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As
filed with the Securities and Exchange Commission on August 18,
2006 Registration No.
333- SECURITIES
AND EXCHANGE COMMISSION Washington, D.C.
20549 FORM
S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933 VIACOM
INC.
(Exact name of registrant as specified
in its
charter)
1515 Broadway
(Address, including
zip code, and telephone number, Michael
D. Fricklas, Esq.
(Name, address,
including zip code, and telephone number,
Copies
to:
Stephen T. Giove, Esq. Approximate date of commencement of proposed sale to the
public: Upon consummation of the Exchange Offer described
herein. If the securities being registered on this Form are being
offered in connection with the formation of a holding company and there
is compliance with General Instruction G, check the following
box. If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities
Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering. If this Form is a post-effective
amendment filed pursuant to Rule 462(d) under the Securities Act, check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. CALCULATION OF
REGISTRATION
FEE The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may
determine. The
information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the
offer or sale is not permitted. Subject to
completion dated August 18, 2006 VIACOM
INC. OFFER TO EXCHANGE Unregistered Floating
Rate Senior Notes due 2009 and Unregistered
5.75% Senior Notes due 2011 and Unregistered
6.25% Senior Notes due 2016 and Unregistered
6.875% Senior Debentures due 2036 TERMS OF
EXCHANGE OFFER
Please see
‘‘Risk Factors’’ beginning on page 18 for a
discussion of certain factors you should consider in connection with
the exchange offer.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or
disapproved of the senior securities to be distributed in the exchange
offer, nor have any of these organizations determined that this
prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
The date of this prospectus is
, 2006
TABLE OF
CONTENTS You
should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different or additional
information. If anyone provides you with different or additional
information, you should not rely on it. You should assume that the
information contained in this prospectus is accurate only as of the
date of this prospectus. Our business, financial condition, results of
operations and prospects may have changed since then. We are not making
an offer of the senior notes and debentures in any jurisdiction where
the offer is not permitted. References to
‘‘Viacom,’’
‘‘we,’’ ‘‘us’’
and ‘‘our’’ in this prospectus are
references to Viacom Inc., a Delaware corporation, and its
consolidated subsidiaries, unless the context otherwise requires.
References to ‘‘$’’ and
‘‘dollars’’ are to United States
dollars. Whenever we refer in this prospectus to the floating
rate senior notes due 2009 issued on June 16, 2006, the
5.75% senior notes due 2011 issued on April 12,
2006, the 6.25% senior notes due 2016 issued on April
12, 2006 or the 6.875% senior debentures due 2036 issued
on April 12, 2006, we will refer to them as the
‘‘unregistered 2009 senior notes,’’ the
‘‘unregistered 2011 senior notes,’’ the
‘‘unregistered 2016 senior notes’’ or the
‘‘unregistered 2036 senior debentures,’’
respectively, and collectively as the ‘‘unregistered
senior notes and debentures.’’ Whenever we refer in this
prospectus to the registered floating rate senior notes due 2009, the
registered 5.75% senior notes due 2011, the registered
6.25% senior notes due 2016 or the registered 6.875%
senior debentures due 2036, we will refer to them as the
‘‘exchange 2009 senior notes,’’ the
‘‘exchange 2011 senior notes,’’ the
‘‘exchange 2016 senior notes’’ or the
‘‘exchange 2036 senior debentures,’’
respectively, and collectively as the ‘‘exchange senior
notes and debentures.’’ The unregistered 2009 senior
notes and the exchange 2009 senior notes are collectively referred to
as the ‘‘2009 senior notes,’’ the
unregistered 2011 senior notes and the exchange 2011 senior notes are
collectively referred to as the ‘‘2011 senior
notes,’’ the unregistered 2016 senior notes and the
exchange 2016 senior notes are collectively referred to as the
‘‘2016 senior notes,’’ and the unregistered
2036 senior debentures and the exchange 2036 senior i
debentures are collectively referred to as
the ‘‘2036 senior debentures.’’ The
unregistered senior notes and debentures and the exchange senior notes
and debentures are collectively referred to as the
‘‘senior notes and debentures.’’ Each
holder of an unregistered senior note or debenture wishing to accept
the exchange offer must deliver the unregistered senior notes or
debentures to be exchanged, together with the letter of transmittal
that accompanies this prospectus and any other required documentation,
to the exchange agent identified in this prospectus. Alternatively, you
may effect a tender of unregistered senior notes and debentures by
book-entry transfer into the exchange agent’s account at
Euroclear Bank S.A./N.A., as operator of the Euroclear System
(‘‘Euroclear’’), Clearstream Banking,
société anonyme, Luxembourg (‘‘Clearstream
Luxembourg’’) or The Depository Trust Company
(‘‘DTC’’). All deliveries are at the risk
of the holder. You can find detailed instructions concerning delivery
in the section called ‘‘The Exchange
Offer’’ in this prospectus and in the accompanying letter
of transmittal. If you are a
broker-dealer that receives exchange senior notes and debentures for
your own account you must acknowledge that you will deliver a
prospectus meeting the requirements of the Securities Act in connection
with any resale of the exchange senior notes and debentures. The letter
of transmittal accompanying this prospectus states that by so
acknowledging and by delivering a prospectus, you will not be deemed to
admit that you are an ‘‘underwriter’’
within the meaning of the Securities Act. You may use this prospectus,
as we may amend or supplement it in the future, for your resales of
exchange senior notes and debentures. We will make this prospectus
available to any broker-dealer for use in connection with any such
resale for a period of 180 days after the date of expiration of this
exchange offer or such shorter period which will terminate when the
broker-dealers have completed all resales subject to applicable
prospectus delivery requirements. ii CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS This prospectus
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, and Section 21E of the Securities Exchange Act of 1934,
as amended, or the Exchange Act. These forward-looking statements are
not based on historical facts, but rather reflect our current
expectations concerning future results and events. These
forward-looking statements generally can be identified by the use of
statements that include words such as
‘‘believe,’’
‘‘expect,’’
‘‘anticipate,’’
‘‘intend,’’
‘‘plan,’’
‘‘foresee,’’
‘‘likely,’’
‘‘will’’ or other similar words or phrases.
Similarly, statements that describe our objectives, plans or goals are
or may be forward-looking statements. These forward-looking statements
are not guarantees of future performance and involve known and unknown
risks, uncertainties and other factors that are difficult to predict
and which may cause our actual results, performance or achievements to
be different from any future results, performance and achievements
expressed or implied by these statements. More information about risks,
uncertainties and other factors is included in Viacom’s filings
with the SEC including, but not limited to, Viacom’s Form 10-K
for the year ended December 31, 2005, Viacom’s
Form 10-Q for the quarter ended March 31, 2006 and
Viacom’s Form 10-Q for the quarter ended June 30,
2006. There may be additional risks, uncertainties and factors that we
do not currently view as material or that are not necessarily known. We
cannot make any assurance that projected results or events will be
achieved. The forward-looking statements included in this prospectus
are only made as of the date of this prospectus and we do not have any
obligation to publicly update any forward-looking statement to reflect
subsequent events or circumstances. The risk factors in the section
entitled ‘‘Risk Factors’’ beginning on page
18, among others, could affect future results, causing these results to
differ materially from those expressed in our forward-looking
statements. iii SUMMARY The
Company Separation from the Former Viacom Inc. On
December 31, 2005, we became a stand-alone public entity
by separating from the former Viacom Inc. (‘‘Former
Viacom’’). Prior to the separation, we were a
wholly-owned subsidiary of Former Viacom. The separation was effected
through a merger of Former Viacom and one of its wholly-owned
subsidiaries, pursuant to which Former Viacom continued as the
surviving entity and was renamed CBS Corporation and we were renamed
Viacom Inc. In connection with the merger and the separation, each
share of Former Viacom Class A common stock was converted into the
right to receive 0.5 of a share of Viacom Class A common stock and 0.5
of a share of CBS Corporation Class A common stock. Similarly, each
share of Former Viacom Class B common stock was converted into the
right to receive 0.5 of a share of Viacom Class B common stock and 0.5
of a share of CBS Corporation Class B common stock. Holders of Viacom
Class A and Class B common stock received cash in lieu of fractional
shares. In accordance with the terms of the Separation Agreement
between CBS Corporation and Viacom, on December 29, 2005,
we paid a preliminary special dividend of $5.4 billion to CBS
Corporation, subject to certain adjustments. On March 14,
2006, CBS Corporation provided an initial statement that the dividend
should be increased by a net amount of approximately $460
million. On April 28, 2006, we served CBS Corporation
with a notice of disagreement. Based on an assessment of the amount and
underlying components of the proposed additional dividend payment, we
recorded a net amount of $170.2 million at March
31, 2006, which was paid to CBS Corporation on May
5, 2006. Under the Separation Agreement, after an opportunity
for the parties to negotiate resolution of differences, any disputed
amounts are subject to arbitration. Any further adjustment to the
special dividend will be reflected as an adjustment to additional
paid-in capital. Overview We are a leading worldwide
multiplatform, pure play content company with operations in the
following segments:
Cable Networks: The
Cable Networks segment consists of the businesses of MTV Networks,
including MTV: Music Television®
(‘‘MTV’’), MTV2®,
Nickelodeon®, Nick at Nite®,
Noggin®, The N®, Nicktoons
Network™, Turbo Nick™, VH1®, TV
Land®, Spike TV®,
CMT®: Country Music Television™, Logo™,
Comedy Central®, Comedy Central’s
MotherLoad™, MTV Desi™, MTV Chi™, MTV
Español®, mtvU™, mtvU Uber™, MTV
Hits™, MTV Jams™, TEMPO™, MTV Overdrive™,
MHD™, VH1 Classic™, VHUno™, VH1 Soul™, VH1
Country™, VH1’s Vspot™, Game One™,
VIVA™, TMF™, The Box™, Paramount Comedy™,
Neopets™, GameTrailers.com™ and IFILM®;
and the businesses of BET Networks, which include
BET® (Black Entertainment Television) and BET
J™; and other program services, including online programming
services such as websites, broadband channels and wireless
applications.
Entertainment: The
Entertainment segment includes Paramount Pictures®,
which produces and distributes feature motion pictures, Famous
Music®, which engages in the music publishing
business, and interests in 19 movie theaters. Our revenues from
the Cable Networks segment accounted for 64% of our consolidated
revenues for the six months ended June 30, 2006 and for
70% of our consolidated revenues for 2005. Our revenues from the
Entertainment segment accounted for 37% of our consolidated
revenues for the six months ended June 30, 2006 and for
31% of our consolidated revenues for 2005. Elimination of
intercompany revenues accounted for (1)% of our consolidated
revenues for the six months ended June 30, 2006 and for
(1)% of our consolidated revenues for 2005. Revenues from the
Cable Networks 1
segment are generated primarily from
advertising sales, affiliate fees, home entertainment sales and
licensing and merchandising of branded products. Revenues from the
Entertainment segment are generated primarily from the licensing and
sale of feature film rights in various media and
territories.
Recent acquisitions and
dispositions. On August 9, 2006, we agreed to
acquire Atom Entertainment, Inc., a portfolio of four online
destinations for casual games, short films and animation, for cash
consideration of approximately $200 million. The acquisition is
subject to customary closing conditions and is expected to close in the
third quarter. On June 1, 2006, we acquired an additional
ten percent interest in Nickelodeon UK Limited (‘‘Nick
UK’’) for $8.9 million. Previously, Nick UK was a
fifty-fifty joint venture with BSkyB. With the additional interest, we
obtained control of Nick UK and began consolidating its operations as
of June 1, 2006. On May 9, 2006, we
completed the acquisition of Xfire, Inc, a leading gaming and social
networking service, for initial cash consideration of approximately
$102 million. An additional $8 million is expected to be
paid out over four years based upon continued service of the employees.
On January 31, 2006, we completed our acquisition of
DreamWorks L.L.C. (‘‘DreamWorks’’), a
leading producer of live-action motion pictures, television programming
and home entertainment products, for approximately $1.53 billion, net
of cash acquired. We also entered into exclusive seven-year agreements
for worldwide distribution rights and fulfillment services to films
produced by DreamWorks Animation SKG, Inc. Among the assets acquired
with the purchase of DreamWorks was a live-action film library
consisting of 59 films released through September 16, 2005. On
May 5, 2006, we sold a fifty-one percent controlling
interest in the entity that owns the library to Soros Strategic
Partners LP and Dune Entertainment II LLC, an affiliate of Dune Capital
Management LP, for net proceeds of $675.3 million. We retained a
minority interest in the entity that owns the library. In connection
with the sale of the live-action film library, Soros entered into
exclusive five-year agreements with Paramount Pictures and its
international affiliates for distribution and fulfillment services of
the live-action library by Paramount Pictures. In the event that Soros
and Dune continue to control the entity that owns the film library
after the fifth year, the distribution agreement with Paramount
Pictures will automatically renew. We compete with many different
entities and media in various markets worldwide. Our primary
competitors in the cable and entertainment businesses include Time
Warner Inc., News Corporation, The Walt Disney Company, NBC
Universal Inc., The E.W. Scripps Company and Discovery Holding
Company. We were organized as a Delaware corporation in 2005 and
our principal offices are located at 1515 Broadway, New York, New York
10036. Our telephone number is (212) 258-6000 and our website
address is www.viacom.com. Competitive
Strengths We believe we possess a number of strengths that
enable us to compete successfully:
One of the largest
collections of cable programming assets in the world, with leading
global brands that are attractive advertiser vehicles. We
have one of the largest collections of cable programming assets in the
world. Our leading program services reach 179 territories through more
than 120 worldwide cable networks presented in 28 different languages
and reach over 480 million subscriber households worldwide. In
the United States, our leading networks program approximately
1,780 hours per week and, according to Nielsen Media
Research®, reached approximately 150 million
television viewers each week in the period from February 2006 to
June 2006. Many of our brands, such as MTV, Nickelodeon and VH1,
are known worldwide. MTV is one of the most widely distributed
television brands and is regularly cited, most recently in 2006, as
The World’s Most Valuable Media Brand by Interbrand
Corp., an international brand consultancy. Nickelodeon, which as of
June 2006 was available in approximately 300 million television
households worldwide as a full channel or a branded program block, is
the world’s most widely distributed children’s television
brand and has been the top-rated cable network for children in the
United States for the past 11 years. 2 MTV Networks and BET Networks develop
brands that appeal to a wide range of targeted niche audiences, which
also represent demographics sought after by advertisers. In the United
States, MTV Networks and BET Networks delivered the most multichannel
viewers in the 12 to 34-year-old demographic during 2006, through July
31, 2006, according to Nielsen Media Research. MTV: Music Television
has been the top advertising-supported 24-hour basic cable network
among 12- to 24-year-olds for 37 consecutive quarters, and Nickelodeon
accounted for approximately 53% of all viewing of
advertising-supported children’s television programming in the
United States by children ages two to eleven during the 2005-2006
broadcast season from September 2005 through June 2006. Our
broad distribution to specialized audiences and our focus on forging
strong connections with our audiences make our networks an attractive
vehicle for advertisers. Our strong in-house research teams focus on
identifying emerging behaviors and trends among core audiences, which
we believe is a key competitive advantage. These factors, combined with
our integrated presence on a variety of digital and broadcast
platforms, allow us to provide an efficient and reliable vehicle for
advertisers to reach consumers.
A long-standing international
presence with a global footprint. We have a significant and
growing presence worldwide. Established advertising, distribution and
programming relationships in these markets, together with our
infrastructure, provide a strong platform for new channel launches and
complementary acquisitions. We have created over 120 worldwide cable
networks that are seen in 179 territories. Since January 2006,
we have launched more than seven channels and branded program blocks,
including MTV in Canada, MTV base Africa branded program blocks in
Uganda, Nick Jr2 in the United Kingdom, Nick at Nite branded program
blocks in Latin America, Nickelodeon in New Zealand and Nickelodeon
branded program blocks in Malaysia and the Philippines. Our global
footprint also allows us to incubate technical and programming
expertise in emerging markets where certain new media products have
been deployed more extensively than in the U.S. markets. For example,
we have launched programming applications for advanced mobile services
in Japan and Europe, which we believe better prepares us to offer these
services as the U.S. market develops.
A strong connection with
audiences, a proven ability to create global hits and a valuable
entertainment library. Our focus on understanding our
audiences through research enhances our ability to develop innovative
and original programming. Our programming is broadly diversified, with
popular shows and films that appeal to a variety of audiences, and with
new shows and interactive programming continually being developed and
debuted throughout the year. Our television programming includes
popular shows and enduring characters, including The Real World,
SpongeBob SquarePants, South Park, Dora the
Explorer, The Daily Show with Jon Stewart, Laguna
Beach, Blue’s Clues and Rugrats. Our
programming also includes events, such as the annual MTV Video Music
Awards, Nickelodeon’s Kids’ Choice Awards,
VH1 Save the Music, CMT Music Awards, MTV Movie
Awards, CMT’s Miss America Pageant, Spike
TV Video Game Awards, Comedy Central Roast and the BET
Awards. We have significant in-house creative capabilities and have
helped launch the careers of some of the entertainment
industry’s leading entertainers, directors and producers. We
believe that our strong creative track record, our willingness to
experiment with new shows and concepts, the strength and breadth of our
distribution infrastructure, our solid financial foundation and our
well-known media brands help attract and retain creative talent. Our
motion picture library includes rights to some of the best loved and
most successful films, including Titanic, The Godfather
trilogy, the Indiana Jones films, Forrest Gump and
Braveheart. Following our sale of most of the DreamWorks
live-action library, we retain distribution rights to these films for
at least a five-year period, including Gladiator, American
Beauty, War of the Worlds and Saving Private
Ryan. As a result of our creative output in television and in
motion pictures, we have assembled a library with significant future
revenue potential. Our library consists of over 1,000 motion picture
titles, approximately 18,000 hours of television programming and
varying rights for approximately 2,500 additional motion picture
titles. Our library also contains titles that have not yet been fully
exploited in the DVD or other digital media formats. 3
A secure distribution platform and a
strong track record of obtaining new carriage. Our cable
programming services are made available to consumers in the United
States and internationally through affiliation agreements with
distributors that generally are long-term, have staggered expiration
dates and provide for built-in rate increases and protected
distribution. Eight of our cable programming services are distributed
in over 75 million homes in the United States, and four of our
other services currently reach more than 35 million homes in the
United States. The majority of our networks are available on broadly
distributed programming tiers. We believe that our strong relationships
with our affiliates, the quality and popularity of our networks and our
ability to create programming that is appealing to viewers have enabled
us to renew existing affiliation agreements, to obtain new distribution
for existing networks and to launch new networks.
An
established and growing multiplatform presence. We program
and operate over 100 websites, including broadband sites, which
collectively attracted over 30 million unique visitors in July
of 2006, giving us the second most-visited entertainment website
portfolio on the Internet during that period. We have a total of 24
broadband channels (seven in the U.S. and 17 internationally) in live
deployment. Our complete line-up of broadband channels –
including MTV Overdrive, mtvU’s Uber, VH1's VSpot, Comedy
Central’s Motherload, TurboNick, CMT’s Loaded, Revolution
in Latin America and MTV BoomBox in Korea – is expected to stream
more than 1 billion videos by the end of 2006. We continue to
launch integrated broadband channels and content, online communities,
wireless applications and video-on-demand offerings across our
properties in many countries around the world. We are building wireless
services for the majority of our core brands and are partnering with
carriers such as Virgin Mobile USA, Verizon Wireless, Sprint, China
Mobile, and DoCoMo in Japan to deliver ringtones, text updates and
video programming. On August 9, 2006, MTV Networks agreed to acquire
Atom Entertainment, Inc., a portfolio of several online destinations
for casual games, short films and animation. Also, in the second
quarter of 2006, MTV Networks acquired Xfire, a leading online gaming
communication and community platform. In the fourth quarter of 2005,
MTV Networks acquired IFILM and GameTrailers.com, each of which
provides entertainment content via websites. We also acquired Neopets,
the owner and operator of Neopets.com, a leading online destination and
community for kids and young adults. MTV Networks has various rights in
various territories to create and distribute content for mobile
devices. For example, in June 2005, we entered into a global
licensing agreement with Warner Music Group to create and distribute
short form video content for mobile devices. In May 2006,
we unveiled a beta version of MTV Networks’ new digital music
service, Urge™, which offers rich editorial, hand-crafted
programming and innovative tools to help consumers connect with their
favorite artists and discover new ones. Also, MTV Networks’ vast
array of popular music, comedy and kids programming from its MTV, MTV2,
Comedy Central and Nickelodeon brands is now available for download via
Apple’s iTunes Music Store and AOL’s new video
service.
An attractive financial profile. In the
six months ended June 30, 2006, we derived 37% of
our revenues from advertising, 34% from feature film, 19%
from affiliate fees, and 10% from ancillary revenues. In 2005,
we derived 41% of our revenues from advertising, 30% from
feature film, 19% from affiliate fees, and 10% from
ancillary revenues. We have a large worldwide consumer products
licensing business. Basic cable programming services receive revenue
from both advertising and affiliate fees, which increases the
predictability of these revenues. Further, many of our services,
particularly our cable programming services, develop programming
through in-house capabilities, resulting in lower overall production
costs.
An experienced management team with a proven creative
and financial track record. Our operations are led by a
financially-disciplined management team that has the expertise and the
vision to develop and successfully exploit its programming and other
content. Our senior management and the senior management of our
businesses consist of leaders in the media and entertainment industry
who have established track records of success. 4 Business Strategy Our mission is to
be the leading global, consumer-focused, branded entertainment company,
with the most respected, most successful and best-in-class brands that
live across television, motion pictures and digital media platforms.
Our success is linked to our operating principles, which set us apart
from other companies. First, we are focused on consumers: we believe
that if we can connect with our key consumers, then everything else in
our business will follow naturally. Second, we have a brand-centric
philosophy; in a fragmented media market, we believe that strong brands
are increasingly the most reliable navigation tools for the consumer.
We continuously evolve and revitalize our brands to strengthen their
audience connection and competitive position. Third, we foster a
creative culture and seek creative excellence. Our success in
developing original content, from MTV Networks to BET Networks to
Paramount Pictures, is a result of an institutional commitment to
creativity. Finally, we also bring a global perspective to everything
we do. We believe that we can deliver superior returns to stockholders
by capitalizing on these strengths and deepening our relationships with
advertisers, distribution affiliates, creative talent and
licensees. More specifically, we plan to:
Enhance our
position as a leading global entertainment content company, with
prominent and respected brands in focused demographics. Our
brand-centric, multiplatform strategy and global footprint give us
access to the highest growth areas of the advertising sector. Not only
do we have a portfolio of brands that consumers demand, but we also
have long-term deals with distributors that include built-in annual
rate increases. We intend to continue investing in programming and new
and existing brands to serve and grow our audiences, and expand our
distribution and advertising revenue streams. In particular, we expect
to target new demographic and interest groups and continue the
development of existing services in order to retain and expand our
audiences and the value of our brands. These initiatives will also
continue to benefit from our core consumer research and creative
strengths.
Enlarge our established global
footprint. Our global footprint continues to expand. We were
the first media company to reach the 100 channel milestone when we
launched our first channel in Africa early in 2005. We believe our
established position as a multichannel network operator in many regions
of the world provides us with significant growth opportunities by
acquiring other networks, broadening our platforms, and growing our
consumer products business. We expect to use our knowledge and
experience in local markets around the world and our worldwide scale to
develop and acquire new programming services. We also expect to
strengthen our international position by building our own organizations
to distribute theatrical and television rights to motion pictures in
important foreign markets and by strengthening distribution of home
entertainment products internationally.
Expand our growing
multiplatform business and monetize the growth trend in digital
media. Our digital strategy mirrors our targeted demographic
approach to cable and allows us to offer deeper and more engaging
experiences around our areas of expertise and our target audiences. We
believe media fragmentation plays to our strengths, and our intent is
to take advantage of emerging technological and consumer trends by
extending our brands and distributing our content into new forms of
integrated digital distribution, such as broadband, wireless, online
community, video-on-demand, high-definition programming and other
businesses. We aim to achieve this through a combination of organic
growth, investment in our existing and complementary businesses,
strategic relationships, and focused acquisitions that fit with our
current brands and core competencies. We believe our connection with
our audiences, our marketing expertise and our ability to integrate new
digital offerings and experiences on multiple platforms will support
this expansion, which we expect to generate both increased revenue
growth and stronger connections with our existing viewers. Our key
television viewers are kids, teens and young adults, who are the early
adopters and the heavy users and drivers of new media growth, and that
is where we will continue to focus.
Successfully execute the
turnaround of Paramount Pictures. We believe we have a
significant opportunity to turn around Paramount Pictures and, with the
acquisition of DreamWorks, have begun 5
taking significant steps to do so. With a new
management team in place at Paramount Pictures and key talent at
DreamWorks, we intend to pursue projects more closely aligned with the
tastes of target movie-going audiences and to take advantage of our
significant marketing and creative capabilities. Our movies will
benefit from the brand association demographics and marketing power of
our over 120 worldwide cable networks. In addition, these networks
provide access to up-and-coming talent as well as valuable consumer
knowledge. Paramount Pictures intends to release films not only under
the Paramount Pictures label and its specialty film arm (which is
comprised of Paramount Vantage and Paramount Classics) but also under
the DreamWorks label, and MTV, Nickelodeon and BET brands. We also plan
to strengthen and upgrade our worldwide home entertainment operations,
enhance our revenue opportunities by retaining a greater proportion of
international rights for theatrically released films and begin the
self-distribution of films theatrically in certain key international
markets.
Build on our reputation as a great place to
work. We have created and are committed to maintaining a
diverse culture that attracts the best people, embraces original ideas,
adapts quickly, promotes integrity, creativity and innovation, and
values fun. We believe this diverse and creative culture will enable us
to develop and to market equally diverse, creative and valuable
television, motion picture and new media programming and will give us a
significant strategic advantage, in the United States and around the
world. 6 Summary of the Exchange Offer On
June 16, 2006, we issued $750 million aggregate
principal amount of unregistered floating rate senior notes due 2009.
On April 12, 2006, we issued $1.5 billion
aggregate principal amount of unregistered 5.75% senior notes
due 2011, $1.5 billion aggregate principal amount of
unregistered 6.25% senior notes due 2016 and $1.75
billion aggregate principal amount of unregistered 6.875% senior
debentures due 2036. On each of June 16, 2006 and
April 12, 2006, we and the initial purchasers of the
unregistered senior notes and debentures entered into registration
rights agreements in connection with such debt offerings in which we
agreed that you, as a holder of unregistered senior notes and
debentures, would be entitled to exchange your unregistered senior
notes and debentures for exchange senior notes and debentures
registered under the Securities Act but otherwise having substantially
identical terms to the respective unregistered senior notes and
debentures. This exchange offer is intended to satisfy these rights.
After the exchange offer is completed, you will no longer be entitled
to any registration rights with respect to your senior notes and
debentures. The exchange senior notes and debentures will be our
obligations and will be entitled to the benefits of the base indenture
and supplemental indentures relating to the unregistered senior notes
and debentures. The form and terms of the exchange senior notes and
debentures are identical in all material respects to the form and terms
of the respective unregistered senior notes and debentures,
except: For additional information on the terms
of the exchange offer, see ‘‘The Exchange
Offer.’’ 7 8 9 10 11 12 Summary Description of the Senior Notes
and Debentures The following is a brief summary of some of the
terms of the senior notes and debentures. For a more complete
description of the terms of the senior notes and debentures, see
‘‘Description of the Senior Notes and
Debentures’’ on page 110 of this
prospectus. 13 14 Summary Selected Consolidated Financial
Data The following tables present our summary selected
consolidated financial data. The summary selected consolidated
financial data should be read in conjunction with, and is qualified in
its entirety by reference to, our consolidated financial statements and
the notes thereto included in this prospectus and the related
‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations’’ beginning
on page 33. The consolidated income statement data for the years ended
December 31, 2005, 2004 and 2003 and the consolidated
balance sheet data at December 31, 2005, 2004 and 2003
are derived from our audited consolidated financial statements. The
unaudited consolidated income statement data for the six months ended
June 30, 2006 and 2005 and the unaudited consolidated
balance sheet data at June 30, 2006 are derived from our
accounting records for those periods and have been prepared on a basis
consistent with our audited consolidated financial statements, except
we adopted the provisions of FAS 123R effective January
1, 2006. The summary selected consolidated financial data
may not necessarily reflect our results of operations and financial
position in the future or what results of operations and financial
position would have been had we been a separate, stand-alone company
during the periods presented. For additional information, see
‘‘Unaudited Pro Forma Condensed Consolidated Financial
Information’’ and the notes thereto beginning on page
31. Consolidated Income Statement Data Consolidated
Balance Sheet Data 15 Ratio of Earnings to Fixed
Charges 16 Summary Unaudited Pro Forma Condensed
Consolidated Financial Information The summary unaudited pro
forma condensed consolidated financial information is derived from, and
should be read in conjunction with, the information provided in
‘‘Unaudited Pro Forma Condensed Consolidated Financial
Information’’ and the notes thereto beginning on page 31.
The summary unaudited pro forma condensed consolidated financial
information is based upon our historical financial statements included
in this prospectus. This pro forma financial information is presented
as if the separation, the issuance of the unregistered senior notes and
debentures and the use of the net proceeds therefrom to repay a portion
of amounts previously borrowed had occurred as of the beginning of the
period presented. Management believes the assumptions and allocations
are reasonable. However, the pro forma results do not necessarily
represent what the actual results would have been had Viacom been a
stand alone public company, nor are they necessarily indicative of
future results. Summary Unaudited Pro Forma Condensed
Consolidated Income 17 RISK
FACTORS
You should consider carefully all of the information
set forth in this prospectus and, in particular, the risk factors
described below. In addition, the risks described below and elsewhere
in this prospectus are not the only ones we are facing. The risks
described below are considered to be the most material. However, there
may be other unknown or unpredictable economic, business, competitive,
regulatory or other factors that also could have material adverse
effects on our future results. Past financial performance may not be a
reliable indicator of future performance and historical trends should
not be used to anticipate results or trends in future
periods.
If any of the events described below were to
occur, our businesses, prospects, financial condition, results of
operations and/or cash flows could be materially adversely affected. In
any such case, we may not be able to pay interest or principal on the
senior notes and debentures, and you could lose all or part of your
investment.
Risks Related to Our
Company
Our Success Is Dependent upon Audience
Acceptance of Our Programs and Films Which Is Difficult to
Predict
Entertainment content and feature film production
and distribution are inherently risky businesses because the revenues
derived from the production and distribution of a cable program or
feature film, and the licensing of rights to the intellectual property
associated with a program or film, depend primarily upon its acceptance
by the public, which is difficult to predict. The commercial success of
a cable program or feature film also depends upon the quality and
acceptance of other competing programs and films released into the
marketplace at or near the same time, the availability of alternative
forms of entertainment and leisure time activities, general economic
conditions and other tangible and intangible factors, many of which are
also difficult to predict. Audience sizes for our cable networks are
also factors that are weighed when deciding on the advertising rates
and the renegotiation of affiliate rates that we receive. Poor ratings
in targeted demographics can lead to a reduction in pricing and
advertising spending. Further, the theatrical success of a feature film
may impact revenues from other distribution channels, such as home
entertainment and premium pay television, and sales of licensed
consumer products. Consequently, low public acceptance of our cable
programs and feature films will have an adverse effect on our results
of operations.
A Decline in Advertising Expenditures
Could Cause Our Revenues and Operating Results to Decline Significantly
in Any Given Period or in Specific Markets
We derive
substantial revenues from the sale of advertising on our cable
networks. We have recently experienced a decline in international
(particularly European) advertising revenues. A decline in advertising
expenditures generally or in specific markets, including domestic and
international markets, could significantly adversely affect our
revenues and operating results in any given period. A decline in the
economic prospects of advertisers or the economy in general could alter
current or prospective advertisers’ spending priorities.
Disasters, acts of terrorism, political uncertainty or hostilities
could lead to a reduction in advertising expenditures as a result of
economic uncertainty. In addition, advertising expenditures may also be
affected by increasing competition for the leisure time of audiences.
Advertising expenditures by companies in certain sectors of the
economy, including the children’s toys and entertainment
sectors, represent a sizeable portion of our advertising revenues. Any
political, economic, social or technological change may result in a
reduction of these sectors’ advertising expenditures. For
example, at least one company has announced its intention to shift its
advertising focus away from children under 12 years of age in
response to concerns about child obesity and unhealthy eating. Any
reduction in advertising expenditures could have an adverse effect on
our revenues and results of operations.
Our Businesses
Operate in Highly Competitive Industries
Participants in the
cable and motion picture industries depend primarily upon the sale of
advertising, revenues generated by the distribution of feature films
and affiliate fees to generate revenue. Competition for viewers,
advertising and distribution is intense and comes from broadcast
18
networks and specialty cable channels; movie
studios and independent film producers and distributors; local,
regional and national newspapers; online activities; video gaming;
direct mail; and other communications and advertising media that
operate in these markets. In particular, online search engines have
seen significant advertising growth, a portion of which is derived from
traditional cable network advertisers. In addition, there has been
consolidation in the media industry and our competitors include market
participants with interests in multiple media businesses which are
often vertically integrated. Our ability to compete successfully
depends on a number of factors, including our ability to provide high
quality and popular cable programs and motion pictures and our ability
to achieve high distribution levels. In addition, cable providers and
DTH satellite operators have developed new techniques that allow them
to transmit more channels on their existing equipment to highly
targeted audiences, reducing the cost of creating channels and
potentially leading to the division of the television marketplace into
more specialized niche audiences. More television options increase
competition for viewers, and competitors targeting programming to
narrowly defined audiences may gain an advantage over us for television
advertising and subscription revenues. There can be no assurance that
we will be able to compete successfully in the future against existing
or potential competitors, or that competition will not have a material
adverse effect on our business, financial condition or results of
operations.
The Loss of Affiliation Agreements Could
Cause Our Revenues to Decline in Any Given Period or in Specific
Markets
We are dependent upon the maintenance of affiliation
agreements with cable and DTH satellite operators for the distribution
of our cable networks. Certain BET, BET J and MTV affiliation
agreements have recently expired and are currently being negotiated.
There can be no assurance that these affiliation agreements will be
renewed in the future on terms acceptable to us. The loss of a
significant number of these arrangements or the loss of carriage on the
most widely penetrated programming tiers could reduce the distribution
of our cable networks, which may adversely affect our advertising and
affiliate fee revenues. In addition, further consolidation among cable
and DTH satellite operators and increased vertical integration of such
distributors into the cable or broadcast network business could
adversely affect our ability to negotiate the launch of new networks or
the ability to maintain existing distribution or obtain additional
distribution for existing networks. In a more concentrated market,
there can be no assurance that we will be able to obtain or maintain
carriage of our programming services by distributors on commercially
reasonable terms, or at all.
Box Office Receipts and
DVD Sales Have Recently Been Declining, Which May Adversely Affect Our
Prospects and Results of Operations
Several factors,
including piracy, growing competition for consumer discretionary
spending and low audience acceptance, may be contributing to a recent
industry-wide decline in box office receipts and in declining or, in
some cases, flattening DVD sales. According to Adams Media Research,
domestic consumer spending on DVD and video increased by 5.4% in
2004 but decreased by 2.5% in 2005. Internationally, consumer
spending on DVD and video increased by 14.9% in 2004 but
decreased by 5.5% in 2005, according to Screen Digest. Our
ability to sell our DVDs could also be affected by the influence of
several large retailers, including, without limitation, Wal-Mart, whose
decisions as to placement and removal of our DVDs could have a
significant impact on our revenues from sales of DVDs. A continuing
decline in attendance by moviegoers and in DVD sales could have a
substantial adverse impact on our results of operations and growth
prospects.
Our Revenues and Operating Results Are
Subject to Cyclical and Seasonal Variations
Our revenues and
operating results fluctuate due to the timing and availability of
theatrical and home entertainment releases and of programming for
syndication and cable exhibition and the timing of the beginning of the
license periods for television exhibition of motion pictures. Our
operating results also fluctuate due to the timing of the recognition
of production costs and the possible later recognition of related
revenues. In addition, the success of our individual titles may vary,
causing our operating results to fluctuate. Our business has
experienced and is expected to continue to experience some seasonality
due to, among other things, seasonal advertising patterns and seasonal
influences on people’s viewing and 19
listening habits and attendance. Typically,
our revenue from advertising increases in the fourth quarter and
revenue from feature films increases in the summer. The effect of such
seasonality makes it difficult to estimate future operating results
based on the results of any specific quarter.
We Must
Respond to and Capitalize on Rapid Changes in Technology, Services and
Standards in Order to Remain Competitive and Exploit New
Opportunities
Technology in the video, telecommunications
and data services used in the entertainment industry is changing
rapidly. Advances in technologies or alternative methods of product
delivery and storage or certain changes in consumer behavior driven by
these or other technologies and methods of delivery and storage could
have a negative effect on our business. Examples of such advances in
technologies include video-on-demand, new video formats and downloading
from the Internet. For example, devices that allow users to view cable
programs or motion pictures from a remote location or on a time-delayed
basis and technologies which enable users to fast-forward or skip
advertisements may cause changes in consumer behavior that could affect
the attractiveness of our offerings to advertisers and could therefore
adversely affect our revenues. We may not have the right, and may not
be able to secure the right, to distribute some of our licensed content
across these, or any other, new platforms. In addition, the
ability to capitalize on a variety of distribution platforms for our
programming and films, including new technologies, is one of our key
business strategies. The ability to anticipate and exploit these new
and future sources of revenue from technological developments will
affect our ability to continue to grow and increase our revenue and
expand our business.
Increased Programming and Content
Costs May Adversely Affect Our Profits
We produce
programming and incur costs for all types of creative talent including
actors, writers and producers, and for new show concepts. We also
acquire programming, such as movies and television series, from
television production companies and movie studios. An increase in the
costs of programming may lead to decreased profitability. An
increase in licensing costs could also affect our profits. For example,
we license music videos for exhibition on our cable channels and other
programming or content services from record companies in exchange for
cash and advertising time or for promotional consideration only. We
have entered into global music video licensing agreements with certain
major record companies and into global or regional license agreements
with certain independent record companies. We also license various
other music rights from record companies, music publishers, performing
rights societies and others. There can be no assurance that we will be
able to obtain license renewals or additional license agreements and,
if so, on favorable terms. There can also be no assurance that we will
be able to secure the rights to distribute the content of our licenses
over new platforms on acceptable terms. If we fail to obtain such
extensions, renewals or agreements on acceptable terms and consequently
cannot obtain licensing rights for content needed in our operations,
our revenue or costs may be adversely affected.
Our
Cable Networks Are Included with CBS Corporation’s Programming
under Certain of Our Affiliation Agreements, and New Affiliation
Agreements May Be More Difficult to Negotiate
Former Viacom
was party to affiliation agreements with cable and DTH satellite
operators pursuant to which both our cable networks and CBS
Corporation’s television programming were carried by these
distributors. After these agreements expire, our cable networks will no
longer be included with CBS Corporation’s programming. Certain
BET, BET J and MTV affiliation agreements have recently expired. There
can be no assurance that we will be able to negotiate new affiliation
agreements with these distributors on terms as favorable as was
previously possible.
Changes in U.S. or Foreign
Communications Laws or Other Regulations May Have an Adverse Effect on
Our Business
The multichannel video programming and
distribution industries in the United States are highly regulated by
U.S. federal laws and regulations issued and administered by various
federal agencies, including the FCC. For example, federal legislation
and FCC rules limit the amount and content of 20
commercial material that may be shown on
video programming channels during programming designed for children 12
years of age and younger. In November 2004, the FCC issued new
rules that classify promotions on a channel for programs aired on that
channel as commercial matter unless the programs being promoted are
educational or informational as defined under FCC rules, and that limit
the display during children’s programming of the Internet
addresses of websites that contain or link to commercial material or
that use characters from the program on which the website address is
displayed to sell products or services. If retained without
modification, these rules could have an adverse impact on our
children’s programming channels, including Nickelodeon and Nick
Jr., because they would force a reduction of promotional or advertising
time during this programming and would limit our ability to promote our
program-related websites that contain commercial material.
Children’s advocacy groups and industry parties, including our
company, have agreed to a proposal to modify these rules. The FCC has
postponed implementation of the rule changes while it considers the
proposal. The proposed rule modifications would mitigate the adverse
impacts of the FCC’s rules on our company. However, there can be
no assurance that the FCC will ultimately adopt these
proposals. In addition, the U.S. Congress and the FCC currently
have under consideration, and may in the future adopt, new laws,
regulations and policies regarding a wide variety of matters that
could, directly or indirectly, affect the operations and ownership of
our U.S. media properties. For example, some policymakers support the
extension of indecency rules applicable to over-the-air broadcasters to
cover cable and satellite operators. If such an extension took place
and was not found to be unconstitutional, our content could be subject
to additional regulation. Similarly, changes in regulations imposed by
governments in other jurisdictions in which we, or entities in which we
have an interest, operate could adversely affect our business, results
of operations and ability to expand these operations beyond their
current scope.
Requirements that Cable Operators
Create Family Friendly Tiers or Offer Programming on an A La Carte
Basis May Decrease the Distribution of Our Networks to Cable Television
Subscribers and Materially Affect Our Results of
Operations
Certain policymakers maintain that cable
operators should be required to offer programming to subscribers on a
network-by-network, or à la carte, basis or to provide
‘‘family friendly’’ program tiers. Certain
distributors have recently launched
‘‘family-friendly’’ tiers to their
customers that may or may not include some or all of our networks. In
addition, the FCC recently issued a report finding consumers would
benefit if cable operators were required to offer programming on an
à la carte basis. The unbundling or tiering of program services
could materially reduce distribution of certain of our channels,
thereby leading to reduced viewership and increased marketing expenses,
and could affect our ability to compete for or attract the same level
of advertising dollars. Any decline in subscribers could lead to a loss
in our advertising sales and affiliate fees and a reduction in payments
by cable and DTH satellite operators.
Piracy of Our
Motion Pictures, Intellectual Property and Other Content, Including
Digital and Internet Piracy, May Decrease Revenue Received from the
Exploitation of Our Cable Television Programs and Films and Adversely
Affect Our Business and Profitability
The success of our
business depends in part on our ability to maintain the intellectual
property rights to our products and services. Piracy of motion
pictures, television programming, video content and DVDs as well as
other intellectual property is prevalent in many parts of the world and
is made easier by technological advances allowing conversion of motion
pictures, television programming and other content into digital
formats, which facilitates the creation, transmission and sharing of
high quality unauthorized copies of motion pictures and other content.
The proliferation of unauthorized copies and piracy of these products
may have an adverse effect on our business and profitability because
these products reduce the revenue that we potentially could receive
from the legitimate sale and distribution of our content. In addition,
if piracy were to increase, it would have an adverse effect on business
and profitability. 21
The Loss of Key Personnel,
Including Talent, Could Disrupt the Management and Operations of Our
Business and Adversely Affect Our Revenues
Our business
depends upon the continued efforts, abilities and expertise of our
President and Chief Executive Officer and other key employees and
entertainment personalities. We believe that the unique combination of
skills and experience possessed by our key executives would be
difficult to replace, and that the loss of our key executives could
have a material adverse effect on us, including the impairment of our
ability to execute our business strategy. Additionally, we employ or
contract with several entertainment personalities with loyal audiences.
These personalities are sometimes important to achieving current levels
of viewership. There can be no assurance that these individuals will
remain with us or will retain their current audiences. If we fail to
retain these individuals or our entertainment personalities lose their
current audiences, our revenues could be adversely
affected.
We Could Be Adversely Affected by Strikes
and Other Union Activity
We and our suppliers engage the
services of writers, directors, actors and other talent, trade
employees and others who are subject to collective bargaining
agreements. If we or our suppliers are unable to renew expiring
collective bargaining agreements, it is possible that the affected
unions could take action in the form of strikes or work stoppages. Such
actions, higher costs in connection with these agreements or a
significant labor dispute could adversely affect our business by
causing delays in the production, the release date or by reducing the
profit margins of our cable programs or feature
films.
Political and Economic Risks Associated with
Our Businesses Could Harm Our Financial Condition
Our
businesses operate and have customers worldwide. Inherent risks of
doing business in international markets include, among other risks,
changes in the economic environment, export restrictions, exchange
controls, tariffs and other trade barriers and longer payment cycles.
We may incur substantial expense as a result of the imposition of new
restrictions or changes in the existing economic environment in the
regions where we do business. Acts of terrorism or other hostilities,
or other future financial, political, economic or other uncertainties,
could lead to a reduction in advertising and other revenue, which could
materially adversely affect our business, financial condition or
results of operations.
The Failure or Destruction of
Satellites and Facilities that We Depend Upon to Distribute Our
Programming Could Materially Adversely Affect Our Business and Results
of Operations
We use satellite systems to transmit our cable
networks to cable systems and other distributors worldwide. The
distribution facilities include uplinks, communications satellites and
downlinks. Transmissions may be disrupted as a result of local
disasters that impair on-ground uplinks or downlinks, or as a result of
an impairment of a satellite. Currently, there are a limited number of
communications satellites available for the transmission of
programming. If a disruption occurs, we may not be able to secure
alternate distribution facilities in a timely manner. Failure to secure
alternate distribution facilities in a timely manner could have a
material adverse effect on our business and results of
operations.
We Could Suffer Losses Due to Asset
Impairment Charges for Goodwill and Intangible Assets
In
accordance with Statement of Financial Accounting Standards No. 142,
‘‘Goodwill and Other Intangible Assets,’’
which we refer to in this prospectus as ‘‘SFAS
142,’’ we will test goodwill and intangible assets for
impairment during the fourth quarter of each year, and on an interim
date should factors or indicators become apparent that would require an
interim test. A downward revision in the fair value of a reporting unit
or intangible assets could result in an impairment under SFAS 142 and a
non-cash charge would be required. Any significant shortfall, now or in
the future, in the expected popularity of the feature films or other
content we produce, could lead to a downward revision in the fair value
of such assets. Any such charge could have a material effect on our
reported net earnings. 22
Fluctuations in Foreign
Exchange Rates Could Have an Adverse Effect on Our Results of
Operations
Certain of our revenues are earned and expenses
are incurred in foreign currencies. The value of these currencies
fluctuates relative to the U.S. dollar. As a result, we are exposed to
exchange rate fluctuations, which could have an adverse effect on our
results of operations.
Our Liabilities Related to
Lease Guarantees and Litigation Could Adversely Impact Our Financial
Condition
We have both recognized and potential liabilities
and costs related to discontinued operations and former businesses,
including, among other things, potential liabilities to landlords if
Blockbuster should default on certain store leases entered into prior
to Blockbuster’s initial public offering in 1999, and pending
and threatened litigation. We cannot assure you that our reserves are
sufficient to cover these liabilities in their entirety or any one of
these liabilities when it becomes due or at what point any of these
liabilities may come due. Therefore, there can be no assurance that
these liabilities will not have a material adverse effect on our
financial condition.
If the Integration of DreamWorks
into Our Business Does Not Yield Expected Benefits, or If Our
Transition to a New Distribution Infrastructure in International
Theatrical and Worldwide Television Markets Does Not Fully Succeed, Our
Results of Operations Could Be Adversely Impacted
We
acquired DreamWorks L.L.C. on January 31, 2006. If the
integration of DreamWorks, including its motion pictures, employees and
information systems, into our business is not fully successful or does
not yield expected benefits to Paramount Pictures’ business, our
expected results of operations could be adversely impacted. We also are
developing our television market sales capabilities, restructuring our
international distribution operations and retaining a greater
proportion of international rights to our film product. Any failure to
fully succeed in developing our television market sales capabilities,
restructuring our international distribution operations or capitalizing
on the international rights we retain could adversely affect our
results of operations.
NAI, Through Its Voting Control
of Viacom, Is in a Position to Control Actions that Require Stockholder
Approval and May Have Interests that Are Different than
Yours
NAI, through its beneficial ownership of our Class A
common stock, has voting control of Viacom. Mr. Sumner
M. Redstone, the controlling stockholder, Chairman of the Board
of Directors and Chief Executive Officer of NAI, serves as Executive
Chairman of our Board of Directors and Founder, and Ms.
Shari Redstone, the President and a director of NAI, serves as
non-executive Vice Chair of our Board of Directors. In addition,
Messrs. Abrams and Dauman are directors of both NAI and Viacom. NAI is
in a position to control the outcome of corporate actions that require
stockholder approval, including the election of directors and
transactions involving a change of control. The interests of NAI may
not be the same as yours. Risks Related to Our Separation from
CBS Corporation
Our Historical and Pro Forma
Financial Information May Not Be Indicative of Our Results as a
Separate Company
The historical and pro forma financial
information presented in this prospectus relating to periods prior to
our separation from CBS Corporation may not necessarily reflect what
our results of operations, financial condition and cash flows would
have been had we been operating as a stand-alone entity during the
periods presented or what our results of operations, financial
condition and cash flows will be in the future. As a result, historical
and pro forma financial information should not be relied upon as being
indicative of our future results of operations, financial condition and
cash flows.
Our Business and Other Businesses Which
Are Controlled by Sumner Redstone, Including CBS Corporation, Are and
Will Continue to Be Attributable to Each Other for Certain Regulatory
Purposes
So long as we and CBS Corporation are under common
control, each company’s businesses, as well as the businesses of
any other commonly controlled company, such as NAI, NAIRI and Midway
23
Games, Inc., which is also controlled by
Mr. Redstone, may be attributable to the other companies for
purposes of U.S. and non-U.S. antitrust rules and regulations, certain
rules and regulations of the FCC, and certain rules regarding political
campaign contributions in the United States, among others. The
businesses of each company may continue to be attributable to the other
companies for FCC purposes even after the companies cease to be
commonly controlled, if the companies share common officers, directors,
or attributable stockholders. As a result, the businesses and conduct
of any of these other companies may have the effect of limiting the
activities or strategic business alternatives available to our
company.
The Separation Agreement Between CBS
Corporation and Us Prohibits Us from Engaging in Certain Types of
Businesses
Under the terms of the Separation Agreement, we
generally agreed that we will not own or acquire certain interests in
specified types of media companies if such ownership would cause CBS
Corporation to be in violation of U.S. federal laws limiting the
ownership of broadcast licenses or if it would limit CBS
Corporation’s ability under these laws to acquire television or
radio stations or television networks. Additionally, we may not make
acquisitions, enter into agreements or accept or agree to any condition
that purports to bind CBS Corporation or subjects CBS Corporation to
restrictions it is not otherwise subject to by legal order without CBS
Corporation’s consent. We and CBS Corporation have agreed that
prior to the earliest of (1) the fourth anniversary of the separation,
(2) the date on which none of Mr. Redstone, NAI,
NAIRI or any of their successors, assigns or transferees are deemed to
have interests in both CBS Corporation and Viacom that are attributable
under applicable U.S. federal laws and (3) the date on which the other
company ceases to own the video programming vendors that it owns as of
the separation, neither of them will own or acquire an interest in a
cable television operator if such ownership would subject the other
company to U.S. federal laws regulating contractual relationships
between video programming vendors and video programming distributors
that the other company is not then subject to. These restrictions could
limit the strategic business alternatives available to
us.
The Tax Matters Agreement and the Tax Rules
Applicable to the Separation May Restrict Our Ability to Engage in
Certain Corporate Transactions
In connection with the
separation, we entered into a Tax Matters Agreement, effective upon the
consummation of the separation. The Tax Matters Agreement provides,
among other things, that, depending on the event, we may have to
indemnify CBS Corporation for some or all of the taxes resulting from
the merger and the distribution of our common stock in the merger if
the merger and distribution do not qualify as a tax-free distribution
under Sections 355 and 368 of the Code. In addition, the current U.S.
federal income tax law creates a presumption that the distribution of
our common stock in the merger would be taxable to CBS Corporation, but
not to its stockholders, if we engage in, or enter into an agreement to
engage in, a transaction that would result in a 50% or greater
change, by vote or value, in our stock ownership during the four-year
period that begins two years before the date of the separation, unless
it is established that the transaction was not undertaken pursuant to a
plan or series of transactions related to the separation. The Treasury
Regulations currently in effect generally provide that whether such
distribution is part of a plan is determined based on all of the facts
and circumstances, including, but not limited to, specific factors
described in the Treasury Regulations. In addition, the Treasury
Regulations provide several ‘‘safe
harbors’’ for acquisition transactions that are not
considered to be part of a plan. The indemnification obligations set
forth in the Tax Matters Agreement and the above-described provisions
of the tax law may prevent us from entering into transactions which
might be advantageous to our stockholders, such as issuing equity
securities to satisfy financing needs or acquiring businesses or assets
with equity securities, and may make us less attractive to a potential
acquiror and reduce the possibility that an acquiror will propose or
seek to effect certain transactions with us.
We Rely
on CBS Corporation’s Performance under Various Agreements among
the Companies
In connection with the separation, we entered
into various agreements, including the Separation Agreement, the Tax
Matters Agreement and a Transition Services Agreement pursuant to which
we will provide certain specified services to CBS Corporation following
the separation, and certain related 24
party arrangements pursuant to which we will
provide services and products to CBS Corporation from and after the
separation. The Separation Agreement sets forth the distribution of
assets, liabilities, rights and obligations of Viacom and CBS
Corporation following the separation, and includes indemnification
obligations for such liabilities and obligations. In addition, pursuant
to the Tax Matters Agreement, certain income tax liabilities and
related responsibilities are allocated between, and indemnification
obligations have been assumed by, each of us and CBS Corporation. Each
company will rely on the other company to satisfy its performance and
payment obligations under these agreements. Certain of the liabilities
to be assumed or indemnified by us or CBS Corporation under these
agreements are legal or contractual liabilities of the other company.
If CBS Corporation were to breach or be unable to satisfy its material
obligations under these agreements, including a failure to satisfy its
indemnification obligations, we could suffer operational difficulties
or significant losses.
Certain Members of Management,
Directors and Stockholders May Face Actual or Potential Conflicts of
Interest
The management and directors of Viacom and CBS
Corporation own both our common stock and CBS Corporation common stock,
and both Viacom and CBS Corporation are controlled by NAI. Mr.
Redstone, the controlling stockholder, Chairman of the Board of
Directors and Chief Executive Officer of NAI, serves as our Executive
Chairman of our Board of Directors and Founder and Executive Chairman
of the Board of Directors and Founder of CBS Corporation. Ms.
Redstone, the President and a director of NAI, serves as non-executive
Vice Chair of the Board of Directors of both Viacom and CBS
Corporation. Messrs. Abrams and Dauman are directors of NAI, and
Mr. Dauman serves as a director of both Viacom and CBS
Corporation and Mr. Abrams serves as a director of Viacom. This
ownership overlap and these common directors could create, or appear to
create, potential conflicts of interest when Viacom’s and CBS
Corporation’s management, directors and controlling stockholder
face decisions that could have different implications for Viacom and
CBS Corporation. For example, potential conflicts of interest could
arise in connection with the resolution of any dispute between Viacom
and CBS Corporation regarding the terms of the agreements governing the
separation and the relationship between Viacom and CBS Corporation
thereafter. Potential conflicts of interest could also arise if we and
CBS Corporation enter into any commercial arrangements with each other
in the future. Each of Mr. Redstone, Ms. Redstone
and Mr. Dauman may also face conflicts of interest with regard
to the allocation of his or her time between us and CBS
Corporation. Our certificate of incorporation and the CBS
Corporation certificate of incorporation each contains provisions
related to corporate opportunities that may be of interest to us and to
CBS Corporation. Our certificate of incorporation provides that in the
event that a director, officer or controlling stockholder of ours who
is also a director, officer or controlling stockholder of CBS
Corporation acquires knowledge of a potential corporate opportunity for
both Viacom and CBS Corporation, such director, officer or controlling
stockholder may present such opportunity to us or CBS Corporation or
both, as such director, officer or controlling stockholder deems
appropriate in his or her sole discretion, and that by doing so such
person will have satisfied his or her fiduciary duties to us and our
stockholders. In addition, our certificate of incorporation provides
that we renounce any interest in any such opportunity presented to CBS
Corporation. These provisions create the possibility that a corporate
opportunity of one company may be used for the benefit of the other
company.
We Have a New Operating Structure and New
Members of Management at Viacom Corporate and Paramount
Pictures
The separation of Former Viacom into CBS
Corporation and Viacom involved the division of Former Viacom’s
businesses. In connection with the separation, many jointly-held assets
and operating systems as well as personnel were allocated between the
companies, in particular at Paramount Pictures and in Former
Viacom’s corporate offices, and new related party agreements
were entered into to govern the ongoing business relationships between
the companies following the separation. Viacom corporate and Paramount
Pictures have senior management teams that include several executives
who were hired relatively recently or who recently assumed all or a
substantial part of their current responsibilities. There can therefore
be no assurance that we will be successful under these
conditions. 25 Risks Related to the Exchange Senior
Notes and Debentures
The Exchange Senior Notes and
Debentures Will Be Structurally Subordinated to All Obligations of Our
Subsidiaries
The exchange senior notes and debentures will
not be guaranteed by our subsidiaries, and therefore they will be
structurally subordinated to all existing and future indebtedness and
other obligations of our subsidiaries, including claims with respect to
trade payables. As of June 30, 2006, our direct and
indirect subsidiaries had approximately $337.5 million of indebtedness
outstanding. The indenture for the exchange senior notes and debentures
will not prohibit or limit any of our subsidiaries from incurring any
indebtedness or other obligations. In the event of a bankruptcy,
liquidation or dissolution of a subsidiary, following payment by the
subsidiary of its liabilities, the subsidiary may not have sufficient
assets to make payments to us.
An Active Trading
Market for the Exchange Senior Notes and Debentures May Not Develop or
Be Sustained
The exchange senior notes and debentures are
new securities for which there currently is no market. We have not
listed and do not intend to list the exchange senior notes and
debentures on any U.S. national securities exchange or quotation
system. We cannot assure you that any market for the exchange senior
notes and debentures will develop or be sustained. If an active market
is not developed or sustained, the market price and liquidity of the
exchange senior notes and debentures may be adversely
affected. 26 CAPITALIZATION The following
table sets forth our consolidated capitalization as of June
30, 2006 on a historical basis. This table should also be read
together with our unaudited consolidated historical financial
statements and the notes thereto included in this prospectus. We will
not receive any proceeds from this exchange
offer. 27 RATIO OF EARNINGS TO FIXED
CHARGES Set forth below is information concerning our ratio of
earnings to fixed charges. For purposes of determining the ratio of
earnings to fixed charges, earnings consist of earnings from continuing
operations before income taxes plus distributed income of equity
investees and fixed charges. Fixed charges are defined as interest
expense and one-third of gross rent expense relating to operating
leases which is deemed to be representative of interest. For the six
months ended June 30, 2006, fixed charges include
interest expense on indebtedness outstanding during that period. For
periods ending December 31, 2005 and prior, indebtedness,
other than certain capital lease obligations, was not transferred to
Viacom as it remained at CBS Corporation. Accordingly, debt service
cost is not reflected in periods prior to the six months ended
June 30,
2006. 28 USE OF PROCEEDS We will not
receive any proceeds from the exchange offer. In consideration for
issuing the exchange senior notes and debentures contemplated by this
prospectus, we will receive unregistered senior notes and debentures
from you in like principal amount. The unregistered senior notes and
debentures surrendered in exchange for the exchange senior notes and
debentures will be retired and canceled and cannot be reissued.
Accordingly, issuance of the exchange senior notes and debentures will
not result in any change to our
indebtedness. 29 SELECTED
CONSOLIDATED FINANCIAL DATA The following tables present our
selected consolidated financial data. The selected consolidated
financial data should be read in conjunction with, and is qualified in
its entirety by reference to, our consolidated financial statements and
the notes thereto and the related ‘‘Management’s
Discussion and Analysis of Financial Condition and Results of
Operations’’ beginning on page 33. The consolidated
income statement data for the years ended December 31,
2005, 2004, 2003 and 2002 and the consolidated balance sheet data at
December 31, 2005, 2004 and 2003 are derived from our
audited consolidated financial statements. The unaudited consolidated
income statement data for the six months ended June 30,
2006 and 2005 and for the year ended December 31, 2001
and the unaudited consolidated balance sheet data at June
30, 2006 and December 31, 2002 and 2001 are
derived from our accounting records for those periods and have been
prepared on a basis consistent with our audited consolidated financial
statements, except we adopted the provisions of FAS 123R effective
January 1, 2006. The selected consolidated
financial data may not necessarily reflect our results of operations
and financial position in the future or what results of operations and
financial position would have been had we been a separate, stand-alone
company during the periods presented. For additional information, see
‘‘Unaudited Pro Forma Condensed Consolidated Financial
Information’’ and the notes thereto beginning on page
31. Consolidated Income Statement Data Consolidated
Balance Sheet Data 30 UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION This unaudited pro forma
condensed consolidated financial information and the notes thereto
should be read together with our consolidated financial statements and
the notes thereto included in this prospectus and the related
‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations,’’
beginning on page 33. This pro forma financial information is presented
as if the separation, the issuance of the unregistered senior notes and
debentures and the use of the net proceeds therefrom to repay a portion
of the amounts previously borrowed, had occurred as of the beginning of
the period presented. Management believes the assumptions and
allocations are reasonable. However, the pro forma results do not
necessarily represent what the actual results would have been had
Viacom been a stand alone public company; nor are they necessarily
indicative of future results. Unaudited Pro Forma Condensed
Consolidated Income Statement Information 31 Unaudited Pro Forma Condensed Consolidated
Income Statement Information 32 MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS Management’s discussion and analysis of
results of operations and financial condition should be read in
conjunction with the consolidated financial statements and related
notes included in this prospectus. Descriptions of all documents
included as exhibits to the registration statement that includes this
prospectus are qualified in their entirety by reference to the full
text of such documents so included. References in this section to
‘‘Viacom,’’
‘‘Company,’’
‘‘we,’’ ‘‘us’’
and ‘‘our’’ refer to Viacom Inc. and
its consolidated subsidiaries through which its various businesses are
conducted, unless the context requires otherwise. Certain amounts have
been reclassified to conform to the 2005
presentation. Overview
The Separation
On
December 31, 2005 we became a stand-alone public entity
by separating from Former Viacom. Prior to the separation, we were a
wholly-owned subsidiary of Former Viacom. The separation was effected
through a merger of Former Viacom and one of its wholly-owned
subsidiaries, pursuant to which Former Viacom continued as the
surviving entity and was renamed CBS Corporation and we were renamed
Viacom Inc. In connection with the merger and the separation, each
share of Former Viacom Class A common stock was converted into the
right to receive 0.5 of a share of Viacom Class A common stock and 0.5
of a share of CBS Corporation Class A common stock. Similarly, each
share of Former Viacom Class B common stock was converted into the
right to receive 0.5 of a share of Viacom Class B common stock and 0.5
of a share of CBS Corporation Class B common stock. Holders of Viacom
Class A and Class B common stock received cash in lieu of fractional
shares. In accordance with the terms of the Separation Agreement
between CBS Corporation and Viacom, on December 29, 2005,
we paid a preliminary special dividend of $5.4 billion to CBS
Corporation, subject to certain adjustments. On March 14,
2006, CBS Corporation provided an initial statement that the dividend
should be increased by a net amount of approximately $460
million. On April 28, 2006, we served CBS Corporation
with a notice of disagreement. Based on an assessment of the amount and
underlying components of the proposed additional dividend payment we
recorded a net amount of $170.2 million at March
31, 2006 which was paid to CBS Corporation on May
5, 2006. Under the Separation Agreement, after an opportunity
for the parties to negotiate resolution of differences, any disputed
amounts are subject to arbitration. Any further adjustment to the
special dividend will be reflected as an adjustment to additional
paid-in capital. The Separation Agreement further provided that
the Company is responsible for the first $195.0 million in costs
directly related to the separation. Amounts incurred in excess of
$195.0 million will be funded equally between the Company and
CBS Corporation. Included as a component in selling, general and
administrative expenses in the Company’s Consolidated Income
Statement for the year ended December 31, 2005 is
$163.5 million of transaction costs reflected as period
expenses. Such amounts principally included investment banking and
other professional fees. In connection with the separation,
Viacom and CBS Corporation also entered into certain other agreements
in order to govern certain of the ongoing relationships between Viacom
and CBS Corporation after the separation. These agreements include a
Transition Services Agreement and a Tax Matters Agreement. Related
party arrangements are more fully described below and in the notes to
the consolidated financial statements.
Basis of
Presentation
The accompanying consolidated financial
statements of the Company are presented on a carve-out basis for
periods prior to and including December 31, 2005, and reflect the
consolidated historical results of operations, financial position and
cash flows of the Company, with operations in two segments:
(i) Cable Networks and
(ii) Entertainment. 33 The assets and liabilities of Viacom have
been accounted for at the historical book values carried by Former
Viacom prior to the separation and were assigned to Viacom pursuant to
the terms of the Separation Agreement. The indebtedness of Former
Viacom, other than certain capital lease obligations, was not
transferred to Viacom and remains as indebtedness of CBS Corporation.
Prior to the separation, Former Viacom centrally managed the cash flows
generated from the Company’s various businesses. The Invested
Capital balance included as a component of Stockholders’ Equity
in the Company’s Consolidated Balance Sheet through the date of
separation includes accumulated earnings of the Company as well as
receivables/payables due to/from CBS Corporation resulting from cash
transfers and intercompany activity. Interest was not charged or
credited on amounts due to/from Viacom. The Consolidated Income
Statements include allocations of Former Viacom corporate expenses and
Paramount Pictures corporate overhead including accounting, treasury,
tax, legal, human resources, information systems and other services as
well as depreciation and amortization on allocated costs, to reflect
the utilization of such shared services and assets by the Company.
Total corporate costs allocated to the Company, excluding separations
costs, were approximately $162.0 million, $136.2 million,
and $112.6 million for the years ended December 31, 2005,
2004 and 2003, respectively, and were primarily included in Selling,
General and Administrative expenses in the accompanying Consolidated
Income Statements. Management believes the methodologies used to
allocate charges for the services described above are
reasonable. The consolidated financial statements may not
necessarily reflect Viacom’s results of operations, financial
position and cash flows in the future or what Viacom’s results
of operations, financial position and cash flows would have been had
the Company been a separate, stand-alone company during the periods
presented. As described above, none of the indebtedness of Former
Viacom other than capital lease obligations was assumed by the Company
and remains as indebtedness of CBS Corporation. Accordingly, debt
service cost is not reflected in the Company’s Consolidated
Income Statements for the periods prior to the six months ended
June 30, 2006. Famous Players and
Blockbuster Inc. have been reported as discontinued operations.
Famous Players was sold on July 22, 2005 and Blockbuster was
split-off from Former Viacom in
2004.
Segments
We are a leading worldwide
multiplatform, pure play content company with operations in the
following segments:
Cable Networks: The
Cable Networks segment consists of the businesses of MTV Networks,
including MTV: Music Television®,
MTV2®, Nickelodeon®, Nick at
Nite®, Noggin®, The
N®, Nicktoons Network™, Turbo Nick™,
VH1®, TV Land®, Spike
TV®, CMT®: Country Music
Television™, Logo™, Comedy Central®,
Comedy Central’s MotherLoad™, MTV Desi™, MTV
Chi™, MTV Español®, mtvU™, mtvU
Uber™, MTV Hits™, MTV Jams™, TEMPO™, MTV
Overdrive™, MHD™, VH1 Classic™, VHUno™, VH1
Soul™, VH1 Country™, VH1’s Vspot™, Game
One™, VIVA™, TMF™, The Box™, Paramount
Comedy™, Neopets™, GameTrailers.com™ and
IFILM®; and the businesses of BET Networks, which
include BET® (Black Entertainment Television) and BET
J™; and other program services, including online programming
services such as websites, broadband channels and wireless
applications.
