------
Included in advertising structures are costs allocated to leasehold interests totaling $813 million at December 31, 1999. For the years ended December 31, 1999, 1998, and 1997, depreciation expense totaled $148 million, $137 million, and $120 million, respectively. NOTE 6: INTANGIBLES, NET
AT DECEMBER 31, 1999 1998 - --------------------------------------------------------- Goodwill $18,161 $10,357 FCC licenses 4,725 4,308 Show contracts 478 -- Cable license agreements 402 441 Distribution networks 363 -- Tradenames 245 -- Other intangibles 543 357 - --------------------------------------------------------- Intangibles, net $24,917 $15,463 - ---------------------------------------------------------
Intangible assets presented in the preceding table are net of accumulated amortization of $1,533 million at December 31, 1999 and $1,016 million at December 31, 1998. The increase in intangible assets resulted from the 1999 acquisitions. See note 2 to the financial statements. In addition, goodwill in 1999 includes the effect of Infinity Broadcasting's stock repurchase program. See note 16 to the financial statements. NOTE 7: OTHER CURRENT AND NONCURRENT LIABILITIES Other current liabilities are as follows:
AT DECEMBER 31, 1999 1998 - --------------------------------------------------------- Accrued liabilities $ 442 $318 Income taxes payable 56 24 Accrued employee compensation 149 108 Deferred revenue--Internet (note 3) 125 -- Retained liabilities of discontinued businesses (note 19) 237 254 Other 133 116 - --------------------------------------------------------- Total Other current liabilities $1,142 $820 - ---------------------------------------------------------
CBS CORPORATION 41 42 Other noncurrent liabilities are as follows:
AT DECEMBER 31, 1999 1998 - --------------------------------------------------------- Net liabilities of Discontinued Operations (note 12) $ 637 $1,284 Retained liabilities of discontinued businesses (note 19) 996 766 Deferred revenue-Internet (note 3) 467 -- Other 490 491 - --------------------------------------------------------- Total Other noncurrent liabilities $2,590 $2,541 - ---------------------------------------------------------
NOTE 8: DEBT SHORT-TERM DEBT At December 31, 1999, we had $38 million of short-term borrowings outstanding that primarily related to short-term money market loans under our credit facility. The weighted average interest rate on these borrowings was 7.1%. No short-term borrowings were outstanding at December 31, 1998. LONG-TERM DEBT
AT DECEMBER 31, 1999 1998 - --------------------------------------------------------- Revolver $ 950 $ -- 7.15% senior notes due 2005 499 498 8 7/8% senior subordinated notes due 2007 482 -- 6 7/8% notes due 2003 275 275 8 5/8% debentures due 2012 271 272 7 7/8% debentures due 2023 251 267 9 3/8% senior subordinated notes due 2006 229 -- 8 3/8% notes due 2002 200 200 7 5/8% notes due 2002 143 143 9 3/4% senior notes due 2005 113 163 8 7/8% notes due 2014 102 112 9% senior subordinated notes due 2006 72 165 11 3/8% subordinated exchange debentures due 2009 53 115 7 1/8% notes due 2023 52 80 7 3/4% notes due 1999 -- 125 8 7/8% debentures due 2022 -- 91 7% convertible subordinated debentures due 2011 -- 79 Other 67 80 - --------------------------------------------------------- 3,759 2,665 Less: Current maturities (6) (159) - --------------------------------------------------------- Long-term debt $3,753 $2,506 - ---------------------------------------------------------
We are also obligated under various debt securities related to our Discontinued Operations. See note 12 to the financial statements. The scheduled maturities of long-term debt outstanding at December 31, 1999 are as follows:
YEAR OF MATURITY --------------------------------------------- 2000 2001 2002 2003 2004 THEREAFTER - -------------------------------------------------------------------- Long-term debt $6 $975 $350 $285 $8 $2,135 - --------------------------------------------------------------------
In connection with the acquisition of Outdoor Systems in December 1999, Infinity Broadcasting assumed Outdoor Systems' debt with a fair value of $1.9 billion. At the time of acquisition, approximately $1.1 billion was outstanding under Outdoor Systems' senior credit facility which was repaid in conjunction with the acquisition, primarily with borrowings under Infinity Broadcasting's revolving credit agreement. The remaining debt assumed consisted of 8 7/8% senior subordinated notes due 2007 and 9 3/8% senior subordinated notes due 2006. These notes were recorded at their respective fair values at the date of acquisition. The indentures related to these notes contain covenants applicable to Outdoor Systems including, among others, limitations on sales of assets, dividend payments, and future indebtedness. Under the most restrictive covenants of these indentures, approximately $440 million of Outdoor Systems' net assets at December 31, 1999 are restricted. This, in turn, limits the ability of Outdoor Systems to pay dividends. As a result of the change in control related to the acquisition of Outdoor Systems by Infinity Broadcasting, an offer to purchase the outstanding notes was made in January 2000. The offer expired in February 2000 and $6 million of the notes were redeemed. The 9 3/4% senior notes due 2005, the 9% senior subordinated notes due 2006, the 11 3/8% subordinated exchange debentures due 2009, and the 7% convertible subordinated debentures due 2011 are related to our June 1998 acquisition of American Radio. The indentures related to these notes and debentures contain covenants applicable to American Radio including, among others, limitations on sales of assets, dividend payments, and future indebtedness. Under the most restrictive covenants of these indentures, approximately $1.2 billion of American Radio's net assets at December 31, 1999 are restricted. This, in turn, limits the ability of American Radio to pay dividends. Our August 1996 five-year revolving credit facility, as amended and restated in December 1999, provides for $1.5 billion of credit available to CBS and our subsidiaries excluding Infinity Broadcasting and its subsidiaries, and an additional $1.5 billion of credit available for the exclusive use of Infinity Broadcasting and its subsidiaries. Infinity Broadcasting's borrowings under this facility are guaranteed by us. 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 (LIBOR), plus a margin based on our senior unsecured debt rating and leverage. The cost of the facility includes commitment fees, which are based on the unutilized portion of the facility and vary with our debt ratings. Revolver 42 CBS CORPORATION 43 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 December 31, 1999, we were in compliance with the financial covenants. During 1999, we repurchased, at market value, debt securities with a face value of approximately $371 million. During 1998, we repurchased, at market value, debt securities with a face value of approximately $298 million. As a result of these early extinguishments and the write-off of debt issue costs, we recognized extraordinary losses of $5 million in 1999, and $9 million in 1998, net of tax benefits of $3 million and $6 million, respectively. The 8 7/8% notes due 2014 are redeemable at 100% of principal plus accrued interest at the election of the holder on June 14, 2004. We may redeem the notes only if the total outstanding principal is $10 million or less. We also have the option to redeem certain debentures and notes at specified redemption prices plus accrued interest prior to their scheduled maturity dates, as set forth in the table below.
DEBT SECURITY REDEMPTION DATE - ------------------------------------------------------------ 7.15% senior notes due 2005 Any time 8 7/8% senior subordinated notes due 2007 After June 15, 2002 9 3/8% senior subordinated notes due 2006 After October 15, 2001 9 3/4% senior notes due 2005 After December 1, 2000 9% senior subordinated notes due 2006 After February 1, 2001 11 3/8% subordinated exchange debentures due 2009 After January 15, 2002 - ------------------------------------------------------------
NOTE 9: FINANCIAL INSTRUMENTS The estimated fair value of financial instruments is determined using the best available market information and appropriate valuation methodologies. However, considerable judgment is necessary in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that we could realize in a current market exchange or the value that ultimately will be realized upon maturity or disposition. Additionally, because of the variety of valuation techniques permitted under SFAS No. 107, "Disclosures about Fair Values of Financial Instruments," comparability of fair values among entities may not be meaningful. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts. SHORT-TERM INSTRUMENTS The fair values of cash and cash equivalents, short-term investments, short-term debt and current maturities of long-term debt approximated the carrying values at December 31, 1999 and 1998 because of the short-term nature of these instruments. INVESTMENTS IN MARKETABLE SECURITIES The fair value of investments in marketable securities is based on quoted market prices. Fair value approximated the carrying value at December 31, 1999 and 1998, as these investments are marked-to-market. NONCURRENT CUSTOMER AND OTHER RECEIVABLES The fair values of noncurrent customer and other receivables are estimated by discounting the expected future cash flows at interest rates commensurate with the creditworthiness of the customer or third party. The fair values approximated the carrying values at December 31, 1999 and 1998. LONG-TERM DEBT The fair value of long-term debt is estimated using quoted market prices or discounted cash flow methods based on our current borrowing rates for similar types of borrowing arrangements with comparable terms and maturities. The carrying values and fair values were $3,753 million and $3,785 million, respectively, at December 31, 1999 and $2,506 million and $2,674 million, respectively, at December 31, 1998. FOREIGN CURRENCY EXCHANGE CONTRACTS We are subject to risks associated with changes in foreign currency exchange rates that affect the value of transactions denominated in foreign currencies. Foreign exchange forward contracts are used to manage certain of these risks, primarily with respect to the Canadian dollar. These contracts generally mature in less than six months. At December 31, 1999 and 1998, the notional amount of forward contracts was $99 million and $5 million, respectively. The increase in 1999 relates to contracts to hedge exposures at Outdoor Systems which was acquired in December 1999. Foreign exchange forward contracts are carried on the balance sheet at fair value based on quoted market prices to terminate the contracts. At December 31, 1999 and 1998, the fair value of these contracts was not material. CBS CORPORATION 43 44 INTEREST RATE SWAP CONTRACTS At December 31, 1999, we had variable-to-fixed interest rate swap contracts outstanding with a notional value of $775 million. The swap contracts expire in less than three months. The fair value of these swaps at December 31, 1999 was not material. At December 31, 1998, no interest rate swap contracts were outstanding. CREDIT CONSIDERATIONS Our credit exposure under foreign currency exchange contracts and interest rate swap contracts is limited to the cost of replacing a contract in the event of non-performance by our counterparties. To minimize this risk, we select high credit quality counterparties. We do not anticipate non-performance by our counterparties. LETTERS OF CREDIT Outstanding letters of credit totaled $176 million in 1999 and $148 million in 1998. Management does not believe it is practicable to estimate the fair value of these financial instruments and does not expect any material losses from their resolution since performance is not likely to be required. NOTE 10: INCOME TAXES Income tax expense (benefit) included in the consolidated financial statements is as follows:
YEAR ENDED DECEMBER 31, 1999 1998 1997 - -------------------------------------------------------- Continuing Operations $461 $161 $ 73 Discontinued Operations 294 -- 667 Extraordinary item (3) (6) -- - -------------------------------------------------------- Income tax expense $752 $155 $740 - --------------------------------------------------------
The tax provision for Discontinued Operations includes tax expense of $294 million in 1999 and $779 million in 1997 related to the gain on disposal of Discontinued Operations. Income Tax Expense from Continuing Operations is as follows:
YEAR ENDED DECEMBER 31, 1999 1998 1997 - -------------------------------------------------------- Current: Federal $159 $119 $37 State 69 28 19 Foreign 7 9 1 - -------------------------------------------------------- Total current income tax expense 235 156 57 - -------------------------------------------------------- Deferred: Federal 222 5 14 State 4 -- 2 - -------------------------------------------------------- Total deferred income tax expense 226 5 16 - -------------------------------------------------------- Income tax expense $461 $161 $73 - --------------------------------------------------------
Consolidated Income Tax Expense (Benefit):
YEAR ENDED DECEMBER 31, 1999 1998 1997 - -------------------------------------------------------- Current: Federal $168 $127 $ 79 State 70 28 73 Foreign 7 9 46 - -------------------------------------------------------- Total current income tax expense 245 164 198 - -------------------------------------------------------- Deferred: Federal 486 (9) 553 State 21 -- (41) Foreign -- -- 30 - -------------------------------------------------------- Total deferred income tax expense (benefit) 507 (9) 542 - -------------------------------------------------------- Income tax expense $752 $155 $740 - --------------------------------------------------------
The tax benefit associated with stock based compensation plans reduced taxes currently payable by $131 million for 1999, $121 million for 1998, and $29 million for 1997. Deferred income taxes result from temporary differences in the financial bases and tax bases of assets and liabilities. The types of differences that give rise to significant portions of deferred income tax liabilities or assets are shown in the following table:
AT DECEMBER 31, 1999 1998 - --------------------------------------------------------- Deferred tax assets: Provision for expenses and losses $ 1,004 $ 1,514 Postretirement and postemployment benefits 383 421 Minimum pension liability adjustment 239 415 Tax credit carryforwards 329 353 Long-term contracts in process -- 9 Other 83 362 - --------------------------------------------------------- Total deferred tax assets 2,038 3,074 Valuation allowance (53) (84) - --------------------------------------------------------- Net deferred tax asset 1,985 2,990 - --------------------------------------------------------- Deferred tax liabilities: Property, equipment, and intangibles assets (2,484) (1,768) Leasing activities (436) (526) Other (792) (939) - --------------------------------------------------------- Total deferred tax liabilities (3,712) (3,233) - --------------------------------------------------------- Deferred income taxes, net liability $(1,727) $ (243) - ---------------------------------------------------------
At December 31, 1999 and 1998, included in the balance sheet of Continuing Operations and the net liabilities of Discontinued Operations are the following deferred tax assets and liabilities:
AT DECEMBER 31, 1999 1998 - --------------------------------------------------------- Continuing Operations $(1,517) $(657) Discontinued Operations (210) 414 - --------------------------------------------------------- Deferred income taxes, net liability $(1,727) $(243) - ---------------------------------------------------------
The valuation allowance for deferred tax assets primarily reflects foreign tax credits which may not be utilized as a result of the reduction in foreign source income caused by the divestiture of foreign subsidiaries 44 CBS CORPORATION 45 principally related to Discontinued Operations. We believe we will have sufficient future taxable income to make it more likely than not that the net deferred tax asset will be realized. At December 31, 1999, CBS and Infinity Broadcasting had alternative minimum tax credit carryfowards of $192 million and $14 million, respectively, both having no expiration dates. In addition, CBS had $32 million of foreign tax credit carryfowards that expire through 2003. Infinity Broadcasting also has recognized a deferred tax asset for net operating loss carryforwards of $91 million primarily related to Mexican operating loss benefits that expire in 2008. The Infinity Broadcasting net operating loss carryforwards arose from the operations of Outdoor Systems prior to the acquisition by Infinity Broadcasting. We believe that our taxable income will more likely than not be sufficient to utilize the net operating loss carryforwards prior to their expiration. Income Tax Expense (Benefit) from Continuing Operations is as follows:
YEAR ENDED DECEMBER 31, 1999 1998 1997 - -------------------------------------------------------- Federal income tax expense (benefit) at statutory rate $267 $ 54 $(21) Increase (decrease) in tax resulting from: Amortization of goodwill 101 88 78 State income tax expense, net of federal effect 47 18 13 Lower tax rate on income of foreign sales corporation (4) (5) (5) Nondeductible expenses 10 4 3 Other differences, net 40 2 5 - -------------------------------------------------------- Income tax expense from Continuing Operations $461 $161 $ 73 - --------------------------------------------------------
The foreign portion of income or loss from Continuing Operations before income taxes and minority interest in income of consolidated subsidiaries consisted of income of $35 million in 1999, $26 million in 1998 and $13 million in 1997. Such income consists of profits and losses generated from foreign operations that can be subject to both U.S. and foreign income taxes. The federal income tax returns are settled through the year ended December 31, 1989. We have reached an agreement with the Internal Revenue Service regarding certain issues for the years 1990 through 1992 and a tentative agreement for 1993. We believe adequate provisions for taxes have been made through December 31, 1999. NOTE 11: PENSIONS, POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS In 1998, we adopted SFAS 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." SFAS 132 standardized the disclosures of pensions and other postretirement benefits into a combined format but did not change the accounting for these benefits. We have a number of defined benefit pension and other postretirement benefit plans. PENSION AND POSTRETIREMENT BENEFITS The change in benefit obligation and plan assets and the amounts recognized in the Consolidated Balance Sheet are presented in the following tables:
POSTRETIREMENT PENSION BENEFITS BENEFITS ---------------- ----------------- AT DECEMBER 31, 1999 1998 1999 1998 - ---------------------------------------------------------------- CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year $5,430 $ 5,276 $ 1,315 $ 1,425 Service cost 34 60 4 10 Interest cost 313 359 79 98 Plan participants' contributions 4 13 2 3 Actuarial (gain) loss (476) 463 (97) 58 Foreign currency exchange rate change 8 (13) -- (1) Benefits paid (542) (644) (108) (114) Plan amendments (75) -- -- (112) Divestitures (454) (136) (103) (52) Curtailments (1) -- -- -- Special termination benefits 32 52 -- -- - ---------------------------------------------------------------- Benefit obligation at end of year $4,273 $ 5,430 $ 1,092 $ 1,315 - ---------------------------------------------------------------- CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year $4,253 $ 4,014 $ 61 $ 69 Actual return on plan assets 452 705 1 6 Employer contributions 276 296 90 97 Plan participants' contributions 4 13 2 3 Benefits paid (542) (644) (108) (114) Foreign currency exchange rate change 8 (13) -- -- Divestitures (291) (118) -- -- - ---------------------------------------------------------------- Fair value of plan assets at end of year $4,160 $ 4,253 $ 46 $ 61 - ---------------------------------------------------------------- FUNDED STATUS: Net amount recognized $ 310 $ 128 $ (999) $(1,144) Unrecognized actuarial loss (546) (1,366) (126) (247) Unrecognized prior service benefit 126 105 79 137 Unrecognized net transition obligation (3) (44) -- -- - ---------------------------------------------------------------- Funded status $ (113) $(1,177) $(1,046) $(1,254) - ----------------------------------------------------------------
CBS CORPORATION 45 46 Amounts Recognized in the Consolidated Balance Sheet:
POSTRETIREMENT PENSION BENEFITS BENEFITS ----------------- --------------- AT DECEMBER 31, 1999 1998 1999 1998 - ----------------------------------------------------------- Prepaid benefit cost $ -- $ 5 $ -- $ -- Accrued benefit liability (407) (1,105) (999) (1,144) Intangible asset - Other noncurrent assets 1 5 -- -- Accumulated other comprehensive loss 477 808 -- -- Deferred tax effects of accumulated other comprehensive loss 239 415 -- -- - ----------------------------------------------------------- Net amount recognized $ 310 $ 128 $(999) $(1,144) - -----------------------------------------------------------
Of the amounts above, the following are included in net liabilities of discontinued operations in the Consolidated Balance Sheet. All other amounts are included in the balance sheet of Continuing Operations. Amounts Recognized in Discontinued Operations:
POSTRETIREMENT PENSION BENEFITS BENEFITS ----------------- --------------- AT DECEMBER 31, 1999 1998 1999 1998 - ----------------------------------------------------------- Prepaid benefit cost $ -- $ 5 $ -- $ -- Accrued benefit liability -- (160) -- (98) - ----------------------------------------------------------- Total $ -- $ (155) $ -- $ (98) - -----------------------------------------------------------
Due to the disposition of certain industrial businesses in 1999 and 1998, we recognized losses (gains) from curtailments and settlements as follows:
POSTRETIREMENT PENSION BENEFITS BENEFITS ----------------- --------------- AT DECEMBER 31, 1999 1998 1999 1998 - ----------------------------------------------------------- Recognition of: Actuarial loss $ 136 $ 26 $ 20 $ 2 Prior service benefit (41) (16) (48) (8) Net obligation 36 22 -- -- - ----------------------------------------------------------- Net amount recognized $ 131 $ 32 $ (28) $ (6) - -----------------------------------------------------------
Selected information for plans with accumulated benefit obligation in excess of plan assets:
PENSION BENEFITS ----------------- AT DECEMBER 31, 1999 1998 - --------------------------------------------------------- Projected benefit obligation $(3,483) $(4,495) Accumulated benefit obligation (3,455) (4,316) Fair value of plan assets 3,046 3,234 - ---------------------------------------------------------
Included in pension plan assets at December 31, 1999 are 5,614,600 shares of CBS's common stock with a market value of $359 million. The weighted average assumptions used to measure the present value of benefit obligations and net periodic benefit cost are shown in the following table:
POSTRETIREMENT PENSION BENEFITS BENEFITS ------------------ ------------------ AT DECEMBER 31, 1999 1998 1997 1999 1998 1997 - ---------------------------------------------------------------- Discount rate 8.0% 6.75% 7.25% 8.0% 6.75% 7.25% Expected return on plan assets 8.2 9.5 9.5 7.9 7.0 7.0 Compensation increase rate 5.5 4.0 4.0 5.5 4.0 4.0 - ----------------------------------------------------------------
For measurement purposes, an 8% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2000. The rate was assumed to decrease gradually to 6% for 2004 and remain at that level thereafter. Components of Net Periodic Benefit Cost:
POSTRETIREMENT PENSION BENEFITS BENEFITS --------------------- ------------------ YEAR ENDED DECEMBER 31, 1999 1998 1997 1999 1998 1997 - -------------------------------------------------------------------- Service cost $ 34 $ 60 $ 62 $ 4 $10 $ 11 Interest cost 313 359 384 79 98 104 Expected return on plan assets (332) (342) (346) (4) (5) (5) Amortization of unrecognized net transition obligation 5 22 27 -- -- -- Amortization of unrecognized prior service benefit (13) (14) (10) (10) (3) (3) Recognized actuarial loss 88 93 83 7 5 4 - -------------------------------------------------------------------- Net periodic benefit cost $ 95 $ 178 $ 200 $76 $105 $111 - -------------------------------------------------------------------- DISTRIBUTION OF NET PERIODIC BENEFIT COST: Continuing Operations $ 83 $ 106 $ 117 $72 $80 $ 69 Discontinued Operations 12 72 83 4 25 42 - -------------------------------------------------------------------- Net periodic benefit cost $ 95 $ 178 $ 200 $76 $105 $111 - --------------------------------------------------------------------
A one percentage point increase or decrease in the assumed health care cost trend rates would have an approximate effect of a $2 million increase or decrease on the total of service and interest cost components and a $26 million increase or decrease on the postretirement benefit obligation. We also participate in various multi-employer, union-administered defined benefit plans that cover certain broadcast employees. Contributions for pension and other postretirement benefits to these multi-employer plans were $16 million in 1999, $14 million in 1998 and $13 million in 1997. POSTEMPLOYMENT BENEFITS We provide certain postemployment benefits to former or inactive employees and their dependents during the time period following employment but before retirement. Our liability for postemployment benefits totaled 46 CBS CORPORATION 47 $34 million in 1999 and $55 million in 1998. The portion of this liability included in the net assets of Discontinued Operations was $26 million in 1998. NOTE 12: DISCONTINUED OPERATIONS In recent years, we adopted various disposal plans that, in the aggregate, provide for the disposal of all of our industrial and financial services businesses. The assets and liabilities and the results of operations for these businesses are classified as Discontinued Operations for all periods presented. Certain environmental, litigation and other liabilities associated with the industrial businesses were not assumed by other parties in the divestiture transactions. These liabilities were retained by CBS and reported in Retained liabilities of discontinued businesses in the Consolidated Balance Sheet. See notes 7 and 19 to the financial statements. During 1999, we closed on the previously announced sales of our Energy Systems, Government Operations, Machinery Apparatus Operations and Plant Apparatus Division businesses for approximately $250 million in cash plus the assumption by the buyers of liabilities, commitments and obligations totaling approximately $970 million, all in accordance with the terms of their respective agreements. These disposals, as well as purchase price resolutions related to businesses previously disposed, resulted in a gain of $628 million, net of income tax expense of $294 million. During 1998 and 1997, we sold several businesses as well as certain securities and other assets in connection with our disposal plans. The most significant of these disposals were the 1998 sale of the Power Generation business for $1.2 billion in cash and the 1997 sale of Thermo King for $2.6 billion in cash. In 1997, we recognized a gain of $871 million, net of income tax expense of $779 million, primarily related to the sale of Thermo King. NET LIABILITIES OF DISCONTINUED OPERATIONS
AT DECEMBER 31, 1999 1998 - --------------------------------------------------------- Total assets (including cash and cash equivalents of $55 and $27) $ 613 $ 1,919 Less: Total liabilities (1,250) (3,203) - --------------------------------------------------------- Net liabilities of Discontinued Operations $ (637) $(1,284) - ---------------------------------------------------------
Total assets of Discontinued Operations at December 31, 1999 consist primarily of portfolio investments that remain from the financial services business. These investments totaled $555 million and $642 million at December 31, 1999 and 1998. The portfolio investments consist of direct financing and leveraged leases and are generally expected to liquidate in accordance with contractual terms through 2015. At December 31, 1999 and 1998, 84% and 81% of the portfolio investments related to aircrafts while the remainder primarily related to cogeneration facilities. Approximately $281 million of the portfolio investment balance in 1999 relates to the estimated residual value of leased assets. Total liabilities of Discontinued Operations consist primarily of the estimated loss on disposal of $623 million in 1999 and $1,309 million in 1998. At December 31, 1999, the estimated loss on disposal primarily includes the portfolio investments' estimated results of operations through the expected date of liquidation, unresolved purchase price adjustments, costs to dispose of surplus property held for sale and certain contingencies related to the divestiture of the industrial businesses. Satisfaction of these liabilities is expected to occur over the next several years. During 1999, we resolved several purchase price adjustments resulting in a reduction to the estimated loss on disposal. We believe the liability for estimated loss on disposal at December 31, 1999 is adequate to cover liquidation of the remaining assets and liabilities of Discontinued Operations, resolution of unresolved purchase price adjustments and other related costs and contingencies. Liabilities of Discontinued Operations also include portfolio related debt of $415 million and $428 million at December 31, 1999 and 1998, as follows:
AT DECEMBER 31, 1999 1998 - -------------------------------------------------------- 8 7/8% notes due 2001 $230 $229 8 3/8% notes due 2002 122 122 Other 63 77 - -------------------------------------------------------- 415 428 Less: Current maturities (10) (46) - -------------------------------------------------------- Long-term debt $405 $382 - --------------------------------------------------------
Contractual maturities for leasing rental payments receivable at December 31, 1999 are as follows:
YEAR OF MATURITY --------------------------------------------- 2000 2001 2002 2003 2004 THEREAFTER - -------------------------------------------------------------------- Contractual Maturities $32 $41 $33 $35 $26 $200 - --------------------------------------------------------------------
SETTLEMENT AND ENVIRONMENTAL LIABILITIES Prior to the disposition of our Energy Systems business in 1999, we had been defending various lawsuits claiming damages in connection with certain steam generators sold by the Energy Systems business. Settlement agreements had been entered into resolving a number of the litigation claims, which generally required that we provide certain products and services at prices discounted at varying rates. In addition, we CBS CORPORATION 47 48 were 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. RESULTS OF OPERATIONS Summarized in the following table are the operating results of Discontinued Operations, primarily related to industrial businesses, after the measurement date charged directly to the liability for estimated loss on disposal.
YEAR ENDED DECEMBER 31, 1999 1998 1997 - ---------------------------------------------------- Sales of products or services $137 $2,256 $1,319 Pre-tax loss 51 181 101 - ----------------------------------------------------
The loss from Discontinued Operations reflected in the Consolidated Statement of Income includes the operating results of the discontinued businesses prior to adoption of the related disposal plans. For the year ended December 31, 1997, this loss totaled $191 million, net of tax benefits of $112 million. Sales of Discontinued Operations in 1997 prior to adoption of the related disposal plans totaled $2,950 million. CASH FLOWS 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. Cash flows associated with the financial services business, including interest cost on debt of Discontinued Operations and the repayment of that debt, will be satisfied through borrowings under the CBS revolver and cash from continuing operations, which the cash inflows from contractual liquidation of the leasing portfolio are expected to be sufficient to repay. Operating cash flows of Discontinued Operations, which include cash flows from the operations of the businesses prior to the date of disposal as well as payments for disposition-related costs, are presented separately from Continuing Operations in the Consolidated Statement of Cash Flows. NOTE 13: RESTRUCTURING In recent years, we have restructured our corporate headquarters and certain businesses in an effort to reduce our cost structure and remain competitive. 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 the restructuring activities and provide no future benefit. Generally, separated employees receive benefits under certain plans, including layoff income benefits, retraining, and/or outplacement assistance. The amount included for these benefits in the restructuring charge represents the incremental cost of such benefits over those amounts previously accrued under SFAS No. 112, "Employers' Accounting for Postemployment Benefits." Restructuring costs totaling $2 million in 1999, $62 million in 1998 and $15 million in 1997 are included in our results of operations. Except for lease termination and other facility closure costs of $10 million at our television segment in 1998, these costs were essentially for the elimination of positions and separation of employees. Expenditures for employee separation costs generally are paid over a period of up to two years following the separation although payments can extend longer in certain cases. Certain expenditures for lease commitments will extend over the next several years. The remaining liability of $15 million at December 31, 1999 is primarily for lease termination costs and to a lesser extent employee separation costs. The 1998 plan primarily included the separation of 441 employees and the termination of leases at our Television and Cable segments. Implementation of the plan began in September 1998 and was to be completed in 1999. Of the 441 employees, 283 employees have been terminated through December 31, 1999 while 80 employees will no longer be terminated. The remaining 78 employees are expected to be terminated by year-end 2000. In the second quarter of 1999, we reversed a total of $26 million of the $62 million restructuring reserve primarily as a result of television programming changes and lower than expected severance costs. The 1997 plan primarily included the separation of 118 employees at the former Pittsburgh headquarters related to the transfer of our overhead functions to New York. Implementation of this plan began in January 1998 and was completed by the end of 1999. Future expenditures for the 1997 plan consist prima- 48 CBS CORPORATION 49 rily of remaining lease commitments and separation costs for actions already taken. The following is a reconciliation of the restructuring liability: - -------------------------------------------------------- Balance at January 1, 1997 $117 Provision for restructuring 15 Cash expenditures (83) Non-cash charges (8) - -------------------------------------------------------- Balance at December 31, 1997 41 Provision for restructuring 62 Cash expenditures (37) - -------------------------------------------------------- Balance at December 31, 1998 66 Provision for restructuring 2 Cash expenditures (27) Change in estimates (26) - -------------------------------------------------------- Balance at December 31, 1999 $ 15 - --------------------------------------------------------
Subsequent to December 31, 1999, we approved a proposed plan to integrate the newly acquired operations of King World with the existing CBS syndication business to achieve synergies and eliminate redundant functions. The plan is expected to result in a restructuring accrual in the range of $10 million to $14 million in 2000 and reflects primarily severance-related and relocation costs of the acquired business. Restructuring costs related to the historical operating activities of King World will increase goodwill and those costs incurred relating to the existing CBS syndication business will be charged to operations. The restructuring accrual includes severance-related and relocation costs of the acquired business for approximately 70 employees in redundant functions and are expected to be paid by year-end 2000. Terminations of employees are expected to be completed by year-end 2000. NOTE 14: LEASES AND OTHER COMMITMENTS LEASES We lease certain office space and equipment through various operating and capital lease agreements. Rental expense for Continuing Operations was $131 million in 1999, $85 million in 1998 and $64 million in 1997. These amounts include immaterial amounts for contingent rentals and sublease income. Additionally, our outdoor advertising business has franchise rights entitling it to display advertising on such media as buses, taxis, trains, bus shelters, terminals, billboards, and phone kiosks. Under most of these franchise agreements, the franchiser is entitled to receive the greater of a percentage of the relevant advertising revenues, net of advertising agency fees, or a specified guaranteed minimum annual payment. Franchise expense totaled $271 million in 1999, $222 million in 1998 and $192 million in 1997. Future minimum rental and franchise payments are as follows:
GUARANTEED LEASES MINIMUM ------------------- FRANCHISE AT DECEMBER 31, CAPITAL OPERATING PAYMENTS - ----------------------------------------------------------- 2000 $ 6 $240 $202 2001 6 128 190 2002 6 104 144 2003 6 88 107 2004 8 57 88 Thereafter 14 150 105 - ----------------------------------------------------------- Minimum rental and franchise payments $46 $767 $836 - ----------------------------------------------------------- Less: Interest and executory costs (15) - --------------------------------- Present value of minimum rental payments $31 - ---------------------------------
OTHER COMMITMENTS We routinely enter into commitments to purchase the rights to broadcast programs, including feature films and sports events. These contracts permit the broadcast of such properties for various periods. At December 31, 1999, we were committed to make payments under such broadcasting contracts, along with commitments for talent contracts, of $13.5 billion. Aggregate payments related to these commitments during the next five years and thereafter are as follows:
AGGREGATE AT DECEMBER 31, PAYMENTS - --------------------------------------------------------- 2000 $ 1,545 2001 1,470 2002 1,332 2003 1,399 2004 1,340 Thereafter 6,440 - --------------------------------------------------------- Total other commitments $13,526 - ---------------------------------------------------------
NOTE 15: SHAREHOLDERS' EQUITY Our Board of Directors authorized a $3 billion multi-year stock repurchase program in 1998. During 1999, we purchased 11.5 million shares for $489 million, bringing our total share repurchases under this program to 39.8 million shares for $1.3 billion. Of the common stock held in treasury at December 31, 1999 and 1998, 14 million and 16 million shares, respectively, were held by our rabbi trusts for the payment of benefits under executive benefit plans. In October 1999, in conjunction with our acquisition of KTVT-TV in Dallas Fort-Worth, we issued 10,142 CBS CORPORATION 49 50 shares of CBS Series B participating preferred stock (the preferred stock) with a par value $1.00 per share. Total consideration for the issuance of the preferred stock was $485 million. Holders of the preferred stock are entitled to receive, when and if declared by the Board of Directors, a cash dividend equal to 1,000 times the aggregate per share amount of each cash dividend declared or paid on the CBS common stock. Each share of the preferred stock is entitled to 1,000 votes per share and is convertible at the option of the holder into 1,000 shares of our common stock. Approximately 10,142,000 common shares have been reserved for conversion. The preferred stock ranks senior to the common shares outstanding. The liquidation preference of the preferred stock is equal to the greater of $1.00 per share plus accrued and unpaid dividends, or an amount equal to 1,000 times the per share amount to be distributed to common shareholders. On May 30, 1997, we redeemed all outstanding shares of CBS Series C Conversion Preferred Stock (Series C Preferred) and, in connection with the redemption, issued 32 million shares of common stock. All accrued and unpaid dividends on the redeemed shares of CBS Series C Preferred were paid on May 30, 1997. COMMON SHARES (in thousands)
ISSUED IN TREASURY OUTSTANDING - ------------------------------------------------------------ Balance at January 1, 1997 608,972 22,627 586,345 Shares issued for dividend reinvestment plan 384 (29) 413 Shares issued for employee plans 17,245 (925) 18,170 Shares issued for acquisitions 59,058 -- 59,058 Shares issued for conversion of Series C Preferred 31,859 -- 31,859 - ------------------------------------------------------------ Balance at December 31, 1997 717,518 21,673 695,845 Shares used for dividend reinvestment plan 132 -- 132 Shares issued for employee plans 15,881 (6,811) 22,692 Shares repurchased -- 28,342 (28,342) - ------------------------------------------------------------ Balance at December 31, 1998 733,531 43,204 690,327 Shares issued for employee plans 13,845 (738) 14,583 Shares issued for acquisitions 57,771 -- 57,771 Shares repurchased -- 11,467 (11,467) - ------------------------------------------------------------ Balance at December 31, 1999 805,147 53,933 751,214 - ------------------------------------------------------------
On December 29, 1995, the Board of Directors adopted a shareholder rights plan providing for the distribution of one right for each share of common stock outstanding on January 9, 1996 or issued thereafter until the occurrence of certain events. The rights become exercisable only in the event, with certain exceptions, that an acquiring party accumulates 15% or more of our voting stock or a party announces an offer to acquire 30% or more of the voting stock. The rights have an exercise price of $64 per share and expire on January 9, 2006. The Board of Directors has adopted a resolution affirming its intention to redeem the rights in January 2001 (if still outstanding). Upon the occurrence of certain events, holders of the rights will be entitled to purchase either CBS preferred shares or shares in an acquiring entity at half of their market value. We are entitled to redeem the rights at a value of $.01 per right at any time until the tenth day following the acquisition of a 15% position in our voting stock. The rights will expire at the time of consummation of the Viacom/CBS merger. OTHER COMPREHENSIVE INCOME In 1998 we adopted SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income and its components in the financial statements but did not change the recognition or measurement of assets and liabilities. Comprehensive income is used to describe all changes in equity from transactions and other events and circumstances from nonowner sources. Comprehensive income includes net income and other comprehensive income or loss items. The following table presents the components of Accumulated other comprehensive loss, net of related taxes presented in our Consolidated Balance Sheet:
AT DECEMBER 31, 1999 1998 - -------------------------------------------------------- Minimum pension liability adjustment $(477) $(808) Unrealized gains on marketable securities 73 1 Foreign currency translation adjustment (13) -- - -------------------------------------------------------- Total accumulated other comprehensive loss $(417) $(807) - --------------------------------------------------------
NOTE 16: SUBSIDIARY STOCK TRANSACTIONS In December 1998, Infinity Broadcasting, our then wholly owned subsidiary, issued 155 million shares of its Class A common stock in an initial public offering (IPO). We own all of the 700 million outstanding shares of Infinity Broadcasting's Class B common stock. Holders of Infinity Broadcasting Class A common stock generally have identical rights to the 50 CBS CORPORATION 51 holders of Infinity Broadcasting Class B common stock except that the holders of the Class A common stock are entitled to one vote per share, while holders of the Class B common stock are entitled to five votes per share on matters submitted to a vote of the stockholders. In addition, the shares of Class B common stock maintain certain conversion rights and transfer restrictions. As a result of the IPO, at December 31, 1998, we beneficially owned 82% of Infinity Broadcasting's equity, which represented 96% of the voting power. Proceeds from the offering, based on the offering price of $20.50 per share, totaled $3.2 billion ($3.0 billion, net of offering expenses). A gain of $1.4 billion was recognized in shareholders' equity as a direct increase in capital in excess of par value. In June 1999, Infinity Broadcasting's Board of Directors authorized a $500 million stock repurchase program. By December 31, 1999 Infinity Broadcasting had bought back approximately 17.6 million Class A common shares at a total cost of $485 million. This stock repurchase program resulted in an increase in our ownership interest to approximately 84%, excluding the dilutive effect of stock options, and resulted in incremental goodwill of approximately $300 million. In January 2000, Infinity Broadcasting's Board of Directors authorized an additional $500 million stock repurchase plan. The increase in our ownership interest as a result of stock repurchases under the above described plan was more than offset by Infinity Broadcasting's $8.7 billion, December 7, 1999, acquisition of Outdoor Systems through the issuance of approximately 233 million shares of Infinity Broadcasting Class A common stock. This issuance reduced our ownership interest in Infinity Broadcasting from approximately 84% to just over 65% and reduced our voting interest to approximately 90%, both excluding the dilutive effect of stock options. The impact of this issuance of subsidiary stock resulted in the recognition of approximately a $2.7 billion gain through shareholders' equity as a direct increase to capital in excess of par value. The reduction in our ownership interest also results in an increase in minority interest participation at the time of the transaction and in Infinity Broadcasting's future results of operations from the date of the transaction. Additionally, during 1999, stock transactions of our equity method investees resulted in our recording a net gain of approximately $135 million through shareholders' equity as a direct increase to capital in excess of par value. The offset resulted in a net increase in our related investment balances for the respective investees. Under an intercompany agreement, we provide to Infinity Broadcasting a number of services, including executive, human resources, legal, finance, information management, internal audit, tax, and treasury services. The costs of these services are allocated according to established methodologies determined on an annual basis. In addition, a tax sharing agreement generally provides that, for any taxable period in which Infinity Broadcasting is included in our consolidated tax return, the amount of income taxes to be paid by them were determined as if they had filed separate income tax returns. At the time of the Outdoor Systems acquisition, because our ownership interest in Infinity Broadcasting fell below 80% they no longer qualified for inclusion in our federal income tax filing and some state tax combine filings, and therefore in those instances they will be filing a separate tax return. NOTE 17: STOCK-BASED COMPENSATION PLANS At December 31, 1999, we had stock-based compensation plans at CBS and Infinity Broadcasting that provide for the granting of stock options, restricted stock, and other performance awards to employees or directors. We account for our stock-based compensation plans under APB 25. For stock options granted, the option price is not less than the market value of shares on the grant date; therefore, no compensation cost has been recognized for stock options granted. Had compensation cost for these plans been determined under the provisions of SFAS 123, our net income and earnings per share would have been reduced to the following pro forma amounts:
YEAR ENDED DECEMBER 31, 1999 1998 1997 - --------------------------------------------------------- Report results: Net income (loss) $ 780 $ (21) $549 Net income (loss) per common share: Basic 1.10 (.03) .84 Diluted 1.08 (.03) .84 - --------------------------------------------------------- Pro Forma results: Net income (loss) $ 728 $ (55) $487 Net income (loss) per common share: Basic 1.04 (.08) .74 Diluted 1.01 (.08) .74 - ---------------------------------------------------------
These pro forma effects may not be representative of future amounts since the estimated fair value of stock options on the date of grant is amortized to expense over the vesting period, and additional options may be granted in future years. CBS CORPORATION 51 52 CBS STOCK OPTION PLANS At December 31, 1999, shares authorized for awards under the CBS plans totaled 66.9 million of which 10.3 million shares remained available for future awards. Generally, stock option awards vest over a three-year period from the date of grant and expire 10 years after the date of grant. In connection with the acquisitions of King World, TNN and CMT, and Infinity Media Corporation, we assumed options outstanding under the King World, Gaylord and Infinity Media Corporation plans as of the date of the acquisition. The then-outstanding options were converted to options to acquire CBS's common stock and are included in the following table as awards assumed. Exercise prices for awards assumed in the 1999 King World acquisition range from $12.81 to $44.30. Exercise prices for awards assumed in the 1997 TNN and CMT acquisition, range from $9.45 to $25.41. Exercise prices for awards assumed in the 1996 Infinity Media Corporation acquisition, range from $0.0002 to $19.66. Generally, these options assumed have a ten-year term and become exercisable over a vesting period of five years. In addition to the stock options shown in the following table, we granted 8,903 shares, 9,493 shares and 9,449 shares of restricted stock to employees and directors in 1999, 1998 and 1997, respectively. These shares had a weighted-average fair value at date of grant of $34.64, $29.96 and $18.52, respectively, with a weighted-average vesting period of one year. CBS STOCK OPTION INFORMATION (options in thousands)
1999 1998 1997 ------------------- ------------------- ------------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE - -------------------------------------------------------------------------------------------------------------- Balance at January 1, 54,617 $18.14 60,409 $14.05 57,816 $13.15 Options granted 8,845 38.70 9,494 29.86 12,917 19.30 Awards assumed 12,494 23.97 -- -- 124 17.06 Options exercised (13,756) 19.00 (14,483) 7.90 (8,106) 14.62 Options forfeited (766) 30.82 (799) 26.45 (1,945) 10.69 Options expired (13) 25.72 (4) 26.19 (397) 30.70 - -------------------------------------------------------------------------------------------------------------- Balance at December 31, 61,421 21.93 54,617 18.14 60,409 14.05 - -------------------------------------------------------------------------------------------------------------- Exercisable at December 31, 44,229 $17.80 44,990 $15.90 45,267 $18.87 - --------------------------------------------------------------------------------------------------------------
1999 1998 1997 --------------------- --------------------- --------------------- WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE FAIR EXERCISE FAIR EXERCISE FAIR EXERCISE VALUE PRICE VALUE PRICE VALUE PRICE - -------------------------------------------------------------------------------------------------------------- Options granted: Exercise price equaled grant date stock price $16.82 $38.70 $12.85 $29.86 $7.92 $19.30 Exercise price exceeded grant date stock price -- -- -- -- 6.51 23.46 - --------------------------------------------------------------------------------------------------------------
52 CBS CORPORATION 53 CBS STOCK OPTIONS OUTSTANDING AT DECEMBER 31, 1999 (options in thousands)
WEIGHTED- WEIGHTED- AVERAGE AVERAGE WEIGHTED- REMAINING EXERCISE RANGE OF OUTSTANDING AT AVERAGE CONTRACTUAL EXERCISABLE AT PRICE OF EXERCISE PRICES DECEMBER 31, 1999 EXERCISE PRICE LIFE IN YEARS DECEMBER 31, 1999 EXERCISABLE OPTIONS - -------------------------------------------------------------------------------------------------------------------- $.0002 -- 4.99 3,325 $ 1.92 2.36 3,325 $ 1.92 5 -- 9.99 4,512 7.06 4.55 4,512 7.06 10 -- 14.99 4,804 13.42 5.28 4,182 13.37 15 -- 19.99 17,296 17.83 5.77 16,980 17.82 20 -- 29.99 20,793 25.55 6.46 13,398 24.55 30 -- 39.99 6,881 33.95 8.39 1,829 33.71 40 -- 60.47 3,810 44.84 9.52 3 43.09 - -------------------------------------------------------------------------------------------------------------------- Total 61,421 21.93 44,229 17.80 - --------------------------------------------------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant using the Black Scholes Option pricing model with the following weighted average assumptions:
1999 1998 1997 - ------------------------------------------------------------------------------------ Risk free interest rate 5.1% 5.5% 6.4% Expected life (years) 6.5 6.6 7.3 Expected volatility 32.2% 31.0% 30.0% Expected dividend yield -- -- 1.0% - ------------------------------------------------------------------------------------
Each CBS option outstanding at the time of the merger will convert into 1.085 options to purchase shares of Viacom non-voting Class B common stock at an exercise price adjusted for the 1.085 conversion factor. The majority of these options contain a provision that accelerates their vesting upon a change in control. The consummation of the merger with Viacom would be considered to be a change in control under a majority of these option agreements. Therefore, approximately 11 million of unvested options outstanding at the date we entered into the merger agreement will become fully vested upon the closing of the transaction. Additionally, approximately 36 million of the options outstanding at the date we entered into the merger agreement contain a limited stock appreciation right feature that becomes exercisable for a thirty-day period upon a change in control. This feature entitles the holder to receive the highest reported closing sales price of a share of CBS common stock on the New York Stock Exchange during a period preceding the date of exercise. INFINITY STOCK OPTION PLANS At December 31, 1999, Infinity Broadcasting had several stock-based compensation plans that provide for the granting of stock-based awards, including non- statutory stock options, to non-employee directors of Infinity Broadcasting, and to officers or employees of Infinity Broadcasting, its parent or their subsidiaries. At December 31, 1999, approximately 18 million shares (excluding Outdoor Systems options assumed) of Infinity Broadcasting's Class A common stock were authorized for awards under the plans of which 12 million shares remained available for future awards. Generally, stock option awards vest three-years from the date of grant and expire ten years from the date of grant. In conjunction with the acquisition of Outdoor Systems on December 7, 1999, Infinity Broadcasting assumed 28 million options to acquire shares of Infinity Broadcasting's Class A common stock with a weighted-average exercise price of $2.89 per share. CBS CORPORATION 53 54 INFINITY BROADCASTING STOCK OPTION INFORMATION (options in thousands)
1999 --------------------------- WEIGHTED-AVERAGE OPTIONS EXERCISE PRICE - ------------------------------------------------------------------------------------------- Balance at January 1, -- $ -- Options granted 5,716 26.15 Awards assumed 27,822 2.89 Options exercised (724) 1.65 Options forfeited (48) 25.94 - ------------------------------------------------------------------------------------------- Balance at December 31, 32,766 6.94 - ------------------------------------------------------------------------------------------- Exercisable at December 31, 27,098 $ 2.93 - -------------------------------------------------------------------------------------------
Options to acquire shares of Infinity Broadcasting's Class A common stock granted during 1999 had a weighted average fair value per share of $13.37. INFINITY BROADCASTING STOCK OPTIONS OUTSTANDING AT DECEMBER 31, 1999 (options in thousands)
WEIGHTED- AVERAGE WEIGHTED-AVERAGE WEIGHTED- REMAINING EXERCISE RANGE OF OUTSTANDING AT AVERAGE CONTRACTUAL EXERCISABLE AT PRICE OF EXERCISE PRICES DECEMBER 31, 1999 EXERCISE PRICE LIFE IN YEARS DECEMBER 31, 1999 EXERCISABLE OPTIONS - --------------------------------------------------------------------------------------------------------------------- $ -- 65(1) $ -- N/A 65 $ -- .01 -- .99 17,163(2) .04 N/A 17,163 .04 1.00 -- 4.99 5,803 1.58 6.4 5,803 1.58 5.00 -- 9.99 159 7.25 7.4 159 7.25 10.00 -- 14.99 1,259 12.47 8.1 1,259 12.47 15.00 -- 19.99 2,649 19.87 9.2 2,649 19.87 20.00 -- 27.99 5,668 26.15 9.2 -- -- - --------------------------------------------------------------------------------------------------------------------- Total 32,766 6.94 27,098 2.93 - ---------------------------------------------------------------------------------------------------------------------
(1) These options have no exercise price, have no expiration date and are exercisable only upon termination. (2) These options are fully exercisable and have no expiration date. NOTE 18: SEGMENT INFORMATION In 1998, we adopted SFAS No. 131, "Disclosure about Segments of a Business Enterprise and Related Information." The segment information reflects a new organizational structure which presents our Internet operations as a separate segment called the Internet Group, formerly referred to as New Media. These results were previously reported within the Television segment. This change was as a result of our growth in Internet based companies during 1999 and the identification of a separate management team to run these operations. The prior segment information presented in this note has been restated to reflect the Internet Group as a separate segment. We are aligned into four business segments: Infinity, Television, Cable and the Internet Group. These business segments are consistent with our management of these businesses, our financial reporting structure and operating focus. Our segments operate predominately in the United States. The accounting policies as described in the summary of significant accounting policies note are applied consistently across the segments. Intersegment sales and transfers are not material to our Infinity, Television and Cable segment results and are eliminated in Corporate and Other. Our Internet Group segment includes $19 million of advertising expense for our consolidated Internet investments for advertising and promotion time provided by our Infinity, Television and Cable segments. We evaluate operating performance based on earnings before interest, taxes, minority interest, equity losses, depreciation and amortization (EBITDA). We believe that EBITDA is an appropriate measure of evaluating the operating performance of our segments. EBITDA eliminates the effect of depreciation and amortization of tangible and intangible assets caused by the 54 CBS CORPORATION 55 magnitude and timing of acquisitions. However, EBITDA should be considered in addition to, not as a substitute for operating earnings, net earnings, 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. SEGMENT DATA
DEPRECIATION REVENUES EBITDA AND AMORTIZATION --------------------------- ----------------------- ------------------ YEAR ENDED DECEMBER 31, 1999 1998 1997 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------- Infinity $ 2,449 $ 1,893 $ 1,480 $1,067 $ 798 $ 575 $327 $250 $197 Television 4,371 4,369 3,589 606 385 339 231 209 209 Cable 565 546 302 219 148 73 105 107 35 Internet Group 13 4 -- (37) (4) -- 1 -- -- - --------------------------------------------------------------------------------------------------------------------- Total combined segments 7,398 6,812 5,371 1,855 1,327 987 664 566 441 Corporate and Other (25) (7) (4) (44) (68) (72) 5 5 4 Residual costs of discontinued businesses -- -- -- (175) (163) (143) -- -- -- - --------------------------------------------------------------------------------------------------------------------- Total $ 7,373 $ 6,805 $ 5,367 $1,636 $1,096 $ 772 $669 $571 $445 - ---------------------------------------------------------------------------------------------------------------------
EXPENDITURES FOR TOTAL ASSETS LONG-LIVED ASSETS --------------------------- ----------------------- DECEMBER 31, 1999 1998 1997 1999 1998 1997 - ------------------------------------------------------------------------------------------------ Infinity $19,561 $10,798 $ 7,074 $ 53 $ 32 $ 15 Television 10,260 6,665 6,602 295 201 264 Cable 1,809 1,850 1,958 10 18 17 Internet Group 849 28 8 53 10 -- - ------------------------------------------------------------------------------------------------ Total combined segments 32,479 19,341 15,642 411 261 296 Corporate and Other 646 798 861 16 5 4 - ------------------------------------------------------------------------------------------------ Total $33,125 $20,139 $16,503 $ 427 $ 266 $ 300 - ------------------------------------------------------------------------------------------------
INFINITY Management characterizes its Infinity segment as out-of-home media because the majority of radio listening and virtually all viewing of outdoor advertising takes place in automobiles, transit systems, on the street and other locations outside the consumer's home, including listening to radio at work. The Infinity segment owns and operates radio stations and participates in the outdoor advertising business. Radio station revenues were 75% in 1999, 77% in 1998 and 75% in 1997 of total Infinity revenues. The percentage of outdoor revenues is expected to increase in 2000 due to the full-year impact of the December 1999 acquisition of Outdoor Systems. Infinity Broadcasting owns and operates 162 radio stations located in 34 markets. Sixty-two of these radio stations are in the nation's ten largest radio markets. We believe that the presence of Infinity Broadcasting's radio stations in large markets makes it attractive to advertisers and that the overall diversity of its stations reduces its dependence on any single station, local economy, or advertiser. Infinity Broadcasting also has a minority equity investment in Westwood One, Inc. (Westwood One), which it manages. Westwood One produces and distributes syndicated and network radio programming and also manages the CBS Radio Network. Infinity Broadcasting operates the largest outdoor advertising business in North America through its wholly owned subsidiaries. Our outdoor advertising business sells advertising space throughout the United States, United Kingdom, Republic of Ireland, Canada, Mexico, and the Netherlands on various media, including buses, trains, malls, train platforms and terminals throughout commuter rail systems, and on painted billboards, eight and thirty-sheet posters, and phone kiosks. TELEVISION The Television segment consists of three integrated operations: the CBS television network; our owned and operated television stations; and our television syndication operations. In November 1999, we acquired King World, a leading syndicator of television programming. See note 2 to the financial statements. The CBS television network produces or acquires, and distributes a comprehensive schedule of news, public affairs, entertainment and sports programming, to our CBS CORPORATION 55 56 owned and operated television stations and more than 200 affiliates. Our owned and operated television stations and domestic affiliates serve, in the aggregate, all 50 states and the District of Columbia. The television network is responsible for sales of advertising time for the television network broadcasts of news, public affairs, sports and entertainment programming. Our programming also involves the production, distribution and marketing of first-run and off-network syndicated programming to television stations, cable, home video, in-flight, and emerging media worldwide. Subsequent to December 31, 1999, we approved a proposed plan to integrate the newly acquired operations of King World with the existing CBS syndication business to achieve synergies and eliminate redundant functions. See notes 2 and 13 to the financial statements. The success of our television segment is driven primarily by programming. Our network depends on our owned and operated television stations, our television syndication operations and the affiliates for distribution of the programming. In addition, the network provides the majority of programming aired at our owned and operated television stations. CABLE The Cable segment primarily consists of our cable networks, including TNN, CMT and two regional sports networks. These networks are distributed by cable television and other multi-channel technologies. TNN is an advertiser-supported cable network featuring country lifestyle and entertainment programming. The network serves approximately 76 million U.S. homes. TNN offers a broad array of programming from original series to movies to country music concerts as well as motorsports, including the NASCAR Winston Cup Races, outdoor sports such as hunting and fishing, professional bull riding and sports entertainment such as wrestling. In April 2000, TNN is expected to be the primary network for the Arena Football League. Our rights to broadcast the NASCAR Winston Cup races were not renewed and expire during the year 2000. CMT is an advertiser-supported, 24-hour cable network with a country music video format. It reaches approximately 39 million U.S. homes. In addition, we own and operate the Midwest Sports Channel, a regional sports network in Minneapolis, and we are a majority owner of Home Team Sports, a regional sports network serving the mid-Atlantic states. Also part of the cable operations, Group W Network Services (GWNS) is a global provider of satellite services to broadcast, cable, and corporate networks. Based in Stamford, Connecticut, GWNS provides transmission and other technical services to U.S. broadcast networks and to many major cable networks. INTERNET GROUP The Internet Group segment consists of our consolidated and nonconsolidated Internet businesses including CBS.com, Inc. the operator of two Internet sites- CBS.com and CBSNews.com. CBS.com, which launched in February 1998, offers a broad range of informational, entertainment, news, and promotional content. In January 2000, CBS.com, Inc. launched CBSNews.com, a news and news related information web site. A majority of the television network affiliates currently participate in these web sites. During the second half of 1999, we closed on a number of strategic investments focused on growing our Internet based operations. We received an equity interest in these Internet companies, primarily in exchange for future advertising and promotion time on our television, radio, outdoor and cable media properties. The segment data tables above, except total assets, exclude the effect of changes in market value for our publicly traded cost method investments and the results of operations for our equity method of accounting Internet investments. Our proportionate share of losses and related amortization expense in our equity method investments are reported separately as Equity losses of unconsolidated affiliated companies, net of income taxes on the Consolidated Statement of Income. The appreciation or depreciation in the stock prices on our publicly traded cost method Internet investments are recorded as a component of Accumulated other comprehensive loss in shareholders' equity. In exchange for providing advertising and promotion time on its media properties, Infinity Broadcasting will be provided an economic interest in certain of these Internet investments. See note 3 to the financial statements. OTHER The category "Corporate and Other" includes certain assets and results of operations that are either not identifiable to a specific reportable segment or relate to the maintenance of corporate functions. These assets primarily include cash and cash equivalents, deferred income taxes, property and equipment and other assets associated with corporate headquarters as well as certain receivables. Included in the results of 56 CBS CORPORATION 57 operations are intersegment eliminations, non-allocated income and costs related to interest, taxes and employee benefits as well as certain headquarters related income and expenses. Residual costs of discontinued businesses primarily include pension and postretirement benefit costs for benefit plans retained by us for previously divested industrial businesses. Long-lived assets include property and equipment, programming, noncurrent receivables, and investments in joint ventures or other affiliates, and exclude such assets as goodwill, FCC licenses, other intangible assets, financial instruments, deferred acquisition costs and deferred tax assets. Increases in long-lived assets during 1999 and 1998 are due primarily to acquisitions. Expenditures for long-lived assets are primarily related to spending on programming of $193 million, $108 million, and $161 million as well as capital spending of $171 million, $139 million, and $121 million during 1999, 1998, and 1997, respectively. NOTE 19: CONTINGENT LIABILITIES, Certain environmental, litigation and other liabilities associated with the industrial businesses were not assumed by other parties in the divestiture transactions and, therefore, were retained by us. These liabilities include certain environmental, general litigation, 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 $1.2 billion at December 31, 1999, including $581 million for accrued legal matters as well as amounts related to previously discontinued businesses of CBS Inc. Of the $1.2 billion, $996 million is classified as noncurrent. A separate asset of $202 million was recorded for estimated amounts recoverable from third parties, of which $175 million is classified in Other noncurrent assets in the Consolidated Balance Sheet. LEGAL MATTERS SECURITIES CLASS ACTIONS--FINANCIAL SERVICES We have been defending derivative and class action lawsuits alleging federal securities law and common law violations arising out of purported misstatements or omissions contained in public filings and in a Prospectus and Registration Statement for a public offering of CBS's common stock in 1991. The parties to the class actions and derivative action reached an agreement to settle the matters for a total cost of $67 million, funded in large part by our liability insurers. On October 19, 1999, the district court approved the settlements and our share was paid in 1999. The parties await the entry of a final order by the district court. ASBESTOS We are a defendant in numerous lawsuits claiming various asbestos-related personal injuries, which allegedly occurred from use or inclusion of asbestos in certain products supplied by the industrial businesses, generally in the pre-1970 time period. Typically, these lawsuits are brought against multiple defendants. We were neither a manufacturer nor a producer of asbestos and we are oftentimes dismissed from these lawsuits on the basis that we have no relationship to the products in question or the claimant did not have exposure to our product. At December 31, 1999, we had approximately 121,000 unresolved claims pending. In court actions that have been resolved, we have prevailed in many of the asbestos claims and have resolved others through settlement. Furthermore, we have brought suit against certain of our 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 us for a substantial portion of our current costs and settlements associated with asbestos claims. We recorded a liability reflected in Retained liabilities of discontinued businesses for asbestos-related matters that is deemed probable and can be reasonably estimated. We have also separately recorded an asset reflected in Other noncurrent assets in the Consolidated Balance Sheet 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. We have not been able to reasonably estimate costs for unasserted asbestos claims. However, we review asbestos claims on an ongoing basis and adjust our liability as appropriate. GENERAL Litigation is inherently uncertain and always difficult to predict. Substantial damages are sought in certain CBS CORPORATION 57 58 groupings of asbestos claims, and, although we believe a significant adverse judgment is unlikely, any such judgment could have a material adverse effect on our results of operations for a quarter or a year. However, based on our understanding and evaluation of the relevant facts and circumstances, we believe that we have adequately provided for costs arising from resolution of these matters and that the litigation should not have a material adverse effect on our financial condition. 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 us. 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. We have, 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. We recognize 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, we have been named a potentially responsible party (PRP) at numerous sites located throughout the country. At many of these sites, we are either not a responsible party or its site involvement is very limited or de minimis. However, we may have varying degrees of cleanup responsibilities at approximately 74 sites. We believe that any liability incurred for cleanup at these sites will be satisfied over a number of years, and in many cases, the costs will be shared with other responsible parties. These sites include certain sites for which we, as part of an agreement for sale, have retained obligations for remediation of environmental contamination and for other Comprehensive Environmental Response Compensation and Liability Act (CERCLA) issues. Based on the costs associated with the most probable alternative remediation strategy for the previously mentioned sites, we have an accrued liability of $514 million at December 31, 1999 which is reflected in Retained liabilities of discontinued businesses in the Consolidated Balance Sheet. Depending on the remediation alternatives ultimately selected, the costs related to these sites could differ from the amounts currently accrued. The accrued liability includes $397 million for site investigation and remediation, and $117 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 during periods of up to 30 years. OTHER We are involved with several administrative actions alleging violations of federal, state, or local environmental regulations. For these matters, we have estimated our remaining reasonably possible costs and determined them to be immaterial. We believe, based on our best estimate, that we have adequately provided for the present environmental obligations and that complying with existing government regulations will not materially impact our financial position, liquidity or results of operations. NOTE 20: SUBSEQUENT EVENT (AS OF MARCH 21, 2000) On March 3, 2000, Infinity Broadcasting entered into an asset purchase agreement to acquire 18 radio stations, located in the top 50 markets, from Clear Channel Communications, Inc. for approximately $1.4 billion. This transaction is expected to close by year-end 2000 and is subject to regulatory reviews and approvals. On March 21, 2000, Infinity Broadcasting announced that it had entered into an agreement to purchase Giraudy, one of France's largest outdoor advertising companies, for approximately $425 million. This transaction is expected to close mid-year 2000. Infinity Broadcasting plans to finance these acquisitions with excess cash from operations and by executing a credit facility which will increase their borrowing availability by $2.0 billion. 58 CBS CORPORATION 59 QUARTERLY FINANCIAL INFORMATION (unaudited, in millions except per share amounts)
1999 QUARTER ENDED 1998 QUARTER ENDED ------------------------------------- ------------------------------------- DEC 31 SEPT 30 JUNE 30 MARCH 31 DEC 31 SEPT 30 JUNE 30 MARCH 31 - ------------------------------------------------------------------------------------------------------------ Revenues $2,219 $1,708 $1,678 $1,768 $1,791 $1,581 $1,484 $1,949 Gross Margin 938 759 787 608 659 601 528 644 Operating profit (loss) (a) 298 246 294 118 117 102 127 136 Income (loss) from Continuing Operations (b) 19 35 78 25 3 (38) 4 19 Gain on disposal of Discontinued Operations (c) 232 12 18 366 -- -- -- -- Extraordinary item -- -- (1) (4) (4) (5) -- -- Net income (loss) 251 47 95 387 (1) (43) 4 19 - ------------------------------------------------------------------------------------------------------------ Net income (loss) per common share: Basic: Continuing Operations $ .03 $ .05 $ .11 $ .04 $ (.00) $ (.05) $ .01 $ .03 Discontinued Operations .32 .02 .03 .53 -- -- -- -- Extraordinary item -- -- -- (.01) (.00) (.01) -- -- Net income (loss) .35 .07 .14 .56 (.00) (.06) .01 .03 Diluted: Continuing Operations .03 .05 .11 .04 (.00) (.05) .01 .03 Discontinued Operations .31 .02 .02 .52 -- -- -- -- Extraordinary item -- -- -- (.01) (.00) (.01) -- -- Net income (loss) .34 .07 .13 .55 (.00) (.06) .01 .03 - ------------------------------------------------------------------------------------------------------------ Market price per share (d): High $63 15/16 $51 13/16 $46 7/8 $ 41 $32 13/16 $35 1/4 $36 3/16 $ 33 15/16 Low 43 3/16 43 15/1 40 1/16 31 7/8 20 1/2 23 1/4 29 3/4 27 117/25 - ------------------------------------------------------------------------------------------------------------
Per common share amounts for the quarters do not add to the year-end amounts because of differences in the average common shares outstanding during each quarter. (a) Includes restructuring charges of $2 million in the second quarter of 1999 and $62 million ($38 million after-tax) in the third quarter of 1998. In the second quarter of 1999, $26 million of the 1998 restructuring charge was reversed. See note 13 to the financial statements. (b) Includes a charge of $24 million in the second quarter of 1999 related to probable obligations associated with TeleNoticias which may revert back to us. (c) Reflects a pre-tax gain of $922 million ($628 million after-tax) on disposal of industrial businesses. See note 12 to the financial statements. (d) Represents the high and low closing prices for one share of CBS common stock on the New York Stock Exchange (NYSE). CBS CORPORATION 59 60 FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA (unaudited, in millions except per share and employee data)
1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------ STATEMENT OF INCOME DATA Revenues $ 7,373 $ 6,805 $ 5,367 $ 4,143 $ 1,074 Operating Profit 956 482 253 54 160 Income (loss) from Continuing Operations before income taxes, minority interest and equity losses 763 155 (59) (292) 128 Income (loss) from Continuing Operations 157 (12) (131) (221) 47 Income (loss) from Discontinued Operations 628 -- 680 409 (57) Extraordinary item--Extinguishment of Debt (5) (9) -- (93) -- Net income (loss) 780 (21) 549 95 (10) - ------------------------------------------------------------------------------------------------------ PER SHARE DATA Net Income (loss) per common share--Basic: Continuing Operations $ .22 $ (.02) $ (.24) $ (.67) $ (.09) Discontinued Operations .89 -- 1.08 1.02 (.16) Extraordinary item (.01) (.01) -- (.23) -- Net Income (loss) per common share--Basic 1.10 (.03) .84 .12 (.25) Net Income (loss) per common share--Diluted: Continuing Operations .22 (.02) (.24) (.67) (.09) Discontinued Operations .87 -- 1.08 1.02 (.16) Extraordinary item (.01) (.01) -- (.23) -- Net Income (loss) per common share--Diluted 1.08 (.03) .84 .12 (.25) Cash Dividends per common share -- .05 .20 .20 .20 - ------------------------------------------------------------------------------------------------------ BALANCE SHEET DATA Total assets: Continuing Operations $33,125 $20,139 $16,503 $15,406 $10,391 Discontinued Operations 613 1,919 4,101 5,710 8,157 Total assets 33,738 22,058 20,604 21,116 18,548 Long-term debt: Continuing Operations 3,753 2,506 3,236 5,147 7,222 Discontinued Operations 405 382 440 419 161 Total debt: Continuing Operations 3,797 2,665 3,387 5,635 7,840 Discontinued Operations 415 428 543 439 528 Shareholders' equity 16,147 9,054 8,080 5,731 1,453 - ------------------------------------------------------------------------------------------------------ CASH FLOW DATA Operating activities of Continuing Operations $ 686 $ 295 $ (201) $ (95) $ 175 Investing activities 422 467 2,487 2,893 (4,336) Financing activities (1,443) 327 (2,015) (2,479) 3,525 Purchases of treasury stock 489 859 -- -- -- - ------------------------------------------------------------------------------------------------------ STATISTICAL DATA EBITDA--Continuing Operations (a) $ 1,636 $ 1,096 $ 772 $ 388 $ 369 Average shares outstanding--diluted 721 696 629 401 370 Market price per share at end of year (b) $63 15/16 $32 13/16 $29 7/16 $19 7/8 $16 3/8 Number of employees--Continuing Operations 28,900 23,700 14,100 11,900 6,300 Number of employees--Discontinued Operations -- 22,100 32,400 41,300 65,400 - ------------------------------------------------------------------------------------------------------
We have made numerous acquisitions in the last three years, see note 2 to the financial statements. On December 31, 1996, we acquired Infinity Media Corporation which gave rise to the year-over-year increases in 1997. In November 1995, we acquired CBS Inc. which gave rise to the significant year-over-year increases in 1996. See note 12 to the financial statements for discussions on discontinued businesses. (a) We evaluate our operating performance based on several factors, of which the primary financial measure is earnings before interest, taxes, minority interest, equity losses, depreciation, and amortization (EBITDA). EBITDA eliminates the effect of depreciation and amortization of tangible and intangible assets, most of which were from acquisitions accounted for under the purchase method of accounting. However, EBITDA should be considered in addition to, not as a substitute for, operating earnings, net earnings, 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. EBITDA differs from cash flows from operating activities primarily because it does not consider changes in assets and liabilities from period to period, and it does not include cash flows for interest and taxes. (b) Represents the closing price for one share of CBS common stock on the NYSE. 60 CBS CORPORATION 61 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information concerning executive officers required by this item is set forth in Part I pursuant to General Instruction G to Form 10-K; the remainder of the information required by this item is expected to be filed in a subsequent filing on Form 10-K/A. The information as to directors is expected to be filed in a subsequent filing on Form 10-K/A. ITEM 11. EXECUTIVE COMPENSATION. The information required by this item is expected to be filed in a subsequent filing on Form 10-K/A. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item is expected to be filed in a subsequent filing on Form 10-K/A. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this item is expected to be filed in a subsequent filing on Form 10-K/A. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1) FINANCIAL STATEMENTS The financial statements required by this item are listed under Part II, Item 8, which list is incorporated herein by reference. (a)(2) FINANCIAL STATEMENT SCHEDULES The following financial statement schedule for CBS and the Independent Auditors' Reports thereon are included in Part IV of this report:
PAGES Independent Auditors' Report on Financial Statement Schedule 67 Schedule II--Valuation and Qualifying Accounts for the three years ended December 31, 1999 68
Other schedules are omitted because they are not applicable or because the required information is included in the financial statements or notes thereto. (a)(3) EXHIBITS (3) Articles of Incorporation and Bylaws (a) The Restated Articles of the Corporation, as amended to October 27, 1999, are incorporated herein by reference to Exhibit 3(a) to Form 10-Q for the quarter ended September 30, 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.