Entertainment: The
Entertainment segment includes Paramount Pictures®,
which produces and distributes feature motion pictures, Famous
Music®, which engages in the music publishing
business, and interests in 19 movie theaters. Our revenues from
the Cable Networks segment accounted for 64% of our consolidated
revenues for the six months ended June 30, 2006 and for
70% of our consolidated revenues for 2005. Our revenues from the
Entertainment segment accounted for 37% of our consolidated
revenues for the six months ended June 30, 2006 and for
31% of our consolidated revenues for 2005. Elimination of
intercompany revenues accounted for (1)% of our consolidated
revenues for the six months ended June 30, 2006 and for
(1)% of our consolidated revenues for 2005. 34
Revenues
We have one of
the largest collections of cable programming assets in the world. Our
leading program services reach 179 territories through more than 120
worldwide cable networks presented in 28 different languages and reach
over 480 million subscriber households worldwide. In the United
States, our leading networks program approximately 1,780 hours
per week and, according to Nielsen Media Research®, reached
approximately 150 million television viewers each week in the
period from February 2006 to June 2006. Many of our
brands, such as MTV, Nickelodeon and VH1, are known worldwide. MTV is
one of the most widely distributed television brands and is regularly
cited, most recently in 2006, as The World’s Most Valuable
Media Brand by Interbrand Corp., an international brand
consultancy. Nickelodeon, which as of June 2006 was available in
approximately 300 million television households worldwide as a
full channel or a branded program block, is the world’s most
widely distributed children’s television brand and has been the
top-rated cable network for children in the United States for the past
11 years. Our Cable Networks segment revenues depend on the
strength of our brands, which significantly affect our ability to
attract and retain advertisers and affiliates. Our revenues depend in
part on our success in developing brands that appeal to a wide range of
targeted niche audiences and represent demographics sought after by
advertisers and affiliates. In addition, the extent of our distribution
to specialized audiences and our focus on forging strong connections
with our audiences determine whether our networks are an attractive
venue for advertisers and affiliates. Revenues from the Cable
Networks segment are generated principally from advertising sales and
affiliate fees. The sale of advertising time is affected by the
desirability of viewer demographics, viewer ratings and economic
conditions in the marketplace that could alter advertisers’
spending habits. Affiliate fees consist of subscription fees from cable
television operators, DTH satellite operators and other distributors
who carry our networks. Our agreements with our distributors generally
are long-term, have staggered expiration dates and provide for built-in
rate increases and protected distribution. Other Cable Networks
revenues consist of revenues from home entertainment sales of our
original cable programming, the licensing and merchandising of our
cable and consumer products worldwide and the syndication of cable
programming. These revenues are driven primarily by the popularity of
our programming airing on our cable networks. Cable
Network’s revenue growth depends on the continued increases in
advertising revenues and affiliate fees from our distributors through
the continued production of compelling content. Growth also depends on
our ability to successfully expand onto new distribution platforms such
as wireless and the Internet as these platforms become increasingly
attractive to advertisers. We believe media fragmentation plays to our
strengths, and our intent is to take advantage of emerging
technological and consumer trends by extending our brands and
distributing our content into new forms of integrated digital
distribution, such as broadband, wireless, online community,
video-on-demand, high-definition programming and other businesses. We
aim to achieve this through a combination of organic growth, investment
in our existing and complementary businesses, strategic relationships,
and focused acquisitions that fit with our current brands and core
competencies. Revenues from our Entertainment segment are
primarily generated from feature film, which includes the exploitation
of motion pictures in theatrical release, home entertainment, and other
means, including network, pay television, syndication and basic cable
revenues. Other Entertainment revenues principally relate to music
publishing. The results of operations for the Entertainment segment
substantially depend on the public response to our theatrical and DVD
releases, our ability to obtain creative talent and story properties,
and our films’ distribution and marketing success. Therefore,
the results of the Entertainment segment can be volatile. Our
strategies for growing Entertainment revenues include implementing a
multi-label model capitalizing on MTVN, BET, and DreamWorks brands;
owning and increasing our control over international distribution;
significantly expanding our home entertainment capabilities; and
broadening our portfolio of films with an increased focus on specialty
films. Developing synergies across our brands permits us to leverage
our core MTVN and BET audiences that open and drive movies. Using
35
our creative and marketing advantages in our
common research, talent connections and global marketing activities
will also benefit Entertainment.
Operating
Expenses
Operating expenses represented approximately
70% and 68% of our total expenses for the six months
ended June 30, 2006 and 2005, respectively, and
represented approximately 65%, 67% and 69% our
total expenses in 2005, 2004 and 2003, respectively. Operating expenses
consist of the following:
Production and program
expenses. In the Cable Networks segment, these expenses
reflect amortization cost of all original and acquired programming
exhibited on our cable networks. Production and program expenses are
generally variable and depend primarily on the cost of on- and
off-screen talent, whether or not scripted and whether animated or
live. In the Entertainment segment, production and program expenses
relate primarily to the amortization of feature film production costs,
and development projects, production overhead and acquisition
costs.
Distribution expenses. These
expenses include advertising and other distribution costs incurred
primarily with respect to Entertainment product in theatrical or home
entertainment release.
Other operating
expenses. These expenses primarily include the cost of home
entertainment product as well as licensing and merchandising of Cable
Networks product.
Selling, General and Administrative
Expenses
Our selling, general and administrative expenses
primarily include expenses incurred for selling and marketing,
occupancy, insurance, administrative support activities and public
company expenses and for the year ended December 31,
2005, includes separation-related costs of
$163.5 million.
Depreciation and
Amortization
Our depreciation and amortization primarily
relates to owned buildings, leasehold improvements, equipment and
transponders, and intangible assets.
Acquisitions and
Dispositions
On August 9, 2006, we agreed to
acquire Atom Entertainment, Inc., a portfolio of four online
destinations for casual games, short films and animation, for cash
consideration of approximately $200 million. The acquisition is
subject to customary closing conditions and is expected to close in the
third quarter. On June 1, 2006, we acquired an additional
ten percent interest in Nick UK for $8.9 million. Previously,
Nick UK was a fifty-fifty joint venture with BSkyB. With the additional
interest, we obtained control of Nick UK and began consolidating its
operations as of June 1, 2006. On May 9,
2006, we completed the acquisition of Xfire, Inc, a leading gaming and
social networking service, for initial cash consideration of
approximately $102 million. An additional $8 million is
expected to be paid out over four years based upon continued service of
the employees. On January 31, 2006, we completed our
acquisition of DreamWorks, a leading producer of live-action motion
pictures, television programming and home entertainment products, for
approximately $1.53 billion, net of cash acquired. We also entered into
exclusive seven-year agreements for worldwide distribution rights and
fulfillment services to films produced by DreamWorks Animation SKG,
Inc. Among the assets acquired with the purchase of DreamWorks was a
live-action film library consisting of 59 films released through
September 16, 2005. On May 5, 2006, we sold a fifty-one
percent controlling interest in the entity that owns the library to
Soros Strategic Partners LP and Dune Entertainment II LLC, an affiliate
of Dune Capital Management LP, for net proceeds of $675.3 million. We
retained a minority interest in the entity that owns the library. In
connection with the sale of the live-action film library, Soros entered
into exclusive five-year agreements with Paramount Pictures and its
international affiliates for distribution and fulfillment services of
the live-action library by Paramount Pictures. In the event that Soros
and Dune continue to control the entity that owns the film library
after the fifth year, the distribution agreement with Paramount
Pictures will automatically renew. 36 On November 22, 2005, MTV Networks
acquired substantially all the assets of GameTrailers LLC, including
the internet site GameTrailers.com. GameTrailers.com is the largest
online-focused provider and aggregator of broadband video content for
video game enthusiasts. On October 12, 2005, MTV Networks
acquired IFILM Corp., which owns IFILM.com, a website that allows users
to upload and download short video clips, television show segments and
movie trailers, for $49.0 million. On August 2, 2005,
Famous Music acquired The Extreme Music Library Limited and
Director’s Cuts Production Music Limited and their wholly-owned
subsidiaries for approximately $45.1 million. On June 20,
2005, MTV Networks acquired Neopets for approximately
$160.0 million. Neopets is the owner and operator of
Neopets.com, a leading online destination and community for kids and
young adults, whose members, among other things, create and care for
virtual pets. During 2004, MTV Networks acquired 97.8% of
VIVA, a youth entertainment media company based in Germany, for a total
purchase price of $393.6 million and acquired the remainder in
2005 for $8.4 million. During 2003, MTV Networks acquired the
remaining 50% interest in Comedy Central that it did not
previously own for $1.2 billion. On July 22, 2005,
Former Viacom sold Famous Players, its Canadian-based theater chain,
for approximately $400.0 million. In October 2004, Former
Viacom completed the split-off of Blockbuster by exchanging the
72 million shares of Blockbuster Class A common stock and
72 million shares of Blockbuster Class B common stock
that it owned for 27,961,165 shares of Former Viacom Class A and
Class B common stock.
Consolidated Results of
Operations – Six months ended June 30, 2006 vs. six
months ended June 30, 2005 and year ended December
31, 2005 vs. year ended December 31, 2004 and year ended December 31,
2004 vs. year ended December 31, 2003
The accompanying
consolidated financial statements are presented on a carve-out basis
for periods prior to and including December 31, 2005 and reflect the
consolidated historical results of operations, financial position and
cash flows of the Company, with operations in two segments:
(i) Cable Networks which includes MTV Networks and BET Networks
and (ii) Entertainment which includes Paramount Pictures, Famous
Music publishing operations and interests in 19 movie theaters. The historical financial statements include allocations of Former
Viacom corporate expenses and Paramount Pictures corporate overhead,
including accounting, treasury, tax, legal, human resources,
information systems and other transactions with Former Viacom. Former
Viacom debt, other than capital lease obligations, has not been
allocated and the related interest expense is not reflected in results
of operations. Management believes the assumptions underlying the
consolidated financial statements are reasonable. However, the
consolidated financial statements included herein do not necessarily
reflect what Viacom’s results of operations, financial position
and cash flows in the future or what its results of operations,
financial position and cash flows would have been if Viacom had been a
stand-alone company during the periods presented. Transactions between
Viacom and Former Viacom and between Viacom and CBS Corporation have
been identified as transactions between related
parties. 37 The following table sets forth our results
of
operations:
Revenues
Revenues for the six months
ended June 30, 2006 increased $805.8 million, or
18%, to $5.21 billion versus the same period last year.
The acquisition of DreamWorks L.L.C., which was consummated on January
31, 2006, and the commencement of distribution activities for
DreamWorks Animation SKG Inc. (‘‘DreamWorks
Animation’’) and DreamWorks live-action films
(collectively ‘‘DreamWorks’’) contributed
$519.5 million, or 64%, of the reported growth for the
same period. Cable Networks segment revenue increased 7%, or
$229.2 million, to $3.32 billion compared to the same
period for 2005, driven principally by increases in domestic
advertising sales of 8%, or $126.8 million, to
$1.77 billion and affiliate fee increases of 10%, or
$88.5 million, to $990.7 million. Entertainment revenues
were up $585.1 million compared to the same period for 2005,
principally attributable to DreamWorks. Our revenues for 2005 of
$9.61 billion increased $1.48 billion, or 18%,
from $8.13 billion for 2004, reflecting 18% growth in
Cable Networks and 19% growth in Entertainment. Our revenues for
2004 of 38
$8.13 billion increased
$827.8 million, or 11%, from $7.30 billion for
2003, driven by a 20% increase in Cable Networks, partially
offset by a decline in Entertainment of 5%. For 2005,
acquisitions, including IFILM, Extreme Music and Neopets, and VIVA,
which was acquired in 2004, contributed incremental revenues of
$104.2 million, or 1%, to our revenue growth. In 2004,
acquisitions, including VIVA and Comedy Central, which was acquired in
2003, contributed incremental revenues of $306.1 million, or
4%, to our revenue growth. The tables below present our
revenues by component, net of intercompany eliminations, for each of
the six-month periods ended June 30, 2006 and 2005 and
for each of the years ended December 31, 2005, 2004 and
2003.
Operating
Expenses
For the six months ended June 30,
2006, operating expenses of $2.75 billion increased
$578.2 million, or 27%, from $2.17 billion for the
six months ended June 30, 2005. For 2005, operating
expenses of $4.74 billion increased $829.4 million, or
21%, from $3.91 billion in 2004. For 2004, operating
expenses increased $235.4 million, or 6%, from
$3.67 billion in 2003. The table below presents our operating
expenses by type for each of the six month periods ended June
30, 2006 and 2005 and for each of the years ended
December 31, 2005, 2004 and
2003: The
major changes in operating expenses were as follows: For the six
months ended June 30, 2006, production and programming
expenses increased $338.8 million, or 24%, versus the
same period last year, primarily attributable to increased film
amortization and, to a lesser extent, increased amortization for
programming airing on the Company’s cable networks. Production
and program expenses of $3.17 billion in 2005 increased
$742.9 million, or 31%, from $2.43 billion in
2004. Cable Networks expenses grew 19% in line with revenue
growth. Entertainment expenses grew 49%, or
$421.9 million, driven primarily by two productions War of
the Worlds and The Longest Yard. Also contributing to the
growth in Entertainment expenses were write-offs of
$31.6 million related to management’s decision to abandon
certain development projects and increases of $20 million in
development costs associated with the transition to new leadership at
Paramount. For 2004, production and program expenses increased
$232.3 million, or 11%, from 39
$2.19 billion in 2003 with an
increase in Cable Networks of 23% in line with revenue growth,
partially offset by a decrease in Entertainment of 4%, driven by
a 19% reduction in development costs and a 3% decline in
film amortization, participation and residual
expense. Distribution expenses increased $195.5 million,
or 32%, for the six months ended June 30, 2006.
This increase reflects higher print and advertising costs in
Entertainment as a result of the timing of spending for theatrical
releases and the commencement of distribution activities for DreamWorks
Animation and DreamWorks L.L.C. productions. The increase was partially
offset by lower distribution expenses in Cable Networks related
principally to the timing of DVD releases. Distribution expenses of
$1.18 billion in 2005 increased $6.8 million, or
1%, from $1.17 billion in 2004. Distribution expenses for
2004 decreased $86.0 million, or 7%, from
$1.26 billion in 2003 principally reflecting lower distribution
costs for home entertainment releases of feature films. Other
operating expenditures increased $43.9 million, or 30%,
for the six months ended June 30, 2006 versus the same
period last year, driven principally by the growth in ancillary
revenues and the related participations owed on ancillary revenues
generated. Other operating expenses of $389.5 million in 2005
increased $79.7 million, or 26%, from
$309.8 million in 2004 due to higher costs associated with home
entertainment sales and licensing, which grew by 29% in Cable
Networks. Other operating expenses increased $89.1 million, or
40%, to $309.8 million in 2004 from 2003 principally due
to 37% growth in Cable Networks reflecting higher costs
associated with home entertainment sales and licensing and additional
costs from Comedy Central, acquired in
May 2003.
Selling, General and Administrative
Expenses
Selling, general and administrative expenditures
were up $108.9 million, or 12%, in the six months ended
June 30, 2006 compared to the same period for 2005. The
increases are driven by higher overhead at Entertainment resulting from
the DreamWorks acquisition on January 31, 2006. Corporate
expenses also increased 54% for the six months ended June
30, 2006 compared to the same period for 2005 driven principally
by higher compensation-related expense, including stock based
compensation. An incremental $14.9 million in compensation
expense was recognized for the six months ended June 30,
2006. Selling, general and administrative expenses of
$2.25 billion in 2005 increased $557.0 million, or
33%, reflecting separation-related charges of
$163.5 million, $70.5 million in operating segment
severance charges and an increase of $217.9 million, or
16%, in Cable Networks in line with 18% revenue growth.
Selling, general and administrative expenses of $1.69 billion in
2004 increased $257.7 million, or 18%, primarily
reflecting higher employee-related expenses, severance charges of
$28.1 million, as well as twelve months of expenses for Comedy
Central, versus seven months in 2003.
Depreciation and
Amortization
Depreciation and amortization increased
$42.2 million for the six months ended June 30,
2006 as compared to the same period for 2005. The increase is
principally attributable to the acquisition of DreamWorks. Incremental
transponder amortization for the six months ended June
30, 2006 of $4.3 million also contributed to the overall
increases. For 2005, depreciation and amortization increased
$7.4 million, or 3%, from $251.6 million
principally driven by higher intangible asset amortization resulting
from acquisitions. For 2004, depreciation and amortization increased
$53.7 million, or 27%, from $197.9 million in
2003, primarily reflecting capital expenditures increases related to
leasehold improvements, equipment and transponders.
Interest
Expense, net
For the six months ended June
30, 2006, interest expense, net increased $189.9 million,
as compared to the same period for 2005, principally due to higher
average debt outstanding and higher interest rates in 2006. The higher
debt outstanding results from funding the special dividend payment to
CBS Corporation made in connection with the separation from Former
Viacom in December 2005, the purchase of DreamWorks on
January 31, 2006, and the purchase of common stock under
the stock repurchase program which began in January 2006.
Interest expense, net for 2006 includes costs related 40
to our senior notes and debentures, credit
facilities, capitalized lease obligations and amounts associated with
our derivative financial instruments. For 2005, interest expense
decreased by $1.2 million from $24.2 million and interest
income increased by $.6 million to $3.9 million. For
2004, interest expense increased by $1.0 million to
$24.2 million from $23.2 million in 2003 and interest
income increased by $1.1 million to $3.3 million versus
$2.2 million in 2003. Interest expense for 2005 was not
materially impacted by the debt incurred by the Company in connection
with the payment of the special dividend due to the short period of
time the debt was outstanding in 2005. We may incur additional debt for
a variety of reasons, including, but not limited to, acquisitions and
stock repurchases. We expect interest expense, net for the full year
2006 to be significantly higher in 2006 as compared to 2005, which was
prepared on a carve-out basis. See the Unaudited Pro Forma Condensed
Consolidated Income Statement.
Other Items,
net
For the six months ended June 30, 2006,
other items, net increased $10.8 million as compared to the same
period for 2005, which reflects the transactional foreign exchange
gains that occurred in the second quarter, partially offset by the
costs associated with the securitization of trade receivables. Other
items, net reflected a net loss of $29.0 million for 2005,
$17.7 million for 2004 and $24.6 million for 2003,
principally consisting of costs associated with securitizing trade
receivables of $15.9 million, $7.7 million and
$5.7 million, respectively, and foreign exchange losses of
$14.3 million, $9.3 million, and $18.9 million,
respectively.
Provision for Income Taxes
The
provision for income taxes relates to federal, state, local and foreign
income taxes on earnings before income taxes. For the six months ended
June 30, 2006, we recorded income tax expense of
$359.9 million on pretax income of $1.09 billion resulting in an
effective tax rate of 33.0%. Included in income tax expense is
the release of $70.7 million of discrete tax and related
interest reserves as a result of audit settlements and a reduction in
the full year effective tax rate to 39.6% principally due to a
reduction in state and international effective tax rates. Our annual
effective tax rate was 44.0% in 2005 versus 36.0% in 2004
and 40.3% before the cumulative effect of accounting changes in
2003. Our higher effective rate for 2005 principally reflects the
effect of non-deductible separation-related expenses of
$102.0 million which are included in the total separation costs
of $163.5 million. Included in the 2004 rate was the recognition
of $77.0 million in tax benefits from the resolution of certain
income tax audits in 2004. Former Viacom managed its tax position for
the benefit of its entire portfolio of businesses, and its tax
strategies are not necessarily reflective of the tax strategies that
the Company would have followed or will follow as a stand-alone
company.
Equity in Earnings (Loss) of Affiliated Companies,
Net of Tax
Equity in earnings of affiliated companies, net
of tax reflected earnings of $5.8 million for the six months
ended June 30, 2006 and increased $1.0 million as
compared to the same period for 2005. The increase was driven
principally by the performance of equity affiliates in Brazil and
Australia, partially offset by declines at MTV Russia and MTV Italy.
Equity in earnings (loss) of affiliated companies, net of tax reflected
earnings of $9.4 million for 2005 and losses of
$40.0 million for 2004 and $18.2 million for 2003. For
2005, earnings primarily include positive results from MTV Networks
international affiliates. For 2004, the loss principally reflected
losses from the sale of international theater ventures, partially
offset by positive results from other international ventures. For 2003,
results principally reflected operating losses from international
ventures, partially offset by the positive results of Comedy Central
prior to acquisition in May 2003.
Minority Interest,
Net of Tax
Minority interest, net of tax primarily
represents ownership held by third parties of certain international pay
television companies. Minority interest, net of tax was flat for the
six months ended June 30, 2006 as compared to the same
period for 2005. 41
Discontinued Operations,
Net
For the six months ended June 30, 2006,
discontinued operations principally includes the release of reserves
resulting from an audit settlement and the effect of adjusting recorded
liabilities for lease obligations provided on behalf of Blockbuster and
Famous Players to fair value. Net earnings (loss) from discontinued
operations for prior periods reflects the operating results of
Blockbuster and Famous Players through their respective dates of
disposition. Discontinued operations reflected losses of
$47.0 million, $1.1 billion and $802.8 million for
2005, 2004 and 2003, respectively. Former Viacom recognized a net loss
of $47.0 million in 2005 in connection with the sale of Famous
Players. The loss from discontinued operations in 2004 included a
non-cash charge of $1.5 billion ($1.2 billion net of
minority interest and tax) for the impairment of Blockbuster goodwill
and other long-lived assets in accordance with SFAS 142
‘‘Goodwill and Other Intangible Assets’’
and SFAS No. 144 ‘‘Accounting for the Impairment or
Disposal of Long-Lived Assets.’’ In 2003, we
recorded a non-cash impairment charge related to Blockbuster of
approximately $1.3 billion ($1.0 billion, net of minority
interest and tax) in accordance with SFAS 142. In completing our
analysis of the fair value of the video business, several events led to
the conclusion that the business had incremental risks that were
required to be included in our evaluation of goodwill. Additionally,
Blockbuster’s review of long-lived assets in conjunction with
SFAS 144 resulted in an impairment charge of approximately
$18.5 million to reduce the carrying value of certain fixed
assets in four international markets.
Cumulative Effect of
Accounting Change, Net of Tax
For 2003, the cumulative
effect of accounting change, net of tax, of $6.1 million,
resulted from the adoption of SFAS No. 143
‘‘Accounting for Asset Retirement
Obligations.’’
Net Earnings
For
the six months ended June 30, 2006 and 2005, we reported
consolidated net earnings of $754.5 million and $704.2
million, respectively. The $50.3 million increase was primarily driven
by an increase in operating income and reduction of income tax expense,
partially offset by increased interest expense. For 2005, we reported
consolidated net earnings of $1.26 billion versus
$293.7 million in 2004 and $338.5 million in 2003. The
increase in net earnings in 2005 was largely attributable to the
decline in net loss from discontinued operations and increased revenues
of 18%, partially offset by higher operating expenses. The
decrease in net earnings in 2004 was driven by the increase in net loss
from discontinued operations partially offset by revenue growth
primarily from advertising. 42
Segment Results of Operations
– For the Six Months Ended June 30, 2006 and 2005
and for the Years Ended December 31, 2005, 2004 and
2003
The tables below present our revenues, operating income,
and depreciation and amortization by segment for each of the six month
periods ended June 30, 2006 and 2005 and each of the
years ended December 31, 2005, 2004 and
2003. Cable Networks Cable Networks
contributed 64% of consolidated revenues for the six months
ended June 30, 2006. Cable Networks contributed
70% of consolidated revenues for the year ended
December 31, 2005, 71% for the year ended
December 31, 2004 and 65% for the year ended
December 31, 2003. The table below presents Cable
Networks’ revenues by component for each of the six month
periods ended June 30, 2006 and 2005 and each of the
years ended December 31, 2005, 2004 and
2003.
Six
Months Ended June 30, 2006 vs. Six Months Ended
June 30, 2005
For the six months ended
June 30, 2006, revenues increased 7% to
$3.32 billion compared to the same period for 2005. Domestic
revenue for the six months ended June 30, 2006 was up
9% compared with the six months ended June 30, 2005, including
advertising revenues up 8%, affiliate fees up 10% and
ancillary revenues up 12%, principally based upon higher
syndication fees. International revenues were flat as increases in
affiliate fees and ancillary revenues were offset by decreases in
advertising. 43
Domestic advertising revenues increased
$126.8 million, or 8%, offset by a decline in
international advertising of $13.0 million, or 7%.
Advertising revenues were down internationally 7% attributable
to lower advertising spend, principally in Germany, and the impact of
foreign exchange, partially offset by increases across much of the rest
of Europe and in emerging markets, principally in Asia and Latin
America. Affiliate fees increased $88.5 million, or 10%,
including a 10% growth in international markets driven
principally by France due to new channel launches. Domestic affiliate
growth increased 10% as a result of both rate and subscriber
increases. Ancillary revenues increased $26.9 million, or
7%, led principally by a 12% growth in domestic ancillary
revenues, or $26.4 million, principally as a result of higher
syndication fees resulting from the availability of South Park
as well as other licensing and merchandising revenues when compared to
2005. For the six months ended June 30, 2006,
operating income increased 10% as a result of $229.2
million of increased revenue, principally advertising revenue,
partially offset by a $97.7 million increase in operating and
selling, general and administrative costs as well as an increase in
depreciation and amortization. Operating expenses increased
$72.6 million, mostly for domestic networks due primarily to
increases in programming and production costs. Original programming
increased due to the addition of several new shows including The
Colbert Report, The Daily Show, Mind of Mencia and Showbiz Show.
Acquired programming also increased mainly due to third-party
acquisitions airing subsequent to the second quarter of 2005. The
production and programming increases were partially offset by the
non-renewal of WWE in 2006. Total selling, general and administrative
expenses increased $25.1 million, mostly due to increases in
general and administrative costs. Selling and marketing costs increased
$2.1 million predominantly all within domestic operations. The
increase was mainly driven by higher integrated marketing spending as
well as advertising expense, including upfront expenses, primarily
offset by savings in on-air promotions and consumer marketing
campaigns. General and administrative costs account for the remainder
of the increase primarily driven by increased facilities costs and
stock-based compensation expense. Depreciation and amortization
increased $14.4 million due principally to increases in
depreciation related to property, plant and equipment and increased
depreciation also related to MTV Europe transponders and
acquisition-related amortization.
2005 vs.
2004
For 2005, Cable Networks revenues increased
$1.01 billion, or 18%, to $6.76 billion
principally driven by a $625.1 million, or 18%, increase
in advertising revenues, a $184.5 million, or 11%,
increase in affiliate revenues, and a $202.7 million, or
29%, increase in ancillary revenues. Advertising sales, which
represented 60% of total revenues in 2005 and 59% in
2004, reflected double-digit gains across all MTV Networks domestic
channels and BET, as well as 26% growth in international
markets. Affiliate fees, which represented 27% of Cable Networks
revenues in 2005, were up 11%, reflecting subscriber and rate
increases at MTV Networks from new and existing domestic networks and
across international geographies as well as subscriber and rate
increases at BET. Ancillary revenues, which represented approximately
13% of Cable Networks revenues in 2005, were up 29%,
primarily reflecting higher home video revenues as well as higher
syndicated fees for Comedy Central and for VIVA. Acquisitions,
including VIVA, IFILM and Neopets, contributed $99 million in
incremental revenues in 2005. For 2005, Cable Networks operating
income increased $345.1 million, or 15%, to
$2.61 billion, reflecting higher revenues, partially offset by
21% and 20% increases in operating expenses and SG&A,
respectively. The increase in operating expenses reflected a
$64.1 million increase in original series programming costs at
MTV Networks as well as higher amortization expenses associated with
new acquired programming, such as CSI: Crime Scene Investigation
for Spike, and higher music publishing and license fees. SG&A
expenses increased principally due to higher domestic and international
marketing expenses of $92.4 million, increased rent and
maintenance costs, as well as severance expense of $47.9 million
at MTV Networks. Total expenses for 2005 also included the full year
impact of VIVA, which was acquired in 2004 and the inclusion of IFILM
and Neopets. 44
2004 vs. 2003
For 2004,
Cable Networks revenues increased $970.2 million, or 20%,
to $5.75 billion, principally driven by a $591.2 million,
or 21%, increase in advertising sales and a
$191.9 million, or 13%, increase in affiliate fees and a
37% increase in ancillary. Approximately 13% of Cable
Networks revenues were generated from international regions, of which
approximately 71% came from Europe. Total international revenue
growth was 35%, led by Europe, and domestic revenues grew
19%. Advertising sales, which represented 59% of
total revenues in 2004 and 2003, grew as a result of an increase in the
number of units sold and higher average rates. MTV Networks’
advertising sales grew 22%, led by growth at Comedy Central,
Nickelodeon and MTV, as well as the inclusion of VIVA. Advertising
revenues at BET grew 11%. The growth in affiliate fees, which
represented 29% and 30% of total revenues in 2004 and
2003, respectively, was principally driven by rate increases and
subscriber growth at domestic channels. Ancillary revenues, increased
$187.1 million, or 37%, benefiting from increases in
Nickelodeon merchandising and licensing and higher home entertainment
revenues led by Chappelle’s Show DVD sales and higher
international syndication sales. For 2004, Cable Networks
operating income increased $336.1 million, or 17%, to
$2.27 billion, reflecting higher revenues, partially offset by a
22% increase in total expenses. The increase in total expenses
for the year included an increase in operating expenses of
$376.3 million, or 24%, which was driven by higher costs
for original and acquired programming, particularly at MTV, VH1, Spike,
TV Land and BET. Selling, general and administrative expenses for 2004
increased $205.8 million, or 18%, primarily due to higher
sales and marketing-related costs at MTV Networks and increased
employee-related expenses. Total expenses also included the full year
impact of Comedy Central and the inclusion of VIVA. VIVA’s
results, included as part of MTV Networks, contributed
$63.0 million of revenues to Cable Networks for 2004 from the
date of acquisition, and contributed 1% to the total revenue
increase. Comedy Central, which was acquired in May 2003,
contributed 5% to Cable Networks revenue growth for
2004. Entertainment Entertainment contributed 37%
of consolidated revenues for the six months ended June
30, 2006. DreamWorks contributed $519.5 million for the
six months ended June 30, 2006. Entertainment contributed
31% of consolidated revenues for the years ended
December 31, 2005 and 2004, and 36% for the year ended
December 31, 2003. The table below presents
Entertainment’s revenues by component for each of the six month
periods ended June 30, 2006 and 2005 and each of the
years ended December 31, 2005, 2004 and
2003.
Six
Months Ended June 30, 2006 vs. Six Months Ended
June 30, 2005
Feature film includes revenues
earned from theatrical, home entertainment and television exhibition.
For the six months ended June 30, 2006, entertainment
revenues increased 43%, or $585 million, primarily due to
increases in television license fees and theatrical revenues and, to a
lesser extent, increases in home entertainment revenues and ancillary
revenues. Home entertainment revenues increased 8%, or
$58.0 million, due to incremental DreamWorks revenue of
$157.4 million, substantially offset by lower revenues for
Paramount titles. Domestically, Failure to Launch and Yours,
Mine & Ours in the current period compared unfavorably against
Lemony Snicket’s A Series of Unfortunate Events, The
SpongeBob SquarePants Movie and Coach Carter for the
comparable 2005 period. Internationally, home video sales of
Collateral in the prior period were substantially higher
45
than current period titles, including
Four Brothers and Elizabethtown. Significant DreamWorks
products for the period included Just Like Heaven and
Dreamer. The $258.1 million, or 89%, increase in
television fees for the six months ended June 30, 2006
was principally attributable to DreamWorks. DreamWorks contributed an
incremental $202.7 million based upon the availability of such
titles as Madagascar, War of the Worlds, and Shark Tale.
In addition, Paramount titles contributed to higher pay television and
network fees due to the mix and availability of titles. Theatrical
revenues increased $208.2 million based mostly on stronger
international performance. DreamWorks contributed $151.5 million
from titles including Over the Hedge, She’s the Man,
Match Point and Munich. In addition, domestic theatrical
releases including Mission: Impossible III and Failure to
Launch performed comparably to Longest Yard and Coach
Carter, however, international revenues for Mission:
Impossible III exceeded those of the comparable War of the
Worlds due mostly to the timing of each release as compared to
quarter end. The increase in ancillary revenues of $60.8 million
for the six months ended June 30, 2006 was principally
driven by studio rental income as well as increased music royalties
earned by Famous Music. Operating income for the six months ended
June 30, 2006 increased $3.3 million compared to the same period
for 2005, reflecting increases in television revenues offset by the
timing of distribution expenses and higher overhead costs, principally
due to the integration of DreamWorks. Operating expenses increased
$506.6 million for the six months ended June 30,
2006, principally driven by increased film amortization due to
increased revenues generated from both Paramount and DreamWorks
product. Distribution costs increased principally as a result of print
and advertising costs associated with the timing of theatrical releases
and the larger slate of film product with the addition of DreamWorks
L.L.C. and DreamWorks Animation distribution. Selling, general and
administrative costs for the six months ended June 30,
2006 increased due to higher overhead resulting from the DreamWorks
acquisition on January 31, 2006. The increase in
depreciation and amortization for the six months ended June
30, 2006 is principally attributable to the amortization of
distribution rights acquired as part of the DreamWorks L.L.C.
acquisition.
2005 vs. 2004
For 2005,
Entertainment revenues increased $481.6 million, or 19%,
to $3.0 billion, driven by War of the Worlds, The Longest
Yard, Coach Carter, Sahara and Four Brothers. Including home
entertainment sales, those five films more than doubled the performance
of comparable 2004 titles, including Mean Girls, The Manchurian
Candidate, The Stepford Wives, Collateral and Twisted. 2005
also benefited from the carryover impact of the 2004 slate which
contributed over $100 million more to 2005 than the 2003 titles
contributed to 2004; however, those gains were partially offset by
lower sales from older titles and the carryover impact of the 2003 DVD
release of The Adventures of Indiana Jones titles in 2004.
Approximately 40% of Entertainment’s revenues were
partially generated from international regions in 2005, principally
Europe and Canada. For 2005, Entertainment operating income
decreased $84.1 million, or 55%, to $70.1 million,
primarily due to a $31.6 million charge related to the
abandonment of development projects started by prior management,
severance costs of $22.6 million incurred to adjust
Paramount’s overhead structure, and incremental development
costs of approximately $20 million.
2004 vs.
2003
For 2004, Entertainment revenues decreased
$142.1 million, or 5%, to $2.51 billion,
principally reflecting lower feature film revenues, partially offset by
higher ancillary revenues from music publishing. Approximately
39% of Entertainment’s revenues were generated from
international regions in 2004, principally Europe and Canada. For
2004, feature film revenues decreased $151.3 million, or
6%, principally reflecting 11% lower worldwide home
entertainment revenues as contributions from 2004 titles, including
Mean Girls, School of Rock, The Manchurian Candidate, The Stepford
Wives and Paycheck, did not match the success of the prior
year’s titles led by The Adventures of Indiana
Jones–the Complete DVD Movie Collection, How To Lose A Guy
In 10 Days and The Italian Job. Worldwide theatrical
revenues 46
decreased 3% with releases, including
Mean Girls, Collateral, Lemony Snicket’s A
Series of Unfortunate Events, The SpongeBob SquarePants Movie and
The Manchurian Candidate. Ancillary revenues, primarily from
music publishing, increased $9.2 million, or 12%, to
$88.3 million in 2004. For 2004, Entertainment operating
income decreased $35.5 million, or 19%, to
$154.2 million primarily due to the revenue decreases noted
above, partially offset by a $106.6 million, or 4%,
decrease in total expenses primarily from operating expenses. The
decrease in operating expenses principally reflected lower film
distribution costs, film amortization and participation and residual
expenses. Selling, general and administrative expenses increased
13% due in part to a severance charge of $10.4 million
recorded in the second quarter of 2004 related to a management
change. License fees for television exhibition of completed
motion pictures are recorded as revenue in the period that the products
are available for such exhibition, which, among other reasons, may
cause substantial fluctuation in operating results. Unrecognized
revenues attributable to television licensing agreements were
approximately $1.1 billion as of December 31, 2005 and
$1.2 billion as of December 31, 2004 and 2003, including
intercompany revenues of $61.3 million, $65.9 million and
$68.9 million, respectively. Cash Flows Cash and
cash equivalents decreased by $49.0 million for the six months
ended June 30, 2006 and $211.1 million for the
year ended December 31, 2005.
Operating
Activities
Cash provided by operating activities decreased
by $108.9 million as compared to the six months ended
June 30, 2005. The decrease was principally driven by
higher investments in film, substantially driven by DreamWorks and
Cable Networks programming as well as higher cash interest payments,
partially offset by lower cash tax payments. Cash provided by
operating activities of $1.63 billion for the year ended
December 31, 2005 decreased $362.5 million versus 2004.
The decrease was principally due to a decrease in cash flows
attributable to discontinued operations of $285.8 million, lower
net earnings from continuing operations and higher cash taxes paid in
2005. In 2004, cash provided by operating activities increased
$78.9 million to $1.99 billion from $1.91 billion
for the same prior year period. The increase primarily reflected higher
earnings from continuing operations in 2004 and higher receivable
collections in 2004, partially offset by a decrease in cash flow
provided by discontinued operations in 2004 and the timing of the
split-off of Blockbuster which occurred in October 2004. In
2003, cash provided by operating activities increased
$310.2 million to $1.9 billion, principally due to higher
earnings from continuing operations in 2003 and higher cash flow
provided by discontinued operations.
Investing
Activities
Net cash utilized for investing activities in
the six months ended June 30, 2006 increased $75.4 million as
compared to the comparable 2005 period due to the acquisition of
DreamWorks and Xfire, partially offset by the sale of the live-action
library in the second quarter. Cash used for net investing
activities of $165.1 million for the year ended
December 31, 2005 principally reflected acquisitions of
$356.1 million, consisting primarily of the acquisition of
Neopets, 47
IFILM and Extreme Music, and capital
expenditures of $193.0 million, partially offset by proceeds
from dispositions of $404.2 million, primarily from the sale of
Famous Players. Capital expenditures of $193.0 million increased
$52.5 million, or 37%, principally reflecting increased
investment in information systems in part related to the separation
from the Former Viacom and leasehold improvements. Capital expenditures
for Cable Networks were $142.5 million, $86.9 million and
$81.7 million for 2005, 2004 and 2003, respectively. The
64% incremental spending in 2005 is largely attributable to
investments in technology and information systems. Entertainment
capital expenditures were $46.7 million, $29.2 million
and $27.6 million for 2005, 2004 and 2003, respectively. The
60% incremental spending in 2005 primarily relates to
information systems and improvements to Paramount’s studio
assets. In 2004, cash used for investing activities of
$288.6 million reflected acquisitions of $363.7 million,
primarily consisting of the acquisition of VIVA, capital expenditures
of $140.5 million and cash flow attributable to discontinued
operations of $433.3 million partially offset by the
$738.1 million special distribution paid by Blockbuster in the
third quarter of 2004. Capital expenditures increased
$26.2 million, or 23%, to $140.5 million in 2004.
Net cash expenditures for investing activities of $1.6 billion
for the year ended December 31, 2003 principally reflected
acquisitions of $1.3 billion and capital expenditures of
$114.3 million. Acquisitions in 2003 included the acquisition of
the remaining 50% interest in Comedy Central for
$1.2 billion. Investing activities also included additional
investments in affiliated companies which totaled $74.3 million
in 2004 and $23.2 million in 2003.
Financing
Activities
For the period ended June 30,
2006, we utilized the $5.47 billion of net proceeds from two
private placements of debt securities to repay a significant portion of
amounts previously outstanding under our credit facilities. For the six
months ended June 30, 2006, we borrowed a net
$1.89 billion, the proceeds of which were primarily utilized for
acquisitions, principally DreamWorks, and the purchase of treasury
stock. Cash used for financing activities for 2005 principally
reflected the net contribution to Former Viacom. Since the businesses
of Viacom were held directly or indirectly by Former Viacom, daily cash
needs of Viacom were funded by Former Viacom and cash generated by the
operations of Viacom was swept daily to Former Viacom for general
corporate purposes, including acquisitions and stock
repurchases. In accordance with the terms of the Separation
Agreement, on December 29, 2005 the Company paid a preliminary
special dividend to the Former Viacom of $5.4 billion. The
dividend reduced the Company’s Stockholders’ Equity in
the Company’s Consolidated Balance Sheet as of
December 31, 2005 and was funded by borrowings under the
Company’s term loan facility, which is more fully described in
the Liquidity and Capital Resources section. Pursuant to the provisions
of the Separation Agreement, the preliminary special dividend is
subject to adjustments for, among other items, actual Former Viacom
debt as of the date of the separation and actual CBS Corporation cash
flow for the full year 2005, compared to estimates used to calculate
the preliminary dividend paid on December 29, 2005. On
March 14, 2006, we received from CBS Corporation an initial
statement that the dividend should be increased by a net amount of
approximately $460 million. Based on an assessment of the amount
and underlying components of the proposed additional dividend payment
we recorded a net amount of $170.2 million at March
31, 2006 which was paid to CBS Corporation on May
5, 2006. Under the Separation Agreement, after an opportunity
for the parties to negotiate resolution of differences, any disputed
amounts are subject to arbitration. Any further adjustment to the
special dividend will be reflected as an adjustment to additional
paid-in capital. In 2004, cash flow used for financing activities
of $1.8 billion principally reflected the net contribution to
Former Viacom of $1.7 billion. In 2003, cash flow uses for
financing activities of $220.3 million primarily reflected
$361.9 million used by discontinued operations partially offset
by $189.1 million of funding from Former Viacom. The funding in
2003 was due to the $1.2 billion acquisition of Comedy Central,
partially offset by operating cash flow contributed to Former
Viacom. 48 Stock Repurchase Program The
Company has a $3.0 billion share repurchase program which was
approved by the Former Viacom Board on December 8, 2005 and
ratified by our Board on January 26, 2006. As of August 16,
2006, 40.4 million shares had been repurchased in the open market under
the program for an aggregate purchase price of approximately $1.59
billion, and an additional 5.2 million shares had been purchased under
the NAIRI Agreement for an aggregate purchase price of $206.1 million.
See ‘‘Certain Relationships and Related Party
Transactions’’ beginning on
page 94. Liquidity and Capital
Resources
Commercial Paper
At June
30, 2006, Viacom’s commercial paper had a weighted
average interest rate of 5.59% and average maturity of less than
30 days.
Viacom Credit Agreement
As of
June 30, 2006, our credit facilities were comprised of a
$3.25 billion revolving facility due December 2010, and a
$560 million term facility due in June 2007
(collectively, the ‘‘Credit Facilities’’).
The terms of the Credit Facilities are described in Note 10 to
the audited consolidated financial statements. In the first six months
of 2006, we issued $5.5 billion in aggregate principal amount of
senior notes and debentures and utilized the net proceeds to repay a
portion of amounts borrowed under the term facility. See
‘‘— Private Placements of Senior Notes and
Debentures’’ below. The revolving facility was
entered into on December 8, 2005, and became effective on
December 31, 2005. The primary purpose of this facility is to
fund short-term liquidity needs and to support commercial paper
borrowings. The term facility was entered into on
December 8, 2005 and became effective on
December 29, 2005. As of June 30, 2006, we had
outstanding borrowings of $560 million under the term facility.
The net proceeds of any offering of long-term debt securities by us
must be used to prepay the term facility. To the extent the term
facility has been repaid, the borrowing capacity under the facility is
permanently extinguished. In connection with the DreamWorks
acquisition, we borrowed approximately $1.1 billion in the
aggregate under our revolving facility and under Tranche B of
our term facility. Borrowing rates under the Credit Facilities
are determined at our option at the time of each borrowing and are
based generally on the prime rate in the United States or the London
Interbank Offer Rate plus a margin based on our senior unsecured credit
rating. We also pay a facility fee based on the total amount of the
commitments under the revolving facility and a portion of the term
facility. At our option, we may borrow in certain foreign currencies up
to specified limits under the revolving facility. The Credit
Facilities contain covenants, which, among other things, require that
we maintain a minimum interest coverage ratio. At June
30, 2006, we were in compliance with all covenants under the
Credit Facilities.
Private Placements of Senior Notes and
Debentures
On April 12, 2006, we announced
the completion of a private placement of $4.75 billion in
aggregate principal amount of senior notes and debentures. The senior
notes due 2011 totaling $1.5 billion bear interest at
5.75% per annum. The senior notes due 2016, also totaling
$1.5 billion, bear interest at 6.25% per annum. The
senior debentures due 2036 totaling $1.75 billion bear interest
at 6.875% per annum. We utilized the net proceeds to repay a
portion of amounts borrowed under the term facility. We agreed to use
our reasonable best efforts to publicly register such securities
pursuant to a registration rights agreement. On June
16, 2006, we announced the completion of a private placement of
$750,000,000 in aggregate principal amount of senior floating rate
notes due 2009. The 2009 senior notes bear interest 49
at a rate per year equal to three-month
LIBOR plus 0.35%, to be reset quarterly. We utilized the net
proceeds to repay a portion of amounts borrowed under the term
facility. We agreed to use our reasonable best efforts to publicly
register such securities pursuant to a registration rights
agreement. The senior notes and debentures are our unsecured
senior obligations and rank equally with all of our existing and future
unsecured senior obligations. The senior notes and debentures are
structurally subordinated to all obligations of our subsidiaries,
including claims with respect to trade payables. We may redeem some or
all of the 2011 senior notes, the 2016 senior notes and the 2036 senior
debentures at any time and from time to time at their principal amount,
plus the applicable premium and accrued interest. Pursuant to the terms
of the indentures under which the senior notes and debentures were
issued, our ability to (i) consolidate, merge or sell all or
substantially all of our assets, (ii) create liens and (iii) enter into
sale and leaseback transactions, is limited, subject to a number of
important qualifications and exceptions as set forth in the
indentures. Financing obligations consist of the following at
June 30, 2006 and December 31,
2005: We
believe that our operating cash flows, cash and cash equivalents,
borrowing capacity under committed bank facilities and future access to
capital markets will be sufficient to fund our operating needs,
including commitments, contingencies, capital and investing
commitments, and our financing requirements. The funding for our
commitments to purchase programming rights, film operations, and talent
contracts will come primarily from cash flow from operations. We
project anticipated cash requirements, which include capital
expenditures, share purchases, acquisitions, and payments on our
indebtedness, principally to be financed from cash flows generated from
operating activities. Any future net cash funding requirements are
expected to be financed with short-term borrowings and long-term
debt. The Company anticipates that future debt maturities will be
funded with cash and cash equivalents, cash flows generated from
operating activities and future access to capital markets. There can be
no assurance that the Company will be able to access capital markets on
terms and conditions that will be acceptable to it. There are no
provisions in any of the Company’s material financing agreements
that would cause an acceleration of the obligation in the event of a
downgrade in the Company’s debt ratings. 50 As of December 31, 2005, our
significant contractual obligations, including payments due by period,
were as
follows: Off-Balance Sheet
Arrangements Our off-balance sheet arrangements primarily
consist of an accounts receivable securitization program and
guarantees.
Accounts Receivable Securitization
Program
As of June 30, 2006, we had a total
of $450.0 million outstanding under a revolving receivable
securitization program. The program resulted in the sale of receivables
on a non-recourse basis to unrelated third parties on a one-year
renewable basis, thereby reducing accounts receivable and debt on our
balance sheets. We enter into this arrangement because it provides a
cost-efficient form of financing and an additional source of liquidity.
The terms of the revolving securitization arrangement require that the
receivable pools subject to the program meet certain performance
ratios. We are in compliance with the required ratios under the
receivable securitization program for all periods
presented.
Guarantees
We follow the recognition
provisions of Financial Accounting Standards Board Interpretation
No. 45, ‘‘Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others,’’ which we refer to herein as
‘‘FIN 45,’’ for guarantees, including
indemnities, issued or modified after December 31, 2002. FIN 45
requires a guarantor to recognize, at the inception of a guarantee, a
liability for the fair value of an obligation assumed by issuing a
guarantee. FIN 45 also requires additional disclosures for certain
guarantees. The adoption of FIN 45 did not have a significant impact on
our financial position, results of operations or cash
flows. Under the terms of the DW Funding LLC sale agreement, more
fully described in Note 3 (Business Combinations and Dispositions) to
the unaudited interim consolidated financial statements, 51
for the six months ended June 30, 2006,
Soros Strategic Partners LP and Dune Entertainment II LLC, an affiliate
of Dune Capital Management LP, can require us to purchase and we can
require Soros and Dune to sell their respective interests via a call
obligation at the then-current value of DW Funding commencing nine
months prior to the fifth anniversary of the sale. To the extent the
current fair value at the option closing date is insufficient to repay
the related indebtedness of DW Funding, we would be required to repay
certain lenders all accrued and unpaid interest and principal amounts
outstanding. As of June 30, 2006, the maximum aggregate
principal amount that would be payable under such provisions of the
agreement is $102.8 million. Therefore, as of June
30, 2006, our maximum exposure to loss as a result of our
involvement with DW Funding is the $102.8 million previously
described as well as the $7.35 million we paid for our equity
investment. In connection with the separation, we agreed to
indemnify CBS Corporation with respect to obligations of Former Viacom
as guarantor on certain Blockbuster store leases. Blockbuster’s
obligations under these store leases aggregated approximately
$329.6 million at June 30, 2006. Certain leases
contain renewal options that can extend the primary lease term and
remain covered by the guarantees. Blockbuster’s indemnification
obligations are secured by a $150.0 million letter of credit. We
had established a liability of $53.2 million to reflect the fair
value of our indemnification obligation as reflected in the
accompanying Consolidated Balance Sheet at June 30, 2006.
Blockbuster has agreed to indemnify Former Viacom with respect to any
amount paid under these guarantees. In the third quarter of 2005,
Former Viacom sold Famous Players, an operator of movie theaters in
Canada. CBS Corporation may incur liabilities associated with Famous
Players theater leases. Famous Players obligations under these theater
leases aggregated approximately $1.07 billion at June
30, 2006. We agreed to indemnify CBS Corporation with respect to
any liability under these theater leases. We had established a
liability of approximately $200.6 million to reflect the fair
value of these indemnification obligations as reflected in the
accompanying Consolidated Balance Sheet at June 30,
2006. In the fourth quarter of 2004, Former Viacom sold
substantially all of its 50% equity interest in UCI, which
operates movie theaters in Europe, Latin America and Asia. In
connection with the separation, we agreed to indemnify CBS Corporation
with respect to the obligations of Former Viacom as guarantor on
certain UCI theater leases. These guarantees totaled approximately
$152.4 million at December 31, 2005 and are secured by
bank guarantees provided by the buyer. Former Viacom had guaranteed
UCI’s debt obligations under a revolving credit facility which
was repaid during the fourth quarter of 2004, and contributed
$29.1 million toward the repayment of UCI’s debt
obligation under the terms of this guarantee. We also own a
50% interest in WF Cinema Holdings, L.P. and a 35%
interest in Grauman’s Theaters LLC. Viacom has guaranteed
certain of these theater leases. These guarantees totaled approximately
$10.0 million at December 31, 2005 and
$13.3 million at December 31, 2004. The lease guarantees
would only be triggered upon non-payment by the respective primary
obligors. These guarantees are not recorded on the balance sheet as of
December 31, 2005 as they were provided by the Company prior to
the adoption of FIN 45. We agreed to indemnify CBS Corporation with
respect to any obligations of Viacom under these
guarantees. Additionally, we have indemnification obligations
with respect to letters of credit and surety bonds primarily used as
security against non-performance in the normal course of business. The
outstanding letters of credit and surety bonds approximated
$29.8 million at December 31, 2005 and
$24.8 million at December 31, 2004 and are not recorded
on the balance sheet as of December 31, 2005 and
December 31, 2004. Legal Matters In
July 2002, judgment was entered in favor of Former Viacom,
Blockbuster, Paramount Home Entertainment and other major motion
picture studios and their home video subsidiaries with respect to a
complaint filed in the United States District Court for the Western
District of Texas. The complaint included federal antitrust and
California state law claims. In August 2003, the U.S. Court of
Appeals for the Fifth Circuit affirmed the federal court judgment. The
U.S. Supreme Court refused 52
plaintiffs’ petition for writ of
certiorari in March 2004. In February 2003, a similar
complaint that had been filed in a Los Angeles County Superior Court
was also dismissed with prejudice. The plaintiffs appealed the
California state court dismissal, as well as a prior denial of class
certification. On November 22, 2005, the California Court of
Appeal affirmed the trial court’s dismissal of the antitrust and
conspiracy claims. The court reversed the dismissal of California
Unfair Practices Act and Unfair Competition Act claims and remanded
those claims to the trial court, except with regard to transactions
between Paramount and Blockbuster as to which the trial court dismissal
was affirmed. Blockbuster remains a defendant in the case with respect
to our transactions with studios other than Paramount. As the result of
the split-off of Blockbuster from Former Viacom in 2004, any judgment
in this matter adverse to Former Viacom, Blockbuster and/or Paramount
Home Entertainment may be allocated 33.33% to Blockbuster and
66.67% to Former Viacom. Pursuant to the Separation Agreement,
we have assumed and will indemnify CBS Corporation for Former
Viacom’s responsibility for losses in this matter. On
July 13, 2005, two identical shareholder derivative lawsuits
were filed against Former Viacom. The suits, consolidated as In re
Viacom Shareholders Derivative Litigation, relate to the
compensation of Sumner Redstone, Tom Freston and Leslie Moonves, each
of whom were executive officers of Former Viacom. Mr. Redstone
is currently our Executive Chairman of the Board and Founder and
Mr. Freston is our President and Chief Executive Officer.
Mr. Moonves is the President and Chief Executive Officer of CBS
Corporation. The plaintiffs claim that the compensation of these
officers was excessive and unwarranted and not entirely fair to Former
Viacom and its shareholders. Plaintiffs seek disgorgement of
compensation paid to the named officers in 2004, unspecified damages
from members of Former Viacom’s Board of Directors for alleged
breach of fiduciary duty, and other relief. In June 2006, the trial
level court denied Former Viacom’s motion to dismiss the case on
procedural and substantive grounds. Former Viacom intends to appeal
this decision. Under the Separation Agreement, liabilities arising from
and control of claims relating to the pre-separation compensation to
officers of Former Viacom are shared equally by Viacom and CBS
Corporation. In late 2005 and early 2006, Former Viacom
was named as a defendant in three lawsuits in the United States
District Court for the Northern District of Texas and one lawsuit in
the United States District Court for the Southern District of New York,
each relating to the 2004 split-off of Blockbuster from Former Viacom.
In August 2006, an additional lawsuit was filed in the Delaware Court
of Chancery. The lawsuits name as defendants various combinations of
NAI, Former Viacom, Blockbuster, and certain of their respective
present and former officers and directors, including some individuals
who are officers and directors of New Viacom. The Texas lawsuits are
purported class actions which allege violations of the federal
securities laws. The New York case is a purported class action which
alleges that the defendants breached fiduciary obligations to the
Blockbuster Investment Plan in violation of the Employee Retirement
Income Security Act by continuing to offer to plan participants
Blockbuster stock from and after November 2003 and by offering
to plan participants the opportunity to exchange their shares of Former
Viacom common stock for the shares of Blockbuster common stock that
were owned by Former Viacom in connection with the 2004 split-off
transaction. The Delaware case is a purported class action which
alleges that the directors of Former Viacom at the time of the
split-off breached certain fiduciary obligations to Viacom
shareholders. Plaintiffs in each of the lawsuits allege that the
defendants made untrue statements of material facts and concealed and
failed to disclose material facts with respect to Blockbuster’s
business prospects. The lawsuits seek damages in unspecified amounts
and other relief. In connection with the split-off, Blockbuster agreed
to indemnify Former Viacom and our employees, officers and directors
with respect to liabilities arising out of any material untrue
statements and omissions in those portions of the 2004 Prospectus-Offer
to Exchange relating to the split-off that were provided by
Blockbuster. In July 2006, Former Viacom and Blockbuster moved
to dismiss the New York case. The Texas cases have been consolidated
and the plaintiffs are expected to file a consolidated complaint.
Pursuant to the Separation Agreement we will indemnify CBS Corporation
for any losses arising from these lawsuits. We believe that the
plaintiffs’ positions in these litigations are without merit and
intend to vigorously defend ourselves in the litigations. Litigation is
inherently uncertain and always difficult to predict. However, based on
our understanding and evaluation of the relevant facts and
circumstances, 53
we believe that the above-described legal
matters and other litigation to which we are a party are not likely, in
the aggregate, to have a material adverse effect on our results of
operations, financial position or cash flows.
Recent
Accounting Pronouncements
In July 2006, FASB
Interpretation No. 48, Accounting for Uncertainty in Income
Taxes – An Interpretation of FASB Statement No. 109
(‘‘FIN 48’’), was released. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in
the Company's financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes. FIN 48 also
prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken
or expected to be taken in a tax return and provides guidance on
derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. The provisions of FIN 48
are to be applied to all tax positions upon initial adoption of this
standard. Only tax positions that meet the
more-likely-than-not-recognition threshold at the effective date may be
recognized or continue to be recognized upon adoption of FIN 48. The
cumulative effect of applying the provisions of FIN 48, if any, will be
reported as an adjustment to the opening balance of retained earnings.
FIN 48 will be effective for the Company beginning January 1, 2007. The
Company is evaluating the impact of adopting of FIN 48. In March
2006, Statement No. 156, Accounting for Servicing of Financial
Assets, an amendment of FASB Statement No. 140, (‘‘FAS
156’’) was released. FAS 156 amends Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, (‘‘FAS
140’’) to require that all separately recognized servicing
assets and liabilities in accordance with FAS 140 be initially measured
at fair value, if practicable. Furthermore, this standard permits, but
does not require, fair value measurement for separately recognized
servicing assets and liabilities in subsequent reporting periods. FAS
156 is also effective for the Company beginning January 1, 2007;
however, the standard is not expected to have any impact on the
Company's financial position, results of operation or cash
flows. In February 2006, Statement No. 155, Accounting
for Certain Hybrid Financial Instruments, (‘‘FAS
155’’) was released. FAS 155 is an amendment of Statement
No. 133, Accounting for Derivative Instruments and Hedging
Activities, and FAS 140. FAS 155 establishes, among other items,
the accounting for certain derivative instruments embedded within other
types of financial instruments; and, eliminates a restriction on the
passive derivative instruments that a qualifying special-purpose entity
may hold. Effective for the Company beginning January 1, 2007, FAS 155
is not expected to have any impact on the Company's financial
position, results of operations or cash flows. In the first
quarter of 2006, the Company adopted Statement No. 154, Accounting
for Changes and Error Corrections – a replacement of APB Opinion
No. 20 and FASB Statement No. 3, (‘‘FAS
154’’) which changed the requirements for the accounting
for and reporting of a voluntary change in accounting principle. The
Company also adopted Statement No. 151, Inventory Costs – an
amendment of ARB No. 43, Chapter 4’’ (‘‘FAS
151’’) which, among other changes, requires certain
abnormal expenditures to be recognized as expenses in the current
period versus capitalized as a component of inventory. The adoption of
FAS 154 did not impact the results presented and the impact on any
future periods will depend on the nature and significance of any future
accounting changes subject to the provisions of the statement. The
adoption of FAS 151 did not have any impact on the Company's
financial position, results of operations or cash
flows. Market Risk We are exposed to
market risk related to foreign currency exchange rates and interest
rates. We use or expect to use derivative financial instruments to
modify exposure to risks from fluctuations in foreign currency exchange
rates and interest rates. In accordance with our policy, we do not use
derivative instruments unless there is an underlying exposure and
therefore, we do not hold or enter into financial instruments for
speculative trading purposes. 54
Foreign Exchange
Risk
We conduct business in various countries
outside the United States, resulting in exposure to movements in
foreign exchange rates when translating from the foreign local currency
to the U.S. dollar. In order to hedge anticipated cash flows and
foreign currency balances in such currencies as the Euro, the British
Pound, the Japanese Yen, the Canadian Dollar and the Singapore Dollar,
foreign currency forward and option contracts are used. Additionally,
we designate forward contracts used to hedge future production costs as
cash flow hedges, and designate certain forward contracts as a hedge of
the foreign currency exposure of a net investment in a foreign
operation. The change in fair value of the non-designated contracts is
included in current period earnings as part of ‘‘Other
items, net.’’ We manage the use of foreign exchange
derivatives centrally. At December 31, 2005, the notional value
of all foreign exchange contracts was $109.1 million, of which
$33.6 million related to the hedging of future production costs.
The remaining $75.5 million represents hedges of underlying
foreign currency balances and expected foreign currency net cash flows.
At December 31, 2004, the notional value of all foreign exchange
contracts was $174.8 million, of which $74.6 million
related to the hedging of future production costs. The remaining
$100.2 million represents hedges of underlying foreign currency
balances and expected foreign currency net cash flows. At
December 31, 2003, the notional value of all foreign exchange
contracts of $79.5 million represented hedges of underlying
foreign currency balances and expected foreign currency net cash
flows.
Interest Rate Risk
Our interest
expense is exposed to movements in short-term rates. Swap agreements
may be used to modify this exposure. For the quarter ended March
31, 2006, we had entered into $2.35 billion notional
amount of variable to fixed interest rate swaps to hedge the
variability of cash flows attributable to changes in the benchmark
interest rate. In the second quarter of 2006, we terminated the swaps
resulting in cash proceeds to us of approximately $88.0 million.
As of December 31, 2005 and December 31, 2004, there were
no interest rate swaps outstanding. We have variable-rate debt that had
an outstanding balance of $5.4 billion as of December 31,
2005. Based on our variable-rate obligations outstanding at
December 31, 2005, a 1% increase or decrease in the level
of interest rates would, respectively, increase or decrease our annual
interest expense and related cash payments by approximately
$54.0 million. Such potential increases or decreases are based
on certain simplifying assumptions, including a constant level of
variable-rate debt for all maturities and an immediate,
across-the-board increase or decrease in the level of interest rates
with no other subsequent changes for the remainder of the period.
Conversely, since almost all of our cash balance of approximately
$361.1 million, as of December 31, 2005, was
invested in variable-rate interest earning assets, we would also earn
more (less) interest income due to such an increase (decrease) in
interest rates.
Credit Risk
We
continually monitor our positions with, and credit quality of, the
financial institutions which are counterparties to our financial
instruments. We are exposed to credit loss in the event of
nonperformance by the counterparties to the agreements. However, we do
not anticipate nonperformance by the
counterparties. 55 BUSINESS Separation
from the Former Viacom Inc. On December 31, 2005,
we became a stand-alone public entity by separating from Former Viacom.
Prior to the separation, we were a wholly-owned subsidiary of Former
Viacom. The separation was effected through a merger of Former Viacom
and one of its wholly-owned subsidiaries, pursuant to which Former
Viacom continued as the surviving entity and was renamed CBS
Corporation and we were renamed Viacom Inc. In connection with the
merger and the separation, each share of Former Viacom Class A common
stock was converted into the right to receive 0.5 of a share of Viacom
Class A common stock and 0.5 of a share of CBS Corporation Class A
common stock. Similarly, each share of Former Viacom Class B common
stock was converted into the right to receive 0.5 of a share of Viacom
Class B common stock and 0.5 of a share of CBS Corporation Class B
common stock. Holders of Viacom Class A and Class B common stock
received cash in lieu of fractional shares. In accordance with
the terms of the Separation Agreement between CBS Corporation and
Viacom, on December 29, 2005, we paid a preliminary
special dividend of $5.4 billion to CBS Corporation, subject to
certain adjustments. On March 14, 2006, CBS Corporation
provided an initial statement that the dividend should be increased by
a net amount of approximately $460 million. On April
28, 2006, we served CBS Corporation with a notice of
disagreement. Based on an assessment of the amount and underlying
components of the proposed additional dividend payment, we recorded a
net amount of $170.2 million at March 31, 2006,
which was paid to CBS Corporation on May 5, 2006. Under
the Separation Agreement, after an opportunity for the parties to
negotiate resolution of differences, any disputed amounts are subject
to arbitration. Any further adjustment to the special dividend will be
reflected as an adjustment to additional paid-in
capital. Overview We are a leading worldwide
multiplatform, pure play content company with operations in the
following segments:
Cable Networks: The
Cable Networks segment consists of the businesses of MTV Networks,
including MTV: Music Television®,
MTV2®, Nickelodeon®, Nick at
Nite®, Noggin®, The
N®, Nicktoons Network™, Turbo Nick™,
VH1®, TV Land®, Spike
TV®, CMT®: Country Music
Television™, Logo™, Comedy Central®,
Comedy Central’s MotherLoad™, MTV Desi™, MTV
Chi™, MTV Español®, mtvU™, mtvU
Uber™, MTV Hits™, MTV Jams™, TEMPO™, MTV
Overdrive™, MHD™, VH1 Classic™, VHUno™, VH1
Soul™, VH1 Country™, VH1’s Vspot™, Game
One™, VIVA™, TMF™, The Box™, Paramount
Comedy™, Neopets™, GameTrailers.com™ and
IFILM®; and the businesses of BET Networks, which
include BET® (Black Entertainment Television) and BET
J™; and other program services, including online programming
services such as websites, broadband channels and wireless
applications.
Entertainment: The
Entertainment segment includes Paramount Pictures®,
which produces and distributes feature motion pictures, Famous
Music®, which engages in the music publishing
business, and interests in 19 movie theaters. Our revenues from
the Cable Networks segment accounted for 64% of our consolidated
revenues for the six months ended June 30, 2006 and for
70% of our consolidated revenues for 2005. Our revenues from the
Entertainment segment accounted for 37% of our consolidated
revenues for the six months ended June 30, 2006 and for
31% of our consolidated revenues for 2005. Elimination of
intercompany revenues accounted for (1)% of our consolidated
revenues for the six months ended June 30, 2006 and for
(1)% of our consolidated revenues for 2005. Revenues from the
Cable Networks segment are generated primarily from advertising sales,
affiliate fees, home entertainment sales and licensing and
merchandising of branded products. Revenues from the Entertainment
segment are generated primarily from the licensing and sale of feature
film rights in various media and territories.
Recent
acquisitions and dispositions. On August 9,
2006, we agreed to acquire Atom Entertainment, Inc., a portfolio of
four online destinations for casual games, short films and
56
animation, for cash consideration of
approximately $200 million. The acquisition is subject to
customary closing conditions and is expected to close in the third
quarter. On June 1, 2006, we acquired an additional ten
percent interest in Nick UK for $8.9 million. Previously, Nick
UK was a fifty-fifty joint venture with BSkyB. With the additional
interest, we obtained control of Nick UK and began consolidating its
operations as of June 1, 2006. On May 9,
2006, we completed the acquisition of Xfire, Inc, a leading gaming and
social networking service, for initial cash consideration of
approximately $102 million. An additional $8 million is
expected to be paid out over four years based upon continued service of
the employees. On January 31, 2006, we completed our
acquisition of DreamWorks, a leading producer of live-action motion
pictures, television programming and home entertainment products, for
approximately $1.53 billion, net of cash acquired. We also entered into
exclusive seven-year agreements for worldwide distribution rights and
fulfillment services to films produced by DreamWorks Animation SKG,
Inc. Among the assets acquired with the purchase of DreamWorks was a
live-action film library consisting of 59 films released through
September 16, 2005. On May 5, 2006, we sold
a fifty-one percent controlling interest in the entity that owns the
library to Soros Strategic Partners LP and Dune Entertainment II LLC,
an affiliate of Dune Capital Management LP, for net proceeds of $675.3
million. We retained a minority interest in the entity that owns the
library. In connection with the sale of the live-action film library,
Soros entered into exclusive five-year agreements with Paramount
Pictures and its international affiliates for distribution and
fulfillment services of the live-action library by Paramount Pictures.
In the event that Soros and Dune continue to control the entity that
owns the film library after the fifth year, the distribution agreement
with Paramount Pictures will automatically renew. For additional
information about significant acquisitions and dispositions, see Note 3
to the unaudited interim consolidated financial statements for the six
months ended June 30, 2006. We compete with many different
entities and media in various markets worldwide. Our primary
competitors in the cable and entertainment businesses include Time
Warner Inc., News Corporation, The Walt Disney Company, NBC
Universal Inc., The E.W. Scripps Company and Discovery Holding
Company. We were organized as a Delaware corporation in 2005 and
our principal offices are located at 1515 Broadway, New York, New York
10036. Our telephone number is (212) 258-6000 and our website address
is www.viacom.com. Competitive Strengths We
believe we possess a number of strengths that enable us to compete
successfully:
One of the largest collections of cable
programming assets in the world, with leading global brands that are
attractive advertiser vehicles. We have one of the largest
collections of cable programming assets in the world. Our leading
program services reach 179 territories through more than 120 worldwide
cable networks presented in 28 different languages and reach over
480 million subscriber households worldwide. In the United
States, our leading networks program approximately 1,780 hours
per week and, according to Nielsen Media Research®,
reached approximately 150 million television viewers each week
in the period from February 2006 to June 2006. Many of
our brands, such as MTV, Nickelodeon and VH1, are known worldwide. MTV
is one of the most widely distributed television brands and is
regularly cited, most recently in 2006, as The World’s Most
Valuable Media Brand by Interbrand Corp., an international brand
consultancy. Nickelodeon, which as of June 2006 was available in
approximately 300 million television households worldwide as a
full channel or a branded program block, is the world’s most
widely distributed children’s television brand and has been the
top-rated cable network for children in the United States for the past
11 years. MTV Networks and BET Networks develop brands that
appeal to a wide range of targeted niche audiences, which also
represent demographics sought after by advertisers. In the United
States, MTV Networks and BET Networks delivered the most multichannel
viewers in the 12 to 34-year-old demographic during 2006, through July
31, 2006, according to Nielsen Media Research. MTV: Music Television
has been the top advertising-supported 24-hour basic cable network
among 12- to 24-year-olds for 37 consecutive quarters, and Nickelodeon
accounted for approximately 53% of all 57
viewing of advertising-supported
children’s television programming in the United States by
children ages two to eleven during the 2005-2006 broadcast season from
September 2005 through June 2006. Our broad distribution to
specialized audiences and our focus on forging strong connections with
our audiences make our networks an attractive vehicle for advertisers.