CBS CORPORATION 61 62 (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 Annual Performance Plan, as amended to July 28, 1999, is incorporated herein by reference to Exhibit 10.19 to Form 10-Q of Infinity Broadcasting Corporation for the quarter ended September 30, 1999. (c*) The 1993 Long-Term Incentive Plan, as amended to July 28, 1999, is incorporated herein by reference to Exhibit 10.16 to Form 10-K for the quarter ended September 30, 1999. (d*) The 1991 Long-Term Incentive Plan, as amended to July 28, 1999, is incorporated herein by reference to Exhibit 10.15 to Form 10-K of Infinity Broadcasting Corporation for the quarter ended September 30, 1999. (e*) The 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 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, is incorporated herein by reference to Exhibit 10(h) to Form 10-Q for the quarter ended September 30, 1999. (i*) CBS Bonus Supplemental Executive Retirement Plan, as amended to April 1, 1999, is incorporated herein by reference to Exhibit 10(i) to Form 10-Q for the quarter ended September 30, 1999. (j*) CBS Supplemental Employee Investment Fund, as amended as of January 1, 1998, is incorporated by reference to Exhibit 10(j) to Form 10-Q for the quarter ended September 30, 1999. (k*) The Deferred Compensation and Stock Plan for Directors, as amended as of July 28, 1999, is incorporated by reference to Exhibit 10(k) to Form 10-Q for the quarter ended September 30, 1999. (l*) The 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*) 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 is incorporated by reference to Exhibit (q*) to Form 10-Q for the quarter ended September 30, 1999. (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.
62 CBS CORPORATION 63 (t*) The Infinity Broadcasting Corporation 1998 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.16 to the Infinity Broadcasting Form 10-K for the year ended December 31, 1999. (u*) The Infinity Broadcasting Corporation Executive Annual Incentive Plan is incorporated by reference to Exhibit 10.17 to the Infinity Broadcasting Form 10-K for the year ended December 31, 1999. (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) Amended and Restated Credit Agreement, dated as of December 10, 1999, among CBS Corporation, the Subsidiary Borrowers parties thereto, the Lenders named therein, The Chase Manhattan Bank, as Documentation Agent, Morgan Guaranty Trust Company of New York, as Administrative Agent, and Bank of American, N.A. and The Toronto-Dominion Bank, as Syndication Agents. (bb) Credit Agreement, dated as of December 10, 1999, among Infinity Broadcasting Corporation, the Subsidiary Borrowers parties thereto, CBS Corporation, as Guarantor, the Lenders named therein, The Chase Manhattan Bank, as Documentation Agent, Morgan Guaranty Trust Company of New York, as Administrative Agent, and Bank of American, N.A. and The Toronto-Dominion Bank, as Syndication Agents, is incorporated by reference to Exhibit 10.8 to the Infinity Broadcasting Form 10-K for the year ended December 31, 1999. (cc) Intercompany Agreement between CBS 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 CBS 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.
CBS CORPORATION 63 64 (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. (ss*) First Amendment to Employment Agreement dated December 31, 1999, between Viacom Inc. and Mel Karmazin. (tt) Amended and Restated Agreement and Plan of Merger dated as of November 23, 1999 among the Corporation, Viacom Inc. and Viacom/CBS LLC, is incorporated by reference to Exhibit 2.1 to Registration Statement No. 333-88613 on Form S-4 filed by Viacom Inc. with the SEC.
64 CBS CORPORATION 65 (uu) Asset Purchase Agreement dated as of March 3, 2000 among Clear Channel Communications, Inc., AMFM Inc., CCU Merger Sub, Inc. and CBS Radio, Inc., is incorporated by reference to Exhibit 10.30 to the Infinity Broadcasting Form 10-K for the year ended December 31, 1999. (vv) Asset Purchase Agreement, dated as of November 14, 1997, between the Corporation and Siemens Power Generation Corporation, a subsidiary of Siemens A.G., is incorporated by reference to Exhibit 10(w) to Form 10-K for the year ended December 31, 1997. (ww) 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. (xx) 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. (21) Subsidiaries of the Registrant (23) Consent of Independent Auditors (24) Power of Attorney and Extract of Resolutions of Board of Directors (27.1) Financial Data Schedule for the year ended December 31, 1999 (27.2) Restated Financial Data Schedules for the years ended December 31, 1998 and 1997
- --------------- * Identifies management contract or compensatory plan or arrangement. (b) REPORTS ON FORM 8-K A current report on Form 8-K (Item 5), filed with the Securities and Exchange Commission on October 8, 1999, filing financial information related to Viacom Inc., with whom we have a pending merger. A current report on Form 8-K (Item 5), filed with the Securities and Exchange Commission on October 8, 1999, filing financial information related to King World Productions, Inc., and describing certain amendments to the CBS/King World merger agreement. A current report on Form 8-K (Items 5 and 7), filed with the Securities and Exchange Commission on October 12, 1999, filing the Amended and Restated Agreement and Plan of Merger, dated as of September 6, 1999, as amended and restated as of October 8, 1999 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 October 29, 1999, filing a press release announcing our earnings for the third quarter of 1999 and for the nine months ended September 30, 1999. A current report on Form 8-K (Items 5 and 7), filed with the Securities and Exchange Commission on November 2, 1999, filing a press release announcing that we set November 12, 1999 as the record date for the special meeting of stockholders to be held with respect to the approval of the merger with Viacom Inc. A current report on Form 8-K (Items 5 and 7), filed with the Securities and Exchange Commission on November 5, 1999, filing a press release announcing that we reset the record date for the special meeting of stockholders to be held with respect to the approval of the merger with Viacom Inc. from November 12, 1999 to November 17, 1999. A current report on Form 8-K (Items 2 and 7), filed with the Securities and Exchange Commission on November 22, 1999, filing a press release announcing we completed our acquisition of King World Productions, Inc. on November 15, 1999. A current report on Form 8-K (Item 5), filed with the Securities and Exchange Commission on November 22, 1999, filing financial information related to King World Productions, Inc., acquired on November 15, 1999. A current report on Form 8-K (Item 5), filed with the Securities and Exchange Commission on December 6, 1999, filing financial information related to Viacom Inc., with whom we have a pending merger. CBS CORPORATION 65 66 A current report on Form 8-K (Items 2 and 7), filed with the Securities and Exchange Commission on December 22, 1999, filing a press release announcing that Infinity Broadcasting Corporation completed its acquisition of Outdoor Systems, Inc. on December 7, 1999. A current report on Form 8-K (Items 5 and 7), filed with the Securities and Exchange Commission on December 29, 1999, filing a press release announcing our shareholders approved the pending merger with Viacom Inc. 66 CBS CORPORATION 67 INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF CBS CORPORATION Under date of January 25, 2000, except as to note 20, which is as of March 21, 2000, we reported on the consolidated balance sheet of CBS Corporation and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income and comprehensive income, cash flows, and shareholders' equity, for each of the years in the three year period ended December 31, 1999, which are included in the 1999 Annual Report on Form 10-K. In connection with our audits of the aforementioned consolidated financial statements, we have also audited the related consolidated financial statement schedule included in the 1999 Annual Report on Form 10-K. The consolidated financial statement schedule is the responsibility of management. Our responsibility is to express an opinion on this consolidated financial statement schedule based on our audits. In our opinion, the December 31, 1999, 1998, and 1997 consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP KPMG LLP New York, New York March 21, 2000 CBS CORPORATION 67 68 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (in millions)
YEAR ENDED DECEMBER 31, 1999 1998 1997 - --------------------------------------------------------------------------------------- CUSTOMER RECEIVABLES FROM CONTINUING OPERATIONS-- ALLOWANCE FOR DOUBTFUL ACCOUNTS: Balance at beginning of year $ 48 $ 35 $ 27 Charged to costs and expenses 19 21 12 Increase resulting from business acquisitions 22 8 7 Write-offs, net of recoveries (15) (16) (11) - --------------------------------------------------------------------------------------- Balance at end of year $ 74 $ 48 $ 35 - --------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- DEFERRED INCOME TAXES--VALUATION ALLOWANCE: Balance at beginning of year $ 84 $ 137 $ 52 Charged to costs and expenses, net of reclassification (31) (53) 85(a) - --------------------------------------------------------------------------------------- Balance at end of year $ 53 $ 84 $ 137 - ---------------------------------------------------------------------------------------
(a) Relates primarily to foreign tax credit carryforwards not expected to be realized. 68 CBS CORPORATION 69 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) 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 29th day of March, 2000. CBS CORPORATION By: /s/ ROBERT G. FREEDLINE --------------------------------------- Robert G. Freedline Vice President and Controller Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. SIGNATURE AND TITLE George H. Conrades, Director Martin C. Dickinson, Director Robert G. Freedline, Vice President and Controller (principal accounting officer) William H. Gray III, Director Mel Karmazin, President and Chief Executive Officer and Director (principal executive officer) Jan Leschly, Director David T. McLaughlin, Chairman and Director Leslie Moonves, President and Chief Executive Officer, CBS Television and Director Richard R. Pivirotto, Director Fredric G. Reynolds, Executive Vice President and Chief Financial Officer (principal financial officer) Raymond W. Smith, Director Dr. Paula Stern, Director Patty Stonesifer, Director Robert D. Walter, Director By: /s/ ROBERT G. FREEDLINE --------------------------- Robert G. Freedline Attorney-in-fact March 29, 2000 Original powers of attorney authorizing Robert G. Freedline and certain others, individually, to sign this report on behalf of the listed directors and officers of the Corporation and a certified copy of resolutions of the Board of Directors of the Corporation authorizing Robert G. Freedline and certain others to sign on behalf of the Corporation have been filed with the Securities and Exchange Commission and are included as Exhibit 24 to this report. CBS CORPORATION 69 EX-10.AA 2 AMENDED & RESTATED CREDIT AGREEMENT 1 Exhibit 10(aa) EXECUTION COPY - -------------------------------------------------------------------------------- $1,500,000,000 AMENDED AND RESTATED CREDIT AGREEMENT among CBS CORPORATION, THE SUBSIDIARY BORROWERS PARTIES HERETO, THE LENDERS NAMED HEREIN, THE CHASE MANHATTAN BANK, as Documentation Agent, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent, and BANK OF AMERICA, N.A. and THE TORONTO-DOMINION BANK, as Syndication Agents Dated as of December 10, 1999 - -------------------------------------------------------------------------------- CHASE SECURITIES INC., as Sole Lead Arranger and Book Manager 2 TABLE OF CONTENTS
Page ---- ARTICLE I. DEFINITIONS............................................................................................1 SECTION 1.1. Defined Terms..............................................................................1 SECTION 1.2. Terms Generally...........................................................................19 ARTICLE II. THE CREDITS..........................................................................................20 SECTION 2.1. Commitments...............................................................................20 SECTION 2.2. Revolving Credit Loans; Competitive Loans.................................................20 SECTION 2.3. Competitive Bid Procedure.................................................................21 SECTION 2.4. Revolving Credit Borrowing Procedure......................................................23 SECTION 2.5. Repayment of Loans........................................................................23 SECTION 2.6. Swingline Loans...........................................................................23 SECTION 2.7. Letters of Credit.........................................................................26 SECTION 2.8. Conversion and Continuation Options.......................................................29 SECTION 2.9. Fees......................................................................................30 SECTION 2.10. Interest on Loans; Eurodollar Tranches; Etc...............................................31 SECTION 2.11. Default Interest..........................................................................31 SECTION 2.12. Alternate Rate of Interest................................................................32 SECTION 2.13. Termination and Reduction of Commitments..................................................32 SECTION 2.14. Optional Prepayments of Revolving Credit Loans............................................33 SECTION 2.15. Reserve Requirements......................................................................33 SECTION 2.16. Indemnity.................................................................................34 SECTION 2.17. Pro Rata Treatment; Funding Matters; Evidence of Debt.....................................35 SECTION 2.18. Sharing of Setoffs........................................................................36 SECTION 2.19. Payments..................................................................................37 SECTION 2.20. Taxes.....................................................................................37 SECTION 2.21. Termination or Assignment of Commitments Under Certain Circumstances......................39 ARTICLE III. REPRESENTATIONS AND WARRANTIES......................................................................40 SECTION 3.1. Corporate Existence.......................................................................40 SECTION 3.2. Financial Condition.......................................................................40 SECTION 3.3. Litigation................................................................................40 SECTION 3.4. No Breach, etc............................................................................41 SECTION 3.5. Corporate Action..........................................................................41 SECTION 3.6. Approvals.................................................................................41 SECTION 3.7. ERISA.....................................................................................41 SECTION 3.8. Taxes.....................................................................................41 SECTION 3.9. Investment Company Act....................................................................42 SECTION 3.10. Public Utility Holding Company Act........................................................42 SECTION 3.11. Hazardous Materials.......................................................................42 SECTION 3.12. Material Subsidiaries.....................................................................42 SECTION 3.13. No Material Misstatements.................................................................42 SECTION 3.14. Ownership of Property.....................................................................42 SECTION 3.15. Intellectual Property.....................................................................43 SECTION 3.16. FCC Matters...............................................................................43 -i-
3 ARTICLE IV. CONDITIONS OF EFFECTIVENESS AND LENDING..............................................................43 SECTION 4.1 Effectiveness..............................................................................43 SECTION 4.2. Initial Loans to Subsidiary Borrowers......................................................43 SECTION 4.3. All Credit Events..........................................................................44 ARTICLE V. COVENANTS.............................................................................................44 SECTION 5.1. Financial Statements......................................................................45 SECTION 5.2. Corporate Existence, Etc..................................................................47 SECTION 5.3. Insurance.................................................................................47 SECTION 5.4. Prohibition of Fundamental Changes........................................................47 SECTION 5.5. Limitation on Liens.......................................................................48 SECTION 5.6. Limitation on Subsidiary Indebtedness.....................................................50 SECTION 5.7. Consolidated Leverage Ratio...............................................................51 SECTION 5.8. Consolidated Coverage Ratio...............................................................51 SECTION 5.9. Minimum Consolidated Net Worth............................................................51 SECTION 5.10. Use of Proceeds...........................................................................51 SECTION 5.11. Transactions with Affiliates..............................................................51 SECTION 5.12. Limitation on Negative Pledge Clauses.....................................................51 ARTICLE VI. EVENTS OF DEFAULT....................................................................................52 ARTICLE VII. THE AGENTS..........................................................................................54 ARTICLE VIII. GUARANTEE..........................................................................................57 SECTION 8.1. Guarantee.................................................................................57 SECTION 8.2. No Subrogation, etc.......................................................................57 SECTION 8.3. Amendments, etc. with respect to the Subsidiary Borrower Obligations......................58 SECTION 8.4. Guarantee Absolute and Unconditional......................................................58 SECTION 8.5. Reinstatement.............................................................................59 SECTION 8.6. Payments..................................................................................59 ARTICLE IX. MISCELLANEOUS........................................................................................59 SECTION 9.1. Notices...................................................................................59 SECTION 9.2. Survival of Agreement.....................................................................60 SECTION 9.3. Binding Effect............................................................................60 SECTION 9.4. Successors and Assigns....................................................................60 SECTION 9.5. Expenses; Indemnity.......................................................................63 SECTION 9.6. Right of Setoff...........................................................................64 SECTION 9.7. APPLICABLE LAW............................................................................64 SECTION 9.8. Waivers; Amendment........................................................................64 SECTION 9.9. Entire Agreement..........................................................................65 SECTION 9.10. Waiver of Jury Trial......................................................................65 SECTION 9.11. Severability..............................................................................65 SECTION 9.12. Counterparts..............................................................................65 SECTION 9.13. Headings..................................................................................65 SECTION 9.14. Jurisdiction; Consent to Service of Process...............................................65 SECTION 9.15. Confidentiality...........................................................................66 -ii-
4 Page ---- EXHIBITS - -------- Exhibit A Administrative Questionnaire Exhibit B-1 Form of Competitive Bid Request Exhibit B-2 Form of Notice of Competitive Bid Request Exhibit B-3 Form of Competitive Bid Exhibit B-4 Form of Revolving Credit Borrowing Request Exhibit B-5 Form of Swingline Borrowing Request Exhibit B-6 Form of Notice of Designated Letter of Credit Exhibit B-7 Form of Subsidiary Borrower Designation Exhibit B-8 Form of Subsidiary Borrower Request Exhibit C Form of Assignment and Acceptance Exhibit D Form of Confidentiality Agreement Exhibit E Omitted Exhibit F Form of Closing Certificate Exhibit G Form of Issuing Lender Agreement SCHEDULES - --------- Schedule 1.1 Commitments; Addresses for Notices Schedule 3.12 Material Subsidiaries Schedule 5.5(n) Certain CBS Assets Schedule 5.6 Existing CBS Indebtedness -iii- 5 AMENDED AND RESTATED CREDIT AGREEMENT entered into as of December 10, 1999, among CBS CORPORATION, a Pennsylvania corporation ("CBS"); each Subsidiary Borrower (as herein defined); the lenders whose names appear on Schedule 1.1 hereto or who subsequently become parties hereto as provided herein (the "Lenders"); BANK OF AMERICA, N.A. ("Bank of America") and THE TORONTO-DOMINION BANK ("Toronto Dominion"), as syndication agents for the Lenders (in such capacity, the "Syndication Agents"); THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), as documentation agent for the Lenders; and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking corporation ("Morgan"), as administrative agent for the Lenders. W I T N E S S E T H : - - - - - - - - - - WHEREAS, CBS is a party to the Credit Agreement dated as of August 29, 1996, as amended by the First Amendment thereto dated as of January 29, 1997, the Second Amendment thereto dated as of March 21, 1997, the Third Amendment thereto dated as of March 3, 1998 and the Fourth Amendment thereto dated as of February 26, 1999 (the "Existing Credit Agreement"), among CBS Corporation ("CBS"), the Subsidiary Borrowers (as defined therein) parties thereto, including Infinity Broadcasting Corporation, a Delaware corporation ("Infinity"), the Lenders, 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; WHEREAS, CBS and Infinity have requested that the rights and obligations of Infinity under the Existing Credit Agreement (and those of any Subsidiary Borrower that is a Subsidiary of Infinity) be re-evidenced in a separate $1,500,000,000 credit agreement (as further defined herein, the "Infinity Credit Agreement"); and WHEREAS, CBS has requested that the Existing Credit Agreement be amended and restated to (i) permit the Infinity Credit Agreement and (ii) make certain other amendments; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto hereby agree that, effective the Closing Date (as defined herein) the Existing Credit Agreement shall be amended and restated as follows: ARTICLE I. DEFINITIONS SECTION 1.1. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "ABR Loan" shall mean (a) any Revolving Credit Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II and (b) any ABR Swingline Loan. "ABR Revolving Credit Loan" shall mean any Revolving Credit Loan which is an ABR Loan. 6 2 "ABR Swingline Exposures" shall mean at any time the aggregate principal amount at such time of the outstanding ABR Swingline Loans. The ABR Swingline Exposure of any Lender at any time shall mean its Revolving Credit Percentage of the aggregate ABR Swingline Exposures at such time. "ABR Swingline Loan" shall have the meaning assigned to such term in Section 2.6(a). "Absolute Rate Loan" shall mean any Competitive Loan bearing interest at a fixed percentage rate per annum (expressed in the form of a decimal rounded to no more than four decimal places) specified by the Lender making such Loan in its Competitive Bid. "Administrative Agent" shall mean Morgan, together with its affiliates, as an arranger of the Commitments and as the administrative agent for the Lenders under this Agreement, and any successor thereto pursuant to Article VII. "Administrative Agent Fee Letter" shall mean the Fee Letter with respect to this Agreement between CBS and the Administrative Agent, as amended, supplemented or otherwise modified from time to time. "Administrative Agent's Fees" shall have the meaning assigned to such term in Section 2.9(c). "Administrative Questionnaire" shall mean an Administrative Questionnaire in the form of Exhibit A hereto. "Affiliate" shall mean, as to CBS, any Person which directly or indirectly controls, is under common control with or is controlled by CBS. As used in this definition, "control" (including, with correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), provided that, in any event, any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation or 10% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person. Notwithstanding the foregoing, (a) no individual shall be deemed to be an Affiliate of CBS solely by reason of his or her being an officer, director or employee of CBS or any of its Subsidiaries, (b) CBS and its Subsidiaries shall not be deemed to be Affiliates of each other and (c) no Person of which CBS or any of its Subsidiaries acquires or has acquired control in connection with or as a consequence of any debt or equity financing provided to such Person in the ordinary course of business of WFSI, any of its Subsidiaries, Financial Services or WCI shall be deemed an Affiliate of CBS. "Agents" shall mean the collective reference to the Administrative Agent, the Documentation Agent and the Syndication Agents. "Aggregate LC Exposure" shall mean, at any time, the sum of (a) the aggregate undrawn amount of all Letters of Credit outstanding at such time and (b) the aggregate amount which has been drawn under Letters of Credit but for which the applicable Issuing Lender or the Lenders, as the case may be, have not been reimbursed by CBS at such time. 7 3 "Agreement" shall mean this Credit Agreement, as amended, supplemented or otherwise modified from time to time. "Alternate Base Rate" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Lender serving as the Administrative Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced as effective; and "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms thereof, the Alternate Base Rate shall be the Prime Rate until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Applicable Commitment Fee Rate" shall mean the "Applicable Commitment Fee Rate" determined in accordance with the Pricing Grid set forth in Annex I hereto. "Applicable Eurodollar Margin" shall mean the "Applicable Eurodollar Margin" determined in accordance with the Pricing Grid set forth in Annex I hereto. "Applicable LC Fee Rate" shall mean (a) with respect to Financial Letters of Credit, the "Applicable Financial LC Fee Rate" determined in accordance with the Pricing Grid set forth in Annex I hereto and (b) with respect to Non-Financial Letters of Credit, the "Applicable Non-Financial LC Fee Rate" determined in accordance with the Pricing Grid set forth in Annex I hereto. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of Exhibit C. "Bank of America" shall have the meaning assigned to such term in the preamble to this Agreement. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States. "Borrower" shall mean, as applicable, CBS or the relevant Subsidiary Borrower. "Business Day" shall mean any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for business in New York City; provided, however, that, when used in connection with a Eurodollar Loan, the term "Business Day" shall 8 4 also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market. "Capital Lease Obligations" of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "Capital Stock" shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "CBS" shall have the meaning assigned to such term in the preamble to this Agreement. "Change of Control" shall mean that any person or group of persons, (within the meaning of Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the SEC relating to such sections) (other than Viacom and its Subsidiaries pursuant to the Viacom Merger Agreement) shall have acquired beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 promulgated by the SEC pursuant to the Exchange Act) of 30% or more of the outstanding shares of voting stock of CBS. "Chase" shall have the meaning assigned to such term in the preamble to this Agreement. "Closing Certificate" shall mean a certificate, substantially in the form of Exhibit F. "Closing Date" shall mean December 10, 1999. "Code" shall mean the Internal Revenue Code of 1986, as the same may be amended from time to time. "Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Revolving Credit Loans pursuant to Section 2.1, to make or refund ABR Swingline Loans pursuant to Section 2.6 and to issue or participate in Letters of Credit pursuant to Section 2.7, as set forth on Schedule 1.1, as such Lender's Commitment may be permanently terminated or reduced from time to time pursuant to Section 2.13 or changed pursuant to Section 9.4. "Commitment Fee Calculation Amount" shall mean, as to any Lender at any time, an amount equal to the excess, if any, of (a) such Lender's Commitment over (b) the sum of (i) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding, (ii) such Lender's LC Exposure at such time and (iii) in the case of each Swingline Lender, the aggregate principal amount of all Swingline Loans made by such Swingline Lender then outstanding. "Commitment Fees" shall mean all fees payable pursuant to Section 2.9(a). "Communications Act" shall mean the Communications Act of 1934, as amended. 9 5 "Competitive Bid" shall mean an offer to make a Competitive Loan pursuant to Section 2.3. "Competitive Bid Rate" shall mean, as to any Competitive Bid made pursuant to Section 2.3(b), (a) in the case of a Eurodollar Competitive Loan, the Margin, and (b) in the case of an Absolute Rate Loan, the fixed rate of interest offered by the Lender making such Competitive Bid. "Competitive Bid Request" shall mean a request made pursuant to Section 2.3 in the form of Exhibit B-1. "Competitive Loan" shall mean a Loan from a Lender to a Borrower pursuant to the bidding procedure described in Section 2.3. Each Competitive Loan shall be a Eurodollar Competitive Loan or an Absolute Rate Loan. "Compliance Certificate" shall have the meaning assigned to such term in Section 5.1. "Confidential Information" shall have the meaning assigned to such term in Section 9.15(a). "Confidential Information Memorandum" shall mean the Information Memorandum dated October 1999 and furnished to the Lenders. "Confidentiality Agreement" shall mean a confidentiality agreement substantially in the form of Exhibit D, with such changes as CBS may approve. "Consolidated Coverage Ratio" shall mean, for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period. "Consolidated EBITDA" shall mean, with respect to CBS and its Consolidated Subsidiaries for any period, operating profit (loss) (excluding that related to Discontinued Operations), plus other income (loss), plus interest income, plus depreciation and amortization (excluding amortization related to programming rights), excluding (a) gains (losses) on sales of assets (except (I) gains (losses) on sales of inventory sold in the ordinary course of business and (II) gains (losses) on sales of other assets if such gains (losses) are less than $10,000,000 individually and less than $50,000,000 in the aggregate during such period), and (b) other non-cash items (including (i) provisions for losses and additions to valuation allowances, (ii) provisions for restructuring, litigation and environmental reserves and losses on the Disposition of businesses and (iii) pension settlement charges), in each case determined for such period on a basis consistent with that reported in CBS's Form 10-Q for the fiscal quarter ended September 30, 1998 filed with the SEC, minus cash payments made during such period in respect of non-cash charges taken during any previous period (excluding cash payments in respect of non-cash charges taken prior to December 31, 1998). "Consolidated Interest Expense" shall mean, for any period, the gross interest expense of CBS and its Consolidated Subsidiaries for such period, computed and consolidated in accordance with GAAP, but excluding (a) the amortization of deferred financing charges for such period and (b) the gross interest expense of the Discontinued Operations for such period. "Consolidated Leverage Ratio" shall mean, as of the last day of any period, the ratio of Consolidated Total Funded Indebtedness at such date to Consolidated EBITDA for such period. 10 6 "Consolidated Net Income" shall mean, with respect to CBS and its Consolidated Subsidiaries for any period, the aggregate net income (or net deficit) of such Persons (excluding that related to the Discontinued Operations) minus gains on the sale of assets (other than (a) gains on sales of inventory sold in the ordinary course of business and (b) gains on sales of other assets if such gains are less than $10,000,000 individually and less than $50,000,000 in the aggregate during such period) and extraordinary gains, computed and consolidated in accordance with GAAP; provided, that, except as otherwise provided in Section 1.2(c), there shall be excluded from the foregoing calculation (I) the income of any other Person accrued prior to the date it becomes a Consolidated Subsidiary of CBS or is merged into or consolidated with CBS or any of its Consolidated Subsidiaries, (II) the income of any other Person (other than a Consolidated Subsidiary of CBS) in which CBS or any of its Consolidated Subsidiaries has an ownership interest, except to the extent that any such income is actually received by CBS or such Consolidated Subsidiary in the form of dividends or similar distributions, (III) the Undistributed Income of any Consolidated Subsidiary (other than a Wholly Owned Subsidiary), except to the extent of CBS's direct or indirect percentage equity interest in such Consolidated Subsidiary, and (IV) the Undistributed Income of any Subsidiary (a "Limited Subsidiary") to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or requirement of law applicable to such Subsidiary. For the purposes of this definition, income shall be treated as "Undistributed Income" unless it has been distributed to CBS or a Wholly Owned Consolidated Subsidiary of CBS which is not a Limited Subsidiary. "Consolidated Net Worth" shall mean the total shareholders' equity of CBS and its Consolidated Subsidiaries determined without giving effect to any changes in such total shareholders' equity resulting from (a) changes in pension liabilities after the Net Worth Commencement Date pursuant to SFAS 87 and SFAS 88, (b) non-cash losses on the Disposition of businesses after the Net Worth Commencement Date, (c) changes made in accordance with GAAP to the amortization periods of separately identified intangible assets and goodwill attributable to the acquisition of CBS, Infinity or American Radio Systems, as the case may be, from the 40-year amortization utilized in the projections contained in the Confidential Information Memorandum (in the case of CBS and Infinity) or in the projections separately furnished to the Lenders (in the case of American Radio Systems) or (d) provisions for restructuring reserves (but not environmental or litigation reserves) established after the Net Worth Commencement Date and not exceeding $50,000,000 in the aggregate, net of cash payments made in respect of such reserves, all net of tax effect and computed and consolidated in accordance with GAAP. "Consolidated Subsidiary" shall mean, as to any Person, each Subsidiary of such Person (whether now existing or hereafter created or acquired) the financial statements of which shall be consolidated with the financial statements of such Person in accordance with GAAP. "Consolidated Total Funded Indebtedness" shall mean, with respect to CBS and its Consolidated Subsidiaries at any date, the sum at such date of (a) all Indebtedness for Borrowed Money (including commercial paper and unpaid reimbursement obligations in respect of drawn letters of credit but otherwise excluding letters of credit), (b) all indebtedness for the deferred purchase price of Property or services (other than trade accounts payable and accruals in the ordinary course of business), (c) all Capital Lease Obligations, (d) the amount of any Indebtedness for Borrowed Money secured by receivables sold by CBS and its Consolidated Subsidiaries pursuant to a program established for the purpose of financing such receivables, and (e) all Guarantees of indebtedness of the type referred to in any of clauses (a) through (d) above (other than Guarantees of any such indebtedness of CBS and its 11 7 Consolidated Subsidiaries); provided, that, in no event shall Indebtedness attributable to Discontinued Operations be included in Consolidated Total Funded Indebtedness. "Credit Event" shall mean the making of any Loan or the issuance of any Letter of Credit hereunder (including the designation of a Designated Letter of Credit as a "Letter of Credit" hereunder). It is understood that conversions and continuations pursuant to Section 2.8 do not constitute "Credit Events". "Debt Rating" shall mean the rating applicable to CBS's senior, unsecured, non-credit-enhanced long-term indebtedness for borrowed money, as assigned by either Rating Agency. "Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. "Designated Letters of Credit" shall mean each letter of credit issued by an Issuing Lender that (a) is not a Letter of Credit hereunder at the time of its issuance and (b) is designated on or after the Closing Date by CBS, with the consent of such Issuing Lender, as a "Letter of Credit" hereunder by written notice to the Administrative Agent in the form of Exhibit B-6. "Discontinued Operations" shall mean the operations classified as "discontinued operations" pursuant to Accounting Principles Board Opinion No. 30 as presented in the quarterly report of CBS on Form 10-Q for the quarter ended September 30, 1997 and filed with the SEC on December 14, 1997. "Disposition" shall mean, with respect to any Property, any sale, lease, assignment, conveyance, transfer or other disposition thereof; and the terms "Dispose" and "Disposed of" shall have correlative meanings. "Documentation Agent" shall mean Chase, together with its affiliates, as an arranger of the Commitments and as the documentation agent for the Lenders under this Agreement. "Dollars" or "$" shall mean lawful money of the United States of America. "Environmental Laws" shall mean any and all Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment, including, without limitation, ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" shall mean, with respect to CBS, any trade or business (whether or not incorporated) that is a member of a group of which CBS is a member and which is treated as a single employer under Section 414 of the Code. 12 8 "Eurodollar Competitive Loan" shall mean any Competitive Loan which is a Eurodollar Loan. "Eurodollar Loan" shall mean any Loan bearing interest at a rate determined by reference to the Eurodollar Rate. "Eurodollar Rate" shall mean, with respect to an Interest Period pertaining to any Eurodollar Loan, the rate of interest determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate Screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate Screen (or otherwise on the Telerate Service), the "Eurodollar Rate" shall be determined by reference to such other publicly available service for displaying eurodollar rates as may be agreed upon by the Administrative Agent and CBS or, in the absence of such agreement, the "Eurodollar Rate" shall instead be the interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the average of the rates at which Dollar deposits approximately equal in principal amount to (a) in the case of a Eurodollar Tranche, the portion of such Eurodollar Tranche of the Lender serving as Administrative Agent and (b) in the case of a Eurodollar Competitive Loan, a principal amount that would have been the portion of such Loan of the Lender serving as the Administrative Agent had such Loan been a Eurodollar Revolving Credit Loan, and for a maturity comparable to such Interest Period, are offered by the principal London offices of the Reference Banks (or, if any Reference Bank does not at the time maintain a London office, the principal London office of any affiliate of such Reference Bank) for immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Eurodollar Revolving Credit Loan" shall mean any Revolving Credit Loan which is a Eurodollar Loan. "Eurodollar Tranche" shall mean the collective reference to Eurodollar Revolving Credit Loans made by the Lenders, the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "Event of Default" shall have the meaning assigned to such term in Article VI, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Exchange Act Report" shall have the meaning assigned to such term in Section 3.3. "Excluded Indebtedness" shall mean (a) Indebtedness of any Person which is acquired by CBS or any of its Subsidiaries after the Original Closing Date, which Indebtedness was outstanding prior to the date of acquisition of such Person and was not created in anticipation thereof, (b) any Indebtedness owing by CBS or any of its Subsidiaries to CBS or any of its Subsidiaries (including any intercompany Indebtedness created by the declaration of a note payable dividend by any Subsidiary to CBS or any of its other Subsidiaries) and (c) Specified Section 5.5(o) Indebtedness. "Existing Credit Agreement" shall have the meaning assigned to such term in the recitals to this Agreement. 