Our strong in-house research teams focus on identifying emerging
behaviors and trends among core audiences, which we believe is a key
competitive advantage. These factors, combined with our integrated
presence on a variety of digital and broadcast platforms, allow us to
provide an efficient and reliable vehicle for advertisers to reach
consumers.
A long-standing international presence with a
global footprint. We have a significant and growing presence
worldwide. Established advertising, distribution and programming
relationships in these markets, together with our infrastructure,
provide a strong platform for new channel launches and complementary
acquisitions. We have created over 120 worldwide cable networks that
are seen in 179 territories. Since January 2006, we have
launched more than seven channels and branded program blocks, including
MTV in Canada, MTV base Africa branded program blocks in Uganda, Nick
Jr2 in the United Kingdom, Nick at Nite branded program blocks in Latin
America, Nickelodeon in New Zealand and Nickelodeon branded program
blocks in Malaysia and the Philippines. Our global footprint also
allows us to incubate technical and programming expertise in emerging
markets where certain new media products have been deployed more
extensively than in the U.S. markets. For example, we have launched
programming applications for advanced mobile services in Japan and
Europe, which we believe better prepares us to offer these services as
the U.S. market develops.
A strong connection with audiences,
a proven ability to create global hits and a valuable entertainment
library. Our focus on understanding our audiences through
research enhances our ability to develop innovative and original
programming. Our programming is broadly diversified, with popular shows
and films that appeal to a variety of audiences, and with new shows and
interactive programming continually being developed and debuted
throughout the year. Our television programming includes popular shows
and enduring characters, including The Real World, SpongeBob
SquarePants, South Park, Dora the Explorer, The
Daily Show with Jon Stewart, Laguna Beach, Blue’s
Clues and Rugrats. Our programming also includes events,
such as the annual MTV Video Music Awards,
Nickelodeon’s Kids’ Choice Awards, VH1 Save the
Music, CMT Music Awards, MTV Movie Awards,
CMT’s Miss America Pageant, Spike TV Video Game
Awards, Comedy Central Roast and the BET Awards. We
have significant in-house creative capabilities and have helped launch
the careers of some of the entertainment industry’s leading
entertainers, directors and producers. We believe that our strong
creative track record, our willingness to experiment with new shows and
concepts, the strength and breadth of our distribution infrastructure,
our solid financial foundation and our well-known media brands help
attract and retain creative talent. Our motion picture library includes
rights to some of the best loved and most successful films, including
Titanic, The Godfather trilogy, the Indiana Jones
films, Forrest Gump and Braveheart. Following our sale of
most of the DreamWorks live-action library, we retain distribution
rights to these films for at least a five-year period, including
Gladiator, American Beauty, War of the Worlds and
Saving Private Ryan. As a result of our creative output in
television and in motion pictures, we have assembled a library with
significant future revenue potential. Our library consists of over
1,000 motion picture titles, approximately 18,000 hours of
television programming and varying rights for approximately 2,500
additional motion picture titles. Our library also contains titles that
have not yet been fully exploited in the DVD or other digital media
formats.
A secure distribution platform and a strong track
record of obtaining new carriage. Our cable programming
services are made available to consumers in the United States and
internationally through affiliation agreements with distributors that
generally are long-term, have staggered expiration dates and provide
for built-in rate increases and protected distribution. Eight of our
cable programming services are distributed in over 75 million
homes in the United States, and four of our other services currently
reach more than 35 million homes in the United States. The
majority of our networks are available on broadly distributed
programming tiers. We believe that our strong relationships with our
affiliates, the quality and popularity of our networks and our ability
to create 58
programming that is appealing to viewers have
enabled us to renew existing affiliation agreements, to obtain new
distribution for existing networks and to launch new
networks.
An established and growing multiplatform
presence. We program and operate over 100 websites,
including broadband sites, which collectively attracted over
30 million unique visitors in July of 2006, giving us the second
most-visited entertainment website portfolio on the Internet during
that period. We have a total of 24 broadband channels (seven in the
U.S. and 17 internationally) in live deployment. Our complete line-up
of broadband channels – including MTV Overdrive, mtvU’s
Uber, VH1's VSpot, Comedy Central’s Motherload, TurboNick,
CMT’s Loaded, Revolution in Latin America and MTV BoomBox in
Korea – is expected to stream more than 1 billion videos
by the end of 2006. We continue to launch integrated broadband channels
and content, online communities, wireless applications and
video-on-demand offerings across our properties in many countries
around the world. We are building wireless services for the majority of
our core brands and are partnering with carriers such as Virgin Mobile
USA, Verizon Wireless, Sprint, China Mobile, and DoCoMo in Japan to
deliver ringtones, text updates and video programming. On August 9,
2006, MTV Networks agreed to acquire Atom Entertainment, Inc., a
portfolio of several online destinations for casual games, short films
and animation. Also, in the second quarter of 2006, MTV Networks
acquired Xfire, a leading online gaming communication and community
platform. In the fourth quarter of 2005, MTV Networks acquired IFILM
and GameTrailers.com, each of which provides entertainment content via
websites. We also acquired Neopets, the owner and operator of
Neopets.com, a leading online destination and community for kids and
young adults. MTV Networks has various rights in various territories to
create and distribute content for mobile devices. For example, in
June 2005, we entered into a global licensing agreement with
Warner Music Group to create and distribute short form video
content for mobile devices. In May 2006, we unveiled a beta
version of MTV Networks’ new digital music service,
Urge™, which offers rich editorial, hand-crafted programming and
innovative tools to help consumers connect with their favorite artists
and discover new ones. Also, MTV Networks’ vast array of popular
music, comedy and kids programming from its MTV, MTV2, Comedy Central
and Nickelodeon brands is now available for download via Apple’s
iTunes Music Store and AOL’s new video service.
An
attractive financial profile. In the six months ended
June 30, 2006, we derived 37% of our revenues from
advertising, 34% from feature film, 19% from affiliate
fees, and 10% from ancillary revenues. In 2005, we derived
41% of our revenues from advertising, 30% from feature
film, 19% from affiliate fees, and 10% from ancillary
revenues. We have a large worldwide consumer products licensing
business. Basic cable programming services receive revenue from both
advertising and affiliate fees, which increases the predictability of
these revenues. Further, many of our services, particularly our cable
programming services, develop programming through in-house
capabilities, resulting in lower overall production costs.
An
experienced management team with a proven creative and financial track
record. Our operations are led by a financially-disciplined
management team that has the expertise and the vision to develop and
successfully exploit its programming and other content. Our senior
management and the senior management of our businesses consist of
leaders in the media and entertainment industry who have established
track records of success. Business Strategy Our mission
is to be the leading global, consumer-focused, branded entertainment
company, with the most respected, most successful and best-in-class
brands that live across television, motion pictures and digital media
platforms. Our success is linked to our operating principles, which set
us apart from other companies. First, we are focused on consumers: we
believe that if we can connect with our key consumers, then everything
else in our business will follow naturally. Second, we have a
brand-centric philosophy; in a fragmented media market, we believe that
strong brands are increasingly the most reliable navigation tools for
the consumer. We continuously evolve and revitalize our brands to
strengthen their audience connection and competitive position. Third,
we foster a creative culture and seek creative excellence. Our success
in developing original content, from MTV Networks to BET Networks to
Paramount Pictures, is a result of an institutional commitment to
creativity. Finally, we also bring a global perspective to everything
we do. We believe that we can deliver superior returns to 59
stockholders by capitalizing on these
strengths and deepening our relationships with advertisers,
distribution affiliates, creative talent and licensees. More
specifically, we plan to:
Enhance our position as a leading
global entertainment content company, with prominent and respected
brands in focused demographics. Our brand-centric,
multiplatform strategy and global footprint give us access to the
highest growth areas of the advertising sector. Not only do we have a
portfolio of brands that consumers demand, but we also have long-term
deals with distributors that include built-in annual rate increases. We
intend to continue investing in programming and new and existing brands
to serve and grow our audiences, and expand our distribution and
advertising revenue streams. In particular, we expect to target new
demographic and interest groups and continue the development of
existing services in order to retain and expand our audiences and the
value of our brands. These initiatives will also continue to benefit
from our core consumer research and creative
strengths.
Enlarge our established global
footprint. Our global footprint continues to expand. We were
the first media company to reach the 100 channel milestone when we
launched our first channel in Africa early in 2005. We believe our
established position as a multichannel network operator in many regions
of the world provides us with significant growth opportunities by
acquiring other networks, broadening our platforms, and growing our
consumer products business. We expect to use our knowledge and
experience in local markets around the world and our worldwide scale to
develop and acquire new programming services. We also expect to
strengthen our international position by building our own organizations
to distribute theatrical and television rights to motion pictures in
important foreign markets and by strengthening distribution of home
entertainment products internationally.
Expand our growing
multiplatform business and monetize the growth trend in digital
media. Our digital strategy mirrors our targeted demographic
approach to cable and allows us to offer deeper and more engaging
experiences around our areas of expertise and our target audiences. We
believe media fragmentation plays to our strengths, and our intent is
to take advantage of emerging technological and consumer trends by
extending our brands and distributing our content into new forms of
integrated digital distribution, such as broadband, wireless, online
community, video-on-demand, high-definition programming and other
businesses. We aim to achieve this through a combination of organic
growth, investment in our existing and complementary businesses,
strategic relationships, and focused acquisitions that fit with our
current brands and core competencies. We believe our connection with
our audiences, our marketing expertise and our ability to integrate new
digital offerings and experiences on multiple platforms will support
this expansion, which we expect to generate both increased revenue
growth and stronger connections with our existing viewers. Our key
television viewers are kids, teens and young adults, who are the early
adopters and the heavy users and drivers of new media growth, and that
is where we will continue to focus.
Successfully execute the
turnaround of Paramount Pictures. We believe we have a
significant opportunity to turn around Paramount Pictures and, with the
acquisition of DreamWorks, have begun taking significant steps to do
so. With a new management team in place at Paramount Pictures and key
talent at DreamWorks, we intend to pursue projects more closely aligned
with the tastes of target movie-going audiences and to take advantage
of our significant marketing and creative capabilities. Our movies will
benefit from the brand association demographics and marketing power of
our over 120 worldwide cable networks. In addition, these networks
provide access to up-and-coming talent as well as valuable consumer
knowledge. Paramount Pictures intends to release films not only under
the Paramount Pictures label and its specialty film arm (which is
comprised of Paramount Vantage and Paramount Classics) but also under
the DreamWorks label, and MTV, Nickelodeon and BET brands. We also plan
to strengthen and upgrade our worldwide home entertainment operations,
enhance our revenue opportunities by retaining a greater proportion of
international rights for theatrically released films and begin the
self-distribution of films theatrically in certain key international
markets.
Build on our reputation as a great place to
work. We have created and are committed to maintaining a
diverse culture that attracts the best people, embraces original ideas,
adapts quickly, promotes integrity, creativity and innovation, and
values fun. We believe this diverse and creative 60
culture will enable us to develop and to
market equally diverse, creative and valuable television, motion
picture and new media programming and will give us a significant
strategic advantage, in the United States and around the
world. Business Segments Our reportable business segments
are Cable Networks and Entertainment. Financial and other information
by segment is included in the Notes to the consolidated financial
statements.
Cable Networks (64% of our
combined revenues for the six months ended June 30, 2006
and 70% of our combined revenues for 2005) We own and
operate advertiser-supported basic cable television program services in
the United States and internationally. Our cable networks
generate revenues principally from two sources: the sale of advertising
time on our networks and the receipt of affiliate fees from cable
television operators, direct-to-home or
‘‘DTH’’ satellite operators and other
distributors. For the six months ended June 30, 2006,
revenues from advertising sales and affiliate fees were 58% and
30%, respectively, of total revenues for the Cable Networks
segment. In 2005, revenues from advertising sales and affiliate fees
were 60% and 27%, respectively, of total revenues for the
Cable Networks segment. Our cable networks also derive revenues from
home entertainment sales of our cable programming, the licensing of our
cable networks in international markets and the licensing of our brands
for consumer products. The sale of advertising time is affected by the
desirability of viewer demographics, viewer ratings and market
conditions for advertising time. Affiliate fees and licensing revenues
are related to the popularity of cable programming. Adverse changes to
any of these factors could have an adverse effect on revenues. See
‘‘— Cable Networks Competition’’
beginning on page 68. To sell advertising, we maintain both
domestic and international sales forces, which call on both clients and
their associated advertising agencies. To meet a broad range of client
needs, we maintain specific sales forces around key brands, such as MTV
and Nickelodeon. We also have the ability to package across brands and
platforms where client needs dictate this approach or when such a
strategy is beneficial to it, for example during the
‘‘upfront’’ selling season, during which
advertisers purchase advertising inventory prior to the start of the
broadcast television season. Our revenue from advertising is subject to
seasonal and market-based variations and typically increases in the
fourth quarter. Cable and DTH satellite distribution are
currently the predominant means of distributing our program services in
the United States. Internationally, distribution technology varies
region by region. We have historically negotiated affiliation
agreements generally with long terms and staggered expiration dates
with cable television operators and DTH satellite operators. These
agreements generally cover a number of networks which may be provided
by the cable operator or DTH satellite operator to consumers in various
channel positions and programming
‘‘tiers,’’ and may also include additional
platforms such as video-on-demand. These agreements are generally
renewed. Consolidation among cable and DTH satellite operators over the
past several years has meant that approximately 90% of the cable
and DTH households in the United States are now controlled by eight
distributors and approximately 43% of households are controlled
by the top two distributors. International markets are also
experiencing consolidation. Industry consolidation can make it more
difficult for us to negotiate favorable arrangements with our
distributors. We produce original programming using internal
production employees, freelance employees and external production
companies. We also acquire programming such as movies and television
series from television production companies and movie studios.
Production costs are generally variable and depend primarily on the
cost of on and off-screen talent, whether or not scripted, and whether
animated or live. We are an industry leader in developing
programming for our networks that target specific audiences. Cable and
DTH satellite operators seek to carry programming that appeals to
consumers they wish to attract to their businesses. We believe that our
track record and skill in researching and understanding our consumers
and developing niche, innovative cable networks, together with our
61
relationships with distributors, provides us
with an advantage in obtaining distribution for new services. For
example, in June 2005 we launched Logo, a gay and lesbian themed
network. In November 2005, we launched TEMPO, a new network
dedicated to Caribbean music and culture. On January 16, 2006,
MTV Networks launched MHD, a high-definition television channel
featuring multiple genres of music drawn from the MTV, VH1 and CMT
family of brands. In September 2006, we expect to launch MTV
Tr3s, a channel for today’s 12-34 year-old bicultural U.S.
Latinos. For 2005, according to information from the Nielsen
Media Research report covering the period between December 27,
2004 and December 25, 2005, our basic cable networks had the
following percentage shares in total television viewing: approximately
21% (for viewers ages 2-24), 17% (for viewers ages 2-34),
16% (for viewers ages 12-34) and 10% (for viewers ages
18-49).
MTV Networks
In the United States, MTV
Networks’ owned and operated program services, including MTV,
MTV2, Nickelodeon, Nick at Nite, Noggin, The N, Nicktoons Network,
Turbo Nick, VH1, TV Land, Spike TV, CMT: Country Music Television
(‘‘CMT’’), Comedy Central, Comedy
Central’s MotherLoad, MTV Desi, MTV Chi, MTV Español,
mtvU, mtvU Uber, MTV Hits, MTV Jams, MTV Overdrive, VH1 Classic, VHUno,
VH1 Soul, VH1 Country, VH1’s Vspot, Logo, Neopets, IFILM and
GameTrailers.com, among others. Subscriber numbers for MTV Networks are
typically based on Nielsen Media Research reports. MTV’s
programming consists primarily of youth-oriented programs, including
music videos, music-based programming, music and general lifestyle
information, reality-based programming, comedy and dramatic series,
animated programs, news specials, interviews and documentaries. Recent
programming highlights include the annual MTV Video Music
Awards, The Real World, My Super Sweet 16 and
Laguna Beach. At July 31, 2006, MTV reached
approximately 89 million domestic subscriber households. MTV2, a
spin-off of MTV, features music videos from a broad range of musical
genres and related programming. At July 31, 2006, MTV2
reached approximately 61 million domestic subscriber households.
On June 27, 2006, we launched MTV K to super-serve Korean
Americans living in the U.S. It is the third channel under the MTV
World™ umbrella. MTV Desi, for bi-cultural Americans with roots
in the Indian sub-continent, was launched on July 12,
2005, and MTV Chi for Chinese Americans, was launched on
December 6, 2005. MTV World™ consists of a package
of domestic program services, each including programming that is
originally produced and programming derived from MTV Networks’
international program services, and is designed to appeal to an
ethnic-targeted American youth audience. mtvU offers students on U.S.
college campuses a blend of music, news, sports and college-specific
programming. MTV Networks licenses music videos from record
companies for exhibition on MTV, MTV2, VH1, CMT and other MTV Networks
programming services, in exchange for cash and advertising time or for
promotional consideration. MTV Networks has entered into global music
video licensing agreements with certain major record companies and into
global or regional licensing agreements with certain independent record
companies. MTV Networks also licenses various other music rights from
record companies, music publishers, performing rights societies and
others. MTV Networks expects to continue or initiate additional global
or regional license agreements with these and other parties. VH1
presents music programming, including music videos, long-form
programming, live music events, reality-based programming,
documentaries and other pop culture and lifestyle programming. Recent
programming highlights include I Love the 80s and Celebrity
Fit Club. At July 31, 2006, VH1 reached approximately
90 million domestic subscriber households. CMT primarily
presents country music-related original programming, live concerts and
events, as well as country music videos. Recent programming highlights
include the 2006 Miss America Pageant and Trick My
Truck. At July 31, 2006, CMT reached approximately
82 million domestic subscriber
households. Nickelodeon’s programming consists primarily
of originally produced programs appealing to audiences ages two to
eleven, which includes Nick Jr., a program block designed for two to
five year olds, and popular shows such as Dora the Explorer,
Zoey 101, The Fairly Odd Parents and SpongeBob
SquarePants. Nick at Nite is telecast in the evening and nighttime
hours, appeals primarily to 62
audiences ages 18 to 49 and offers mostly
situation comedies from various eras and original programming. At
July 31, 2006, each of Nickelodeon and Nick at Nite
reached approximately 90 million domestic subscriber households.
Nickelodeon, the world’s leading multimedia entertainment brand
dedicated exclusively to kids, reaches a total of 205 million
households via 34 channels, plus a further 176 million
households via 22 branded program blocks, and can be seen in 22
languages across 171 territories throughout Africa, Asia, Europe, Latin
America, and the United States. The brand’s exposure is
increased through 32 websites, two broadband channels and six mobile
television channels, and its international program sales business
ensures that Nickelodeon programming airs on third-party broadcasters
in major territories around the world. Noggin is a commercial-free
educational channel designed for pre-schoolers, offering twelve hours
of educational classics such as Sesame Street and
Blue’s Clues along with new original series like
Oobi and Jack’s Big Music Show. The N, an
ad-supported programming block targeted to the teen audience, is
telecast during the evening and nighttime hours on Noggin and features
licensed teen classics such as Sabrina the Teenage Witch and
Moesha and original programming such as DeGrassi: The Next
Generation and South of Nowhere. Nicktoons Network, the
24-hour animation network owned by Nickelodeon, features a wide variety
of programming that have defined kids’ and animation
lovers’ television for more than 10 years. Targeting kids
6 to 14 years old, Nicktoons Network features programming that is
75% exclusive to the channel, including Martin Mystery,
My Dad the Rock Star, Corneil & Bernie,
Kaput & Zosky and Yakkity Yak, as well as
classic Nicktoons hits like Ren & Stimpy, Invader
Zim, Ahhh! Real Monsters, SpongeBob SquarePants and
The Fairly OddParents. In addition, Nicktoons Network is home to
award-winning short-form programming that helped redefine kids’
television. As of July 31, 2006, Nicktoons Network
reached approximately 39 million domestic subscriber
households. Comedy Central features comedy programming, including
The Daily Show with Jon Stewart, The Colbert Report, South Park
and Reno 911. At July 31, 2006, Comedy Central
reached approximately 89 million domestic subscriber households.
TV Land consists of a broad range of well-known television programs,
including comedies, dramas, westerns, variety and other formats from
the 1950s through today. At July 31, 2006, TV Land
reached approximately 87 million domestic subscriber households.
Spike TV is an entertainment network for men which features hit
original series, such as The Ultimate Fighter, acquired series,
such as CSI: Crime Scene Investigation, and movies such as
Die Another Day and Scarface. At July 31,
2006, Spike TV reached approximately 90 million domestic
subscriber households. In July 2005, we launched Logo, a gay and
lesbian themed network, which, based on reporting by distributors,
reached approximately 24 million subscribers as of July
31, 2006. MTV Films and Nickelodeon Movies produce and
acquire the rights to feature films, the majority of which were
released by Paramount Pictures. In many cases, Paramount Pictures
incurs the production and marketing costs of films it releases that are
produced by MTV Films or Nickelodeon Movies. MTV Films and Nickelodeon
Movies are entitled to receive fees and participations based on the
performance of these films.
International
Operations. Globally, MTV Networks owns and operates,
participates in as a joint venturer, and licenses third parties to
operate, over 130 MTV Networks program services, including MTV, VH1,
Nickelodeon, TV Land, Paramount Comedy, The Box, CMT, Game One, VIVA
and TMF, among others. These program services reach audiences in
Canada, Asia, Europe, Australia, Latin America, the Caribbean and
Africa. Most of the MTV Networks international program services are
regionally customized for the particular viewers through the inclusion
of local music, programming and on-air personalities, and use of the
local language. MTV Networks is Europe’s most widely distributed
cable and satellite network, comprising more than 68 individual music,
kids and comedy channels. As of March 2006, the leading MTV
Networks program services reached approximately 160.8 million
households and 197.5 million households in Europe and
Asia-Pacific, respectively, and approximately 126.8 million
households in the rest of the world (including the United States)
through a combination of DTH satellite operators, cable and terrestrial
distribution. We actively pursue the development or acquisition
of program services in international markets. During 2005 and the first
half of 2006, MTV Networks launched VH1 in Brazil, Poland and Russia;
launched Nickelodeon in France, Germany and New Zealand; launched MTV
base™, a pan-African music television channel; launched MTV in
Norway, Finland, Denmark, Sweden, Canada and the 63
Adriatic regions; launched digital channels
MTVIdol and MTVPulse in France, MTVFlux in Italy and Nick Jr2 in the
United Kingdom; and launched TEMPO, a Caribbean lifestyle television
channel.
BET Networks
BET Networks’ owned
and operated cable program services include BET and BET J (formerly BET
Jazz), and its digital services BET Gospel® and BET
Hip Hop®. BET targets the African-American viewing
audience by providing a broad mix of music, entertainment, sports,
religious, news and public affairs programming, consisting of both
original and acquired programs, including The BET Awards Show,
106 & Park: BET Top Ten Live and The BET Comedy
Awards. BET J, a U.S. network devoted primarily to jazz, R&B
and neo-soul music, includes programming that consists of a mixture of
in-studio performances, festivals, concerts, celebrity interviews and
documentaries such as Journey with Jazz at Lincoln
Center. As of July 31, 2006, according to
Nielsen Media Research, BET reached approximately 82 million
domestic subscriber households. BET J derives its revenue principally
from subscription fees generated by the license of its network to cable
television operators, DTH satellite operators and other distributors.
On March 1, 2006, DIRECTV launched BET J as part of its service.
This, when added to an additional launch by Charter Communications in
late 2005, gives BET J a distribution platform that reaches
approximately 21.5 million homes, based on reports from our
affiliates. BET Gospel features gospel music programming, gospel
artist performances and interviews, religious ministries, family
programming and programming fare designed to provide spiritual
fulfillment. BET Event Productions® produces
special musical events and festivals featuring various music genres.
Its services include event management, venue selection, talent
recruitment and sound, light and stage production, including supporting
the production needs of BET J. 64 The following table highlights many of
MTV Networks’ and BET’s channels in various
regions: 65
Websites and Digital
Services
We operate Internet sites, including numerous
music websites, around the world that target the current audiences of
our various television program services, as well as other online
audiences. These websites provide entertainment and information, serve
as an additional outlet for advertising sales and serve as a
promotional platform for programming and program services. For the
month of July 2006, our websites collectively attracted over
30 million unique visitors (inclusive of Neopets.com and
BET.com) according to comScore Media Metrix (a division of comScore
Networks Inc.), a leading online audience research measurement
service, giving us the second most-visited entertainment website
portfolio on the Internet during that period. These Internet sites
derive revenue from a combination of advertising and sponsorships,
subscription services and e-commerce, with 56% growth in
Internet advertising for 2005 when compared to the prior year. MTV
Networks currently obtains much of its website content from record
labels, music publishers and artists. We are rapidly extending
our brands to new platforms of distribution. Leading broadband
entertainment offerings based on our brands are a key focus of MTV
Networks, providing original, on-demand and personalized video
programming with content archives and cutting-edge functionality. For
example, we provide broadband-based interactive video experiences, with
products such as MTV Overdrive, mtvU Uber, Turbo Nick, VH1’s
Vspot and Comedy Central’s MotherLoad. In the wireless area, we
also provide a mix of digital applications, ringtones and video
programming to partners such as Virgin Mobile USA, Verizon Wireless and
Sprint in the United States and China Mobile and DoCoMo
internationally. MTV Networks has various rights in various territories
to create and distribute content for mobile devices. In
June 2005, we entered into a global licensing agreement with
Warner Music Group to create and distribute short form video
content for mobile devices. We have entered into worldwide and/or
U.S.-only agreements with all four of the major recorded music groups
for the online distribution of their music videos on a
free-to-the-viewer, on-demand basis. We have an arrangement with Apple
to make certain MTV, MTV2, Nickelodeon, Spike TV, TVLand, Logo and
Comedy Central programs available for purchase on Apple’s iTunes
Music Store. More than one million episodes of MTV Networks’
programming were downloaded in the first month of their availability on
iTunes. Overall, we have sold in excess of 3.5 million units (or
shows) via iTunes, across all of our groups, from music to kids and
entertainment to comedy. BET has an approximately 42%
interest in BET Interactive, LLC, a company which, through its website,
BET.com, offers users content and interactive features for news,
entertainment, community and other areas tailored to the unique
interests and issues of African-Americans. BET.com also provides
program schedules for BET and BET J, the latest music news, artist
information, music offerings and interactive entertainment for
BET’s programs. For the twelve-month period January 1,
2005 to December 31, 2005, BET.com attracted over
1.7 million U.S. monthly unique visitors, according to comScore
Media Metrix. Our experience in international local markets also
allows the introduction of new products for which markets are not yet
developed in the United States. For example, in June 2005, we
launched FLUX, a subscription-based service delivering entertainment
and music via mobile phones and online networks to consumers in Japan.
We also have 16 mobile television channels in Europe, including five in
the United Kingdom. In addition, we have over 24 broadband services
around the world. 66 The following table highlights certain of
our websites, broadband channels and other wireless
services:
WEBSITES
67
BROADBAND
CHANNELS
WIRELESS
SERVICES
MOBILE
CONTENT DISTRIBUTION
RELATIONSHIPS
Consumer
Products Licensing
We own a large worldwide consumer
products licensing business, licensing popular characters such as those
featured in Blue’s Clues, Dora the Explorer,
SpongeBob SquarePants and South Park and such famous
motion pictures as The Godfather trilogy and Forrest
Gump. We license our brands and characters for and in connection
with merchandise, videogames, and publishing worldwide. We generally
are paid a royalty based upon a percentage of the licensee’s
wholesale revenues, with an advance against future expected royalties.
We believe that licensing is lower risk and more profitable than
manufacturing, distributing or selling these products at retail.
Licensing revenue may vary from period to period depending on the
popularity of the intellectual property available for license in a
particular period and the popularity of licensed products among
consumers.
Cable Networks Competition
MTV
Networks. MTV Networks competes for advertising revenue with
other basic cable and broadcast television networks, radio, online and
print media. For basic cable television networks such as the MTV
Networks services, advertising revenues derived by each program service
depend on the number of households subscribing to the service through
local cable operators, DTH satellite operators and other distributors,
in addition to household and demographic viewership as determined by
research companies such as Nielsen Media Research and various
advertiser integrated marketing programs. MTV Networks’ strategy
is generally to differentiate its services to provide advertising
buyers with an efficient way to reach viewers in particular demographic
categories. MTV Networks’ services compete with other
producers of television programming for actors and actresses, writers,
producers and other creative talent and for new show ideas for its
original programming. MTV Networks’ services also compete with
other cable services and broadcast television for the acquisition of
popular programming. For example, television comedies and dramas that
have previously aired on broadcast networks or other cable networks
represent elements of the programming strategy for TV Land, Nick at
Nite, and Spike. In order to acquire these programs, MTV Networks
competes with other cable networks, including TBS, TNT, and USA
Network. MTV Networks’ services compete for carriage by
cable television operators, DTH satellite operators and other
distributors with other program services, as well as other uses of
bandwidth, such as retransmission of free over-the-air broadcast
networks, telephony and data transmission. A principal focus of
competition is for distribution of MTV Networks’ services that
are not already distributed within a particular cable or DTH system.
For such program services, distributors make decisions on the use of
bandwidth based on various considerations, including amounts paid by
68
programmers for launches, affiliate and
license fees payable by distributors and appeal to the
distributors’ subscribers. In addition, Nickelodeon competes
internationally with other television program services and blocks
targeted at children for distribution over-the-air or by cable, DTH and
other systems, and for distribution license fees and advertising
revenue. Certain major record companies that supply music content
to various MTV Networks program services also operate music-based
program services, including Viewsic, which is owned by Sony Music
Japan. The Universal Music Group launched a music channel in 2005 that
is carried on the EchoStar DTH platform. These music-based program
services, as well as general entertainment and other program services,
compete with MTV Networks’ program services for distribution by
cable, DTH and other systems, and for distribution license fees and
advertising revenues.
BET: Black Entertainment
Television. In addition to facing many of the same
competitive issues that MTV Networks faces with respect to creative
talent, acquiring popular programming and carriage by cable television
operators, DTH satellite operators and other distributors, as well as
other uses of bandwidth, BET generally faces competition for
advertising revenue from other African-American targeted media,
including other cable networks that target BET’s
African-American audience. Such competitors include TV One,
African-American-oriented radio stations, magazines such as Ebony,
Black Enterprise, Jet and Essence, and African-American-oriented
broadcast television as well as with other media,
generally.
Entertainment (37% of our
combined revenues for the six months ended June 30, 2006
and 31% of our consolidated revenues in 2005) The
Entertainment segment includes Paramount Pictures, which produces and
distributes feature motion pictures, Famous Music, which engages in the
music publishing business, and interests in 19 movie theaters.
Features
Paramount Pictures produces, finances and
distributes feature motion pictures. Each picture is a separate and
distinct product with its financial success dependent upon many
factors, among which cost and public response are of fundamental
importance. In general, motion pictures produced or acquired for
distribution by Paramount Pictures are exhibited in U.S. and foreign
theaters followed by their release on DVDs and videocassettes,
pay-per-view television, pay television, network television and basic
cable and syndicated television exploitation. In 2005, Paramount
Pictures theatrically released 12 motion pictures, including Coach
Carter and The Longest Yard, which were produced in
association with MTV Films, and War of the Worlds, a
co-production with DreamWorks, Four Brothers, Sahara and
Yours, Mine and Ours. In 2004, Paramount’s 16 motion
pictures included Lemony Snicket’s A Series Of Unfortunate
Events, Collateral, Mean Girls and The SpongeBob
SquarePants Movie, some of which were produced in association with
Nickelodeon Movies and MTV Films. Generally, Paramount Pictures incurs
the production and marketing costs of films produced by MTV Films or
Nickelodeon Movies and released by Paramount Pictures. In such cases,
MTV Films or Nickelodeon Movies receive producer fees and
participations based on the performance of these films. Paramount
Vantage, a division of Paramount Pictures, established to handle the
distribution of specialized film product, released five films in 2005,
including Hustle and Flow. On January 31,
2006, we completed our acquisition of DreamWorks, a leading producer of
live-action motion pictures, television programming and home
entertainment products, for approximately $1.53 billion, net of cash
acquired. We also entered into exclusive seven-year agreements for
worldwide distribution rights and fulfillment services to films
produced by DreamWorks Animation SKG, Inc. Among the assets acquired
with the purchase of DreamWorks was a live-action film library
consisting of 59 films released through September 16,
2005. On May 5, 2006, we sold a fifty-one percent
controlling interest in the entity that owns the library to Soros
Strategic Partners LP and Dune Entertainment II LLC, an affiliate of
Dune Capital Management LP, for net proceeds of $675.3 million. We
retained a minority interest in the entity that owns the library. In
connection with the sale of the live-action film library, Soros entered
into exclusive five-year agreements with Paramount Pictures and its
international affiliates for distribution and fulfillment 69
services of the live-action library by
Paramount Pictures. In the event that Soros and Dune continue to
control the entity that owns the film library after the fifth year, the
distribution agreement with Paramount Pictures will automatically
renew. Paramount Motion Picture Group expects to, in the
aggregate, release 14 to 16 films in 2006, including such released
motion pictures as Mission: Impossible III, Nacho Libre and
World Trade Center and such upcoming releases as Jackass
2, Last Kiss, Flags of Our Fathers, Flushed Away,
Charlotte’s Web and Dreamgirls. Release plans for
films may change due to a variety of factors. Our revenue from feature
films is subject to seasonal variations and typically increases in the
summer. Paramount Pictures has generally distributed its motion
pictures for theatrical release outside the United States and Canada
through United International Pictures
(‘‘UIP’’), a company that we and an
affiliate of Universal Studios, Inc. own. Pursuant to an
agreement, UIP will continue to distribute each studio’s films
through 2006. Commencing in January 2007, Paramount Pictures
will begin self-distribution in 15 key countries outside North America.
Paramount Pictures and Universal Studios, Inc. will each have
the option to continue a transitional distribution arrangement in these
territories for up to two years. The UIP joint venture will continue to
operate in certain other territories outside North America through
December 2011. Paramount Pictures distributes its motion
pictures on DVDs and videocassettes in the United States and Canada
through Paramount Home Entertainment™ and in the rest of the
world generally through Paramount Home Entertainment International.
Paramount Pictures’ feature films initially theatrically
released in the United States on or after January 1, 1998 have
been exhibited exclusively in U.S. premium subscription television on
Showtime Networks program services for certain windows. This
arrangement will continue for films theatrically released through
December 2007. Paramount Pictures also licenses its motion
pictures for premium subscription television outside the United States
through other pay services, for worldwide free and basic cable
television release, and for residential and hotel/motel pay-per-view,
airlines, schools and universities. License fees for exhibition on
broadcast and/or cable television are generally collected in
installments. License fees for television exhibition (including
international and U.S. premium television and basic cable television)
are recorded as revenue in the period that licensed films are available
for such exhibition, which, among other reasons, may cause substantial
fluctuation in Paramount Pictures’ operating results. Paramount
Pictures' library consists of more than 1,000 motion picture
titles and varying rights for additional motion picture titles.
Music Publishing
The publishing companies of Famous
Music LLC own, control and/or administer all or a portion of the
copyrights to tens of thousands of musical works such as songs, scores
and cues, ranging from standards popular for many decades, such as
Mona Lisa, Silver Bells and Moon River to
contemporary hits by artists such as Eminem and Shakira. These rights
are principally obtained in connection with motion pictures, television
programs and other properties produced by our divisions, as well as
from direct agreements between Famous Music and songwriters or their
companies. Famous Music derives revenue from licensing the musical
works it owns or controls either through direct licenses or licenses
issued by major representatives and sublicensees such as the Harry Fox
Agency, BMI, ASCAP, SESAC or foreign subpublishers. The musical works
can then be used for mechanical reproduction and digital copies such as
CDs, Internet downloads and ringtones, synchronization in television
programs, theatrical motion pictures, karaoke devices and videogames,
printed works, and public performances. In addition, Extreme Music and
Director’s Cuts, which are wholly-owned subsidiaries of Famous
Music, are engaged in the production music library business. Those
companies acquire music and recordings from composers, producers and
production companies that cover a wide variety of musical genres and
styles, but which do not involve popular songs. They then issue
licenses for use of the music and recordings in films, commercials,
television shows, promotional announcements and various other media at
rates lower than what would be charged for popular musical works. These
companies own the music copyrights and master recordings to thousands
of musical works. 70
Theatrical Exhibition
On
July 22, 2005, Former Viacom sold Famous Players, its
Canadian-based theater chain, for approximately $400 million. In
the fourth quarter of 2004, entities affiliated with Former Viacom and
Vivendi Universal sold their respective 50% equity interests in
United Cinema International Multiplex B.V.
(‘‘UCI’’). Following the sale, our
affiliates and affiliates of Vivendi Universal continued to each own a
50% interest in entities which operated approximately 10
theaters in Brazil. Following an auction, this business was sold to
National Amusements, Inc. (‘‘NAI’’)
in a transaction that closed in October 2005 and was approved by
the unanimous vote of our disinterested directors. We currently have
ownership interests in two entities which operate 113 screens in 18
theaters under the name Mann Theatres, which are located in
California. We also own Films Paramount, which operates one movie
theater in Paris, France.
Entertainment
Competition
Theatrical Motion Pictures. We
compete with other major studios such as Disney, Fox, Sony Pictures,
Universal and Warner Bros. and independent film producers in the
production and distribution of motion pictures, DVDs and
videocassettes. Paramount Pictures’ competitive position
primarily depends on the quality of the product produced, their
distribution and marketing success and public response. We also compete
to obtain creative talent and story properties which are essential to
our success.
Music Publishing. Famous Music
competes principally with the music publishing companies owned by other
major entertainment companies, such as EMI Music Publishing, The
Universal Music Group, Sony Music Publishing, BMG Music Publishing and
Warner Chappell Music. Famous Music’s competitive position
primarily depends on its ability to license the works it owns or
controls, its ability to continue to acquire important musical works
desired by licensees and its ability to maximize its collection of
royalty income generated by its works worldwide. Its subsidiaries,
Extreme Music and Director’s Cuts, compete with other major
production music libraries such as Killer Tracks, KPM Music and
Associated Production Music. Their competitive position primarily
depends on their ability to acquire, promote and license music and
master recordings desired by licensees. Regulation Our
businesses are either subject to or affected by regulations of U.S.
federal, state and local governmental authorities. The rules,
regulations, policies and procedures affecting these businesses are
constantly subject to change. The descriptions which follow are
summaries and should be read in conjunction with the texts of the
statutes, rules and regulations described herein. The descriptions do
not purport to describe all present and proposed statutes, rules and
regulations affecting our businesses.
Intellectual
Property
Laws affecting intellectual property are of
significant importance to us. See ‘‘— Intellectual
Property’’ beginning on
page 73.
Copyright Law and Content. In the
United States, under current law, the copyright term for authored works
is the life of the author plus 70 years. For
works-made-for-hire, the copyright term is the shorter of
95 years from first publication or 120 years from
creation.
Peer-to-Peer Piracy. Unauthorized
distribution of copyrighted material over the Internet such as through
so-called peer-to-peer services is a threat to copyright owners’
ability to protect and exploit their property. We are engaged in
enforcement and other activities to protect our intellectual property
and are an active participant in various industry-wide litigations,
education and public relations programs and legislative activity on a
worldwide basis. On June 27, 2005, the U.S. Supreme Court
reached a unanimous decision in MGM v. Grokster, holding that Grokster
could be held liable for copyright infringement by providing
peer-to-peer services that facilitated worldwide dissemination of
millions of infringing copies of motion pictures and music on the
Internet. The U.S. Supreme Court 71
overruled the U.S. Court of Appeals for the
Ninth Circuit’s grant of defendants’ motion for summary
judgment, and suggested that the lower court should consider granting
summary judgment for plaintiffs. The U.S. Supreme Court ruled that one
who distributes a device with the object of promoting its use to
infringe copyright, as shown by clear expression or other affirmative
steps taken to foster infringement, is liable for the resulting acts of
infringement by third parties. This ruling will be a significant tool
in our enforcement efforts. The Grokster suit itself has been settled
with respect to most of the defendants and the Grokster service has
been shut down.
Cable Networks
Online Music
Royalties. MTV Networks, on behalf of its websites, and BET
Interactive, on behalf of BET.com, currently obtain website content
from record labels, music publishers and artists. MTV Networks and BET
Interactive also obtain certain rights to some of their website
content, such as performance rights of song composers and
non-interactive rights to digital transmission of recordings, pursuant
to statutory compulsory licenses established by the Digital Millennium
Copyright Act, as amended. The royalties payable for such licenses are
established periodically by Copyright Arbitration Royalty
Panels.
A la Carte Programming. Some policymakers
maintain that cable operators should be required to offer programming
to subscribers on a network-by-network, or a la carte, basis or provide
‘‘family-friendly’’ program tiers. For
example, on February 9, 2006, the FCC’s Media Bureau
issued a report finding that ‘‘a la carte’’
programming would benefit consumers. Certain distributors have recently
launched ‘‘family-friendly’’ tiers to their
customers that may or may not include some or all of our networks. The
unbundling or tiering of program services could reduce distribution of
certain channels, thereby leading to reduced viewership and increased
marketing expenses, and could affect a cable network’s ability
to compete for or attract the same level of advertising dollars.
Children’s Programming. Federal legislation and
FCC rules limit the amount and content of commercial matter that may be
shown on cable channels during programming designed for children
12 years of age and younger. In November 2004, the FCC
issued new rules that classify promotions on a channel for programs
aired on that channel as commercial matter unless the programs being
promoted are educational and informational as defined under FCC rules,
and that limit the display during children’s programming of the
Internet addresses of websites that contain or link to commercial
material or that use characters from the program on which the website
address is displayed to sell products or services. If not modified by
the agency on reconsideration, the rules could have an adverse impact
on our children’s programming channels, including Nickelodeon,
because they would force a reduction of promotional or advertising time
during this programming and would limit our ability to promote our
program-related websites that contain commercial material. The FCC has
stayed implementation of these rules while it considers a joint
proposal for revisions to the November 2004 rules by
children’s advocacy groups and industry parties, including us.
Under the proposal, we would not be required to count program
promotions during our children’s programming toward the hourly
commercial limits unless they promote programming appearing on the same
channel that is not age-appropriate for children, or programming
appearing on another channel that is not children’s educational
and informational programming. In addition, under the proposal we would
retain greater latitude to display website addresses during
children’s programming. Pending the agency’s
reconsideration process, the industry parties, including us, have
agreed to abide by the rules recommended in the joint proposal. The
industry parties, again including us, have also agreed to voluntarily
dismiss litigation challenging the new rules, which is now being held
in abeyance by the court pending the agency’s reconsideration
process, if the agency adopts the joint proposal. In
October 2004, Former Viacom entered into a consent decree with
the FCC, which also binds us and our affiliates, to dismiss with
prejudice alleged violations of the commercial limits during
children’s programming on Nickelodeon. Under the consent decree,
Nickelodeon made a voluntary contribution to the U.S. Treasury in the
amount of $1 million and reduced commercial matter aired on
Nickelodeon by an amount equal to the excess commercial matter
Nickelodeon allegedly aired during the period of inquiry. The consent
decree also obligates Nickelodeon to provide training with respect
72
to the children’s television rules
and to implement other measures to reduce the risk of exceeding the
commercial limits. The consent decree will expire in
October 2006.
Indecency. Some policymakers
support the extension of indecency rules applicable to over-the-air
broadcasters to cover cable and satellite programming. If such an
extension took place and was not found to be unconstitutional, our
content could be subject to additional regulation and may not be able
to attract the audiences which make our programming attractive to
advertisers.
Program Access. Under the
Communications Act, vertically integrated cable programmers are
generally prohibited from offering different prices, terms or
conditions to competing multichannel video programming distributors
unless the differential is justified by certain permissible factors set
forth in the FCC’s regulations. The FCC’s
‘‘program access’’ rules also limit the
ability of a vertically integrated cable programmer to enter into
exclusive distribution arrangements with cable operators. A cable
programmer is considered to be vertically integrated if it owns or is
owned by a cable operator in whole or in part under the FCC’s
program access attribution rules. Cable operators for this purpose may
include telephone companies that provide video programming directly to
subscribers. Our wholly owned program services are not currently
subject to the program access rules. Our flexibility to negotiate the
most favorable terms available for our content and our ability to offer
cable operators exclusive programming could be adversely affected if we
were to become subject to the program access rules. Under the
terms of our Separation Agreement with CBS Corporation, we and CBS
Corporation generally agreed that prior to the earliest of
(1) the fourth anniversary of the separation, (2) the
date on which none of Mr. Redstone, NAI, NAIRI, Inc. or any of
their successors, assigns or transferees are deemed to have interests
in both CBS Corporation and Viacom that are attributable under
applicable U.S. federal laws and (3) the date on which the other
company ceases to own the video programming vendors that it owns as of
the separation, neither of them will own or acquire an interest in a
cable television operator if such ownership would subject the other
company to U.S. federal laws regulating contractual relationships
between video programming vendors and video programming distributors
that the other company is not then subject to. Intellectual
Property We create, own and distribute intellectual property
worldwide. It is our practice to protect our theatrical and television
product, characters, publications and other original and acquired
works, ancillary goods and services. The following logos, trade names,
trademarks and related trademark families are among those strongly
identified with the product lines they represent and are significant
assets of ours: Viacom®, BET, Comedy Central, CMT,
MTV, mtvU, Nickelodeon, Nick Jr.®, Nick at Nite, Noggin, The N,
Spike TV, TV Land, VH1, Paramount, Paramount Pictures, Famous Music,
Logo, TMF, VIVA, GameTrailers.com, IFILM, Neopets and other Internet
websites. As a result, domestic and foreign laws and enforcement
efforts protecting intellectual property rights are important to us,
and we actively enforce our intellectual property rights against
infringements. Properties Our world headquarters is
located at 1515 Broadway, New York, New York, where we rent
approximately 1.4 million square feet for executive offices and
certain of our operating divisions. The lease for the majority of the
space runs to 2010, with four renewal options for five years each
thereafter. We also occupy the following major facilities for certain
of our operating divisions: (a) approximately 310,000 square
feet of leased office space at 1633 Broadway, New York, New York,
through 2010, and (b) approximately 225,000 square feet of
office space at three facilities on 26th Street in Santa
Monica, California, under leases which expire between 2011 and
2016. Paramount Pictures owns the Paramount Pictures studio at
5555 Melrose Avenue, Los Angeles, California, located on approximately
62 acres. BET’s headquarters at BET Plaza in Washington, DC
contains approximately 228,000 square feet of office and studio space,
the majority of which is leased through 2013 and the balance of which
is owned. 73 We also own and lease office, studio and
warehouse space, broadcast, antenna and satellite transmission
facilities throughout the United States and several other countries
around the world for our businesses. We consider our properties
adequate for our present needs. Employees and Labor
Matters At July 31, 2006, we employed approximately 9,700
full-time salaried employees. Legal Proceedings In
July 2002, judgment was entered in favor of Former Viacom,
Blockbuster, Paramount Home Entertainment and other major motion
picture studios and their home video subsidiaries with respect to a
complaint filed in the United States District Court for the Western
District of Texas. The complaint included federal antitrust and
California state law claims. In August 2003, the U.S. Court of
Appeals for the Fifth Circuit affirmed the federal court judgment. The
U.S. Supreme Court refused plaintiffs’ petition for writ of
certiorari in March 2004. In February 2003, a similar
complaint that had been filed in a Los Angeles County Superior Court
was also dismissed with prejudice. The plaintiffs appealed the
California state court dismissal, as well as a prior denial of class
certification. On November 22, 2005, the California Court of
Appeal affirmed the trial court’s dismissal of the antitrust and
conspiracy claims. The court reversed the dismissal of California
Unfair Practices Act and Unfair Competition Act claims and remanded
those claims to the trial court, except with regard to transactions
between Paramount and Blockbuster as to which the trial court dismissal
was affirmed. Blockbuster remains a defendant in the case with respect
to its transactions with studios other than Paramount. As the result of
the split-off of Blockbuster from Former Viacom in 2004, any judgment
in this matter adverse to Former Viacom, Blockbuster and/or Paramount
Home Entertainment may be allocated 33.33% to Blockbuster and
66.67% to Former Viacom. Pursuant to the Separation Agreement,
we have assumed and will indemnify CBS Corporation for Former
Viacom’s responsibility for losses in this matter. On
July 13, 2005, two identical shareholder derivative lawsuits
were filed against Former Viacom. The suits, consolidated as In re
Viacom Shareholders Derivative Litigation, relate to the
compensation of Sumner Redstone, Tom Freston and Leslie Moonves, each
of whom were executive officers of Former Viacom. Mr. Redstone
is currently our Executive Chairman of the Board and Founder and
Mr. Freston is our President and Chief Executive Officer.
Mr. Moonves is the President and Chief Executive Officer of CBS
Corporation. The plaintiffs claim that the 2004 compensation of these
officers was excessive and unwarranted and not entirely fair to Former
Viacom and its shareholders. Plaintiffs seek disgorgement of
compensation paid to the named officers in 2004, unspecified damages
from members of Former Viacom’s Board of Directors for alleged
breach of fiduciary duty, and other relief. In June 2006, the trial
level court denied Former Viacom’s motion to dismiss the case on
procedural and substantive grounds. Former Viacom intends to appeal
this decision. Under the Separation Agreement, liabilities arising from
and control of claims relating to officers of Former Viacom are shared
equally by Viacom and CBS Corporation. In late 2005 and early
2006, Former Viacom was named as a defendant in three lawsuits in the
United States District Court for the Northern District of Texas and one
lawsuit in the United States District Court for the Southern District
of New York, each relating to the 2004 split-off of Blockbuster from
Former Viacom. In August 2006, an additional lawsuit was filed in the
Delaware Court of Chancery. The lawsuits name as defendants various
combinations of NAI, Former Viacom, Blockbuster and certain of their
respective present and former officers and directors, including some
individuals who are officers and directors of New Viacom. The Texas
lawsuits are purported class actions which allege violations of the
federal securities laws. The New York case is a purported class action
which alleges that the defendants breached fiduciary obligations to the
Blockbuster Investment Plan in violation of the Employee Retirement
Income Security Act by continuing to offer to plan participants
Blockbuster stock from and after November 2003 and by offering
to plan participants the opportunity to exchange their shares of Former
Viacom common stock for the shares of Blockbuster common stock that
were owned by Former Viacom in connection with the 2004 split-off
transaction. 74
The Delaware case is a purported class
action which alleges that the directors of Former Viacom at the time of
the split-off breached certain fiduciary obligations to Viacom
shareholders. Plaintiffs in each of the lawsuits allege that the
defendants made untrue statements of material facts and concealed and
failed to disclose material facts with respect to Blockbuster’s
business prospects. The lawsuits seek damages in unspecified amounts
and other relief. In connection with the split-off, Blockbuster agreed
to indemnify Former Viacom and our employees, officers and directors
with respect to liabilities arising out of any material untrue
statements and omissions in those portions of the 2004 Prospectus-Offer
to Exchange relating to the split-off that were provided by
Blockbuster. In July 2006, Former Viacom and Blockbuster moved
to dismiss the New York case. The Texas cases have been consolidated,
and the plaintiffs are expected to file a consolidated complaint.
Pursuant to the Separation Agreement, we will indemnify CBS Corporation
for any losses arising from these lawsuits. We believe that the
plaintiffs’ positions in these litigations are without merit and
intend to vigorously defend ourselves in the litigations. Litigation is
inherently uncertain and always difficult to predict. However, based on
our understanding and evaluation of the relevant facts and
circumstances, we believe that the above-described legal matters and
other litigation to which we are a party are not likely, in the
aggregate, to have a material adverse effect on our results of
operations, financial position or cash
flows. 75 MANAGEMENT Executive
Officers The following table sets forth the name, age and
position of each person who serves as an executive officer of our
company. Information about
each person who serves as an executive officer of our company is set
forth below. 76 77 78 Board of
Directors Our board of directors consists of 12 members, a
majority of whom are independent under the NYSE and other applicable
standards. Each director holds office, in accordance with our
certificate of incorporation and bylaws, until the next annual meeting
of stockholders and until his or her successor is duly elected and
qualified. The following table sets forth the name, age and
position of each person who serves as a director of our
company. Information about each person who
serves as a director of our company, but who is not also an executive
officer noted above, is set forth below. Information about Messrs.
Redstone and Freston is set forth above in the section entitled
‘‘Executive Officers.’’ 79 80 81 Director
Compensation Directors who are not employees of Viacom or any of
our subsidiaries (the ‘‘Outside
Directors’’) are entitled to receive compensation for
their service on the Board and are eligible to participate in certain
director plans, as described below. Messrs. Abrams, Dauman, Dooley,
Greenberg, Kraft, Phillips, Salerno and Schwartz and Ms. Futter
and Ms. Redstone are Outside Directors.
Cash
Compensation
Cash compensation for our Outside Directors is
as follows: Outside Directors may elect to defer their cash
compensation under the Viacom Inc. Deferred Compensation Plan for
Outside Directors. In addition, in 2005, Messrs. Dauman and
Salerno and Ms. Redstone were each paid $30,000 by Former Viacom
in connection with their service on the Former Viacom Special
Separation Committee formed to oversee matters relating to the
separation. 82
Equity
Compensation
Stock Options. Under the Viacom
Inc. 2006 Stock Option Plan for Outside Directors, which became
effective upon the separation, Outside Directors automatically receive
the following: The exercise price of the stock option grants is the
closing price of our Class B common stock on the NYSE on the date of
grant. The number of stock options granted to our Outside Directors as
set forth above reflects an adjustment in connection with the
separation to maintain the same value as Former Viacom’s grants
pre-separation. Former Viacom had an initial grant of 10,000 stock
options and an annual grant of 4,000 stock options.
Restricted
Share Units. Under the Viacom Inc. 2006 RSU Plan for Outside
Directors, which became effective upon the separation, Outside
Directors receive an annual grant of restricted share units
(‘‘RSUs’’) on January 31 of each
year equal to $55,000 in value based on the closing price of Class B
common stock on the NYSE on the date of grant, which RSUs vest one year
from the date of grant. RSUs are payable to Outside Directors in shares
of Class B common stock upon vesting unless the Outside Director elects
to defer settlement of the RSUs to a future date. Outside Directors are
entitled to receive dividend equivalents on the RSUs in the event we
pay a regular cash dividend on our Class B common
stock.
Recent Transactions in Equity
Securities. The holdings of our directors of Former Viacom
Class A and Class B common stock, stock options, RSUs and phantom units
were converted in the separation in accordance with the terms of the
Merger Agreement by which the separation was effected. In addition, on
January 3, 2006, Messrs. Dooley and Kraft and Ms.
Futter, our Outside Directors who did not serve on the Former Viacom
board immediately prior to the separation, received the initial grant
of options to purchase shares of Class B common stock described above.
On January 31, 2006, all Outside Directors received the
annual grant of options to purchase shares of Class B common stock and
RSUs as described above. For more information on the equity holdings of
our directors as of July 31, 2006, see
‘‘Security Ownership of Certain Beneficial Owners and
Management.’’
Deferred Compensation
Plan
Under the Viacom Inc. Deferred Compensation Plan for
Outside Directors (the ‘‘Director Deferred Compensation
Plan’’), which became effective upon the separation,
Outside Directors may elect to defer their Board and Committee
retainers and meeting fees for the upcoming calendar year. Deferred
amounts will be credited during a calendar quarter to an
interest-bearing income account or a stock unit account in accordance
with the director’s prior election. Amounts credited to an
income account will bear interest at the prime rate in effect at the
beginning of each calendar quarter. Amounts credited to a stock unit
account will be deemed invested in phantom units for an as equal as
possible number of shares of Class A common stock and Class B common
stock, calculated based on the closing market prices on the first day
of the next calendar quarter. Upon a director’s retirement
from the Board, the amounts deferred under the Director Deferred
Compensation Plan are paid in cash in a lump sum or in three or five
annual installments, based on the director’s prior election,
with the lump sum or initial annual installment becoming payable on the
later of six months after the director leaves the Board or on
January 15 of the following year. The value of a stock unit
account is determined by reference to the average of the closing market
prices of Class A common stock and Class B common stock on the NYSE on
each trading date during the 83
four-week period ending five business days
prior to the payment date. Amounts paid in installments accrue interest
until the final installment is paid. For more information on the
phantom units held by our directors as of July 31, 2006,
including those that converted from Former Viacom phantom units in the
separation, see footnote 1 to ‘‘Security Ownership of
Certain Beneficial Owners and
Management.’’
Director Attendance at Certain
Viacom Events
Because we believe it is in our best interest
for directors to participate in certain events and meet with
management, customers, talent and others important to our business, the
Board has established a policy on director attendance at events. Under
the policy, directors are allocated tickets without charge to attend
specific events that have been designated as having a business purpose.
In addition, travel expenses to such events are reimbursed by us in
accordance with our normal travel policies. The cost of tickets and
travel to any events other than the designated events will be at the
director’s expense. The Governance and Nominating Committee is
responsible for monitoring the implementation of this
policy. Executive Compensation
Summary Executive
Compensation Table
The following table sets forth
information on the total compensation in 2005 for our President and
Chief Executive Officer and four most highly compensated executive
officers (the ‘‘named executive
officers’’). These persons became our executive officers
effective at the time of the separation. All 2005 annual and other
compensation was paid, credited or deferred, as appropriate, by Former
Viacom, except for bonus amounts which were paid by us in 2006
following the separation. Liabilities with respect to deferred amounts
were transferred to us in connection with the separation, except that
liability for amounts owed to Mr. Redstone was split equally
between us and CBS Corporation. Equity compensation awards in 2005 were
made by Former Viacom and were converted to Viacom equity awards in the
separation pursuant to the terms of the Merger Agreement. The share
amounts presented below reflect this conversion. 84 85 86
Option Grants in Fiscal
2005
The following table sets forth certain information
with respect to option grants to purchase shares of Viacom Class B
common stock awarded during 2005 to our named executive officers and
reflects the conversion of the grants in the separation. The table
includes a column designated ‘‘Grant Date Present
Value.’’ The calculation in that column is based on
Former Viacom’s Black-Scholes option pricing model adapted for
use in valuing stock options at the time of
grant. The
approach used in developing the assumptions upon which the
Black-Scholes valuation is based is consistent with the requirements of
Statement of Financial Accounting Standards No. 123,
‘‘Accounting for Stock-Based
Compensation.’’ 87
Aggregated Option Exercises in
Fiscal 2005 and Value of Options at January 3,
2006
The following table sets forth information with
respect to option exercises of Former Viacom stock options during 2005
for the named executive officers, and the status of their options at
January 3, 2006, which reflects the conversion of their
options in the separation. The value of unexercised in-the-money
options as of January 3, 2006, the first day of trading
of our Class B common stock following the separation, is calculated by
subtracting the exercise price of the options from the opening price on
the New York Stock Exchange of $41.12 and multiplying that number by
the number of
options. On March 8,
2005, the compensation committee of Former Viacom approved the
acceleration of the vesting of unvested stock options having an
exercise price of $38 ($47.93 on a converted basis) or greater (other
than options under Former Viacom’s Fund the Future program)
granted from 1999 through May 19, 2004 under Former
Viacom’s 2000 Long-Term Management Incentive Plan that were held
by current employees on March 8, 2005, including our
named executive officers (other than Mr. Dolan, who was not an
employee of Former Viacom at that time). Also accelerated were a small
number of unvested stock options having an exercise price of $38
($47.93 on a converted basis) or greater granted under Former
Viacom’s 1997 Long-Term Management Incentive Plan. Stock option
awards granted from 1999 through May 19, 2004 with
respect to approximately 29 million shares of Former Viacom
Class B common stock, including options with respect to 2,371,250
shares of Former Viacom Class B common stock that were held by our
named executive officers, were subject to this acceleration which was
effective as of March 8, 2005. The compensation committee
of Former Viacom also imposed a holding period that required certain
Former Viacom executive officers who became our executive officers to
refrain from selling the shares acquired upon the exercise of these
options (other than shares needed to cover the exercise price and
satisfy withholding taxes) until the date on which the exercise would
have been permitted under the option’s original vesting terms
or, if earlier, the executive officer’s last day of
employment. Retirement Plans
The Viacom Pension
Plans. We have established a tax-qualified defined
benefit pension plan (the ‘‘Pension Plan’’)
for all eligible Viacom employees who satisfy age and service
requirements, including the named executive officers. The Pension Plan
assumed from the Former Viacom pension plan the liability for benefits
accrued through the date of the separation for our named executive
officers who participated in the Former Viacom pension plan, except for
Mr. Redstone for whom such liability will remain in the Former
Viacom pension plan. Assets allocable to those accrued benefits are
being transferred from the Former Viacom pension plan to the Pension
Plan based on applicable rules governing such
transfers. Participation in our Pension Plan begins on the later
of the first of the month coincident with or next following the date an
employee turns 21 and completes one year of eligibility service. An
eligible 88
employee will receive a retirement benefit
that is calculated using the plan formula and is based upon the
employee’s years of benefit service (up to a maximum of 30
years) and final average compensation (eligible salary, commissions and
bonus) for the highest 60 consecutive months out of the final 120
months of employment. Participants in the Pension Plan receive credit
for years of service credited under the Former Viacom pension plan.
Employees are fully vested in their accrued benefit upon completion of
five full years of service. Compensation for purposes of the
Pension Plan is limited by federal law to $220,000 for 2006. This
amount is adjusted each year in accordance with the Internal Revenue
Code (the ‘‘Code’’). We have established an
excess pension plan (the ‘‘Excess Pension
Plan’’) to provide benefits to participants in the
Pension Plan whose annual base salary and commissions exceed the annual
compensation limitation. We have assumed the liability for amounts
credited under the Former Viacom excess pension plan through the date
of the separation for our named executive officers who participated in
the Former Viacom excess pension plan, except for the liability for
Mr. Redstone that will remain a liability of Former
Viacom. The benefits under the Excess Pension Plan are calculated
using the Pension Plan formula and eligible compensation in excess of
the annual compensation limitation. The maximum amount of total annual
compensation that may be taken into account under the Pension Plan and
the Excess Pension Plan (together, the ‘‘Pension
Plans’’) is $750,000 or, for any employee who was a
participant in the Former Viacom excess pension plan as of
December 31, 1995, the employee’s base salary as
of December 31, 1995, if greater than $750,000. In the
case of Mr. Redstone, the maximum amount is limited to $375,000.
Mr. Freston’s base salary as of December
31, 1995 exceeded $750,000 but was less than $1 million
and his pension benefit will therefore be based on his base salary as
of that date. The following table illustrates, for representative
average annual compensation and years of benefit service
classifications, the annual retirement benefit payable to employees
under the Pension Plans upon retirement in 2006 at age 65, based on the
single life annuity form of benefit payment and not subject to
offset. Pension Plan
Table The
number of years of benefit service through July 31, 2006
credited for Messrs. Freston, Fricklas and Bakish are approximately 21
years, 12 years, and 8.5 years, respectively. Mr.
Redstone’s participation in the Pension Plans is deemed to have
commenced on January 1, 2006 for purposes of benefit
service. Mr. Redstone must receive certain minimum payments from
the Pension Plan beginning in 2007. Mr. Dolan’s
participation in the Pension Plans commenced on June 1,
2006 and he is credited with two months of benefit service through
July 31, 2006.
The Viacom 401(k)
Plans. We have established a tax-qualified defined
contribution 401(k) plan (the ‘‘401(k)
Plan’’) for all eligible employees, including the named
executive officers, who satisfy age requirements, and, for certain
categories of employees, service requirements. The full account
balances as of the separation date of our named executive officers
under the Former Viacom 401(k) plan have been transferred to the 401(k)
Plan, except for the account balance of Mr. Redstone that will
remain in the Former Viacom 401(k) Plan. Full-time employees who have
turned 21 will be eligible to participate in the 401(k) Plan
immediately upon their date of hire. Participants may defer between
1% and 15% of their eligible compensation on a before tax
or after tax basis. Our matching contribution is calculated using a
performance-based formula. Employees become vested in their matching
contribution account in the 401(k) Plan according to a schedule over a
five-year period. For purposes of vesting, participants receive credit
for years of service credited under the Former Viacom 401(k)
plan. 89 Compensation for purposes of the 401(k)
Plan is limited by federal law to $220,000 for 2006. This amount is
adjusted each year in accordance with the Code. We have established
excess 401(k) plans to provide benefits to employees who are
participants in the 401(k) Plan and whose annual base salary and
commissions exceed the annual compensation limitation. We maintain an
account in the name of each participant and that account is credited
with the amount of the participant’s deferral. Participant
accounts under the excess 401(k) plans are credited (or charged) with
earnings, gains or losses based on the investment performance of the
funds selected by the participant for amounts contributed to the 401(k)
Plan. We have assumed the liability for amounts credited under the
Former Viacom excess 401(k) plans through the date of the separation
for our named executive officers who participated in the Former Viacom
excess 401(k) plans, except for the liability for Mr. Redstone
that will remain in the Former Viacom excess 401(k) plans. All of our
executive officers are eligible to participate in the Viacom Excess
401(k) Plan for Designated Senior Executives. Matching
contributions made by us to the 401(k) Plan and credited under the
excess 401(k) plans together for any participant will not be made with
respect to eligible compensation in excess of $750,000 or, for any
employee who was a participant in the Former Viacom excess 401(k) plans
as of December 31, 1995, the sum of the employee’s
base salary plus bonus as of December 31, 1995, if
greater than $750,000. In the case of Mr. Redstone, the maximum
amount of compensation with respect to which matching contributions
will be made is limited to $375,000. In the case of Mr. Freston,
the maximum amount of compensation with respect to which matching
contributions will be made is limited to his base salary plus bonus as
of December 31, 1995, which exceeded $750,000. Mr.
Freston is not currently contributing to the excess 401(k)
plan.
The Bonus Deferral Plans. Our bonus
deferral plans are voluntary unfunded nonqualified deferred
compensation plans for the benefit of senior executives who are
designated as eligible to participate in the excess 401(k) plans (whose
annual base salary and commissions exceed the annual compensation limit
under the 401(k) Plan). Under the terms of the bonus deferral plans, a
participant may elect before the end of each year to defer a portion
(from 1% to 15%) of his or her cash bonus compensation
earned in respect of the next succeeding calendar year. We maintain an
account in the name of each participant, which account is credited with
the amount of the participant’s bonus deferral. Participant
accounts under the bonus deferral plans are credited (or charged) with
earnings, gains or losses based on the investment performance of the
funds selected by the participant for amounts contributed to the 401(k)
Plan. We have assumed the liability for amounts credited under the
Former Viacom bonus deferral plans through the date of the separation
for our named executive officers who participated in the Former Viacom
bonus deferral plans. All of our executive officers are eligible to
participate in the Viacom Bonus Deferral Plan for Designated Senior
Executives. Employment Agreements On December
29, 2005, we entered into a new employment agreement with Sumner
M. Redstone, pursuant to which Mr. Redstone serves as our
Executive Chairman and Founder effective as of the separation.
Mr. Redstone’s agreement provides that he will be
actively engaged in, and have responsibility, working with the Board
and our President and Chief Executive Officer, for (a) our
overall leadership and strategic direction; (b) providing guidance and
support to our senior management; (c) the coordination of the
activities of the Board; and (d) communication with stockholders and
other important constituencies. Under the Employment Agreement,
Mr. Redstone will receive an annual salary of $1.75
million; annual deferred compensation of $1.3 million; an annual
bonus for 2005, as jointly determined by the compensation committees of
Viacom and CBS Corporation and to be paid 50% by each company;
and an annual bonus for 2006 and thereafter to be paid in accordance
with our Senior Executive Short-Term Incentive Plan based on
performance objectives established by our compensation committee (with
the target bonus for 2006 and later years being 200% of the sum
of Mr. Redstone’s salary and deferred compensation). The
Employment Agreement also provides that Mr.
Redstone’s Former Viacom equity awards be
converted into corresponding Viacom and CBS Corporation awards in
accordance with the terms of the Merger Agreement by which the
separation was effected. The Employment Agreement generally permits
Mr. Redstone to participate in all arrangements for benefits,
business expenses and perquisites 90
available to our senior executives
(including life insurance, which in the case of Mr. Redstone is
in the amount of $2.5 million). The Employment Agreement has no
specific term and may be terminated at the will of either party upon
notice to the other. Pursuant to the terms of Mr.
Redstone’s employment agreement in place during 2005, he
received an award under the Former Viacom LTMIP of 115,000 RSUs in
2005. The RSUs vest upon certification by the Compensation Committee
that the one-year performance criteria established by the Compensation
Committee for the year in which the units were granted have been
achieved. The units are payable in shares of Class B common stock.
Mr. Redstone elected to defer the settlement of his 2005 grant
of RSUs. On July 1, 2004, Former Viacom entered
into an employment agreement with Mr. Freston with a five-year
term. On June 14, 2005, Former Viacom amended the terms
of Mr. Freston’s employment agreement by letter
agreement. As of the date of the separation, Mr.
Freston’s employment agreement was assigned to us and Mr.
Freston serves as our President and Chief Executive Officer. The
employment agreement provided that the assignment did not constitute
‘‘good reason’’ to terminate the agreement.
Pursuant to his employment agreement, Mr. Freston began to
receive a salary of $3 million per annum on July
1, 2004 and deferred compensation at a rate of $2 million
per annum that increases for subsequent calendar years by $300,000 on
each January 1, commencing January 1, 2005. In
addition, Mr. Freston is eligible to receive annual bonus
compensation with a target bonus set at 200% of the sum of his
salary and deferred compensation for such year. Mr. Freston is
entitled to be provided with $8 million of life insurance during
the employment term. Mr. Freston’s agreement provides for
him to receive awards under the Former Viacom LTMIP or our 2006 LTMIP,
as appropriate, of 115,000 RSUs per year (as such number was adjusted
in connection with the separation) during the first quarter of each of
2005, 2006, 2007 and 2008. The RSUs vest upon certification by the
Compensation Committee that the one-year performance criteria
established by the Compensation Committee for the year in which the
units were granted have been achieved. The units are payable in shares
of Class B common stock. Mr. Freston can elect to defer payment
of the RSUs prior to the year of grant for up to ten years for
in-service distributions and for up to three years for post-termination
distributions. On May 24, 2006, Mr. Freston received a grant of 90,141
RSUs. In addition, in connection with the separation, Mr.
Freston’s Former Viacom equity awards were
converted into corresponding Viacom awards in accordance with the terms
of the Merger Agreement. The employment agreement for Mr.
Freston contains restrictive covenants imposing non-competition
obligations, restricting solicitation of employees, protecting
confidential information and Former Viacom’s ownership of work
product and requiring cooperation in litigation, as well as other
covenants, during the executive’s employment and for specified
periods after the termination of employment. The employment agreement
for Mr. Freston provides that, in the event of the termination
of his employment by us without ‘‘cause’’
or his voluntary termination for ‘‘good
reason’’ (as these terms are defined in his employment
agreement) during the employment term, Mr. Freston will be
entitled to receive salary, deferred compensation and target bonus
compensation and certain benefits and perquisites for the balance of
the employment term (or, in the case of medical and dental coverage
under the Consolidated Omnibus Budget Reconciliation Act
(‘‘COBRA’’), for at least 18 months after
the date of termination), subject to mitigation after the first 36
months. Further, in such event, all unvested RSUs will vest and become
payable and all stock options granted on or after July 1,
2004 that are vested on the date of such termination of his employment,
or that would have vested and become exercisable by the end of the
employment term, will be exercisable for the following period after the
date of such termination (but not beyond the expiration date of the
stock options): (i) six months, if the termination occurs during the
first year of the term, (ii) one year, if the termination occurs during
the second year of the term, (iii) two years, if the termination occurs
during the third year of the term, and (iv) three years, if the
termination occurs during the fourth or fifth years of the
term. Mr. Fricklas’ employment agreement with
Former Viacom was amended in April 2005. Effective as of the
date of the separation, Mr. Fricklas’ employment
agreement with Former Viacom was assigned to us and Mr. Fricklas
serves as Executive Vice President, General Counsel and Secretary of
Viacom. The employment agreement provides that it shall not be
considered ‘‘good reason’’ or a
91
breach of Former Viacom’s obligations
under the employment agreement if Mr. Fricklas is assigned
duties directly comparable to those set forth in his employment
agreement, reports to our Chairman or the Chief Executive Officer
directly, holds a title no less than the title he held with Former
Viacom prior to the separation and our financial statements report no
less than 30% of the consolidated revenues and OIBDA of Former
Viacom for the year ended December 31, 2004.
‘‘OIBDA’’ refers to operating income before
depreciation and amortization. Mr. Fricklas’ agreement
provides that he will continue to be employed as our Executive Vice
President, General Counsel and Secretary through January
31, 2008, at a salary of $1.25 million per annum.
Mr. Fricklas’ annual target bonus was set at $1
million for calendar year 2005 and increased to 100% of the sum
of his salary and deferred compensation for 2006 and subsequent years.
Mr. Fricklas earned deferred compensation at an annual rate of
$100,000 through April 30, 2005 and then at an annual
rate of $175,000 for the balance of 2005. Beginning on January
1, 2006, Mr. Fricklas earned deferred compensation at an
annual rate of $250,000. Mr. Fricklas is also eligible to
receive annual grants of long-term compensation for 2006 and subsequent
years, as determined by the Compensation Committee based on a target
value of $3 million. On May 24, 2006, Mr. Fricklas received a
grant of 189,873 stock options and 24,470 RSUs. Under his employment
agreement, Mr. Fricklas is provided with $5 million of
life insurance in effect from January 1, 2006. Mr.
Fricklas’ employment agreement contains restrictive covenants
imposing non-competition obligations, restricting solicitation of
employees, protecting confidential information and our ownership of
work product and requiring cooperation in litigation, as well as other
covenants, during his employment and for specified periods after the
termination of employment. In the event of the termination of
Mr. Fricklas’ employment by us without
‘‘cause’’ or his voluntary termination for
‘‘good reason’’ (as these terms are defined
in his employment agreement) during the employment term, he will be
entitled to receive salary, deferred compensation and target bonus
compensation and certain benefits and perquisites for the balance of
the employment term, subject to mitigation after the first 12 months.
Further, in such event, stock options that would have vested during the
employment term will vest on the date of termination and, together with
outstanding options that vested prior to the date of termination, will
remain exercisable for the following period after the date of
termination (but not beyond the expiration of such stock options): one
year for options granted on or after January 29, 2003 and
six months for options granted before January 29, 2003.
Effective as of the date of the separation, the restrictive covenants
contained in Mr. Fricklas’ employment agreement will
apply to the benefit of both Viacom and CBS Corporation until one year
after the date of the separation and thereafter only to us. On
May 2, 2005, Former Viacom entered into an employment
agreement with Mr. Dolan with a four-year term. The employment
agreement provides that Mr. Dolan would be employed as Executive
Vice President of Former Viacom effective May 2, 2005 and
Chief Financial Officer of Former Viacom effective May
11, 2005, at a salary of $1.25 million per annum.
Effective as of the date of the separation, Mr. Dolan’s
employment agreement was assigned to us and Mr. Dolan serves as
our Chief Financial Officer. Mr. Dolan’s annual target
bonus is 100% of the sum of his salary and deferred
compensation. Mr. Dolan earns deferred compensation at an annual
rate of $250,000. The amount of Mr. Dolan’s salary and
deferred compensation will be subject to discretionary annual merit
reviews commencing May 2, 2006. Mr. Dolan is also
eligible to receive annual grants of long-term compensation for the
calendar years 2005 through 2008, as determined by the Compensation
Committee, based on a target value of $3 million. On May 24,
2006, Mr. Dolan received a grant of 189,873 stock options and 24,470
RSUs. Under his employment agreement, Mr. Dolan is provided with
$5 million of life insurance. Mr. Dolan’s
employment agreement contains restrictive covenants imposing
non-competition obligations, restricting solicitation of employees,
protecting confidential information and our ownership of work product
and requiring cooperation in litigation, as well as other covenants,
during his employment and for specified periods after the termination
of employment. In the event of the termination of Mr.
Dolan’s employment by us without
‘‘cause’’ or his voluntary termination for
‘‘good reason’’ (as these terms are defined
in his employment agreement) during the employment term, he will be
entitled to receive salary, deferred compensation and target bonus
compensation and certain benefits and perquisites for the balance of
the employment term, subject to mitigation after the first 12 months.
Further, in such event, stock options that would have vested during the
employment term will vest on the date of termination and, together with
92
outstanding options that vested prior to the
date of termination, will remain exercisable for one year after the
date of termination (but not beyond the expiration of such stock
options). On August 1, 2004, Former Viacom entered
into an employment agreement with Mr. Bakish for a three-year
term. Effective as of the date of the separation, Mr.
Bakish’s employment agreement with Former Viacom was assigned to
us and Mr. Bakish serves as Executive Vice President, Operations
and Viacom Enterprises. The employment agreement provides that
Mr. Bakish would be employed as Executive Vice President,
Operations, of the office of the co-President and co-Chief Operating
Officer of Former Viacom with responsibility for MTV Networks, at a
salary of $900,000 per annum subject to annual merit reviews.
Mr. Bakish’s annual target bonus is 100% of his
salary. Mr. Bakish is eligible to receive annual grants of
long-term compensation for 2006 and 2007, as determined by the
Compensation Committee, based on a target value of $3 million,
through a combination of RSUs and stock options, with at least
30% of the value of each annual long-term compensation award
derived from the grant of RSUs. On May 24, 2006, Mr. Bakish received a
grant of 189,873 stock options and 24,470 RSUs. Mr.
Bakish’s employment agreement contains restrictive covenants
imposing non-competition obligations, restricting solicitation of
employees, protecting confidential information and our ownership of
work product and requiring cooperation in litigation, as well as other
covenants, during his employment and for specified periods after the
termination of employment. In the event of the termination of
Mr. Bakish’s employment by us without
‘‘cause’’ or his voluntary termination for
‘‘good reason’’ (as these terms are defined
in his employment agreement) during the employment term, he will be
entitled to receive salary, target bonus compensation and certain
benefits and perquisites for the balance of the employment term,
subject to mitigation after the first 12 months. Further, in such
event, stock options that would have vested during the employment term
will vest on the date of termination and will remain exercisable for
the following periods after the date of termination (but not beyond the
expiration of such stock options); for options granted before
August 1, 2004, six months after the date of termination;
and for options granted on or after August 1, 2004, one
year if the termination occurs before August 1, 2006 and
two years if the termination occurs on or after August 1,
2007. In addition, in such event, all unvested RSUs that would have
vested during the employment term will vest and become payable on the
date of termination. Compensation Committee Interlocks and
Insider Participation Robert K. Kraft, Frederic V. Salerno and
William Schwartz serve on our Compensation Committee. None of such
persons has ever been an officer or employee of ours or any of our
subsidiaries. The members of Former Viacom’s Compensation
Committee during 2005 were Frederic V. Salerno, William Schwartz,
Robert D. Walter, and until May 2005, Jan Leschly. During 2005,
no Former Viacom executive officer served as a director or member of
the compensation committee of any other entity of which an executive
officer served on Former Viacom’s Board of Directors or
Compensation Committee. 93 CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS National Amusements
(‘‘NAI’’) licenses films in the ordinary
course of its business for its motion picture theaters from all major
studios, including Paramount Pictures, one of our business units.
Payments by NAI to Paramount Pictures for film licenses amounted to
approximately $14.6 million in 2005, and, during the six month
periods ended June 30, 2006 and 2005, such payments
amounted to approximately $1.8 million and $4.0 million,
respectively. NAI also licenses films from a number of unaffiliated
companies, and Paramount Pictures expects to continue to license films
to NAI on similar terms in the future. In addition, NAI and Paramount
Pictures have co-op advertising arrangements pursuant to which
Paramount Pictures paid NAI approximately $734,000 in 2005. Our
businesses also occasionally engage in transactions with NAI (e.g.,
movie ticket purchases and various promotional activities) from time to
time, none of which we believe have been or are expected to be
material, either individually or in the aggregate. We believe that the
terms of these transactions between NAI and Paramount Pictures and our
other businesses were no more or less favorable to Paramount Pictures
or our other businesses than transactions between unaffiliated
companies and NAI. On December 21, 2005, in
anticipation of the commencement of our $3.0 billion stock
purchase program in January 2006, we entered into an agreement
with NAI and NAIRI, Inc. (the ‘‘NAIRI
Agreement’’) under which we agreed to buy, and NAI and
NAIRI agreed to sell, a number of shares of our Class B common stock
each month such that the ownership percentage of our Class A common
stock and Class B common stock (considered as a single class) held by
NAI and/or NAIRI would not increase as a result of our purchases of
shares under our stock purchase program. The NAIRI Agreement became
effective at the time of the separation, and was approved by the Former
Viacom Board on December 8, 2005 and ratified by our
Board on January 26, 2006. Its terms are substantially
identical to the agreement between Former Viacom, NAI and NAIRI in
effect prior to the separation. From January 1, 2006 to
August 16, 2006, we purchased 5.2 million shares of our Class B
common stock from NAIRI for approximately
$206.1 million. In September 2005, Cinemas
International Corporation N.V., a joint venture between Former Viacom
and Vivendi Universal, agreed to sell its Brazilian movie operations to
NAI for approximately $27.5 million in a transaction that closed
in October 2005. The sale was discussed with multiple potential
purchasers, negotiated on an arm’s length basis, and approved by
disinterested directors (after receiving an opinion from an independent
financial advisory firm that the transaction was fair to Former Viacom
from a financial point of view). Mr. Redstone and NAI own
in the aggregate approximately 88% of the common stock of Midway
Games, Inc. (‘‘Midway’’) as of July 31,
2006. Midway places advertisements on several of our cable networks
from time to time. During 2005, Midway made payments to MTV Networks of
approximately $5.9 million and, during the six months ended
June 30, 2006 and 2005, Midway made payments to MTV
Networks of approximately $3.0 million and $2.4 million,
respectively. In addition, in 2004, Paramount Pictures, MTV Films and
Midway announced agreements pursuant to which Paramount Pictures and
MTV Films would acquire the film rights for certain Midway video games.
No amounts were paid with respect to these agreements in 2005. In
addition, Paramount is in development on a film based on a Midway game
title, the rights to which it acquired from a third party. Midway will
share in the gross receipts of the film if it is released. In
June 2005, MTV Networks and Midway entered into marketing and
licensing arrangements with respect to certain Midway game titles.
Under the arrangements, MTV Networks will provide certain licenses of
MTV Networks intellectual property to Midway and has the option to
provide marketing support for the game titles. If the option is
exercised, Midway has committed to purchasing advertising time from MTV
Networks, paying MTV Networks a royalty on sales of the game titles,
and allowing MTV Networks to sell certain advertisements within the
games. No amounts were paid in connection with these arrangements in
2005. We believe that the volume and terms of these transactions were
no more or less favorable to our respective businesses than they would
have obtained from unrelated parties. We may continue to enter into
similar business transactions with Midway in the
future. 94 Mr. George S.
Abrams, who is a Viacom director and is also a director of NAI, entered
into an agreement with Former Viacom in 1994 to provide legal and
governmental consulting services to Former Viacom. Former Viacom made
payments to Mr. Abrams for such services of $120,000 in 2005. We
assumed the agreement from Former Viacom in the
separation. Mr. Alan C. Greenberg is a
Viacom director and is chairman of the executive committee and a member
of the board of directors of Bear Stearns. Bear Stearns administers our
stock repurchase program and also acted as one of Viacom’s
financial advisors in connection with the separation. Bear Stearns is
expected to continue to perform certain broker services for Viacom and
may provide investment banking services from time to time. Travis
Griffith, the son of Ms. JoAnne Griffith, works in the
human resources department of MTV Networks in Chicago. His compensation
in 2005 was approximately $82,000. His compensation is comparable to
other MTV Networks employees at a similar level. Irwin Robinson,
the father of Ms. Carole Robinson, is Chairman and Chief
Executive Officer of Famous Music. Mr. Robinson’s
compensation is comparable to senior executives in similar positions at
Viacom. In November 1995, Former Viacom entered into an
agreement with Gabelli Asset Management Company
(‘‘GAMCO’’) pursuant to which GAMCO managed
certain assets in the Former Viacom pension plan. Former Viacom paid
GAMCO approximately $341,000 in 2005 for these investment management
services. According to a Schedule 13D filed on January
13, 2006 with the SEC by entities that are affiliated with
GAMCO, such entities own 4,851,223 shares of our Class A common stock,
or approximately 7.9% of the outstanding shares of that class.
GAMCO does not currently serve as an investment manager for our pension
plan.
Transactions with CBS Corporation.
Prior to the separation, we engaged in various intercompany
transactions with the businesses that are now part of CBS Corporation.
Following the separation, NAI, through NAIRI, continues to hold
approximately 11.5% of the outstanding equity and approximately
76.7% of the voting stock of Viacom and approximately
11.1% of the outstanding equity and approximately 74.4%
of the voting stock of CBS Corporation. The following discusses the
material agreements between CBS Corporation and us and/or our
respective subsidiaries. Through Paramount Pictures, we license
motion picture products to CBS Corporation. Paramount Pictures also
distributes certain television products on behalf of CBS television in
the home entertainment market. MTV Networks and BET recognize
advertising revenues for media spending placed by various subsidiaries
of CBS Corporation. In addition, we are also involved in transactions
with Simon & Schuster and Paramount Parks, which, in the case of
Simon & Schuster, is a wholly owned subsidiary of CBS Corporation
and, in the case of Paramount Parks, was a wholly owned subsidiary of
CBS Corporation until it was sold to Cedar Fair L.P. on June
30, 2006. Total revenues from these transactions were
$154.9 million in 2005 and $103.8 million and
$86.7 million for the six months ended June 30,
2006 and 2005, respectively. Through MTV Networks and BET, we
purchase television programming from CBS Corporation. In addition, we
place advertisements with various subsidiaries of CBS Corporation. The
total related party purchases were $173.6 million, of which
$78.8 million was for purchases of advertising, in 2005, and
$42.8 million, of which $34.8 million was for purchases
of advertising, and $75.5 million, of which $53.0 million
was for purchases of advertising, for the six months ended June
30, 2006 and 2005, respectively. Transactions with CBS
Corporation through the normal course of business are settled in cash.
As of June 30, 2006, CBS Corporation owed us approximately
$102 million, and we owed CBS Corporation approximately
$342 million in connection with our various
transactions.
Separation-Related Agreements with CBS
Corporation. In connection with the separation, we
entered into a Separation Agreement with CBS Corporation that
identified assets to be transferred, liabilities to be assumed and
obligations of each company following the separation, including
indemnification obligations for such liabilities. We also entered into
a Transition Services Agreement, 95
pursuant to which we and CBS Corporation
provide certain specified services to each other on an interim basis,
and a Tax Matters Agreement, which sets forth our responsibilities with
respect to, among other things, liabilities for federal, state, local
and foreign income taxes for periods prior to the separation and
indemnification for income taxes that would become due if the
separation were a taxable event. These agreements are described in more
detail in our Annual Report on Form 10-K for the year ended
December 31, 2005. In accordance with the terms of
the Separation Agreement, on December 29, 2005 we paid a
preliminary special dividend to Former Viacom of $5.4 billion,
which amount is subject to adjustments set forth in the agreement. On
March 14, 2006, we received from CBS Corporation an
initial statement that the dividend should be increased by a net amount
of approximately $460 million. On April 28, 2006,
we served CBS Corporation with a notice of disagreement. Based on an
assessment of the amount and underlying components of the proposed
additional dividend payment we recorded a net amount of $170.2
million at March 31, 2006 which was paid to CBS
Corporation on May 5, 2006. Under the Separation
Agreement, after an opportunity for the parties to negotiate resolution
of differences, any disputed amounts are subject to arbitration. Any
further adjustment to the special dividend will be reflected as an
adjustment to additional paid-in capital. 96 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT The table below sets forth as of
July 31, 2006, unless otherwise indicated, information
concerning the beneficial ownership of our Class A and Class B common
stock by (i) each current director, (ii) each named executive officer
and (iii) our current directors and executive officers as a group.
‘‘Option Shares’’ reflects options to
purchase shares which were unexercised but exercisable within a period
of 60 days and are excluded from the column ‘‘Number of
Equity Shares.’’ Each person has sole voting and
investment power over the shares reported, except as noted. Also set
forth below is information concerning the beneficial ownership by each
person, or group of affiliated persons, who is known by us to
beneficially own 5% or more of Class A common stock. As of
July 31, 2006, there were 61,073,449 shares of Class A
common stock outstanding and 648,387,493 shares of Class B common stock
outstanding. 97 98 THE EXCHANGE
OFFER Purpose and Effect of Exchange Offer; Registration
Rights We sold the unregistered 2009 senior notes to Deutsche
Bank Securities Inc., as representative of the initial purchasers, on
June 16, 2006. The initial purchasers then resold the
unregistered 2009 senior notes under an offering memorandum dated
June 13, 2006 in reliance on Rule 144A and Regulation S
under the Securities Act. We sold the unregistered 2011 senior notes,
the unregistered 2016 senior notes and the unregistered 2036 senior
debentures to Banc of America Securities LLC, Citigroup Global Markets
Inc. and J.P. Morgan Securities Inc., as representatives of the initial
purchasers, on April 12, 2006. The initial purchasers
then resold the unregistered 2011 senior notes, the unregistered 2016
senior notes and the unregistered 2036 senior debentures under an
offering memorandum dated April 5, 2006 in reliance on
Rule 144A and Regulation S under the Securities Act. On April
12, 2006, we entered into a registration rights agreement with
the initial purchasers of the unregistered 2011 senior notes, the
unregistered 2016 senior notes and unregistered 2036 senior debentures
and on June 16, 2006, we entered into a registration
rights agreement with the initial purchasers of the unregistered 2009
senior notes. Under the registration rights agreements, we agreed to
use our reasonable best efforts to cause an exchange offer to be
consummated within 300 days of June 16, 2006 (in the case
of the unregistered 2009 senior notes) and within 300 days of
April 12, 2006 (in the case of the unregistered 2011
senior notes, the unregistered 2016 senior notes and the unregistered
2036 senior debentures). If you participate in the exchange
offer, you will, with limited exceptions, receive exchange senior notes
and debentures that are freely tradable and not subject to restrictions
on transfer. You should read the information in this prospectus under
the heading ‘‘— Resales of Exchange Senior Notes
and Debentures’’ for more information relating to your
ability to transfer exchange senior notes and debentures. The
exchange offer is not being made to, nor will we accept tenders for
exchange from, holders of unregistered senior notes and debentures in
any jurisdiction in which the exchange offer or the acceptance of the
exchange offer would not be in compliance with the securities laws or
blue sky laws of such jurisdiction. If you are eligible to
participate in this exchange offer and you do not tender your
unregistered senior notes and debentures as described in this
prospectus, you will not have any further registration rights. In that
case, your unregistered senior notes and debentures will continue to be
subject to restrictions on transfer under the Securities
Act. Shelf Registration In the registration rights
agreements, we agreed to file a shelf registration statement only
if: 99 If a shelf registration statement is
required, we will: During any
365-day period, we will have the ability to suspend the availability of
the shelf registration statement for up to 4 periods of up to 45
consecutive days (except for the consecutive 45-day period immediately
prior to the respective maturities of the senior notes and debentures),
but no more than an aggregate of 90 days during any 365-day period, if
our board of directors determines in good faith that there is a valid
purpose for the suspension. The shelf registration statement will
permit only certain holders to resell their unregistered senior notes
and debentures from time to time. In particular, such holders
must: If we are required to
file a shelf registration statement, we will provide to each holder of
unregistered senior notes and debentures that are covered by the shelf
registration statement copies of the prospectus that is a part of the
shelf registration statement and notify each such holder when the shelf
registration statement becomes effective. A holder who sells
unregistered senior notes and debentures pursuant to the shelf
registration statement will be required to be named as a selling
securityholder in the prospectus and to deliver a copy of the
prospectus to purchasers. Such holder will be subject to certain of the
civil liability provisions under the Securities Act in connection with
such sales, and will be bound by the provisions of the registration
rights agreements which are applicable to such a holder (including the
applicable indemnification obligations). Additional
Interest If a registration default (as defined below) occurs, we
will be required to pay additional interest to each holder of
unregistered senior notes and debentures. During the first 90-day
period that a registration default occurs, we will pay additional
interest equal to 0.25% per annum. At the beginning of the
second and any subsequent 90-day period that a registration default is
continuing, the amount of additional interest will increase by an
additional 0.25% per annum until all registration defaults have
been cured. However, in no event will the rate of additional interest
exceed 0.50% per annum for each series of the unregistered
senior notes and debentures. Such additional interest will accrue only
for those days that a registration default occurs and is continuing.
All accrued additional interest will be paid to the holders of the
unregistered senior notes and debentures in the same manner as interest
payments on the unregistered senior notes and debentures are made, with
payments being made on the interest payment dates for the unregistered
senior notes and debentures. Following the cure of all registration
defaults, no more additional interest will accrue. You will not be
entitled to receive any additional interest if you were, at any time
while the exchange offer was pending, eligible to exchange, and did not
validly tender your unregistered senior notes and debentures for
exchange senior notes and debentures in the exchange
offer. 100 A ‘‘registration
default’’ includes any of the
following: The exchange offer is intended to
satisfy our exchange offer obligations under the registration rights
agreements. The above summary of the registration rights agreements is
not complete and is subject to, and qualified by reference to, all the
provisions of the registration rights agreements. Copies of the
registration rights agreements are filed as exhibits to the
registration statement that includes this prospectus. Terms of
the Exchange Offer Upon the terms and subject to the conditions
set forth in this prospectus and in the accompanying letter of
transmittal, we are offering to exchange $1,000 principal amount of
exchange senior notes and debentures for each $1,000 principal amount
of unregistered senior notes and debentures. You may tender some or all
of your unregistered senior notes and debentures only in minimum
denominations of $2,000 or in integral multiples of $1,000 in excess
thereof. As of the date of this prospectus, $750 million
aggregate principal amount of the unregistered 2009 senior notes are
outstanding, $1.5 billion aggregate principal amount of the
unregistered 2011 senior notes are outstanding, $1.5 billion
aggregate principal amount of the unregistered 2016 senior notes are
outstanding and $1.75 billion aggregate principal amount of the
unregistered 2036 senior debentures are outstanding. The terms of
the exchange senior notes and debentures to be issued are substantially
similar to the unregistered senior notes and debentures, except that
the exchange senior notes and debentures will have been registered
under the Securities Act and, therefore, the certificates for the
exchange senior notes and debentures will not bear legends restricting
their transfer. The exchange senior notes and debentures will be issued
under and be entitled to the benefits of the base indenture, dated as
of April 12, 2006, among us and The Bank of New York, as
Trustee. The indenture was supplemented, in connection with the
issuance of the unregistered 2011 senior notes, the unregistered 2016
senior notes and the unregistered 2036 senior debentures, by the first
supplemental indenture, dated as of April 12, 2006, and
was supplemented, in connection with the issuance of the unregistered
2009 senior notes, by the second supplemental indenture, dated as of
June 16, 2006. We refer to the indenture, as so
supplemented, as the
‘‘Indenture.’’ In connection with the
issuance of the unregistered senior notes and debentures, we arranged
for the unregistered senior notes and debentures to be issued and
transferable in book-entry form through the facilities of Euroclear,
Clearstream Luxembourg and DTC, acting as a depositary. The exchange
senior notes and debentures will also be issuable and transferable in
book-entry form through Euroclear, Clearstream Luxembourg and
DTC. There will be no fixed record date for determining the
eligible holders of the unregistered senior notes and debentures that
are entitled to participate in the exchange offer. We will be deemed to
have accepted for exchange validly tendered unregistered senior notes
and debentures when and if we have given oral (promptly confirmed in
writing) or written notice of acceptance to the exchange agent. The
exchange agent will act as agent for the tendering holders of
unregistered senior notes and debentures for the purpose of receiving
exchange senior notes and debentures from us and delivering them to
such holders. If any tendered unregistered senior notes and
debentures are not accepted for exchange because of an invalid tender
or the occurrence of certain other events described herein,
certificates for any 101
such unaccepted unregistered senior notes
and debentures will be returned, without expenses, to the tendering
holder thereof as promptly as practicable after the expiration of the
exchange offer. Holders of unregistered senior notes and
debentures who tender in the exchange offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the
letter of transmittal, transfer taxes with respect to the exchange of
unregistered senior notes and debentures for exchange senior notes and
debentures pursuant to the exchange offer. We will pay all charges and
expenses, other than certain applicable taxes, in connection with the
exchange offer. It is important that you read the section
‘‘— Fees and Expenses’’ below for
more details regarding fees and expenses incurred in the exchange
offer. If we successfully complete this exchange offer, any
unregistered senior notes and debentures which holders do not tender or
which we do not accept in the exchange offer will remain outstanding
and will continue to be subject to restrictions on transfer. The
unregistered senior notes and debentures will continue to accrue
interest, but, in general, the holders of unregistered senior notes and
debentures after the exchange offer will not have further rights under
the registration rights agreements, and we will not have any further
obligation to register the unregistered senior notes and debentures
under the Securities Act. In that case, holders wishing to transfer
unregistered senior notes and debentures would have to rely on
exemptions from the registration requirements of the Securities
Act. Conditions of the Exchange Offer You must tender
your unregistered senior notes and debentures in accordance with the
requirements of this prospectus and the letter of transmittal in order
to participate in the exchange offer. Notwithstanding any other
provision of the exchange offer, or any extension of the exchange
offer, we will not be required to accept for exchange any unregistered
senior notes and debentures, and may amend or terminate the exchange
offer if:
Expiration Date;
Extensions; Amendment; Termination
The exchange offer will
expire 5:00 p.m., New York City time, on ,
2006, unless, in our sole discretion, we extend it. In the case of any
extension, we will notify the exchange agent orally (promptly confirmed
in writing) or in writing of any extension. We will also notify the
registered holders of unregistered senior notes and debentures of the
extension no later than 9:00 a.m., New York City time, on the business
day after the previously scheduled expiration of the exchange
offer. To the extent we are legally permitted to do so, we
expressly reserve the right, in our sole discretion,
to: We will give oral or written notice of any
non-acceptance or amendment to the registered holders of the
unregistered senior notes and debentures as promptly as practicable. If
we consider an amendment to the exchange offer to be material, we will
promptly inform the registered holders of unregistered senior notes and
debentures of such amendment in a reasonable manner. 102 If we determine in our sole discretion
that any of the events or conditions described in
‘‘— Conditions of the Exchange
Offer’’ has occurred, we may terminate the exchange
offer. If we decide to terminate the exchange offer, we
may: If any such waiver constitutes a material change in
the exchange offer, we will disclose the change by means of a
supplement to this prospectus that will be distributed to each
registered holder of unregistered senior notes and debentures, and we
will extend the exchange offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders of the unregistered senior notes
and debentures, if the exchange offer would otherwise expire during
that period. Any determination by us concerning the events
described above will be final and binding upon the parties. Without
limiting the manner by which we may choose to make public announcements
of any extension, delay in acceptance, amendment or termination of the
exchange offer, we will have no obligation to publish, advertise, or
otherwise communicate any public announcement, other than by making a
timely release to a financial news service. Interest on the
Exchange Senior Notes and Debentures The exchange senior notes
and debentures will accrue interest from the date interest was last
paid on the unregistered senior notes and debentures. If no interest
was paid on your unregistered senior notes and debentures, your
exchange senior notes and debentures will accrue interest from and
including June 16, 2006, in the case of the exchange 2009
senior notes, or from and including April 12, 2006, in
the case of the exchange 2011 senior notes, the exchange 2016 senior
notes and the exchange 2036 senior debentures. Interest will be paid on
the exchange 2009 senior notes quarterly on March 16,
June 16, September 16 and December 16 of each
year. Interest will be paid on the exchange 2011 senior notes, the
exchange 2016 senior notes and the exchange 2036 senior debentures
semi-annually on April 30 and October 30 of each year.
Holders of unregistered senior notes and debentures that are accepted
for exchange will be deemed to have waived the right to receive any
payment in respect of interest accrued from the date of the last
interest payment date that was made in respect of the unregistered
senior notes and debentures (or, if no interest was paid, from and
including June 16, 2006, in the case of the unregistered
2009 senior notes, or from and including April 12, 2006,
in the case of the unregistered 2011 senior notes, the unregistered
2016 senior notes and the unregistered 2036 senior debentures) until
the date of the issuance of the exchange senior notes and debentures.
Consequently, holders of exchange senior notes and debentures will
receive the same interest payments that they would have received had
they not accepted the exchange offer. Resale of Exchange Senior
Notes and Debentures Based upon existing interpretations of the
staff of the SEC set forth in several no-action letters issued to third
parties unrelated to us, we believe that the exchange senior notes and
debentures issued pursuant to the exchange offer in exchange for the
unregistered senior notes and debentures may be offered for resale,
resold and otherwise transferred by their holders, without complying
with the registration and prospectus delivery provisions of the
Securities Act, provided that: 103 If you wish to participate in the exchange
offer, you will be required to make these representations to us in the
letter of transmittal. If you are a broker-dealer that receives
exchange senior notes and debentures in exchange for unregistered
senior notes and debentures held for your own account, as a result of
market-making or other trading activities, you must acknowledge that
you will deliver a prospectus in connection with any resale of the
exchange senior notes and debentures. The letter of transmittal states
that by so acknowledging and by delivering a prospectus, you will not
be deemed to admit that you are an
‘‘underwriter’’ within the meaning of the
Securities Act. The prospectus, as it may be amended or supplemented
from time to time, may be used by any broker-dealers in connection with
resales of exchange senior notes and debentures received in exchange
for unregistered senior notes and debentures. We have agreed that, for
a period of 180 days after the expiration of the exchange offer, we
will make this prospectus and any amendment or supplement to this
prospectus available to any such broker-dealer for use in connection
with any resale. Clearing of the Exchange Senior Notes and
Debentures Upon consummation of the exchange offer, the
exchange senior notes and debentures will have different CUSIP, Common
Code and ISIN numbers from the unregistered senior notes and
debentures. Unregistered senior notes and debentures that were
issued under Regulation S that are not tendered for exchange will
continue to clear through Euroclear and Clearstream Luxembourg under
their original Common Codes and their ISIN numbers will remain the
same. Regulation S senior notes and debentures (unless acquired by a
manager as part of their original distribution) may now be sold in the
United States or to U.S. persons and, upon any such transfer, a
beneficial interest in the Regulation S global senior notes and
debentures will be able to be exchanged for an interest in the global
exchange senior notes and debentures in accordance with procedures
established by Euroclear or Clearstream Luxembourg and
DTC. Beneficial interests in the restricted Regulation S global
senior notes and debentures may be transferred to a person who takes
delivery in the form of an interest in the Regulation S global senior
notes and debentures upon receipt by the trustee of a written
certification from the transferor, in the form provided in the
Indenture, to the effect that the transfer is being made in accordance
with Rule 903 or 904 of Regulation S. We cannot predict the
extent to which beneficial owners of an interest in the Regulation S
global senior notes and debentures will participate in the exchange
offer. Beneficial owners should consult their own financial advisors as
to the benefits to be obtained from exchange. 104 Procedures for Tendering The term
‘‘holder’’ with respect to the exchange
offer means any person in whose name unregistered senior notes and
debentures are registered on our agent’s books or any other
person who has obtained a properly completed bond power from the
registered holder, or any person whose unregistered senior notes and
debentures are held of record by DTC, Euroclear or Clearstream
Luxembourg who desires to deliver such unregistered senior notes and
debentures by book-entry transfer at DTC, Euroclear or Clearstream
Luxembourg, as the case may be. Except in limited circumstances,
only a Euroclear participant, Clearstream Luxembourg participant or a
DTC participant listed on a DTC securities position listing with
respect to the unregistered senior notes and debentures may tender its
unregistered senior notes and debentures in the exchange offer. To
tender unregistered senior notes and debentures in the exchange
offer: In addition,
either: The tender by a
holder of unregistered senior notes and debentures will constitute an
agreement between such holder and us in accordance with the terms and
subject to the conditions set forth in this prospectus and in the
letter of transmittal. If less than all the unregistered senior notes
and debentures held by a holder of unregistered senior notes and
debentures are tendered, a tendering holder should fill in the amount
of unregistered senior notes and debentures being tendered in the
specified box on the letter of transmittal. The entire amount of
unregistered senior notes and debentures delivered to the exchange
agent will be deemed to have been tendered unless otherwise
indicated. The method of delivery of unregistered senior notes
and debentures, the letter of transmittal and all other required
documents or transmission of an agent’s message, as described
under ‘‘— Book-Entry
Transfer,’’ to the exchange agent is at the election and
risk of the holder. Instead of delivery by mail, we recommend that
holders use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery prior to
the expiration of the exchange offer. No letter of transmittal or
unregistered senior notes and debentures should be sent to Viacom but
must instead be delivered to the exchange agent. Delivery of documents
to DTC, Euroclear or Clearstream Luxembourg in accordance with their
respective procedures will not constitute delivery to the exchange
agent. If you are a beneficial owner of unregistered senior notes
and debentures that are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender
your unregistered senior notes and debentures, you should contact the
registered holder 105
promptly and instruct the registered holder
to tender on your behalf. If you wish to tender on your own behalf, you
must, prior to completing and executing the letter of transmittal and
delivering your unregistered senior notes and debentures,
either: The transfer of
record ownership may take considerable time and may not be completed
prior to the expiration date. Signatures on a letter of
transmittal or a notice of withdrawal as described in
‘‘— Withdrawal of Tenders’’ below,
as the case may be, must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an
office or correspondent in the United States or an
‘‘eligible guarantor institution’’ within
the meaning of Rule 17Ad-15 under the Exchange Act, unless the
unregistered senior notes and debentures tendered pursuant thereto are
tendered: If the letter of transmittal is signed by a person
other than the registered holder of any unregistered senior notes and
debentures listed therein, the unregistered senior notes and debentures
must be endorsed or accompanied by appropriate bond powers which
authorize the person to tender the unregistered senior notes and
debentures on behalf of the registered holder, in either case signed as
the name of the registered holder or holders appears on the
unregistered senior notes and debentures. If the letter of transmittal
or any unregistered senior notes and debentures or bond powers are
signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate
when signing and, unless waived by us, evidence satisfactory to us of
their authority to so act must be submitted with the letter of
transmittal. We will determine in our sole discretion all the
questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered unregistered senior
notes and debentures. Our determinations will be final and binding. We
reserve the absolute right to reject any and all unregistered senior
notes and debentures not validly tendered or any unregistered senior
notes and debentures our acceptance of which would, in the opinion of
our counsel, be unlawful. We also reserve the absolute right to waive
any irregularities or conditions of tender as to particular
unregistered senior notes and debentures. Our interpretation of the
terms and conditions of the exchange offer (including the instructions
in the letter of transmittal) will be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders
of unregistered senior notes and debentures must be cured within such
time as we will determine. Neither we, the exchange agent nor any other
person shall be under any duty to give notification of defects or
irregularities with respect to tenders of unregistered senior notes and
debentures nor shall any of them incur any liability for failure to
give such notification. Tenders of unregistered senior notes and
debentures will not be deemed to have been made until such
irregularities have been cured or waived. Any unregistered senior notes
and debentures received by the exchange agent that are not properly
tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost by the exchange agent to
the tendering holder of such unregistered senior notes and debentures,
unless otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date of the exchange
offer. In addition, we reserve the right in our sole discretion
to (a) purchase or make offers for any unregistered senior notes and
debentures that remain outstanding subsequent to the expiration date,
and (b) to the extent permitted by applicable law, purchase
unregistered senior notes and debentures in the open market, privately
negotiated transactions or otherwise. The terms of any such purchases
or offers may differ from the terms of the exchange
offer. 106 Book-Entry Transfer We understand
that the exchange agent will make a request promptly after the date of
this document to establish accounts with respect to the unregistered
senior notes and debentures at DTC, Euroclear or Clearstream Luxembourg
for the purpose of facilitating the exchange offer. Any financial
institution that is a participant in DTC’s system may make
book-entry delivery of unregistered senior notes and debentures by
causing DTC to transfer such unregistered senior notes and debentures
into the exchange agent’s DTC account in accordance with
DTC’s Automated Tender Offer Program procedures for such
transfer. Any participant in Euroclear or Clearstream Luxembourg may
make book-entry delivery of Regulation S unregistered senior notes and
debentures by causing Euroclear or Clearstream Luxembourg to transfer
such unregistered senior notes and debentures into the exchange
agent’s account in accordance with established Euroclear or
Clearstream Luxembourg procedures for transfer. The exchange for
tendered unregistered senior notes and debentures will only be made
after a timely confirmation of a book-entry transfer of the
unregistered senior notes and debentures into the exchange
agent’s account, and timely receipt by the exchange agent of an
agent’s message. The term ‘‘agent’s
message’’ means a message, transmitted by DTC, Euroclear
or Clearstream Luxembourg, as the case may be, and received by the
exchange agent and forming part of the confirmation of a book-entry
transfer, which states that DTC, Euroclear or Clearstream Luxembourg,
as the case may be, has received an express acknowledgment from a
participant tendering unregistered senior notes and debentures and that
such participant has received an appropriate letter of transmittal and
agrees to be bound by the terms of the letter of transmittal, and we
may enforce such agreement against the participant. Delivery of an
agent’s message will also constitute an acknowledgment from the
tendering DTC, Euroclear, or Clearstream Luxembourg participant, as the
case may be, that the representations contained in the appropriate
letter of transmittal and described above are true and
correct. Guaranteed Delivery Procedures Holders who wish
to tender their unregistered senior notes and debentures and (i) whose
unregistered senior notes and debentures are not immediately available,
or (ii) who cannot deliver their unregistered senior notes and
debentures, the letter of transmittal, or any other required documents
to the exchange agent prior to the expiration date, or if such holder
cannot complete DTC’s, Euroclear’s or Clearstream
Luxembourg’s respective standard operating procedures for
electronic tenders before expiration of the exchange offer, may tender
their unregistered senior notes and debentures
if: 107 Upon request to the exchange agent, a
notice of guaranteed delivery will be sent to holders who wish to
tender their unregistered senior notes and debentures according to the
guaranteed delivery procedures set forth above. Withdrawal of
Tenders Except as otherwise provided herein, tenders of
unregistered senior notes and debentures may be withdrawn at any time
prior to 5:00 p.m., New York City time, on ,
2006, the expiration date of the exchange offer. For a withdrawal
to be effective: Any notice of withdrawal
must: If unregistered
senior notes and debentures have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at DTC,
Euroclear or Clearstream Luxembourg to be credited with the withdrawn
unregistered senior notes and debentures and otherwise comply with the
procedures of the facility. We will determine all questions as to the
validity, form and eligibility (including time of receipt) for such
withdrawal notices, and our determination shall be final and binding on
all parties. Any unregistered senior notes and debentures so withdrawn
will be deemed not to have been validly tendered for purposes of the
exchange offer, and no exchange senior notes and debentures will be
issued with respect thereto unless the unregistered senior notes and
debentures so withdrawn are validly re-tendered. Any unregistered
senior notes and debentures which have been tendered but which are not
accepted for exchange will be returned to the holder without cost to
such holder as soon as practicable after withdrawal. Properly withdrawn
unregistered senior notes and debentures may be re-tendered by
following the procedures described above under
‘‘—Procedures for Tendering’’ at any
time prior to the expiration date. Consequences of Failure to
Exchange If you do not tender your unregistered senior notes and
debentures to be exchanged in this exchange offer, they will remain
‘‘restricted securities’’ within the
meaning of Rule 144(a)(3) of the Securities Act. Accordingly,
they: 108 As a result of the restrictions on
transfer and the availability of the exchange senior notes and
debentures, the unregistered senior notes and debentures are likely to
be much less liquid than before the exchange offer. Following the
consummation of the exchange offer, in general, holders of unregistered
senior notes and debentures will have no further registration rights
under the registration rights agreements. Exchange
Agent The Bank of New York has been appointed as the exchange
agent for the exchange of the unregistered senior notes and debentures.
Questions and requests for assistance relating to the exchange of the
unregistered senior notes and debentures should be directed to the
exchange agent addressed as follows: The Bank of New
York Fees and Expenses We will bear
the expenses of soliciting tenders pursuant to the exchange offer. The
principal solicitation for tenders pursuant to the exchange offer is
being made by mail. Additional solicitations may be made by our
officers and regular employees and our affiliates in person, by
telegraph or telephone. We will not make any payments to brokers,
dealers or other persons soliciting acceptances of the exchange offer.
We, however, will pay the exchange agent reasonable and customary fees
for its services and will reimburse the exchange agent for its related
reasonable out-of-pocket expenses and accounting and legal fees. We may
also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this prospectus, letters of transmittal and
related documents to the beneficial owners of the unregistered senior
notes and debentures and in handling or forwarding tenders for
exchange. We will pay all transfer taxes, if any, applicable to
the exchange of unregistered senior notes and debentures pursuant to
the exchange offer. The tendering holder, however, will be required to
pay any transfer taxes whether imposed on the registered holder or any
other person, if: If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the
letter of transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder. 109 DESCRIPTION OF
THE SENIOR NOTES AND DEBENTURES We issued the unregistered
senior notes and debentures and will issue the exchange senior notes
and debentures under an indenture dated as of April 12,
2006 (the ‘‘base indenture’’) between
Viacom Inc., as issuer (in this Description of the Senior Notes and
Debentures, ‘‘Viacom’’), and The Bank of
New York, as trustee (the ‘‘Trustee’’). The
base indenture was supplemented by a first supplemental indenture dated
as of April 12, 2006 (the ‘‘first
supplemental indenture’’) and a second supplemental
indenture dated as of June 16, 2006 (together with the
base indenture and the first supplemental indenture, the
‘‘indenture’’) between Viacom and the
Trustee. In this Description of the Senior Notes and Debentures,
‘‘we,’’ ‘‘us,’’
‘‘our’’ and similar words refer to Viacom
Inc. and not to any of its consolidated subsidiaries. The terms
of the exchange senior notes and debentures to be issued are
substantially similar to those of the unregistered senior notes and
debentures, except that the exchange senior notes and debentures will
have been registered under the Securities Act, the certificates for the
exchange senior notes and debentures will not bear legends restricting
their transfer, and the exchange senior notes and debentures will not
have registration rights or any rights to additional interest
conditioned upon a registration default. Because this section is
a summary, it does not describe every aspect of the senior notes and
debentures and the indenture. This summary is subject to, and qualified
in its entirety by reference to, all the provisions of the senior notes
and debentures and the indenture, including definitions of certain
terms used therein. You may obtain copies of the senior notes and
debentures and the indenture by requesting them from us or the
Trustee. General The senior notes and
debentures: The senior notes and debentures are subject in all cases
to any tax, fiscal or other law or regulation or administrative or
judicial interpretation applicable thereto. We are not required to make
any payment to a holder with respect to any tax, assessment or other
governmental charge imposed (by withholding or otherwise) by any
government or a political subdivision or taxing authority thereof or
therein due and owing with respect to the senior notes and
debentures. Principal, Maturity and Interest Holders of
unregistered senior securities that are accepted for exchange will be
deemed to have waived the right to receive any payment in respect of
interest accrued from the date of the last interest payment date that
was made in respect of the unregistered senior securities until the
date of the issuance of the exchange senior securities. Consequently,
holders of exchange senior securities will receive the same interest
payments that they would have received had they not accepted the
exchange offer. 110 Interest on the senior notes and
debentures will be paid beginning on the interest payment date
immediately following the last interest payment date for which interest
was paid on the relevant series of senior notes and debentures or the
first interest payment date, respectively, if no interest payments have
been made.
2009 Senior Notes
The 2009 senior
notes will bear interest at a rate per year equal to three-month LIBOR
(determined as described herein) plus 0.35%, to be reset
quarterly as described below. Interest will be payable quarterly in
arrears on the 2009 senior notes on March 16, June 16,
September 16 and December 16 of each year, beginning on
September 16, 2006, each an interest payment date, and
will be computed on the basis of a 360-day year and the actual number
of days elapsed. Interest on the 2009 senior notes will accrue from and
including the settlement date and will be paid to holders of record on
the March 1, June 1, September 1 and
December 1 immediately before the respective interest payment
date; provided, however, that interest that we pay on the maturity date
will be payable to the person to whom the principal will be
payable. The 2009 senior notes will mature on June
16, 2009. On the maturity date of the 2009 senior notes, the
holders will be entitled to receive 100% of the principal amount
of the 2009 senior notes. The 2009 senior notes do not provide for any
sinking fund. Interest on the 2009 senior notes will accrue from,
and including, June 16, 2006, to, but excluding, the
first interest payment date and then from, and including, the
immediately preceding interest payment date to which interest has been
paid or duly provided for to, but excluding, the next interest payment
date or the maturity date, as the case may be. We will refer to each of
these periods as an ‘‘interest period.’’
The amount of accrued interest that we will pay for any interest period
can be calculated by multiplying the outstanding principal amount of
the 2009 senior notes by an accrued interest factor. This accrued
interest factor is computed by adding the interest factor calculated
for each day from the settlement date, or from the last date we paid
interest, to the date for which accrued interest is being calculated.
The interest factor for each day is computed by dividing the interest
rate applicable to that day by 360. If any interest payment date falls
on a day that is not a business day, then payment of interest will be
made on the next succeeding business day unless such business day is in
the next succeeding calendar month, in which case, payment of interest
will be made on the immediately preceding business day. If the maturity
date of the 2009 senior notes falls on a day that is not a business
day, we will pay principal and interest on the next succeeding business
day, but we will consider that payment as being made on the date that
the payment was due. Accordingly, no interest will accrue on the
payment for the period from and after the maturity date to the date we
make the payment on the next succeeding business day. With
respect to the 2009 senior notes, when we use the term
‘‘business day’’ we mean any day except a
Saturday, a Sunday or a day on which banking institutions in The City
of New York are authorized or required by law, regulation or executive
order to close; provided that the day is also a London business day.
‘‘London business day’’ means any day on
which dealings in United States dollars are transacted in the London
interbank market. The interest rate per year on the 2009 senior
notes will be calculated by the calculation agent appointed by us and
will be equal to LIBOR plus 0.35%, except that the interest rate
per year in effect for the period from the settlement date to and
including September 16, 2006, the initial reset date,
will be established by us as the rate for deposits in United States
dollars having a maturity of three months commencing on the settlement
date that appears on Telerate Page 3750 as of 11:00 a.m., London time,
on the day that is two London business days prior to the settlement
date, plus 0.35%. The calculation agent will reset the interest
rate on each interest payment date, each of which we will refer to as
an ‘‘interest reset date.’’ The second
London business day preceding an interest reset date will be the
‘‘interest determination date’’ for that
interest reset date. The interest rate in effect on each day that is
not an interest reset date will be the interest rate determined as of
the interest determination date pertaining to the immediately preceding
interest reset date. The interest rate in effect on any day that is an
interest reset date will be the interest rate determined as of the
interest 111
determination date pertaining to that
interest reset date, except that the interest rate in effect for the
period from and including the settlement date to the initial interest
reset date will be the initial interest rate.
‘‘LIBOR’’ will be determined by the
calculation agent in accordance with the following
provisions: ‘‘Telerate Page
3750’’ means the display designated as
‘‘Page 3750’’ on Telerate, Inc., or any
successor service, for the purpose of displaying the London interbank
rates of major banks for United States dollars.
2011 Senior
Notes, 2016 Senior Notes and 2036 Senior Debentures
Each
2011 senior note will bear interest at a rate of 5.75% per year,
each 2016 senior note will bear interest at a rate of 6.25% per
year, and each 2036 senior debenture will bear interest at a rate of
6.875% per year. Interest will be payable semi-annually in
arrears on the 2011 senior notes, the 2016 senior notes and the 2036
senior debentures on April 30 and October 30 of each
year, and will be computed on the basis of a 360-day year of twelve
30-day months. Interest on the 2011 senior notes, the 2016 senior notes
and the 2036 senior debentures will accrue from and including
April 12, 2006 and will be paid to holders of record on
the April 15 and October 15 immediately before the
respective interest payment date. The 2011 senior notes will
mature on April 30, 2011, the 2016 senior notes will
mature on April 30, 2016, and the 2036 senior debentures
will mature on April 30, 2036. On the maturity dates of
the 2011 senior notes, the 2016 senior notes and the 2036 senior
debentures, the holders will be entitled to receive 100% of the
principal amount of the senior notes and debentures. None of the 2011
senior notes, 2016 senior notes or 2036 senior debentures provides for
any sinking fund. If any interest payment date with respect to
such senior notes and debentures falls on a day that is not a business
day, then payment of interest may be made on the next succeeding
business day and no interest will accrue because of such delayed
payment. With respect to the 2011 senior notes, the 2016 senior notes
and the 2036 senior debentures, when we use the term
‘‘business day’’ we mean any day except a
Saturday, a Sunday or a day on which banking institutions in the
applicable place of payment are authorized or required by law,
regulation or executive order to close. 112 Ranking The senior notes and
debentures will be unsecured senior obligations of Viacom Inc. and will
rank equally with all of Viacom Inc.’s existing and future
unsecured senior obligations. As of June 30, 2006, Viacom
Inc. had approximately $7.32 billion of indebtedness outstanding under
its credit facilities and the unregistered senior notes and
debentures. We conduct our operations through subsidiaries. As a
result, distributions or advances from our subsidiaries are a major
source of funds necessary to meet our debt service and other
obligations. Contractual provisions, laws or regulations, as well as
our subsidiaries’ financial condition and operating
requirements, may limit our ability to obtain cash required to pay our
debt service obligations, including payments on the senior notes and
debentures. The senior notes and debentures will be structurally
subordinated to all obligations of our subsidiaries including claims
with respect to trade payables. This means that holders of the exchange
senior notes and debentures will have a junior position to the claims
of creditors of our subsidiaries on the assets and earnings of such
subsidiaries. As of June 30, 2006, our direct and
indirect subsidiaries had approximately $337.5 million of indebtedness
outstanding. Further Issues We may from time to time,
without notice to or the consent of the holders of the senior notes and
debentures of any series currently being offered, create and issue
further senior notes and debentures of such series ranking equally and
ratably in all respects with the senior notes and debentures of such
series, or in all respects except for the payment of interest accruing
prior to the issue date or except, in some circumstances, for the first
payment of interest following the issue date of those further senior
notes and debentures. Any such further senior notes and debentures of
such series will be consolidated with and form a single series with the
senior notes and debentures of such series currently being offered and
will have the same terms as to status, CUSIP number or otherwise as
such senior notes and debentures. Any such further senior notes and
debentures will be issued pursuant to a resolution of our board of
directors, a supplement to the indenture or under an officer’s
certificate pursuant to the indenture.
Optional
Redemption
2009 Senior Notes
The 2009 senior
notes are not redeemable at our option prior to their
maturity.
2011 Senior Notes, 2016 Senior Notes and 2036
Senior Debentures
Prior to maturity, we may redeem some or
all of any series of the 2011 senior notes, the 2016 senior notes and
the 2036 senior debentures, at any time and from time to time, at our
option, on not less than 30 nor more than 60 days’ prior notice,
at a redemption price equal to the sum of their principal amount, the
Make-Whole Amount, if any, described below and any accrued and unpaid
interest to the date of redemption. Holders of record on a record date
that is on or prior to a redemption date will be entitled to receive
interest due on the interest payment date. The term
‘‘Make-Whole Amount’’ means the excess, if
any, of (i) the aggregate present value as of the date of the
redemption of the principal being redeemed and the amount of interest
(exclusive of interest accrued to the date of redemption) that would
have been payable if redemption had not been made, determined by
discounting, on a semiannual basis, the remaining principal and
interest at the Reinvestment Rate described below (determined on the
third business day preceding the date fixed for redemption) from the
dates on which the principal and interest would have been payable if
the redemption had not been made, to the date of redemption, over (ii)
the aggregate principal amount of such senior notes or
debentures. The term ‘‘Reinvestment
Rate’’ means (i) the arithmetic mean of the yields under
the heading ‘‘Week Ending’’ published in
the most recent Federal Reserve Statistical Release H.15 under the
113
caption ‘‘Treasury Constant
Maturities’’ for the maturity (rounded to the nearest
month) corresponding to the remaining life to maturity, as of the
payment date of the principal being redeemed or paid, plus (ii)
0.25% in the case of the exchange 2011 senior notes,
0.30% in the case of the exchange 2016 senior notes or
0.35% in the case of the exchange 2036 senior debentures, as the
case may be. If no maturity exactly corresponds to the maturity, yields
for the two published maturities most closely corresponding to the
maturity would be so calculated and the Reinvestment Rate would be
interpolated or extrapolated on a straight-line basis, rounding to the
nearest month. The most recent Federal Reserve Statistical Release H.15
published prior to the date of determination of the Make-Whole Amount
will be used for purposes of calculating the Reinvestment
Rate. The Make-Whole Amount will be calculated by an independent
investment banking institution of national standing appointed by us. If
we fail to make the appointment at least 30 business days prior to the
date of redemption, or if the institution is unwilling or unable to
make the calculation, the calculation will be made by an independent
investment banking institution of national standing appointed by the
Trustee. If the Reinvestment Rate is not available as described
above, the Reinvestment Rate will be calculated by interpolation or
extrapolation of comparable rates selected by the independent
investment banking institution. In the case of any partial
redemption, selection of the senior notes and debentures for redemption
will be made by the Trustee in compliance with the requirements of the
principal U.S. national securities exchange, if any, on which the
senior notes and debentures are listed or, if they are not listed on a
U.S. national securities exchange, by lot or by such other method as
the Trustee in its sole discretion deems to be fair and
appropriate. The Trustee and Transfer and Paying
Agent The Bank of New York, acting through its principal
corporate trust office at 101 Barclay Street, No service
charge will be made for any transfer or exchange of any senior notes
and debentures, but we may, except in specific cases not involving any
transfer, require payment of a sufficient amount to cover any tax or
other governmental charge payable in connection with the transfer or
exchange. Our rights and the rights of our creditors, including
holders of senior notes and debentures, to participate in any
distribution of assets of any subsidiary of ours upon its liquidation
or reorganization or otherwise is subject to the prior claims of
creditors of the subsidiary, except to the extent that our claims as a
creditor of the subsidiary may be recognized. Payments of
principal of, any premium on, and any interest on individual senior
notes and debentures represented by a global security registered in the
name of a depositary or its nominee will be made to the depositary or
its nominee as the registered owner of the global security representing
the senior notes and debentures. Neither we, the Trustee, any paying
agent, nor the transfer agent for the senior notes and debentures will
have any responsibility or liability for the records relating to or
payments made on account of beneficial ownership interests of the
global security for the senior notes and debentures or for maintaining,
supervising or reviewing any records relating to the beneficial
ownership interests. We expect that the depositary for the senior
notes and debentures or its nominee, upon receipt of any payment of
principal, premium or interest in respect of a permanent global
security representing any of the senior notes and debentures, will
immediately credit participants’ accounts with payments in
amounts proportionate to their beneficial interests in the principal
amount of the global security for 114
the senior notes and debentures as shown on
the records of the depositary or its nominee. We also expect that
payments by participants to owners of beneficial interests in the
global security held through the participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or
registered in ‘‘street name.’’ The payments
will be the responsibility of those participants. In specific
instances, we or the holders of a majority of the then outstanding
principal amount of a series of the senior notes and debentures may
remove the Trustee and appoint a successor Trustee. The Trustee may
become the owner or pledgee of any of the senior notes and debentures
with the same rights, subject to conflict of interest restrictions, it
would have if it were not the Trustee. The Trustee and any successor
trustee must be eligible to act as trustee under the Section 310(a)(1)
of the Trust Indenture Act of 1939 and shall have a combined capital
and surplus of at least $50,000,000 and be subject to examination by
federal or state authority. Subject to applicable law relating to
conflicts of interest, the Trustee may also serve as trustee under
other indentures relating to securities issued by us or our affiliated
companies and may engage in commercial transactions with us and our
affiliated companies. Merger, Consolidation or Sale of
Assets Under the terms of the indenture, we generally would be
permitted to consolidate or merge with another entity or to sell all or
substantially all of our assets to another entity, subject to our
meeting all of the following
conditions: We may merge or consolidate with,
or sell all or substantially all of our assets to, any of our
Subsidiaries. In the event that we consolidate or merge with
another entity or sell all or substantially all of our assets to
another entity, the surviving entity will be substituted for us under
the indenture, and we will be discharged from all of our obligations
under the indenture. Although there is a limited body of case law
interpreting the phrase ‘‘all or substantially
all,’’ there is no precise established definition of the
phrase under applicable law. Accordingly, in certain circumstances
there may be a degree of uncertainty as to whether a particular
transaction would involve a disposition of ‘‘all or
substantially all’’ of our assets. As a result, it may be
unclear as to whether the merger, consolidation or sale of assets
covenant would apply to a particular transaction as described above
absent a decision by a court of competent
jurisdiction. Limitations on Liens We covenant in the
indenture that we will not create, assume or permit any Lien on any of
our properties or assets, unless we secure the senior notes and
debentures at least equally and ratably to the secured Indebtedness.
The foregoing only applies to Liens that in the aggregate exceed
15% of our total consolidated assets, reduced by the
Attributable Debt related to any permitted sale and leaseback
arrangement. See ‘‘— Limitations on Sale and
Leaseback Transactions’’ below. The restrictions do not
apply to Capitalized Leases or Indebtedness that is secured
by: 115 The restrictions do not apply to
extensions, renewals or replacements of any of the foregoing types of
Liens. Limitations on Sale and Leaseback Transactions We
covenant in the indenture that neither we nor any Restricted Subsidiary
will enter into any arrangement with any person to lease a Principal
Property (except for any arrangements that existed, in the case of the
2009 senior notes, on June 16, 2006 and, in the case of
the 2011 senior notes, the 2016 senior notes and the 2036 senior
debentures, on April 12, 2006; or that exist at the time
any person that owns a Principal Property becomes a Restricted
Subsidiary) which has been or is to be sold by us or the Restricted
Subsidiary to the person unless: The term ‘‘Attributable
Debt,’’ with regard to a sale and leaseback arrangement
of a Principal Property, is defined in the indenture as an amount equal
to the lesser of: (a) the fair market value of the property (as
determined in good faith by our board of directors); or (b) the present
value of the total net amount of rent payments to be made under the
lease during its remaining term, discounted at the rate of interest set
forth or implicit in the terms of the lease, compounded semi-annually.
The calculation of the present value of the total net amount of rent
payments is subject to adjustments specified in the
indenture. The term ‘‘Principal
Property’’ is defined in the indenture to include any
parcel of our or our Restricted Subsidiaries’ real property and
related fixtures or improvements located in the United States, the
aggregate book value of which on the date of determination exceeds
$1.5 billion. The term ‘‘Principal
Property’’ does not include any telecommunications
equipment or parcels of real property and related fixtures or
improvements that are determined in good faith by our board of
directors not to be of material importance to us and our
Subsidiaries’ total business. As of the date of this prospectus,
neither we nor any of our Subsidiaries owns any Principal
Property. Defaults and Remedies Holders of senior notes
and debentures will have specified rights if an Event of Default (as
defined below) occurs in respect of the senior notes and debentures of
that series, as described below. The term ‘‘Event
of Default’’ in respect of the senior notes and
debentures of a particular series means any of the
following: 116 If an Event of Default has occurred,
the Trustee or the holders of at least 25% in principal amount
of the senior notes and debentures of the affected series may declare
the entire unpaid principal amount (and premium, if any) of, and all
the accrued interest on, the senior notes and debentures of that series
to be due and immediately payable. This is called a declaration of
acceleration of maturity. There is no action on the part of the Trustee
or any holder of senior notes and debentures required for such
declaration if the Event of Default is a specified event of bankruptcy,
insolvency or reorganization. Holders of a majority in principal amount
of the senior notes and debentures of a series may also waive certain
past defaults under the indenture on behalf of all of the holders of
such series of senior notes and debentures. A declaration of
acceleration of maturity may be canceled, under specified
circumstances, by the holders of at least a majority in principal
amount of a series of senior notes and debentures and the
Trustee. Except in cases of default, where the Trustee has
special duties, the Trustee is not required to take any action under an
indenture at the request of holders unless the holders offer the
Trustee protection from expenses and liability satisfactory to the
Trustee. If an indemnity satisfactory to the Trustee is provided, the
holders of a majority in principal amount of a series of senior notes
and debentures may direct the time, method and place of conducting any
lawsuit or other formal legal action seeking any remedy available to
the Trustee. The Trustee may refuse to follow those directions in
certain circumstances specified in the indenture. No delay or omission
in exercising any right or remedy will be treated as a waiver of the
right, remedy or Event of Default. Before holders are allowed to
bypass the Trustee and bring a lawsuit or other formal legal action or
take other steps to enforce their rights or protect their interests
relating to the senior notes and debentures, the following must
occur: Holders are, however, entitled at any time to bring a
lawsuit for the payment of money due on the senior notes and debentures
on or after the due date. Modification of the
Indenture The indenture provides that we and the Trustee may,
without the consent of any holders of the senior notes and debentures,
enter into supplemental indentures for the purposes, among other
things, of: 117 With specific
exceptions, the indenture or the rights of the holders of the senior
notes and debentures may be modified by us and the Trustee with the
consent of the holders of a majority in aggregate principal amount of
the securities of each series affected by the modification then
outstanding, but no modification may be made without the consent of the
holders of each outstanding senior note or debenture affected that
would: Meetings The indenture contains provisions for
convening meetings of the holders of the senior notes and debentures.
Specific terms related to such meetings of the holders are described in
the indenture. Defeasance and Covenant Defeasance We may
elect either (i) to defease and be discharged from any and all
obligations with respect to a series of the senior notes and debentures
(except as otherwise provided in the indenture)
(‘‘defeasance’’) or (ii) to be released
from our obligations with respect to certain covenants that are
described in the indenture (‘‘covenant
defeasance’’), upon the deposit with the Trustee, in
trust for such purpose, of money and/or government obligations that
through the payment of principal and interest in accordance with their
terms will provide money in an amount sufficient, without reinvestment,
to pay the principal of, premium, if any, and interest on the senior
notes and debentures of such series to maturity or redemption, as the
case may be, and any mandatory sinking fund or analogous senior
payments thereon. As a condition to defeasance or covenant defeasance,
we must deliver to the Trustee an opinion of counsel to the effect that
the holders of the senior notes and debentures of such series will not
recognize income, gain or loss for United States federal income tax
purposes as a result of such defeasance or covenant defeasance and will
be subject to United States federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if
such defeasance or covenant defeasance had not occurred. Such opinion
of counsel, in the case of defeasance under clause (i) above, must
refer to and be based upon a ruling of the Internal Revenue Service or
a change in applicable United States federal income tax law occurring
after the date of the indenture. 118 We may exercise our defeasance option
with respect to the senior notes and debentures of any series
notwithstanding our prior exercise of our covenant defeasance option.