13 9 "Facility Exposure" shall mean, with respect to any Lender, the sum of (a) the Outstanding Revolving Extensions of Credit of such Lender, (b) the aggregate outstanding principal amount of any Competitive Loans made by such Lender and (c) in the case of a Swingline Lender, the aggregate outstanding principal amount of any Quoted Swingline Loans made by such Swingline Lender. "FCC" shall mean the Federal Communications Commission. "FCC Licenses" shall mean, with respect to CBS or any of its Subsidiaries, any radio, television or other license, permit, certificate of compliance or authorization issued by the FCC and required for the operation of its respective radio and television broadcast stations. "Federal Funds Effective Rate" shall have the meaning assigned to such term in the definition of "Alternate Base Rate". "Fees" shall mean the Commitment Fees, the Administrative Agent's Fees, the Issuing Lender Fees and the LC Fees. "Financial Covenants" shall have the meaning assigned to such term in Section 1.2(b). "Financial Letter of Credit" shall mean any Letter of Credit that, as determined by the Administrative Agent, (a) supports a financial obligation and (b) qualifies for the 100% credit conversion factor under the applicable Bank for International Settlements guidelines. "Financial Officer" of any corporation shall mean its chief financial officer, its Vice President and Treasurer or its Vice President and Controller or, in each case, any comparable officer or any Person designated by any such officer. "Financial Services" shall mean those operations designated as the Financial Services portion of Discontinued Operations in the 1996 First Quarter Financial Statements. "Foreign Currency" shall mean any currency other than Dollars which is readily convertible by the relevant Issuing Lender into Dollars. "Foreign Exchange Rate" shall mean, with respect to any Foreign Currency on a particular date, the rate at which such Foreign Currency may be exchanged into Dollars, determined by reference to the selling rate in respect of such Foreign Currency published in the "Wall Street Journal" on the relevant date of determination. In the event that such rate is not, or ceases to be, so published by the "Wall Street Journal", the "Foreign Exchange Rate" with respect to such Foreign Currency shall be determined by reference to such other publicly available source for determining exchange rates as may be agreed upon by the Administrative Agent and CBS or, in the absence of such agreement, such "Foreign Exchange Rate" shall instead be the Administrative Agent's spot rate of exchange in the interbank market where its foreign currency exchange operations in respect of such Foreign Currency are then being conducted, at or about 12:00 noon, local time, at such date for the purchase of Dollars with such Foreign Currency, for delivery two banking days later. "FSC" shall mean a subsidiary of CBS or any of its Subsidiaries which is a FSC as defined in Section 922 of the Code, or in any successor provision, and which is used solely for the purpose of a single lease project or lease transaction or related lease projects or lease transactions and is not related to Property predominantly manufactured by CBS or any of its Subsidiaries. 14 10 "GAAP" shall mean generally accepted accounting principles applied on a consistent basis (but subject to changes approved by CBS's independent public accountants). "Governmental Authority" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Granting Bank" shall have the meaning specified in Section 9.4(i). "Guarantee" of or by any Person shall mean any obligation, contingent or otherwise, of such Person guaranteeing or entered into with the purpose of guaranteeing any Indebtedness of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (b) to purchase Property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness or (c) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness; provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit, in either case in the ordinary course of business. "Indebtedness" of any Person shall mean, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to Property or assets purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of Property or services, (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on Property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person and (i) all obligations of such Person as an account party in respect of outstanding letters of credit (whether or not drawn) and bankers' acceptances; provided, however, that Indebtedness shall not include (i) trade accounts payable arising in the ordinary course of business, (ii) deferred compensation, (iii) any Indebtedness of such Person (other than any such Person that is a FSC) to the extent (A) such Indebtedness does not appear on the financial statements of such Person, (B) such Indebtedness is recourse only to certain assets of such Person and (C) the assets to which such Indebtedness is recourse only appear on the financial statements of such Person net of such Indebtedness or (iv) obligations (not constituting obligations for borrowed money) specifically with respect to the production, distribution and acquisition of television and other programming rights or talent; and provided further that the amount of any Indebtedness described in clause (f) above shall be the lower of the amount of the obligation or the fair market value of the collateral securing such obligation. The Indebtedness of any Person shall include the Indebtedness of any partnership in which such Person is a general partner, which Indebtedness is recourse to such general partner. "Indebtedness for Borrowed Money" shall mean Indebtedness of the type described in clause (a) or (b) of the definition of "Indebtedness" and any Guarantee thereof. "Infinity" shall have the meaning assigned to such term in the recitals to this Agreement. 15 11 "Infinity Credit Agreement" shall mean the Credit Agreement, dated as of the date hereof, among Infinity, the Subsidiary Borrowers (as defined therein) parties thereto, the lenders named therein, Bank of America, N.A. and Toronto Dominion Bank, as syndication agents, The Chase Manhattan Bank, as documentation agent and Morgan Guaranty Trust Company of New York, as administrative agent, as amended, supplemented or otherwise modified from time to time. "Information" shall have the meaning assigned to such term in Section 3.13. "Intellectual Property" shall mean the collective reference to patents, trademarks (registered or unregistered), trade names, service marks, assumed names, copyrights, technology, know-how and processes. "Interest Payment Date" shall mean (a) with respect to any Eurodollar Loan or Absolute Rate Loan, the last day of the Interest Period applicable thereto and, in the case of a Eurodollar Loan with an Interest Period of more than three months' duration or an Absolute Rate Loan with an Interest Period of more than 90 days' duration, each day that would have been an Interest Payment Date for such Loan had successive Interest Periods of three months' duration or 90 days' duration, as the case may be, been applicable to such Loan and, in addition, the date of any conversion of any Eurodollar Revolving Credit Loan to an ABR Loan, the date of repayment or prepayment of any Eurodollar Loan and the applicable Maturity Date; (b) with respect to any ABR Loan (other than an ABR Swingline Loan which is not an Unrefunded Swingline Loan), the last day of each March, June, September and December and the applicable Maturity Date; (c) with respect to any ABR Swingline Loan (other than an Unrefunded Swingline Loan), the earlier of (i) the day that is five Business Days after such Loan is made and (ii) the Revolving Credit Maturity Date and (d) with respect to any Quoted Swingline Loan, the date established as such by the relevant Swingline Borrower and the relevant Swingline Lender prior to the making thereof (but in any event no later than the Revolving Credit Maturity Date). "Interest Period" shall mean (a) as to any Eurodollar Loan, the period commencing on the borrowing date or conversion date of such Loan, or on the last day of the immediately preceding Interest Period applicable to such Loan, as the case may be, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months or (subject, in the case of Revolving Credit Loans, to the prior consent of each Lender) 9 or 12 months thereafter, as the relevant Borrower may elect, and (b) as to any Absolute Rate Loan, the period commencing on the date of such Loan and ending on the date specified in the Competitive Bids in which the offer to make such Absolute Rate Loan was extended, which shall not be later than 180 days after the date of such Loan; provided, however, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of Eurodollar Loans only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) notwithstanding anything to the contrary herein, no Borrower may select an Interest Period which would end after the Maturity Date applicable to the relevant Loan. Interest shall accrue from and including that first day of an Interest Period to but excluding the last day of such Interest Period. "Interim Certificate" shall have the meaning assigned to such term in Annex I hereto. "Issuing Lender" shall mean any Lender designated as an Issuing Lender in an Issuing Lender Agreement executed by such Lender, CBS and the Administrative Agent. 16 12 "Issuing Lender Agreement" shall mean an agreement, substantially in the form of Exhibit G, executed by a Lender, CBS, and the Administrative Agent pursuant to which such Lender agrees to become an Issuing Lender hereunder. "Issuing Lender Fees" shall mean, as to any Issuing Lender, the fees set forth in the applicable Issuing Lender Agreement. "King World" shall mean King World Productions, Inc. "King World Merger" shall mean the merger of King World with and into a Subsidiary of CBS. "King World Merger Date" shall mean the date of consummation of the King World Merger, December 15, 1999. "LC Disbursement" shall mean any payment or disbursement made by an Issuing Lender under or pursuant to a Letter of Credit. "LC Exposure" shall mean, as to each Lender, such Lender's Revolving Credit Percentage of the Aggregate LC Exposure. "LC Fee" shall have the meaning assigned such term in Section 2.9(b). "Lenders" shall have the meaning assigned to such term in the preamble to this Agreement. "Letters of Credit" shall mean letters of credit or bank guarantees issued by an Issuing Lender for the account of CBS pursuant to Section 2.7 (including any Designated Letters of Credit). "Leveraged Spin-Off Indebtedness" shall mean Indebtedness incurred by a Subsidiary (either previously existing or newly formed) for the purpose of financing a cash dividend or other cash distribution made, directly or indirectly, to CBS, so long as (a) concurrently with or immediately after the incurrence of such Indebtedness and the making of such dividend or distribution, all of the common stock of such Subsidiary is distributed to the common shareholders of CBS and (b) the assets of the Subsidiary which is the subject of such transaction are comprised entirely of assets included within those businesses of CBS and its Subsidiaries identified in a written notice from CBS delivered to the Lenders prior to the Original Closing Date. "Lien" shall mean, with respect to any asset or Property, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset or Property and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset or Property. "Loan" shall mean any loan made by a Lender hereunder. "Margin" shall mean, as to any Eurodollar Competitive Loan, the margin (expressed as a percentage rate per annum in the form of a decimal rounded to no more than four places) to be added to or subtracted from the Eurodollar Rate in order to determine the interest rate applicable to such Loan, as specified in the Competitive Bid relating to such Loan. 17 13 "Margin Stock" shall have the meaning assigned to such term under Regulation U. "Material Acquisition" shall mean any acquisition of Property or series of related acquisitions of Property (including by way of merger) which (a) constitutes assets comprising all or substantially all of an operating unit of a business or constitutes all or substantially all of the common stock of a Person and (b) involves the payment of consideration by CBS and its Subsidiaries (valued at the initial principal amount thereof in the case of non-cash consideration consisting of notes or other debt securities and valued at fair market value in the case of other non-cash consideration) in excess of $50,000,000. "Material Adverse Effect" shall mean (a) a material adverse effect on the Property, business, results of operations or financial condition of CBS and its Subsidiaries taken as a whole or (b) material impairment of the ability of CBS to perform any of its obligations under this Agreement. "Material Disposition" shall mean any Disposition of Property or series of related Dispositions of Property which yields gross proceeds to CBS or any of its Subsidiaries (valued at the initial principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $50,000,000. "Material Subsidiary" shall mean any Subsidiary of CBS except for Subsidiaries which in the aggregate would not constitute a significant subsidiary under Regulation S-X of the SEC, provided, that each Subsidiary Borrower shall in any event constitute a Material Subsidiary. "Maturity Date" shall mean (a) in the case of the Revolving Credit Loans and the ABR Swingline Loans, the Revolving Credit Maturity Date, (b) in the case of the Quoted Swingline Loans, the date established as such by the relevant Swingline Borrower and the relevant Swingline Lender prior to the making thereof (but in any event no later than the Revolving Credit Maturity Date) and (c) in the case of Competitive Loans, the last day of the Interest Period applicable thereto, as specified in the related Competitive Bid Request. "Moody's" shall mean Moody's Investors Service, Inc. "Morgan" shall have the meaning assigned to such term in the preamble to this Agreement. "Multiemployer Plan" shall mean a multiemployer plan as defined in Section 3(37) of ERISA to which contributions have been made by CBS or any ERISA Affiliate of CBS and which is covered by Title IV of ERISA. "Net Cash Proceeds" shall mean, in connection with any Disposition of all or any material part of any Allocated Unit, the proceeds thereof in the form of cash and cash equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such Disposition, net of (i) attorneys' fees, accountants' fees, investment banking fees and other customary fees and expenses actually incurred in connection therewith, (ii) taxes paid or reasonably estimated to be payable on a current basis as a result thereof (after taking into account any available tax credits or deductions) and (iii) any cash purchase price adjustments paid in connection therewith (but only as and when paid). 18 14 "Net Worth Commencement Date" shall mean December 31, 1997. "1996 First Quarter Financial Statements" shall mean the unaudited consolidated financial statements of CBS and its subsidiaries as of and for the fiscal quarter ended March 31, 1996 as set forth in the Quarterly Report on Form 10-Q of CBS. "Non-Financial Letter of Credit" shall mean any Letter of Credit that is not a Financial Letter of Credit. "Non-U.S. Person" shall have the meaning assigned to such term in Section 2.20(f). "Original Closing Date" shall mean August 29, 1996. "Outstanding Revolving Extensions of Credit" shall mean, as to any Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding, (b) such Lender's LC Exposure at such time and (c) such Lender's ABR Swingline Exposure at such time. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA, or any successor thereto. "Person" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company or other entity, or any government or any agency or political subdivision thereof. "Plan" shall mean any employee pension benefit plan as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code and which is maintained for employees of CBS or any ERISA Affiliate. "Prime Rate" shall have the meaning assigned to such term in the definition of "Alternate Base Rate". "Pro Forma Period" shall have the meaning assigned to such term in Section 1.2(c). "Projections" shall have the meaning assigned to such term in Section 3.13. "Property" shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock. "Quoted Swingline Loans" shall have the meaning assigned to such term in Section 2.6(a). "Quoted Swingline Rate" shall have the meaning assigned to such term in Section 2.6(a). "Rating Agencies" shall mean S&P and Moody's. "Reference Banks" shall mean Chase, Morgan, Bank of America and Toronto Dominion. 19 15 "Register" shall have the meaning assigned to such term in Section 9.4(d). "Regulation D" shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Required Lenders" shall mean, at any time, Lenders whose respective Total Facility Percentages aggregate not less than 51%. "Responsible Officer" of any corporation shall mean any executive officer or Financial Officer of such corporation and any other officer or similar official thereof responsible for the administration of the obligations of such corporation in respect of this Agreement (or, in the case of matters relating to ERISA, any officer responsible for the administration of the pension funds of such corporation). "Revolving Credit Borrowing Request" shall mean a request made pursuant to Section 2.4 in the form of Exhibit B-4. "Revolving Credit Loans" shall mean the revolving loans made by the Lenders to any Borrower pursuant to Section 2.4. Each Revolving Credit Loan shall be a Eurodollar Loan or an ABR Loan. "Revolving Credit Maturity Date" shall mean August 29, 2001. "Revolving Credit Percentage" of any Lender at any time shall mean the percentage of the aggregate Commitments (or, following any termination of all the Commitments, the Commitments most recently in effect) represented by such Lender's Commitment (or, following any such termination, the Commitment of such Lender most recently in effect). "Sale/Leaseback" shall mean any lease, whether an operating lease or a capital lease, whereby CBS or any of its Subsidiaries, directly or indirectly, becomes or remains liable as lessee or as guarantor or other surety, of any Property whether now owned or hereafter acquired, (a) that CBS or any of its Subsidiaries, as the case may be, has sold or transferred or is to sell or transfer to any other Person (other than CBS or any of its Subsidiaries), or (b) that is acquired by any other Person, as part of a financing transaction to which CBS or any of its Subsidiaries is a party, in contemplation of leasing such Property to CBS or any of its Subsidiaries, as the case may be. "Sale/Leaseback Attributable Debt" shall mean, for any Sale/Leaseback, the present value (discounted at the rate of interest implicit in such Sale/Leaseback, determined in accordance with GAAP or, in the event that such rate of interest is not reasonably determinable, discounted at the interest rate applicable to an ABR Revolving Credit Loan on the date of the commencement of such transaction), as of the date on which the amount thereof is to be determined, of the obligation of the lessee for net rental payments during the remaining term of such Sale/Leaseback (including any period for which such Sale/Leaseback may, at the option of the lessor, be extended). In the case of any master lease agreement, each fixed or capital asset subject thereto (or any related group of such assets for which the lease terms commence at the same time) shall be deemed to be the subject of a separate Sale/Leaseback, and, to the extent that any fixed or capital asset is the subject of a Sale/Leaseback and then of another, the 20 16 Sale/Leaseback Attributable Debt will be deemed to be incurred only under the first such Sale/Leaseback. For the purposes of Section 5.5(o), the Sale/Leaseback Attributable Debt of any Subsidiary of CBS which is not a Wholly Owned Subsidiary shall be deemed to be the amount determined in accordance with the foregoing provisions of this definition multiplied by CBS's direct or indirect percentage common equity interest in such Subsidiary at the date of determination. "S&P" shall mean Standard & Poor's Ratings Services. "SEC" shall mean the Securities and Exchange Commission. "Specified Section 5.5(o) Indebtedness" shall have the meaning assigned to such term in Section 5.5(o). "SPC" shall have the meaning specified in Section 9.4(i). "Subsidiary" shall mean, for any Person (the "Parent"), any corporation, partnership or other entity of which shares of Voting Capital Stock sufficient to elect a majority of the board of directors or other Persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) are at the time directly or indirectly owned or controlled by the Parent or one or more of its Subsidiaries or by the Parent and one or more of its Subsidiaries; provided, however, that (a) no Person of which CBS or any of its Subsidiaries acquires or has acquired control in connection with or as a consequence of any debt or equity financing provided to such Person in the ordinary course of the business of WFSI, any of its Subsidiaries, Financial Services or WCI shall be deemed a Subsidiary of CBS and (b) for purposes of paragraph (d) of Article VI, no Person which is a FSC shall be deemed a Subsidiary of CBS. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of CBS. "Subsidiary Borrower" shall mean any Subsidiary, other than Infinity and its Subsidiaries, (a) which is organized under the laws of the United States of America, any state, territory or possession thereof or the District of Columbia, (b) which is designated as a Subsidiary Borrower by CBS pursuant to a Subsidiary Borrower Designation, (c) which has delivered to the Administrative Agent a Subsidiary Borrower Request and (d) whose designation as a Subsidiary Borrower has not been terminated pursuant to Section 4.2. Notwithstanding anything to the contrary herein, on the Closing Date, (i) any Subsidiary which is a Subsidiary Borrower under the Existing Credit Agreement, other than Infinity or any Subsidiary of Infinity, shall be deemed to be a Subsidiary Borrower under this Agreement; (ii) any Subsidiary of Infinity which is a Subsidiary Borrower under the Existing Credit Agreement shall be deemed to be a Subsidiary Borrower under the Infinity Credit Agreement and not under the Existing Credit Agreement; and (iii) Infinity and each of its Subsidiaries shall cease to be a Subsidiary Borrower under the Existing Credit Agreement. "Subsidiary Borrower Designation" shall mean a designation, substantially in the form of Exhibit B-7, which may be delivered by CBS and shall be accompanied by a Subsidiary Borrower Request. "Subsidiary Borrower Obligations" shall mean, with respect to each Subsidiary Borrower, the unpaid principal of and interest on the Loans made to such Borrower (including, without limitation, interest accruing after the maturity of the Loans made to such Borrower and interest accruing 21 17 after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to such Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) and all other obligations and liabilities of such Borrower to the Administrative Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement. "Subsidiary Borrower Request" shall mean a request, substantially in the form of Exhibit B-8, which is received by the Administrative Agent in connection with a Subsidiary Borrower Designation. "Swingline Borrower" shall mean CBS and any Subsidiary Borrower designated as a "Swingline Borrower" by CBS in a written notice to the Administrative Agent, provided, that, unless otherwise agreed by the Administrative Agent, no more than one Subsidiary Borrower may be a Swingline Borrower at any one time. "Swingline Commitment" shall mean, with respect to any Swingline Lender, the commitment of such Lender to make ABR Swingline Loans pursuant to Section 2.6, as designated in accordance with Section 2.6(g). "Swingline Lender" shall mean any Lender designated by CBS as a "Swingline Lender" pursuant to Section 2.6(g). "Swingline Loans" shall mean the collective reference to the ABR Swingline Loans and the Quoted Swingline Loans. "Swingline Percentage" of any Swingline Lender at any time shall mean the percentage of the aggregate Swingline Commitments represented by such Swingline Lender's Swingline Commitment. "Syndication Agents" shall have the meaning assigned to such term in the preamble to this Agreement. "Test Period" shall have the meaning assigned to such term in Section 1.2(c). "Toronto Dominion" shall have the meaning assigned to such term in the preamble to this Agreement. "Total Commitment" shall mean at any time the aggregate amount of the Commitments in effect at such time. "Total Facility Exposure" shall mean at any time the aggregate amount of the Facility Exposures at such time. "Total Facility Percentage" shall mean, as to any Lender at any time, the quotient (expressed as a percentage) of (a) such Lender's Commitment (or (x) for the purposes of acceleration of the Loans pursuant to clause (II) of Article VI or (y) if the Commitments have terminated, such Lender's Facility Exposure) and (b) the aggregate of all Lenders' Commitments (or (x) for the purposes of 22 18 acceleration of the Loans pursuant to clause (II) of Article VI or (y) if the Commitments have terminated, the Total Facility Exposure). "Transferee" shall mean any assignee or participant described in Section 9.4(b) or (f). "Type" when used in respect of any Loan, shall refer to the Rate by reference to which interest on such Loan is determined. For purposes hereof, "Rate" shall mean the Eurodollar Rate, the Alternate Base Rate, the Quoted Swingline Rate and the rate paid on Absolute Rate Loans. "Unrefunded Swingline Loans" shall have the meaning assigned to such term in Section 2.6(d). "U.S. Person" shall mean a citizen, national or resident of the United States of America, or an entity organized in or under the laws of the United States of America. "Viacom" shall mean Viacom, Inc., a Delaware corporation. "Viacom Merger" shall mean the merger between CBS and Viacom. "Viacom Merger Agreement" shall mean the Amended and Restated Agreement and Plan of Merger, dated as of September 6, 1999, between Viacom and CBS, as amended, supplemented or otherwise modified from time to time. "Voting Capital Stock" shall mean securities or other ownership interests of a corporation, partnership or other entity having by the terms thereof ordinary voting power to vote in the election of the board of directors or other Persons performing similar functions of such corporation, partnership or other entity (without regard to the occurrence of any contingency). "WCI" shall mean WCI Communities, Inc., a Delaware corporation, and its Wholly Owned Subsidiaries. "WFSI" shall mean CBS Financial Services, Inc., a Delaware corporation that was merged into CBS on May 5, 1993. "Wholly Owned Subsidiary" shall mean any Subsidiary of which all shares of Voting Capital Stock (other than, in the case of a corporation, directors' qualifying shares) are owned directly or indirectly by the Parent (as defined in the definition of "Subsidiary"). SECTION 1.2. Terms Generally. (a) The definitions in Section 1.1 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall, except where the context otherwise requires, be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. (b) Except as otherwise expressly provided herein, all terms of an accounting nature shall be construed in accordance with GAAP as in effect from time to time; provided, however, that, for purposes of determining compliance with the covenants set forth in Sections 5.7, 5.8 and 5.9 (such 23 19 Sections being referred to as the "Financial Covenants"), except as otherwise set forth in the Financial Covenants and the definitions related thereto, such terms shall be construed in accordance with GAAP as in effect on March 31, 1996, applied on a basis consistent with the application used in preparing the 1996 First Quarter Financial Statements. (c) For the purposes of calculating Consolidated EBITDA and Consolidated Interest Expense for any period (a "Test Period"), (i) if at any time from the period (a "Pro Forma Period") commencing on the second day of such Test Period and ending on the date which is ten days prior to the date of delivery of the Compliance Certificate or Interim Certificate, as the case may be, in respect of such Test Period (or, in the case of any pro forma calculation made pursuant hereto in respect of a particular transaction, ending on the date such transaction is consummated after giving effect thereto), CBS or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDA for such Test Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the Property which is the subject of such Material Disposition for such Test Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Test Period, and Consolidated Interest Expense for such Test Period shall be reduced by an amount equal to the Consolidated Interest Expense for such Test Period attributable to any Indebtedness of CBS or any Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to CBS and its Subsidiaries in connection with such Material Disposition (or, if the Capital Stock of any Subsidiary is sold, the Consolidated Interest Expense for such Test Period directly attributable to the Indebtedness of such Subsidiary to the extent CBS and its continuing Subsidiaries are no longer liable for such Indebtedness after such Disposition); (ii) if during such Pro Forma Period CBS or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA and Consolidated Interest Expense for such Test Period shall be calculated after giving pro forma effect thereto (including the incurrence or assumption of any Indebtedness in connection therewith) as if such Material Acquisition (and the incurrence or assumption of any such Indebtedness) occurred on the first day of such Test Period; (iii) if during such Pro Forma Period any Person that subsequently became a Subsidiary or was merged with or into CBS or any Subsidiary since the beginning of such Pro Forma Period shall have entered into any disposition or acquisition transaction that would have required an adjustment pursuant to clause (i) or (ii) above if made by CBS or a Subsidiary during such Pro Forma Period, Consolidated EBITDA and Consolidated Interest Expense for such Test Period shall be calculated after giving pro forma effect thereto as if such transaction occurred on the first day of such Test Period; and (iv) the financial results and effects of the operations of the Eye on People and TeleNoticias businesses shall be entirely excluded from Consolidated EBITDA. For the purposes of this paragraph, whenever pro forma effect is to be given to a Material Disposition or Material Acquisition, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness discharged or incurred in connection therewith, the pro forma calculations shall be determined in good faith by a Financial Officer of CBS. If any Indebtedness bears a floating rate of interest and the incurrence or assumption thereof is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the last day of the relevant Pro Forma Period had been the applicable rate for the entire relevant Test Period (taking into account any interest rate protection agreement applicable to such Indebtedness if such interest rate protection agreement has a remaining term in excess of 12 months). (d) For the purposes of the Financial Covenants, (i) the Discontinued Operations shall be disregarded and (ii) the businesses classified as Discontinued Operations shall be limited to those businesses treated as such in the financial statements of CBS referred to in the definition of "Discontinued Operations" and the accounting treatment of Discontinued Operations shall be consistent with the accounting treatment thereof in such financial statements. 24 20 ARTICLE II. THE CREDITS SECTION 2.1. Commitments. Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, to make Revolving Credit Loans to CBS or any Subsidiary Borrower, at any time and from time to time on and after the Closing Date and until the earlier of (a) the Business Day immediately preceding the Revolving Credit Maturity Date and (b) the termination of the Commitment of such Lender, in an aggregate principal amount at any time outstanding not to exceed such Lender's Commitment. Each Borrower may borrow, prepay and reborrow Revolving Credit Loans on and after the Closing Date and prior to the Revolving Credit Maturity Date, subject to the terms, conditions and limitations set forth herein. On the Closing Date, all loans and obligations of, and any Letters of Credit issued on behalf of, CBS and any Subsidiary Borrowers thereunder (other than Infinity and its Subsidiaries) under or in connection with the Existing Credit Agreement shall be deemed to be outstanding hereunder and not under the Existing Credit Agreement. SECTION 2.2. Revolving Credit Loans; Competitive Loans. (a) Each Revolving Credit Loan shall be made to the relevant Borrower by the Lenders ratably in accordance with their respective Commitments. Each Competitive Loan shall be made to the relevant Borrower by the Lender whose Competitive Bid therefor is accepted, and in the amount so accepted, in accordance with the procedures set forth in Section 2.3. The Revolving Credit Loans or Competitive Loans shall be made in minimum amounts equal to (i) in the case of Competitive Loans, $5,000,000 or an integral multiple of $1,000,000 in excess thereof, (ii) in the case of Eurodollar Revolving Credit Loans, $50,000,000 or an integral multiple of $5,000,000 in excess thereof, and (iii) in the case of ABR Revolving Credit Loans, $25,000,000 or an integral multiple of $5,000,000 in excess thereof (or an aggregate principal amount equal to the remaining balance of the available Total Commitment). (b) Each Lender shall make each Loan (other than a Swingline Loan, as to which this Section 2.2 shall not apply) to be made by it on the proposed date thereof by wire transfer of immediately available funds to the Administrative Agent in New York, New York, not later than 12:00 noon, New York City time (or, in connection with an ABR Loan to be made on the same day on which a notice is submitted, 12:30 p.m., New York City time) and the Administrative Agent shall by 3:00 p.m., New York City time, credit the amounts so received to the general deposit account of the relevant Borrower with the Administrative Agent. SECTION 2.3. Competitive Bid Procedure. (a) In order to request Competitive Bids, the relevant Borrower shall hand deliver or telecopy to the Administrative Agent a duly completed Competitive Bid Request in the form of Exhibit B-1, to be received by the Administrative Agent (i) in the case of a Eurodollar Competitive Loan, not later than 10:00 a.m., New York City time, four Business Days before a proposed Competitive Loan and (ii) in the case of an Absolute Rate Loan, not later than 10:00 a.m., New York City time, one Business Day before a proposed Competitive Loan. A Competitive Bid Request that does not conform substantially to the format of Exhibit B-1 may be rejected in the Administrative Agent's discretion (exercised in good faith), and the Administrative Agent shall promptly notify the relevant Borrower of such rejection by telephone, confirmed by telecopier. Such request shall in each case refer to this Agreement and specify (x) whether the Competitive Loan then being requested is to be a Eurodollar Competitive Loan or an Absolute Rate Loan, (y) the date of such Loan (which shall be a Business Day) and the aggregate principal amount thereof which shall be in a minimum principal amount of $5,000,000 and in an integral multiple of $1,000,000, and (z) the Interest Period with respect 25 21 thereto (which may not end after the Revolving Credit Maturity Date). Promptly after its receipt of a Competitive Bid Request that is not rejected as aforesaid (and in any event by 5:00 p.m., New York City time, on the date of such receipt if such receipt occurs by the time specified in the first sentence of this paragraph), the Administrative Agent shall invite by telecopier (in the form set forth in Exhibit B-2) the Lenders to bid, on the terms and conditions of this Agreement, to make Competitive Loans pursuant to such Competitive Bid Request. (b) Each Lender may, in its sole discretion, make one or more Competitive Bids to the relevant Borrower responsive to a Competitive Bid Request. Each Competitive Bid must be received by the Administrative Agent by telecopier, in the form of Exhibit B-3, (i) in the case of a Eurodollar Competitive Loan, not later than 9:30 a.m., New York City time, three Business Days before a proposed Competitive Loan and (ii) in the case of an Absolute Rate Loan, not later than 9:30 a.m., New York City time, on the day of a proposed Competitive Loan. Multiple Competitive Bids will be accepted by the Administrative Agent. Competitive Bids that do not conform substantially to the format of Exhibit B-3 may be rejected by the Administrative Agent after conferring with, and upon the instruction of, the relevant Borrower, and the Administrative Agent shall notify the Lender making such nonconforming Competitive Bid of such rejection as soon as practicable. Each Competitive Bid shall refer to this Agreement and specify (x) the principal amount (which shall be in a minimum principal amount of $5,000,000 and in an integral multiple of $1,000,000 and which may equal the entire principal amount of the Competitive Loan requested by the relevant Borrower) of the Competitive Loan or Loans that the applicable Lender is willing to make to the relevant Borrower, (y) the Competitive Bid Rate or Rates at which such Lender is prepared to make the Competitive Loan or Loans and (z) the Interest Period and the last day thereof. A Competitive Bid submitted pursuant to this paragraph (b) shall be irrevocable (subject to the satisfaction of the conditions to borrowing set forth in Article IV). (c) The Administrative Agent shall promptly (and in any event by 10:15 a.m., New York City time, on the date on which such Competitive Bids shall have been made) notify the relevant Borrower by telecopier of all the Competitive Bids made, the Competitive Bid Rate and the principal amount of each Competitive Loan in respect of which a Competitive Bid was made and the identity of the Lender that made each Competitive Bid. The Administrative Agent shall send a copy of all Competitive Bids to the relevant Borrower for its records as soon as practicable after completion of the bidding process set forth in this Section 2.3. (d) The relevant Borrower may in its sole and absolute discretion, subject only to the provisions of this paragraph (d), accept or reject any Competitive Bid referred to in paragraph (c) above. The relevant Borrower shall notify the Administrative Agent by telephone, confirmed by telecopier in such form as may be agreed upon by such Borrower and the Administrative Agent, whether and to what extent it has decided to accept or reject any of or all the Competitive Bids referred to in paragraph (c) above, (x) in the case of a Eurodollar Competitive Loan, not later than 11:00 a.m., New York City time, three Business Days before a proposed Competitive Loan, and (y) in the case of an Absolute Rate Loan, not later than 11:00 a.m., New York City time, on the day of a proposed Competitive Loan; provided, however, that (i) the failure by such Borrower to give such notice shall be deemed to be a rejection of all the Competitive Bids referred to in paragraph (c) above, (ii) such Borrower shall not accept a Competitive Bid made at a particular Competitive Bid Rate if it has decided to reject a Competitive Bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by such Borrower shall not exceed the principal amount specified in the Competitive Bid Request (but may be less than that requested), (iv) if such Borrower shall accept a Competitive Bid or Competitive Bids made at a particular Competitive Bid Rate but the amount of such Competitive Bid or Competitive Bids shall cause the total amount of Competitive Bids to be accepted by it to exceed the amount specified in 26 22 the Competitive Bid Request, then such Borrower shall accept a portion of such Competitive Bid or Competitive Bids in an amount equal to the amount specified in the Competitive Bid Request less the amount of all other Competitive Bids accepted with respect to such Competitive Bid Request, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Competitive Bid at such Competitive Bid Rate, and (v) except pursuant to clause (iv) above no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral amount multiple of $1,000,000; provided, further, however, that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in a manner which shall be in the discretion of such Borrower. A notice given by any Borrower pursuant to this paragraph (d) shall be irrevocable. (e) The Administrative Agent shall promptly notify each bidding Lender whether or not its Competitive Bid has been accepted (and if so, in what amount and at what Competitive Bid Rate) by telecopy sent by the Administrative Agent, and each successful bidder will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted. (f) A Competitive Bid Request shall not be made within five Business Days after the date of any previous Competitive Bid Request, unless the Administrative Agent shall agree otherwise. (g) If the Lender which is the Administrative Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to the relevant Borrower one quarter of an hour earlier than the latest time at which the other Lenders are required to submit their Competitive Bids to the Administrative Agent pursuant to paragraph (b) above. (h) All notices required by this Section 2.3 shall be given in accordance with Section 9.1. (i) No Borrower shall have the right to prepay any Competitive Loan without the consent of the affected Lender or Lenders. SECTION 2.4. Revolving Credit Borrowing Procedure. In order to request a Revolving Credit Loan, the relevant Borrower shall hand deliver or telecopy to the Administrative Agent a Revolving Credit Borrowing Request in the form of Exhibit B-4 (a) in the case of a Eurodollar Revolving Credit Loan, not later than 11:00 a.m., New York City time, three Business Days before a proposed borrowing and (b) in the case of an ABR Revolving Credit Loan, not later than 11:00 a.m., New York City time, on the day of a proposed borrowing. Such notice shall be irrevocable and shall in each case specify (i) whether the Revolving Credit Loan then being requested is to be a Eurodollar Revolving Credit Loan or an ABR Revolving Credit Loan, (ii) the date of such Revolving Credit Loan (which shall be a Business Day) and the amount thereof; and (iii) in the case of a Eurodollar Revolving Credit Loan, the Interest Period with respect thereto. The Administrative Agent shall promptly advise the Lenders of any notice given pursuant to this Section 2.4 and of each Lender's portion of the requested Loan. SECTION 2.5. Repayment of Loans. Each Borrower shall repay all outstanding Revolving Credit Loans and ABR Swingline Loans made to it, in each case on the Revolving Credit 27 23 Maturity Date (or such earlier date on which the Commitments shall terminate in accordance herewith). Each Borrower shall repay Quoted Swingline Loans and Competitive Loans made to it, in each case on the Maturity Date applicable thereto. Each Loan shall bear interest from and including the date thereof on the outstanding principal balance thereof as set forth in Section 2.10. SECTION 2.6. Swingline Loans. (a) Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, each Swingline Lender agrees, severally and not jointly, at any time and from time to time on and after the Closing Date and until the earlier of the Business Day immediately preceding the Revolving Credit Maturity Date and the termination of the Swingline Commitment of such Swingline Lender, (i) to make available to any Swingline Borrower Swingline Loans ("Quoted Swingline Loans") on the basis of quoted interest rates (each, a "Quoted Swingline Rate") furnished by such Swingline Lender from time to time in its discretion to such Swingline Borrower (through the Administrative Agent) and accepted by such Swingline Borrower in its discretion and (ii) to make Swingline Loans ("ABR Swingline Loans") to any Swingline Borrower bearing interest at a rate equal to the Alternate Base Rate in an aggregate principal amount (in the case of this clause (ii)) not to exceed such Swingline Lender's Swingline Commitment. The aggregate outstanding principal amount of the Quoted Swingline Loans of any Swingline Lender, when added to the aggregate outstanding principal amount of the ABR Swingline Loans of such Swingline Lender, may exceed such Swingline Lender's Swingline Commitment, provided, that in no event shall the aggregate outstanding principal amount of the Swingline Loans exceed the aggregate Swingline Commitments then in effect. Each Quoted Swingline Loan shall be made only by the Swingline Lender furnishing the relevant Quoted Swingline Rate. Each ABR Swingline Loan shall be made by the Swingline Lenders ratably in accordance with their respective Swingline Percentages. The Swingline Loans shall be made in a minimum aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof (or an aggregate principal amount equal to the remaining balance of the available Swingline Commitments). Each Swingline Lender shall make the portion of each Swingline Loan to be made by it available to any Swingline Borrower by means of a credit to the general deposit account of such Swingline Borrower with the Administrative Agent or a wire transfer, at the expense of such Swingline Borrower, to an account designated in writing by such Swingline Borrower, in each case by 3:30 p.m., New York City time, on the date such Swingline Loan is requested to be made pursuant to paragraph (b) below, in immediately available funds. Each Swingline Borrower may borrow, prepay and reborrow Swingline Loans on or after the Closing Date and prior to the Revolving Credit Maturity Date (or such earlier date on which the Commitments shall terminate in accordance herewith) on the terms and subject to the conditions and limitations set forth herein. (b) The relevant Swingline Borrower shall give the Administrative Agent telephonic, written or telecopy notice substantially in the form of Exhibit B-5 (in the case of telephonic notice, such notice shall be promptly confirmed by telecopy) no later than 2:30 p.m., New York City time (or, in the case of a proposed Quoted Swingline Loan, 12:00 noon, New York City time), on the day of a proposed Swingline Loan. Such notice shall be delivered on a Business Day, shall be irrevocable (subject, in the case of Quoted Swingline Loans, to receipt by the relevant Swingline Borrower of Quoted Swingline Rates acceptable to it) and shall refer to this Agreement and shall specify the requested date (which shall be a Business Day) and amount of such Swingline Loan. The Administrative Agent shall promptly advise the Swingline Lenders of any notice received from any Swingline Borrower pursuant to this paragraph (b). In the event that a Swingline Borrower accepts a Quoted Swingline Rate in respect of a proposed Quoted Swingline Loan, it shall notify the Administrative Agent (which shall in turn notify the relevant Swingline Lender) of such acceptance no later than 2:30 p.m., New York City time, on the relevant borrowing date. 28 24 (c) In the event that any ABR Swingline Loan shall be outstanding for more than five Business Days, the Administrative Agent shall, on behalf of the relevant Swingline Borrower (which hereby irrevocably directs and authorizes the Administrative Agent to act on its behalf), request each Lender, including the Swingline Lenders, to make an ABR Revolving Credit Loan in an amount equal to such Lender's Revolving Credit Percentage of the principal amount of such ABR Swingline Loan. Each Lender will make the proceeds of its Revolving Credit Loan available to the Administrative Agent for the account of the Swingline Lenders at the office of the Administrative Agent prior to 12:00 Noon, New York City time, in funds immediately available on the Business Day next succeeding the date such notice is given. The proceeds of such Revolving Credit Loans shall be immediately applied to repay the ABR Swingline Loans. (d) If, for any reason, Revolving Credit Loans may not be (as determined by the Administrative Agent in its sole discretion), or are not, made pursuant to Section 2.6(c) to repay ABR Swingline Loans as required by said Section, then, effective on the date such Revolving Credit Loans would otherwise have been made, each Lender severally, unconditionally and irrevocably agrees that it shall purchase an undivided participating interest in such ABR Swingline Loans ("Unrefunded Swingline Loans") in an amount equal to the amount of the Revolving Credit Loan which otherwise would have been made by such Lender pursuant to Section 2.6(c), which purchase shall be funded by the time such Revolving Credit Loan would have been required to be made pursuant to Section 2.6(c). In the event that the Lenders purchase undivided participating interests pursuant to the first sentence of this paragraph (d), each Lender shall immediately transfer to the Administrative Agent, for the account of the Swingline Lenders, in immediately available funds, the amount of its participation. Any Lender holding a participation in an Unrefunded Swingline Loan may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the relevant Swingline Borrower to such Lender by reason thereof as fully as if such Lender had made a Loan directly to such Swingline Borrower in the amount of such participation. (e) Whenever, at any time after any Swingline Lender has received from any Lender such Lender's participating interest in an ABR Swingline Loan, such Swingline Lender receives any payment on account thereof, such Swingline Lender will promptly distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded); provided, however, that in the event that such payment received by such Swingline Lender is required to be returned, such Lender will return to such Swingline Lender any portion thereof previously distributed by such Swingline Lender to it. (f) Notwithstanding anything to the contrary in this Agreement, each Lender's obligation to make the Revolving Credit Loans referred to in Section 2.6(c) and to purchase and fund participating interests pursuant to Section 2.6(d) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which such Lender or any Swingline Borrower may have against any Swingline Lender, any Swingline Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the conditions specified in Article IV; (iii) any adverse change in the condition (financial or otherwise) of CBS or any of its Subsidiaries; (iv) any breach of this Agreement by any Borrower or any Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (g) Upon written or telecopy notice to the Swingline Lenders and to the Administrative Agent, CBS may at any time terminate, from time to time in part reduce, or from time to time (with the 29 25 approval of the relevant Swingline Lender) increase, the Swingline Commitment of any Swingline Lender. At any time when there shall be fewer than ten Swingline Lenders, CBS may appoint from among the Lenders a new Swingline Lender, subject to the prior consent of such new Swingline Lender and prior notice to the Administrative Agent, so long as at no time shall there be more than ten Swingline Lenders. Notwithstanding anything to the contrary in this Agreement, (i) if any ABR Swingline Loans shall be outstanding at the time of any termination, reduction, increase or appointment pursuant to the preceding two sentences, the Swingline Borrowers shall on the date thereof prepay or borrow ABR Swingline Loans to the extent necessary to ensure that at all times the outstanding ABR Swingline Loans held by the Swingline Lenders shall be pro rata according to the respective Swingline Commitments of the Swingline Lenders and (ii) in no event may the aggregate Swingline Commitments exceed $300,000,000. On the date of any termination or reduction of the Swingline Commitments pursuant to this paragraph (g), the Swingline Borrowers shall pay or prepay so much of the Swingline Loans as shall be necessary in order that, after giving effect to such termination or reduction, (i) the aggregate outstanding principal amount of the ABR Swingline Loans of any Swingline Lender will not exceed the Swingline Commitment of such Swingline Lender and (ii) the aggregate outstanding principal amount of all Swingline Loans will not exceed the aggregate Swingline Commitments. (h) Each Swingline Borrower may prepay any Swingline Loan in whole or in part at any time without premium or penalty; provided that such Swingline Borrower shall have given the Administrative Agent written or telecopy notice (or telephone notice promptly confirmed in writing or by telecopy) of such prepayment not later than 10:30 a.m., New York City time, on the Business Day designated by such Swingline Borrower for such prepayment; and provided further that each partial payment shall be in an amount that is an integral multiple of $1,000,000. Each notice of prepayment under this paragraph (h) shall specify the prepayment date and the principal amount of each Swingline Loan (or portion thereof) to be prepaid, shall be irrevocable and shall commit such Swingline Borrower to prepay such Swingline Loan (or portion thereof) by the amount stated therein on the date stated therein. All prepayments under this paragraph (h) shall be accompanied by accrued interest on the principal amount being prepaid to the date of payment. Each payment of principal of or interest on ABR Swingline Loans shall be allocated, as between the Swingline Lenders, pro rata in accordance with their respective Swingline Percentages. SECTION 2.7. Letters of Credit. (a) Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, each Issuing Lender agrees, at any time and from time to time on or after the Closing Date until the earlier of (i) the tenth Business Day preceding the Revolving Credit Maturity Date and (ii) the termination of the Commitments in accordance with the terms hereof, to issue and deliver or to extend the expiry of Letters of Credit for the account of CBS in an aggregate outstanding undrawn amount which does not exceed the maximum amount specified in the applicable Issuing Lender Agreement; provided that in no event shall the Aggregate LC Exposure exceed $750,000,000 at any time. Each Letter of Credit (i) shall be in a form approved in writing by CBS and the applicable Issuing Lender and (ii) shall permit drawings upon the presentation of such documents as shall be specified by CBS in the applicable notice delivered pursuant to paragraph (c) below. The Lenders agree that, subject to compliance with the conditions precedent set forth in Section 4.3, any Designated Letter of Credit may be designated as a Letter of Credit hereunder from time to time on or after the Closing Date pursuant to the procedures specified in the definition of "Designated Letters of Credit". (b) Each Letter of Credit shall by its terms expire not later than the fifth Business Day preceding the Revolving Credit Maturity Date. Any Letter of Credit may provide for the renewal thereof for additional periods (which shall in no event extend beyond the date referred to in the preceding 30 26 sentence). Each Letter of Credit shall by its terms provide for payment of drawings in Dollars or in a Foreign Currency, provided that a Letter of Credit denominated in a Foreign Currency may not be issued if, after giving effect thereto, the Dollar equivalent of the aggregate face amount of all Letters of Credit denominated in Foreign Currencies then outstanding would exceed $150,000,000, as determined by the Administrative Agent. (c) CBS shall give the applicable Issuing Lender and the Administrative Agent written or telecopy notice not later than 10:00 a.m., New York City time, five Business Days (or such shorter period as shall be acceptable to such Issuing Lender) prior to any proposed issuance of a Letter of Credit. Each such notice shall refer to this Agreement and shall specify (i) the date on which such Letter of Credit is to be issued (which shall be a Business Day) and the face amount of such Letter of Credit, (ii) the name and address of the beneficiary, (iii) whether such Letter of Credit is a Financial Letter of Credit or a Non-Financial Letter of Credit (subject to confirmation of such status by the Administrative Agent), (iv) whether such Letter of Credit shall permit a single drawing or multiple drawings, (v) the form of the documents required to be presented at the time of any drawing (together with the exact wording of such documents or copies thereof), (vi) the expiry date of such Letter of Credit (which shall conform to the provisions of paragraph (b) above) and (vii) if such Letter of Credit is to be in a Foreign Currency, the relevant Foreign Currency. The Administrative Agent shall give to each Lender prompt written or telecopy advice of the issuance of any Letter of Credit. Each determination by the Administrative Agent as to whether or not a Letter of Credit constitutes a Financial Letter of Credit shall be conclusive and binding upon CBS and the Lenders. (d) By the issuance of a Letter of Credit and without any further action on the part of the applicable Issuing Lender or the Lenders in respect thereof, the applicable Issuing Lender hereby grants to each Lender, and each Lender hereby acquires from such Issuing Lender, a participation in such Letter of Credit equal to such Lender's Revolving Credit Percentage at the time of any drawing thereunder of the face amount of such Letter of Credit, effective upon the issuance of such Letter of Credit. In addition, the applicable Issuing Lender hereby grants to each Lender, and each Lender hereby acquires from such Issuing Lender, a participation in each Designated Letter of Credit equal to such Lender's Revolving Credit Percentage at the time of any drawing thereunder of the face amount of such Designated Letter of Credit, effective on the date such Designated Letter of Credit is designated as a Letter of Credit hereunder. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of each Issuing Lender, in accordance with paragraph (f) below, such Lender's Revolving Credit Percentage of each unreimbursed LC Disbursement made by such Issuing Lender; provided, however, that the Lenders shall not be obligated to make any such payment with respect to any payment or disbursement made under any Letter of Credit to the extent resulting from the gross negligence or wilful misconduct of such Issuing Lender. (e) Each Lender acknowledges and agrees that its acquisition of participations pursuant to paragraph (d) above in respect of Letters of Credit shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which such Lender or CBS may have against any Issuing Lender, CBS or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the conditions specified in Article IV; (iii) any adverse change in the condition (financial or otherwise) of CBS or any of its Subsidiaries; (iv) any breach of this Agreement by CBS or any Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 31 27 (f) On the date on which it shall have ascertained that any documents presented under a Letter of Credit appear to be in conformity with the terms and conditions of such Letter of Credit, the applicable Issuing Lender shall give written or telecopy notice to CBS and the Administrative Agent of the amount of the drawing and the date on which payment thereon has been or will be made. If the applicable Issuing Lender shall not have received from CBS the payment required pursuant to paragraph (g) below by 12:00 noon, New York City time, two Business Days after the date on which payment of a draft presented under any Letter of Credit has been made, such Issuing Lender shall so notify the Administrative Agent, which shall in turn promptly notify each Lender, specifying in the notice to each Lender such Lender's Revolving Credit Percentage of such LC Disbursement. Each Lender shall pay to the Administrative Agent, not later than 2:00 p.m., New York City time, on such second Business Day, such Lender's Revolving Credit Percentage of such LC Disbursement (which obligation shall be expressed in Dollars only), which the Administrative Agent shall promptly pay to the applicable Issuing Lender. The Administrative Agent will promptly remit to each Lender such Lender's Revolving Credit Percentage of any amounts subsequently received by the Administrative Agent from CBS in respect of such LC Disbursement; provided that (i) amounts so received for the account of any Lender prior to payment by such Lender of amounts required to be paid by it hereunder in respect of any LC Disbursement and (ii) amounts representing interest at the rate provided in paragraph (g) below on any LC Disbursement for the period prior to the payment by such Lender of such amounts shall in each case be remitted to the applicable Issuing Lender. (g) If an Issuing Lender shall pay any draft presented under a Letter of Credit, CBS shall pay to such Issuing Lender an amount equal to the amount of such draft before 12:00 noon, New York City time, on the second Business Day immediately following the date of payment of such draft, together with interest (if any) on such amount at a rate per annum equal to the interest rate in effect for ABR Loans (or, in the case of Foreign Currency-denominated Letters of Credit, the rate which would reasonably and customarily be charged by such Issuing Lender on outstanding loans denominated in the relevant Foreign Currency) from (and including) the date of payment of such draft to (but excluding) the date on which either CBS shall have repaid, or the Lenders shall have refunded, such draft in full (which interest shall be payable on such second Business Day and from time to time thereafter on demand until either CBS shall have repaid, or the Lenders shall have refunded, such draft in full). In the event that such drawing shall be refunded by the Lenders as provided in Section 2.7(f), CBS shall pay to the Administrative Agent, for the account of the Lenders, quarterly on the last day of each March, June, September and December, interest on the amount so refunded at a rate per annum equal to the interest rate in effect for ABR Loans from (and including) the date of such refunding to (but excluding) the date on which the amount so refunded by the Lenders shall have been paid in full in Dollars by CBS. Each payment made to an Issuing Lender by CBS pursuant to this paragraph shall be made at such Issuing Lender's address for notices specified herein in lawful money of (x) the United States of America (in the case of payments made on Dollar-denominated Letters of Credit) or (y) the applicable foreign jurisdiction (in the case of payments on Foreign Currency-denominated Letters of Credit) and in immediately available funds. The obligation of CBS to pay the amounts referred to above in this paragraph (g) (and the obligations of the Lenders under paragraphs (d) and (f) above) shall be absolute, unconditional and irrevocable and shall be satisfied strictly in accordance with their terms irrespective of: (i) any lack of validity or enforceability of any Letter of Credit or any Issuing Lender Agreement or of the obligations of CBS under this Agreement or any Issuing Lender Agreement; (ii) the existence of any claim, setoff, defense or other right which CBS or any other Person may at any time have against the beneficiary under any Letter of Credit, the Agents, any 32 28 Issuing Lender or any Lender (other than the defense of payment in accordance with the terms of this Agreement or a defense based on the gross negligence or wilful misconduct of the applicable Issuing Lender) or any other Person in connection with this Agreement or any other transaction; (iii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect; provided that payment by the applicable Issuing Lender under such Letter of Credit against presentation of such draft or document shall not have constituted gross negligence or wilful misconduct; (iv) payment by the applicable Issuing Lender under a Letter of Credit against presentation of a draft or other document which does not comply in any immaterial respect with the terms of such Letter of Credit; provided that such payment shall not have constituted gross negligence or wilful misconduct; or (v) any other circumstance or event whatsoever, whether or not similar to any of the foregoing; provided that such other circumstance or event shall not have been the result of gross negligence or wilful misconduct of the applicable Issuing Lender. It is understood that in making any payment under a Letter of Credit (x) such Issuing Lender's exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereof equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be forged, fraudulent or invalid in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever, and (y) any noncompliance in any immaterial respect of the documents presented under a Letter of Credit with the terms thereof shall, in either case, not, in and of itself, be deemed wilful misconduct or gross negligence of such Issuing Lender. (h) (i) Notwithstanding anything to the contrary contained in this Agreement, for purposes of calculating any LC Fee or Commitment Fee payable in respect of any Business Day, the Administrative Agent shall convert the amount available to be drawn under any Letter of Credit denominated in Foreign Currency into an amount of Dollars based upon the relevant Foreign Exchange Rate in effect for such day. If on any date the Administrative Agent shall notify CBS that, by virtue of any change in the Foreign Exchange Rate of any Foreign Currency in which a Letter of Credit is denominated, the Total Facility Exposure shall exceed the Total Commitment then in effect, then, within three Business Days after the date of such notice, CBS shall prepay the Revolving Credit Loans and/or the Swingline Loans to the extent necessary to eliminate such excess. Each Issuing Lender which has issued a Letter of Credit denominated in a Foreign Currency agrees to notify the Administrative Agent of the average daily outstanding amount thereof for any period in respect of which LC Fees or Commitment Fees are payable and, upon request by the Administrative Agent, for any other date or period. For all purposes of this Agreement, determinations by the Administrative Agent of the Dollar equivalent of any amount expressed in a Foreign Currency shall be made on the basis of Foreign Exchange Rates reset monthly (or on such other periodic basis as shall be selected by the Administrative Agent in its sole discretion) and shall in each case be conclusive absent manifest error. 33 29 (ii) Notwithstanding anything to the contrary contained in this Section 2.7, prior to demanding any reimbursement from the Lenders pursuant to Section 2.7(f) in respect of any Letter of Credit denominated in a Foreign Currency, the relevant Issuing Lender shall convert CBS's obligation under Section 2.7(g) to reimburse such Issuing Lender in such Foreign Currency into an obligation to reimburse such Issuing Lender (and, in turn, the Lenders) in Dollars. The amount of any such converted obligation shall be computed based upon the relevant Foreign Exchange Rate (as quoted by the Administrative Agent to such Issuing Lender) in effect for the day on which such conversion occurs. SECTION 2.8. Conversion and Continuation Options. (a) The relevant Borrower may elect from time to time to convert Eurodollar Revolving Credit Loans (or, subject to Section 2.10(f), a portion thereof) to ABR Revolving Credit Loans on the last day of an Interest Period with respect thereto by giving the Administrative Agent prior irrevocable notice of such election. The relevant Borrower may elect from time to time to convert ABR Revolving Credit Loans (subject to Section 2.10(f)) to Eurodollar Revolving Credit Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election. Any such notice of conversion to Eurodollar Revolving Credit Loans shall specify the length of the initial Interest Period therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. All or any part of outstanding Eurodollar Revolving Credit Loans and ABR Revolving Credit Loans may be converted as provided herein, provided that no Revolving Credit Loan may be converted into a Eurodollar Revolving Credit Loan when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined in its or their sole discretion not to permit such a conversion. (b) Any Eurodollar Revolving Credit Loans (or, subject to Section 2.10(f), a portion thereof) may be continued as such upon the expiration of the then current Interest Period with respect thereto by the relevant Borrower giving irrevocable notice to the Administrative Agent, not less than three Business Days prior to the last day of the then current Interest Period with respect thereto, of the length of the next Interest Period to be applicable to such Revolving Credit Loans, provided that no Eurodollar Revolving Credit Loan may be continued as such when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined in its or their sole discretion not to permit such a continuation, and provided, further, that if the relevant Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Eurodollar Revolving Credit Loans shall be automatically converted to ABR Revolving Credit Loans on the last day of such then expiring Interest Period. Upon receipt of any notice from a Borrower pursuant to this Section 2.8(b), the Administrative Agent shall promptly notify each Lender thereof. SECTION 2.9. Fees. (a) CBS agrees to pay to the Administrative Agent for the account of each Lender a Commitment Fee for the period from and including the Original Closing Date to the Revolving Credit Maturity Date (or such earlier date on which the Commitments shall terminate in accordance herewith), computed at a per annum rate equal to the Applicable Commitment Fee Rate on the average daily Commitment Fee Calculation Amount in respect of such Lender during the period for which payment is made. All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days and shall be payable quarterly in arrears on the last day of each March, June, September and December, on the Revolving Credit Maturity Date or such earlier date on which the Commitments shall be terminated, commencing on the first of such dates to occur after the Original Closing Date. (b) CBS agrees to pay each Lender, through the Administrative Agent, on the last day of each March, June, September and December and on the Revolving Credit Maturity Date or the date on which the Commitment of such Lender shall be terminated as provided herein and all Letters of Credit 34 30 issued hereunder shall have expired, a letter of credit fee (an "LC Fee") computed at a per annum rate equal to the Applicable LC Fee Rate on such Lender's Revolving Credit Percentage of the average daily undrawn amount of the Financial Letters of Credit or Non-Financial Letters of Credit, as the case may be, outstanding during the preceding quarter (or shorter period commencing with the Original Closing Date or ending with the Revolving Credit Maturity Date or the date on which the Commitment of such Lender shall have been terminated and all Letters of Credit issued hereunder shall have expired). All LC Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. (c) CBS and Infinity, jointly and severally, agree to pay, without duplication, to the Administrative Agent, for its own account, the administrative agent's fees ("Administrative Agent's Fees") provided for in the Administrative Agent Fee Letter at the times provided therein. (d) CBS agrees to pay to each Issuing Lender, through the Administrative Agent, for its own account, the applicable Issuing Lender Fees. (e) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the relevant Lenders or to the Issuing Lenders. Once paid, none of the Fees shall be refundable under any circumstances (other than corrections of errors in payment). SECTION 2.10. Interest on Loans; Eurodollar Tranches; Etc. (a) Subject to the provisions of Section 2.11, Eurodollar Loans shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to (i) in the case of each Eurodollar Revolving Credit Loan, the Eurodollar Rate for the Interest Period in effect for such Loan plus the Applicable Eurodollar Margin and (ii) in the case of each Eurodollar Competitive Loan, the Eurodollar Rate for the Interest Period in effect for such Loan plus the Margin offered by the Lender making such Loan and accepted by the relevant Borrower pursuant to Section 2.3. The Eurodollar Rate for each Interest Period shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. The Administrative Agent shall promptly advise the relevant Borrower and each Lender of such determination. (b) Subject to the provisions of Section 2.11, ABR Loans shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when determined by reference to the Prime Rate and over a year of 360 days at all other times) at a rate per annum equal to the Alternate Base Rate. The Alternate Base Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. (c) Subject to the provisions of Section 2.11, Quoted Swingline Loans shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the relevant Quoted Swingline Rate. (d) Subject to the provisions of Section 2.11, each Absolute Rate Loan shall bear interest at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the fixed rate of interest offered by the Lender making such Loan and accepted by the relevant Borrower pursuant to Section 2.3. (e) Interest on each Loan shall be payable on each applicable Interest Payment Date. 35 31 (f) Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions, continuations, repayments and prepayments of Eurodollar Revolving Credit Loans hereunder and all selections of Interest Periods hereunder in respect of Eurodollar Revolving Credit Loans shall be in such amounts and shall be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Eurodollar Revolving Credit Loans comprising each Eurodollar Tranche shall be equal to $50,000,000 or a whole multiple of $5,000,000 in excess thereof. Unless otherwise agreed by the Administrative Agent, in no event shall there be more than 25 Eurodollar Tranches outstanding at any time. (g) If no election as to the Type of Revolving Credit Loan is specified in any notice of borrowing with respect thereto, then the requested Loan shall be an ABR Loan. If no Interest Period with respect to a Eurodollar Revolving Credit Loan is specified in any notice of borrowing, conversion or continuation, then the relevant Borrower shall be deemed to have selected an Interest Period of one month's duration. SECTION 2.11. Default Interest. (a) If all or a portion of the principal amount of any Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), all outstanding Loans (whether or not overdue) shall bear interest at a rate per annum which is equal to the rate that would otherwise be applicable thereto pursuant to the provisions of Section 2.10 plus 2% and (b) if all or a portion of any LC Disbursement, any interest payable on any Loan or LC Disbursement or any Fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate otherwise applicable to ABR Loans pursuant to Section 2.10(b) plus 2%, in each case, with respect to clauses (a) and (b) above, from the date of such non-payment until such amount is paid in full (as well after as before judgment). SECTION 2.12. Alternate Rate of Interest. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Loan (i) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon each Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (ii) the Required Lenders shall have determined and shall have notified the Administrative Agent that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining Eurodollar Loans during such Interest Period, the Administrative Agent shall, as soon as practicable thereafter, give written or telecopy notice of such determination to the Borrowers and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrowers and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any request by a Borrower for a Eurodollar Competitive Loan pursuant to Section 2.3 to be made after such determination shall be of no force and effect and shall be denied by the Administrative Agent, (ii) any request by a Borrower for a Eurodollar Revolving Credit Loan pursuant to Section 2.4 to be made after such determination shall be deemed to be a request for an ABR Loan and (iii) any request by a Borrower for conversion into or a continuation of a Eurodollar Revolving Credit Loan pursuant to Section 2.8 to be made after such determination shall have no force and effect (in the case of a requested conversion) or shall be deemed to be a request for a conversion into an ABR Loan (in the case of a requested continuation). Also, in the event of any such determination, the relevant Borrower shall be entitled, in its sole discretion, if the requested Loan has not been made, to cancel its acceptance of the Competitive Bids or to cancel its Competitive Bid Request relating thereto. Each determination by the Administrative Agent or the Required Lenders hereunder shall be conclusive absent manifest error. 36 32 SECTION 2.13. Termination and Reduction of Commitments. (a) Upon at least three Business Days' prior irrevocable written or telecopy notice to the Administrative Agent, CBS may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Commitments; provided, however, that (i) each partial reduction of the Commitments shall be in a minimum principal amount of $10,000,000 and in integral multiples of $1,000,000 in excess thereof and (ii) no such termination or reduction shall be made if, after giving effect thereto and to any prepayments of the Loans made on the effective date thereof, (x) the Outstanding Revolving Extensions of Credit of any Lender would exceed such Lender's Commitment then in effect or (y) the Total Facility Exposure would exceed the Total Commitment then in effect. The Administrative Agent shall promptly advise the Lenders of any notice given pursuant to this Section 2.13(a). (b) Except as otherwise provided in Section 2.21, each reduction in the Commitments hereunder shall be made ratably among the Lenders in accordance with their respective Commitments. CBS agrees to pay to the Administrative Agent for the account of the Lenders, on the date of termination or reduction of the Commitments, the Commitment Fees on the amount of the Commitments so terminated or reduced accrued through the date of such termination or reduction. SECTION 2.14. Optional Prepayments of Revolving Credit Loans. The relevant Borrower may at any time and from time to time prepay the Revolving Credit Loans, in whole or in part, without premium or penalty, upon giving irrevocable written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the Administrative Agent: (i) before 10:00 a.m., New York City time, three Business Days prior to prepayment, in the case of Eurodollar Revolving Credit Loans, and (ii) before 10:00 a.m., New York City time, one Business Day prior to prepayment, in the case of ABR Revolving Credit Loans. Such notice shall specify the date and amount of prepayment and whether the prepayment is of Eurodollar Revolving Credit Loans, ABR Revolving Credit Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. If a Eurodollar Revolving Credit Loan is prepaid on any day other than the last day of the Interest Period applicable thereto, the relevant Borrower shall also pay any amounts owing pursuant to Section 2.16. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with (except in the case of ABR Revolving Credit Loans) accrued interest to such date on the amount prepaid. Partial prepayments of Revolving Credit Loans shall be in an aggregate principal amount of $10,000,000 or a whole multiple of $1,000,000 in excess thereof. SECTION 2.15. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision herein, if after the Original Closing Date any change in applicable law or regulation (including any change in the reserve percentages provided for in Regulation D) or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof shall change the basis of taxation of payments to any Lender of the principal of or interest on any Eurodollar Loan or Absolute Rate Loan made by such Lender (other than changes in respect of taxes imposed on the overall net income of such Lender by the jurisdiction in which such Lender has its principal office (or in which it holds any Eurodollar Loan or Absolute Rate Loan) or by any political subdivision or taxing authority therein and other than taxes that would not have been imposed but for the failure of such Lender to comply with applicable certification, information, documentation or other reporting requirements), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of or deposits with or for the account of such Lender, or shall impose on such Lender or the London interbank market any other condition affecting this Agreement or any Eurodollar Loan or Absolute Rate Loan made by such Lender, and the result of 37 33 any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or Absolute Rate Loan or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) in respect of any Eurodollar Loan or Absolute Rate Loan by an amount deemed by such Lender to be material, then the relevant Borrower agrees to pay to such Lender as provided in paragraph (c) below such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. Notwithstanding the foregoing, no Lender shall be entitled to request compensation under this paragraph with respect to any Competitive Loan if the change giving rise to such request shall, or in good faith should, have been taken into account in formulating the Competitive Bid pursuant to which such Competitive Loan shall have been made. (b) If any Lender or any Issuing Lender shall have determined that the adoption after the Original Closing Date of any law, rule, regulation or guideline regarding capital adequacy, or any change in any law, rule, regulation or guideline regarding capital adequacy or in the interpretation or administration of any of the foregoing by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any lending office of such Lender) or Issuing Lender or any Lender's or Issuing Lender's holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's or Issuing Lender's capital or on the capital of such Lender's or Issuing Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender or the LC Exposure of such Lender or Letters of Credit issued by such Issuing Lender pursuant hereto to a level below that which such Lender or Issuing Lender or such Lender's or Issuing Lender's holding company could have achieved but for such applicability, adoption, change or compliance (taking into consideration such Lender's or Issuing Lender's policies and the policies of such Lender's or Issuing Lender's holding company with respect to capital adequacy) by an amount deemed by such Lender or Issuing Lender to be material, then from time to time CBS agrees to pay to such Lender or Issuing Lender as provided in paragraph (c) below such additional amount or amounts as will compensate such Lender or Issuing Lender or such Lender's or Issuing Lender's holding company for any such reduction suffered. (c) A certificate of each Lender or Issuing Lender setting forth such amount or amounts as shall be necessary to compensate such Lender or Issuing Lender as specified in paragraph (a) or (b) above, as the case may be, and the basis therefor in reasonable detail shall be delivered to the relevant Borrower and shall be conclusive absent manifest error. The relevant Borrower shall pay each Lender or Issuing Lender the amount shown as due on any such certificate within 30 days after its receipt of the same. Upon the receipt of any such certificate, the relevant Borrower shall be entitled, in its sole discretion, if any requested Loan has not been made, to cancel its acceptance of the relevant Competitive Bids or to cancel the Competitive Bid Request relating thereto, subject to Section 2.16. (d) Except as provided in this paragraph, failure on the part of any Lender to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of such Lender's right to demand compensation with respect to any other period. The protection of this Section 2.15 shall be available to each Lender regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed so long as it shall be customary for Lenders affected thereby to comply therewith. No Lender shall be entitled to compensation under this Section 2.15 for any costs incurred or reductions suffered with respect to any date unless it shall have notified the relevant Borrower that it will demand compensation for such costs 38 34 or reductions under paragraph (c) above not more than 90 days after the later of (i) such date and (ii) the date on which it shall have become aware of such costs or reductions. Notwithstanding any other provision of this Section 2.15, no Lender shall demand compensation for any increased cost or reduction referred to above if it shall not at the time be the general policy or practice of such Lender to demand such compensation in similar circumstances under comparable provisions of other credit agreements, if any. In the event any Borrower shall reimburse any Lender pursuant to this Section 2.15 for any cost and such Lender shall subsequently receive a refund in respect thereof, such Lender shall so notify such Borrower and, upon its request, will pay to such Borrower the portion of such refund which such Lender shall determine in good faith to be allocable to the cost so reimbursed. The covenants contained in this Section 2.15 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. SECTION 2.16. Indemnity. Each Borrower agrees to indemnify each Lender against any loss or expense described below which such Lender may sustain or incur as a consequence of (a) any failure by such Borrower to fulfill on the date of any borrowing hereunder the applicable conditions set forth in Article IV, (b) any failure by such Borrower to borrow, continue or convert any Loan hereunder after irrevocable notice of such borrowing, continuation or conversion has been given or deemed given or Competitive Bids have been accepted pursuant to Article II or (c) any payment, prepayment or conversion of a Eurodollar Loan or Absolute Rate Loan made to such Borrower required by any other provision of this Agreement or otherwise made or deemed made, whatever the circumstances may be that give rise to such payment, prepayment or conversion, or any transfer of any such Loan pursuant to Section 2.21 or 9.4(b), on a date other than the last day of the Interest Period applicable thereto. The loss or expense for which such Lender shall be indemnified under this Section 2.16 shall be equal to the excess, if any, as reasonably determined by such Lender, of (i) its cost of obtaining the funds for the Loan being paid, prepaid, converted or not borrowed, continued or converted (assumed to be the Eurodollar Rate in the case of Eurodollar Loans) for the period from the date of such payment, prepayment, conversion or failure to borrow, continue or convert to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow, continue or convert, the Interest Period for such Loan which would have commenced on the date of such failure) over (ii) the amount of interest (as reasonably determined by such Lender) that would be realized by such Lender in reemploying the funds so paid, prepaid, converted or not borrowed, continued or converted for such period or Interest Period, as the case may be; provided, however, that such amount shall not include any loss of a Lender's margin or spread over its cost of obtaining funds as described above. A certificate of any Lender setting forth any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to the relevant Borrower and shall be conclusive absent manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. SECTION 2.17. Pro Rata Treatment; Funding Matters; Evidence of Debt. (a) Except as required under Section 2.21, each payment or prepayment of principal of any Revolving Credit Loan, each payment of interest on the Revolving Credit Loans, each payment of the Commitment Fees pursuant to Section 2.9(a)(i), each payment of LC Fees, and each reduction of the Commitments, shall be allocated pro rata among the Lenders in accordance with their respective Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Revolving Credit Loans). Each Lender agrees that in computing such Lender's portion of any Loan to be made hereunder, the Administrative Agent may, in its discretion, round such Lender's percentage of such Loan to the next higher or lower whole Dollar amount. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the relevant borrowing date that such Lender will not make available to the Administrative Agent such 39 35 Lender's portion of a borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such borrowing in accordance with this Agreement and the Administrative Agent may, in reliance upon such assumption, make available to the relevant Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have made such portion available to the Administrative Agent, each of such Lender and the relevant Borrower agrees to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of such Borrower, the interest rate applicable at the time to the relevant Loan and (ii) in the case of such Lender, the Federal Funds Effective Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such borrowing for the purposes of this Agreement; provided that such repayment shall not release such Lender from any liability it may have to such Borrower for the failure to make such Loan at the time required herein. (c) The failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). (d) Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the relevant Borrower to repay such Loan in accordance with the terms of this Agreement. (e) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness to such Lender resulting from each Loan made by it from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Borrower with respect to each Loan, the Type of each Loan and each Interest Period, if any, applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from any Borrower and each Lender's share thereof. The entries made in the accounts maintained pursuant to this paragraph (e) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of any Borrower to repay the Loans in accordance with their terms. (f) In order to expedite the transactions contemplated by this Agreement, each Subsidiary Borrower shall be deemed, by its execution and delivery of a Subsidiary Borrower Request, to have appointed CBS to act as agent on behalf of such Subsidiary Borrower for the purpose of (a) giving any notices contemplated to be given by such Subsidiary Borrower pursuant to this Agreement, including, without limitation, borrowing notices, prepayment notices, continuation notices, conversion notices, competitive bid requests and competitive bid acceptances or rejections and (b) paying on behalf of such Subsidiary Borrower any Subsidiary Borrower Obligations owing by such Subsidiary Borrower; provided, that each Subsidiary Borrower shall retain the right, in its discretion, to directly give any or all of such notices or make any or all of such payments. (g) The Administrative Agent shall promptly notify the Lenders upon receipt of any Subsidiary Borrower Designation and Subsidiary Borrower Request. The Administrative Agent shall 40 36 promptly notify the Swingline Lenders upon receipt of any designation of a Subsidiary Borrower as a Swingline Borrower. SECTION 2.18. Sharing of Setoffs. Except to the extent that this Agreement provides for payments to be allocated to Revolving Credit Loans, Swingline Loans or Competitive Loans, as the case may be, each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against any Borrower, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means (other than pursuant to any provision of this Agreement), obtain payment (voluntary or involuntary) in respect of any category of its Loans or such Lender's Revolving Credit Percentage of any LC Disbursement as a result of which the unpaid principal portion of such Loans or the unpaid portion of such Lender's Revolving Credit Percentage of the LC Disbursements shall be proportionately less than the unpaid principal portion of such Loans or the unpaid portion of the Revolving Credit Percentage of the LC Disbursements of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in such Loans or the Revolving Credit Percentage of the LC Disbursements of such other Lender, so that the aggregate unpaid principal amount of such Loans and participations in such Loans held by each Lender or the Revolving Credit Percentage of LC Disbursements and participations in LC Disbursements held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all such Loans or LC Disbursements then outstanding as the principal amount of such Loans or the Revolving Credit Percentage of LC Disbursements of each Lender prior to such exercise of banker's lien, setoff or counterclaim or other event was to the principal amount of all such Loans or LC Disbursements outstanding prior to such exercise of banker's lien, setoff or counterclaim or other event; provided, however, that, if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.18 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. Any Lender holding a participation in a Loan or LC Disbursement deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by any Borrower to such Lender by reason thereof as fully as if such Lender had made a Loan directly such Borrower or issued a Letter of Credit for the account of CBS in the amount of such participation. SECTION 2.19. Payments. (a) Except as otherwise expressly provided herein, each Borrower shall make each payment (including principal of or interest on any Loan or any Fees or other amounts) hereunder without setoff or counterclaim and shall make each such payment not later than 12:00 noon, New York City time, on the date when due in Dollars to the Administrative Agent at its offices at 60 Wall Street, New York, New York, in immediately available funds. (b) Whenever any payment (including principal of or interest on any Loan or any Fees or other amounts) hereunder shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable. SECTION 2.20. Taxes. (a) Any and all payments by each Borrower hereunder to or for the benefit of a Non-U.S. Person shall be made, in accordance with Section 2.19, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto imposed by or on behalf of the United States or any political subdivision thereof, excluding taxes imposed on (or measured by) such Non-U.S. Person's net 41 37 income or net receipts, franchise taxes, taxes on doing business or taxes imposed on capital or net worth (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to a Non-U.S. Person, (i) the sum payable shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.20) such Non-U.S. Person shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant taxing authority or other Governmental Authority in accordance with applicable law. (b) The relevant Borrower agrees to pay and reimburse on demand all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any Governmental Authority in respect of this Agreement, any of the Loans or the Letters of Credit (all such taxes, assessments or charges hereinafter referred to as "Other Taxes"). (c) The relevant Borrower will indemnify each Lender (or Transferee) and the Administrative Agent for the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed by the applicable jurisdiction on amounts payable under this Section 2.20) paid by such Lender (or Transferee) or the Administrative Agent, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant taxing authority or other Governmental Authority. Such indemnification shall be made within 30 days after the date such Lender (or Transferee) or the Administrative Agent, as the case may be, makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes or Other Taxes withheld by any Borrower in respect of any payment to a Non-U.S. Person, such Borrower will furnish to the Administrative Agent, at its address referred to in Section 9.1 for delivery to such Non-U.S. Person, the original or a certified copy of a receipt (if available) evidencing payment thereof. (e) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section 2.20 shall survive the payment in full of the principal of and interest on all Loans made hereunder and of all other amounts payable hereunder. (f) Each Lender (or Transferee) that is not a citizen or resident of the United States of America, a corporation, partnership or other entity created or organized in or under the laws of the United States of America, or any estate or trust that is subject to federal income taxation regardless of the source of its income (a "Non-U.S. Person") shall deliver to CBS and the Administrative Agent (or, in the case of a participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Person claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8, or any subsequent versions thereof or successors thereto (and, if such Non-U.S. Person delivers a Form W-8, an annual certificate representing that such Non-U.S. Person is not a "bank" for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of CBS and is not a controlled foreign corporation related to CBS (within the meaning of Section 864(d)(4) of the Code)), properly completed and duly executed by such Non-U.S. Person claiming complete exemption from U.S. federal withholding tax on all payments by any Borrower under this Agreement. Such forms shall be delivered by each Non-U.S. Person promptly after it becomes a party to this Agreement (or, in the case of any participant, promptly after the date such participant purchases the related participation). In addition, 42 38 each Non-U.S. Person shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Person. Each Non-U.S. Person shall promptly notify CBS at any time it determines that it is no longer in a position to provide any previously delivered certificate to CBS (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Unless CBS and the Administrative Agent (or, in the case of a participant, the Lender from which the related participation shall have been purchased) have received forms or other documents satisfactory to them indicating that payments hereunder are not subject to United States withholding tax, the relevant Borrower or the Administrative Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments of interest to or for any Lender (or Transferee) that is a Non-U.S. Person. Notwithstanding any other provision of this Section 2.20(f), a Non-U.S. Person shall not be required to deliver any form pursuant to this Section 2.20(f) that such Non-U.S. Person is not legally able to deliver by reason of the adoption of any law, rule or regulation, or any change in any law, rule or regulation or in the interpretation thereof, in each case occurring after the date such Non-U.S. Person becomes a Lender (or Transferee). (g) No Borrower shall be required to pay any additional amounts to any Non-U.S. Person in respect of United States withholding tax pursuant to paragraph (a) above (i) if the obligation to pay such additional amounts would not have arisen but for a failure by such Non-U.S. Person to comply with the provisions of paragraph (f) above or (ii) in the case of a Transferee, to the extent such additional amounts exceed the additional amounts that would have been payable had no transfer or assignment to such Transferee occurred; provided, however, that each Borrower shall be required to pay those amounts to any Lender (or Transferee) that it was required to pay hereunder prior to the failure of such Lender (or Transferee) to comply with the provisions of such paragraph (f). SECTION 2.21. Termination or Assignment of Commitments Under Certain Circumstances. (a) Any Lender (or Transferee) claiming any additional amounts payable pursuant to Section 2.15 or Section 2.20 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by any Borrower or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue and would not, in the sole determination of such Lender (or Transferee), be otherwise disadvantageous to such Lender (or Transferee). (b) In the event that (x) any Lender shall have delivered a notice or certificate pursuant to Section 2.15, (y) any Borrower shall be required to make additional payments to any Lender under Section 2.20, or (z) any Lender (a "Non-Consenting Lender") shall withhold its consent to any amendment described in clause (i) or (ii) of Section 9.8(b) as to which consents have been obtained from Lenders having Total Facility Percentages aggregating at least 90%, CBS shall have the right, at its own expense, upon notice to such Lender (or Lenders) and the Administrative Agent, (i) to terminate the Commitments of such Lender (except in the case of clause (z) above) or (ii) to require such Lender (or, in the case of clause (z) above, each Non-Consenting Lender) to transfer and assign without recourse (in accordance with and subject to the restrictions contained in Section 9.4) all its interests, rights and obligations under this Agreement to one or more other financial institutions acceptable to the Administrative Agent (which approval shall not be unreasonably withheld) which shall assume such obligations; provided that (w) in the case of any replacement of Non-Consenting Lenders, each assignee shall have consented to the relevant amendment, (x) no such termination or assignment shall conflict with any law, rule or regulation or order of any Governmental Authority, (y) the Borrowers or the assignee (or assignees), as the case may be, shall pay to each affected Lender in immediately available funds on the date of such termination or assignment the principal of and interest accrued to the date of 43 39 payment on the Loans made by it hereunder and all other amounts accrued for its account or owed to it hereunder and (z) CBS may not terminate Commitments representing more than 10% of the original aggregate Commitments pursuant to this paragraph (b). ARTICLE III. REPRESENTATIONS AND WARRANTIES CBS hereby represents and warrants, and each Subsidiary Borrower by its execution and delivery of a Subsidiary Borrower Request represents and warrants (to the extent specifically applicable to such Subsidiary Borrower), to each of the Lenders that: SECTION 3.1. Corporate Existence. Each of CBS and each Material Subsidiary: (a) is a corporation, partnership or other entity duly organized and validly existing under the laws of the jurisdiction of its organization; (b) has all requisite corporate or other power, and has all material governmental licenses, authorizations, consents and approvals, necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the failure to have any of the foregoing would not result in a Material Adverse Effect; and (c) is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify would result in a Material Adverse Effect. SECTION 3.2. Financial Condition. (a) Each of (i) the consolidated balance sheet of CBS and its Consolidated Subsidiaries as at December 31, 1998, and the related consolidated statements of income and cash flows of CBS and its Consolidated Subsidiaries for the fiscal year ended on such date, with the opinion thereon of KPMG, LLP and (ii) the unaudited consolidated balance sheets of CBS and its Consolidated Subsidiaries as at March 31, 1999 and as at June 30, 1999, and the related unaudited consolidated statements of income and cash flows of CBS and its Consolidated Subsidiaries for the fiscal quarters ended on such dates, all certified by a Financial Officer of CBS, heretofore furnished to each of the Lenders, fairly present the consolidated financial condition of CBS and its Consolidated Subsidiaries as at such dates and the consolidated results of their operations for the fiscal year or fiscal quarter ended on such dates in accordance with GAAP (subject, in the case of the statements referred to in clause (ii) above, to year-end audit adjustments). Neither CBS nor any of its Material Subsidiaries had on such dates any known material contingent liability, except as referred to or reflected or provided for in the Exchange Act Report or in such balance sheets (or the notes thereto) as at such dates. (b) There has been no material adverse change in the consolidated financial condition, operations, assets, business or prospects taken as a whole of CBS and its Consolidated Subsidiaries from that set forth in the consolidated financial statements of CBS for the fiscal year ended December 31, 1995 referred to in Section 3.2(a) (it being agreed, however, that none of (i) the reduction by any rating agency of any rating assigned to Indebtedness of CBS, (ii) non-cash provisions for loan losses and additions to valuation allowances, (iii) any change in GAAP or compliance therewith and (iv) any legal or arbitral proceedings which have been disclosed in the Exchange Act Report, whether threatened, pending, resulting in a judgment or otherwise, prior to the time a final judgment for the payment of money shall have been recorded against CBS or any Material Subsidiary by any Governmental Authority having jurisdiction, and the judgment is non-appealable (or the time for appeal has expired) and all stays of execution have expired or been lifted shall, in and of itself, constitute such a material adverse change). SECTION 3.3. Litigation. Except as disclosed to the Lenders in the Exchange Act Report filed prior to the Closing Date or otherwise disclosed in writing to the Lenders prior to the 44 40 Closing Date, there are no legal or arbitral proceedings, or any proceedings by or before any Governmental Authority, pending or (to the knowledge of CBS) threatened against CBS or any of its Material Subsidiaries which have resulted in a Material Adverse Effect (it being agreed that any legal or arbitral proceedings which have been disclosed in the Exchange Act Report, whether threatened, pending, resulting in a judgment or otherwise, prior to the time a final judgment for the payment of money shall have been recorded against CBS or any Material Subsidiary by any Governmental Authority having jurisdiction, and the judgment is non-appealable (or the time for appeal has expired) and all stays of execution have expired or been lifted shall not, in and of itself, be deemed to result in a Material Adverse Effect). The "Exchange Act Report" shall mean, collectively, the Annual Report of each of CBS and Infinity on Form 10-K and Form 10-K/A for the year ended December 31, 1998, each Report on Form 8-K of each of CBS and Infinity filed subsequent to December 31, 1998 and delivered to the Lenders prior to the date hereof, and the Reports of each of CBS and Infinity on Form 10-Q and, with respect to Infinity, on Form 10-Q/A, for the quarter ended June 30, 1999. SECTION 3.4. No Breach, etc. None of the execution and delivery of this Agreement, the consummation of the transactions herein contemplated and compliance with the terms and provisions hereof will conflict with or result in a breach of, or require any consent under, the charter or By-laws (or other equivalent organizational documents) of any Borrower, or any applicable law or regulation, or any order, writ, injunction or decree of any Governmental Authority, or any material agreement or instrument to which CBS or any of its Material Subsidiaries is a party or by which any of them is bound or to which any of them is subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any Lien upon any of the revenues or assets of CBS or any of its Material Subsidiaries pursuant to the terms of any such agreement or instrument. Neither CBS nor any of its Material Subsidiaries is in default under or with respect to any of its material contractual obligations in any respect which would have a Material Adverse Effect. SECTION 3.5. Corporate Action. Each Borrower has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement; the execution and delivery by each Borrower of this Agreement (or, in the case of each Subsidiary Borrower, the relevant Subsidiary Borrower Request), and the performance by each Borrower of this Agreement, have been duly authorized by all necessary corporate action on such Borrower's part; this Agreement (or, in the case of each Subsidiary Borrower, the relevant Subsidiary Borrower Request) has been duly and validly executed and delivered by each Borrower; and this Agreement constitutes a legal, valid and binding obligation of each Borrower, enforceable in accordance with its terms except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). SECTION 3.6. Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority are necessary for the execution, delivery or performance by each Borrower of this Agreement or for the validity or enforceability hereof. SECTION 3.7. ERISA. CBS and, to the best of its knowledge, its ERISA Affiliates have fulfilled their respective obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and are in compliance in all material respects with the currently applicable provisions of ERISA and the Code except where any failure or non-compliance would not result in a Material Adverse Effect. 45 41 SECTION 3.8. Taxes. As of the Closing Date, United States Federal income tax returns of CBS and its Material Subsidiaries have been examined and closed through the fiscal year of CBS ended December 31, 1989. CBS and its Material Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes shown as due on such returns or pursuant to any assessment received by CBS or any of its Material Subsidiaries, except those being contested and reserved against in accordance with Section 5.2. SECTION 3.9. Investment Company Act. No Borrower is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. SECTION 3.10. Public Utility Holding Company Act. No Borrower is subject to regulation as a "holding company", subject to regulation as an "affiliate" of a "holding company", or subject to regulation as a "subsidiary company" of a "holding company", under the Public Utility Holding Company Act of 1935, as amended. SECTION 3.11. Hazardous Materials. CBS and each of its Subsidiaries have obtained all permits, licenses and other authorizations which are required under all Environmental Laws, except to the extent failure to have any such permit, license or authorization has not resulted in a Material Adverse Effect. CBS and each of its Subsidiaries are in compliance with the terms and conditions of all such permits, licenses and authorizations, and are also in compliance with other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any applicable Environmental Law or in any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, except to the extent failure to comply would not result in a Material Adverse Effect. SECTION 3.12. Material Subsidiaries. Set forth in Schedule 3.12 is a complete and correct list, as of the Closing Date, of all Material Subsidiaries. SECTION 3.13. No Material Misstatements. No written information, report, financial statement, exhibit or schedule (the "Information") furnished by or on behalf of CBS to the Administrative Agent or any Lender in connection with the syndication of the Commitments or the negotiation of this Agreement or included in this Agreement or delivered pursuant hereto contained as of the time it was furnished any material misstatement of fact or omitted as of such time to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading; provided that the foregoing representation and warranty is made only to the best of CBS's knowledge in the case of Information relating to King World and its Subsidiaries furnished prior to the King World Merger Date (which knowledge, prior to the King World Merger Date, was principally based upon public disclosure by King World); and provided, further, that with respect to Information consisting of statements, estimates and projections regarding the future performance of CBS and its Subsidiaries ("Projections"), no representation or warranty is made other than that such Projections have been prepared in good faith utilizing due and careful consideration and the best information available to CBS at the time of preparation thereof. SECTION 3.14. Ownership of Property. Each of CBS and each of its Material Subsidiaries has good record and marketable title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other Property, except to the extent that the failure to have such title would not result in a Material Adverse Effect. 