If we exercise our defeasance option, payment of the senior notes and
debentures of such series may not be accelerated because of an event of
default. If we exercise our covenant defeasance option, payment of the
senior notes and debentures of such series may not be accelerated by
reference to any covenant from which we are released as described under
clause (ii) of the immediately preceding paragraph. However, if
acceleration were to occur for other reasons, the realizable value at
the acceleration date of the money and government obligations in the
defeasance trust could be less than the principal and interest then due
on the senior notes and debentures of such series, in that the required
deposit in the defeasance trust is based upon scheduled cash flows
rather than market value, which will vary depending upon interest rates
and other factors. Notices Notices to holders of senior
notes and debentures will be given by mail to the addresses of such
holders as they appear in the security
register. Title We, the Trustee and any agent of ours may
treat the registered owner of any senior notes and debentures as the
absolute owner thereof (whether or not the senior note or debenture
shall be overdue and notwithstanding any notice to the contrary) for
the purpose of making payment and for all other
purposes. Replacement of Senior Notes and Debentures We
will replace any mutilated senior note or debenture at the expense of
the holders upon surrender to the Trustee. We will replace senior notes
and debentures that become destroyed, lost or stolen at the expense of
the holder upon delivery to the Trustee of satisfactory evidence of the
destruction, loss or theft thereof. In the event of a destroyed, lost
or stolen senior note or debenture, an indemnity or security
satisfactory to us and the Trustee may be required at the expense of
the holder of the senior note or debenture before a replacement senior
note or debenture will be issued. Governing Law The
indenture and the senior notes and debentures will be governed by, and
construed in accordance with, the laws of the State of New
York. Book Entry, Delivery and Form The 2009 senior
notes, the 2011 senior notes, 2016 senior notes and 2036 senior
debentures will each be issued in the form of one or more fully
registered global securities (each a ‘‘Global
Security’’) which will be deposited with, or on behalf
of, The Depository Trust Company, New York, New York (the
‘‘Depositary’’) and registered in the name
of Cede & Co., the Depositary’s nominee. We will not issue
senior notes and debentures in certificated form except in certain
circumstances. Beneficial interests in the Global Securities will be
represented through book-entry accounts of financial institutions
acting on behalf of beneficial owners as direct and indirect
participants in the Depositary (the ‘‘Depositary
Participants’’). Investors may elect to hold interests in
the Global Securities through either the Depositary (in the United
States), or Clearstream Luxembourg or Euroclear (in Europe) if they are
participants in those systems, or indirectly through organizations that
are participants in those systems. Clearstream Luxembourg and Euroclear
will hold interests on behalf of their participants through
customers’ securities accounts in Clearstream
Luxembourg’s and Euroclear’s names on the books of their
respective depositaries, which in turn will hold such interests in
customers’ securities accounts in the depositaries’ names
on the books of the Depositary. At the present time, Citibank, N.A.
acts as U.S. depositary for Clearstream Luxembourg and JPMorgan Chase
Bank acts as U.S. depositary for Euroclear (the ‘‘U.S.
Depositaries’’). Beneficial interests in the Global
Securities will be 119
held in minimum denominations of $2,000 and
integral multiples of $1,000 in excess thereof. Except as set forth
below, the Global Securities may be transferred, in whole but not in
part, only to another nominee of the Depositary or to a successor of
the Depositary or its nominee. The Depositary has advised us that
it is a limited-purpose trust company organized under the New York
Banking Law, a ‘‘banking organization’’
within the meaning of the New York Banking Law, a member of the Federal
Reserve System, a ‘‘clearing corporation’’
within the meaning of the New York Uniform Commercial Code, and a
‘‘clearing agency’’ registered pursuant to
the provisions of Section 17A of the Exchange Act. The Depositary holds
securities that its participants (‘‘Direct
Participants’’) deposit with the Depositary. The
Depositary also facilitates the settlement among Direct Participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Direct
Participants’ accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. The Depositary
is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the
Depositary’s book-entry system is also available to others such
as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly (‘‘Indirect
Participants’’). The rules applicable to the Depositary
and its Direct and Indirect Participants are on file with the
Securities and Exchange Commission. Clearstream Luxembourg has
advised us that it is incorporated under the laws of Luxembourg as a
professional depositary. Clearstream Luxembourg holds securities for
its participating organizations, known as Clearstream Luxembourg
participants, and facilitates the clearance and settlement of
securities transactions between Clearstream Luxembourg participants
through electronic book-entry changes in accounts of Clearstream
Luxembourg participants, thereby eliminating the need for physical
movement of certificates. Clearstream Luxembourg provides to
Clearstream Luxembourg participants, among other things, services for
safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream Luxembourg interfaces with domestic markets in several
countries. As a professional depositary, Clearstream Luxembourg is
subject to regulation by the Luxembourg Commission for the Supervision
of the Financial Sector, also known as the Commission de Surveillance
du Secteur Financier. Clearstream Luxembourg participants are
recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Indirect access
to Clearstream Luxembourg is also available to others, such as banks,
brokers, dealers and trust companies that clear through, or maintain a
custodial relationship with, a Clearstream Luxembourg participant
either directly or indirectly. Distributions with respect to the
senior notes and debentures held beneficially through Clearstream
Luxembourg will be credited to the cash accounts of Clearstream
Luxembourg participants in accordance with its rules and procedures, to
the extent received by the U.S. Depositary for Clearstream
Luxembourg. Euroclear has advised us that it was created in 1968
to hold securities for its participants, known as Euroclear
participants, and to clear and settle transactions between Euroclear
participants and between Euroclear participants and participants of
certain other securities intermediaries through simultaneous electronic
book-entry delivery against payment, eliminating the need for physical
movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Euroclear is owned by Euroclear
Clearance System Public Limited Company and operated through a license
agreement by Euroclear Bank S.A./N.V., known as the Euroclear operator.
The Euroclear operator provides Euroclear participants, among other
things, with safekeeping, administration, clearance and settlement,
securities lending and borrowing and related services. Euroclear
participants include banks (including central banks), securities
brokers and dealers and other professional financial
intermediaries. Indirect access to Euroclear is also available to
others that clear through or maintain a custodial relationship with a
Euroclear participant, either directly or indirectly. 120 The Euroclear operator is regulated and
examined by the Belgian Banking and Finance
Commission. Securities clearance accounts and cash accounts with
the Euroclear operator are governed by the Terms and Conditions
Governing Use of Euroclear and the related Operating Procedures of the
Euroclear System, and applicable Belgian law, collectively referred to
as the terms and conditions. The terms and conditions govern transfers
of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear operator acts under the
terms and conditions only on behalf of Euroclear participants, and has
no record of or relationship with persons holding through Euroclear
participants. Distributions with respect to senior notes and
debentures held beneficially through Euroclear will be credited to the
cash accounts of Euroclear participants in accordance with the terms
and conditions, to the extent received by the U.S. Depositary for
Euroclear. If the Depositary is at any time unwilling or unable
to continue as depositary and a successor depositary is not appointed
by us within 90 days, we will issue the senior notes and debentures in
definitive form in exchange for the entire Global Security representing
such senior notes and debentures. In this case, an owner of a
beneficial interest in the Global Security will be entitled to physical
delivery in definitive form of senior notes and debentures represented
by such Global Security equal in principal amount to such beneficial
interest and to have such senior notes and debentures registered in its
name. Title to book-entry interests in the senior notes and
debentures will pass by book-entry registration of the transfer within
the records of Clearstream Luxembourg, Euroclear or the Depositary, as
the case may be, in accordance with their respective procedures.
Book-entry interests in the senior notes and debentures may be
transferred within Clearstream Luxembourg and within Euroclear and
between Clearstream Luxembourg and Euroclear in accordance with
procedures established for these purposes by Clearstream Luxembourg and
Euroclear. Book-entry interests in the senior notes and debentures may
be transferred within the Depositary in accordance with procedures
established for this purpose by the Depositary. Transfers of book-entry
interests in the senior notes and debentures among Clearstream
Luxembourg and Euroclear and the Depositary may be effected in
accordance with procedures established for this purpose by Clearstream
Luxembourg, Euroclear and the Depositary. Global Clearance and
Settlement Procedures Secondary market trading between
Depositary Participants will occur in the ordinary way in accordance
with the Depositary’s rules and will be settled in immediately
available funds using the Depositary’s Same-Day Funds Settlement
System. Secondary market trading between Clearstream Luxembourg
participants and Euroclear participants will occur in the ordinary way
in accordance with the applicable rules and operating procedures of
Clearstream Luxembourg and Euroclear and will be settled using the
procedures applicable to conventional eurobonds in immediately
available funds. Cross-market transfers between persons holding
directly or indirectly through the Depositary, on the one hand, and
directly or indirectly through Clearstream Luxembourg or Euroclear
participants, on the other, will be effected through the Depositary in
accordance with the Depositary’s rules on behalf of the relevant
European international clearing system by its U.S. Depositary; however,
such cross-market transactions will require delivery of instructions to
the relevant European international clearing system by the counterparty
in such system in accordance with its rules and procedures and within
its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its U.S. Depositary to
take action to effect final settlement on its behalf by delivering or
receiving the senior notes and debentures in the Depositary, and making
or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to 121
the Depositary. Clearstream Luxembourg
participants and Euroclear participants may not deliver instructions
directly to their respective U.S. Depositaries. Because of
time-zone differences, credits of the senior notes and debentures
received in Clearstream Luxembourg or Euroclear as a result of a
transaction with a Depositary Participant will be made during
subsequent securities settlement processing and dated the business day
following the Depositary settlement date. Such credits, or any
transactions in the senior notes and debentures settled during such
processing, will be reported to the relevant Euroclear participants or
Clearstream Luxembourg participants on that business day. Cash received
in Clearstream Luxembourg or Euroclear as a result of sales of senior
notes and debentures by or through a Clearstream Luxembourg participant
or a Euroclear participant to a Depositary Participant will be received
with value on the business day of settlement in the Depositary but will
be available in the relevant Clearstream Luxembourg or Euroclear cash
account only as of the business day following settlement in the
Depositary. Although the Depositary, Clearstream Luxembourg and
Euroclear have agreed to the foregoing procedures in order to
facilitate transfers of securities among participants of the
Depositary, Clearstream Luxembourg and Euroclear, they are under no
obligation to perform or continue to perform such procedures and they
may discontinue the procedures at any time. Certain
Definitions The following definitions are applicable to the
indenture: ‘‘Capitalized Lease’’
means any obligation of a person to pay rent or other amounts incurred
with respect to real property or equipment (other than in respect of
telecommunications equipment including, without limitation, satellite
transponders) acquired or leased by such person and used in its
business that is required to be recorded as a capital lease in
accordance with generally accepted accounting principles consistently
applied as in effect from time to
time. ‘‘Indebtedness’’ of any person
means, without duplication, (i) any obligation of such person for money
borrowed, (ii) any obligation of such person evidenced by bonds,
debentures, notes or other similar instruments, (iii) any reimbursement
obligation of such person in respect of letters of credit or other
similar instruments which support financial obligations which would
otherwise become Indebtedness, (iv) any obligation of such person under
Capitalized Leases and (v) any obligation of any third party to the
extent secured by a Lien on the assets of such person; provided,
however, that ‘‘Indebtedness’’ of such
person shall not include any obligation of such person (i) to any
Subsidiary of such person or to any person with respect to which such
person is a Subsidiary or (ii) specifically with respect to the
production, distribution or acquisition of motion pictures or other
programming rights, talent or publishing
rights. ‘‘Lien’’ means any pledge,
mortgage, lien, encumbrance or other security
interest. ‘‘Restricted Subsidiary’’
means a corporation all of the outstanding voting stock of which is
owned, directly or indirectly, by us or by one or more of our
Subsidiaries, or by us and one or more of our Subsidiaries, which is
incorporated under the laws of a State of the United States, and which
owns a Principal
Property. ‘‘Subsidiary’’ of any
person means (i) a corporation a majority of the outstanding voting
stock of which is at the time, directly or indirectly, owned by such
person, by one or more Subsidiaries of such person, or by such person
and one or more Subsidiaries thereof or (ii) any other person (other
than a corporation), including, without limitation, a partnership or
joint venture, in which such person, one or more Subsidiaries thereof,
or such person and one or more Subsidiaries thereof, directly or
indirectly, at the date of determination thereof, has at least majority
ownership interest entitled to vote in the election of directors,
managers or trustees thereof (or other persons performing similar
functions). 122 EUROPEAN UNION DIRECTIVE ON THE
TAXATION OF SAVINGS INCOME The European Union has adopted a
Directive regarding the taxation of savings income. The Directive
provides for member states of the European Union (each, a
‘‘Member State,’’ and together,
‘‘Member States’’) to provide to the tax
authorities of other Member States details of payments of interest and
other similar income paid by a person to an individual in another
Member State, except that Austria, Belgium and Luxembourg have instead
opted to impose a withholding system for a transitional period unless
during such period they elect otherwise. UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS The following discussion is a summary
of certain United States federal income tax consequences of the
exchange offer and the purchase, ownership and disposition of the
exchange senior notes and debentures to the holders of exchange senior
notes and debentures that have held the unregistered senior notes and
debentures and will hold the exchange senior notes and debentures as
capital assets (generally, property held for investment). This summary
is based on the Internal Revenue Code of 1986, as amended (the
‘‘Code’’), administrative pronouncements of
the Internal Revenue Service (the ‘‘IRS’’),
judicial decisions and existing and proposed Treasury Regulations, and
interpretations of the foregoing, changes to any of which subsequent to
the date of this prospectus may affect the tax consequences described
herein. This summary does not address all of the tax consequences that
may be relevant to holders in light of their particular circumstances
or to holders that may be subject to special tax rules, such as
financial institutions, insurance companies, tax-exempt organizations,
partnerships and other pass-through entities, dealers in securities or
foreign currencies, United States Holders (as defined below) whose
functional currency (as defined in Section 985 of the Code) is not the
U.S. dollar, persons holding exchange senior notes and debentures in
connection with a hedging transaction,
‘‘straddle,’’ conversion transaction or
other integrated transaction, traders in securities that elect to mark
to market, holders liable for alternative minimum tax or persons who
have ceased to be United States citizens or to be taxed as resident
aliens. Persons considering the purchase of the exchange senior notes
and debentures should consult their tax advisors concerning the
application of United States federal income tax laws, as well as the
laws of any state, local or foreign taxing jurisdictions and any other
tax laws, including gift and estate tax laws, as may be applicable to
their particular situations. As used in this section, a
‘‘United States Holder’’ means a beneficial
owner of exchange senior notes and debentures that is, for United
States federal income tax purposes, (i) an individual who is a citizen
or resident of the United States, (ii) a corporation, or other entity
taxable as a corporation, created or organized in or under the laws of
the United States, any State thereof or the District of Columbia, (iii)
an estate the income of which is subject to United States federal
income taxation regardless of its source, or (iv) a trust if a court
within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States persons
have the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, certain trusts in existence on
August 20, 1996 and treated as United States persons
prior to such date may elect to continue to be treated as United States
persons. A ‘‘United States Alien Holder’’
is a beneficial owner of exchange senior notes and debentures that is
neither a United States person nor a partnership or other entity
treated as a partnership for United States federal income tax
purposes. If a holder of the exchange senior notes and debentures
is a partnership or other entity treated as a partnership for United
States federal income tax purposes, the tax treatment of the
partnership and each partner in such partnership generally will depend
on the activities of the partnership and the status of the partner.
Partnerships that hold exchange senior notes and debentures, and
partners in such partnerships, should consult their own tax
advisors. Exchange of Unregistered Senior Notes and Debentures
in the Exchange Offer The exchange of the unregistered senior
notes and debentures for exchange senior notes and debentures in the
Exchange Offer will not constitute a taxable event to holders for
United States federal income tax purposes. Consequently, a holder will
not recognize gain or loss upon the exchange 123
of an unregistered senior note or debenture
for an exchange senior note or debenture, the holder’s adjusted
tax basis in the exchange senior note or debenture will be the same as
its adjusted tax basis in the corresponding unregistered senior note or
debenture immediately before the exchange, and the holder’s
holding period in the exchange senior note or debenture will include
the holding period in the unregistered senior note or debenture
exchanged therefor. Tax Consequences to United States
Holders
Payments of Stated Interest
Payments of
stated interest on the exchange senior notes and debentures generally
will be taxable to a United States Holder as ordinary interest income
at the time any such interest accrues or is received in accordance with
the United States Holder’s regular method of accounting for
United States federal income tax purposes.
Market Discount
and Bond Premium
A United States Holder who purchases one
or more exchange senior notes or debentures at a market discount
(generally, at a cost less than its stated principal amount) that
exceeds a statutorily defined de minimis amount will be subject to the
‘‘market discount’’ rules of the Code.
These rules, provide, in part, that gain on the sale or other
disposition of a debt instrument is treated as ordinary income to the
extent of accrued market discount not previously included in gross
income. The market discount rules also provide for the deferral of
interest deductions with respect to debt incurred to purchase or carry
a note that has market discount unless a United States Holder elects to
include market discount in its income currently. A United States
Holder who purchases one or more exchange senior notes and debentures
at a premium (generally, at a cost in excess of its stated principal
amount) may elect to amortize such premium as an offset to interest
income under the premium amortization rules of the Code. Any election
to amortize bond premium will apply to all notes held by the United
States Holder at the beginning of the first taxable year to which the
election applies or thereafter acquired by the United States Holder and
is irrevocable without the consent of the IRS. A United States
Holder who purchases exchange senior notes and debentures at a premium
or at a discount should consult with its independent tax advisors about
the potential application of the bond premium or market discount
rules.
Sale, Taxable Exchange, Redemption, Retirement or
other Taxable Disposition of the Exchange Senior Notes and Debentures
A United States Holder will recognize gain or loss on the
sale, taxable exchange, redemption, retirement or other taxable
disposition of an exchange senior note or debenture in an amount equal
to the difference between the amount realized upon the disposition
(less any portion allocable to any accrued and unpaid interest, which
will be taxable as ordinary income to the extent not previously
included in gross income) and the United States Holder’s
adjusted tax basis in the exchange senior note or debenture. Such gain
or loss generally will be a capital gain or loss, and will be a
long-term capital gain or loss if the United States Holder has held the
exchange senior note or debenture for more than one year. A United
States Holder’s adjusted tax basis in an exchange senior note or
debenture generally will be the cost of the exchange senior note or
debenture, less any principal payments received by such United States
Holder. Long-term capital gains of certain United States Holders
(including individuals) generally are eligible for reduced rates of
United States federal income tax. The deductibility of capital losses
is subject to limitations under the Code. Tax Consequences to
United States Alien Holders Under present United States federal
income tax law, and subject to the discussion below concerning backup
withholding: 124 The certification
requirement referred to in subparagraph (a) will be fulfilled if the
beneficial owner of exchange senior notes and debentures certifies on
IRS Form W-8BEN or successor form, under penalties of perjury, that
such owner is not a United States person and provides its name and
address, and (i) such beneficial owner files such IRS Form W-8BEN or
successor form with the withholding agent or (ii) in the case of
exchange senior notes and debentures held on behalf of the beneficial
owner by a securities clearing organization, bank or other financial
institution holding customers’ securities in the ordinary course
of its trade or business, such financial institution files with the
withholding agent a statement that it has received the IRS Form W-8BEN
or successor form from the beneficial owner of the exchange senior
notes and debentures, furnishes the withholding agent with a copy
thereof and otherwise complies with the applicable IRS
requirements. If a United States Alien Holder of exchange senior
notes and debentures is engaged in a trade or business in the United
States, and if interest on the exchange senior notes and debentures (or
gain realized on their sale, taxable exchange or other disposition) is
effectively connected with the conduct of such trade or business (and,
if an income tax treaty applies, generally is attributable to a U.S.
‘‘permanent establishment’’ maintained by
such United States Alien Holder), the United States Alien Holder,
although exempt from the withholding tax discussed in subparagraph (a)
above, will be subject to regular United States federal income tax on
such effectively connected interest (or gain), generally in the same
manner as if it were a United States Holder. See ‘‘Tax
Consequences to United States Holders’’ above. In lieu of
the certificate described in the preceding paragraph, such a United
States Alien Holder will be required to provide to the withholding
agent a properly executed IRS Form W-8ECI or successor form, as
appropriate, to claim an exemption from withholding tax. In addition,
if such United States Alien Holder is a foreign corporation, it may be
subject to a 30% branch profits tax (unless reduced or
eliminated by an applicable treaty) on its earnings and profits for the
taxable year attributable to such effectively connected interest (or
gain), subject to certain adjustments. Backup Withholding and
Information Reporting
United States
Holder
Under current United States federal income tax law,
information reporting requirements apply to certain payments of
principal, interest, or proceeds of sales or other dispositions to
noncorporate 125
United States Holders. In addition, a
backup withholding tax will apply to such payments (currently at a rate
of 28%) if the noncorporate United States Holder (i) fails to
furnish its taxpayer identification number
(‘‘TIN’’) which, for an individual, is his
or her social security number, (ii) furnishes an incorrect TIN, (iii)
is notified by the IRS that such United States Holder is subject to
backup withholding for failure to report interest and dividend
payments, or (iv) under certain circumstances fails to certify, under
penalties of perjury, that it has furnished a correct TIN and has not
been notified by the IRS that such United States Holder is subject to
backup withholding for failure to report interest and dividend
payments. United States Holders should consult their tax advisors
regarding their qualification for exemption from backup withholding and
the procedure for obtaining such an exemption if applicable. Backup
withholding is not additional tax. Any amount withheld under the backup
withholding rules generally will be allowed as a refund or credit
against a United States Holder’s United States federal income
tax liability, provided that the required information is timely
furnished to the IRS.
United States Alien
Holder
Interest payments made to a United States Alien
Holder will generally be reported to such United States Alien Holder
and to the IRS on Form 1042-S or any successor form. Backup withholding
will not apply to payments made on the exchange senior notes and
debentures if the certifications required by Sections 871(h) and 881(c)
of the Code as described above are received, provided that we or our
paying agent do not have actual knowledge or reason to know that the
payee is a United States person. Under current Treasury Regulations,
payments on the sale, taxable exchange, redemption, retirement, or
other taxable disposition of exchange senior notes and debentures made
to or through a foreign office of a broker generally will not be
subject to backup withholding. However, if such broker
is: then information
reporting will be required unless the broker has documentary evidence
that the beneficial owner is not a United States person and certain
other conditions are met or the beneficial owner otherwise establishes
an exemption. Backup withholding may apply to any payment that such
broker is required to report if the broker has actual knowledge or
reason to know that the payee is a United States person. Payments to or
through the United States office of a broker will be subject to backup
withholding and information reporting unless the United States Alien
Holder certifies, under penalties of perjury, that it is not a United
States person and the payor does not have actual knowledge or reason to
know that the United States Alien Holder is a United States person, or
the United States Alien Holder otherwise establishes an
exemption. United States Alien Holders of the exchange senior
notes and debentures should consult their tax advisers regarding the
application of information reporting and backup withholding in their
particular situations, the availability of an exemption therefrom, and
the procedure for obtaining such an exemption, if available. Any
amounts withheld from a payment to a United States Alien Holder under
the backup withholding rules will be allowed as a credit against such
United States Alien Holder’s United States federal income tax
liability and may entitle such United States Alien Holder to a refund,
provided that the United States Alien Holder files a United States
income tax return and the required information is timely furnished to
the IRS. 126 PLAN OF DISTRIBUTION Each
broker-dealer that receives exchange senior notes and debentures for
its own account pursuant to the exchange offer must acknowledge that it
will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such exchange senior notes and
debentures. This prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales
of exchange senior notes and debentures received in exchange for
unregistered senior notes and debentures where such unregistered senior
notes and debentures were acquired as a result of market-making
activities or other trading activities. We have agreed that, for a
period of 180 days after the expiration of the exchange offer, or such
shorter period which will terminate when the broker-dealers have
completed all resales subject to applicable prospectus delivery
requirements, we will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such
resale. In addition, until 90 days after the date of this prospectus,
all dealers effecting transactions in the exchange senior notes and
debentures may be required to deliver a prospectus. We will not
receive any proceeds from any sale of exchange senior notes and
debentures by broker-dealers. Exchange senior notes and debentures
received by broker-dealers for their own account pursuant to the
exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the exchange senior
notes and debentures or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions
from any such broker-dealer or the purchasers of any such exchange
senior notes and debentures. Any broker-dealer that resells exchange
senior notes and debentures that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange senior notes and
debentures may be deemed to be an
‘‘underwriter’’ within the meaning of the
Securities Act and any profit on any such resale of exchange senior
notes and debentures and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that, by acknowledging
that it will deliver and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
‘‘underwriter’’ within the meaning of the
Securities Act. We have agreed to pay all expenses incident to
the exchange offer (including the expenses of one counsel for the
holders of the unregistered senior notes and debentures) other than
commissions, discounts or concessions of any broker-dealers and will
indemnify the holders of the unregistered senior notes and debentures
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act. 127 LEGAL MATTERS The validity of
the exchange senior notes and debentures will be passed upon for Viacom
by Shearman & Sterling LLP, New York, New
York. EXPERTS The consolidated financial statements of
Viacom Inc. as of December 31, 2005 and 2004 and for each
of the three years in the period ended December 31, 2005
included in this prospectus and the financial statement schedule
included in the registration statement have been so included in
reliance on the reports of PricewaterhouseCoopers LLP, an independent
registered public accounting firm, given on the authority of said firm
as experts in auditing and accounting. WHERE YOU CAN FIND MORE
INFORMATION We file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy
any document we file at the SEC’s public reference rooms at 100
F Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms.
Our SEC filings are also available to the public on the SEC’s
web site at http://www.sec.gov. Our Class A common stock and Class B
common stock is listed on the New York Stock Exchange. Information
about us is also available at the New York Stock Exchange. You
may obtain a copy of these filings at no cost, by writing or
telephoning us at the following address: Viacom
Inc.
Any request for documents should be made
by , 2006 to ensure timely delivery of the
documents prior to the expiration of the exchange
offer.
128 INDEX
TO FINANCIAL STATEMENTS The following consolidated financial
statements of the registrant and its subsidiaries are submitted
herewith as part of this
prospectus: F-1 MANAGEMENT'S
STATEMENT OF RESPONSIBILITY FOR FINANCIAL REPORTING Management
has prepared and is responsible for our consolidated financial
statements and related notes. They have been prepared in accordance
with generally accepted accounting principles and necessarily include
amounts based on judgments and estimates by management. Our
consolidated financial statements have been audited by
PricewaterhouseCoopers LLP, our independent registered public
accounting firm (‘‘independent auditor’’), who
have expressed their opinion with respect to the presentation of these
statements. We became a new registrant on November 28,
2005 and our separation from the Former Viacom was effective on
December 31, 2005. As a result, for 2005 we were not subject to
the requirements of Section 404 of the Sarbanes-Oxley Act
relating to internal controls. Former Viacom, which included the
business segments we acquired from them, was nonetheless subject to
these requirements in 2005. As a result of the separation,
modifications to internal controls have occurred and will continue to
occur as we evaluate the optimal design of our internal controls as a
separate public company. The Audit Committee of the Board of
Directors, which is comprised solely of independent directors within
the meaning of the NYSE corporate governance listing standards and the
Sarbanes-Oxley Act of 2002, meets periodically with the independent
auditor, with our internal auditors, with our general counsel, as well
as with other members of management, to review accounting, auditing,
internal accounting controls and financial reporting matters. The Audit
Committee is also responsible for retaining the independent auditor for
the coming year, subject to stockholder ratification. The independent
auditor, the internal auditors and the general counsel have full and
free access to the Audit Committee with and without management's
presence. F-2 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM To the Board of Directors and Stockholders
of Viacom Inc.: In our opinion, the consolidated
financial statements listed in the accompanying index present fairly,
in all material respects, the financial position of Viacom Inc.
and its subsidiaries (the ‘‘Company’’) at
December 31, 2005 and 2004, and the results of their operations
and their cash flows for each of the three years in the period ended
December 31, 2005 in conformity with accounting principles
generally accepted in the United States of America. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our
audits of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
/s/
PRICEWATERHOUSECOOPERS
LLP
New York, New
York F-3 VIACOM INC. AND
SUBSIDIARIES See
notes to consolidated financial statements. F-4 VIACOM INC. AND
SUBSIDIARIES F-5 See
notes to consolidated financial statements. F-6 VIACOM INC. AND
SUBSIDIARIES See
notes to consolidated financial statements. F-7 VIACOM INC. AND
SUBSIDIARIES See
notes to consolidated financial statements. F-8 VIACOM INC. AND
SUBSIDIARIES See
notes to consolidated financial
statements. F-9 VIACOM INC.
AND SUBSIDIARIES 1) DESCRIPTION OF
BUSINESS AND BASIS OF PRESENTATION The Separation On
December 31, 2005, Viacom Inc.
(‘‘Viacom’’ or the
‘‘Company’’) became a stand-alone public
company in connection with Viacom's separation from the former
Viacom Inc. (the ‘‘Former Viacom’’).
Prior to the separation, the Company was a wholly-owned subsidiary of
Former Viacom known as ‘‘New Viacom Corp.’’ and
acquired all of the its initial businesses from the Former Viacom. Such
businesses include MTV Networks (‘‘MTVN’’)
(including, among other networks, MTV Music Television, MTV 2, VH1,
Nickelodeon, Nick at Nite, Comedy Central, CMT: Country Music
Television, Spike TV and TV Land), BET, Paramount Pictures, Paramount
Home Entertainment and Famous Music. The separation was effected
through a merger, pursuant to which Viacom Merger Sub Inc. was
merged with Former Viacom, with Former Viacom continuing as the
surviving entity and being renamed CBS Corporation, and New Viacom
Corp. being renamed Viacom Inc. On December 31, 2005, in
connection with the merger and the separation, each share of Former
Viacom Class A common stock was converted into the right to
receive 0.5 of a share of Viacom Class A common stock and 0.5 of
a share of CBS Corporation Class A common stock. Similarly, each
share of Former Viacom Class B common stock was converted into
the right to receive 0.5 of a share of Viacom Class B common
stock and 0.5 of a share of CBS Corporation class B common
stock. Holders of Viacom Class A and B common stock received
cash in lieu of fractional shares. In accordance with the terms
of the Separation Agreement, on December 29, 2005 the Company
paid a preliminary special dividend to the Former Viacom of
$5.4 billion. The dividend reduced the Company's
Stockholders' Equity in the accompanying Consolidated Balance
Sheet as of December 31, 2005 and was funded by borrowings under
the Company's term loan facility, which is more fully described
in Note 10. Pursuant to the provisions of the Separation
Agreement, the preliminary special dividend is subject to adjustments
for, among other items, actual Former Viacom debt as of the date of the
separation and actual CBS Corporation cash flow for the full year 2005,
compared to estimates used to calculate the preliminary dividend paid
on December 29, 2005. On March 14, 2006, the Company
received from CBS Corporation an initial statement that the
dividend should be increased by a net amount of approximately
$460 million. Viacom has begun its assessment of the amount and
underlying components of the proposed increase. Pursuant to the
Separation Agreement, the parties have up to 65 days to settle on the
adjustment before any disputed amounts would become subject to a
dispute resolution process. Any additional amount due will be reflected
as a direct charge to Stockholders' Equity in the period in which
the adjustment amount is determined. The Separation Agreement
further provided that the Company is responsible for the first
$195.0 million in costs directly related to the separation.
Amounts incurred in excess of $195.0 million will be funded
equally between the Company and CBS Corporation. Included as a
component in selling, general and administrative expenses in the
Company's Consolidated Income Statement for the year ended
December 31, 2005 is $163.5 million of transaction costs
reflected as period expenses. Such amounts principally included
investment banking and other professional fees. Also, in
connection with the separation, Viacom and CBS Corporation entered into
certain agreements in order to govern certain of the ongoing
relationships between Viacom and CBS Corporation after the separation.
These agreements include a Transition Services Agreement and a Tax
Matters Agreement. Related party arrangements are more fully described
in Notes 3 and 10. Basis of Presentation The accompanying
consolidated financial statements of the Company are presented on a
carve-out basis and reflect the consolidated historical results of
operations, financial position and cash flows of the Company, with
operations in two segments: (i) Cable Networks and
(ii) Entertainment. F-10 VIACOM INC.
AND SUBSIDIARIES The assets and liabilities of Viacom have
been accounted for at the historical book values carried by Former
Viacom prior to the separation and were assigned to Viacom pursuant to
the terms of the Separation Agreement. The indebtedness of Former
Viacom, other than certain capital lease obligations, was not
transferred to Viacom as it remains the indebtedness of CBS
Corporation. Prior to the separation, Former Viacom centrally managed
the cash flows generated from the Company's various businesses.
The Invested Capital balance included as a component of
Stockholders' Equity in the Company's Consolidated Balance
Sheet through the date of separation includes accumulated earnings of
the Company as well as receivables/payables due to/from CBS Corporation
resulting from cash transfers and intercompany activity. Interest was
not charged or credited on amounts due to/from Viacom. The
Consolidated income Statements include allocations of Former Viacom
corporate expenses and Paramount Pictures corporate overhead including
accounting, treasury, tax, legal, human resources, information systems
and other services as well as depreciation and amortization on
allocated costs, to reflect the utilization of such shared services and
assets by the Company. Total corporate costs allocated to the Company,
excluding separations costs, were approximately $162.0 million,
$136.2 million, and $112.6 million for the years ended
December 31, 2005, 2004 and 2003, respectively, and were
primarily included in Selling, General and Administrative expenses in
the accompanying Consolidated Income Statements. Management believes
the methodologies used to allocate charges for the services described
above are reasonable. The consolidated financial statements may
not necessarily reflect Viacom's results of operations, financial
position and cash flows in the future or what Viacom's results of
operations, financial position and cash flows would have been had the
Company been a separate, stand-alone company during the periods
presented. As described above, none of the indebtedness of Former
Viacom other than capital lease obligations was assigned to the Company
as it remains the indebtedness of CBS Corporation. Accordingly, debt
service cost is not reflected in the Company's Consolidated
Income Statements. Famous Players and Blockbuster Inc.
have been reported as discontinued operations for all periods
presented. Famous Players was sold on July 22, 2005 and
Blockbuster was split-off from Former Viacom in 2004. (See
Note 4). 2) SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Use of Estimates — The
preparation of the Company's financial statements in conformity
with generally accepted accounting principles in the United States
requires management to make estimates, judgments and assumptions that
affect the amounts reported in the financial statements and
accompanying notes, including estimates of ultimate revenues and costs
of feature film product, sales returns, allowance for doubtful
accounts, impairment testing of long-lived assets and for other
reserves. The Company bases its estimates on historical experience and
on various other assumptions that are believed to be reasonable under
the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or
conditions.
Principles of
Consolidation — The consolidated financial
statements include the accounts of the Company and investments in which
it holds more than 50% ownership in subsidiaries. Investments in
affiliated companies over which the Company has a significant influence
and ownership of more than 20% but less than or equal to
50% are accounted for under the equity method. Investments in
which the Company's ownership interest is 20% or less over
which the Company has no significant influence are accounted for under
the cost method. All significant intercompany transactions have been
eliminated. All related party transactions between the Company and CBS
Corporation have not been eliminated in these consolidated financial
statements (See Notes 1, 3 and 13). F-11 VIACOM INC.
AND SUBSIDIARIES The Company applies the guidelines set
forth in Financial Accounting Standards Board
(‘‘FASB’’) Interpretation No. 46R,
‘‘Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51’’ (‘‘FIN
46R’’) in assessing its interests in variable interest
entities to determine whether to consolidate that entity. The
application of FIN 46R has not had a material impact on the
Company's financial statements.
Cash and Cash
Equivalents — Cash and cash equivalents
consist of cash on hand and short-term (maturities of three months or
less at the date of purchase) highly liquid
investments.
Inventories — Inventories
related to theatrical and cable programs (which includes direct
production costs, theatrical production overhead and acquisition costs)
are stated at the lower of amortized cost or net realizable value.
Inventories are amortized and estimated liabilities for residuals and
participations are accrued, for an individual product based on the
proportion that current estimated revenues bear to the estimated
remaining total lifetime revenues. Estimates for initial domestic
syndication and basic cable revenues are not included in the estimated
lifetime revenues of network series until such sales are probable.
These estimates are periodically reviewed and adjustments if any, will
result in changes to inventory amortization rates and estimated
accruals for residuals and participations. The costs of
theatrical development projects are amortized over a three year period
unless they are abandoned earlier, in which case these projects are
written down to their estimated net realizable value in the period the
decision to abandon the project is determined. The Company
estimates that approximately 93% of unamortized costs of
completed and released films at December 31, 2005 will be
amortized within the next three years. Approximately
$381 million of unamortized costs for completed and released
films, and completed but not released films are expected to be
amortized during the next twelve months. As of December 31,
2005, unamortized acquired film libraries of approximately
$111 million remain to be amortized on a straight-line basis
over an average remaining life of eight years.
Program
Rights — The Company acquires rights to
programming and produces programming to exhibit on its cable networks.
The costs incurred in acquiring and producing programs are capitalized
and amortized over the license period or projected useful life of the
programming. Program rights and the related costs and obligations are
recorded when the license period has begun, and when the program is
accepted and available for airing.
Property and
Equipment — Property and equipment is stated
at cost. Depreciation is computed by the straight-line method over
estimated useful lives as
follows: Leasehold
improvements are amortized using the straight-line method over the life
of the asset, not to exceed the life of the lease. Depreciation
expense, including capitalized lease amortization, was
$188.0 million in 2005, $190.9 million in 2004 and
$145.7 million in 2003. Amortization expense related to capital
leases was $53.9 million in 2005, $44.2 million in 2004
and $28.1 million in 2003. Accumulated amortization of capital
leases was $188.4 million at December 31, 2005 and
$187.2 million at December 31, 2004.
Impairment
of Long-Lived Assets — The Company assesses
long-lived assets and intangibles, other than goodwill and intangible
assets with indefinite lives, for impairment whenever there is an
indication that the carrying amount of the asset may not be
recoverable. Recoverability of these assets is determined by comparing
the forecasted undiscounted cash flows generated by those assets to
their net carrying value. The amount of impairment loss, if any, will
generally be measured by the difference between the net book value of
the assets and the estimated fair value of the related
assets. F-12 VIACOM INC.
AND SUBSIDIARIES
Goodwill and Intangible
Assets — The Company follows the guidance
established by Statement of Financial Accounting Standards
(‘‘SFAS’’) 142 ‘‘Goodwill and Other
Intangible Assets’’
(‘‘SFAS 142’’). The Company's
intangible assets are considered to have finite or indefinite lives and
are allocated to various reporting units, which are generally
consistent with or one level below the Company's reportable
segments. Intangible assets with finite lives, which primarily consist
of subscriber and music rights agreements, are generally amortized by
the straight-line method over their estimated useful lives, which range
from 5 to 40 years and are reviewed for impairment at least
annually. Intangible assets with indefinite lives and goodwill are no
longer amortized but are tested for impairment on an annual basis and
between annual tests if events occur or circumstances change that would
more likely than not reduce the fair value below its carrying amount.
If the carrying amount of goodwill or the intangible asset exceeds its
fair value, an impairment loss is recognized as a non-cash
charge.
Discontinued
Operations — On June 13, 2005, Former
Viacom announced that it reached an agreement to sell Famous Players,
its Canadian-based theater chain. The transaction closed on
July 22, 2005, with a sale price of approximately
$400.0 million. In 2004, Former Viacom completed the exchange
offer for the split-off of Blockbuster Inc. and as a result, the
consolidated financial statements of the Company present
Blockbuster and Famous Players as discontinued operations for
all periods presented, in accordance with SFAS No. 144,
‘‘Accounting for the Impairment or Disposal of Long-Lived
Assets’’
(‘‘SFAS 144’’).
Revenue
Recognition — Advertising revenues are
recognized in the period during which advertising spots are aired.
Subscriber fees for Cable Networks are recognized in the period the
service is provided. Cable launch incentive fees to affiliates are
capitalized and amortized as a contra-revenue item. Revenue associated
with audience deficiency units is deferred until the period in which
make good units are aired. In accordance with Statement
of Position 00-2 ‘‘Accounting by Producers or Distributors
of Films’’ (‘‘SOP-002’’),
Entertainment revenues from theatrical distribution of motion pictures
are recognized as motion pictures are exhibited. Revenues from DVD and
videocassette sales of motion pictures are recognized upon shipment to
customers. Revenues from video revenue sharing agreements are
recognized as earned. Revenues from the licensing of motion pictures
and other programming on domestic and international premium
subscription program services, broadcast and basic cable networks, and
individual television stations are recognized upon availability of the
motion picture for telecast except for pay-per-view which is recognized
upon purchase by the consumer. On average, the length of the initial
revenue cycle for motion pictures approximates four to seven years.
Revenues arising from television license agreements are recognized in
the period that the motion picture or television series is available
for telecast.
Sales of Multiple Products or
Services — The Company follows Emerging Issues
Task Force No. 00-21, ‘‘Revenue Arrangements with
Multiple Deliverables’’ for revenue recognition of revenues
derived from a single contract that contains multiple products or
services.
Advertising — Advertising
costs are expensed as incurred. The Company incurred total advertising
expenses of $888.0 million in 2005, $915.5 million in
2004 and $912.5 million in 2003.
Sales Returns
and Allowances — The Company records a
provision for sales returns and allowances at the time of sale based
upon an estimate of future returns of product by analyzing a
combination of historical returns, current economic trends, projections
of consumer demand for the product and point-of-sale data available
from certain retailers. Based on this information, a percentage of each
sale is reserved, provided that the customer has the right of return.
Customers are currently given varying rights of
return.
Provision for Doubtful
Accounts — The provision for doubtful accounts
charged to expense was $28.5 million in 2005,
$30.1 million in 2004 and $32.1 million in
2003. F-13 VIACOM INC.
AND SUBSIDIARIES
Income
Taxes — For federal income tax purposes, the
Company files a consolidated income tax return with CBS Corporation.
Pursuant to the Tax Matters Agreement with CBS Corporation, the Company
determines its federal tax liability principally on a separate company
basis and pays any liability to CBS Corporation. State tax returns are
filed on an individual company basis except for certain states where
they are filed on a combined basis with CBS Corporation. Pursuant to
the Tax Matters Agreement, the Company determines its state tax
liability for those combined states on a separate company basis and
pays any liability to CBS Corporation. The Company
accounts for income taxes as required by Statement of Financial
Accounting Standards No. 109 (‘‘SFAS 109’’),
‘‘Accounting for Income Taxes.’’ Accordingly,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered
or settled.
Pension and Other Postretirement
Benefits — The determination of the
Company's obligation and expense for pension and postretirement
benefits and transfer of plan assets to cover such obligations is based
on assumptions which were actuarially determined. The Company believes
such allocation methodologies are reasonable and consistent with the
Separation
Agreement.
Interest — Costs
associated with any issuance of debt are expensed as interest over the
term of the related debt.
Foreign Currency Translation
and Transactions — The Company's foreign
subsidiaries' assets and liabilities are translated at exchange
rates in effect at the balance sheet date, while results of operations
are translated at average exchange rates for the respective periods.
The resulting translation gains or losses, are included as a separate
component of stockholders' equity in accumulated other
comprehensive income. Foreign currency transaction gains and losses
have been included in ‘‘Other items, net’’ in
the Consolidated Income Statements.
Net Earnings
(Loss) per Common Share — Basic Earnings per
Share (‘‘EPS’’) are computed by dividing net
earnings by the number of shares of common stock issued and outstanding
at the date of the separation as if such shares were outstanding for
the full year for all periods presented. Diluted EPS for the year ended
2005 is computed by dividing net earnings by the number of shares
issued and outstanding at the date of the separation through the end of
the year adjusted to give effect to all potentially dilutive common
shares weighted from the date of the separation. Diluted EPS for the
years prior to 2005 is equal to basic earnings per share as no dilutive
securities were outstanding for those
periods.
Comprehensive Income
(Loss) — As of December 31, 2005,
minimum pension liability adjustment is net of a tax benefit of
$15.0 million. F-14 VIACOM INC.
AND SUBSIDIARIES
Stock-based
Compensation — The Company follows the
disclosure-only provisions of SFAS No. 123,
‘‘Accounting for Stock-Based Compensation’’
(‘‘SFAS 123’’). The Company applies APB
Opinion No. 25 ‘‘Accounting for Stock Issued to
Employees’’ and does not recognize compensation expense for
the stock option grants because options are not issued at exercise
prices below market value at date of grant. Employees were granted
options to purchase shares of the Former Viacom's Class B
common stock under the Former Viacom's Long-Term Management
Incentive Plan (See Note 12). On March 8, 2005, the
Compensation Committee of the board of directors of the Former Viacom
approved the acceleration of the vesting of unvested stock options
having an exercise price of $38.00 or greater (on a pre-conversion
basis) granted under the Former Viacom's 2000 and 1997 Long-Term
Management Incentive Plans. Stock option awards granted to employees of
the Company from 1999 through 2004 with respect to approximately
12 million shares of Former Viacom's class B common
stock were subject to this acceleration which was effective as of
March 8, 2005. Since these options had exercises prices in
excess of the current market values and were not fully achieving their
original objectives of incentive compensation and employee retention,
the Former Viacom expected the acceleration to have a positive effect
on employee morale, retention and perception of option value. As the
exercise prices of the option grants were in excess of the
Company's common stock price at the time of the acceleration of
the vesting, no compensation expense was required to be recognized. The
acceleration also eliminated future compensation expense the Company
would otherwise recognize in its Consolidated Statement of Operations
under SFAS No. 123 (revised 2004) ‘‘Share-Based
Payment’’ (‘‘SFAS 123R’’).
Incremental expense of $105.9 million associated with the
acceleration was recorded in the 2005 option expense pro forma
disclosure which follows. The following table reflects the effect
on net earnings from continuing operations if the Company had applied
the fair value recognition provisions of SFAS 123 to stock-based
employee compensation. These pro forma effects may not be
representative of future stock compensation expense since the estimated
fair value of stock options on the date of grant is amortized to
expense over the vesting period and the vesting of certain options was
accelerated on March 8, 2005. See Note 12 for detailed
assumptions. For the
years ended December 31, 2005, 2004 and 2003, if the Company had
applied the fair value recognition provision of SFAS 123, an
additional expense of $.6 million, $15.7 million and
$19.0 million, respectively, would have been recognized in
discontinued operations.
Accounting
Changes — For 2003, the cumulative effect of
accounting change, net of minority interest and tax, of
$(6.1) million, resulted from the adoption of SFAS
No. 143 ‘‘Accounting for Asset Retirement
Obligations.’’
Derivative Instruments and Hedging
Activities — SFAS No. 133,
‘‘Accounting for Derivative Instruments and Hedging
Activities,’’ as amended
(‘‘SFAS 133’’) requires all derivatives
to be recorded on the balance sheet at fair value. SFAS 133 also
established rules for hedging instruments F-15 VIACOM INC.
AND SUBSIDIARIES
which, depending on the nature of the hedge,
require that changes in the fair value of the derivatives either be
offset against the change in fair value of assets or liabilities
through earnings, or be recognized in other comprehensive income until
the hedged item is recognized in
earnings.
Reclassifications — Certain
amounts have been reclassified to conform to the 2005
presentation.
Recent
Pronouncements — In May 2005, the FASB
issued SFAS No. 154 ‘‘Accounting Changes and Error
Corrections’’
(‘‘SFAS 154’’), a replacement of APB
Opinion No. 20, ‘‘Accounting Changes’’,
and FASB Statement No. 3, ‘‘Reporting Accounting
Changes in Interim Financial Statements’’, effective for
fiscal years beginning after December 15, 2005. SFAS 154
changes the requirements for the accounting for and reporting of a
voluntary change in accounting principle as well as the changes
required by an accounting pronouncement which does not include specific
transition provisions. The Company does not expect the implementation
of SFAS 154 to have any impact on the Company's
consolidated financial position, results of operations or cash
flows. In December 2004, the Financial Accounting
Standards Board (‘‘FASB’’) issued SFAS
No. 123 (revised 2004) ‘‘Share-Based
Payment’’ (‘‘SFAS 123R’’).
SFAS 123R revises SFAS 123 and supersedes APB 25.
SFAS 123R requires companies to measure the cost of employee
services received in exchange for an award of equity instruments based
on grant-date fair value of the award. That cost will be recognized
over the vesting period during which an employee is required to provide
service in exchange for the award. On April 14, 2005, the
Securities and Exchange Commission issued a ruling that amended the
effective date for SFAS 123R. As a result, the Company adopted
SFAS 123R on January 1, 2006. The standard provides
for a prospective application. Under this method, the Company will
begin recognizing compensation cost for equity based compensation of
all new or modified grants after the date of adoption. In addition, the
Company will recognize the unvested portion of the grant date fair
value of awards issued prior to the adoption based on the fair values
previously calculated for disclosure purposes. At December 31,
2005, the aggregate value of unvested options as determined using a
Black-Scholes option valuation model, was approximately
$64.4 million. Upon adoption of SFAS 123R, such amount
will be recognized over the remaining vesting period of these
options. 3) RELATED PARTY TRANSACTIONS NAI is the
controlling stockholder of both Viacom and CBS Corporation. Sumner
M. Redstone, the controlling shareholder of NAI through NAIRI,
is the Executive Chairman of the Board and Founder of the Company and
CBS Corporation. Viacom and CBS Corporation Related Party
Transactions The Company, in the normal course of business, is
involved in transactions with companies owned by or affiliated with CBS
Corporation. The Company, through Paramount Pictures, licenses motion
picture products to CBS Corporation. Paramount Pictures also
distributes certain television products for a fee on behalf of CBS
Corporation's television production group in the home
entertainment market. MTV Networks and BET recognize advertising
revenues for media spending placed by various subsidiaries of CBS
Corporation. In addition, the Company is involved in transactions with
Simon & Schuster and Paramount Parks, wholly owned
subsidiaries of CBS Corporation. Total revenues from these transactions
were $154.9 million, $157.4 million, and
$221.2 million for the years ended December 31, 2005,
2004 and 2003, respectively. The Company, through MTV Networks
and BET, purchases television programming from CBS Corporation. The
cost of these purchases is initially recorded as program rights
inventory and amortized over the life of the contract. In addition, the
Company places advertisements with various subsidiaries of CBS
Corporation. The total related party purchases were
$173.6 million, of which F-16 VIACOM INC.
AND SUBSIDIARIES
$78.8 million was for purchases of
advertising, $378.2 million, of which $214.1 million was
for purchases of programming, and $186.8 million, of which
$112.0 million was for purchases of programming, for the years
ended December 31, 2005, 2004 and 2003,
respectively. Transactions with CBS Corporation, through the
normal course of business, are settled in cash. The following table
presents the amounts due from or due to CBS Corporation as reflected in
our consolidated balance
sheet: As discussed in
Note 1, the Company also entered into a Transition Services
Agreement with CBS Corporation, pursuant to which the Company will
provide CBS Corporation and CBS Corporation will provide the Company
with various support services for certain of their respective
businesses including data center, payroll and uplink services for
various periods subsequent to the date of separation. No amounts have
been reflected in the accompanying Consolidated Income Statements as
the Separation occurred on December 31,
2005. Relationship between Viacom and Other Related
Parties NAI licenses films in the ordinary course of business
for its motion picture theaters from all major studios including
Paramount Pictures. During the year ended December 31, 2005 and
for the years ended December 31, 2004 and 2003, NAI made
payments to Paramount Pictures in the aggregate amounts of
approximately $14.6 million, $11.2 million,
$9.6 million, respectively. NAI and Mr. Redstone
owned in the aggregate approximately 88% of the common stock of
Midway Games Inc. (‘‘Midway’’) as of
March 9, 2006. Midway places advertisements on several of
Viacom's cable networks from time to time. During the years ended
December 31, 2005, 2004 and 2003, transactions with Midway
totaled approximately $5.9 million, $5.5 million and
$1.4 million, respectively. The Company believes that these
transactions were no more or less favorable to the subsidiaries than
they would have obtained from unrelated parties. The Company may
continue to enter into similar business transactions with Midway in the
future. On December 21, 2005, Viacom entered into an
agreement with NAI and NAIRI (the ‘‘NAIRI
Agreement’’) pursuant to which Viacom agreed to buy, and
NAI and NAIRI agreed to sell, a number of shares of Viacom
class B common stock each month such that the ownership
percentage of Viacom class A common stock and Viacom
class B common stock (considered as a single class) held by NAI
and/or NAIRI would not increase as a result of purchases of shares of
Viacom common stock under Viacom's $3.0 billion stock
purchase program which was approved, along with the NAIRI Agreement, by
the Former Viacom Board on December 8, 2005 and ratified by our
Board on January 26, 2006. F-17 VIACOM INC.
AND SUBSIDIARIES In September 2005, Cinemas
International Corporation N.V., a joint venture between Former Viacom
and Vivendi Universal, agreed to sell its Brazilian movie operations to
NAI for approximately $27.5 million in a transaction that closed
in October 2005. The sale was discussed with multiple potential
purchasers and negotiated on terms we believe are no more or less
favorable than those that might have been negotiated with an
unaffiliated party. The Company, in the normal course of
business, is involved in other related party transactions that have not
been material in any of the periods
presented. 4) DISCONTINUED OPERATIONS On
July 22, 2005, Former Viacom sold Famous Players Inc.,
its Canadian-based theater chain, for approximately
$400 million. Famous Players has been presented as a
discontinued operation in the consolidated financial statements for all
periods presented. In 2004, Former Viacom completed the exchange
offer for the split-off of Blockbuster Inc.
(‘‘Blockbuster’’) (NYSE: BBI and BBI.B). Under
the terms of the offer, Former Viacom accepted 27,961,165 shares of
Former Viacom common stock in exchange for the 144 million
common shares of Blockbuster that Former Viacom owned. Each share of
Former Viacom Class A or Class B common stock accepted
for exchange by Former Viacom was exchanged for 5.15 shares of
Blockbuster common stock, consisting of 2.575 shares of Blockbuster
class A common stock and 2.575 shares of Blockbuster
class B common stock. The Company has agreed to indemnify CBS
Corporation with respect to its obligations as guarantor on certain
Blockbuster store leases (See Note 15). The following
table sets forth the Company's net loss attributable to
Blockbuster Inc. and Famous Players, which are presented as
discontinued
operations: F-18 VIACOM INC.
AND SUBSIDIARIES In
2004, the loss from discontinued operations of $1.4 billion
primarily reflects a non-cash impairment charge of $1.5 billion
for the impairment of goodwill and other long-lived assets in
accordance with SFAS 142 and SFAS 144. Blockbuster
performed an interim impairment test of its goodwill during the third
quarter of 2004 because of factors surrounding the Former
Viacom's exchange offer for the split-off of Blockbuster. In
2003, the loss from discontinued operations of $877.8 million
primarily reflects a non-cash impairment charge of $1.3 billion
recorded in accordance with SFAS 142. In completing its analysis
of the fair value of the video business, several events led Blockbuster
to conclude that the business had incremental risks that were required
to be included in the evaluation of goodwill. Additionally,
Blockbuster's review of long-lived assets in conjunction with
SFAS 144 resulted in an impairment charge of approximately
$18.5 million to reduce the carrying value of certain fixed
assets in four international markets. These charges were included in
loss from discontinued operations for the year ended
December 31, 2003. The following table presents the major
classes of assets and liabilities of Famous
Players: The net cash flow
provided by operating activities attributable to Blockbuster of
$236.6 million in 2004 reflects Blockbuster activities prior to
the completion of the split-off. The net cash flow used for investing
activities attributable to Blockbuster of $(421.0) million primarily
consists of Blockbuster cash and capital expenditures of
$221.9 million and $183.6 million, respectively. The net
cash flow used for financing activities attributable to Blockbuster of
$(49.0) million primarily reflects the special distribution of $5 per
Blockbuster's common share for a total of approximately
$738.1 million offset by the proceeds from Blockbuster's
new credit facilities. Refer to Note 15 Commitments and
Contingencies for discussion of guarantees relating to discontinued
operations. F-19 VIACOM INC.
AND SUBSIDIARIES 5) GOODWILL AND OTHER INTANGIBLE
ASSETS For the year ended December 31, 2005, the changes
in the book value of goodwill by segment were as
follows: At December 31, 2005 and
December 31, 2004, the Company had approximately
$370.8 million and $250.2 million of intangible assets,
respectively. Included in this amount were intangible assets with
indefinite lives for MTVN trademarks for approximately
$115.5 million at December 31, 2005 and approximately
$33.5 million at December 31, 2004. These assets are not
subject to amortization. The Company's intangible assets
subject to amortization and the related accumulated amortization were
as
follows: Amortization
expense relating to intangible assets was $71.0 million (2005),
$60.7 million (2004), and $52.2 million (2003). The
Company expects its aggregate annual amortization expense for existing
intangible assets subject to amortization for each of the next five
succeeding years to be as
follows: 6) SEVERANCE
AND OTHER CHARGES In conjunction with the separation, the
overhead structures at MTVN and Paramount were rationalized. In 2005,
the Company recorded charges of $47.9 million and
$22.6 million at MTVN and Entertainment respectively. In
2004, the Company recorded severance charges of $28.1 million,
related to the terminations of the former Entertainment Segment
Chairman and the former President and Chief Operating Officer of the
Former Viacom. Their allocation of the severance charges were recorded
in selling, general and administrative expenses in the Entertainment
Segment for $10.4 million and in Corporate expenses for
$17.7 million. Also in 2004, MTVN recorded a decrease of
$9.7 million to severance accruals due to a change in estimate
for a 2001 charge and revised its initial estimate of severance
liabilities for the acquisition of Comedy Central by
$1.6 million. F-20 VIACOM INC.
AND SUBSIDIARIES In 2003, charges of $18.0 million
were recorded at MTVN principally reflecting $9.3 million of
severance liabilities resulting from the acquisition of the remaining
50% of Comedy Central that the Company did not own and
$8.4 million for lease termination costs. The charges were
reflected in the Consolidated Income Statement as part of selling,
general and administrative expenses for the year ended
December 31, 2003. Severance payments continue through 2005
since certain employees were paid out over the terms of their
employment contracts. The following table summarizes the activity
for the restructuring charges discussed
above: 7) ACQUISITIONS On
December 9, 2005, the Company and its subsidiary Paramount
Pictures Corporation (‘‘Paramount’’) entered
into a purchase agreement (the ‘‘Agreement’’)
with DreamWorks L.L.C. and certain holders of outstanding membership
interests in DreamWorks L.L.C. identified therein (the
‘‘Sellers’’), pursuant to which the Company
acquired all of the outstanding limited liability company interests in
DreamWorks L.L.C. upon the terms and subject to the conditions set
forth in the Agreement for approximately $1.6 billion, including
the assumption of debt and certain other obligations. Paramount also
entered into an exclusive seven-year distribution agreement with
DreamWorks Animation SKG, Inc. At the date of the agreement, the
Company paid $75.0 million as a deposit against the purchase
price. The acquisition was completed on January 31, 2006 (See
Note 20). On October 12, 2005, the Company acquired
IFILM for $49.0 million. IFILM's results have been
consolidated as part of the Cable Networks Segment, effective from the
date of the acquisition. The excess purchase price over the fair value
of the tangible and identifiable intangible net assets acquired of
approximately of $47.1 million was allocated to goodwill. The
allocation of the purchase price is pending a final evaluation of the
fair value of the assets acquired and liabilities assumed. On
August 2, 2005, the Company acquired Extreme Music for
$45.1 million. Extreme Music's results have been
consolidated as part of Entertainment Segment, effective from the date
of the acquisition. The excess purchase price over the fair value of
the tangible and identifiable intangible net assets acquired of
approximately of $44.8 million has been allocated to intangible
assets. The allocation of the purchase price is pending a final
evaluation of the fair value of assets acquired and liabilities
assumed. On June 20, 2005, the Company acquired
Neopets, Inc. for approximately $160.0 million.
Neopets, Inc.'s results have been consolidated as part of
Cable Networks, effective from the date of F-21 VIACOM INC.
AND SUBSIDIARIES
the acquisition. The excess purchase price
over the fair value of the tangible and identifiable intangible net
assets acquired of approximately of $154.0 million was allocated
to goodwill and other intangibles. The allocation of the purchase price
is pending a final evaluation of the fair value of assets acquired and
liabilities assumed. In August 2004, the Company acquired
75.8% of VIVA Media AG for $306.9 million. Pursuant to a
tender offer, the Company subsequently purchased additional shares of
VIVA Media AG, raising total ownership to 97.8% for a total
purchase price of $393.6 million. VIVA Media AG's results
have been included as part of Cable Networks since the date of
acquisition. In June 2005, the Company acquired the remaining
2.2% interest in VIVA Media AG that it did not own for a total
purchase price for $8.4 million. On May 22, 2003,
the Company acquired the remaining 50% interest in Comedy
Central that it did not own for $1.2 billion in cash. Comedy
Central's results have been consolidated as part of Cable
Networks, effective from the date of acquisition. The excess purchase
price over the fair value of the tangible and identifiable intangible
net assets acquired of approximately $1.0 billion was allocated
to goodwill and other intangibles. The final allocation of the purchase
price was based on the fair value of Comedy Central's assets
acquired and liabilities assumed. Pro forma results of operations
have not been presented for the acquisitions completed during the years
ended December 31, 2005, 2004 and 2003, as the results of the
acquired companies, not already consolidated, either individually or in
the aggregate were not material to the Company's financial
results before the
acquisitions. 8) INVENTORY 9) INVESTMENTS
IN AFFILIATED COMPANIES The Company accounts for its investments
in affiliated companies over which the Company has significant
influence or ownership of more than 20% but less than or equal
to 50%, under the equity method. Such investments principally
include but are not limited to the Company's interest in,
Nickelodeon U.K. (50% owned), MTV Brazil (30% owned), MTV
Japan (36% owned), WF Cinema Holding L.P. (50% owned) and
Grauman's Theatres LLC (35% owned). Equity
investments of $147.2 million and $110.9 million are
recorded in ‘‘other assets’’ in the
consolidated balance sheets at December 31, 2005 and 2004,
respectively. For equity investments, a difference typically exists
between the initial investment and the proportionate share in the
underlying net assets of the investee. The unamortized difference
included in the equity investment balance was $50.8 million and
$39.6 million at December 31, 2005 and 2004,
respectively. F-22 VIACOM INC.
AND SUBSIDIARIES 10) BANK FINANCING AND
DEBT Long-term debt consists of the
following: The
Company's scheduled maturities of long-term debt at face value,
excluding capital leases, outstanding at December 31, 2005 were
as
follows:
Viacom
Credit Agreements
Term Facility On
December 8, 2005, the Company entered into a $6.0 billion
term loan credit agreement (‘‘Term Facility’’).
The Term Facility, became effective upon the initial borrowing
thereunder used to fund the preliminary special dividend paid to the
Former Viacom shortly prior to the separation. The Term Facility
consists of two tranches, (i) Tranche A, a single-draw term loan
in the principal amount of $4.75 billion, which is due and
payable on March 29, 2007 and (ii) Tranche B, a
multi-draw term loan in the principal amount of $1.25 billion,
which is due and payable on June 29, 2007. The net proceeds of
any offering of long-term debt securities by the Company must be used
to prepay the Term Facility. Borrowing rates under the Term Facility
are determined at the Company's option at the time of each
borrowing and are generally based on the prime rate in the United
States or LIBOR plus a specified margin. The Company pays a facility
fee based on the total amount of the Tranche B commitments under
the Term Facility and a utilization fee on the Tranche B borrowings if
outstanding borrowings under the Term Facility exceed 50% of the
total amount of the commitments thereunder. On December 29,
2005, the Company borrowed $4.75 billion under Tranche A and
$655 million under Tranche B to fund the preliminary special
dividend. The Company may make further borrowings under the Tranche B
of the Term Facility for general corporate purposes, including
acquisitions and commercial paper backup. As of December 31,
2005, the Company had unused borrowings under Tranche B totaling
$595.0 million in the aggregate. The Term Facility
contains covenants which, among other things, require that the Company
maintain a minimum interest coverage ratio. At December 31,
2005, the Company was in compliance with all covenants under the Term
Facility. Revolving Credit Facility On December 8,
2005, Viacom entered into a $3.25 billion five-year credit
agreement (the ‘‘Revolving Facility’’). The
Revolving Facility became effective at the time of the
Separation. Borrowing rates under the Revolving Facility are to
be determined at the Company's option at the time of each
borrowing and are to be generally based on the prime rate in the United
States or LIBOR plus a specified margin. The Company pays a facility
fee based on the total amount of the F-23 VIACOM INC.
AND SUBSIDIARIES
commitments under the Revolving Facility and
a utilization fee if outstanding borrowings exceed 50% of the
total amount of the commitments thereunder. Borrowings under the
Revolving Facility are expected to be used for general corporate
purposes, including acquisitions and commercial paper backup. It is
expected that the Company will borrow under the Revolving Facility from
time to time. As of December 31, 2005, the Company had no
borrowings under the Revolving Facility. The Viacom Credit
Facilities contains covenants which, among other things, require that
the Company maintain a minimum interest coverage ratio. At
December 31, 2005, the Company was in compliance with all
covenants under the Term Facility. Provided the Company is in
compliance with debt covenants, the Company is not precluded from
paying dividends.
Accounts Receivable Securitization
Program
As of December 31, 2005 and
December 31, 2004, the Company had a total of
$450.0 million outstanding under a revolving receivable
securitization program. The program resulted in the sale of receivables
on a non-recourse basis to unrelated third parties on a one-year
renewable basis, thereby reducing accounts receivable and debt on the
Company's Consolidated Balance Sheets. The Company enters into
this arrangement because it provides an additional source of liquidity.
The terms of the revolving securitization arrangement requires that the
receivable pools subject to the program meet certain performance
ratios. As of December 31, 2005, the Company was in compliance
with the required ratios under the receivable securitization
program. 11) FINANCIAL INSTRUMENTS The Company uses
derivative financial instruments to modify its exposure to market risks
from changes in foreign exchange rates and interest rates. The Company
does not hold or enter into financial instruments for speculative
trading purposes. The foreign exchange hedging instruments used are
spot, forward and option contracts. The foreign exchange contracts have
principally been used to hedge the British Pound, the Australian
Dollar, the Japanese Yen, the Canadian Dollar, the Singapore Dollar and
the Euro. The Company designates forward contracts used to hedge future
production costs as cash flow hedges. Additionally, the Company enters
into non-designated forward contracts to hedge non-dollar denominated
cash flows and foreign currency balances. The changes in fair value of
the non-designated contracts are included in current period earnings as
part of ‘‘Other items, net.’’ The
Company's interest expense is exposed to movements in short-term
rates. Swap agreements may be used to modify this exposure. As of
December 31, 2005, there were no interest rate swaps
outstanding. At December 31, 2005, the notional value of
all foreign exchange contracts was $109.1 million, of which
$33.6 million related to the hedging of future production costs.
The remaining $75.5 million represents hedges of underlying
foreign currency balances, expected foreign currency net cash flows and
investment hedges. At December 31, 2004, the notional
value of all foreign exchange contracts was $174.8 million, of
which $74.6 million related to the hedging of future production
costs. The remaining $100.2 million represents hedges of
underlying foreign currency balances, expected foreign currency net
cash flows and investment hedges. At December 31, 2005,
the Company did not have any interest rate cash flow hedges
outstanding. The Company continually monitors its positions with,
and credit quality of, the financial institutions which are
counterparties to its financial instruments. The Company is exposed to
credit loss in the event of nonperformance by the counterparties to the
agreements. However, the Company does not anticipate nonperformance by
the counterparties. F-24 VIACOM INC.
AND SUBSIDIARIES The Company's receivables do not
represent significant concentrations of credit risk at
December 31, 2005, due to the wide variety of customers, markets
and geographic areas to which the Company's products and services
are sold. 12) STOCKHOLDERS' EQUITY The
following is a description of the material terms of Viacom's
capital stock. The following description is not meant to be complete
and is qualified by reference to Viacom's certificate of
incorporation and bylaws and the Delaware General Corporation
Law.
Common Stock — All
issued and outstanding shares of Viacom Class A common stock and Viacom
Class B common stock are identical and stockholders are entitled to the
same rights and privileges, except as provided in the Viacom
certificate of incorporation as described below.
Voting
Rights. Holders of Viacom Class A common stock are entitled
to one vote per share. Holders of Viacom Class B common stock do not
have any voting rights, except as required by Delaware law. Generally,
all matters to be voted on by Viacom stockholders must be approved by a
majority of the aggregate voting power of the shares of Class A common
stock present in person or represented by proxy, except as required by
Delaware law.
Dividends. Stockholders of Viacom
Class A common stock and Viacom Class B common stock will share ratably
in any cash dividend declared by the Viacom Board of Directors, subject
to any preferential rights of any outstanding preferred stock. Viacom
does not currently pay a cash dividend, and any decision to pay a cash
dividend in the future will be at the discretion of the Viacom Board of
Directors and will depend on many factors. If the Company's Board
of Directors declares a dividend of any securities of Viacom or another
entity, the Board of Directors will determine whether the stockholders
of Viacom Class A common stock and Class B common stock are to receive
identical securities or to receive different classes or series of
securities, but only to the extent such differences are consistent in
all material respects with any differences between New Viacom Class A
common stock and New Viacom Class B common
stock.