46 42 SECTION 3.15. Intellectual Property. Each of CBS and each of its Material Subsidiaries maintains, and is in compliance in all material respects with, appropriate policies and procedures for establishing and protecting their respective rights in Intellectual Property. Except as, in the aggregate, would not result in a Material Adverse Effect, (a) each of CBS and each of its Material Subsidiaries owns, or is licensed to use, all Intellectual Property necessary for the conduct of their respective businesses; (b) no claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does CBS know of any valid basis for any such claim; and (c) to the best knowledge of CBS, the use of the Intellectual Property by CBS and its Material Subsidiaries does not infringe on the rights of any Person. SECTION 3.16. FCC Matters. Except as, in the aggregate, would not result in a Material Adverse Effect: (a) CBS and each of its Material Subsidiaries have all the FCC Licenses necessary for the conduct of their respective businesses; (b) CBS and each of its Material Subsidiaries are in substantial compliance with the Communications Act and with the rules and regulations thereunder; (c) neither CBS nor any of its Material Subsidiaries is a party to, or has any knowledge of, any pending investigation, notice of violation, order or complaint issued with respect to it by or before the FCC; and (d) CBS and its Material Subsidiaries have no reason to believe that any FCC License will not be renewed in the ordinary course of business. SECTION 3.17. Year 2000 Matters. The statements contained in CBS's filings with the Securities and Exchange Commission with respect to year 2000 compliance are true and correct. ARTICLE IV. CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 4.1 Effectiveness. The effectiveness of this Agreement is subject to the satisfaction of the following conditions (the date on which all of such conditions shall have been satisfied, the "Closing Date"): (a) Credit Agreement. The Administrative Agent shall have received this Agreement, executed and delivered by a duly authorized officer of CBS. (b) Closing Certificate. The Administrative Agent shall have received a Closing Certificate, substantially in the form of Exhibit F, of CBS, with appropriate insertions and attachments. (c) Consent. The Administrative Agent shall have (i) received the consent of the Required Lenders authorizing the Administrative Agent to execute this Agreement and (ii) executed this Agreement. (a) Infinity Credit Agreement. The Infinity Credit Agreement shall have been executed and delivered by Infinity, CBS and the Administrative Agent. SECTION 4.2. Initial Loans to Subsidiary Borrowers. The obligation of each Lender to make its initial Loan to a particular Subsidiary Borrower, if designated as such after the Closing Date, is subject to the satisfaction of the conditions that (a) CBS shall have delivered to the Administrative Agent 47 43 a Subsidiary Borrower Designation for such Subsidiary Borrower and (b) such Subsidiary Borrower shall have furnished to the Administrative Agent (i) a Subsidiary Borrower Request, (ii) a Closing Certificate of such Subsidiary Borrower, with appropriate insertions and attachments and (iii) one or more executed legal opinions with respect to such Subsidiary Borrower, in form and substance reasonably satisfactory to the Administrative Agent and including, to the extent applicable, the opinions set forth in Exhibits E-1 and E-2. CBS may from time to time deliver a subsequent Subsidiary Borrower Designation with respect to any Subsidiary Borrower, countersigned by such Subsidiary Borrower, for the purpose of terminating such Subsidiary Borrower's designation as such, so long as, on the effective date of such termination, all Subsidiary Borrower Obligations in respect of such Subsidiary Borrower shall have been paid in full. In addition, if on any date a Subsidiary Borrower shall cease to be a Subsidiary, all Subsidiary Borrower Obligations in respect of such Subsidiary Borrower shall automatically become due and payable on such date and no further Loans may be borrowed by such Subsidiary Borrower hereunder. SECTION 4.3. All Credit Events. The obligation of each Lender to make each Loan, and the obligation of each Issuing Lender to issue each Letter of Credit, are subject to the satisfaction of the following conditions. (a) The Administrative Agent shall have received a request for, or notice of, such Credit Event if and as required by Section 2.3, 2.4, 2.6 or 2.7, as applicable. (b) Each of the representations and warranties made by CBS and, in the case of a borrowing by a Subsidiary Borrower, by such Subsidiary Borrower, in Article III, or in any certificate delivered pursuant hereto, shall be true and correct in all material respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date in which case such representations and warranties shall be true and correct in all material respects as of such earlier date; provided that, with respect to any Loan made or Letter of Credit issued after the Closing Date, in the event that the CBS Ratings are then A-2 or higher by S&P and P-2 or higher by Moody's, the representation in Section 3.2(b) shall be excluded from the foregoing requirement. (c) At the time of and immediately after giving effect to such Credit Event no Default or Event of Default shall have occurred and be continuing. (d) After giving effect to such Credit Event, (i) the Outstanding Revolving Extensions of Credit of each Lender shall not exceed such Lender's Commitment then in effect and (ii) the Total Facility Exposure shall not exceed the Total Commitment then in effect. Each Credit Event shall be deemed to constitute a representation and warranty by CBS on the date of such Credit Event as to the matters specified in paragraphs (b) and (c) of this Section 4.3. ARTICLE V. COVENANTS CBS covenants and agrees with each Lender that, as long as the Commitments shall be in effect or the principal of or interest on any Loan shall be unpaid, or there shall be any Aggregate LC Exposure, unless the Required Lenders shall otherwise consent in writing: 48 44 SECTION 5.1. Financial Statements. CBS shall deliver to each of the Lenders: (a) within 55 days after the end of each of the first three quarterly fiscal periods of each fiscal year of CBS, consolidated statements of income and cash flows of CBS and its Consolidated Subsidiaries for such period and for the period from the beginning of the respective fiscal year to the end of such period, and the related consolidated balance sheet as at the end of such period, setting forth in each case in comparative form the corresponding consolidated figures for the corresponding period in the preceding fiscal year, accompanied by a certificate of a Financial Officer of CBS which certificate shall state that such financial statements fairly present the consolidated financial condition and results of operations of CBS and its Consolidated Subsidiaries in accordance with GAAP as at the end of, and for, such period, subject to normal year-end audit adjustments (provided that the requirement herein for the furnishing of such quarterly financial statements may be fulfilled by providing to the Lenders the report of CBS to the SEC on Form 10-Q for the applicable quarterly period, accompanied by the officer's certificate described in the last sentence of this Section 5.1); (b) within 105 days after the end of each fiscal year of CBS, consolidated statements of income and cash flows of CBS and its Consolidated Subsidiaries for such year and the related consolidated balance sheet as at the end of such year, setting forth in comparative form the corresponding consolidated figures for the preceding fiscal year, and accompanied by an opinion thereon (unqualified as to the scope of the audit) of independent certified public accountants of recognized national standing, which opinion shall state that such consolidated financial statements fairly present the consolidated financial condition and results of operations of CBS and its Consolidated Subsidiaries as at the end of, and for, such fiscal year (provided that the requirement herein for the furnishing of annual financial statements may be fulfilled by providing to the Lenders the report of CBS to the SEC on Form 10-K for the applicable fiscal year); (c) promptly upon their becoming publicly available, copies of all registration statements and regular periodic reports (including without limitation any and all reports on Form 8-K), if any, which CBS or any of its Subsidiaries shall have filed with the SEC or any national securities exchange; (d) promptly upon the mailing thereof to the shareholders of CBS generally, copies of all financial statements, reports and proxy statements so mailed; (e) within 30 days after a Responsible Officer of CBS knows or has reason to believe that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan have occurred or exist which would reasonably be expected to result in a Material Adverse Effect, a statement signed by a senior financial officer of CBS setting forth details respecting such event or condition and the action, if any, which CBS or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by CBS or an ERISA Affiliate with respect to such event or condition): (i) any reportable event, as defined in Section 4043(b) of ERISA and the regulations issued thereunder, with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event (provided that a failure to meet the minimum 49 45 funding standard of Section 412 of the Code or Section 302 of ERISA shall be a reportable event regardless of the issuance of any waiver in accordance with Section 412(d) of the Code); (ii) the filing under Section 4041 of ERISA of a notice of intent to terminate any Plan or the termination of any Plan; (iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by CBS or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan; (iv) the complete or partial withdrawal by CBS or any ERISA Affiliate under Section 4201 or 4204 of ERISA from a Multiemployer Plan, or the receipt by CBS or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; (v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against CBS or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and (vi) a failure to make a required installment or other payment with respect to a Plan (within the meaning of Section 412(n) of the Code), in which case the notice required hereunder shall be provided within 10 days after the due date for filing notice of such failure with the PBGC; (f) promptly after a Responsible Officer of CBS knows or has reason to believe that any Default or Event of Default has occurred, a notice of such Default or Event of Default describing it in reasonable detail and, together with such notice or as soon thereafter as possible, a description of the action that CBS has taken and proposes to take with respect thereto; (g) promptly after a Responsible Officer of CBS knows that any change has occurred in CBS's Debt Rating by either Rating Agency, a notice describing such change; and (h) promptly from time to time such other information regarding the financial condition, operations or business of CBS or any of its Subsidiaries (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA) as any Lender through the Administrative Agent may reasonably request. CBS will furnish to the Administrative Agent and each Lender, at the time it furnishes each set of financial statements pursuant to paragraph (a) or (b) above, a certificate (which may be a copy in the case of each Lender) of a Financial Officer of CBS (a "Compliance Certificate") (i) to the effect that no Default or Event of Default has occurred and is continuing (or, if any Default or Event of Default has occurred and is continuing, describing it in reasonable detail and describing the action that CBS has taken and proposes to take with respect thereto), and (ii) setting forth in reasonable detail the computations (including any pro forma calculations as described in Section 1.2(c)) necessary to determine whether CBS is in compliance with the Financial Covenants as of the end of the respective quarterly fiscal period or fiscal year. 50 46 SECTION 5.2. Corporate Existence, Etc. CBS will, and will cause each of its Material Subsidiaries to, preserve and maintain its legal existence and all of its material rights, privileges and franchises (provided that (a) nothing in this Section 5.2 shall prohibit any transaction expressly permitted under Section 5.4 and (b) CBS or such Material Subsidiary shall not be required to preserve or maintain any such right, privilege or franchise if the Board of Directors of CBS or such Material Subsidiary, as the case may be, shall determine that the preservation or maintenance thereof is no longer desirable in the conduct of the business of CBS or such Material Subsidiary, as the case may be); comply with the requirements of all applicable laws, rules, regulations and orders of Governmental Authorities (including, without limitation, all Environmental Laws) and with all contractual obligations if failure to comply with such requirements or obligations would reasonably be expected to result in a Material Adverse Effect; pay and discharge all material taxes, assessments, governmental charges, levies or other obligations of whatever nature imposed on it or on its income or profits or on any of its Property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge, levy or other obligation the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; maintain all its Property used or useful in its business in good working order and condition, ordinary wear and tear excepted, all as in the judgment of CBS or such Material Subsidiary may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times (provided that CBS or such Material Subsidiary shall not be required to maintain any such Property if the failure to maintain any such Property is, in the judgment of CBS or such Material Subsidiary, desirable in the conduct of the business of CBS or such Material Subsidiary); keep proper books of records and accounts in which entries that are full, true and correct in all material respects shall be made in conformity with GAAP; and permit representatives of any Lender, during normal business hours upon reasonable advance notice, to inspect any of its books and records and to discuss its business and affairs with its Financial Officers or their designees, all to the extent reasonably requested by such Lender. SECTION 5.3. Insurance. CBS will, and will cause each of its Material Subsidiaries to, keep insured by financially sound and reputable insurers all Property of a character usually insured by corporations engaged in the same or similar business and similarly situated against loss or damage of the kinds and in the amounts consistent with prudent business practice and carry such other insurance as is consistent with prudent business practice (it being understood that self-insurance shall be permitted to the extent consistent with prudent business practice). SECTION 5.4. Prohibition of Fundamental Changes. CBS will not, and will not permit any of its Material Subsidiaries to (i) enter into any transaction of merger, consolidation, liquidation or dissolution or (ii) Dispose of, in one transaction or a series of related transactions, all or a substantial part (determined by reference to CBS and its Subsidiaries taken as a whole) of its business or Property, whether now owned or hereafter acquired (excluding (x) financings by way of sales of receivables or inventory, (y) inventory or other Property Disposed of in the ordinary course of business and (z) obsolete or worn-out Property, tools or equipments no longer used or useful in its business). Notwithstanding the foregoing provisions of this Section 5.4: (a) any Subsidiary of CBS may be merged or consolidated with or into: (i) CBS if CBS shall be the continuing or surviving corporation or (ii) any other such Subsidiary; provided that (x) if any such transaction shall be between a Subsidiary and a Wholly Owned Subsidiary, such Wholly Owned Subsidiary shall be the continuing or surviving corporation and (y) if any such transaction shall be between a Subsidiary and a Subsidiary Borrower, the continuing or surviving corporation shall be a Subsidiary Borrower; 51 47 (b) any Subsidiary of CBS may distribute, dividend or Dispose of any of or all its Property (upon voluntary liquidation or otherwise) to CBS or a Wholly Owned Subsidiary of CBS; (c) CBS may merge or consolidate with or into any other Person if (i) either (x) CBS is the continuing or surviving corporation or (y) the corporation (or other entity, in the case of the Viacom Merger) formed by such consolidation or into which CBS is merged shall be a corporation (or other entity, in the case of the Viacom Merger) organized under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume the obligations of CBS hereunder and under the Infinity Credit Agreement, as Guarantor, pursuant to a written agreement and shall have delivered to the Administrative Agent such agreement and a certificate of a Responsible Officer and an opinion of counsel to the effect that such merger or consolidation complies with this Section 5.4(c), and (ii) after giving effect thereto and to any repayment of Loans to be made upon consummation thereof (it being expressly understood that no repayment of Loans is required solely by virtue thereof), no Default or Event of Default shall have occurred and be continuing; (d) CBS or any Subsidiary of CBS may merge or consolidate with or into any other Person if, after giving effect thereto and to any repayment of Loans to be made upon the consummation thereof (it being expressly understood that, except as otherwise expressly provided in Section 4.2 with respect to Subsidiary Borrowers, no repayment of Loans is required solely by virtue thereof), no Default or Event of Default shall have occurred and be continuing; and (e) CBS or any Subsidiary of CBS may Dispose of its Property if, after giving effect thereto and to any repayment of Loans to be made upon the consummation thereof (it being expressly understood that, except as otherwise expressly provided in Section 4.2 with respect to Subsidiary Borrowers, no repayment of Loans is required solely by virtue thereof), no Default or Event of Default shall have occurred and be continuing. SECTION 5.5. Limitation on Liens. CBS will not, and will not permit any of its Material Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its Property, or enter into any Sale/Leaseback with respect to any such Property, whether now owned or hereafter acquired; provided that the foregoing restrictions shall not apply to: (a) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet due and payable or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's, architects' or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings; (c) Liens securing judgments or to perfect an appeal of any order or decree but only to the extent, for an amount and for a period not resulting in an Event of Default under paragraph (h) of Article VI; 52 48 (d) pledges or deposits under worker's compensation, unemployment insurance and other social security legislation; (e) pledges or deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations to secure surety, appeal or performance bonds and contractual and other obligations of a like nature incurred in the ordinary course of business and not involving the borrowing of money; (f) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of Property or minor imperfections in title thereto and Liens under leases and subleases which, in the aggregate, are not material in amount, and which do not interfere in any material respects with the ordinary conduct of the business of CBS and its Subsidiaries taken as a whole; (g) Liens on Property of any Subsidiary of CBS or of any Person which is or was merged with or into CBS or any Subsidiary thereof, provided that such Liens are or were in existence at the time such Person becomes or became a Subsidiary of CBS or such Person merged with or into CBS or any Subsidiary thereof, as the case may be, were not created in anticipation thereof other than to finance the purchase thereof and are not spread to cover any Property other than the Property covered at the time of the relevant transaction; (h) Liens upon real and/or personal property acquired (by purchase, construction, foreclosure, deed in lieu of foreclosure or otherwise) by CBS or any of its Subsidiaries, each of which Liens either (A) existed on such Property before the time of its acquisition and was not created in anticipation thereof or (B) was created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, all or a part of the cost (including the cost of construction) of such Property or improvements thereon; provided that no such Lien shall extend to or cover any Property of CBS or such Subsidiary other than the respective Property so acquired and improvements thereon; (i) mortgages on Property securing indebtedness in favor of the United States of America or any state thereof or any department, agency or instrumentality or political subdivision of the United States of America or any state thereof, incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the Property subject to such mortgages (including without limitation such debt secured by such mortgages in connection with pollution control, industrial revenue or similar financings) or incurred to secure progress, advance or other payments pursuant to any contract or provision of any statute; (j) Liens securing Indebtedness owed to CBS or to any Wholly Owned Subsidiary of CBS; (k) Liens (i) upon the receivables and inventory of CBS or any of its Subsidiaries to secure Indebtedness resulting from financings of such receivables and inventory in an aggregate amount not greater than $800,000,000 less the aggregate amount of Indebtedness that is secured pursuant to clause (ii) below, provided that the terms of such Indebtedness do not provide for any recourse to CBS or any Material Subsidiary (except to the extent of breaches of representations and warranties of CBS or any of its Subsidiaries in connection with such 53 49 financings and other recourse customary in connection with "off-balance sheet" financings) and (ii) upon the Property of CBS to secure Indebtedness of CBS in an aggregate amount not greater than $250,000,000; (l) Sale/Leasebacks consummated prior to the Original Closing Date; (m) any Sale/Leaseback of CBS's headquarters building located at 51 West 52nd Street in New York City; (n) any Sale/Leaseback of assets of CBS owned on the Original Closing Date and listed on Schedule 5.5(n); (o) additional Liens upon real and/or personal property, and additional Sale/Leasebacks, provided that the sum of (i) the aggregate principal amount of the obligations secured by such Liens (other than Indebtedness as defined in clause (f) of the definition thereof which has not been assumed by CBS or any of its Subsidiaries and where the Lien relates to Property acquired by CBS or any of its Subsidiaries in satisfaction, in whole or in part, of indebtedness to CBS or any of its Subsidiaries, in the ordinary course of business (any such Indebtedness, "Specified Section 5.5(o) Indebtedness")) and (ii) the aggregate Sale/Leaseback Attributable Debt with respect to such Sale/Leasebacks shall not exceed $250,000,000 at any one time outstanding; (p) any extension, renewal or replacement of the foregoing; provided, however, that, except to the extent otherwise permitted by this Section 5.5 (including Section 5.5(o)), the Liens permitted under this paragraph shall not be spread to cover any additional Indebtedness or Property (other than a substitution of like Property or improvements on such Property or other Property of equivalent value); and (q) Liens upon real and/or personal property owned at the Original Closing Date by WCI. SECTION 5.6. Limitation on Subsidiary Indebtedness. CBS will not permit any of its Subsidiaries to create, incur, assume or suffer to exist any Indebtedness (which includes, for the purposes of this Section 5.6, any preferred stock), except (i) Indebtedness of CBS Broadcasting Inc. outstanding on the Original Closing Date and in the approximate amounts set forth on Schedule 5.6 (but not any refinancing, refunding or other replacement thereof), (ii) Excluded Indebtedness, (iii) Leveraged Spin-Off Indebtedness, (iv) Indebtedness of any Subsidiary Borrower under this Agreement, (v) Indebtedness incurred on any date when, after giving effect thereto, the aggregate principal amount of Indebtedness incurred pursuant to this clause (v) that is outstanding on such date (it being understood that, for the purposes of this clause (v), the term "Indebtedness" does not include borrowings under this Agreement or Excluded Indebtedness) does not exceed the greater of (x) $750,000,000 and (y) consolidated EBITDA of Infinity and its consolidated Subsidiaries (determined in a manner comparable to that set forth in the definition of "Consolidated EBITDA") for the most recent period of four consecutive fiscal quarters for which the relevant financial information is available less, in the case of any such Indebtedness incurred by Infinity or any of its consolidated Subsidiaries, the then actual aggregate outstanding balances of Indebtedness incurred pursuant to this clause (v) by Subsidiaries other than Infinity and its consolidated Subsidiaries, provided that the aggregate outstanding principal amount of Indebtedness incurred pursuant to this clause (v) by Subsidiaries other than Infinity and its consolidated Subsidiaries shall not exceed $300,000,000 at any time and (vi) Indebtedness of Infinity and its Subsidiaries under the Infinity Credit Agreement up to an aggregate principal amount of $1,500,000,000. 54 50 SECTION 5.7. Consolidated Leverage Ratio. CBS will not permit the Consolidated Leverage Ratio at the end of any period of four consecutive fiscal quarters ending on any date set forth below to be greater than the ratio set forth below opposite such date:
Date Ratio ---- ----- 12/31/99 and 3/31/00 4.00 to 1 6/30/00 and 9/30/00 3.75 to 1 12/31/00 and thereafter 3.50 to 1
SECTION 5.8. Consolidated Coverage Ratio. CBS will not permit the Consolidated Coverage Ratio for any period of four consecutive fiscal quarters to be less than 3:00 to 1. SECTION 5.9. Minimum Consolidated Net Worth. CBS will not permit Consolidated Net Worth on the last day of any fiscal quarter to be less than the sum of (a) $6,060,800,000, (b) 50% of cumulative Consolidated Net Income for each fiscal quarter of CBS ending after the Net Worth Commencement Date for which Consolidated Net Income is positive and (c) 100% of the amount by which total shareholders' equity of CBS and its Consolidated Subsidiaries increases after the Net Worth Commencement Date as a result of the merger of Infinity with and into a Subsidiary of CBS, including, without limitation, as a result of the issuance of Capital Stock of CBS in connection with the exercise of warrants, options and similar deferred issuances of common stock (determined at the time of the exercise thereof). SECTION 5.10. Use of Proceeds. On and after the Closing Date each Borrower will use the proceeds of the Loans and will use the Letters of Credit hereunder solely for general corporate purposes (in each case in compliance with all applicable legal and regulatory requirements, including, without limitation, Regulation U and the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the regulations thereunder), provided that neither any Agent nor any Lender shall have any responsibility as to the use of any of such proceeds. SECTION 5.11. Transactions with Affiliates. CBS will not, and will not permit any of its Material Subsidiaries to, directly or indirectly enter into any material transaction with any Affiliate of CBS except on terms at least as favorable to CBS or such Subsidiary as it could obtain on an arm's-length basis. SECTION 5.12. Limitation on Negative Pledge Clauses. CBS will not, and will not permit any of its Material Subsidiaries to, enter into any contractual obligation (a "Lien Restriction") in connection with the incurrence of Indebtedness for Borrowed Money which, with respect to any material asset of CBS or any of its Material Subsidiaries, would prohibit CBS or such Material Subsidiary from granting a Lien on such asset as collateral security for the obligations of CBS hereunder or, as applicable, a Guarantee of such obligations by such Material Subsidiary (collectively, "Credit Obligations"), except (a) Lien Restrictions with respect to any asset encumbered by a Lien permitted by Section 5.5, (b) Lien Restrictions with respect to any asset (or any proceeds thereof) which are comparable to Lien Restrictions affecting such asset on the Original Closing Date, (c) Lien Restrictions included in the documentation governing the terms of any Indebtedness of any Person which is acquired by CBS or any of its Material Subsidiaries after the Original Closing Date, which Indebtedness was outstanding prior to the date of acquisition of such Person and was not created in anticipation thereof, (d) Lien Restrictions in connection with securitizations or other transactions involving sales of receivables affecting only such 55 51 receivables and (e) Lien Restrictions included in the Infinity Credit Agreement. It is understood that an "equal and ratable" clause shall not be deemed to constitute a Lien Restriction so long as such clause would permit the obligations entitled to the benefit of such clause and the applicable Credit Obligations to be secured by Liens on the relevant assets on a pari passu basis. ARTICLE VI. EVENTS OF DEFAULT. In case of the happening of any of the following events ("Events of Default"): (a) (i) any Borrower shall default in the payment when due of any principal of any Loan or (ii) any Borrower shall default in the payment when due of any interest on any Loan, any reimbursement obligation in respect of any LC Disbursement, any Fee or any other amount payable by it hereunder and, in the case of this clause (ii), such default shall continue unremedied for a period of five Business Days; (b) any representation, warranty or certification made or deemed made herein (or in any modification or supplement hereto) by any Borrower, or any certificate furnished to any Lender or the Administrative Agent pursuant to the provisions hereof, shall prove to have been false or misleading in any material respect as of the time made, deemed made or furnished; (c) (i) CBS shall default in the performance of any of its obligations under Section 5.1(f), Section 5.4, Section 5.5, Sections 5.7 through 5.10 (inclusive) or Section 5.12 or (ii) CBS shall default in the performance of any of its other obligations under this Agreement and, in the case of this clause (ii), such default shall continue unremedied for a period of 15 days after notice thereof to CBS by the Administrative Agent or the Required Lenders (through the Administrative Agent); (d) CBS or any of its Subsidiaries shall (i) fail to pay at maturity any Indebtedness (other than Indebtedness as defined in subsection (f) of the definition thereof which has not been assumed by CBS or any of its Subsidiaries and where the Lien relates to Property acquired by CBS or any of its Subsidiaries in satisfaction, in whole or in part, of indebtedness to CBS or any of its Subsidiaries, in the ordinary course of business of WFSI, any of its Subsidiaries, Financial Services or WCI] in an aggregate amount in excess of $100,000,000, or (ii) fail to make any payment (whether of principal, interest or otherwise), regardless of amount, due in respect of, or fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing, any such Indebtedness in excess of $100,000,000 if the effect of any failure referred to in this clause (ii) (x) is to cause, or to permit the holder or holders of such Indebtedness or a trustee on its or their behalf to cause, such Indebtedness to become due prior to its stated maturity (provided that this subclause (ii)(x) shall not apply to any provision that permits the holders, or a trustee on their behalf, to cause Indebtedness to become due prior to its stated maturity because of the failure to deliver to such holders or such trustee financial statements or certificates for any Subsidiary that is not required by law or regulation to file financial statements with the SEC, unless such Indebtedness has become due prior to its stated maturity as a result of such failure) or (y) has caused such Indebtedness to become due prior to its stated maturity (it being agreed that for purposes of this paragraph (d) only (other than subclause (ii)(x) of this paragraph (d)), the term "Indebtedness" 56 52 shall include obligations under any interest rate protection agreement, foreign currency exchange agreement or other interest or exchange rate hedging agreement and that the amount of any Person's obligations under any such agreement shall be the net amount that such Person could be required to pay as a result of a termination thereof by reason of a default thereunder); (e) CBS or any of its Material Subsidiaries shall admit in writing its inability, or be generally unable, to pay its debts as such debts become due; (f) CBS or any of its Material Subsidiaries shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, trustee or liquidator of itself or of all or a substantial part of its Property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Bankruptcy Code (as now or hereafter in effect), (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code, or (vi) take any corporate action for the purpose of effecting any of the foregoing; (g) a proceeding or a case shall be commenced, without the application or consent of CBS or any of its Material Subsidiaries, in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of CBS or such Material Subsidiary or of all or any substantial part of its assets or (iii) similar relief in respect of CBS or such Material Subsidiary under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 60 or more days; or an order for relief against CBS or such Material Subsidiary shall be entered in an involuntary case under the Bankruptcy Code; (h) a final judgment or judgments for the payment of money in excess of $100,000,000 in the aggregate shall be rendered by one or more courts, administrative tribunals or other bodies having jurisdiction against CBS and/or any of its Material Subsidiaries and the same shall not be paid or discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 60 days from the date of the date of entry thereof and CBS or the relevant Material Subsidiary shall not, within said period of 60 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; (i) an event or condition specified in Section 5.1(e) shall occur or exist with respect to any Plan or Multiemployer Plan and, as a result of such event or condition, together with all other such events or conditions, CBS or any ERISA Affiliate shall incur or in the good faith opinion of the Required Lenders shall be reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of the foregoing) which would constitute, in the good faith determination of the Required Lenders, a Material Adverse Effect; (j) a Change of Control shall have occurred or, with respect to any period of 25 consecutive calendar months (whether commencing before or after the date of this Agreement), individuals who were directors of CBS on the first day of such period or who were nominated by 57 53 such directors (or by directors in a direct chain of directors so nominated) shall no longer occupy a majority of the seats (other than vacant seats) on the Board of Directors of CBS (excluding by reason of the death or retirement of any director or by reason of the Viacom Merger); or (k) The guarantee contained in Article VIII shall cease, for any reason, to be in full force and effect or CBS shall so assert; then and in every such event (other than an event with respect to CBS described in paragraph (f) or (g) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to CBS, take any or all of the following actions, at the same or different times: (I) terminate forthwith the Commitments, (II) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of each Borrower accrued hereunder, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by each Borrower, anything contained herein to the contrary notwithstanding, and (III) require that CBS deposit cash with the Administrative Agent, in an amount equal to the Aggregate LC Exposure, as collateral security for the repayment of any future LC Disbursements; and in any event with respect to any Borrower described in paragraph (f) or (g) above, (A) if such Borrower is CBS, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of each Borrower accrued hereunder, shall automatically become due and payable and CBS shall be required to deposit cash with the Administrative Agent, in an amount equal to the Aggregate LC Exposure, as collateral security for the repayment of any future drawings under the Letters of Credit and (B) if such Borrower is a Subsidiary Borrower, the principal of the Loans made to such Subsidiary Borrower then outstanding, together with accrued interest thereon and all other liabilities of such Subsidiary Borrower accrued hereunder, shall automatically become due and payable, in each case without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by each Borrower, anything contained herein to the contrary notwithstanding. ARTICLE VII. THE AGENTS In order to expedite the transactions contemplated by this Agreement, each Agent is hereby appointed to act as Agent on behalf of the Lenders. Each of the Lenders and the Issuing Lenders hereby irrevocably authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are specifically delegated to the Administrative Agent by the terms and provisions hereof, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders and the Issuing Lenders, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders all payments of principal of and interest on the Loans and the LC Disbursements and all other amounts due to the Lenders and Issuing Lenders hereunder, and promptly to distribute to each Lender and Issuing Lender its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Borrowers of any Event of Default specified in this Agreement of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute to each Lender and Issuing Lender copies of all notices, financial statements and other materials delivered by any Borrower pursuant to this Agreement as received by the Administrative Agent. 58 54 Neither any Agent nor any of its directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his own gross negligence or wilful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by any Borrower of any of the terms, conditions, covenants or agreements contained in this Agreement. The Agents shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or other instruments or agreements. The Administrative Agent shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders (or, when expressly required hereby, all the Lenders) and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders and the Issuing Lenders. The Administrative Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper Person or Persons. Neither the Agents nor any of their directors, officers, employees or agents shall have any responsibility to any Borrower on account of the failure of or delay in performance or breach by any Lender or Issuing Lender of any of its obligations hereunder or to any Lender or Issuing Lender on account of the failure of or delay in performance or breach by any other Agent, any other Lender or Issuing Lender or any Borrower of any of their respective obligations hereunder or in connection herewith. The Administrative Agent may execute any and all duties hereunder by or through agents or employees and shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. The Lenders and the Issuing Lenders hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right to appoint from the Lenders a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint from the Lenders a successor Administrative Agent which shall be a bank with an office in New York, New York, having a combined capital and surplus of at least $500,000,000 or an affiliate of any such bank, which successor shall be acceptable to CBS (such acceptance not to be unreasonably withheld). Upon the acceptance of any appointment as Administrative Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.5 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. With respect to the Loans made by them and their LC Exposure hereunder, the Agents in their individual capacity and not as Agents shall have the same rights and powers as any other Lender and may exercise the same as though they were not Agents, and the Agents and their affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrowers or any of their respective Subsidiaries or any Affiliate thereof as if they were not Agents. 59 55 Each Lender and Issuing Lender agrees (i) to reimburse the Administrative Agent in the amount of its pro rata share (based on its Total Facility Percentage or, after the date on which the Loans shall have been paid in full, based on its Total Facility Percentage immediately prior to such date) of any reasonable, out-of-pocket expenses incurred for the benefit of the Lenders or the Issuing Lenders by the Administrative Agent, including reasonable counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders or the Issuing Lenders, which shall not have been reimbursed by or on behalf of any Borrower and (ii) to indemnify and hold harmless the Administrative Agent and any of its directors, officers, employees or agents, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by it under this Agreement, to the extent the same shall not have been reimbursed by or on behalf of CBS, provided that no Lender or Issuing Lender shall be liable to the Administrative Agent or any such director, officer, employee or agent for any portion of such liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or wilful misconduct of the Administrative Agent or any of its directors, officers, employees or agents. Each Lender and Issuing Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender or Issuing Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and Issuing Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender or Issuing Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. Neither the Documentation Agent nor either Syndication Agent nor any managing agent shall have any duties or responsibilities hereunder in its capacity as such. ARTICLE VIII. GUARANTEE SECTION 8.1. Guarantee. In order to induce the Administrative Agent and the Lenders to become bound by this Agreement and to make or maintain the Loans hereunder, and in consideration thereof, CBS hereby unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, to the Administrative Agent, for the ratable benefit of the Lenders, the prompt and complete payment and performance by each Subsidiary Borrower when due (whether at stated maturity, by acceleration or otherwise) of the Subsidiary Borrower Obligations, and CBS further agrees to pay any and all expenses (including, without limitation, all reasonable fees, charges and disbursements of counsel) which may be paid or incurred by the Administrative Agent or by the Lenders in enforcing, or obtaining advice of counsel in respect of, any of their rights under the guarantee contained in this Article VIII. The guarantee contained in this Article VIII, subject to Section 8.5, shall remain in full force and effect until the Subsidiary Borrower Obligations are paid in full and the Commitments are terminated, notwithstanding that from time to time prior thereto any Subsidiary Borrower may be free from any Subsidiary Borrower Obligations. 