Conversion. So long as there are 5,000
shares of Viacom Class A common stock outstanding, each share of Viacom
Class A common stock will be convertible at the option of the holder of
such share into one share of Viacom Class B common
stock.
Liquidation Rights. In the event of
liquidation, dissolution or winding-up of Viacom, all stockholders of
Viacom common stock, regardless of class, will be entitled to share
ratably in any assets available for distributions to stockholders of
shares of Viacom common stock subject to the preferential rights of any
outstanding preferred stock.
Split, Subdivisions or
Combination. In the event of a split, subdivision or
combination of the outstanding shares of Viacom Class A common stock or
Viacom Class B common stock, the outstanding shares of the other class
of Viacom common stock will be divided
proportionally.
Preemptive Rights. Shares of Viacom
Class A common stock and Class B common stock do not entitle a
stockholder to any preemptive rights enabling a stockholder to
subscribe for or receive shares of stock of any class or any other
securities convertible into shares of stock of any class of Viacom. The
Viacom Board of Directors has the power to issue shares of authorized
but unissued Viacom Class A common stock and Class B common stock
without further stockholder action, subject to the requirements of
applicable law and stock exchanges. Viacom's certificate of
incorporation authorizes 375 million shares of Class A common
stock and 5 billion shares of Class B common stock. The number
of authorized shares of Viacom Class A common stock and Class B common
stock could be increased with the approval of the stockholders of a
majority of the outstanding shares of Viacom Class A common stock and
without any action by the holders of shares of Viacom Class B common
stock. F-25 VIACOM INC.
AND SUBSIDIARIES
Other Rights. The Viacom
certificate of incorporation provides that Viacom may prohibit the
ownership of, or redeem, shares of its capital stock in order to ensure
compliance with, or prevent the applicability of limitations imposed
by, the requirements of U.S. laws or regulations applicable to
specified types of media companies.
Preferred
Stock — In connection with the
separation, the Company's capital stock includes 25
million authorized shares of preferred stock with a par value of $.001
per share. At December 31, 2005, none of the 25
million authorized shares of the preferred stock is issued and
outstanding.
Stock Repurchase
Program — The Company has put into place
a $3.0 billion share repurchase program which was approved by
the Former Viacom Board on December 8, 2005 and ratified by
Viacom's Board on January 26, 2006.
Long-Term
Incentive Plan — The Company has a
Long-Term Management Incentive Plan (the
‘‘LTMIP’’) under which stock options and
Restricted Share Units (‘‘RSU’’) are
outstanding. The purpose of the LTMIP is to benefit and advance the
interests of the Company by rewarding certain employees for their
contributions to the financial success of the Company and thereby
motivating them to continue to make such contributions in the future.
The LTMIP provides for awards of stock options, stock appreciation
rights, restricted and unrestricted shares, restricted share units,
phantom shares, dividend equivalents, performance awards and other
equity related awards and cash payments. The stock options generally
vest over a three-to five-year period from the date of grant and expire
eight to ten years after the date of grant. A total of 41,423,086
shares of the Company's Class B common stock was reserved
for issuance to employees of the Company for future exercise of stock
options outstanding as of December 31, 2005. There were an
aggregate of 50 million options and RSU's available for
future grant under the LTMIP.
Conversion in the
Separation. On the effective date of the separation, all
outstanding unexercised options to purchase shares of Former Viacom
Class B common stock and all outstanding RSUs of Former Viacom Class B
common stock held by an individual who was an employee or director of
Former Viacom immediately prior to the effective date and became an
employee or director of Viacom immediately following the separation
were converted into options to purchase shares of Viacom Class B common
stock and RSUs of Viacom Class B common stock, respectively. The Former
Viacom stock options were converted in a manner designed to preserve
their intrinsic value which existed immediately prior to the
separation, and the Former Viacom RSUs were converted in a manner
designed to preserve their value. To accomplish this, adjustments were
made to the number of options and the option exercise prices, and the
number of RSUs. The conversion of Former Viacom stock options and RSUs
to stock options and RSUs of the Company did not require the
recognition of compensation expense as the value of the respective
awards remained unchanged. Accordingly, each grant of stock
options to purchase Former Viacom Class B common stock was converted
into a number of stock options to purchase Viacom's Class B
common stock determined by multiplying the number of outstanding stock
options included in the grant by 0.792802. The per share exercise price
of the converted stock option was determined by dividing the exercise
by 0.792802. Each grant of RSUs of Former Viacom Class B common stock
was converted into a number of RSUs of Viacom's Class B common
stock determined by multiplying the number of RSU included in the grant
by 0.792802. Presented below is the stock option details of
Former Viacom which pertain to stock awards of current and former
employees of Viacom. Unless otherwise indicated, amounts and exercise
prices have not been adjusted by the conversion factor described
above. F-26 VIACOM INC.
AND SUBSIDIARIES The weighted-average fair value of each
option as of the grant date was $9.95, $17.88, $18.62 in 2005, 2004 and
2003, respectively. 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: The following table
summarizes the Company's stock activity under the
LTMIP: The following
table summarizes information concerning outstanding and exercisable
stock options on a post conversion basis for the Company's
employees under the LTMIP at December 31,
2005: F-27 VIACOM INC.
AND SUBSIDIARIES Stock options exercisable by employees of
Former Viacom at December 31, 2005 and 2004 and by employees of
the Company at December 31, 2005 were as
follows: 13) INCOME TAXES See
Note 3 for a summary of the Tax Matters Agreement entered into
with CBS Corporation. U.S. and foreign earnings before income
taxes are as
follows: Components
of the provision for income taxes on earnings before income taxes are
as
follows: The
equity losses of affiliated companies are shown net of tax on the
Company's consolidated Income Statements. The tax provision
relating to losses from equity investments in 2005, 2004, and 2003 were
$9.8 million, $6.1 million, and $16.2 million,
respectively, which represented an effective tax rate of 51.0%,
18.0%, and 785.8%, respectively. The difference
between income taxes as expected at the U.S. federal statutory income
tax rate of 35% and income taxes provided on earnings are
summarized as
follows: The
increase in the Other, net tax rate shown in the table above compared
to 2004 is largely the result of non-deductible separation related
expenses of $102 million, which are included in the total
separation costs of $163.5 million. F-28 VIACOM INC.
AND SUBSIDIARIES The following is a summary of the
components of the deferred tax
accounts: At
December 31, 2005 and 2004, respectively, the Company's
deferred tax assets and liabilities were reflected in the Consolidated
Balance Sheets as indicated in the following
table: At
December 31, 2005, the Company had net operating loss
carryforwards for federal, state and local and foreign jurisdiction of
approximately $6 million, which expire in various years from
2006 through 2020, and capital loss carryforwards of
$13.3 million which expire in 2009. The 2005 and 2004
deferred tax assets were reduced by a valuation allowance of
$2.1 million and $9.6 million, respectively, principally
relating to tax benefits of net operating losses which are not expected
to be realized. The Company's share of the undistributed
earnings of foreign subsidiaries not included in its consolidated
federal income tax return that could be subject to additional income
taxes if remitted was approximately $350.6 million at
December 31, 2005 and $155.4 million at
December 31, 2004. No provision has been recorded for the U.S.
or foreign taxes that could result from the remittance of such
undistributed earnings since the Company intends to distribute only the
portion of such earnings which would be offset by U.S. foreign tax
credits, and intends to reinvest the remainder outside the U.S.
indefinitely, and for this portion it is not practicable to estimate
the amount of such deferred taxes. The IRS is currently examining
the years 2000 through 2003. The Company believes that adequate
provision has been made for income taxes for all open tax periods
through December 31, 2005. F-29 VIACOM INC.
AND SUBSIDIARIES In connection with the separation and
pursuant to the terms of the Tax Matters Agreement, Viacom and CBS
Corporation have agreed to each be financially responsible for
50% of any potential liabilities that may arise to the extent
such potential liabilities are not directly attributable to their
respective business operations. 14) PENSION AND OTHER
POSTRETIREMENT BENEFITS At the separation, the Company
assumed responsibility for pension and postretirement benefit
obligations for its active employees. Obligations related to retired
and terminated vested employees as of December 31, 2005 remain
the responsibility of CBS Corporation. Prior to the separation, the
Company's employees participated in the Former Viacom pension
plans and postretirement benefit plans. In addition, prior to the
separation, the determination of the Company's obligation and
expense for pension and postretirement benefits and transfer of plan
assets to cover such obligations was based on assumptions which were
actuarily determined. The Company believes such allocation
methodologies are reasonable and consistent with the Separation
Agreement. At the separation, the assets of the Former Viacom pension
and other employee benefit plans were divided and transferred between
CBS Corporation and the Company in accordance with the Separation
Agreement. The Company employees participate in
Viacom's non-contributory pension plans. The benefits for certain
plans are based primarily on an employee's years of service and
average pay near retirement. Benefits under other plans are based
primarily on an employee's pay for each year that the employee
participates in the plan. Participating employees are vested in the
plans after five years of service. Viacom policy for all pension plans
is to fund amounts in accordance with the Employee Retirement Income
Security Act of 1974, the Internal Revenue code of 1986 and the
applicable rules and regulations. Plan assets consist principally of
equity securities, marketable bonds and U.S. government securities. The
Company's proportionate share of the Former Viacom Class B
common stock represents approximately 1.8% of the plan
assets' fair values at December 31, 2005 and 2004,
respectively. In addition, the Company employees
participate in Viacom sponsored health and welfare plans that provide
certain postretirement health care and life insurance benefits to
retired employees and their covered dependents. Retiring employees are
eligible for these benefits if they meet certain age and service
requirements at the time of their retirement. Most of the plans are
contributory and contain cost-sharing features such as deductibles and
coinsurance which are adjusted annually. Claims are paid either through
certain trusts funded by Viacom or by the Company's own
funds. A December 31 measurement date is used for
all pension and other postretirement benefit plans. The following table
sets forth the Company's change in benefit obligation under
Viacom's benefit
plans: F-30 VIACOM INC.
AND SUBSIDIARIES The following table sets forth the
Company's change in plan assets under Viacom's benefit
plans: The
accrued pension and postretirement costs recognized in the
Company's Consolidated Balance Sheets were computed as
follows: The accumulated benefit obligation of the Company
under Viacom's defined pension plans was $424.0 million
and $343.7 million at December 31, 2005 and 2004,
respectively. Information for pension plans with an accumulated
benefit obligation in excess of plan assets is set forth
below: F-31 VIACOM INC.
AND SUBSIDIARIES Net periodic cost for the Company under
Viacom's pension and postretirement benefit plans consists of the
following: The expected long-term returns on
plan assets were based upon the target asset allocation and return
estimates for equity and debt securities. The expected rate of return
for equities was based upon the risk-free rate plus a premium for
equity securities. The expected return on debt securities was based
upon an analysis of current and historical yields on portfolios of
similar quality and duration. The following assumptions were also
used in accounting for postretirement
benefits: Assumed health care
cost trend rates could have a significant effect on the amounts
reported for the postretirement health care plan. A one percentage
point change in assumed health care cost trend rates would have the
following
effects: F-32 VIACOM INC.
AND SUBSIDIARIES The asset allocations for the Company
under Viacom's retirement benefit trusts for the qualified
pension benefit plans are based upon an analysis of the timing and
amount of projected benefit payments, the expected returns and risk of
the asset classes and the correlation of those returns. The
percentage of asset allocations of the Company's pension plans at
December 31, 2005 and 2004, by asset category were as
follows: The
assets of the Company's postretirement benefit plans at
December 31, 2005 and 2004 primarily consisted of
cash. Future Benefit Payments The estimated future
benefit payments are as
follows: The
Company expects to contribute $10.0 million to
Viacom Inc.'s pension plans and $.5 million to the
other postretirement benefit plans in 2006. Certain employees of
the Company under collective bargaining agreements participate in
Viacom's multi-employer plans which provide pension and health
and welfare benefits. The contributions to these plans were
$12.9 million and $13.1 million in 2005 and 2004,
respectively. In addition, Viacom has defined contribution plans for
the benefit of substantially all the Company's employees meeting
certain eligibility requirements. Former Viacom contributions to such
plans were $16.1 million, $19.3 million and
$16.3 million for the years ended December 31, 2005, 2004
and 2003, respectively. 15) COMMITMENTS AND
CONTINGENCIES The Company's commitments not recorded on
the balance sheet primarily consist of programming and talent
commitments, operating lease arrangements and purchase obligations for
goods and services. These arrangements result from the Company's
normal course of business and represent obligations that are payable
over several years. Programming and talent commitments of the
Company, estimated to aggregate approximately $1.06 billion as
of December 31, 2005, included $824.9 million relating to
cable programming, feature film production and feature film
acquisitions, and $234.4 million for talent contracts. A
majority of such fees are payable over several years, as part of the
normal course of business. The Company has long-term
non-cancelable operating lease commitments for office space and
equipment, transponders, studio facilities and vehicles. The Company
also enters into capital leases for satellite transponders. At
December 31, 2005, future operating leases payments are
estimated to aggregate $859.7 million. The Company also
has purchase obligations which include agreements to purchase goods or
services in the future that totaled $95.1 million as of
December 31, 2005. F-33 VIACOM INC.
AND SUBSIDIARIES At December 31, 2005, minimum
rental payments under noncancelable leases and minimum franchise
payments are as
follows: Future minimum
operating lease payments have been reduced by future minimum sublease
income of $13.6 million. Rent expense amounted to
$140.6 million in 2005, $98.1 million in 2004 and
$88.9 million in 2003.
Guarantees
The
Company follows the recognition provisions of FASB Interpretation
No. 45, ‘‘Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others’’ (‘‘FIN
45’’) for guarantees, including indemnities, issued or
modified after December 31, 2002. FIN 45 requires a guarantor to
recognize, at the inception of a guarantee, a liability for the fair
value of an obligation assumed by issuing a guarantee. FIN 45 also
requires additional disclosures for certain guarantees. In
connection with the separation, the Company agreed to indemnify Former
Viacom with respect to obligations as guarantor on certain Blockbuster
store leases. Blockbuster's obligations under these store leases
aggregated approximately $353.0 million at December 31,
2005. Certain leases contain renewal options that can extend the
primary lease term and remain covered by the guarantees.
Blockbuster's indemnification obligations are secured by a
$150 million letter of credit. Viacom recorded a liability of
approximately $53.1 million to reflect the estimated fair value
of its indemnification obligation. Blockbuster has agreed to indemnify
Former Viacom with respect to any amount paid under these
guarantees. In the third quarter of 2005, Former Viacom sold
Famous Players, an operator of movie theaters in Canada. Former Viacom
may incur liabilities associated with Famous Players theater leases.
Famous Players obligations under these theater leases aggregated
approximately $1.02 billion at December 31, 2005. The
Company agreed to indemnify CBS Corporation, with respect to any
liability under these theater leases. The Company recorded a liability
of approximately $179.9 million to reflect the estimated fair
value of these indemnification obligations. In the fourth quarter
of 2004, Former Viacom sold substantially all of its 50% equity
interest in UCI, which operates movie theaters in Europe, Latin America
and Asia. Former Viacom had guaranteed UCI's debt obligations
under a revolving credit facility which was repaid during the fourth
quarter of 2004. Former Viacom contributed $29.1 million toward
the repayment of UCI's debt obligation under the terms of this
guarantee. These guarantees totaled approximately $152.4 million
at December 31, 2005 and are secured by bank guarantees provided
by the buyer. In connection with the separation, the Company agreed to
indemnify CBS Corporation with respect to any obligations CBS
Corporation may pay under these guarantees. F-34 VIACOM INC.
AND SUBSIDIARIES The Company also owns a 50%
interest in WF Cinema Holdings, L.P. and a 35% interest in
Grauman's Theatres LLC and guarantees certain theater leases.
These guarantees totaled approximately $10.0 million at
December 31, 2005. The Company agreed to indemnify CBS
Corporation with respect to any obligations of Former Viacom under
these guarantees. Additionally, the Company has indemnification
obligations with respect to letters of credit and surety bonds
primarily used as security against non-performance in the normal course
of business. The outstanding letters of credit and surety bonds
approximated $29.8 million at December 31, 2005 and are
not recorded on the balance sheet as of December 31,
2005. In the course of its business, the Company both provides
and receives the benefit of indemnities which are intended to allocate
certain risks associated with business transactions. Similarly, the
Company may remain contingently liable for various obligations of a
business that has been divested in the event that a third party does
not live up to its obligations under an indemnification obligation. The
Company records a liability for its indemnification obligations and
other contingent liabilities when probable under generally accepted
accounting principles in the United States. Legal
Matters In July 2002, judgment was entered in favor of
Former Viacom, Blockbuster, Paramount Home Entertainment and other
major motion picture studios and their home video subsidiaries with
respect to a complaint filed in the United States District Court for
the Western District of Texas. The complaint included federal antitrust
and California state law claims. In August 2003, the U.S. Court
of Appeals for the Fifth Circuit affirmed the federal court judgment.
The U.S. Supreme Court refused plaintiffs' petition for writ of
certiorari in March 2004. In February 2003, a similar
complaint that had been filed in a Los Angeles County Superior Court
was also dismissed with prejudice. The plaintiffs appealed the
California state court dismissal, as well as a prior denial of class
certification. On November 22, 2005, the California Court of
Appeal affirmed the trial court's dismissal of the antitrust and
conspiracy claims. The court reversed the dismissal of California
Unfair Practices Act and Unfair Competition Act claims and remanded
those claims to the trial court, except with regard to transactions
between Paramount and Blockbuster as to which the trial court dismissal
was affirmed. Blockbuster remains a defendant in the case with respect
to our transactions with studios other than Paramount. As the result of
the split-off of Blockbuster from Former Viacom in 2004, any judgment
in this matter adverse to Former Viacom, Blockbuster and/or Paramount
Home Entertainment may be allocated 33.33% to Blockbuster and
66.67% to Viacom. Pursuant to the Separation Agreement, Viacom
has assumed and will indemnify CBS Corporation for Former
Viacom's responsibility for losses in this matter. On
July 13, 2005, two identical shareholder derivative lawsuits
were filed against Former Viacom. The suits, consolidated as In re
Viacom Shareholders Derivative Litigation, relate to the
compensation of Sumner Redstone, Tom Freston and Leslie Moonves, each
of whom were executive officers of Former Viacom. Mr. Redstone
is currently Viacom's Executive Chairman of the Board and Founder
and Mr. Freston is Viacom's President and Chief Executive
Officer. Mr. Moonves is the President and Chief Executive
Officer of CBS Corporation. The plaintiffs claim that the compensation
of these officers was excessive and unwarranted and not entirely fair
to Former Viacom and its shareholders. Plaintiffs seek disgorgement of
compensation paid to the named officers in 2004, unspecified damages
from members of Former Viacom's Board of Directors for alleged
breach of fiduciary duty, and other relief. Prior to the separation,
Former Viacom moved to dismiss the case on both procedural and
substantive grounds. No decision has been rendered on the motion.
Former Viacom also was served with several shareholder demands for
business records under Delaware law in connection with the
shareholders' purported investigations of similar claims. Under
the Separation Agreement, liabilities in connection with executive
compensation claims relating to officers of Former Viacom are shared
equally by Viacom and CBS Corporation. F-35 VIACOM INC.
AND SUBSIDIARIES In late 2005 and early 2006, Former
Viacom was named as a defendant in three lawsuits in the United States
District Court for the Northern District of Texas and one lawsuit in
the United States District Court for the Southern District of New York,
each relating to the 2004 split-off of Blockbuster from Former Viacom.
Each of the lawsuits names as defendants NAI, Former Viacom and
Blockbuster, and certain of their respective present and former
officers and directors, including some individuals who are officers and
directors of New Viacom. The Texas lawsuits are purported class actions
which allege violations of the federal securities laws. The New York
case is a purported class action which alleges that the defendants
breached fiduciary obligations to the Blockbuster Investment Plan in
violation of the Employee Retirement Income Security Act by continuing
to offer to plan participants Blockbuster stock from and after
November 2003 and by offering to plan participants the
opportunity to exchange their shares of Former Viacom common stock for
the shares of Blockbuster common stock that were owned by Former Viacom
in connection with the 2004 split-off transaction. Plaintiffs in each
of the lawsuits allege that the defendants made untrue statements of
material facts and concealed and failed to disclose material facts with
respect to Blockbuster's business prospects. The lawsuits seek
damages in unspecified amounts and other relief. In connection with the
split-off, Blockbuster agreed to indemnify Former Viacom and our
employees, officers and directors with respect to liabilities arising
out of any material untrue statements and omissions in those portions
of the 2004 Prospectus-Offer to Exchange relating to the split-off that
were provided by Blockbuster. Pursuant to the Separation Agreement, we
will indemnify CBS Corporation for any losses arising from these
lawsuits. Viacom believes that the plaintiffs' positions in
these litigations are without merit and intends to vigorously defend
itself in the litigations. Litigation is inherently uncertain and
always difficult to predict. However, based on Viacom's
understanding and evaluation of the relevant facts and circumstances,
it believes that the above-described legal matters and other litigation
to which it is a party are not likely, in the aggregate, to have a
material adverse effect on its results of operations, financial
position or cash flows. 16) REPORTABLE SEGMENTS The
following tables set forth the Company's financial performance by
reportable operating segment. The Company's reportable operating
segments have been determined in accordance with the Company's
internal management structure. The Company operates two segments:
(i) Cable Networks and (ii) Entertainment. The
accounting policies of the segments are the same as those described in
Note 2 — Summary of Significant Accounting Policies.
Intercompany revenue eliminations associated with the Entertainment and
Cable Networks segments, respectively, were ($1.9) million and
($141.6) million for 2005, ($1.9) million and
($125.1) million for 2004, and ($1.6) million and
($125.1) million for 2003. Operating income eliminations
primarily reflect the timing of intercompany transactions from the sale
of feature films to cable networks. F-36 VIACOM INC.
AND SUBSIDIARIES F-37 VIACOM INC.
AND SUBSIDIARIES Information
regarding the Company's revenues by type is as
follows: Information regarding the
Company's operations by geographic area is as
follows: Transactions
within the Company between geographic areas are not
significant. 17) OTHER ITEMS,
NET Other items, net reflected a net loss of
$29.0 million for 2005, $17.7 million for 2004, and
$24.6 million for 2003, principally consisting of costs
associated with securitizing trade receivables of $15.9 million,
$7.7 million and $5.7 million, respectively, and foreign
exchange losses of $14.3 million for 2005, $9.3 million
for 2004, and $18.9 million for 2003. F-38 VIACOM INC.
AND SUBSIDIARIES 18) SUPPLEMENTAL CASH FLOW
INFORMATION 19) QUARTERLY FINANCIAL DATA
(unaudited): 20) SUBSEQUENT
EVENTS On January 31, 2006, the Company completed the
acquisition of substantially all of the outstanding limited liability
company interests of DreamWorks L.L.C.
(‘‘DreamWorks’’), a motion picture studio,
pursuant to the purchase agreement dated as of December 9, 2005
among the Company, its subsidiary Paramount Pictures Corporation,
DreamWorks and certain holders of membership interests in DreamWorks
identified therein (the ‘‘Acquisition’’). The
purchase price was approximately $1.6 billion consisting of cash
and the assumption of debt. In connection with the Acquisition,
the Company borrowed approximately $1.1 billion in the aggregate
under its $3.25 billion five-year credit agreement with the
lenders named therein, JP Morgan Chase Bank, N.A., as administrative
agent, Citibank, N.A., as syndication agent, and Bank of America, N.A.,
Deutsche Bank Securities Inc. and The Bank of
Tokyo-Mitsubishi, Ltd., New York Branch, as co-documentation
agents, and Tranche B of its $6.0 billion term loan credit
agreement with the lenders named therein, Citibank, N.A., as
administrative agent, JP Morgan Chase Bank, N.A., as syndication agent,
and Bank of America, N.A., Deutsche Bank Securities Inc. and The
Bank of Tokyo-Mitsubishi, Ltd., New York Branch, as
co-documentation agents (collectively, the ‘‘Credit
Facilities’’). The terms of the Credit Facilities are
described in Note 10. During the first quarter of 2006,
the Company entered into $2.35 billion notional amount of
variable to fixed rate interest
swaps. F-39 VIACOM
INC. See
notes to consolidated financial statements. F-40 VIACOM INC. See
notes to consolidated financial statements. F-41 VIACOM INC. See
notes to consolidated financial
statements. F-42 VIACOM
INC. NOTE 1. BASIS OF
PRESENTATION Viacom Inc. and its consolidated subsidiaries
(‘‘Viacom’’ or the
‘‘Company’’) are a leading, global
entertainment content company, with respected brands in focused
demographics. On December 31, 2005 the Company became a
stand-alone public entity by separating from the former Viacom Inc.
(‘‘Former Viacom’’). Prior to the
separation, the Company was a wholly-owned subsidiary of Former Viacom.
The separation was effected through a merger of Former Viacom and one
of its wholly-owned subsidiaries, pursuant to which Former Viacom
continued as the surviving entity and was renamed CBS Corporation. In
connection with the merger and the separation, each share of Former
Viacom Class A common stock was converted into the right to receive 0.5
of a share of Viacom Class A common stock and 0.5 of a share of CBS
Corporation Class A common stock. Similarly, each share of Former
Viacom Class B common stock was converted into the right to receive 0.5
of a share of Viacom Class B common stock and 0.5 of a share of CBS
Corporation Class B common stock. Holders of Viacom Class A and Class B
common stock received cash in lieu of fractional shares. The
accompanying unaudited consolidated financial statements have been
prepared on a basis consistent with accounting principles generally
accepted in the United States (‘‘GAAP’’)
for interim financial information and pursuant to the rules of the
Securities and Exchange Commission
(‘‘SEC’’). In the opinion of management,
the accompanying unaudited financial statements reflect all
adjustments, consisting of only normal and recurring adjustments,
necessary for a fair presentation of the financial position, results of
operations and cash flows for the periods presented. The results of
operations for such periods are not necessarily indicative of the
results expected for the full year or any future period. These
statements should be read in conjunction with the Company’s
Annual Report on Form 10-K for the fiscal year ended December
31, 2005, as filed with the SEC on March 16, 2006
(the ‘‘2005 Annual
Report’’). Preparing financial statements in
conformity with GAAP requires management to make estimates, judgments
and assumptions that affect the reported amounts of assets and
liabilities as of the dates presented and the reported amounts of
revenues and expenses during the reporting periods presented.
Significant estimates inherent in the preparation of the accompanying
financial statements include estimates of film ultimate revenues,
product returns, amount of receivables expected to be collected,
potential outcome of uncertain tax positions and determination of fair
value of equity based compensation. Estimates are based on past
experience and other considerations reasonable under the circumstances.
Actual results may differ from these estimates.
Carve-out
Financial Presentation
As a result of the separation from
Former Viacom, the Consolidated Statements of Earnings for the six
months ended June 30, 2005 and Consolidated Statement of
Cash Flows for the six months ended June 30, 2005 and the
Consolidated Balance Sheet at December 31, 2005 are
presented on a carve-out basis. Accordingly, for the respective period,
the assets and liabilities of Viacom have been accounted for at the
historical book values carried by Former Viacom prior to the separation
and were assigned to Viacom pursuant to the terms of the Separation
Agreement. Indebtedness, other than certain capital lease obligations,
was not transferred to Viacom and remained at CBS Corporation.
Accordingly, debt service cost is not reflected in the Company’s
Consolidated Statements of Earnings for the six months ended
June 30, 2005. The accompanying Consolidated
Statements of Earnings for the six months ended June 30,
2005 includes allocation of Former Viacom corporate expenses of
$69.8 million, respectively, primarily included within
Selling, general and administrative costs. The allocations are
generally meant to reflect the utilization of shared corporate
facilities, people and services of Former Viacom by the Company and are
not necessarily representative of actual costs. F-43 VIACOM
INC. The historical carve-out consolidated
financial statements may not necessarily reflect what the
Company’s results of operations, financial position and cash
flows would have been if the Company had been a separate stand-alone
company during the periods presented.
Special Dividend to
Former Viacom
In accordance with the terms of the Separation
Agreement between CBS Corporation and Viacom, on December
29, 2005, the Company paid a preliminary special dividend of
$5.4 billion, subject to certain adjustments. On March
14, 2006, CBS Corporation provided an initial statement that the
dividend should be increased by a net amount of approximately
$460 million. On April 28, 2006, the Company
served CBS Corporation with a notice of disagreement. Based on an
assessment of the amount and underlying components of the proposed
additional dividend payment the Company recorded an amount payable as
of March 31, 2006 and subsequently paid $170.2
million to CBS Corporation on May 5, 2006. Under the
Separation Agreement, after an opportunity for the parties to negotiate
resolution of differences, any disputed amounts are subject to
arbitration. Any further adjustment to the special dividend will be
reflected as an adjustment to additional paid-in capital.
Stock Based Compensation
The Company has adopted
Financial Accounting Standards Board
(‘‘FASB’’) Statement No. 123 (revised
2004), Share-Based Payment (‘‘FAS
123R’’) and SEC Staff Accounting Bulletin No. 107
(‘‘SAB 107’’) as of January
1, 2006. FAS 123R requires a company to measure the cost of
employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award. The fair
value received is recognized in earnings over the period during which
an employee is required to provide service. FAS 123R also amends FASB
Statement No. 95, Statement of Cash Flows, to require that
excess tax benefits as defined, realized from the exercise of stock
option be reported as a financing cash inflow rather than as a
reduction of taxes paid in cash flow from operations. In
adopting FAS 123R, the Company has elected the modified prospective
methodology. As such, periods prior to January 1, 2006
are presented in accordance with the disclosure only provisions of FASB
Statement 123, Accounting for Stock-Based Compensation
(‘‘FAS 123’’), the standard prior to FAS
123R. The following table reflects the effect on net earnings if the
Company had applied the fair value recognition provisions of FAS 123 to
stock based employee compensation in these periods. These pro forma
effects may not be representative of future stock compensation expense
since the estimated fair value of stock options on the date of grant is
amortized to expense over the vesting period and the vesting of certain
options was accelerated on March 8,
2005: For additional information
regarding the adoption of FAS 123R, please refer to Note 9 Stock
Based Compensation. F-44 VIACOM
INC.
Distribution Services
In
connection with the purchase of DreamWorks L.L.C.
(‘‘DreamWorks’’), and the disposition of DW
Funding LLC (‘‘DW Funding’’), the Company
was granted the exclusive worldwide right to distribute all of the
animated feature films produced by DreamWorks Animation SKG, Inc.
(‘‘DreamWorks Animation’’) and live-action
films released by DreamWorks prior to September 15, 2005
(the ‘‘live-action library’’). Under
the terms of both the DreamWorks Animation and live-action library
distribution agreements the Company is generally responsible for all
out-of-pocket costs, primarily comprised of distribution and marketing
costs. For the provision of distribution services, the Company is
entitled to (i) retain a fee of eight percent of gross receipts and
(ii) recoup expended distribution and marketing costs on a film-by-film
basis prior to any participation payments to DreamWorks Animation or DW
Funding. The Company accounts for the arrangements in accordance with
Statements of Position 00-2, Accounting by Producers or Distributors
of Films (‘‘SOP 00-2’’). In addition,
print and advertising costs are expensed as incurred in accordance with
SOP 93-7, Reporting on Advertising Costs. As primary obligor,
revenue and related distribution and marketing costs are presented on a
gross basis in accordance with Emerging Issues Task Force
(‘‘EITF’’) No. 99-19, Reporting Revenue
Gross as a Principal versus Net as an Agent (‘‘EITF
99-19’’).
Income Tax
Contingencies
Income tax contingencies are determined using
an asset recognition model for which the initial valuation is based on
an evaluation of tax positions under applicable tax law and the
likelihood of prevailing based on these positions. Tax positions
considered probable of being sustained on audit based solely on the
technical merits of the position are recorded as a benefit. Under the
asset recognition model, if the initial assessment fails to result in
the recognition of a tax benefit, the position is monitored and
subsequently recognized as a tax benefit if there are changes in tax
law or analogous case law that sufficiently raise the likelihood of
prevailing on the technical merits of the position to probable; if the
statute of limitations expires; or if there is a completion of an audit
resulting in a settlement of that tax year with the appropriate agency.
In the six months ended June 30, 2006, the Company
reached a settlement of certain tax positions principally relating to
the 2000–2003 combined federal income tax returns of Former
Viacom. Principally as a result of the audit settlements, tax reserves
of $70.7 million were recognized as a component of income tax
expense.
Discontinued Operations
On
July 22, 2005, Former Viacom sold Famous Players Inc.
(‘‘Famous Players’’), its Canadian-based
theater chain, for approximately $400 million. Famous Players
has been presented as a discontinued operation in the consolidated
financial statements for the six months ended June 30,
2005 (see Note 13 Commitments and Contingencies). In 2004,
Former Viacom completed the exchange offer for the split-off of
Blockbuster Inc. (‘‘Blockbuster’’). As part
of the separation from CBS Corporation, the Company has agreed to
indemnify CBS Corporation with respect to obligations as guarantor on
certain Blockbuster store leases (see Note 13 Commitments and
Contingencies). For the six months ended June
30, 2006 discontinued operations principally includes the
release of reserves resulting from an audit settlement and the effect
of adjusting recorded liabilities for lease obligations provided on
behalf of Blockbuster and Famous Players to fair value.
Reclassifications
Certain amounts have been
reclassified to conform to the current presentation. F-45 VIACOM
INC.
Recent Accounting
Pronouncements
In July 2006, FASB Interpretation No.
48, Accounting for Uncertainty in Income Taxes — An
Interpretation of FASB Statement No. 109 (‘‘FIN
48’’), was released. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in the Company’s
financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes. FIN 48 also prescribes a
recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or
expected to be taken in a tax return and provides guidance on
derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. The provisions of FIN 48
are to be applied to all tax positions upon initial adoption of this
standard. Only tax positions that meet the
more-likely-than-not-recognition threshold at the effective date may be
recognized or continue to be recognized upon adoption of FIN 48. The
cumulative effect of applying the provisions of FIN 48, if any, will be
reported as an adjustment to the opening balance of retained earnings.
FIN 48 will be effective for the Company beginning January
1, 2007. The Company is evaluating the impact of adopting of FIN
48. In March 2006, Statement No. 156, Accounting for
Servicing of Financial Assets, an amendment of FASB Statement No.
140, (‘‘FAS 156’’) was released. FAS
156 amends Statement No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities,
(‘‘FAS 140’’) to require that all
separately recognized servicing assets and liabilities in accordance
with FAS 140 be initially measured at fair value, if practicable.
Furthermore, this standard permits, but does not require, fair value
measurement for separately recognized servicing assets and liabilities
in subsequent reporting periods. FAS 156 is also effective for the
Company beginning January 1, 2007; however, the standard
is not expected to have any impact on the Company’s financial
position, results of operation or cash flows. In February
2006, Statement No. 155, Accounting for Certain Hybrid Financial
Instruments, (‘‘FAS 155’’) was
released. FAS 155 is an amendment of Statement No. 133, Accounting
for Derivative Instruments and Hedging Activities, and FAS 140. FAS
155 establishes, among other items, the accounting for certain
derivative instruments embedded within other types of financial
instruments; and, eliminates a restriction on the passive derivative
instruments that a qualifying special-purpose entity may hold.
Effective for the Company beginning January 1, 2007, FAS
155 is not expected to have any impact on the Company’s
financial position, results of operations or cash flows. In the
first quarter of 2006, the Company adopted Statement No. 154,
Accounting for Changes and Error Corrections — a replacement
of APB Opinion No. 20 and FASB Statement No. 3,
(‘‘FAS 154’’) which changed the
requirements for the accounting for and reporting of a voluntary change
in accounting principle. The Company also adopted Statement No. 151,
Inventory Costs — an amendment of ARB No. 43, Chapter 4
(‘‘FAS 151’’) which, among other changes,
requires certain abnormal expenditures to be recognized as expenses in
the current period versus capitalized as a component of inventory. The
adoption of FAS 154 did not impact the results presented and the impact
on any future periods will depend on the nature and significance of any
future accounting changes subject to the provisions of the statement.
The adoption of FAS 151 did not have any impact on the Company’s
financial position, results of operations or cash flows. NOTE
2. STOCK REPURCHASE PROGRAM The Company has in place a
$3.0 billion share repurchase program under which it commenced
repurchases on January 3, 2006. In addition, Viacom has
entered into an agreement with National Amusements, Inc.
(‘‘NAI’’) and its wholly-owned subsidiary
NAIRI, Inc. (the ‘‘NAIRI Agreement’’)
pursuant to which Viacom has agreed to buy, and NAI and NAIRI have
agreed to sell, a number of shares of Viacom Class B Common Stock each
month such that the ownership percentage of Viacom Class A Common Stock
and Class B Common Stock (considered as a single class) held by NAI
and/or F-46 VIACOM
INC.
NAIRI would not increase as a result of
Viacom’s purchase of shares under the stock repurchase program.
For the six months ended June 30, 2006, 35.6 million shares have
been repurchased in the open market for an aggregate price of
$1,418.1 million. For the six months ended June 30, 2006, an
additional 4.6 million shares had been purchased under the NAIRI
Agreement for an aggregate purchase price of $184.2 million. NOTE 3. BUSINESS COMBINATIONS AND
DISPOSITIONS
DreamWorks L.L.C.
On January
31, 2006, the Company completed the acquisition of DreamWorks, a
leading producer of live-action motion pictures, television programming
and home entertainment products. The total consideration of
$1,529.3 million net of cash acquired of $257.2 million
consisted of $1,106.6 million of cash paid, $657.4
million of assumed note payables and preferred interest and
$22.5 million of stock based compensation and transaction costs.
The preferred interest assumed was repurchased and cancelled prior to
March 31, 2006. The table below provides a summary
of initial purchase price allocations as of the acquisition date. The
initial purchase price allocations are based on a preliminary study
performed by a valuation specialist and are subject to further analysis
and completion: The
results of operations for DreamWorks is included as part of Paramount
Pictures Corporation (‘‘Paramount’’) in the
Entertainment segment beginning February 1, 2006. The
following unaudited pro forma financial information presents the
combined results of operations of the Company and DreamWorks as if the
acquisition had occurred as of January 1, 2005. The
unaudited pro forma financial information is not intended to represent
or be indicative of the Company’s consolidated financial results
of operations that would have been reported had the business
combination been completed as of the beginning of the periods presented
and should not be taken as indicative of the Company’s future
consolidated results of
operations:
Sale
of DreamWorks Live-Action Film Library
Among the film
library assets acquired with the purchase of DreamWorks was a
live-action film library consisting of 59 films released through
September 16, 2005. Title to the live-action library is
F-47 VIACOM
INC.
held by DW Funding, previously a wholly-owned
subsidiary of DreamWorks. On May 5, 2006, the Company
sold a fifty-one percent controlling interest in DW Funding to Soros
Strategic Partners LP (‘‘Soros’’) and Dune
Entertainment II LLC (‘‘Dune’’). In
connection with the sale, DW Funding entered into senior borrowings
with a third-party and mezzanine financings with Soros and Dune, the
proceeds of which were utilized to fund the cash paid to the Company
for the sale of the library. The Company received $675.3 million
net proceeds after considering closing adjustments, which was
principally utilized to repay notes acquired as part of the DreamWorks
acquisition. DW Funding is a variable interest entity; however, the
Company is not the primary beneficiary and therefore accounts for its
minority interest held in DW Funding, which was valued at $7.35
million, as an equity investment. In connection with the sale of
the live-action film library, Soros entered into exclusive five-year
agreements with Paramount and its international affiliates for
distribution and fulfillment services of the live-action library. The
Company has determined that it is the primary obligor with respect to
providing these services and accounts for revenues earned and costs
incurred on a gross recognition basis pursuant to EITF 99-19. In the
event that Soros and Dune continue to own DW Funding after the fifth
year, the distribution agreement with Paramount will automatically
renew.
Other Business Combinations
On May
9, 2006, the Company completed its acquisition of Xfire, Inc, a
leading gaming and social networking service, for initial consideration
of approximately $102 million. Additional amounts of up to eight
million will be paid out over four years based upon continued service
of the employees. On June 1, 2006, the Company acquired
an additional ten percent interest in Nickelodeon UK Limited
(‘‘Nick UK’’) for $8.9 million.
Previously Nick UK was a fifty-fifty joint venture with BSkyB. With the
additional interest, the Company obtained control of Nick UK and began
consolidating its operations as of June 1, 2006. The pro
forma impact of the other business combinations, either individually or
combined, is not material to the Company. NOTE
4. INVENTORY The following is an analysis of inventory,
including film
inventory: F-48 VIACOM
INC. NOTE 5. FINANCING
OBLIGATIONS Financing obligations of the Company consist of the
following: As
of June 30, 2006, the Company had credit facilities
totaling $3.81 billion, comprised of a $3.25 billion
revolving facility due December 2010 and a $560 million
term facility due in June 2007 (collectively, the
‘‘Credit Facilities’’). The net proceeds of
any offering of long-term debt securities by the Company must be used
to prepay the term facility. To the extent the term facility has been
repaid, the borrowing capacity under the facility is permanently
extinguished. The Credit Facilities contain covenants which, among
other things, require that the Company maintains a minimum interest
coverage ratio. At June 30, 2006, the Company was in
compliance with all covenants related to financing
obligations. On June 16, 2006, the Company
completed a private placement of $750 million in floating rate
senior notes. The senior notes are due on June 16, 2009
and bear interest at a rate per year equal to three-month LIBOR plus
0.35% to be reset quarterly. On April 12, 2006,
the Company completed a private placement of $4.75 billion in
aggregate principal amounts of fixed rate senior notes and debentures
due 2011, 2016, and 2036 that bear a fixed per annum interest rate. The
Company utilized the net proceeds from both private placements to repay
a portion of amounts previously borrowed under the term facility. At
June 30, 2006 the total unamortized discount related to
the fixed rate senior notes and debentures was $32.4
million. During the first quarter of 2006, the Company had
entered into a $2.35 billion notional amount of variable to
fixed interest rate swaps to hedge the variability of cash flows
attributable to changes in the benchmark interest rate. In the second
quarter of 2006 the Company terminated the swaps resulting in cash
proceeds to the Company of approximately $88.0 million that was
principally recorded as a component of other comprehensive income, net
of tax. Such amount recorded in other comprehensive income will be
recognized as a reduction of interest expense, net over the life of the
senior notes and debentures. At June 30, 2006 the
commercial paper had a weighted average interest rate of 5.59%
and average maturity of less than 30 days. The Company
classifies the term facility and commercial paper as non-current
financing obligations as management has the intent and ability, through
utilization of the $3.25 billion revolving facility due
December 2010, to refinance such obligations as
long-term. F-49 VIACOM
INC. NOTE 6. COMPREHENSIVE
INCOME Comprehensive income consists of net earnings and other
comprehensive income, which refers to revenue, expenses, gains and
losses that under GAAP are recorded as an element of
Stockholders’ equity. The following table summarizes the
components of comprehensive
income: NOTE
7. EARNINGS PER SHARE Basic earnings per common share
excludes potentially dilutive securities and is computed by dividing
net earnings by the weighted average number of common shares
outstanding during the period. Basic earnings per share for the six
months ended June 30, 2005 was computed by dividing net
earnings by the number of shares of common stock issued and outstanding
at the date of the separation as if such shares were outstanding as of
January 1, 2005. The determination of diluted
earnings per common share includes the potential dilutive effect of
stock options and restricted share units based upon the application of
the treasury stock method. Diluted earnings per common share for the
six months ended June 30, 2005 is equal to basic earnings
per share for both periods as no dilutive securities were outstanding
for such period. The following table sets forth the computation
of basic and diluted earnings per common share, before discontinued
operations: Stock
options to purchase 38.9 million shares and 0.1 million
restricted share units of Company common stock were outstanding but
excluded from the calculation of diluted earnings per common share
because their inclusion would have been anti-dilutive for the six
months ended June 30, 2006. Additionally, restricted
share units of 0.7 million were excluded from the calculation of
diluted earning per common share because their performance conditions
were not met as of June 30, 2006. F-50 VIACOM
INC. NOTE 8. RELATED PARTY
TRANSACTIONS NAI through its wholly-owned subsidiary NAIRI,
Inc. is Viacom’s controlling stockholder, and Sumner M.
Redstone is the controlling stockholder of NAI and is Viacom’s
Executive Chairman of the Board and Founder. NAI and/or NAIRI also own
controlling interests in various other companies, some of which do
business with Viacom. These companies include CBS Corporation and
Midway Games, Inc., as further described below. NAI licenses
films in the ordinary course of business for its motion picture
theaters from all major studios including Paramount. During the six
months ended June 30, 2006 and 2005, NAI made payments to
Paramount in connection with these licenses in the aggregate amounts of
approximately $1.8 million, and $4.0 million,
respectively. NAI and Mr. Redstone owned in the aggregate
approximately 88% of the common stock of Midway
Games Inc. (‘‘Midway’’) as of
June 30, 2006. Midway places advertisements on several of
Viacom's cable networks from time to time. During the six months
ended June 30, 2006 and 2005, Midway made payments to MTV
Networks of approximately $3.0 million and $2.4 million,
respectively. The Company believes that these transactions were no more
or less favorable to the subsidiaries than they would have obtained
from unrelated parties. The Company may continue to enter into these
and other business transactions with Midway in the future. For
information on NAI and NAIRI’s participation in the
Company’s stock repurchase program, see Note 2 Stock
Repurchase Program. Viacom and CBS Corporation Related Party
Transactions The Company, in the normal course of business, is
involved in transactions with companies owned by or affiliated with CBS
Corporation which results in the recognition of revenue by Viacom.
Total revenues from these transactions were $103.8 million and
$86.7 million for the six months ended June 30,
2006 and 2005, respectively. In addition, the total related party
purchases from CBS Corporation included $42.8 million
($34.8 million for advertising and $8.0 million for
programming) and $75.5 million ($53.0 million for
advertising and $22.5 million for programming), for the six
months ended June 30, 2006 and 2005, respectively. Transactions with CBS Corporation, through the normal course of
business, are settled in cash. The following table presents the amounts
due from or due to CBS Corporation as included in our Consolidated
Balance
Sheet: F-51 VIACOM
INC.
Separation Related Agreements with
CBS Corporation
In connection with the separation, Viacom
entered into a Separation Agreement with CBS Corporation that
identified assets to be transferred, liabilities to be assumed and
obligations of each company following the separation, including
indemnification obligations for such liabilities. For information
regarding the special dividend paid to CBS Corporation in accordance
with the terms of the Separation Agreement and the related
post-separation adjustment to the dividend, see Note 1 Basis of
Presentation to the Consolidated Financial Statements. Viacom
entered into a Transition Services Agreement, pursuant to which Viacom
and CBS Corporation provide certain specified services to each other on
an interim basis. For the six months ended June 30, 2006,
approximately $3.7 million was included as a net charge within
the Consolidated Statements of Earnings with respect to these
services. Viacom and CBS Corporation also entered into a Tax
Matters Agreement, which sets forth Viacom’s responsibilities
with respect to, among other things, liabilities for federal, state,
local and foreign income taxes for periods prior to the separation and
indemnification for income taxes that would become due if the
separation were a taxable event. These agreements are described
in more detail in Viacom’s 2005 Annual
Report.
Relationship between Viacom and Other Related
Parties
The Company, in the normal course of business, is
involved in other related party transactions that have not been
material in any of the periods presented. NOTE 9. STOCK
BASED COMPENSATION The Company’s Long-Term Management
Incentive Plan (the ‘‘LTMIP’’), and
similarly the Directors’ plan, provide for the granting of stock
options, stock appreciation rights, restricted and unrestricted shares,
restricted share units (‘‘RSUs’’), phantom
shares, dividend equivalents, performance awards and other equity
related awards and cash payments. Historically, the Company has granted
stock options and RSUs. The purpose of the LTMIP is to benefit and
advance the interests of the Company by rewarding certain employees for
their contributions to the financial success of the Company and thereby
motivating them to continue to make such contributions in the future.
The stock options generally vest ratably over a four-year period from
the date of grant and expire eight-to-ten years after the date of a
grant. RSUs typically vest ratably over four years from the date of the
grant. On December 31, 2005, as a result of the
separation from Former Viacom, all outstanding unexercised options to
purchase shares of Former Viacom Class B Common Stock and all
outstanding RSUs of Former Viacom Class B Common Stock held by an
individual who was an employee or director of Former Viacom immediately
prior to December 31, 2005 and was an employee or
director of Viacom immediately following December 31,
2005 were converted into options to purchase shares of Viacom Class B
Common Stock and RSUs of Viacom Class B Common Stock, respectively. For
additional information, refer to the Company’s 2005 Annual
Report. Upon the exercise of a stock option award or the vesting
of RSUs, Class B Common Shares are issued from authorized but unissued
shares or from treasury stock. At June 30, 2006 the
Company had 40.2 million shares in treasury. In addition,
options and RSUs available for future grants as of June
30, 2006 and December 31, 2005 approximated
42.0 million and 50.5 million, respectively. F-52 VIACOM
INC.
Compensation Cost
Recognized
In accordance with FAS 123R, the Company elected
the modified prospective application method. Under this method, the
Company began recognizing compensation cost for equity based
compensation for all new or modified grants beginning January
1, 2006. In addition, the Company has begun to recognize the
unvested portion of the grant date fair value of awards issued prior to
the adoption based on the fair values previously calculated for
disclosure purposes. At December 31, 2005, the aggregate
fair value of unvested options was approximately $63.2 million,
net of forfeitures, of which $11.3 million was recognized during
the six months ended June 30, 2006. The remaining amount
will continue to be recognized over the remaining vesting period of the
options, the weighted-average of which is approximately 2.4 years. Presented below is a summary of the compensation cost recognized in
the accompanying Consolidated Statements of
Earnings:
Stock
Option Plans
The fair value of each option grant is
estimated on the date of grant. For options granted during 2006, the
determination of volatility is principally based upon implied
volatilities from traded options, whereas for options granted during
2005 and prior, the assumption for volatility was based upon historical
volatility of the Former Viacom. The expected term, representing the
period of time that options granted are expected to be outstanding, is
estimated using statistical analysis incorporating historical post vest
exercise and employee termination behavior. The risk-free rate assumed
in valuing the options is based on the U.S. Treasury Yield curve in
effect applied against the expected term of the option at the time of
the grant. The expected dividend yield, applicable for the Former
Viacom, was based on the expected dividend yield percentage of Former
Viacom divided by the market price of Former Viacom common stock at the
date of grant. The Company has no intention of declaring a dividend at
this time. Presented below is the weighted average fair value of grants
for the periods presented and the weighted average of the applicable
assumptions used to value stock options at grant date: F-53 VIACOM
INC. The following table summarizes
information about stock options outstanding at June 30,
2006. The exercise price and remaining contractual life calculations
are based on weighted
averages: The
following table summarizes information relating to stock option
exercises during the periods
presented: Stock options
granted for the six months ended June 30, 2006 include
approximately 685,300 replacement awards as a result of the DreamWorks
acquisition. Total unrecognized compensation cost related to unvested
stock option awards at June 30, 2006 is approximately
$122.8 million and is expected to be recognized on a
straight-line basis over a weighted-average period of 3.2
years.
Restricted Share Units
The following table
summarizes information about restricted share units outstanding at
June 30, 2006. The grant date fair value and remaining
contractual life calculations are based on weighted
averages: In
May 2006, the Company awarded, under the LTMIP, 752,300 RSUs
subject to performance or market and performance conditions with time
vesting to its senior executives. The grant date discounted fair value
for the RSUs subject to both market and performance conditions was
computed using a lattice model. The grant date fair value for RSUs
subject to performance conditions and time vesting is the underlying
share price on the date of grant. Compensation cost assumes all
performance goals will be met and is being recognized as the requisite
service period is fulfilled. F-54 VIACOM
INC. The fair value of RSUs vested during the
six months ended June 30, 2006 was $13.2 million.
No RSUs vested in 2005. Total unrecognized compensation cost related to
RSUs at June 30, 2006 is approximately $68.2
million and is expected to be recognized over a weighted-average period
of 2.8 years. NOTE 10. BENEFIT PLANS Viacom has both
funded and unfunded noncontributory defined benefit pension plans. The
components of net periodic benefits costs recognized, and contributions
made, were as
follows: Contributions
for the six months ended June 30, 2006 and 2005 relate to
payments on unfunded plans to the extent benefits were paid, which
generally occurs ratably over the year. After considering the funded
status of the Company’s defined benefit plans, minimum required
contributions, movements in discount rate, investment performance and
related tax consequences, the Company may choose to make contributions
to its funded plans in any given year. There are currently no minimum
required contributions for funded plans. NOTE
11. SEVERANCE AND OTHER CHARGES At December
31, 2005, the Company had accrued $74.9 million related
to severance charges principally related to costs incurred in
rationalizing the overhead structures of the Cable Networks segment
($47.9 million) and Entertainment segment ($22.6 million)
as a result of the separation from Former Viacom. The following table
summarizes the activity for severance and other charges for the six
month period ended June 30,
2006: F-55 VIACOM
INC. NOTE 12. SEGMENT INFORMATION The following tables set forth the Company's financial
performance by reportable operating segment. The Company's
reportable operating segments have been determined in accordance with
the Company's internal management structure. The Company operates
two segments: (i) Cable Networks and
(ii) Entertainment. Operating income eliminations
primarily reflect the timing of intercompany transactions from the
license of feature films to cable
networks. NOTE
13. COMMITMENTS AND CONTINGENCIES
Commitments and
Contingencies
The Company’s commitments not recorded
on the balance sheet primarily consist of programming and talent
commitments, operating lease arrangements and purchase obligations for
goods and services. These arrangements result from the Company’s
normal course of business and represent obligations that are payable
over several years.
Guarantees
In the course of
its business, the Company both provides and receives the benefit of
indemnities that are intended to allocate certain risks associated with
business transactions. Similarly, the Company may remain contingently
liable to third parties for various obligations of a business that has
been divested. Further information is provided below and in the 2005
Annual Report of the Company. F-56 VIACOM
INC. Under the terms of the DW Funding sale
agreement, more fully described in Note 3 Business Combinations and
Dispositions, Soros and Dune can require Viacom to purchase and
Viacom can require Soros and Dune to sell their respective interest via
a call obligation at the then current value of DW Funding, commencing
nine months prior to the fifth anniversary of the sale. To the extent
the current fair value at the option closing date is insufficient to
repay the related indebtedness of DW Funding, the Company would be
required to repay certain lenders all accrued and unpaid interest and
principal amounts outstanding. As of June 30, 2006, the
maximum aggregate principal amount that would be payable under such
provisions of the agreement is $102.8 million. Therefore, as of
June 30, 2006, the Company’s maximum exposure to
loss as a result of its involvement with DW Funding is the
$102.8 million previously described as well as the $7.35
million of value ascribed to the equity investment. In connection
with the separation, the Company has agreed to indemnify CBS
Corporation with respect to the obligations of the former Viacom as
guarantor on certain Blockbuster store leases. Blockbuster’s
obligations under these store leases aggregated approximately
$329.6 million at June 30, 2006. Certain leases
contain renewal options that can extend the primary lease term and
remain covered by the guarantees. Blockbuster’s indemnification
obligations are secured by a $150 million letter of credit.
Viacom had established a liability of $53.2 million to reflect
the fair value of its indemnification obligation at June
30, 2006. In 2005, the former Viacom sold Famous Players,
an operator of movie theaters in Canada. CBS Corporation may incur
liabilities associated with Famous Players theater leases. The Company
agreed to indemnify CBS Corporation, with respect to any liability
under these theater leases. Famous Players obligations under these
theater leases aggregated approximately $1.07 billion at
June 30, 2006. The Company had established a liability of
approximately $200.6 million to reflect the fair value of these
indemnification obligations.
Legal Proceedings
In
July 2002, judgment was entered in favor of Former Viacom,
Blockbuster, Paramount Home Entertainment and other major motion
picture studios and their home video subsidiaries with respect to a
complaint filed in the United States District Court for the Western
District of Texas. The complaint included federal antitrust and
California state law claims. In August 2003, the U.S. Court of
Appeals for the Fifth Circuit affirmed the federal court judgment. The
U.S. Supreme Court refused plaintiffs' petition for writ of
certiorari in March 2004. In February 2003, a similar
complaint that had been filed in a Los Angeles County Superior Court
was also dismissed with prejudice. The plaintiffs appealed the
California state court dismissal, as well as a prior denial of class
certification. On November 22, 2005, the California Court of
Appeal affirmed the trial court's dismissal of the antitrust and
conspiracy claims. The court reversed the dismissal of California
Unfair Practices Act and Unfair Competition Act claims and remanded
those claims to the trial court, except with regard to transactions
between Paramount and Blockbuster as to which the trial court dismissal
was affirmed. Blockbuster remains a defendant in the case with respect
to our transactions with studios other than Paramount. As the result of
the split-off of Blockbuster from Former Viacom in 2004, any judgment
in this matter adverse to Former Viacom, Blockbuster and/or Paramount
Home Entertainment may be allocated 33.33% to Blockbuster and
66.67% to Viacom. Pursuant to the Separation Agreement, Viacom
has assumed and will indemnify CBS Corporation for Former
Viacom's responsibility for losses in this matter. On
July 13, 2005, two identical shareholder derivative lawsuits
were filed against Former Viacom. The suits, consolidated as In re
Viacom Shareholders Derivative Litigation, relate to the
compensation of Sumner Redstone, Tom Freston and Leslie Moonves, each
of whom were executive officers of Former Viacom. Mr. Redstone
is currently Viacom's Executive Chairman of the Board and Founder
and Mr. Freston is Viacom's President and Chief Executive
Officer. Mr. Moonves is the President and F-57 VIACOM
INC.
Chief Executive Officer of CBS Corporation.
The plaintiffs claim that the compensation of these officers was
excessive and unwarranted and not entirely fair to Former Viacom and
its shareholders. Plaintiffs seek disgorgement of compensation paid to
the named officers in 2004, unspecified damages from members of Former
Viacom's Board of Directors for alleged breach of fiduciary duty,
and other relief. In June of 2006, the trial level court denied Former
Viacom’s motion to dismiss the case on procedural and
substantive grounds. Former Viacom intends to appeal this decision.
Under the Separation Agreement, liabilities arising from and control of
claims relating to the pre-separation compensation of officers of
Former Viacom are shared equally by Viacom and CBS
Corporation. In late 2005 and early 2006, Former Viacom was named
as a defendant in three lawsuits in the United States District Court
for the Northern District of Texas and one lawsuit in the United States
District Court for the Southern District of New York, each relating to
the 2004 split-off of Blockbuster from Former Viacom. In August
2006, an additional lawsuit was filed in the Delaware Court of
Chancery. The lawsuits name as defendants various combinations of NAI,
Former Viacom, Blockbuster, and certain of their respective present and
former officers and directors, including some individuals who are
officers and directors of New Viacom. The Texas lawsuits are purported
class actions which allege violations of the federal securities laws.
The New York case is a purported class action which alleges that the
defendants breached fiduciary obligations to the Blockbuster Investment
Plan in violation of the Employee Retirement Income Security Act by
continuing to offer to plan participants Blockbuster stock from and
after November 2003 and by offering to plan participants the
opportunity to exchange their shares of Former Viacom common stock for
the shares of Blockbuster common stock that were owned by Former Viacom
in connection with the 2004 split-off transaction. The Delaware case is
a purported class action which alleges that the directors of Former
Viacom at the time of the split-off breached certain fiduciary
obligations to Viacom shareholders. Plaintiffs in each of the lawsuits
allege that the defendants made untrue statements of material facts and
concealed and failed to disclose material facts with respect to
Blockbuster's business prospects. The lawsuits seek damages in
unspecified amounts and other relief. In connection with the split-off,
Blockbuster agreed to indemnify Former Viacom and our employees,
officers and directors with respect to liabilities arising out of any
material untrue statements and omissions in those portions of the 2004
Prospectus-Offer to Exchange relating to the split-off that were
provided by Blockbuster. In July 2006, Former Viacom and
Blockbuster moved to dismiss the New York case. The Texas cases have
been consolidated and the plaintiffs are expected to file a
consolidated complaint. Pursuant to the Separation Agreement, we will
indemnify CBS Corporation for any losses arising from these lawsuits.
In July 2006, Former Viacom and Blockbuster moved to dismiss the
New York case. The Texas cases have been consolidated and the
plaintiffs are expected to file a consolidated complaint. Viacom
believes that the plaintiffs' positions in these litigations are
without merit and intends to vigorously defend itself in the
litigations. Litigation is inherently uncertain and always difficult to
predict. However, based on Viacom's understanding and evaluation
of the relevant facts and circumstances, it believes that the
above-described legal matters and other litigation to which it is a
party are not likely, in the aggregate, to have a material adverse
effect on its results of operations, financial position or cash
flows. F-58 VIACOM
INC. NOTE 14. ADDITIONAL
INFORMATION
Supplemental Cash Flow
Information
Interest
expense,
net
Other
items,
net
NOTE
15. SUBSEQUENT EVENTS On August 9, 2006, the
Company agreed to acquire Atom Entertainment, Inc., a portfolio of four
leading online destinations for casual games, short films and
animation, for initial cash consideration of approximately $200
million. The acquisition is subject to customary closing conditions and
is expected to close in the third
quarter. F-59 VIACOM
INC. OFFER TO EXCHANGE Unregistered Floating Rate
Senior Notes due 2009
and
Unregistered 5.75% Senior
Notes due 2011
and
Unregistered 6.25% Senior
Notes due 2016
and
Unregistered 6.875% Senior
Debentures due 2036 PROSPECTUS ,
2006
Until ,
all dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers’ obligation to
deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or
subscriptions.
PART
II INFORMATION NOT REQUIRED IN PROSPECTUS Item
20. Indemnification of Directors and Officers The
Registrant is incorporated in the State of Delaware. Section 102(b)(7)
of the Delaware General Corporation Law allows a corporation to include
in its certificate of incorporation a provision eliminating or limiting
the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director, except in cases where the director breached his duty of
loyalty to the corporation or its stockholders, failed to act in good
faith, engaged in intentional misconduct or a knowing violation of the
law, willfully or negligently authorized the unlawful payment of a
dividend or approved an unlawful stock redemption or repurchase or
obtained an improper personal benefit. The Registrant’s
certificate of incorporation contains provisions that eliminate
directors’ personal liability in certain circumstances,
including the instances described above. The Registrant’s
certificate of incorporation provides that the corporation shall
indemnify any person who was or is involved in or is threatened to be
involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he is or was a director or officer of the
Registrant, or is or was serving at the request of the Registrant as a
director or officer (including trustee) of another corporation, limited
liability company, partnership, joint venture, trust or other
enterprise, to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended,
against judgments, fines, amounts paid in settlement and expenses
(including attorneys’ fees), actually and reasonably incurred by
him in connection with such action, suit or proceeding. Notwithstanding
the foregoing, except with respect to proceedings to enforce rights to
indemnification and advancement of expenses, the Registrant shall
indemnify an indemnitee in connection with a proceeding (or part
thereof) initiated by the indemnitee, if and only if the board of
directors of the Registrant authorized the bringing of the action, suit
or proceeding (or part thereof) in advance of the commencement of the
proceeding. The Registrant’s certificate of incorporation
provides that to the extent that a director or officer of the
Registrant has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to above, or in defense of any
claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys’ fees) actually and
reasonably incurred by that person in connection therewith. The
indemnification and advancement of expenses provided by, or granted
pursuant to, the indemnification provisions of the Registrant’s
certificate of incorporation shall not be deemed exclusive of any other
rights to which a person seeking indemnification or advancement of
expenses may be entitled under any statute, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action
in that person’s official capacity and as to action in another
capacity while holding such office. Without limiting the foregoing, the
Registrant is authorized to enter into an agreement with any director
or officer of the Registrant providing indemnification for such person
against expenses, including attorneys’ fees, judgments, fines
and amounts paid in settlement that result from any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including any action by or in the
right of the Registrant, that arises by reason of the fact that such
person is or was a director or officer of the Registrant, or is or was
serving at the request of the Registrant as a director or officer of
another corporation, limited liability company, partnership, joint
venture, trust or other enterprise, to the fullest extent allowed by
law, except that no such agreement shall provide for indemnification
for any actions that constitute fraud, actual dishonesty or willful
misconduct. The Registrant's bylaws provide that the
Registrant shall indemnify any present or former employee who was or is
involved in or is threatened to be involved in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or
was an employee of the Registrant, or is or was serving at the request
of the Registrant as an employee of another corporation, limited
liability company, partnership, joint II-1
venture, trust or other enterprise, to the
fullest extent authorized by the Delaware General Corporation Law, as
the same exists or may hereafter be amended, against judgments, fines,
amounts paid in settlement and expenses (including attorneys'
fees), actually and reasonably incurred by him in connection with such
action, suit or proceeding. Notwithstanding the foregoing, except with
respect to proceedings to enforce rights to indemnification and
advancement of expenses, the Registrant shall indemnify an indemnitee
in connection with a proceeding (or part thereof) initiated by the
indemnitee, if and only if the board of directors of the Registrant
authorized the bringing of the action, suit or proceeding (or part
thereof) in advance of the commencement of the proceeding. The
Registrant may purchase and maintain insurance on behalf of any person
who is or was a director or officer of the Registrant, or is or was
serving at the request of the Registrant as a director or officer of
another corporation, limited liability company, partnership, joint
venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Registrant would have the power
to indemnify him against such liability under the provisions of the
Registrant’s certificate of incorporation. Item
21. Exhibits See the
index to exhibits that appears immediately following the signature
pages to this registration
statement. Report of Independent Registered Public Accounting
Firm Schedule II—Valuation and Qualifying Accounts Report of Independent Registered Public Accounting Firm To the Board of
Directors and Stockholders of Viacom Inc.: Our audits of
the consolidated financial statements referred to in our report dated
March 16, 2006 appearing in this Registration Statement on Form S-4
also included an audit of the financial statement schedule listed in
Item 21(b) of this Form S-4. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated
financial statements. /s/ PricewaterhouseCoopers LLP New York, New York II-2 VIACOM INC. AND SUBSIDIARIES All
other Schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission
of the schedule. II-3 Item
22. Undertakings (a) The undersigned
registrant hereby undertakes: (1) To file,
during any period in which offers or sales are being made, a
post-effective amendment to this Registration
Statement: (i) To include any prospectus required
by Section 10(a)(3) of the Securities Act of
1933; (ii) To reflect in the prospectus any facts
or events arising after the effective date of the Registration
Statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the ‘‘Calculation of
Registration Fee’’ table in the effective Registration
Statement; and (iii) To include any material
information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change in such
information in the Registration
Statement. (2) That, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at the time shall be deemed to be the initial bona
fide offering thereof. (3) To remove from
registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of
the offering. (b) Insofar as
indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such
issue. (c) To respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business
day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to
the request. (d) To supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject
of and included in the registration statement when it became
effective. II-4 SIGNATURES Pursuant
to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York,
State of New York on August 18, 2006. Pursuant to the requirements of the
Securities Act of 1933, this registration statement has been signed by
the following persons in the capacities and on the dates
indicated: II-5 INDEX
TO
EXHIBITS II-6 II-7 II-8 II-9 Exhibit
4.4 VIACOM INC. AND THE BANK OF NEW
YORK Trustee SECOND
SUPPLEMENTAL INDENTURE Dated as of June 16, 2006 To Indenture dated as of April 12, 2006 Senior
Notes SECOND
SUPPLEMENTAL INDENTURE, dated as of June 16, 2006, between VIACOM INC.,
a Delaware corporation (the
‘‘Company’’), and The Bank of
New York, a New York banking corporation, as trustee (the
‘‘Trustee’’) to the Indenture,
dated as of April 12, 2006, between the Company and the Trustee as
supplemented by the First Supplemental Indenture dated as of April 12,
2006 between the Company and the Trustee, (as so supplemented and as
supplemented hereby, the
‘‘Indenture’’). RECITALS
OF THE COMPANY WHEREAS, Section 901(5) of the Indenture permits
supplements thereto without the consent of Holders of Securities to
change any provisions of the Indenture with respect to a series of
Securities, where there are no Securities Outstanding which are
entitled to the benefit of such provision; and WHEREAS, as
contemplated by Section 301 of the Indenture, the Company intends to
issue from time to time floating rate senior notes due 2009 (the
‘‘Senior Notes’’) under the
Indenture; NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE
WITNESSETH: For consideration, the adequacy and sufficiency of
which are hereby acknowledged by the parties hereto, each party agrees
as follows, for the benefit of the other party and for the equal and
proportionate benefit of all Holders of the Senior Notes, as
follows: SECTION 1. For the purpose of this Second
Supplemental Indenture, all terms used herein, unless otherwise
defined, shall have the meaning assigned to them in the Indenture, as
amended hereby. SECTION 2. The Company shall issue
Senior Notes in an aggregate principal amount of $750,000,000. The form
of Senior Notes is set forth in Exhibit A hereto. The Senior Notes
shall include the legends set forth on the face of Exhibit A hereto,
substantially in the form so set forth, except to the extent otherwise
provided herein. SECTION 3. The Senior Notes offered
and sold in reliance on Rule 144A shall be issued initially in the form
of one or more permanent global Senior Notes in registered form,
substantially in the form set forth in Exhibit A hereto (the
‘‘U.S. Global Securities’’),
registered in the name of the nominee of the Depositary, deposited with
the Trustee, as custodian for the Depositary, duly executed by the
Company and authenticated by the Trustee as provided in Section 303 of
the Indenture. The aggregate principal amount of the U.S. Global
Securities may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the
Depositary or its nominee, in accordance with the instructions given by
the Holder thereof, as hereinafter
provided. 1 The Senior Notes offered and sold in
offshore transactions in reliance on Regulation S shall be issued
initially in the form of one or more permanent global Senior Notes in
registered form, substantially in the form set forth in Exhibit A (the
‘‘Offshore Global Securities’’),
registered in the name of the nominee of the Depositary, deposited with
the Trustee, as custodian for the Depositary, duly executed by the
Company and authenticated by the Trustee as provided in Section 303 of
the Indenture. The aggregate principal amount of the Offshore Global
Securities may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the
Depositary or its nominee, as hereinafter provided. The U.S.