60 56 CBS agrees that whenever, at any time, or from time to time, it shall make any payment to the Administrative Agent or any Lender on account of its liability under this Article VIII, it will notify the Administrative Agent and such Lender in writing that such payment is made under the guarantee contained in this Article VIII for such purpose. No payment or payments made by any Subsidiary Borrower or any other Person or received or collected by the Administrative Agent or any Lender from any Subsidiary Borrower or any other Person by virtue of any action or proceeding or any setoff or appropriation or application, at any time or from time to time, in reduction of or in payment of the Subsidiary Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of CBS under this Article VIII which, notwithstanding any such payment or payments, shall remain liable for the unpaid and outstanding Subsidiary Borrower Obligations until, subject to Section 8.5, the Subsidiary Borrower Obligations are paid in full and the Commitments are terminated. SECTION 8.2. No Subrogation, etc. Notwithstanding any payment or payments made by CBS hereunder, or any set-off or application of funds of CBS by the Administrative Agent or any Lender, CBS shall not be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against any Subsidiary Borrower or against any collateral security or guarantee or right of offset held by the Administrative Agent or any Lender for the payment of the Subsidiary Borrower Obligations, nor shall CBS seek or be entitled to seek any contribution, reimbursement, exoneration or indemnity from or against any Subsidiary Borrower in respect of payments made by CBS hereunder, until all amounts owing to the Administrative Agent and the Lenders by the Subsidiary Borrowers on account of the Subsidiary Borrower Obligations are paid in full and the Commitments are terminated. So long as the Subsidiary Borrower Obligations remain outstanding, if any amount shall be paid by or on behalf of any Subsidiary Borrower or any other Person to CBS on account of any of the rights waived in this Section 8.2, such amount shall be held by CBS in trust, segregated from other funds of CBS, and shall, forthwith upon receipt by CBS, be turned over to the Administrative Agent in the exact form received by CBS (duly indorsed by CBS to the Administrative Agent, if required), to be applied against the Subsidiary Borrower Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine. SECTION 8.3. Amendments, etc. with respect to the Subsidiary Borrower Obligations. CBS shall remain obligated under this Article VIII notwithstanding that, without any reservation of rights against CBS, and without notice to or further assent by CBS, any demand for payment of or reduction in the principal amount of any of the Subsidiary Borrower Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender, and any of the Subsidiary Borrower Obligations continued, and the Subsidiary Borrower Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any Lender, and this Agreement and any other documents executed and delivered in connection herewith may be amended, modified, supplemented or terminated, in whole or in part, as the Required Lenders (or all Lenders, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any Lender for the payment of the Subsidiary Borrower Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any lien at any time held by it as security for the Subsidiary Borrower Obligations or for the guarantee contained in this Article VIII or any property subject thereto. SECTION 8.4. Guarantee Absolute and Unconditional. CBS waives any and all notice of the creation, renewal, extension or accrual of any of the Subsidiary Borrower Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon the guarantee contained in 61 57 this Article VIII or acceptance of the guarantee contained in this Article VIII; the Subsidiary Borrower Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Article VIII; and all dealings between CBS or the Subsidiary Borrowers, on the one hand, and the Administrative Agent and the Lenders, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Article VIII. CBS waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon CBS or any Subsidiary Borrower with respect to the Subsidiary Borrower Obligations. The guarantee contained in this Article VIII shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of this Agreement, any of the Subsidiary Borrower Obligations or any collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any Lender, (b) the legality under applicable requirements of law of repayment by the relevant Subsidiary Borrower of any Subsidiary Borrower Obligations or the adoption of any requirement of law purporting to render any Subsidiary Borrower Obligations null and void, (c) any defense, setoff or counterclaim (other than a defense of payment or performance by the applicable Subsidiary Borrower) which may at any time be available to or be asserted by CBS against the Administrative Agent or any Lender, or (d) any other circumstance whatsoever (with or without notice to or knowledge of CBS or any Subsidiary Borrower) which constitutes, or might be construed to constitute, an equitable or legal discharge of any Subsidiary Borrower for any Subsidiary Borrower Obligations, or of CBS under the guarantee contained in this Article VIII, in bankruptcy or in any other instance. When the Administrative Agent or any Lender is pursuing its rights and remedies under this Article VIII against CBS, the Administrative Agent or any Lender may, but shall be under no obligation to, pursue such rights and remedies as it may have against any Subsidiary Borrower or any other Person or against any collateral security or guarantee for the Subsidiary Borrower Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent or any Lender to pursue such other rights or remedies or to collect any payments from any Subsidiary Borrower or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of any Subsidiary Borrower or any such other Person or of any such collateral security, guarantee or right of offset, shall not relieve CBS of any liability under this Article VIII, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent and the Lenders against CBS. SECTION 8.5. Reinstatement. The guarantee contained in this Article VIII shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Subsidiary Borrower Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Subsidiary Borrower or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, any Subsidiary Borrower or any substantial part of its property, or otherwise, all as though such payments had not been made. SECTION 8.6. Payments. CBS hereby agrees that any payments in respect of the Subsidiary Borrower Obligations pursuant to this Article VIII will be paid to the Administrative Agent without setoff or counterclaim in Dollars at the office of the Administrative Agent specified in Section 9.1. 62 58 ARTICLE IX. MISCELLANEOUS SECTION 9.1. Notices. Notices and other communications provided for herein shall be in writing (or, where permitted to be made by telephone, shall be confirmed promptly in writing) and shall be delivered by hand or overnight courier service, mailed or sent by telecopier as follows: (a) if to CBS, to it at CBS Corporation, 51 West 52nd Street, New York, New York 10019, Attention of Executive Vice President and Chief Financial Officer (Telecopy No. (212) 975-9191), with a copy to General Counsel (Telecopy No. (212) 597-4031); (b) if to the Administrative Agent, to it at 60 Wall Street, New York, New York 10260, Attention of Laura Reim (Telecopy No. (212) 648-5336); (c) if to any Issuing Lender, to it at the address for notices specified in the applicable Issuing Lender Agreement; (d) if to a Lender, to it at its address (or telecopy number) set forth in Schedule 1.1 or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto; and (e) if to a Subsidiary Borrower, to it at its address set forth in the relevant Subsidiary Request. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service, sent by telecopy or, if permitted by the terms hereof and if promptly confirmed in writing, by telephone, or on the date five Business Days after dispatch by registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.1 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.1. SECTION 9.2. Survival of Agreement. All representations and warranties made hereunder and in any certificate delivered pursuant hereto or in connection herewith shall be considered to have been relied upon by the Agents and the Lenders and shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder, regardless of any investigation made by the Agents or the Lenders or on their behalf. SECTION 9.3. Binding Effect. This Agreement shall be binding upon and inure to the benefit of each Borrower, each Agent and each Lender and their respective successors and assigns, except that CBS shall not have the right to assign its rights or obligations hereunder or any interest herein without the prior consent of all the Lenders. SECTION 9.4. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, and all covenants, promises and agreements by or on behalf of each Borrower, either Agent or any Lender that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. (b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment or Swingline Commitment and the Loans at the time owing to it); provided, however, that (i) except in the case of an 63 59 assignment to a Lender or an affiliate of such Lender (other than if at the time of such assignment, such Lender or affiliate would be entitled to require any Borrower to pay greater amounts under Section 2.20(a) than if no such assignment had occurred, in which case such assignment shall be subject to the consent requirement of this clause (i)), CBS and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) (x) except in the case of assignments of Competitive Loans or assignments to any Person that is a Lender prior to giving effect to such assignment, the amount of the aggregate Commitments and/or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $12,500,000 and (y) the amount of the aggregate Commitments and/or Loans retained by any assigning Lender (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $12,500,000, unless (in the case of clause (x) or (y) above) the assigning Lender's Commitment and Loans (other than any Competitive Loans) are being reduced to $0 pursuant to such assignment, (iii) the assignor and assignee shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Upon acceptance and recording pursuant to Section 9.4(e), from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof (or any lesser period to which the Administrative Agent and CBS may agree), (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto (but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.20 and 9.5, as well as to any Fees accrued for its account hereunder and not yet paid)). Notwithstanding the foregoing, any Lender or Issuing Lender assigning its rights and obligations under this Agreement may maintain any Competitive Loans or Letters of Credit made or issued by it outstanding at such time, and in such case shall retain its rights hereunder in respect of any Loans or Letters of Credit so maintained until such Loans or Letters of Credit have been repaid or terminated in accordance with this Agreement. (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other instrument or document furnished pursuant hereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto or the financial condition of CBS or any of its Subsidiaries or the performance or observance by CBS or any of its Subsidiaries of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Sections 3.2 and 5.1 and such other documents and information as it has deemed appropriate to make it own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender or any other Agent or Lender and based on such documents 64 60 and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) The Administrative Agent, acting for this purpose as agent of each Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive in the absence of manifest error and each Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of CBS and the Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to CBS. (f) Each Lender may without the consent of any Borrower or the Agents sell participations to one or more banks, other financial institutions or other entities (provided that any such other entity is a not a competitor of CBS or any Affiliate of CBS) in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (ii) the participating banks or other entities shall be entitled to the benefit of the cost protection provisions contained in Sections 2.15, 2.16 and 2.20 to the same extent as if they were Lenders (provided that additional amounts payable to any Lender pursuant to Section 2.20 shall be determined as if such Lender had not sold any such participations) and (iv) the Borrowers, the Agents and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of each Borrower relating to the Loans and the Letters of Credit and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable hereunder or the amount of principal of or the rate at which interest is payable on the Loans or LC Disbursements, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans or LC Disbursements or of LC Fees or Commitment Fees, increasing the amount of or extending the Commitments or releasing the guarantee contained in Article VIII, in each case to the extent the relevant participant is directly affected thereby). (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.4, disclose to the assignee or participant or proposed assignee or participant any information relating to any Borrower furnished to such Lender by or on behalf of such Borrower; provided that, prior to any such disclosure of information 65 61 designated by such Borrower as confidential, each such assignee or participant or proposed assignee or participant shall execute a Confidentiality Agreement whereby such assignee or participant shall agree (subject to the exceptions set forth therein) to preserve the confidentiality of such confidential information. A copy of each such Confidentiality Agreement executed by an assignee shall be promptly furnished to CBS. It is understood that confidential information relating to the Borrowers would not ordinarily be provided in connection with assignments or participations of Competitive Loans. (h) Notwithstanding the limitations set forth in paragraph (b) above, (i) any Lender may at any time assign or pledge all or any portion of its rights under this Agreement to a Federal Reserve Bank and (ii) any Lender which is a "fund" may at any time assign or pledge all or any portion of its rights under this Agreement to secure such Lender's indebtedness, in each case without the prior written consent of any Borrower or the Administrative Agent; provided that each such assignment shall be made in accordance with applicable law and no such assignment shall release a Lender from any of its obligations hereunder. In order to facilitate any such assignment, each Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a registered promissory note or notes evidencing the Loans made to such Borrower by the assigning Lender hereunder. (i) Notwithstanding anything to the contrary contained herein, any Bank (a "Granting Bank") may grant to a special purpose funding vehicle (a "SPC"), identified as such in writing from time to time by the Granting Bank to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Bank would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof. The making of an Loan by an SPC hereunder shall utilize the Commitment of the Granting Bank to the same extent, and as if, such Loan were made by such Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Bank). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section, any SPC may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Bank or to any financial institutions (consented to by the Borrower and Administrative Agent ) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This section may not be amended without the written consent of any SPC which has been identified as such by the Granting Bank to the Administrative Agent and the Borrower and which then holds any Loan pursuant to this paragraph (i). (j) CBS shall not assign or delegate any of its rights or duties hereunder without the prior consent of all the Lenders. 66 62 SECTION 9.5. Expenses; Indemnity. (a) CBS agrees to pay all reasonable out-of-pocket expenses incurred by the Agents in connection with the preparation, negotiation, execution and delivery of this Agreement or in connection with any amendments, modifications or waivers of the provisions hereof (whether or not the transactions hereby contemplated shall be consummated) or incurred by any Agent, any Lender or any Issuing Lender in connection with the enforcement or protection of the rights of the Agents, the Lenders or the Issuing Lenders under this Agreement or in connection with the Loans made or the Letters of Credit issued hereunder, including, without limitation, the reasonable fees, charges and disbursements of Simpson Thacher & Bartlett, counsel for the Agents, and, in connection with any such enforcement or protection, the reasonable fees, charges and disbursements of any other counsel for any Agent, Lender or Issuing Lender. (b) CBS agrees to indemnify and hold harmless each Agent, each Lender, each Issuing Lender and each of their respective directors, officers, employees, affiliates and agents (each, an "Indemnified Person") against, and to reimburse each Indemnified Person, upon its demand, for, any losses, claims, damages, liabilities or other expenses ("Losses") to which such Indemnified Person becomes subject insofar as such Losses arise out of or in any way relate to or result from (i) the execution or delivery of this Agreement, any Letter of Credit or any agreement or instrument contemplated hereby (and any amendment hereto or thereto), the performance by the parties hereto or thereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby or (ii) the use (or proposed use) of the proceeds of the Loans or other extensions of credit hereunder, including, without limitation, Losses consisting of reasonable legal or other expenses incurred in connection with investigating, defending or participating in any legal proceeding relating to any of the foregoing (whether or not such Indemnified Person is a party thereto); provided that the foregoing will not apply to any Losses to the extent they are found by a final decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Person. (c) The provisions of this Section 9.5 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any investigation made by or on behalf of any Agent or Lender. All amounts under this Section 9.5 shall be payable on written demand therefor. SECTION 9.6. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Agent and each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Agent or Lender to or for the credit or the account of any Borrower against any of and all the obligations of such Borrower now or hereafter existing under this Agreement or the Administrative Agent Fee Letter held by such Agent or Lender which shall be due and payable. The rights of each Agent and each Lender under this Section 9.6 are in addition to other rights and remedies (including other rights of setoff) which such Agent or Lender may have. SECTION 9.7. APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS AND PRINCIPLES OF SUCH STATE. 67 63 SECTION 9.8. Waivers; Amendment. (a) No failure or delay of any Agent, any Issuing Lender or any Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agents, the Issuing Lenders and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Borrower from any such provision shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Borrower in any case shall entitle any Borrower to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement in writing entered into by the Borrowers and the Required Lenders; provided, however, that no such agreement shall (i) reduce the amount or extend the scheduled date of maturity of any Loan or of any installment thereof, or reduce the stated amount of any LC Disbursement, interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Commitment of any Lender, in each case without the prior written consent of each Lender directly affected thereby; (ii) amend, modify or waive any provision of this Section 9.8(b), or reduce the percentage specified in the definition of "Required Lenders", release the guarantee contained in Article VIII or consent to the assignment or transfer by CBS of any of its rights and obligations under this Agreement, in each case without the prior written consent of all the Lenders; or (iii) amend, modify or waive any provision of Article VII without the prior written consent of each Agent affected thereby; provided, further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Swingline Lenders or the Issuing Lenders hereunder in such capacity without the prior written consent of the Administrative Agent, each Swingline Lender directly affected thereby or each Issuing Lender directly affected thereby, as the case may be. SECTION 9.9. Entire Agreement. This Agreement (together with the Issuing Lender Agreements, the Subsidiary Borrower Designations and the Subsidiary Borrower Requests) constitutes the entire contract between the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement. Nothing in this Agreement, expressed or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (b) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10. SECTION 9.11. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or 68 64 unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 9.12. Counterparts. This Agreement may be executed in two or more counterparts, each of which constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 9.3. SECTION 9.13. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 9.14. Jurisdiction; Consent to Service of Process. (a) Each Borrower hereby irrevocably and unconditionally submits, for itself and its Property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each Subsidiary Borrower designates and directs CBS at its offices at 51 West 52nd Street, New York, New York 10019, as its agent to receive service of any and all process and documents on its behalf in any legal action or proceeding referred to in this Section 9.14 in the State of New York and agrees that service upon such agent shall constitute valid and effective service upon such Subsidiary Borrower and that failure of CBS to give any notice of such service to any Subsidiary Borrower shall not affect or impair in any way the validity of such service or of any judgment rendered in any action or proceeding based thereon. Nothing in this Agreement shall affect any right that any Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Borrower or its Properties in the courts of any jurisdiction. (b) Each Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.1. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.15. Confidentiality. (a) Each Lender agrees to keep confidential and not to disclose (and to cause its affiliates, officers, directors, employees, agents and representatives to keep confidential and not to disclose) and, at the request of CBS (except as provided below or if such Lender is required to retain any Confidential Information (as defined below) pursuant to customary internal or banking practices, bank regulations or applicable law), promptly to return to CBS or destroy the Confidential Information and all copies thereof, extracts therefrom and analyses or other materials based thereon, except that such Lender shall be permitted to disclose Confidential Information (i) to such of its officers, directors, employees, agents, affiliates and representatives as need to know such Confidential Information in connection with such Lender's participation in this Agreement, each of whom shall be informed by such Lender of the confidential nature of the Confidential 69 65 Information and shall agree to be bound by the terms of this Section 9.15; (ii) to the extent required by applicable laws and regulations or by any subpoena or similar legal process or requested by any Governmental Authority or agency having jurisdiction over such Lender; provided, however, that, except in the case of disclosure to bank regulators or examiners in accordance with customary banking practices, written notice of each instance in which Confidential Information is required or requested to be disclosed shall be furnished to CBS not less than 30 days prior to the expected date of such disclosure or, if 30 days' notice is not practicable under the circumstances, as promptly as practicable under the circumstances; (iii) to the extent such Confidential Information (A) is or becomes publicly available other than as a result of a breach of this Agreement, (B) becomes available to such Lender on a non-confidential basis from a source other than a party to this Agreement or any other party known to such Lender to be bound by an agreement containing a provision similar to this Section 9.15 or (C) was available to such Lender on a non-confidential basis prior to this disclosure to such Lender by a party to this Agreement or any other party known to such Lender to be bound by an agreement containing a provision similar to this Section 9.15; (iv) as permitted by Section 9.4(g); or (v) to the extent CBS shall have consented to such disclosure in writing. As used in this Section 9.15, "Confidential Information" shall mean any materials, documents or information furnished by or on behalf of any Borrower in connection with this Agreement designated by or on behalf of such Borrower as confidential. (b) Each Lender (i) agrees that, except to the extent the conditions referred to in subclause (A), (B) or (C) of clause (iii) of paragraph (a) above have been met and as provided in paragraph (c) below, (A) it will use the Confidential Information only in connection with its participation in this Agreement and (B) it will not use the Confidential Information in connection with any other matter or in a manner prohibited by any law, including, without limitation, the securities laws of the United States and (ii) understands that breach of this Section 9.15 might seriously prejudice the interest of the Borrowers and that the Borrowers are entitled to equitable relief, including an injunction, in the event of such breach. (c) Notwithstanding anything to the contrary contained in this Section 9.15, each Agent and each Lender shall be entitled to retain all Confidential Information for so long as it remains an Agent or a Lender to use solely for the purposes of servicing the credit and protecting its rights hereunder. 70 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. CBS CORPORATION By: /s/ Fredric G. Reynolds ------------------------------------ Title: Executive Vice President and Chief Financial Officer MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By: /s/ Dennis Wilczek ------------------------------------ Title: Associate EX-10.SS 3 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT 1 Exhibit 10(ss) FIRST AMENDMENT TO EMPLOYMENT AGREEMENT WHEREAS, Mel Karmazin (the "Executive") and Viacom Inc. ("Viacom") entered into an employment agreement dated September 6, 1999 (the "Agreement") to be effective at the Effective Time (as defined in the Agreement and Plan of Merger between Viacom and CBS Corporation ("CBS") dated as of September 6, 1999, as amended and restated as of October 8, 1999 and November 23, 1999 (as amended, the "Merger Agreement")); and WHEREAS, the Executive and Viacom desire to amend the Agreement in certain respects, as described hereinbelow; NOW, THEREFORE, the Executive and the Company agree that the Agreement is hereby amended, effective as of September 6, 1999, as follows: 1. Section 7(k) of the Agreement is amended hereby by adding a new sentence at the end thereof to read as follows: "Notwithstanding anything hereinabove to the contrary, the provisions of this Section 7(k) shall not apply to any of the following: (i) any shares that were held in the Karmazin Charitable Lead Annuity Trust dated December 28, 1998 (the "Trust") on September 6, 1999 that are transferred from the Trust as required by the provisions of the trust agreement under which the Trust was established as in effect as of the date hereof ("Trust Agreement") and as may be required by the Internal Revenue Code of 1986, as amended (the "Code"), to the Mel Karmazin Foundation, Inc., a Delaware corporation (the "Foundation"), or to another 2 charitable organization, and any shares disposed of by the Foundation as required by the private foundation minimum distribution requirements of the Code, and the terms of the operative documents for such Foundation as in effect as of the date hereof (copies of which Trust and Foundation have been provided to Viacom by you); (ii) any shares required to be transferred by you to or for the benefit of your former spouse, Sharon Karmazin, pursuant to a Separation and Property Settlement Agreement dated as of July 1, 1996, as amended (the "Settlement Agreement") (a copy of which has been provided to Viacom by you); and (iii) any shares sold or disposed of (including pursuant to withholding by CBS or Viacom upon the exercise of stock options to acquire either CBS or Viacom shares) by you in order to satisfy any tax obligation arising upon your exercise of stock options (i) that would otherwise expire in accordance with their terms during the Employment Term within a reasonable period of time preceding such options' expiration or (ii) to satisfy any transfers of CBS or Viacom shares to Sharon Karmazin required pursuant to the Settlement Agreement." 2. Except as hereinabove provided, the Agreement is ratified and confirmed in all respects. IN WITNESS WHEREOF, the Executive and Viacom have executed this First Amendment to the Agreement on this 31st day of December, 1999. VIACOM INC. by: /s/ Philippe P. Dauman ------------------------------------------- Name: Philippe P. Dauman Title: Deputy Chairman ACCEPTED AND AGREED: /s/ Mel Karmazin - ------------------------------------ Mel Karmazin EX-21 4 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Subsidiary companies of the Registrant are listed below. With respect to the companies named, all voting securities are owned directly or indirectly by the Registrant, except where otherwise indicated. Ownership percentages are as of December 31, 1999.
INCORPORATED OWNED BY UNDER IMMEDIATE NAME LAWS OF PARENT - ----------------------------------------------------------------------------------------------- Bay County Energy Systems, Inc. Delaware 100 Bonneville Wind Corporation Utah 100 CBS Cable Networks, Inc. Delaware 100 Network Enterprises, Inc. (1) Tennessee 100 Peppercorn Productions, Inc. Tennessee 100 Silver Spice Productions, LLC Delaware 50 TNN Productions, Inc. Delaware 100 World Sports Enterprises Tennessee 51 World Skating League, LLC Tennessee 50 CBS.com, Inc. Delaware 100 CBS Communications Services, Inc. Delaware 100 CBS Dallas Media, Inc. Delaware 100 KTVT Broadcasting Company, LP Texas 100 CBS Dallas Ventures, Inc. Texas 100 CBS Mass Media Corporation Delaware 100 Central Fidelity Insurance Company Vermont 100 Communities IP Holdings, Inc. Delaware 100 Communities LP Holdings, Inc. Delaware 100 Delaware Resource Beneficiary, Inc. Delaware 100 Delaware Resource Lessee Trust Delaware 100 Delaware Resource Management, Inc. Delaware 100 Dutchess Resource Management, Inc. Delaware 100 First Hotel Investment Corporation Delaware 100 First Westinghouse Capital Corporation Delaware 100 GLD Holdings, LLC Delaware 80 Group W Television Stations, Inc. Delaware 100 Group W Television Stations LP Delaware 100 Home Team Sports Limited Partnership Delaware 66 iWon, Inc. Delaware 54 King World Productions, Inc. (2) Delaware 100 Peak FSC, Ltd. Bermuda 100 Rocky Mount Town Associates Limited Partnership Delaware 100 Seven-Up Bottling Co. of Visalia California 100 Ship House, Inc. Florida 100 Station Holdings B, Inc. Delaware 100 Group W/CBS Television Station Partners Delaware 100 KUTV, LP Delaware 88 KUTV Associates Delaware 100 KUTV Real Estate Company, LLC Delaware 100 KUTV Holdings, Inc. Delaware 100 Symphonette Recording Society, LLC Delaware 50 Tube Mill, Inc. Alabama 100 Two Productions, Inc. Delaware 100 W-F Productions, Inc. Delaware 100 Waste Resource Energy, Inc. Delaware 100 WBCE Corporation New York 100 WCC FSC I, Inc. Delaware 100
2
INCORPORATED OWNED BY UNDER IMMEDIATE NAME LAWS OF PARENT - ----------------------------------------------------------------------------------------------- WCC FSC III, Inc. U.S. Virgin Islands 100 WCC FSC IV, Inc. U.S. Virgin Islands 100 WCC FSC V, Inc. Bermuda 100 WCC FSC VIII, Inc. U.S. Virgin Islands 100 WCC FSC IX, Inc. U.S. Virgin Islands 100 Wcc Project Corp. Delaware 100 Wcc Soledad I, Inc. Delaware 100 Wcc Soledad II, Inc. Delaware 100 Westinghouse (New Zealand) Ltd. New Zealand 100 Westinghouse Canada Holdings LLC Delaware 100 CBS Canada Co. Nova Scotia 100 Westinghouse Electric Corporation Delaware 100 Westinghouse Hanford Company Delaware 100 Westinghouse Holdings Corporation Delaware 100 Westinghouse Electric GmbH, Birsfelden Switzerland 100 Westinghouse Electric (Asia-Pacific) Holdings, Ltd. Singapore 100 Group W Yarra Broadcast Pte. Ltd. Singapore 51 Westinghouse Irish Holdings, Limited Ireland 100 Westinghouse Reinvestment Company LLC Delaware 100 Westinghouse Investment Corporation Delaware 100 Westinghouse World Investment Corporation Delaware 100 Westinghouse Foreign Sales Corporation Barbados 100 Westinghouse Licensing Corporation Pennsylvania 100 Westinghouse LMG, Inc. Delaware 100 Westinghouse Pictures, Inc. Delaware 100 WPIC Corporation Delaware 100 York Resource Energy Systems, Inc. Delaware 100 Westinghouse CBS Holding Company, Inc. Delaware 100 CBS Broadcasting Inc. (3) New York 100 Bala Cynwyd Associates Pennsylvania 50 CBS Pageants, Inc. Delaware 100 Miss Universe LP, LLP Delaware 50 CBS Survivor Productions, Inc. Delaware 100 Survivor Productions, LLC Delaware 50 Meadowlands Parkway Associates New Jersey 50 The CBS/FOX Company New York 50 Infinity Broadcasting Corporation Delaware 65 CBS Radio Inc. (4) Delaware 100 Radio Data Group, Inc. Virginia 50 Infinity Media Corporation (5) Delaware 100 TDI Worldwide, Inc. (6) Delaware 100 TDI Holdings Limited (7) United Kingdom 100 LDI Limited United Kingdom 100 TDI Advertising Limited (8) United Kingdom 100 TDI Mail Holdings Limited (9) Northern Ireland 75 Transportation Displays Incorporated (10) Delaware 100 Infinity Radio, Inc. Delaware 100 Outdoor Systems, Inc. (11) Delaware 100 Spark Network Services, Inc. Delaware 100
- --------------- (1) Network Enterprises, Inc. is also the parent company of 10 wholly-owned subsidiaries which operate cable stations and produce, marketing, and broadcasting related cable programming, of which 9 are incorporated in the United States and 1 is incorporated in Canada. 3 (2) King World Productions, Inc. is the parent company of 17 wholly-owned subsidiaries, incorporated in the United States for the purpose of producing and distributing various television programming. (3) CBS Broadcasting Inc. is the parent company of 23 wholly-owned subsidiaries which produce, market and broadcast various network programming, of which 20 are incorporated in the United States and 3 are incorporated in foreign countries. (4) CBS Radio, Inc. is the parent company of 15 wholly-owned subsidiaries which consist of primarily radio station operations, all of which are incorporated in the United States. (5) Infinity Media Corporation is the parent company of 53 wholly-owned subsidiaries which consist primarily of radio station operations, all of which are incorporated in the United States. (6) TDI Worldwide, Inc. is the parent company of 3 wholly-owned outdoor and transit advertising companies and franchises, all of which are incorporated in Ireland. (7) TDI Holdings Limited is the parent company of 5 wholly-owned subsidiaries which consist primarily of outdoor and transit advertising operations, all of which are incorporated in the Netherlands. (8) TDI Advertising Limited is the parent company of 6 wholly-owned outdoor and transit advertising subsidiaries, all of which are incorporated in the United Kingdom. (9) TDI Mail Holdings Limited is the parent company of 3 wholly-owned outdoor and transit advertising subsidiaries, all of which are incorporated in foreign countries. (10) Transportation Displays Incorporated is the parent company of 5 wholly-owned outdoor and transit advertising subsidiaries, all of which are incorporated in the United States. (11) Outdoor Systems, Inc. is the parent company of 21 wholly-owned outdoor and transit advertising subsidiaries, of which 17 are incorporated in the United States and 4 are incorporated in foreign countries. Companies not shown by name, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. EX-23 5 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in each prospectus constituting part of the Registration Statements on Form S-3 (Nos. 333-88775 and 33-41475), and on Form S-8 (Nos. 2-92085, 33-44044, 33-45365, 33-46779, 33-51445, 33-51579, 33-53815, 33-53819, 33-62043, 33-62045, 333-12583, 333-12589, 333-12591, 333-13219, 333-23661, 333-23663, 333-30127, 333-30468, 333-37497, 333-75843, 333-75845, and 333-84761) of CBS Corporation, of our report dated January 25, 2000, except as to note 20, which is as of March 21, 2000, appearing on page 30 of this Form 10-K. We also consent to the incorporation by reference of our report on the financial statement schedule, which appears on page 67 of this Form 10-K. /s/ KPMG LLP KPMG LLP New York, New York March 29, 2000 EX-24 6 EXHIBIT 24 1 Exhibit 24 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ George H. Conrades ------------------------------- 2 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ Martin C. Dickinson ----------------------------- 3 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ William H. Gray ----------------------------- 4 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ Mel Karmazin ----------------------------- 5 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ Jan Leschly ----------------------------- 6 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ David T. McLaughlin ----------------------------- 7 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ Leslie Moonves ----------------------------- 8 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ Richard R. Pivirotto ----------------------------- 9 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ Raymond W. Smith ----------------------------- 10 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ Paula Stern ----------------------------- 11 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ Patty Stonesifer ----------------------------- 12 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ Robert D. Walter ----------------------------- 13 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ Fredric G. Reynolds ----------------------------- 14 POWER OF ATTORNEY ---------------------------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of CBS CORPORATION, a Pennsylvania corporation (the "Corporation"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1999, hereby constitutes and appoints Mel Karmazin, Fredric G. Reynolds, Louis J. Briskman and Robert G. Freedline, his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Corporation thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 27th day of March, 2000. /s/ Robert G. Freedline ----------------------------- 15 EXTRACT FROM MINUTES OF MEETING OF THE BOARD OF DIRECTORS OF CBS CORPORATION HELD ON JANUARY 26, 2000 ------------------------ RESOLVED, that the Chief Executive Officer, President, Executive Vice President and Chief Financial Officer, Executive Vice President and General Counsel, Principal Accounting Officer, Vice President and Treasurer, and Vice President, Secretary and Deputy General Counsel of the Company are, and each of them with full power to act without the others hereby is, authorized to prepare, or cause to be prepared, and to execute the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and the Company's Quarterly Reports on Form 10-Q for 2000, as well as any and all other reports or documents to be filed by the Company and/or its subsidiaries with the Securities and Exchange Commission, and any and all amendments thereto, on behalf of and as attorneys for the Company and/or its subsidiaries, and to file said Forms 10-K and 10-Q and other reports or documents, and any and all amendments thereto, with all exhibits thereto and any and all other documents in connection therewith, with the Securities and Exchange Commission on behalf of, and as attorneys for, the Company and/or its subsidiaries. ----------------------- I, JULIANNE O'RIORDAN, Assistant Secretary of CBS Corporation, DO HEREBY CERTIFY that the foregoing is a true and correct copy of resolutions adopted at a meeting of the Board of Directors of said Company held on January 26, 2000, at which meeting a quorum was present and which resolution is still in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of said Company. Dated: March 28, 2000 /s/ Julianne O'Riordan ----------------------- Assistant Secretary EX-27.1 7 FINANCIAL DATA SCHEDULE
5 1,000,000 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 194 306 1,750 74 0 3,372 3,701 631 33,125 1,964 3,753 0 0 805 15,342 33,125 7,373 7,373 4,281 4,281 844 19 204 763 461 157 628 (5) 0 780 1.10 1.08
EX-27.2 8 FINANCIAL DATA SCHEDULE
5 YEAR YEAR DEC-31-1998 DEC-31-1997 JAN-01-1998 JAN-01-1997 DEC-31-1998 DEC-31-1997 798 8 0 0 1,228 971 48 35 0 0 2,789 1,975 1,622 1,481 473 415 20,139 16,715 1,605 1,549 2,506 3,236 0 0 0 0 734 718 8,320 7,362 20,139 16,715 6,805 5,367 6,805 5,367 4,373 3,483 4,373 3,483 734 588 21 12 370 386 155 (59) 161 73 (12) (131) 0 680 (9) 0 0 0 (21) 549 (.03) .84 (.03) .84
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