Global Securities and the Offshore Global Securities are sometimes
referred to herein as the ‘‘Global
Securities.’’ SECTION 4. For the sole
benefit of the Holders of the Senior Notes, Section 101 of the
Indenture is hereby amended by adding the following definitions, each
in appropriate alphabetical
order: ‘‘Agent’’ means any Transfer
Agent, Registrar, co-Registrar, Paying Agent or Authenticating
Agent. ‘‘Closing Date’’ means June 16,
2006. ‘‘Depositary’’ means, as
applicable, either the U.S. Depositary or the Common
Depositary. ‘‘Exchange Notes’’ means any
securities of the Company containing terms identical to the Senior
Notes (except that such Exchange Notes shall be registered under the
Securities Act and shall not include the restrictions on transfer or
any increase in the interest rate) that are issued and exchanged for
the Senior Notes pursuant to the Registration Rights Agreement and the
Indenture. ‘‘Exchange Offer Registration
Statement’’ means the Exchange Offer Registration Statement
as defined in the Registration Rights
Agreement. ‘‘Non-United States Person’’
means a Person who is not a United States
Person. ‘‘Participant’’ means a Person
who has an account with a Depositary. ‘‘Registration
Rights Agreement’’ means the Registration Rights Agreement,
dated June 16, 2006, among the Company, Deutsche Bank Securities Inc.
and certain permitted assigns specified
therein. ‘‘Registration Statement’’ means
the Registration Statement as defined and described in the Registration
Rights Agreement. ‘‘Regulation S’’ means
Regulation S under the Securities Act. ‘‘Regulation S
Non-U.S. Person’’ means a person who is not a
‘‘U.S. Person’’ as defined in Regulation
S. 2 ‘‘Regulation S U.S.
Person’’ has the meaning assigned thereto in Regulation
S. ‘‘Restricted Security’’ means any
Senior Note that has not been sold in connection with an effective
Registration Statement. ‘‘Rule 144A’’
means Rule 144A under the Securities
Act. ‘‘Securities Act’’ means the
Securities Act of 1933, as amended from time to
time. ‘‘Shelf Registration Statement’’
means the Shelf Registration Statement as defined in the Registration
Rights Agreement. SECTION
5. [Reserved] SECTION
6. [Reserved] SECTION 7. For the sole
benefit of the holders of the Senior Notes, Section 305 of the
Indenture is hereby deleted in its entirety and replaced by the
following Sections 305, 305A, 305B, 305C, 305D and 305E (the
‘‘New Provisions’’): SECTION 305. Registrar and Paying Agent. The
Company shall maintain an office or agency in the City of New York
where Securities may be presented for transfer or for exchange (the
‘‘Transfer Agent’’) and for the
registration of such transfer or exchange (the
‘‘Registrar’’, which term shall
include acting in the capacity of Transfer Agent), an office or agency
in the City of New York where Securities may be presented for payment
(the ‘‘Paying Agent’’) and an
office or agency where notices and demands pursuant to this section to
or upon the Company in respect of the Securities and this Indenture may
be served, which shall be in the Borough of Manhattan, The City of New
York with respect to such series. The Company shall cause the Registrar
to keep a register of the Securities and of their transfer and exchange
(the ‘‘Security Register’’). The
Security Register shall be in written form or any other form capable of
being converted into written form within a reasonable time. The Company
may have one or more co-Registrars and one or more additional Paying
Agents. The Company shall enter into an
appropriate agency agreement with any Agent not a party to this
Indenture. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall give prompt
written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Company fails to
maintain a Registrar, Paying Agent and/or agent for service of notices
and demands pursuant to this section, the Trustee shall act as such
Registrar, Paying Agent and/or agent for service of notices and demands
pursuant to this section. The Company may remove any Agent upon written
notice to such Agent and the Trustee; provided that no such removal
shall become effective until (i) the acceptance of an appointment by a
successor Agent to such Agent as evidenced by an appropriate agency
agreement entered into by the Company and such successor Agent and
delivered to the Trustee or (ii) notification to the Trustee that the
Trustee shall serve as such Agent until the appointment of a successor
Agent in accordance with clause (i) of this proviso. The Company, any
Subsidiary of the Company, or any Affiliate of any of them may
act 3 as Paying Agent, Registrar or co-Registrar,
and/or agent for service of notice and demands. The Company initially appoints the Trustee as
Registrar, Paying Agent, Authenticating Agent and agent for service of
notice and demands. The Trustee shall preserve in as current a form as
is reasonably practicable the most recent list available to it of the
names and addresses of Holders and shall otherwise comply with TIA
Section 312(a). If the Trustee is not the Registrar, the Company shall
furnish to the Trustee as of each Regular Record Date and at such other
times as the Trustee may reasonably request the names and addresses of
Holders as they appear in the Security Register, including the
aggregate principal amount of Securities held by each Holder. SECTION 305A. Transfer and Exchange. A Holder may
transfer a Security only by written application to the Registrar
stating the name of the proposed transferee and otherwise complying
with the terms of this Indenture. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only
upon, final acceptance and registration of the transfer by the
Registrar in the Security Register. Prior to the registration of any
transfer by a Holder as provided herein, the Company, the Trustee, and
any agent of the Company shall treat the person in whose name the
Security is registered as the owner thereof for all purposes whether or
not the Security shall be overdue, and neither the Company, the
Trustee, nor any such agent shall be affected by notice to the
contrary. Furthermore, any Holder of a Global Security shall, by
acceptance of such Global Security, agree that transfers of beneficial
interests in such Global Securities may be effected only through a
book-entry system maintained by the Holder of such Global Security (or
its agent) and that ownership of a beneficial interest in the Security
shall be required to be reflected in a book-entry. When Securities are
presented to the Registrar or a co-Registrar with a request to register
the transfer or to exchange them for an equal principal amount of
Securities of other authorized denominations, the Registrar shall
register the transfer or make the exchange as requested if its
requirements for such transactions are met (including that such
Securities are duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and Registrar duly
executed by the Holder thereof or by an attorney who is authorized in
writing to act on behalf of the Holder); provided that the requirements
of Section 305D herein are met. To permit registrations of transfers
and exchanges, the Company shall execute and the Trustee shall
authenticate Securities at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange or
redemption of the Securities, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith. The Registrar
shall not be required (i) to issue, register the transfer of or
exchange any Security during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of
redemption of Securities selected for redemption under Article Eleven
and ending at the close of business on the day of such mailing, or (ii)
to register the transfer of or exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any
Security being redeemed in
part. 4 SECTION 305B. Legend on
Restricted Securities. (i) Unless and until a Senior Note is exchanged
for an Exchange Note or sold in connection with an effective Shelf
Registration Statement pursuant to the Registration Rights Agreement,
the U.S. Global Securities shall bear the legends set forth on the face
of Exhibit A, and (ii) the Offshore Global Securities shall bear the
legends set forth on the face of Exhibit A until (A) at least the 41st
day after the Closing Date and (B) receipt by the Company and the
Trustee of a certificate substantially in the form of Appendix I
hereto. Except as provided in Section 305D,
the Trustee shall not issue any unlegended Senior Notes until it has
received an Officers' Certificate from the Company directing it
to do so. SECTION 305C. Book-Entry Provisions
for U.S. Global Securities and Offshore Global Securities. (a) Each
U.S. Global Security and Offshore Global Security initially shall (i)
be registered in the name of the Depositary for such U.S. Global
Security or Offshore Global Security or the nominee of such Depositary,
(ii) be delivered, as applicable, either to the Trustee, as custodian
for the U.S. Depositary, or to the Common Depositary and (iii) bear
legends as set forth on the face of the form of the Senior Note. Members of, or Participants in, the Depositary
(‘‘Agent Members’’) shall have
no rights under this Indenture with respect to any Global Security held
on their behalf by the Depositary, or the Trustee as its custodian or
the Common Depositary, as applicable, or under such Global Security,
and the Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of such
Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights
of a holder of any Security. (b) Transfers of
a Global Security shall be limited to transfers of such Global Security
in whole, but not in part, to the Depositary, its successors or their
respective nominees, and as further specified in Section 305D.
Transfers of interests in one Global Security to parties who will hold
the interests through the same Global Security will be effected in the
ordinary way in accordance with the respective rules and operating
procedures of the applicable Depositaries and the provisions of Section
305D. The provisions of the ‘‘Operating Procedures of the
Euroclear System’’ and ‘‘Terms and Conditions
Governing Use of Euroclear’’ of Euroclear and the
‘‘General Terms and Conditions of Clearstream’’
and ‘‘Customer Handbook’’ of Clearstream shall
be applicable to interests in the Global Securities that are held by
Agent Members through Euroclear and Clearstream. (c) Any beneficial interest in one of the Global
Securities that is transferred to a person who takes delivery in the
form of an interest in another Global Security will, upon transfer,
cease to be an interest in such Global Security and become an interest
in such other Global Security and, accordingly, will thereafter be
subject to all 5 transfer restrictions, if any, and
other procedures applicable to beneficial interests in such other
Global Security for so long as it remains such an interest. (d) In connection with any transfer of a portion
of the interests in a Global Security to beneficial owners pursuant to
paragraph (c) of this Section 305C, the Registrar shall reflect on its
books and records the date and a decrease in the principal amount of
such Global Security in an amount equal to the principal amount of the
interest in such Global Security to be transferred. (e) In connection with the transfer of the U.S.
Global Securities or the Offshore Global Securities, in whole, to
beneficial owners pursuant to paragraph (b) of this Section 305C, the
U.S. Global Securities or Offshore Global Securities, as the case may
be, shall be deemed to be surrendered to the Trustee for
cancellation. (f) The registered holder of a
Global Security may grant proxies and otherwise authorize any person,
including Agent Members and persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take
under this Indenture or the Securities. (g)
The Securities are initially solely issuable as Global Securities.
Registered Securities shall be physically transferred to all beneficial
owners in definitive form in exchange for their beneficial interests in
a Global Security, if the Depositary with respect to such Global
Securities notifies the Company that it is unwilling or unable to
continue as Depositary for such Global Security, as the case may be,
and a successor Depositary is not appointed by the Company within 90
days of such notice. (h) All Securities issued
upon any transfer or exchange of Securities shall be valid, legally
enforceable obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange. SECTION 305D. (a) Transfers to QIBs. The following
provisions shall apply with respect to the registration of any proposed
transfer of Senior Notes constituting a Restricted Security to a
qualified institutional buyer as defined in Rule 144A (a
‘‘QIB’’): (i) if the Senior Notes to be transferred consist
of an interest in the U.S. Global Securities, the transfer of such
interest may be effected through the book-entry system maintained by
the Depositary; (ii) (A) if the
proposed transferor is an Agent Member holding a beneficial interest in
the Offshore Global Securities, upon receipt by the Registrar of
instructions in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books
and records the date and a decrease in the principal amount of the
Offshore Global Securities, in an amount equal to the principal amount
of the beneficial interest in the Offshore Global Securities to be
transferred, and (B) if the proposed transferee is an Agent Member,
upon receipt by the Registrar of instructions given in accordance with
the Depositary's and the Registrar's procedures, the
Registrar shall reflect on
its 6 books and records the date and an
increase in the principal amount of the U.S. Global Securities, in an
amount equal to the principal amount of the Offshore Global Securities
to be transferred and the Trustee shall decrease the amount of the
Offshore Global Securities. (b) Transfers of
Interests in the Offshore Global Securities. The following provisions
shall apply with respect to any transfer of interests in Offshore
Global Securities: (i) until the expiration of
the 40-day distribution compliance period within the meaning of Rule
903 of Regulation S, any offer or sale of interests in the Offshore
Global Securities shall be made (a) (1) outside the United States in
compliance with Rule 903 or 904 under the Securities Act or (2) to a
QIB in compliance with Rule 144A and (b) in accordance with all
applicable securities laws of the states of the United States or any
other applicable jurisdiction; (ii) prior to
the removal of the legend from the Offshore Global Securities pursuant
to Section 305B, the Registrar shall refuse to register such transfer
unless such transfer complies with this Section 305D; and (iii) after such removal, the Registrar shall
register the transfer of any such Senior Note without requiring any
additional certification. (c) Transfers to
Regulation S Non-U.S. Persons at Any Time. The following provisions
shall apply with respect to any transfer of a Restricted Security to a
Regulation S Non-U.S. Person: (i) The
Registrar shall register any proposed transfer to any Regulation S
Non-U.S. Person if (A) the Senior Note to be transferred is an interest
in U.S. Global Securities, (B) the proposed transferor has delivered to
the Registrar a certificate substantially in the form of Appendix I
hereto and (C) if requested by the Company, the proposed transferee has
delivered to the Registrar an opinion of counsel acceptable to the
Company that such transfer is in compliance with the Securities
Act. (ii) (A) If the proposed transferor is an
Agent Member holding a beneficial interest in U.S. Global Securities
upon receipt by the Registrar of (x) the documents, if any, required by
paragraph (i) and (y) instructions in accordance with the
Depositary's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and a decrease in the
principal amount of the U.S. Global Securities in an amount equal to
the principal amount of the beneficial interest in the U.S. Global
Securities to be transferred, and (B) if the proposed transferee is an
Agent Member, upon receipt by the Registrar of instructions given in
accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the
date and an increase in the principal amount of the Offshore Global
Securities in an amount equal to the
principal 7 amount of the U.S. Global
Securities to be transferred, and the Trustee shall decrease the amount
of the U.S. Global Securities. SECTION 305E.
General. By its acceptance of any Senior Notes bearing the legends set
forth on the face of the form of the Senior Notes, each Holder of such
a Senior Note acknowledges the restrictions on transfer of such Senior
Note set forth in the Indenture and in such legends and agrees that it
will transfer such Senior Note only as provided in the Indenture. The Registrar shall retain, in accordance with its
customary procedures, copies of all letters, notices and other written
communications received pursuant to this Section 305E. The Company
shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar. SECTION 8. [Reserved] SECTION
9. For the sole benefit of the Holders of the Senior Notes, a new
Section 1108 shall be added to the Indenture as follows: (a) Exchange Notes may from time to time be
executed by the Company and delivered to the Trustee for authentication
and the Trustee shall thereupon authenticate and deliver said Exchange
Notes, as the case may be, upon cancellation of an equal amount of
Restricted Securities tendered in exchange, upon a Company Order
without further action by the Company. (b) No
exchange of Senior Notes for Exchange Notes, as the case may be, shall
occur until a Registration Statement shall have been declared effective
by the Commission and any Senior Notes that are exchanged for Exchange
Notes shall be cancelled by the Trustee. SECTION
10. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS SECOND
SUPPLEMENTAL INDENTURE. SECTION 11. This Second
Supplemental Indenture may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original, but
such counterparts shall together constitute but one and the same
instrument. SECTION 12. Except as herein amended
with respect to the Senior Notes, all applicable terms, conditions and
provisions of the Indenture, as supplemented, shall continue in full
force and effect and shall remain binding and enforceable in accordance
with their respective
terms. 8 IN
WITNESS WHEREOF, the parties have caused this Second Supplemental
Indenture to be duly executed and attested, all as of the day and year
first written above. 9 EXHIBIT
A TO SECOND SUPPLEMENTAL INDENTURE Unless and until a Security
is exchanged for an Exchange Note or sold in connection with an
effective Registration Statement pursuant to the Registration Rights
Agreement, (i) the U.S. Global Securities shall bear the legend set
forth below on the face thereof and (ii) the Offshore Global Securities
shall bear the legend set forth below on the face thereof until at
least the 41st day after the Closing Date and receipt by the Company
and the Trustee of a certificate substantially in the form of Appendix
I hereto: THIS SENIOR SECURITY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
‘‘SECURITIES ACT’’), OR ANY
STATE OR OTHER SECURITIES LAWS. NEITHER THIS SENIOR SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM,
OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
‘‘QUALIFIED INSTITUTIONAL BUYER’’ (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT (‘‘ RULE
144A’’)), OR (B) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SENIOR SECURITY IN AN ‘‘OFFSHORE
TRANSACTION’’ PURSUANT TO RULE 903 OR 904 OF REGULATION S,
(2) AGREES NOT TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SENIOR
SECURITY PRIOR TO THE DATE WHICH IS THE LATER OF (X) TWO YEARS (OR SUCH
SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) OF THE SECURITIES
ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR ANY
PREDECESSOR OF THIS SENIOR SECURITY) AND THE LAST DATE ON WHICH VIACOM
OR ANY AFFILIATE OF VIACOM WAS THE OWNER OF THIS SENIOR SECURITY (OR
ANY PREDECESSOR OF THIS SENIOR SECURITY) AND (Y) SUCH LATER DATE, IF
ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE
‘‘RESALE RESTRICTION TERMINATION
DATE’’) EXCEPT (A) TO VIACOM OR ANY SUBSIDIARY
THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SENIOR SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE
THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A
‘‘QUALIFIED INSTITUTIONAL BUYER’’ AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO NON-U.S. PERSONS IN AN
OFFSHORE TRANSACTION WITHIN THE MEANING AND CONSISTENT WITH THE TERMS
AND CONDITIONS OF REGULATION S UNDER THE SECURITIES ACT, OR (E)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO
EACH PERSON TO WHOM THIS SENIOR SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT VIACOM, THE
TRUSTEE, AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION REASONABLY SATISFACTORY
TO A-1 EACH OF THEM, AND (II) IN EACH OF
THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SENIOR SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO VIACOM AND THE TRUSTEE. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
‘‘UNITED STATES,’’ ‘‘OFFSHORE
TRANSACTION,’’ AND ‘‘U.S. PERSON’’
HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. Each Offshore Global Security shall bear the
following legend: PRIOR TO EXPIRATION OF THE 40-DAY DISTRIBUTION
COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S, THIS SENIOR
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO A U.S. PERSON OR FOR THE ACCOUNT OR
BENEFIT OF A U.S. PERSON. Each Global Security shall bear the
following legend: Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
(‘‘DTC’’), to the Company (as
defined below) or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede
& Co. or such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein. Any Global
Security issued hereunder shall bear a legend in substantially the
following form: This Security is a Global Security within the meaning
of the Indenture hereinafter referred to and is registered in the name
of the Depositary or a nominee of the Depositary. This Security is
exchangeable for Securities registered in the name of a person other
than the Depositary or its nominee only in the limited circumstances
described in the Indenture, and may not be transferred except as a
whole by the Depositary to a nominee of the Depositary by a nominee of
the Depositary, by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such
nominee to a successor Depositary or a nominee of such a successor
Depositary. Unless and until it is exchanged in whole or in part
for Securities in definitive registered form in accordance with the
provisions of the Indenture (as defined below) applicable to such
exchange, this certificate may not be transferred except as a whole by
DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or by DTC or any such nominee to a successor Depository
or a nominee of such successor
Depository. A-2 VIACOM
INC. Floating Rate Senior Note due 2009 Viacom Inc., a
Delaware corporation (herein called the
‘‘Company,’’ which term includes
any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to Cede & Co., or registered
assigns, the principal sum of
$ on
June 16, 2009 (the ‘‘Maturity
Date’’) at the office or agency of the Company
referred to below, and to pay interest thereon at the floating rate per
annum determined in accordance with the provisions below (the
‘‘Interest Rate’’), until the
principal hereof is paid or duly provided for. The Company will pay
interest in arrears on each Interest Payment Date (as defined below),
commencing on September 16, 2006 (being the first Interest Payment Date
succeeding June 16, 2006 (the ‘‘Original Issue
Date’’)), and on the Maturity Date. Interest on
this Security will be computed on the basis of a 360-day year and the
actual number of days elapsed. As used herein, ‘‘Interest
Payment Date’’ means each March 16, June 16, September 16
and December 16 in each year, provided that if any such date falls on a
day that is not a Business Day with respect to this Security, the
applicable Interest Payment Date shall be the next succeeding Business
Day unless such Business Day is in the next succeeding calendar month,
in which case the applicable Interest Payment Date shall be the
immediately preceding Business Day. Interest on this Security
will accrue from, and including, the immediately preceding Interest
Payment Date to which interest has been paid or duly provided for (or
from, and including, the Original Issue Date if no interest has been
paid or duly provided for) to, but excluding, the next applicable
Interest Payment Date or the Maturity Date, as the case may be (each,
an ‘‘Interest Period’’). The
amount of accrued interest payable for any Interest Period shall be
calculated by multiplying the face amount of this Security by an
accrued interest factor. Such accrued interest factor is computed by
adding the interest factor calculated for each day from the Original
Issue Date, or from the immediately preceding Interest Payment Date to
which interest has been paid or duly provided for, to the date for
which accrued interest is being calculated. The interest factor for
each day shall be computed by dividing the Interest Rate applicable by
such day by 360. If the Maturity Date of this Security falls on
a day that is not a Business Day, the payment of principal, premium, if
any, and interest shall be made on the next succeeding Business Day, as
if made on the date such payment was due, and no interest shall accrue
on such payment for the period from and after the Maturity Date to the
date of such payment on the next succeeding Business Day. The
interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid, in
immediately available funds, to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at
the A-1 close of business on March 1, June
1, September 1 and December 1, as the case may be, next preceding such
Interest Payment Date, provided, however, that interest so payable on
the Maturity Date shall be payable to the person to whom the principal
is payable. Any such interest not so punctually paid or duly provided
for shall forthwith cease to be payable to the Holder on such Regular
Record Date, and such defaulted interest, shall be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to the Holder of this Security not less than 10
days prior to such Special Record Date, or may be paid at any time in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, all as more fully
provided in said Indenture. Payment of the principal of and
interest on this Security will be made at the Corporate Trust Office of
the Trustee or such other office or agency of the Company as may be
designated for such purpose, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that each installment
of interest and principal on this Security may at the Company's
option be paid in immediately available funds by transfer to an account
maintained by the payee located in the United States. As used
herein, ‘‘Business Day’’ means any day except a
Saturday, Sunday or a legal holiday in The City of New York, State of
New York on which banking institutions are authorized or required by
law, regulation or executive order to close; provided that such day is
also a London Business Day. ‘‘London Business
Day’’ means any day on which dealings in United States
dollars are transacted in the London interbank market. The Interest
Rate on this Security shall be calculated by an agent appointed by the
Company for the purpose (the ‘‘Calculation
Agent’’) and shall be equal to LIBOR (as defined
below) plus 0.35%; provided, however, that the Interest Rate in
effect for the period from the Original Issue Date to the Initial
Interest Reset Date (as defined below) shall be the rate for deposits
in United States dollars having a maturity of three months commencing
on the Original Issue Date that appears on Telerate Page 3750 as of
11:00 a.m., London time, on the day that is two London Business Days
prior to the Original Issue Date, plus 0.35% (the
‘‘Initial Interest Rate’’). The
Interest Rate shall be reset each March 16, June 16, September 16 and
December 16 (each an ‘‘Interest Reset
Date’’), commencing September 16, 2006 (the
‘‘Initial Interest Reset
Date’’). The Interest Rate in effect on each day
that is not an Interest Reset Date shall be the Interest Rate
determined as of the second London Business Day preceding the
applicable Interest Reset Date (each an ‘‘Interest
Determination Date’’) pertaining to the immediately
preceding Interest Reset Date, and the Interest Rate in effect on any
day that is an Interest Reset Date shall be the Interest Rate
determined as of the Interest Determination Date pertaining to such
Interest Reset Date; provided, however, that the interest rate in
effect for the period from the Original Issue Date to the Inital
Interest Reset Date shall be the Initial Interest Rate. If any Interest
Reset Date would otherwise be a day that is not a Business Day, the
Interest Reset Date shall be postponed to the next succeeding day that
is a Business Day, except that if such Business Day falls in the next
succeeding calendar month, such Interest Reset Date shall be the
immediately preceding Business
Day. A-2 ‘‘LIBOR’’
shall be determined by the Calculation Agent in accordance with the
following provisions: ‘‘Telerate Page
3750’’ means the display designated as ‘‘Page
3750’’ on Telerate, Inc. (or any successor service) for the
purpose of displaying the London interbank rates of major banks for
United States dollars. The Interest Rate applicable to each
Interest Period commencing on the related Interest Reset Date shall be
the rate determined as of the applicable Interest Determination Date on
or prior to the Calculation Date (as defined below). The
Calculation Agent (which initially shall be The Bank of New York and
which may be changed by the Company from time to time) shall calculate
the Interest Rate on this Security on or before each Calculation Date
and, upon request, provide holders of the Securities the Interest Rate
then in effect and, if determined, the Interest Rate which shall become
effective as a result of a determination made for the next succeeding
Interest Reset Date with respect
to A-3 this Security. The Calculation
Agent's determination of any interest rate shall be final and
binding absent error in the calculation thereof. The
‘‘Calculation Date’’ pertaining to any Interest
Determination Date shall be the earlier of (a) the tenth calendar day
after such Interest Determination Date, or if any such day is not a
Business Day, the next succeeding Business Day, or (b) the Business Day
immediately preceding the applicable Interest Payment Date or the
Maturity Date, as the case may be. Notwithstanding the other
provisions herein, the Interest Rate hereon shall in no event be higher
than the maximum rate permitted by New York law, as the same may be
modified by United States law of general application. Except as
otherwise provided herein, all percentages resulting from any
calculation shall be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upwards (e.g., 9.876545% (or .09876545)
would be rounded to 9.87655% (or .0987655)), and all amounts
used in or resulting from such calculation shall be rounded to the
nearest cent (with one-half cent being rounded upward). The
statements set forth in the restrictive legends above are an integral
part of the terms of this Security and by acceptance hereof each holder
of this Security agrees to be subject to and bound by terms and
provisions set forth in such legend. This Security is one of a
duly authorized issue of securities of the Company (herein called the
‘‘Securities’’), unlimited in
aggregate principal amount, issued and to be issued in one or more
series under an indenture dated as of April 12, 2006 between the
Company and The Bank of New York, as trustee (herein called the
‘‘Trustee,’’ which term includes
any successor trustee under the Indenture), as supplemented by the
First Supplemental Indenture dated as of April 12, 2006 between the
Company and the Trustee and a Second Supplemental Indenture dated June
16, 2006 between the Company and the Trustee (as so supplemented, the
‘‘Indenture’’), to which
Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights,
duties, obligations and immunities thereunder of the Company, the
Trustee and the Holders of the Securities, and of the terms upon which
the Securities are, and are to be, authenticated and delivered. This
Security is one of a series designated as Floating Rate Senior Notes
due 2009, initially limited in aggregate principal amount to
$750,000,000. This Security is a global Security representing
$ of the
Securities. INCLUDE IF SECURITY IS A GLOBAL SECURITY: This
Security is a ‘‘book-entry’’ Security and is
being registered in the name of Cede & Co. as nominee of The
Depository Trust Company
(‘‘DTC’’), a clearing agency.
Subject to the terms of the Indenture, this Security will be held by a
clearing agency or its nominee, and beneficial interest will be held by
beneficial owners through the book-entry facilities of such clearing
agency or its nominee in minimum denominations of $2,000 and integral
multiples of $1,000 in excess thereof. As long as this Security is
registered in the name of DTC or its nominee, the Trustee will make
payments of principal of and interest on this Security by wire transfer
of immediately available funds to DTC or its nominee. Notwithstanding
the above, the final payment on this Security will be made after due
notice by the Trustee of the pendency of such payment and only upon
presentation and surrender
of A-4 this Security at its principal
corporate trust office or such other offices or agencies appointed by
the Trustee for that purpose and such other locations provided in the
Indenture. The Holder of this Security is entitled to the
benefits of the Registration Rights Agreement, dated as of June 16,
2006. In the event that (i) the Exchange Offer is not consummated on or
prior to the 300th calendar day following the Closing Date or (ii) if
required, a Shelf Registration Statement with respect to the Securities
is not declared effective by the Commission on or prior to the 360th
calendar day following the Closing Date (or on or prior to such later
date as provided in the Registration Rights Agreement) or ceases to be
effective or usable during the periods specified in the Registration
Rights Agreement (each, a ‘‘Registration
Default’’), the per annum interest rate borne by
the Securities shall be increased by one-quarter of one percent
(0.25%) per annum from the end of the applicable period giving
rise to such Registration Default. The interest rate borne by the
Securities will be increased by an additional one-quarter of one
percent (0.25%) per annum for each subsequent 90-day period
during which any such Registration Default continues; provided that the
aggregate increase in such annual interest rate may in no event exceed
one-half of one percent (0.50%) per annum. Following the cure of
all Registration Defaults, the interest rate borne by the Securities
shall be reduced to the original interest rate borne by the Securities.
No increase in the rate shall be payable for any period during which a
Shelf Registration is effective. All accrued additional interest shall
be paid to Holders by the Company in the same manner as interest is
paid pursuant to the Indenture. All terms used in this Security that
are defined in the Registration Rights Agreement shall have the
meanings assigned to them in the Registration Rights Agreement. If an Event of Default with respect to Securities of this series
shall occur and be continuing, the principal of the Securities of this
series may be declared due and payable in the manner and with the
effect provided in the Indenture. The Securities of this series
are not subject to any sinking fund. INCLUDE IF SECURITY IS A
GLOBAL SECURITY: In the event of a deposit or withdrawal of an interest
in this Security, including an exchange, transfer, repurchase or
conversion of this Security in part only, the Trustee, as custodian of
the Depositary, shall make an adjustment on its records to reflect such
deposit or withdrawal in accordance with the rules and procedures of
the Depositary. INCLUDE IF SECURITY IS A RESTRICTED SECURITY:
Subject to certain limitations in the Indenture, at any time when the
Company is not subject to Section 13 or 15(d) of the U.S. Securities
Exchange Act of 1934, as amended, upon the request of a Holder of a
Restricted Security, the Company will promptly furnish or cause to be
furnished Rule 144A Information (as defined below) to such Holder of
Restricted Securities, or to a prospective purchaser of any such
security designated by any such Holder, to the extent required to
permit compliance by any such Holder with Rule 144A under the
Securities Act of 1933, as amended (the ‘‘Securities
Act’’). ‘‘Rule 144A
Information’’ shall be such information as is specified
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto). The Indenture contains provisions for
defeasance at any time of (a) the entire indebtedness of the Company on
this Security and (b) certain restrictive covenants and
the A-5 related Defaults and Events of
Default, upon compliance by the Company with certain conditions set
forth therein, which provisions apply to this Security. The
Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of
the Company and the rights of the Holders of the Securities of each
series to be affected under the Indenture at any time by the Company
and the Trustee with the consent of the Holders of not less than a
majority in principal amount of the Outstanding Securities of each
series affected thereby. The Indenture also contains provisions
permitting the Holders of not less than specified percentages in
aggregate principal amount of the Outstanding Securities of each
series, on behalf of the Holders of all the Securities of such series,
to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by or on behalf of the Holder
of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent or waiver is made
upon this Security. As set forth in, and subject to, the
provisions of the Indenture, no Holder of any Security of this series
will have any right to institute any proceeding with respect to the
Indenture or for any remedy thereunder, unless such Holder shall have
previously given to the Trustee written notice of a continuing Event of
Default with respect to this series, the Holders of not less than
25% in principal amount of the Outstanding Securities of this
series shall have made written request, and offered indemnity
reasonably satisfactory to it, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the
Holders of a majority in principal amount of the Outstanding Securities
of this series a direction inconsistent with such request and shall
have failed to institute such proceeding within 60 days;
provided, however, that such limitations do not apply to
a suit instituted by the Holder hereof for the enforcement of payment
of the principal of or interest on this Security on or after the
respective due dates expressed herein. No reference herein to
the Indenture and no provision of this Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and interest on this
Security at the times, place, and rate, and in the coin or currency,
herein prescribed. As provided in the Indenture and subject to
certain limitations therein set forth, the transfer of this Security is
registerable on the Security Register of the Company, upon surrender of
this Security for registration of transfer at the office or agency of
the Company maintained for such purpose in New York, New York or at
such other office or agency as the Company may designate, duly endorsed
by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series of authorized
denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees. The
Securities of this series are issuable only in registered form without
coupons in denominations of $2,000 and any integral multiple of $1,000
in excess thereof. As
provided A-6 in the Indenture and subject
to certain limitations therein set forth, the Securities of this series
are exchangeable for a like aggregate principal amount of Securities of
this series and of a different authorized denomination, as requested by
the Holder surrendering the same. No service charge shall be
made for any registration of transfer or exchange of Securities, but
the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith. Prior
to the time of due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Security is registered
as the absolute owner hereof for all purposes, whether or not this
Security be overdue, and none of the Company, the Trustee or any agent
of the Company or the Trustee shall be affected by notice to the
contrary. If at any time, a Depositary is at any time unwilling
or unable to continue as Depositary and a successor Depositary is not
appointed by the Company within 90 days, then the Company will execute
and the Trustee will authenticate and deliver Securities in definitive
registered form, in authorized denominations, and in an aggregate
principal amount equal to the principal amount of this Security in
exchange for this Security. Such Securities in definitive registered
form shall be registered in such names and issued in such authorized
denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver such Securities to the Persons in
whose names such Securities are so registered. Unless the
certificate of authentication hereon has been duly executed by or on
behalf of The Bank of New York, the Trustee under the Indenture, or its
successor thereunder, by the manual or facsimile signature of one of
its authorized officers, this Security shall not be entitled to any
benefit under the Indenture, or be valid or obligatory for any
purpose. This Security shall be governed by, and construed in
accordance with, the laws of the State of New
York. A-7 IN WITNESS WHEREOF, the Company has
caused this instrument to be duly executed. A-8 TRUSTEE'S CERTIFICATE OF
AUTHENTICATION This is one of the Securities of a series
referred to in the within-mentioned Indenture. Dated: June
16, 2006 A-9 APPENDIX
I TO SECOND SUPPLEMENTAL INDENTURE EXCHANGE CERTIFICATE VIACOM INC. Floating Rate Senior Notes due
2009 The Bank of New York We, as the
seller of the Senior Notes
(‘‘Seller’’), are requesting a
transfer (tick one of the following)
of: 1 In
connection with such request, and in respect of such Securities, we, as
the Seller do hereby certify that such Securities are being transferred
in accordance with the transfer restrictions set forth in the offering
memorandum prepared in connection with the issuance of the Securities
and the Securities and that we are transferring such Securities (tick
one of the
following): 2 If none of the foregoing boxes are ticked, the Registrar
shall not be obliged to register the transfer of the Senior Note. Reference is hereby made to the Second Supplemental Indenture
dated as of June 16, 2006, between Viacom Inc. (the
‘‘Company’’) and The Bank of New
York, as trustee (the
‘‘Trustee’’), to the Indenture
dated as of April 12, 2006, between the Company and the Trustee, as
supplemented by the First Supplemental Indenture dated as of April 12,
2006 between the Company and the Trustee and as further supplemented by
the Second Supplemental Indenture dated June 16, 2006 between the
Company and the Trustee (as so supplemented, the
‘‘Indenture’’). Terms used but
not defined herein shall have the meanings given to them in the
Indenture. Other terms shall have the meanings given to them in
Regulation S. 3 [NAME OF
SELLER] By:
Dated:
4 FORM OF TRANSFER FOR VALUE
RECEIVED, the undersigned hereby transfers
to (PRINT
NAME AND ADDRESS OF TRANSFEREE) U.S.$ principal
amount of this Security, and all rights with respect thereto, and
irrevocably constitutes and appoints
as attorney to transfer this Security on the books kept for
registration thereof, with full power of
substitution.
Delaware
20-3515052
(State
or other jurisdiction of
incorporation or
organization)(I.R.S. Employer
Identification
No.)
New York, NY
10036
(212) 258-6000
including area code, of
Registrant’s principal executive
offices)
Executive Vice President,
General Counsel and
Secretary
Viacom Inc.
1515 Broadway
New York, New York
10036
(212) 258-6000
including area code, of
agent for
service)
Shearman
& Sterling LLP
599 Lexington Avenue
New York, New York
10022
Title
of Each Class of
Securities to be RegisteredAmount to
be
RegisteredProposed Maximum
Offering Price
Per
Security(1)Proposed
Maximum
Aggregate
Offering PriceAmount
of
Registration
Fee
Floating rate senior notes
due
2009
$
750,000,000
100%
$
750,000,000
$
80,250
5.75%
senior notes due
2011
$
1,500,000,000
100%
$
1,500,000,000
$
160,500
6.25%
senior notes due
2016
$
1,500,000,000
100%
$
1,500,000,000
$
160,500
6.875%
senior debentures due
2036
$
1,750,000,000
100%
$
1,750,000,000
$
187,250
(1)
Estimated
solely for the purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as
amended.
($750,000,000 aggregate principal amount
issued June 16, 2006)
for
Floating Rate Senior Notes due
2009
that have been registered under the Securities Act of
1933
($1,500,000,000 aggregate
principal amount issued April 12, 2006)
for
5.75%
Senior Notes due 2011
that have been registered under the
Securities Act of
1933
($1,500,000,000 aggregate
principal amount issued April 12, 2006)
for
6.25%
Senior Notes due 2016
that have been registered under the
Securities Act of
1933
($1,750,000,000 aggregate
principal amount issued April 12,
2006)
for
6.875% Senior Debentures due 2036
that
have been registered under the Securities Act of
1933
•
The exchange offer will
expire at 5:00 p.m., New York City time, on , 2006, unless we
extend the offer.
•
Tenders of outstanding
unregistered senior notes and debentures may be withdrawn at any time
before 5:00 p.m. on the date of expiration of the exchange
offer.
•
All outstanding unregistered senior
notes and debentures that are validly tendered and not validly
withdrawn will be exchanged.
•
The terms of
the exchange senior notes and debentures to be issued are substantially
similar to the unregistered senior notes and debentures, except for
being registered under the Securities Act of 1933 (the
‘‘Securities Act’’) and not having any
transfer restrictions, registration rights or rights to additional
interest.
•
The exchange of senior notes and
debentures will not be a taxable exchange for U.S. federal income tax
purposes.
•
We will not receive any proceeds
from the exchange
offer.
•
the exchange senior notes and
debentures will have been registered under the Securities Act, and
therefore will contain no restrictive
legends;
•
the exchange senior notes and
debentures will not have registration rights;
and
•
the exchange senior notes and
debentures will not have rights to additional interest conditioned upon
a registration default.
The
Exchange Offer
We are offering to exchange $1,000
principal amount of:
•
floating rate senior
notes due 2009 which have been registered under the Securities Act of
1933 for each $1,000 principal amount of our outstanding unregistered
2009 senior notes that were issued on June 16, 2006. As
of the date of this prospectus, $750 million in aggregate
principal amount of our unregistered 2009 senior notes are
outstanding;
•
5.75% senior notes due
2011 which have been registered under the Securities Act of 1933 for
each $1,000 principal amount of our outstanding unregistered 2011
senior notes that were issued on April 12, 2006. As of
the date of this prospectus, $1.5 billion in aggregate principal
amount of our unregistered 2011 senior notes are
outstanding;
•
6.25% senior notes due
2016 which have been registered under the Securities Act of 1933 for
each $1,000 principal amount of our outstanding unregistered 2016
senior notes that were issued on April 12, 2006. As of
the date of this prospectus, $1.5 billion in aggregate principal
amount of our unregistered 2016 senior notes are outstanding;
and
•
6.875% senior debentures due
2036 which have been registered under the Securities Act of 1933 for
each
$1,000 principal amount of our outstanding
unregistered 2036 senior debentures that were issued on April
12, 2006. As of the date of this prospectus, $1.75
billion in aggregate principal amount of our unregistered 2036 senior
debentures are outstanding.
Expiration of Exchange
Offer
The exchange offer will expire at 5:00 p.m., New
York City time, on , 2006, unless we decide to
extend the expiration date.
Conditions of the Exchange
Offer
We will not be required to accept for exchange
any unregistered senior notes or debentures, and we may amend or
terminate the exchange offer if any of the following conditions or
events occurs:
•
the exchange offer, or the
making of any exchange by a holder, violates applicable law or any
applicable interpretation of the staff of the
SEC;
•
any action or proceeding shall have
been instituted or threatened with respect to the exchange offer which,
in our judgment, would impair our ability to proceed with the exchange
offer; and
•
any law, rule or regulation or
applicable interpretation of the staff of the SEC has been issued or
promulgated which, in our good faith determination, does not permit us
to effect the exchange offer.
We will give oral or written
notice of any non-acceptance, amendment or termination to the
registered holders of the unregistered senior notes and debentures as
promptly as practicable. We reserve the right to waive any conditions
of the exchange offer.
Resale of Exchange Senior Notes
and Debentures
Based on interpretative letters of the
SEC staff to third parties unrelated to us, we believe that you can
resell and transfer the exchange senior notes and debentures you
receive pursuant to this exchange offer, without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that:
•
any exchange senior notes
and debentures to be received by you will be acquired in the ordinary
course of your business;
•
you are not
engaged in, do not intend to engage in and have no arrangement or
understanding with any person to participate in the distribution of the
unregistered senior notes or debentures or exchange senior notes or
debentures;
•
you are not an
‘‘affiliate’’ (as defined in Rule 405 under
the Securities Act) of Viacom or, if you are such
an affiliate, you will comply with the
registration and prospectus delivery requirements of the Securities Act
to the extent applicable;
•
if you are a
broker-dealer, you have not entered into any arrangement or
understanding with Viacom or any
‘‘affiliate’’ of Viacom (within the meaning
of Rule 405 under the Securities Act) to distribute the exchange senior
notes or debentures;
•
if you are a
broker-dealer, you will receive exchange senior notes and debentures
for your own account in exchange for unregistered senior notes and
debentures that were acquired as a result of market-making activities
or other trading activities and that you will deliver a prospectus in
connection with any resale of such exchange senior notes and
debentures; and
•
you are not acting on
behalf of any person or entity that could not truthfully make these
representations.
If you wish to accept the exchange offer,
you must represent to us that these conditions have been
met.
If our belief is inaccurate and you transfer any
exchange senior notes or debentures without delivering a prospectus
meeting the requirements of the Securities Act or without an exemption
from registration under the Securities Act, you may incur liability
under the Securities Act. We do not assume or indemnify you against
such liability, but we do not believe that any such liability should
exist.
Accrued Interest on the Exchange Senior Notes and
Debentures and Unregistered Senior Notes and
Debentures
The exchange senior notes and debentures
will accrue interest from the date interest was last paid on the
relevant series of unregistered senior notes and debentures. If no
interest was paid on your unregistered senior notes and debentures,
your exchange senior notes and debentures will accrue interest from and
including June 16, 2006, in the case of the exchange 2009
senior notes, or from and including April 12, 2006, in
the case of the exchange 2011 senior notes, the exchange 2016 senior
notes and the exchange 2036 senior debentures. We will pay interest on
the exchange 2009 senior notes quarterly on March 16,
June 16, September 16 and December 16 of each
year. We will pay interest on the exchange 2011 senior notes, the
exchange 2016 senior notes and the exchange 2036 senior debentures
semi-annually on April 30 and October 30 of each
year.
Holders of unregistered senior notes and debentures
that are accepted for exchange will be deemed to have waived the right
to receive any payment in respect of interest
accrued from the date of the last interest
payment date that was made in respect of the relevant series of
unregistered senior notes and debentures (or, if no interest was paid,
from and including June 16, 2006, in the case of the
unregistered 2009 senior notes, or from and including April
12, 2006, in the case of the unregistered 2011 senior notes, the
unregistered 2016 senior notes and the unregistered 2036 senior
debentures) until the date of the issuance of the exchange senior notes
and debentures. Consequently, holders of exchange senior notes and
debentures will receive the same interest payments that they would have
received had they not accepted the exchange
offer.
Procedures for Tendering Unregistered Senior
Notes and Debentures
If you wish to participate in the
exchange offer, you must transmit a properly completed and signed
letter of transmittal, and all other documents required by the letter
of transmittal, to the exchange agent at the address set forth in the
letter of transmittal. These materials must be received by the exchange
agent before 5:00 p.m., New York City time, on
, 2006, the expiration date of the exchange
offer. You must also provide:
•
a
confirmation of any book-entry transfer of unregistered senior notes
and debentures tendered electronically into the exchange agent’s
account with DTC, Euroclear or Clearstream Luxembourg. You must comply
with DTC’s, Euroclear’s or Clearstream
Luxembourg’s respective standard operating procedures for
electronic tenders, by which you will agree to be bound in the letter
of transmittal; or
•
physical delivery of
your unregistered senior notes and debentures to the exchange
agent’s address as set forth in the letter of
transmittal.
The letter of transmittal must also contain
the representations you must make to us as described under
‘‘The Exchange Offer – Resale of Exchange Senior
Notes and Debentures.’’
Special Procedures
for Beneficial Owners
If you are a beneficial owner of
unregistered senior notes and debentures that are held through a
broker, dealer, commercial bank, trust company or other nominee and you
wish to tender such unregistered senior notes and debentures, you
should contact the person promptly and instruct the person to tender
your unregistered senior notes and debentures on your
behalf.
Guaranteed Delivery Procedures for
Unregistered Senior Notes and Debentures
If you cannot
meet the expiration deadline, or you cannot deliver your unregistered
senior notes and debentures, the letter of transmittal or any other
required documentation, or comply with DTC’s, Euroclear’s
or Clearstream Luxembourg’s respective standard operating
procedures for electronic tenders on time, you may tender your
unregistered senior notes and debentures according to the guaranteed
delivery procedures set forth under ‘‘The Exchange Offer
— Guaranteed Delivery
Procedures.’’
Withdrawal
Rights
You may withdraw the tender of your unregistered
senior notes and debentures at any time prior to 5:00 p.m., New York
City time, on , 2006, the expiration
date.
Consequences of Failure to
ExchangeIf you are eligible to participate in this
exchange offer and you do not tender your unregistered senior notes and
debentures as described in this prospectus, you will not have any
further registration rights. In that case, your unregistered senior
notes and debentures will continue to be subject to restrictions on
transfer. As a result of the restrictions on transfer and the
availability of exchange senior notes and debentures, the unregistered
senior notes and debentures are likely to be much less liquid than
before the exchange offer. The unregistered senior notes and debentures
will, after the exchange offer, bear interest at the same rate as the
respective exchange senior notes and debentures.
Certain
U.S. Federal Income Tax Consequences
The exchange of
the unregistered senior notes and debentures for exchange senior notes
and debentures pursuant to the exchange offer will not be a taxable
exchange for U.S. federal income tax purposes.
Use of
Proceeds
We will not receive any proceeds from the
issuance of exchange senior notes and debentures pursuant to the
exchange offer.
Accounting Treatment
We
will record the exchange senior notes and debentures at the same
carrying value of the unregistered senior notes and debentures of the
corresponding series reflected in our accounting records on the date
the exchange offer is completed. Accordingly, we will not recognize any
gain or loss for accounting purposes upon the exchange of exchange
senior notes and debentures for unregistered senior notes and
debentures. We will amortize certain expenses incurred in connection
with the issuance of the exchange senior notes and debentures over
their respective terms.
Exchange Agent for Unregistered
Senior Notes and Debentures
The Bank of New York, the
trustee under the indenture for the unregistered senior notes and
debentures, is serving as the exchange agent in connection with the
exchange offer. The Bank of New York can be reached at 101 Barclay
Street, 7 East, New York, New York 10286; its telephone number is (212)
815-3687 and its facsimile number is (212)
298-1915.
Issuer
Viacom Inc.
Exchange Senior Notes and
Debentures•
$750,000,000 aggregate
principal amount of registered floating rate senior notes due
2009;
•
$1,500,000,000 aggregate principal
amount of registered 5.75% senior notes due
2011;
•
$1,500,000,000 aggregate principal
amount of registered 6.25% senior notes due 2016;
and
•
$1,750,000,000 aggregate principal
amount of registered 6.875% senior debentures due
2036.
Maturity
The exchange senior
notes due 2009 will mature on June 16,
2009.
The exchange senior notes due 2011 will mature on
April 30, 2011.
The exchange senior notes due
2016 will mature on April 30, 2016.
The
exchange senior debentures due 2036 will mature on April
30, 2036.
Interest
The exchange
senior notes due 2009 will bear interest at a rate per year equal to
three-month LIBOR plus 0.35% to be reset quarterly. Interest on
the exchange senior notes due 2009 will be payable quarterly in arrears
on March 16, June 16, September 16 and
December 16 of each year.
The exchange senior notes
due 2011 will bear interest at the rate of 5.75% per year; the
exchange senior notes due 2016 will bear interest at the rate of
6.25% per year; and the exchange senior debentures due 2036 will
bear interest at the rate of 6.875% per year. Interest on the
exchange senior notes due 2011, the exchange senior notes due 2016 and
the exchange senior debentures due 2036 will be payable semi-annually
in arrears on April 30 and October 30 of each
year.
Interest on the exchange senior notes and debentures
will be paid beginning on the interest payment date immediately
following the last interest payment date for which interest was paid on
the relevant series of unregistered senior notes and debentures (or, if
no interest was paid, beginning on the first interest payment date
following the issuance of such series of
unregistered notes or debentures).
Ranking
The exchange senior notes and debentures will be unsecured senior
obligations of Viacom Inc. and will rank equally with all of Viacom
Inc.’s existing and future unsecured senior obligations,
including its credit facilities. As of June 30, 2006,
Viacom Inc. had approximately $7.32 billion of indebtedness outstanding
under its credit facilities, the unregistered senior notes and
debentures and its commercial paper program.
The exchange
senior notes and debentures will be structurally subordinated to all
obligations of our subsidiaries including claims with respect to trade
payables. As of June 30, 2006, our direct and indirect
subsidiaries had approximately $337.5 million of indebtedness
outstanding.
Sinking
fund
None.
Optional
redemption
We may not redeem the exchange senior notes
due 2009 at our option prior to their maturity date.
We may
redeem some or all of the exchange senior notes due 2011, the exchange
senior notes due 2016 and the exchange senior debentures due 2036 at
any time and from time to time at their principal amount, plus the
applicable premium, if any, and accrued interest. See
‘‘Description of the Senior Notes and Debentures –
Optional Redemption.’’
Certain
covenants
We will issue the senior notes and debentures
under an indenture that, among other things, limits our ability
to:
• consolidate, merge or sell all
or substantially all of our
assets;
• create liens;
and
• enter into sale and leaseback
transactions.
All of these limitations are subject to a
number of important qualifications and exceptions. See
‘‘Description of the Senior Notes and
Debentures.’’
Governing
law
The senior notes and debentures and the indenture
under which they will be issued will be governed by New York
law.
Risk factors
See
‘‘Risk Factors’’ beginning on page 18 for a
discussion of the factors you should consider carefully before deciding
to invest in the senior notes and
debentures.
(in millions, except
per share
amounts)
Six
Months
Ended June 30,Year Ended December
31,
2006
2005
2005
2004
2003
(unaudited)
Revenues
$
5,214.2
$
4,408.4
$
9,609.6
$
8,132.2
$
7,304.4
Operating
income
$
1,286.7
$
1,210.4
$
2,366.4
$
2,282.8
$
2,001.8
Net
earnings from continuing
operations
$
733.2
$
724.6
$
1,303.9
$
1,392.9
$
1,147.4
Net
earnings from continuing operations per common share (basic and
diluted)
$
1.00
$
0.96
$
1.73
$
1.85
$
1.53
Weighted
average number of common shares
outstanding:
Basic
common
shares
729.1
751.6
751.6
751.6
751.6
Diluted
common
shares
731.1
751.6
751.6
751.6
751.6
(in
millions)
At
June 30,
2006At December
31,
2005
2004
2003
(unaudited)
Total
assets
$
20,048.1
$
19,115.6
$
18,440.8
$
22,304.4
Financing
obligations –
non-current(1)
$
7,601.6
$
5,702.1
$
291.7
$
163.4
Total
stockholders’
equity/invested
capital$
6,893.9
$
7,787.9
$
13,465.2
$
15,815.7
Cash
dividends declared per
common
share$
—
$
—
$
—
$
—
(1)
Financing
obligations – non-current includes long-term debt, long-term
capital leases, commercial paper and notes payable to banks, to the
extent these existed in the periods
presented.
Six
Months
Ended June 30,Year Ended December
31,
2006
2005
2004
2003
2002
2001
Ratio
of earnings to fixed
charges(1)
5.3x
34.8x
40.7x
38.7x
25.6x
18.8x
(1)
For
more information, see ‘‘Ratio of Earnings to Fixed
Charges’’ on page 28.
Statement Information
(in millions, except
per share
amounts)
Six
Months Ended
June 30, 2006Year Ended
December 31,
2005
Revenues
$
5,214.2
$
9,609.6
Operating
income
$
1,286.7
$
2,497.4
Net
earnings from continuing
operations
$
719.2
$
1,211.3
Net
earnings from continuing operations per common
share:
Basic
$
0.99
$
1.61
Diluted
$
0.98
$
1.61
Weighted
average number of common shares
outstanding:
Basic
729.1
751.6
Diluted
731.1
752.7
At
June
30,
2006
(unaudited)
(in
millions)
Cash and cash
equivalents
$
312.1
Debt:
Notes
payable to banks
560.0
Senior notes
due 2009, LIBOR +
0.35%
750.0
Senior notes due
2011, 5.75%
1,491.3
Senior
notes due 2016,
6.25%
1,493.6
Senior
debentures due 2036,
6.875%
1,732.7
Commercial
paper
1,295.9
Capital
leases
337.5
Total
debt
7,661.0
Stockholders’
Equity:
Class A Common Stock, par
value $0.001 per share, 375 shares authorized: 61.6
shares
outstanding0.1
Class B Common Stock,
par value $0.001 per share, 5,000 shares authorized: 690.6
shares
outstanding0.7
Additional paid-in
capital
7,693.0
Treasury
stock
(1,602.3
Retained
earnings
754.5
Accumulated other
comprehensive
income
47.9
Total
Stockholders’
Equity
6,893.9
Total
Capitalization
$
14,554.9
Six
Months
Ended
June 30,Year Ended December
31,
2006
2005
2004
2003
2002
2001
Ratio
of Earnings to Fixed
Charges(1)
5.3x
34.8x
40.7x
38.7x
25.6x
18.8x
(1)
Interest
expense increased for the first six months of 2006 principally due to
higher average debt outstanding and higher interest rates. The higher
debt outstanding resulted principally from funding the special dividend
payment made to CBS Corporation in connection with the separation from
Former Viacom in December 2005, the purchase of DreamWorks on
January 31, 2006, and the purchase of common stock under
the Company’s stock repurchase program which began in
January 2006. Interest expense will increase substantially for
the remainder of 2006 versus 2005 as this higher level of debt is
expected to be outstanding for the entire
year.
(in millions, except
per share
amounts)
Six
Months Ended
June30,Year Ended December
31,
2006
2005
2005
2004
2003
2002
2001
(unaudited)
(unaudited)
Revenues
$
5,214.2
$
4,408.4
$
9,609.6
$
8,132.2
$
7,304.4
$
6,050.7
$
5,497.6
Operating
income
$
1,286.7
$
1,210.4
$
2,366.4
$
2,282.8
$
2,001.8
$
1,737.6
$
1,092.1
Net
earnings from continuing
operations
$
733.2
$
724.6
$
1,303.9
$
1,392.9
$
1,147.4
$
993.9
$
438.5
Net
earnings from continuing operations per common share (basic and
diluted)
$
1.00
$
0.96
$
1.73
$
1.85
$
1.53
$
1.32
$
0.58
Weighted
average number of common shares
outstanding:
Basic
common
shares
729.1
751.6
751.6
751.6
751.6
751.6
751.6
Diluted
common
shares
731.1
751.6
751.6
751.6
751.6
751.6
751.6
(in
millions)
At
June 30,
At December
31,
2006
2005
2004
2003
2002
2001
(unaudited)
(unaudited)
(unaudited)
Total
assets
$
20,048.1
$
19,115.6
$
18,440.8
$
22,304.4
$
21,993.0
$
23,007.8
Financing
obligations –
non-current(1)
$
7,601.6
$
5,702.1
$
291.7
$
163.4
$
139.9
$
156.8
Total
stockholders’
equity/invested
capital$
6,893.9
$
7,787.9
$
13,465.2
$
15,815.7
$
15,248.6
$
16,275.6
Cash
dividends declared per
common
share$
—
$
—
$
—
$
—
$
—
$
—
(1)
Financing
obligations – non-current includes long-term debt, long-term
capital leases, commercial paper and notes payable to banks, to the
extent these existed in the periods
presented.
Year ended
December 31, 2005
(In millions, except per share
amounts)
Historical
Pro
Forma
AdjustmentsPro
Forma
Revenues
$
9,609.6
$
—
$
9,609.6
Expenses:
Operating
4,737.4
—
4,737.4
Selling,
general and
administrative(1)(2)
2,246.8
(151.9
2,094.9
Depreciation
and
amortization(2)
259.0
20.9
279.9
Total
expenses
7,243.2
(131.0
7,112.2
Operating
income
2,366.4
131.0
2,497.4
Interest
expense(3)
(23.0
(344.6
(367.6
Interest
income
3.9
—
3.9
Other
items,
net
(29.0
—
(29.0
Earnings
from continuing operations before income taxes, equity
in earnings
of affiliated companies and minority
interest2,318.3
(213.6
2,104.7
Provision
for income
taxes(4)
(1,020.0
121.0
(899.0
Equity
in earnings of affiliated companies, net of
tax
9.4
—
9.4
Minority
interest, net of
tax
(3.8
(3.8
Net
earnings from continuing
operations
1,303.9
(92.6
1,211.3
Net
earnings from continuing operations per common
share(5)
Basic
$
1.73
—
$
1.61
Diluted
$
1.73
—
$
1.61
Weighted
average number of common shares
outstanding
Basic
751.6
—
751.6
Diluted
751.6
1.1
752.7
(1)
Pro
forma adjustment eliminates the impact of separation-related costs of
$163.5 million.
(2)
Pro forma adjustments
of $32.5 million (including $11.6 million adjustment to
selling, general and administrative and $20.9 million adjustment
to depreciation and amortization) necessary to increase Paramount
Pictures and Corporate overhead expenses to reflect our cost base as a
stand-alone public company.
(3)
The pro
forma adjustment to interest expense has been determined by adding (i)
the annual interest charge of $302.7 million for the 2011 senior
notes, the 2016 senior notes and the 2036 senior debentures as if such
senior notes and debentures were outstanding as of January
1, 2005 and (ii) the annual interest charge of $41.9
million for $716 million of the 2009 senior notes, based on an
annual interest rate of 5.69%, being LIBOR plus 0.35%,
which was utilized to repay the remaining $716 million of the
$5.4 billion of debt incurred to pay the special dividend to
Former Viacom under the terms of the Separation Agreement as if such
2009 senior notes were
outstanding as of January 1,
2005. For each 1/8 percentage point change in the annual interest rate
on the 2009 senior notes, the effect on net income is $0.5
million.
(4)
Pro forma adjustment to the
provision for income taxes calculated using blended statutory rates in
effect for 2005.
(5)
Basic Earnings per Share
(‘‘EPS’’) is computed by dividing net
earnings by the number of shares of common stock issued and outstanding
at the date of the separation as if such shares were outstanding for
the full year. Diluted EPS is computed by dividing net earnings by the
number of shares issued and outstanding at the date of separation
adjusted to give effect to all potentially dilutive common shares
weighted for the full year-ended December 31,
2005.
Six Months ended June 30,
2006
(In millions, except per share
amounts)
Historical
Pro
Forma
AdjustmentsPro
Forma
Revenues
$
5,214.2
$
—
$
5,214.2
Expenses:
Operating
2,745.2
—
2,745.2
Selling,
general and
administrative
1,018.0
—
1,018.0
Depreciation
and
amortization
164.3
—
164.3
Total
expenses
3,927.5
—
3,927.5
Operating
income
1,286.7
—
1,286.7
Interest
expense,
net(l)
(199.4
(23.2
(222.6
Other
items,
net
2.2
—
2.2
Earnings
from continuing operations before income taxes, equity in earnings of
affiliated companies and minority
interest
1,089.5
(23.2
1,066.3
Provision
for income
taxes(2)
(359.9
9.2
(350.7
Equity
in earnings of affiliated companies, net of
tax
5.8
—
5.8
Minority
interest, net of
tax
(2.2
—
(2.2
Net
earnings from continuing
operations
733.2
(14.0
719.2
Net
earnings from continuing operations per common
share:
Basic
$
1.00
$
—
$
0.99
Diluted
$
1.00
$
—
$
0.98
Weighted
average number of common shares
outstanding:
Basic
729.1
—
729.1
Diluted
731.1
—
731.1
(1)
Pro
forma adjustments to interest expense, net have been determined by
adding (i) the interest charge of $87.4 million for the 2011 senior
notes, the 2016 senior notes and the 2036 senior debentures as if such
senior notes and debentures were outstanding as of January
1, 2006 until April 11, 2006 plus (ii) the interest charge of
$19.8 million for the 2009 senior notes, based on an annual interest
rate of 5.69%, being LIBOR plus 0.35%, as if such 2009
senior notes were outstanding as of January 1, 2006 until
June 15, 2006 less (iii) the interest expense savings of $84.0 million
(calculated based on actual interest rates in effect for the six months
ended June 30, 2006) resulting from utilizing the net
proceeds from the issuance of the unregistered senior notes and
debentures to repay a portion of the $6.0 billion term facility
due in 2007 as if such amounts were repaid as of January
1, 2006. For each 1/8 percentage point change in the annual
interest rate on the 2009 senior notes the effect on six months ended
June 30, 2006 net income is $0.2
million.
(2)
Pro forma adjustments to the
provision for income taxes calculated using the blended statutory tax
rate of 39.6% for the six months ended June 30,
2006.
(in
millions)
Six Months Ended June
30,
Year Ended December
31,
2006
2005
2005
2004
2003
Revenues
$
5,214.2
$
4,408.4
$
9,609.6
$
8,132.2
$
7,304.4
Expenses:
Operating
2,745.2
2,167.0
4,737.4
3,908.0
3,672.6
Selling,
general and administrative
1,018.0
908.9
2,246.8
1,689.8
1,432.1
Depreciation
and amortization
164.3
122.1
259.0
251.6
197.9
Total
expenses
3,927.5
3,198.0
7,243.2
5,849.4
5,302.6
Operating
income
1,286.7
1,210.4
2,366.4
2,282.8
2,001.8
Interest
expense, net
(199.4
(9.5
(19.1
(20.9
(21.0
Other
items, net
2.2
(8.6
(29.0
(17.7
(24.6
Earnings
from continuing operations before income taxes, equity in earnings
(loss) of affiliated companies and minority interest
1,089.5
1,192.3
2,318.3
2,244.2
1,956.2
Provision
for income taxes
(359.9
(470.3
(1,020.0
(808.2
(787.6
Equity
in earnings (loss) of affiliated companies, net of tax
5.8
4.8
9.4
(40.0
(18.2
Minority
interest, net of tax
(2.2
(2.2
(3.8
(3.1
(3.0
Net
earnings from continuing operations
733.2
724.6
1,303.9
1,392.9
1,147.4
Discontinued
operations, net of tax
(a)
21.3
(20.4
(47.0
(1.099.2
(802.8
Net
earnings before cumulative effect of accounting change
754.5
704.2
1,256.9
293.7
344.6
Cumulative
effect of accounting change, net of taxes
—
—
—
—
(6.1
Net
earnings
$
754.5
$
704.2
$
1,256.9
$
293.7
$
338.5
(a)
On
July 22, 2005, Former Viacom sold Famous Players, its
Canadian-based theater chain, to Cineplex Galaxy L.P., and as a result
Famous Players is presented as a discontinued operation. In
October 2004, the exchange offer for the split-off of
Blockbuster was completed. Accordingly, Blockbuster is also presented
as a discontinued operation. All prior period amounts have been
reclassified to conform to this presentation. For the six months ended
June 30, 2006, discontinued operations principally includes the release
of reserves resulting from an audit settlement and the effect of
adjusting recorded liabilities for lease obligations provided on behalf
of Blockbuster and Famous Players to fair
value.
(in
millions)
Revenues by ComponentSix Months
Ended June
30,
Year Ended
December 31,
Year
Ended
December
31,
2006
2005
2006
vs.
20052005
2004
2005
vs.
20042003
2004
vs.
2003
Advertising sales
$
1,916.7
$
1,800.5
6
$
3,963.4
$
3,349.6
18
$
2,769.0
21
Feature
film
1,786.9
1,277.7
40
2,873.4
2,394.5
20
2,561.7
(7
Affiliate
fees
990.7
902.2
10
1,824.8
1,640.3
11
1,448.4
13
Ancillary
519.9
428.0
21
948.0
747.8
27
525.3
42
Total
Revenues by
Component
$
5,214.2
$
4,408.4
18
$
9,609.6
$
8,132.2
18
$
7,304.4
11
Six
Months Ended June 30,
Year Ended December
31,
Percentage
of Revenues by
Type
2006
2005
2005
2004
2003
Advertising
sales
37
41
41
41
38
Feature
film
34
29
30
30
35
Affiliate
fees
19
20
19
20
20
Ancillary
10
10
10
9
7
Total
100
100
100
100
100
(in
millions)
Operating Expenses by
Type Six Months Ended
June 30,
Year Ended
December 31,
Year
Ended
December
31,
2006
2005
2006
vs.
20052005
2004
2005
vs.
20042003
2004
vs.
2003
Production and program
$
1,742.1
$
1,403.3
24
$
3,168.9
$
2,426.0
31
$
2,193.7
11
Distribution
813.9
618.4
32
1,179.0
1,172.2
1
1,258.2
(7
Other
189.2
145.3
30
389.5
309.8
26
220.7
40
Total
Operating Expenses
$
2,745.2
$
2,167.0
27
$
4,737.4
$
3,908.0
21
$
3,672.6
6
(in
millions)
Six Months Ended June
30,
Year Ended December
31,
2006
2005
2005
2004
2003
Revenues:
Cable
Networks
$
3,322.8
$
3,093.6
$
6,757.8
$
5,745.5
$
4,775.3
Entertainment
1,948.2
1,363.1
2,995.3
2,513.7
2,655.8
Eliminations(a)
(56.8
(48.3
(143.5
(127.0
(126.7
Total
Revenues
$
5,214.2
$
4,408.4
$
9,609.6
$
8,132.2
$
7,304.4
Operating
Income:
Cable
Networks
$
1,331.4
$
1,214.3
$
2,610.1
$
2,265.0
$
1,928.9
Entertainment
57.5
54.2
70.1
154.2
189.7
Segment
Total
1,388.9
1,268.5
2,680.2
2,419.2
2,118.6
Corporate
expenses
(102.2
(65.8
(308.5
(128.1
(103.8
Eliminations(a)
—
7.7
(5.3
(8.3
(13.0
Total
Operating Income
$
1,286.7
$
1,210.4
$
2,366.4
$
2,282.8
$
2,001.8
Depreciation
and Amortization:
Cable
Networks
$
121.8
$
107.4
$
230.8
$
223.2
$
171.4
Entertainment
36.4
11.1
23.0
19.0
16.8
Corporate
6.1
3.6
5.2
9.4
9.7
Total
Depreciation and Amortization
$
164.3
$
122.1
$
259.0
$
251.6
$
197.9
(a)
Eliminations
principally reflect intercompany transactions related to the sale of
advertising time to Paramount Pictures and the license of feature films
to Cable Networks.
(in
millions)
Six Months Ended
June 30,
Year Ended
December
31,
Year Ended
December 31,
Revenues by
Component
2006
2005
2006
vs.
20052005
2004
2005
vs
20042003
2004
vs.
2003
Advertising sales
$
1,942.4
$
1,828.6
6
$
4,035.3
$
3,410.2
18
$
2,819.0
21
Affiliate
fees
990.7
902.2
10
1,824.8
1,640.3
11
1,448.4
13
Ancillary
389.7
362.8
7
897.7
695.0
29
507.9
37
Total
Revenues by
Component
$
3,322.8
$
3,093.6
7
$
6,757.8
$
5,745.5
18
$
4,775.3
20
(in
millions)
Six Months Ended
June 30,
Year Ended
December 31,
Year Ended
December 31,
Revenues
by
Component
2006
2005
2006
vs.
20052005
2004
2005
vs.
20042003
2004
vs.
2003
Feature
film
$
1,815.7
$
1,291.4
41
$
2,898.7
$
2,425.4
20
$
2,576.7
(6
Ancillary
132.5
71.7
85
96.6
88.3
9
79.1
12
Total
Revenues by
Component
$
1,948.2
$
1,363.1
43
$
2,995.3
$
2,513.7
19
$
2,655.8
(5
(in
millions)
Six Months Ended June
30,
Year Ended December
31,
2006
2005
2005
2004
2003
Cash
provided by operating activities
$
574.7
$
683.6
$
1,627.4
$
1,989.9
$
1,911.0
Cash
used for investing activities
(314.8
(239.4
(165.1
(288.6
(1,594.6
Cash
used for financing activities
(315.7
(472.5
(1,251.2
(1,844.4
(220.3
(in
millions)
June 30, 2006
December
31,
2005
Credit
facilities
$
560.0
$
5,405.0
Senior
notes due 2009, LIBOR +
0.35%
750.0
—
Senior
notes due 2011,
5.75%
1,491.3
—
Senior
notes due 2016,
6.25%
1,493.6
—
Senior
debentures due 2036,
6.875%
1,732.7
—
Commercial
Paper
1,295.9
—
Obligations
under capital leases
337.5
352.9
Total
debt
7,661.0
5,757.9
Less
current portion
59.4
55.8
Total long-term
debt from continuing operations, net of current portion
$
7,601.6
$
5,702.1
(in
millions)
Payments Due by
Period
Total
2006
2007
2008
2009
2010
2011
and
thereafter
Programming and talent
commitments(1)
$
1,064.3
$
318.0
$
180.8
$
167.9
$
88.9
$
68.8
$
239.9
Operating
leases(2)
$
859.7
$
137.7
$
127.9
$
114.7
$
105.4
$
73.5
$
300.5
Purchase
obligations(3)
$
95.1
$
82.3
$
9.1
$
1.7
$
1.3
$
.7
$
—
Capital
lease obligations (including
interest)(4)
$
444.9
$
76.8
$
75.2
68.2
$
64.7
$
47.1
$
112.9
Long-term
debt(5)
$
5,405.0
$
—
$
5,405.0
$
—
$
—
$
—
$
—
Other
long-term
liabilities(6)
$
989.0
$
—
$
539.9
$
234.8
$
100.7
$
52.5
$
61.1
(1)
Programming
and talent commitments primarily include $824.9 million relating
to cable programming and feature film production and acquisitions and
$234.4 million for talent
contracts.
(2)
Includes long-term
non-cancelable operating lease commitments for retail and office space
and equipment, transponders, studio facilities and
vehicles.
(3)
Purchase obligations
include agreements to purchase goods or services that are enforceable
and legally binding and that specify all significant terms, including
open purchase orders.
(4)
Includes
capital leases for satellite
transponders.
(5)
On June 16, 2006, we
completed a private placement of $750 million in aggregate principal
amount of floating rate senior notes. The senior notes are due on June
16, 2009 and bear interest at a rate per year equal to three-month
LIBOR plus 0.35% to be reset quarterly. On April 12, 2006, we
completed a private placement of $4.75 billion in aggregate principal
amount of fixed rate senior notes and debentures due 2011, 2016 and
2036 that each bear a fixed per annum interest rate. At June 30, 2006,
the total unamortized discount related to the fixed rate senior notes
and debentures was $32.4 million. We utilized the net proceeds from
both private placements to repay a portion of amounts previously
borrowed under the term facility. As such, as of June 30, 2006, $560
million remains outstanding under the term facility which is due in
June 2007. In addition, at June 30, 2006, we had $1,295.9 million of
commercial paper outstanding, which is considered a non-current
obligation as we have the intent and ability to refinance through the
utilization of our $3.25 billion revolving facility due December
2010.
(6)
Long-term contractual
obligations primarily consist of participations due to producers and
residuals and cable program liabilities.
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Bouyges
Cingular
Name
Age
Position
Sumner
M.
Redstone
83
Executive
Chairman of the Board and Founder
Thomas E.
Freston
60
President and Chief Executive Officer and
Director
Robert M.
Bakish
42
Executive Vice President, Operations
and
Viacom Enterprises
Michael J.
Dolan
59
Executive Vice President and Chief Financial
Officer
Carl D. Folta
49
Executive
Vice President, Office of the Chairman
Michael D.
Fricklas
46
Executive Vice President, General Counsel
and Secretary
JoAnne Adams
Griffith
62
Executive Vice President, Human
Resources
DeDe Lea
41
Executive Vice
President, Government Relations
Carole
Robinson
45
Executive Vice President, Corporate
Relations
Jacques
Tortoroli
48
Senior Vice President, Controller and
Chief
Accounting Officer
Sumner M.
Redstone
Mr. Redstone is our Founder and has
served as the Executive Chairman of our Board of Directors since
January 1, 2006. He also serves as Executive Chairman of the
Board of CBS Corporation. He was Chief Executive Officer of Former
Viacom from 1996 to 2005 and Chairman of the Board of Former Viacom
since 1986. He has also been Chairman of the Board of National
Amusements, Inc., Former Viacom and CBS Corporation's controlling
stockholder, since 1986, and Chief Executive Officer of National
Amusements since 1967. He served as president of National Amusements
from 1967 through 1999. Mr. Redstone served as the first
Chairman of the Board of the National Association of Theatre Owners and
is currently a member of its Executive Committee. Mr. Redstone
has been a frequent lecturer at universities, including Harvard Law
School and Brandeis University. Mr. Redstone graduated from
Harvard University in 1944 and received an LL.B. from Harvard
University School of Law in 1947. Upon graduation, Mr. Redstone
served as law secretary with the U.S. Court of Appeals and then as a
special assistant to the U.S. Attorney General. Mr. Redstone
served in the Military Intelligence Division during World
War II. While a student at Harvard, he was selected to join a
special intelligence group whose mission was to break Japan's
high-level military and diplomatic codes. Mr. Redstone received,
among other honors, two commendations from the Military Intelligence
Division in recognition of his service, contribution and devotion to
duty. Mr. Redstone is also a recipient
of the Army Commendation Award.
Thomas E.
Freston
Mr. Freston has served as our President
and Chief Executive Officer since January 1, 2006 and
serves on our Board of Directors. Previously, he was Co-President and
Co-Chief Operating Officer of Former Viacom since June 2004.
Prior to that, Mr. Freston served as Chairman and Chief
Executive Officer of MTV Networks since 1987. Mr. Freston joined
MTV Networks' predecessor company in 1980 and was one of the
founding members of the team that launched MTV: Music Television.
Mr. Freston is on the Board of the American Museum of Natural
History.
Robert M.
Bakish
Mr. Bakish has served as our Executive
Vice President of Operations and Viacom Enterprises since
January 1, 2006. Prior to that, he served as Executive Vice
President of Operations for Former Viacom since July 2005.
Previously, Mr. Bakish was Executive Vice President and Chief
Operating Officer of Advertising Sales of MTV Networks from 2001 to
2005; Executive Vice President of Business Development of MTV Networks
from 1999 to 2001; and Senior Vice President, Planning, Development and
Technology of Former Viacom from 1997 to 1999.
Michael
J. Dolan
Mr. Dolan has served as Executive Vice
President and Chief Financial Officer of Viacom since January 1,
2006. Prior to that, he was Executive Vice President and Chief
Financial Officer of Former Viacom since May 2005. Before
joining Viacom, Mr. Dolan served as a senior advisor to Kohlberg
Kravis Roberts & Co., a private equity firm, since late
2004. Previously, Mr. Dolan served as Chairman and Chief
Executive Officer of Young & Rubicam, Inc. from 2000 until his
retirement in 2003, as its President and Chief Executive Officer during
2000, and as its Vice Chairman and Chief Financial Officer from 1996 to
2000. Mr. Dolan also serves as non-executive Chairman of
America's Choice and serves on the Board of Directors of Mattel,
Inc.
Carl D. Folta
Mr. Folta
assumed the role of Executive Vice President, Office of the Chairman,
on January 1, 2006. Previously, he was Executive Vice President,
Corporate Relations of Former Viacom since November 2004. Prior
to that, he served as Senior Vice President of Corporate Relations of
Former Viacom from November 1994 to November 2004 and as
Vice President of Corporate Relations of Former Viacom from
April 1994 to November 1994. Mr. Folta held
various communications positions at Paramount Communications Inc. from
1984 until joining Former Viacom in April
1994.
Michael D.
Fricklas
Mr. Fricklas has served as our
Executive Vice President, General Counsel and Secretary since
January 1, 2006. Prior
to that, he was Executive Vice President,
General Counsel and Secretary of Former Viacom since May 2000.
From October 1998 to May 2000, he served as Senior Vice
President, General Counsel and Secretary of Former Viacom. From
July 1993, he served as Vice President and Deputy General
Counsel of Former Viacom and assumed the title of Senior Vice President
in July 1994.
JoAnne Adams
Griffith
Ms. Griffith assumed the role of
Executive Vice President, Human Resources on January 1, 2006.
Previously, she was Executive Vice President of Human Resources for
Former Viacom since September 2005. She has also served as
Executive Vice President of Human Resources for MTV Networks since 1998
and Vice President of Human Resources of Former Viacom from 1996 to
September 2005. Before that, Ms. Griffith served as Vice
President of Human Resources for Paramount Pictures from 1986 to
1996.
DeDe Lea
Ms. Lea serves as
our Executive Vice President, Government Relations. Ms. Lea
served as Senior Vice President, Government Relations of Former Viacom
from September 2005 through the separation date. Prior to that,
she served as Vice President of Government Affairs at Belo Corp. from
2004 to 2005 and as Vice President of Government Affairs of Former
Viacom from 1997 to 2004.
Carole
Robinson
Ms. Robinson assumed the role of
Executive Vice President, Corporate Relations on January 1,
2006. Previously, she served as Executive Vice President, Corporate
Communications, for MTV Networks since 1999. Prior to that,
Ms. Robinson served as Senior Vice President, Communications, of
MTV Networks from 1994 to 1998. She joined MTV Networks in 1984 and has
held a succession of positions within the corporate communications area
since then.
Jacques
Tortoroli
Mr. Tortoroli assumed the role of
Senior Vice President, Controller and Chief Accounting Officer on
January 1, 2006. He previously served as Executive Vice
President and Chief Financial Officer of Infinity Broadcasting from
2002 to 2005. From 2002 to 2004, Mr. Tortoroli was also Chief
Financial Officer of Westwood One, in which Infinity has an investment.
Prior to that, Mr. Tortoroli was Chief Financial Officer of
Scient, Inc. from 2001 to 2002, and held several financial roles at
Young & Rubicam, Inc. from 1998 to 2001, including Chief
Financial Officer, Senior Vice President of Finance and Controller, and
Chief Financial Officer of Y&R Advertising. Previously,
Mr. Tortoroli spent 12 years with PepsiCo, Inc.,
including financial roles in PepsiCo, Inc. and
Pepsi-Cola.
Name
Age
Position
Sumner
M.
Redstone(1)
83
Executive
Chairman and Founder
Shari
Redstone(1)
52
Non-Executive Vice Chair of
the Board
George S.
Abrams
74
Director
Philippe P.
Dauman
52
Director
Thomas E.
Dooley
46
Director
Thomas E.
Freston
60
President and Chief Executive Officer and
Director
Ellen V.
Futter
56
Director
Alan C.
Greenberg
78
Director
Robert K.
Kraft
65
Director
Charles E.
Phillips, Jr.
47
Director
Frederic
V. Salerno
63
Director
William
Schwartz
73
Director
(1)
Mr.
Redstone and Ms. Redstone serve as Executive Chairman and Founder, and
Non-Executive Vice Chair, respectively, of our board of directors.
Ms. Redstone is Mr. Redstone’s daughter. None of
the other directors are related to any other director by blood,
marriage or adoption.
George S. Abrams
Mr. Abrams
was elected to our Board as of January 1, 2006.
Previously, he served as a director of Former Viacom since 1987. He is
an attorney associated with the law firm of Winer and Abrams in Boston
since 1969. Prior to that, Mr. Abrams served for three years as
General Counsel and Staff Director of the United States Senate
Judiciary Committee for Refugees. Mr. Abrams is a member of the
Boards of Trustees and Visiting Committees of a number of art museums,
arts-related organizational and educational institutions, including the
Museum of Fine Arts in Boston, the Harvard University Art Museums and
the European Fine Arts Foundation. Mr. Abrams is also a director
of National Amusements, Inc. and Sonesta International Hotels
Corporation.
Philippe P.
Dauman
Mr. Dauman was elected to our Board as of
January 1, 2006. Previously, he served as a director of
Former Viacom since 1987. He has been Co-Chairman and Chief Executive
Officer of DND Capital Partners, L.L.C.,
a private equity firm, since May 2000.
Prior to co-founding DND Capital Partners, Mr. Dauman served as
Former Viacom’s Deputy Chairman from 1996 until May 2000
and Executive Vice President from 1994 until May 2000 as well as
a member of its Executive Committee. From 1993 to 1998, Mr.
Dauman served as General Counsel and Secretary of Former Viacom.
Mr. Dauman is also a director of National Amusements, Inc. and
CBS Corporation.
Thomas E.
Dooley
Mr. Dooley was elected to our Board as of
January 1, 2006. He has served as Co-Chairman and Chief
Executive Officer of DND Capital Partners, a private equity firm, since
May 2000. Prior to co-founding DND Capital Partners, Mr.
Dooley held various corporate and divisional positions at Former
Viacom, which he joined in 1980, including Deputy Chairman, member of
its Executive Committee, and Executive Vice President, Finance,
Corporate Development and Communications. He is also a director of
LaBranche & Co. Inc.
Ellen V.
Futter
Ms. Futter was elected to our Board as of
January 1, 2006. She is President of the American Museum
of Natural History, a position she has held since November 1993.
Previously, she served for 13 years as the President of Barnard
College. She currently serves on the boards of American International
Group, Inc., Consolidated Edison, Inc. and JPMorgan Chase &
Co.
Alan C. Greenberg
Mr.
Greenberg was elected to our Board as of January 1, 2006.
Previously, he served as a director of Former Viacom since 2003. He is
Chairman of the Executive Committee of The Bear Stearns Companies Inc.,
a position he has held since June 2001. Mr. Greenberg
also served as Chairman of the Board of Bear Stearns from 1985 to 2001,
and as its Chief Executive Officer from 1978 to 1993. Mr.
Greenberg is also a director of Bear Stearns.
Robert K.
Kraft
Mr. Kraft was elected to our Board as of
January 1, 2006. He is Chairman and Chief Executive
Officer of The Kraft Group, which includes the New England Patriots,
New England Revolution, Gillette Stadium, Rand-Whitney Group and
International Forest Products Corporation. Mr. Kraft has been
the owner of the New England Patriots for the past 10 seasons, and has
served as Chairman of the NFL’s Finance Committee since 1998. He
is a director of the Dana-Farber Cancer Institute, the Federal Reserve
Bank of Boston and The New England Patriots Charitable
Foundation.
Charles E. Phillips,
Jr.
Mr. Phillips was elected to our Board as of
January 1, 2006. He previously served as a director of
Former Viacom since 2004. He has been President of Oracle Corporation
since May 2003. Mr. Phillips has also
served as a member of the Board of Directors
and Executive Management Committee for Oracle Corporation since
January 2004. Prior to joining Oracle, Mr. Phillips was a
Managing Director with Morgan Stanley from 1994 to 2003. Mr.
Phillips is also a director of Oracle Corporation and Morgan
Stanley.
Shari Redstone
Ms.
Redstone is Non-Executive Vice Chair of our Board of Directors, a
position to which she was elected as of January 1, 2006.
She also serves as Non-Executive Vice Chair of the Board of CBS
Corporation. Ms. Redstone served on the Board of Former Viacom
since 1994, becoming Vice Chairman in June 2005. She has been
President of National Amusements, Inc., since January 2000, and
prior to that, served as Executive Vice President of National
Amusements since 1994. Ms. Redstone practiced law from 1978 to
1993, with her practice including corporate law, estate planning and
criminal law. Ms. Redstone is a member of the Board of Directors
and Executive Committee for the National Association of Theatre Owners,
Co-Chairman and Co-Chief Executive Officer of MovieTickets.com, Inc.,
Chairman and Chief Executive Officer of CineBridge Ventures, Inc. and
Chairman and Chief Executive Officer of Rising Star Media. Ms.
Redstone is a member of the board of several charitable organizations,
including the Board of Trustees at the Dana Farber Cancer Institute,
the Board of Directors at Combined Jewish Philanthropies, the Board of
Directors of the John F. Kennedy Library Foundation and the Board of
Directors of the National Center on Addiction and Substance Abuse
(CASA) at Columbia University. Ms. Redstone is also a director
of National Amusements and Vice Chairwoman of Midway Games Inc.
Ms. Redstone is the daughter of Sumner
Redstone.
Frederic V. Salerno
Mr.
Salerno was elected to our Board as of January 1, 2006.
Previously, he served as a director of Former Viacom since 1994. He is
a retired Vice Chairman and Chief Financial Officer of Verizon
Communications Inc., a position he held from June 2000 to
October 2002. Prior to that, Mr. Salerno served as Vice
Chairman and Chief Financial Officer of Bell Atlantic (Verizon’s
predecessor) from August 1997. Prior to the merger of Bell
Atlantic and NYNEX Corporation, Mr. Salerno served as Vice
Chairman, Finance and Business Development, of NYNEX from 1994 to 1997.
Mr. Salerno was Vice Chairman of the Board of NYNEX and
President of the NYNEX Worldwide Services Group from 1991 to 1994.
Mr. Salerno is also a director of Akamai Technologies, Inc., The
Bear Stearns Companies Inc., Consolidated Edison, Inc.,
IntercontinentalExchange, Inc. and Popular Inc.
William
Schwartz
Mr. Schwartz was elected to
our Board as of January 1, 2006. Previously, he served as
a director of Former Viacom since 1987. He is counsel to the law firm
of Cadwalader, Wickersham & Taft, a position he has held since
1988. Mr. Schwartz served as Vice President for Academic Affairs
(the chief academic officer) of Yeshiva University from 1993 to
July 1998, and has been University Professor of Law at Yeshiva
University and the Cardozo School of Law since 1991. Mr.
Schwartz was Dean of the Boston University School of Law from 1980 to
1988, and a professor of law at Boston University from 1955 to 1991.
Mr. Schwartz is an honorary member of the National College of
Probate Judges. Mr. Schwartz formerly served as chairman of UST
Corp., and was chairman of the Boston Mayor’s Special Commission
on Police Procedures and a member of the Legal Advisory Board of the
New York Stock Exchange.
•
an annual Board retainer of
$60,000, payable in equal installments quarterly in advance, plus a per
meeting attendance fee of $2,000;
•
the
chairs of the Audit and Compensation Committees each receive an annual
retainer of $20,000, payable in equal installments quarterly in
advance, and the members of those committees receive a per meeting
attendance fee of $2,000; and
•
the chair
of the Governance and Nominating Committee receives an annual retainer
of $15,000, payable in equal installments quarterly in advance, and the
members of that committee receive a per meeting attendance fee of
$1,500.
•
for directors who did not
serve on the Former Viacom board immediately prior to the separation,
an initial grant of options to purchase 7,928 shares of Class B common
stock on the date the director first joins the Board or becomes an
Outside Director, which options vest one year from the date of grant;
and
•
an annual grant of options to
purchase 3,171 shares of Class B common stock on January 31 of
each year, which options vest in three equal annual installments, on
the first, second and third anniversaries of the date of the
grant.
Annual
Compensation(1)
Long-Term
CompensationAwards
Name
and
Principal
PositionYear
Salary
($)
Bonus
($)
Other
Annual
Compensation
($)(2)Restricted
Share
Awards
($)(3)Securities
Underlying
Stock
Options
(#)(4)All
Other
Compensation
($)(5)Total
Compensation
**
Sumner M.
Redstone Executive Chairman and Founder(6)
2005
$
5,806,651
$
7,125,000
$
115,092
$
4,298,700
—
$
5,940
$
17,351,383
Thomas
E. Freston President and Chief Executive
Officer
2005
5,306,651
13,000,000
84,585
4,298,700
—
8,740
22,698,676
Michael
D. Fricklas Executive Vice President, General Counsel and
Secretary
2005
1,157,132
2,723,200
10,893
899,998
105,640
25,100
6,164,536
Michael
J. Dolan* Executive Vice President and Chief Financial Officer
2005
1,016,266
2,733,848
2,472
899,986
115,376
3,960
5,969,067
Robert
M. Bakish Executive Vice President, Operations and Viacom
Enterprises
2005
931,731
2,242,500
14,200
899,998
105,640
24,816
5,461,458
*
Mr.
Dolan commenced employment as Executive Vice President and Chief
Financial Officer of Former Viacom on May 2,
2005.
**
Total compensation for each
executive represents the aggregate of the columns presented in the
table except for stock options, which are valued at grant date present
value as set forth in the table ‘‘Option Grants in Fiscal
2005.’’
(1)
Annual
Compensation for 2005 includes in salary or bonus, as appropriate, the
following amounts of compensation deferred by the
executive:
Executive
Deferral
Under
Employment
Agreement401(k)
Plan
Excess
401(k) PlanBonus
Deferral
Plan
Sumner M. Redstone
$
2,300,000
—
—
—
Thomas
E.
Freston
2,300,000
$
14,000
—
—
Michael
D.
Fricklas
150,481
14,000
$
45,666
—
Michael
J.
Dolan
168,269
—
—
—
Robert
M.
Bakish
—
14,000
135,423
$
190,125
Amounts
deferred under the 401(k) plan are invested at the executive’s
election in the investment options offered by the 401(k) plan. The
executives are eligible to receive a matching contribution from Viacom
to the 401(k) plan in the same manner as other employees. The amount of
the matching contribution in 2005 for each executive is discussed below
in footnote 5. Amounts deferred under the excess 401(k) plan, bonus
deferral plan and pursuant to the executive’s employment
agreement are credited to a book-entry account in the
participant’s name and deemed invested in the same investment
options the executive selects for the 401(k) plan. Such accounts are
credited with earnings, gains or losses in the same manner as the
401(k) plan. The executives are eligible to receive a matching
contribution from Viacom to the excess 401(k) plan in the same manner
as other participants in the excess 401(k) plan. The amount of the
matching contribution in 2005 for each executive is discussed below in
footnote 5.
(2)
Perquisites. Other
Annual Compensation for 2005 includes the following perquisites
received by the named executive
officers:
Executive
Personal
Use
of
Viacom
Aircraft(a)Car
Allowance(b)Car
InsurancePersonal
Use
of
Car
Service(c)
Sumner M. Redstone
$
107,543
$
6,549
$
1,000
—
Thomas
E.
Freston
69,993
6,549
1,000
$
7,043
Michael
D.
Fricklas
2,704
6,549
1,000
640
Michael
J.
Dolan
—
2,234
—
238
Robert
M.
Bakish
—
13,200
1,000
—
(a)
The
incremental cost of use of our aircraft is calculated by dividing the
total variable costs (such as fuel, aircraft maintenance, landing and
navigation fees and flight crew expenses) by the total flight hours for
such year and multiplying such amount by the individual’s total
number of flight hours for non-business use for the
year.
(b)
This perquisite was
terminated for Messrs. Redstone, Freston, Fricklas and Dolan in
July 2005 and for Mr. Bakish in April
2006.
(c)
Personal use of car service
reflects commuting expenses in excess of company
policy.
(3)
Value presented as of date of grant.
As of January 3, 2006, the first day of trading of our
Class B common stock following the separation, the value of the
restricted share unit grants made in 2005 for each of the executives
based on the opening price on the New York Stock Exchange of $41.12 was
$2,310,532 for Mr. Redstone, $3,748,992 for Mr. Freston,
$784,899 for Mr. Fricklas, $857,352 for Mr. Dolan and
$784,899 for Mr. Bakish. Half of Mr.
Redstone’s Former Viacom restricted share units
converted into restricted share units of CBS
Corporation.
(4)
The number of Former Viacom
stock options granted in 2005 before the conversion in the separation
was as follows: 133,249 for Mr. Fricklas, 145,530 for Mr.
Dolan and 133,249 for Mr. Bakish.
(5)
We
maintain a program of life and disability insurance which is generally
available to all salaried employees on the same basis. In addition,
during 2005, Former Viacom provided certain life insurance benefits at
specified levels for the named executive officers. All Other
Compensation includes (a) premiums paid for life insurance coverage for
2005 of $5,940 for each of Messrs. Redstone and Freston, $2,600 for
Mr. Fricklas, $3,960 for Mr. Dolan and $2,316 for
Mr. Bakish; (b) matching contributions under our 401(k) plan for
2005 of $2,800 for each of Messrs. Freston, Fricklas and Bakish; and
(c) credits for matching contributions under our excess 401(k) plan for
2005 of $19,700 for each of Messrs. Fricklas and
Bakish.
(6)
Amounts represent the full amount
paid to Mr. Redstone by Former Viacom and are duplicative of
amounts reported by CBS Corporation, except for the 2005 bonus amount
which is our portion of Mr. Redstone’s 2005 bonus
compensation that was paid in 2006. An equal amount of bonus
compensation was paid to him by CBS
Corporation.
Number
of
Shares of
Class
B
Common
Stock
Underlying
Options(1)Individual
Grants
Name
%
of Total
Options
Granted to
Employees in
Fiscal
2005Exercise
Price
($/Share)Expiration
DateGrant
Date
Present
Value(2)
Sumner M. Redstone
—
—
—
—
—
Thomas
E.
Freston
—
—
—
—
—
Michael
D.
Fricklas
105,640
2.4
$
47.1493
1/26/13
$
1,348,213
Michael
J.
Dolan
115,376
2.6
43.1634
5/16/13
1,312,535
Robert
M.
Bakish
105,640
2.4
47.1493
1/26/13
1,348,213
(1)
The
number and exercise price of Former Viacom stock options granted in
2005 was as follows: 133,249 for Mr. Fricklas at an exercise
price of $37.38, 145,530 for Mr. Dolan at an exercise price of
$34.22, and 133,249 for Mr. Bakish at an exercise price of
$37.38. The options vest in four equal annual installments beginning
one year from the date of grant, which in the case of Messrs. Fricklas
and Bakish was January 26, 2005, and in the case of
Mr. Dolan was May 16,
2005.
(2)
Valued using the Black-Scholes model.
The actual value, if any, an executive may realize will depend on the
excess of the stock price over the exercise price on the date the
option is exercised. There is no assurance that the value realized by
an executive will be at or near the value estimated by the
Black-Scholes model. Expected volatility for stock option grants was
determined based on Former Viacom’s historical volatility on the
date of grant. The grant date values presented in the table were
determined in part using the following weighted-average assumptions for
Former Viacom. No adjustments were made for non-transferability or risk
of
forfeiture.
Expected
stock price volatility
24.01%
Risk-free
interest rate
3.80%
Expected
dividend yield
.76%
Expected life of
options
5.2 years
Name
Number
of
Shares of
Class B
Common
Stock
Acquired on
ExerciseValue
Realized($)Number of Shares of
Class B
Common Stock Underlying
Unexercised Options as
of
January 3, 2006Value of
Unexercised
In-the-Money Options as of
January 3,
2006($)
Exercisable
Unexercisable
Exercisable
Unexercisable
Sumner M. Redstone
2,000,000(1
$
28,904,000
4,981,855
568,008
$
16,717,293
$
0
Thomas
E.
Freston
—
—
3,624,688
594,602
2,693,578
0
Michael
D.
Fricklas
—
—
610,456
105,640
2,489,991
0
Michael
J.
Dolan
—
—
—
115,376
0
0
Robert
M.
Bakish
—
—
336,940
105,640
1,076,184
0
(1)
The
number of shares acquired on exercise does not reflect the conversion
in the separation. Giving effect to the separation, 1,585,604 shares
were acquired on exercise. Mr. Redstone’s option
exercises were effected pursuant to a Rule 10b5-1 trading plan adopted
on November 3, 2005. Pursuant to the plan, Mr.
Redstone exercised options that would otherwise have expired on
January 29, 2006, and sold only such number of shares
necessary so that the proceeds of the sales would be sufficient to pay
the exercise price, income taxes and other fees associated with the
exercise of the stock options.
Years
of Service
Remuneration
15
20
25
30
$
250,000
$
61,781
$
82,375
$
102,969
$
123,562
500,000
127,406
169,875
212,344
254,812
750,000
193,031
257,375
321,719
386,062
1,000,000
258,656
344,875
431,094
517,312
Beneficial
Ownership of Equity Securities
Name
Title
of Equity
SecurityNumber of
Equity
SharesOption Shares
Percentage
of
Class
George S.
Abrams
Class A
common
stock
9,862
—
Class
B common
stock
26,769
19,817
Robert
M. Bakish
Class A common
stock
—
—
Class
B common
stock
14,788
363,350
Philippe
P. Dauman
Class A common
stock
—
—
Class
B common
stock
3,267
12,699
Michael
J. Dolan
Class A common
stock
—
—
Class
B common
stock
8,241
28,844
Thomas
E. Dooley
Class A common
stock
2,119
—
Class
B common
stock
2,591
—
Thomas
E. Freston
Class A common
stock
1,412
—
Class
B common
stock
55,684
3,822,889
Michael
D. Fricklas
Class A common
stock
36
—
Class
B common
stock
6,948
597,226
Ellen
V. Futter
Class A common
stock
—
—
Class
B common
stock
—
—
Alan
C. Greenberg
Class A common
stock
—
—
Class
B common
stock
26,248
11,099
Robert
K. Kraft
Class A common
stock
811
—
Class
B common
stock
18,311
—
Charles
E. Phillips, Jr.
Class A common
stock
902
—
Class
B common
stock
910
8,985
Shari
Redstone
Class A common
stock
1,207
—
Class
B common
stock
2,709
4,886
Sumner
M. Redstone(7)
Class A common
stock
46,829,454
—
76.7
Class
B common
stock
35,470,424
5,171,191
5.8
Frederic
V. Salerno
Class A common
stock
10,037
—
Class
B common
stock
16,313
15,061
Beneficial
Ownership of Equity Securities
Name
Title
of Equity
SecurityNumber of
Equity
SharesOption Shares
Percentage
of
Class
William
Schwartz
Class A common
stock
12,385
—
Class
B common
stock
17,048
17,439
NAIRI/NAI(9)
Class
A common
stock
46,829,414
—
76.7
Class
B common
stock
35,180,057
—
5.4
Mario
J. Gabelli(10)
Gabelli Asset Management
IncClass A common
stock
4,851,223
—
7.9
Current
directors and executive officers as a group, other than Sumner
M. Redstone (19 persons)
Class A common
stock
39,059
—
Class
B common
stock
208,846
5,308,500
*
Represents
less than 1% of the outstanding common stock of the
class.
(1)
Includes the following
Class A phantom stock units and Class B phantom stock units credited
pursuant to the Director Deferred Compensation Plan: Abrams, 9,862
Class A and 10,043 Class B; Kraft, 811 Class A and 811 Class B;
Phillips, 902 Class A and 910 Class B; Shari Redstone, 1,207 Class A
and 1,209 Class B; Salerno, 10,037 Class A and 10,065 Class B; and
Schwartz, 12,385 Class A and 12,548 Class
B.
(2)
Includes for Abrams, 100
Class B shares held indirectly as executor of a trust; Kraft, 2,500
Class B shares held by Kraft Family Investment LLC; and Shari Redstone,
1,500 Class B shares held in trusts for the benefit of her children for
which she is
co-trustee.
(3)
Includes shares
held through the Viacom 401(k)
plan.
(4)
Includes the following
shares owned by family members of the officer or director: Bakish, 211
Class B and Freston, 32 Class
B.
(5)
Includes the following Class
A stock units and Class B stock units credited pursuant to the Excess
401(k) plan, Bonus Deferral plan and/or contractual deferral: Bakish,
10,540 Class B; Freston, 1,375 Class A and 5,294 Class B; Fricklas, 13
Class A and 3,174 Class B; and Sumner Redstone, 1,826 Class
B.
(6)
Ms. Redstone is a
stockholder of NAI and has a significant indirect beneficial interest
in the Viacom shares owned by
NAI.
(7)
The address for Mr.
Redstone is c/o Viacom Inc., 1515 Broadway, New York, NY
10036-5794.
(8)
Except for 40
shares of Class A common stock and 288,320 shares of Class B common
stock owned directly by Mr. Redstone, 121 shares of Class B
common stock held by Mr. Redstone through the Viacom 401(k)
plan, 100 shares of Class B common stock held by Mr.
Redstone’s wife, and 1,826 shares of Class B common stock held
in deferred compensation accounts, all shares are owned beneficially by
NAI. Mr. Redstone is the beneficial owner of the controlling
interest in NAI and, accordingly, beneficially owns all such shares.
NAIRI is a wholly owned subsidiary of
NAI.
(9)
The address for NAI and
NAIRI is 200 Elm Street, Dedham, Massachusetts
02026.
(10)
According to a Schedule
13D filed on January 13, 2006 with the SEC by GAMCO
Investors, Inc. and related entities. The address for Mario J. Gabelli
and GAMCO Investors, Inc. is One Corporate Center, Rye, New York
10580.
•
after June 16, 2006,
in the case of the unregistered 2009 senior notes, or after
April 12, 2006, in the case of the unregistered 2011
senior notes, the unregistered 2016 senior notes and the unregistered
2036 senior debentures, there is a change in law or applicable
interpretations of the law by the staff of the SEC, and as a result we
are not permitted to complete the exchange offer as contemplated by the
relevant registration rights
agreement;
•
any holder of unregistered
senior notes and debentures (other than an initial purchaser) is not
eligible to participate in the exchange offer or elects to participate
in the exchange offer but does not receive fully transferable exchange
senior notes and debentures;
•
the
exchange offer is not consummated within 300 days of June
16, 2006 (in the case of the unregistered 2009 senior notes) or
within 300 days of April 12, 2006 (in the case of the
unregistered 2011 senior notes, the unregistered 2016 senior notes and
the unregistered 2036 senior debentures);
or
•
upon the request of any of the
initial purchasers made within 90 days after the consummation of the
exchange offer with respect to unregistered senior notes and debentures
not eligible to be exchanged in the exchange offer and held by it
following the consummation of the exchange offer.
•
file a shelf
registration statement with the SEC relating to the offer and sale of
the unregistered senior notes and
debentures;
•
use our reasonable best
efforts to cause the shelf registration statement to be declared
effective by the SEC (a) no later than the 360th day after June
16, 2006 (in the case of the unregistered 2009 senior notes) and
no later than the 360th day after April 12,
2006 (in the case of the unregistered 2011 senior notes, the
unregistered 2016 senior notes and the unregistered 2036 senior
debentures) or (b) within 60 days of a request by any initial purchaser
pursuant to the fifth bullet under the heading ‘‘Shelf
Registration’’ above, if later;
and
•
use our reasonable best efforts to
keep the shelf registration statement effective until two years after
the effective date, or if earlier until all of the unregistered senior
notes and debentures covered by the shelf registration statement are
sold thereunder or are already freely tradable.
•
provide specified information in
connection with the shelf registration statement;
and
•
agree in writing to be bound by all
provisions of the registration rights agreement relating to such
holder’s unregistered senior notes and debentures (including the
applicable indemnification obligations).
•
we fail to consummate the
exchange offer on or prior to the date specified for such
consummation;
•
if a shelf registration
statement is required, the shelf registration statement is not declared
effective by the SEC on or prior to the date specified for such
effectiveness; or
•
the shelf registration
statement or the exchange offer registration statement is declared
effective but thereafter ceases to be effective or usable in connection
with resales of the senior notes and debentures during the period
specified in the applicable registration rights agreement, subject to
certain exceptions for limited periods of time with respect to the
shelf registration statement.
•
the exchange offer, or the
making of any exchange by a holder, violates applicable law or any
applicable interpretation of the staff of the
SEC;
•
any action or proceeding shall have
been instituted or threatened with respect to the exchange offer which,
in our judgment, would impair our ability to proceed with the exchange
offer; and
•
any law, rule or regulation
or applicable interpretations of the staff of the SEC have been issued
or promulgated which, in our good faith determination, does not permit
us to effect the exchange offer.
•
delay accepting any unregistered
senior notes and debentures;
•
waive any
condition of the exchange offer;
and
•
amend the terms of the exchange
offer in any manner.
•
refuse to accept any unregistered
senior notes and debentures and return any unregistered senior notes
and debentures that have been tendered to the
holders;
•
extend the exchange offer and
retain all unregistered senior notes and debentures tendered prior to
the expiration of the exchange offer, subject to the rights of the
holders of tendered unregistered senior notes and debentures to
withdraw their tendered unregistered senior notes and debentures;
or
•
waive the termination event with
respect to the exchange offer and accept all properly tendered
unregistered senior notes and debentures that have not been
withdrawn.
•
any
exchange senior notes and debentures to be received by you will be
acquired in the ordinary course of your business;
•
you are not
engaged in, do not intend to engage in or have any arrangement or
understanding with any person to participate in the distribution of the
unregistered senior notes and debentures or exchange senior notes and
debentures;
•
you are not an
‘‘affiliate’’ (as defined in Rule 405 under
the Securities Act) of Viacom or, if you are such an affiliate, you
will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent
applicable;
•
if you are a broker-dealer,
you have not entered into any arrangement or understanding with Viacom
or any ‘‘affiliate’’ of Viacom (within the
meaning of Rule 405 under the Securities Act) to distribute the
exchange senior notes and debentures;
•
if
you are a broker-dealer, you will receive exchange senior notes and
debentures for your own account in exchange for unregistered senior
notes and debentures that were acquired as a result of market-making
activities or other trading activities and you will deliver a
prospectus in connection with any resale of such exchange senior notes
and debentures; and
•
you are not acting
on behalf of any person or entity that could not truthfully make these
representations.
•
holders of unregistered senior
notes and debentures that are DTC participants may follow the
procedures for book-entry transfer as provided for below under
‘‘— Book-Entry Transfer’’ and in the
letter of transmittal.
•
Euroclear
participants and Clearstream Luxembourg participants on behalf of the
beneficial owners of unregistered senior notes and debentures are
required to use book-entry transfer pursuant to the standard operating
procedures of Euroclear or Clearstream Luxembourg, as the case may be,
which include transmission of a computer-generated message to Euroclear
or Clearstream Luxembourg, as the case may be, in lieu of a letter of
transmittal. See the term ‘‘agent’s
message’’ under ‘‘— Book-Entry
Transfer.’’
•
the exchange agent must receive
any corresponding certificate or certificates representing unregistered
senior notes and debentures along with the letter of transmittal;
or
•
the exchange agent must receive,
before expiration of the exchange offer, a timely confirmation of
book-entry transfer of unregistered senior notes and debentures into
the exchange agent’s account at DTC, Euroclear or Clearstream
Luxembourg according to their respective standard operating procedures
for electronic tenders described below and a properly transmitted
agent’s message described below;
or
•
the holder must comply with the
guaranteed delivery procedures described below.
•
make appropriate arrangements to
register ownership of the unregistered senior notes and debentures in
your name; or
•
obtain a properly
completed bond power from the registered holder.
•
by a registered holder who has
not completed the box entitled ‘‘Special Registration
Instructions’’ or ‘‘Special Delivery
Instructions’’ on the letter of transmittal;
or
•
for the account of an eligible
institution.
•
the tender is made through an
eligible institution;
•
before expiration
of the exchange offer, the exchange agent receives from the eligible
institution either a properly completed and duly executed notice of
guaranteed delivery in the form accompanying this prospectus, by
facsimile transmission, mail or hand delivery, or a properly
transmitted agent’s message in lieu of notice of guaranteed
delivery:
•
setting forth the name and
address of the holder and the certificate number or numbers of the
unregistered senior notes and debentures tendered and the principal
amount of unregistered senior notes and debentures
tendered;
•
stating that the tender offer
is being made by guaranteed delivery;
and
•
guaranteeing that, within three (3)
business days after expiration of the exchange offer, the letter of
transmittal, or facsimile of the letter of transmittal, together with
the unregistered senior notes and debentures tendered or a book-entry
confirmation, and any other documents required by the letter of
transmittal will be deposited by the eligible institution with the
exchange agent; and
•
the exchange agent
receives the properly completed and executed letter of transmittal, or
facsimile of the letter of transmittal, as well as all tendered
unregistered senior notes and debentures in proper form for transfer or
a book-entry confirmation, and all other documents required by the
letter of transmittal, within three (3) business days after expiration
of the exchange offer.
•
the exchange agent must
receive a written notice, which may be by telegram, telex, facsimile
transmission or letter, of withdrawal at the address set forth below
under ‘‘— Exchange Agent’’;
or
•
for DTC, Euroclear or Clearstream
Luxembourg participants, holders must comply with their respective
standard operating procedures for electronic tenders and the exchange
agent must receive an electronic notice of withdrawal from DTC,
Euroclear or Clearstream Luxembourg.
•
specify the name of the person who
tendered the unregistered senior notes and debentures to be
withdrawn;
•
identify the unregistered
senior notes and debentures to be withdrawn, including the certificate
number or numbers and principal amount of the unregistered senior notes
and debentures to be withdrawn;
•
be
signed by the person who tendered the unregistered senior notes and
debentures in the same manner as the original signature on the letter
of transmittal, including any required signature guarantees;
and
•
specify the name in which the
unregistered senior notes and debentures are to be re-registered, if
different from that of the withdrawing holder.
•
may be resold only if (i)
registered pursuant to the Securities Act, (ii) an exemption from
registration is available or (iii) neither registration nor an
exemption is required by law; and
•
shall
continue to bear a legend restricting transfer in the absence of
registration or an exemption therefrom.
Corporate Trust Operation – Reorganization Unit
101
Barclay Street, 7 East
New York, New York 10286
Attn: Mr.
David Mauer
Telephone number: (212) 815-3687
Facsimile
number: (212) 298-1915
•
certificates
representing exchange senior notes and debentures or unregistered
senior notes and debentures for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered
or issued in the name of, any person other than the registered holder
of unregistered senior notes and debentures
tendered;
•
tendered unregistered senior
notes and debentures are registered in the name of any person other
than the person signing the letter of transmittal;
or
•
a transfer tax is imposed for any
reason other than the exchange of unregistered senior notes and
debentures under the exchange offer.
•
will be unsecured senior
obligations of Viacom;
•
will rank equally
with all of our other unsecured senior indebtedness from time to time
outstanding;
•
will initially be limited
to $5,500,000,000 aggregate principal amount consisting of $750,000,000
aggregate principal amount of 2009 senior notes, $1,500,000,000
aggregate principal amount of 2011 senior notes, $1,500,000,000
aggregate principal amount of 2016 senior notes and $1,750,000,000
aggregate principal amount of 2036 senior debentures, which aggregate
principal amounts may, without the consent of holders, be increased in
the future on the same terms as to status, CUSIP number or otherwise as
the senior notes and debentures being offered hereby;
and
•
will be issued in minimum
denominations of $2,000 and integral multiples of $1,000 in excess
thereof.
(1)
With respect to any interest
determination date, LIBOR will be the rate for deposits in United
States dollars having a maturity of three months commencing on the
first day of the applicable interest period that appears on Telerate
Page 3750 as of 11:00 a.m., London time, on that interest determination
date. If no rate appears, then LIBOR, in respect to that interest
determination date, will be determined in accordance with the
provisions described in (2) below.
(2)
With
respect to an interest determination date on which no rate appears on
Telerate Page 3750, as specified in (1) above, the calculation agent
will request the principal London offices of each of four major
reference banks in the London interbank market, as selected by the
calculation agent, to provide the calculation agent with its offered
quotation for deposits in United States dollars for the period of three
months, commencing on the first day of the applicable interest period,
to prime banks in the London interbank market at approximately 11:00
a.m., London time, on that interest determination date and in a
principal amount that is representative for a single transaction in
United States dollars in that market at that time. If at least two
quotations are provided, then LIBOR on that interest determination date
will be the arithmetic mean of those quotations. If fewer than two
quotations are provided, then LIBOR on the interest determination date
will be the arithmetic mean of the rates quoted at approximately 11:00
a.m., in The City of New York, on the interest determination date by
three major banks in The City of New York selected by the calculation
agent for loans in United States dollars to leading European banks,
having a three-month maturity and in a principal amount that is
representative for a single transaction in United States dollars in
that market at that time; provided, however, that if the banks selected
by the calculation agent are not providing quotations in the manner
described by this sentence, LIBOR determined as of the immediately
preceding interest determination date will be LIBOR in effect on that
interest determination date.
7 East, New York,
New York 10286 is the Trustee for the senior notes and debentures and
is the transfer and paying agent for the senior notes and debentures.
Principal and interest will be payable, and the senior notes and
debentures will be transferable, at the office of the paying agent. We
may, however, pay interest by check mailed to registered holders of the
senior notes and debentures. At the maturity of the senior notes and
debentures, the principal, together with accrued interest thereon, will
be payable in immediately available funds upon surrender of such senior
notes and debentures at the office of the Trustee.
•
the resulting entity (if
other than us) must agree through a supplemental indenture to be
legally responsible for the senior notes and
debentures;
•
immediately following the
consolidation, merger, sale or conveyance, no Event of Default (as
defined below) shall have occurred and be
continuing;
•
the surviving entity to the
transaction must be a corporation organized under the laws of the
United States or a state of the United States;
and
•
we must deliver certain certificates
and documents to the Trustee.
•
Liens existing, in the case of the
2009 senior notes, on June 16, 2006 and, in the case of
the 2011 senior notes, the 2016 senior notes and the 2036 senior
debentures, on April 12,
2006;
•
Liens on any property or any
Indebtedness of a person existing at the time the person becomes a
Subsidiary (whether by acquisition, merger or
consolidation);
•
Liens in favor
of us or our Subsidiaries; and
•
Liens
existing at the time of acquisition of the assets secured thereby and
purchase money Liens.
•
the
sale and leaseback arrangement involves a lease for a term of not more
than three years;
•
the sale and leaseback
arrangement is entered into between us and any Subsidiary or between
our Subsidiaries;
•
We or the Restricted
Subsidiary would be entitled to incur indebtedness secured by a Lien on
the Principal Property at least equal in amount to the Attributable
Debt permitted pursuant to the first paragraph under
‘‘— Limitations on Liens’’ without
having to secure equally and ratably the senior notes and
debentures;
•
the proceeds of the sale and
leaseback arrangement are at least equal to the fair market value (as
determined by our board of directors in good faith) of the property and
we apply within 180 days after the sale an amount equal to the greater
of the net proceeds of the sale or the Attributable Debt associated
with the property to (i) the retirement of long-term debt for borrowed
money that is not subordinated to the senior notes and debentures and
that is not debt to us or a Subsidiary, or (ii) the purchase or
development of other comparable property;
or
•
the sale and leaseback arrangement is
entered into within 180 days after the initial acquisition of the
Principal Property subject to the sale and leaseback
arrangement.
•
We do not pay
interest on a senior note or debenture of such series within 30 days of
its due date;
•
We do not pay the
principal of or any premium on a senior note or debenture of such
series when due and payable, at its maturity, or upon its acceleration
or redemption;
•
We remain in breach of a
covenant or warranty in respect of the applicable indenture for 60 days
after we receive a written notice of default; the notice must be sent
by either the Trustee or holders of at least 25% in principal
amount of a series of outstanding senior notes and debentures;
or
•
We file for bankruptcy, or other
events of bankruptcy, insolvency or reorganization specified in the
applicable indenture occur.
•
such holders must give the
Trustee written notice that an Event of Default has occurred and
remains uncured;
•
holders of at least
25% in principal amount of the outstanding senior notes and
debentures of a series must make a written request that the Trustee
take action because of the default and must offer the Trustee indemnity
satisfactory to the Trustee against the cost and other liabilities of
taking that action;
•
the Trustee must
have failed to take action for 60 days after receipt of the notice and
offer of indemnity; and
•
holders of a
majority in principal amount of the senior notes and debentures of a
series must not have given the Trustee a direction inconsistent with
the above notice for a period of 60 days after the Trustee has received
the notice.
•
adding to our
covenants;
•
adding additional events of
default;
•
changing or eliminating any
provisions of the indenture so long as there are no holders entitled to
the benefit of the
provisions;
•
establishing the form or
terms of any series of senior notes and debentures;
or
•
curing ambiguities or inconsistencies
in the indenture or making any other provisions with respect to matters
or questions arising under the indenture.
•
change the maturity of any
payment of principal of, or any premium on, or any installment of
interest on any senior notes and
debentures;
•
change the terms of any
sinking fund with respect to any senior notes and
debentures;
•
reduce the principal amount
of any senior note or debenture, or the interest thereon, or any
premium on any senior notes or debentures upon redemption or upon
repayment at the option of the
holder;
•
change our obligation to pay
additional amounts;
•
change any place of
payment where, or the currency in which, any senior notes and
debentures or any premium or interest is
payable;
•
impair the right to sue for the
enforcement of any payment on or with respect to any senior notes and
debentures; or
•
reduce the percentage in
principal amount of outstanding senior notes and debentures of any
series required to consent to any supplemental indenture, any waiver of
compliance with provisions of the indenture or specific defaults and
their consequences provided for in the indenture, or otherwise modify
the sections in the indenture relating to these
consents.
(a)
payments of interest
on the exchange senior notes and debentures by us or our paying agent
to any United States Alien Holder will be exempt from the 30%
United States federal withholding tax, provided that (i) such United
States Alien Holder does not own, actually or constructively, directly
or indirectly, 10% or more of the total combined voting power of
all classes of our stock entitled to vote, (ii) such United States
Alien Holder is not a controlled foreign corporation related, directly
or indirectly, to us through stock ownership, (iii) such United States
Alien Holder is not a bank that received such interest in an extension
of credit made pursuant to a loan agreement entered into in the
ordinary course of its trade or business, (iv) the requirement to
certify such United States Alien Holder’s non-U.S. status, as
set forth in Section 871(h) or Section 881(c) of the Code and under
applicable Treasury Regulations, has been fulfilled with respect to the
beneficial owner, as discussed below and (v) the interest is not
effectively connected with the conduct by the United States Alien
Holder of a trade or business in the United States;
and
(b)
a United States Alien Holder of exchange
senior notes or debentures will not be subject to United States federal
income tax on gain realized on the sale, taxable exchange, redemption,
retirement or other taxable disposition of such exchange senior notes
or debentures, unless (i) such United States Alien Holder is an
individual who is present in the United States for 183 days or more in
the taxable year of the disposition, and either the gain is
attributable to an office or other fixed place of business maintained
by such individual in the United States or, generally, such individual
has a ‘‘tax home’’ in the United States or
(ii) such gain is effectively connected with the United States Alien
Holder’s conduct of a trade or business in the United States
(and, if an income tax treaty applies, generally is attributable to a
U.S. ‘‘permanent establishment’’ maintained
by such United States Alien Holder).
•
a United States
person;
•
a controlled foreign corporation
for United States federal income tax
purposes;
•
a foreign person 50% or
more of whose gross income for certain periods is effectively connected
with a United States trade or business;
or
•
a foreign partnership with certain
connections to the United States;
1515 Broadway
52nd Floor
New York, New York
10036
Attn: Investor Relations
Telephone Number: (212)
258-6000
VIACOM INC.
By:
/s/
THOMAS E.
FRESTON
Thomas E.
Freston
President and Chief Executive
Officer
By:
/s/
MICHAEL J.
DOLAN
Michael J.
Dolan
Executive Vice President and
Chief Financial
Officer
By:
/s/
JACQUES
TORTOROLI
Jacques
Tortoroli
Senior Vice President, Controller and
Chief
Accounting
Officer
March 16, 2006
CONSOLIDATED INCOME STATEMENTS
(In millions,
except per share
amounts)
Year
Ended
December 31,
2005
2004
2003
Revenues
$
9,609.6
$
8,132.2
$
7,304.4
Expenses:
Operating
4,737.4
3,908.0
3,672.6
Selling,
general and
administrative
2,246.8
1,689.8
1,432.1
Depreciation
and
amortization
259.0
251.6
197.9
Total
expenses
7,243.2
5,849.4
5,302.6
Operating
income
2,366.4
2,282.8
2,001.8
Interest
expense
(23.0
(24.2
(23.2
Interest
income
3.9
3.3
2.2
Other
items,
net
(29.0
(17.7
(24.6
Earnings from continuing operations before income taxes, equity in
earnings (loss) of affiliated companies and minority
interest
2,318.3
2,244.2
1,956.2
Provision
for income
taxes
(1,020.0
(808.2
(787.6
Equity
in earnings (loss) of affiliated companies, net of
tax
9.4
(40.0
(18.2
Minority
interest, net of
tax
(3.8
(3.1
(3.0
Net
earnings from continuing
operations
1,303.9
1,392.9
1,147.4
Discontinued
operations:
Loss
from discontinued operations, net of minority
interest
(99.6
(1,196.5
(719.4
Income
tax benefit
(provision)
52.6
97.3
(83.4
Net
loss from discontinued
operations
(47.0
(1,099.2
(802.8
Net
earnings before cumulative effect of accounting
change
1,256.9
293.7
344.6
Cumulative
effect of accounting change, net of
taxes
—
—
(6.1
Net
earnings
$
1,256.9
$
293.7
$
338.5
Basic
earnings (loss) per common
share:
Net
earnings from continuing
operations
$
1.73
$
1.85
$
1.53
Net
loss from discontinued
operations
$
(.06
$
(1.46
$
(1.07
Net
earnings before cumulative effect of accounting
change
$
1.67
$
.39
$
.46
Cumulative
effect of accounting
change
$
—
$
—
$
(.01
Net
earnings
$
1.67
$
.39
$
.45
Diluted
earnings (loss) per common
share:
Net
earnings from continuing
operations
$
1.73
$
1.85
$
1.53
Net
loss from discontinued
operations
$
(.06
$
(1.46
$
(1.07
Net
earnings before cumulative effect of accounting
change
$
1.67
$
.39
$
.46
Cumulative
effect of accounting
change
$
—
$
—
$
(.01
Net
earnings
$
1.67
$
.39
$
.45
Weighted
average number of common shares
outstanding:
Basic
751.6
751.6
751.6
Diluted
751.6
751.6
751.6
CONSOLIDATED BALANCE SHEETS
(In millions, except
per share
amounts)
At
December
31,
2005
2004
ASSETS
Current
Assets:
Cash and cash
equivalents
$
361.1
$
148.9
Receivables,
less allowances of $138.6 (2005) and $124.1
(2004)
1,981.7
1,828.8
Inventory
506.6
396.6
Deferred
tax assets,
net
132.0
13.5
Prepaid
expenses
150.3
99.7
Other
current
assets
381.1
124.2
Current
assets of discontinued
operations
—
14.6
Total
current
assets
3,512.8
2,626.3
Property
and
Equipment:
Land
239.5
239.5
Buildings
201.0
220.8
Capital
leases
523.0
498.7
Equipment
and
other
1,354.7
1,303.0
2,318.2
2,262.0
Less
accumulated depreciation and
amortization
1,138.3
1,157.1
Net
property and
equipment
1,179.9
1,104.9
Inventory
2,973.2
2,740.4
Goodwill
10,361.4
10,266.9
Intangibles
370.8
250.2
Deferred
tax assets, net
—
435.1
Other
assets
717.5
691.3
Other assets of
discontinued
operations
—
325.7
Total
Assets
$
19,115.6
$
18,440.8
LIABILITIES
AND STOCKHOLDERS'
EQUITY
Current
Liabilities:
Accounts
payable
$
394.0
$
196.2
Accrued
expenses
920.6
656.6
Accrued
compensation
281.0
296.9
Participants'
share, residuals and royalties
payable
673.0
626.4
Program
rights
321.2
295.4
Deferred
income
284.5
272.6
Current
portion of capital
leases
55.8
53.4
Other
current
liabilities
338.5
325.2
Current
liabilities of discontinued
operations
—
62.9
Total
current
liabilities
3,268.6
2,785.6
Long-term
debt
5,405.0
—
Long-term
capital leases
297.1
291.7
Deferred
tax liabilities,
net
41.2
—
Participants'
share, residuals and royalties
payable
471.7
405.1
At
December
31,
2005
2004
Program
rights
459.8
530.8
Other
liabilities
1,381.9
904.5
Other
liabilities of discontinued
operations
—
46.5
Commitments
and contingencies (Note
15)
Minority
interest
2.4
11.3
Minority interest
of discontinued
operations
—
.1
Stockholders'
Equity:
Class A common
stock, par value $.001 per share; 375.0 shares authorized; 65.7 (2005)
shares
issued
.1
—
Class B
common stock, par value $.001 per share; 5,000.0 shares authorized;
685.9 (2005) shares
issued
.7
—
Additional
paid-in
capital
7,837.3
—
Invested
capital
—
13,465.2
Accumulated
other comprehensive income
(loss)
(50.2
9.3
Accumulated
other comprehensive income (loss) from discontinued
operations
—
(9.3
Total
Stockholders'
Equity
7,787.9
13,465.2
Total
Liabilities and Stockholders'
Equity
$
19,115.6
$
18,440.8
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
millions)
Year
Ended December
31,
2005
2004
2003
Operating
Activities:
Net
earnings
$
1,256.9
$
293.7
$
338.5
Plus:
Net loss from discontinued
operations
47.0
1,099.2
802.8
Plus:
Cumulative effect of accounting change, net of minority
interest
and
tax—
—
6.1
Net
earnings from continuing
operations
1,303.9
1,392.9
1,147.4
Adjustments
to reconcile net earnings from continuing operations to net cash flow
from operating
activities:
Provision
for deferred
taxes
20.1
10.8
42.5
Depreciation
and
amortization
259.0
251.6
197.9
Equity
in (earnings) loss of affiliated companies, net of
tax
(9.4
40.0
18.2
Minority
interest, net of
tax
3.8
3.1
3.0
Change
in operating assets and
liabilities:
Increase
in
receivables
(98.4
(76.3
(533.7
(Increase)
decrease in inventory and related program and participation
liabilities,
net
(184.9
(117.6
223.3
(Increase)
decrease in other
assets
(109.7
(13.0
6.0
Increase
in accounts payable and accrued
expenses
405.1
221.1
65.5
(Decrease)
increase in deferred
income
(5.3
(33.2
46.7
Other,
net
62.8
44.3
56.6
Net cash
flow (used for) provided by operating activities attributable to
discontinued
operations
(19.6
266.2
637.6
Net
cash flow provided by operating
activities
1,627.4
1,989.9
1,911.0
Investing
Activities:
Acquisitions,
net of cash
acquired
(356.1
(363.7
(1,284.0
Capital
expenditures
(193.0
(140.5
(114.3
Investments
in and advances to affiliated
companies
(8.8
(74.3
(23.2
Proceeds
from
dispositions
404.2
—
—
Special
distribution received from
Blockbuster
—
738.1
—
Other,
net
(5.7
(14.9
15.2
Net
cash flow used for investing activities attributable to discontinued
operations
(5.7
(433.3
(188.3
Net
cash flow used for investing
activities
(165.1
(288.6
(1,594.6
Financing
Activities:
Borrowings
from banks, net of deferred financing
costs
5,401.5
—
—
Special
dividend to Former
Viacom
(5,400.0
—
—
Net
contribution from/to Former
Viacom
(1,182.9
(1,734.0
189.1
Payment
of capital lease
obligations
(61.1
(52.1
(41.5
Other,
net
(8.4
(7.9
(6.0
Net
cash flow used for financing activities attributable to discontinued
operations
(0.3
(50.4
(361.9
Net
cash flow used for financing
activities
(1,251.2
(1,844.4
(220.3
Net
increase (decrease) in cash and cash
equivalents
211.1
(143.1
96.1
Cash
and cash equivalents at beginning of year (includes $1.1 (2005), $234.8
(2004) and $153.4 (2003) of discontinued operations
cash)
150.0
293.1
197.0
Cash
and cash equivalents at end of year (includes $0 (2005), $1.1 (2004)
and $234.8 (2003) of discontinued operations
cash)
$
361.1
$
150.0
$
293.1
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
(In
millions)
Year
Ended December
31,
2005
2004
2003
Class
A common
stock:
Balance,
beginning of
year
—
—
—
Issuance
of 65.7 million as a result of separation from Former
Viacom
.1
—
—
Balance,
end of
year
.1
—
—
Class
B common
stock:
Balance,
beginning of
year
—
—
—
Issuance
of 685.9 million as a result of separation from Former
Viacom
.7
—
—
Balance,
end of
year
.7
—
—
Additional
Paid-In
Capital:
Balance,
beginning of
year
—
—
—
Capitalization
as a result of separation from Former
Viacom
7,837.3
—
—
Balance,
end of
year
$
7,837.3
$
—
$
—
Invested
Capital:
Balance,
beginning of
year
$
13,465.2
$
15,844.2
$
15,394.3
Acquisitions
356.1
363.7
1,284.0
Disposals
(391.1
(963.0
—
Special
dividend to Former
Viacom
(5,400.0
—
—
Net
earnings
1,256.9
293.7
338.5
Net
contribution to CBS
Corporation
(1,449.0
(2,073.4
(1,172.6
Capitalization
as a result of separation from Former
Viacom
(7,838.1
—
—
Balance,
end of
year
$
—
$
13,465.2
$
15,844.2
Accumulated
Other Comprehensive Income (Loss) from Continuing
Operations:
Balance,
beginning of
year
9.3
19.7
(32.2
Other
comprehensive income
(loss)
(59.5
(10.4
51.9
Balance,
end of
year
$
(50.2
$
9.3
$
19.7
Accumulated
Other Comprehensive Loss from Discontinued
Operations:
Balance,
beginning of
year
(9.3
(48.2
(113.5
Other
comprehensive income from discontinued
operations
9.3
38.9
65.3
Balance,
end of
year
—
(9.3
(48.2
Total
$
7,787.9
$
13,465.2
$
15,815.7
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)
(In
millions)
Year
Ended December
31,
2005
2004
2003
Comprehensive
Income:
Net
earnings
$
1,256.9
$
293.7
$
338.5
Other
Comprehensive Income (Loss) from continuing operations,
net of
tax:
Minimum
pension liability
adjustment
(9.4
(10.9
5.9
Cumulative
translation
adjustments
(47.2
(2.9
42.3
Change
in fair value of cash flow
hedges
(2.7
2.9
3.2
Unrealized
gain (loss) on
securities
(.2
.8
.5
Reclassification
adjustment for net realized
gains
—
(.3
—
Total
Other Comprehensive Income (Loss) from continuing operations, net of
tax
(59.5
(10.4
51.9
Other
Comprehensive Loss from discontinued operations, net of tax and
minority
interest
9.3
38.9
65.3
Total
Other Comprehensive Income (Loss), net of
tax
(50.2
28.5
117.2
Total
Comprehensive
Income
$
1,206.7
$
322.2
$
455.7
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Tabular dollars in millions, except per
share amounts)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Buildings
20 to 40
years
Equipment and other (including capital
leases)
3 to 15 years
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Minimum
Pension
Liability
AdjustmentCumulative
Translation
AdjustmentsChange
in
Fair
Value of
Cash
Flow
HedgesUnrealized
Gain
(Loss)
on
SecuritiesOther
Comprehensive
Income
(loss)
from
Discontinued
OperationsAccumulated
Other
Comprehensive
Loss
At
December 31, 2002
$
(8.8
$
(19.1
$
(3.5
$
(.8
$
(113.5
$
(145.7
2003
Activity
5.9
42.3
3.2
.5
65.3
117.2
At
December 31, 2003
(2.9
23.2
(.3
(.3
(48.2
(28.5
2004
Activity
(10.9
(2.9
2.9
.5
38.9
28.5
At
December 31, 2004
(13.8
20.3
2.6
.2
(9.3
—
2005
Activity
(9.4
(47.2
(2.7
(.2
9.3
(50.2
At
December 31, 2005
$
(23.2
$
(26.9
$
(.1
$
—
$
—
$
(50.2
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Year
Ended December 31,
2005
2004
2003
Net
earnings from continuing operations
$
1,303.9
$
1,392.9
$
1,147.4
Option
expense, net of tax
(140.3
(119.5
(87.8
Net
earnings from continuing operations after option expense
$
1,163.6
$
1,273.4
$
1,059.6
Basic
earnings (loss) per common
share:
Net
earnings from continuing operations
$
1.73
$
1.85
$
1.53
Net
earnings from continuing operations after option expense
$
1.55
$
1.69
$
1.41
Diluted
earnings (loss) per common
share:
Net
earnings from continuing operations
$
1.73
$
1.85
$
1.53
Net
earnings from continuing operations after option expense
$
1.55
$
1.69
$
1.41
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
At
December 31,
2005At
December 31,
2004
Amounts
Due from CBS Corporation
Receivables
$
75.0
$
66.8
Other assets
67.3
88.4
Total
Due from CBS Corporation
$
142.3
$
155.2
Amounts
Due to CBS Corporation
Accounts payable
$
12.4
$
13.2
Participants'
share, residuals and royalties payable
40.6
9.8
Program rights, current
182.8
177.3
Deferred income,
current
13.0
15.0
Other liabilities
(program rights – non-current)
238.2
383.4
Total
Due to CBS Corporation
$
487.0
$
598.7
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Blockbuster
Famous
PlayersTotal
Year
Ended December 31, 2005
Revenues
from discontinued operations
$
—
$
208.0
$
208.0
Loss
from discontinued operations
$
—
$
(25.1
$
(25.1
Loss
on disposal of discontinued operations
—
(72.9
(72.9
Minority
interest
—
(1.6
(1.6
Loss
from discontinued operations
—
(99.6
(99.6
Income
tax benefit
—
52.6
52.6
Net
loss from discontinued operations
$
—
$
(47.0
$
(47.0
Year
Ended December 31, 2004
Revenues
from discontinued operations
$
4,528.9
$
392.5
$
4,921.4
Loss
from discontinued operations
$
(1,404.2
$
(11.6
$
(1,415.8
Loss
on disposal of discontinued operations
(38.2
—
(38.2
Minority
interest
259.7
(2.2
257.5
Loss
from discontinued operations, net of minority interest
(1,182.7
(13.8
(1,196.5
Income
tax benefit
92.4
4.9
97.3
Net
loss from discontinued operations
$
(1,090.3
$
(8.9
$
(1,099.2
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Blockbuster
Famous
PlayersTotal
Year
Ended December 31, 2003
Revenues
from discontinued operations
$
5,911.7
$
386.9
$
6,298.6
Loss
from discontinued operations
$
(878.8
$
1.0
$
(877.8
Minority
interest
160.0
(1.6
158.4
Loss
from discontinued operations, net of minority interest
(718.8
(.6
(719.4
Income
tax (provision) benefit
(83.6
.2
(83.4
Net
loss from discontinued operations
$
(802.4
$
(.4
$
(802.8
At
December 31,
2004
Current assets
(including cash and cash equivalents of $1.1)
$
14.6
Long-term assets
325.7
Total
Assets
$
340.3
Current
liabilities (including current debt of $.3)
$
62.9
Long-term debt
6.0
Other liabilities
40.5
Total
Liabilities
$
109.4
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Balance
at
December 31,
2004Acquisitions(a)
Adjustments(b)
Balance
at
December 31,
2005
Cable Networks
$
8,964.0
$
226.2
$
(171.7
$
9,018.5
Entertainment
1,302.9
—
40.0
1,342.9
Total
$
10,266.9
$
226.2
$
(131.7
$
10,361.4
(a)
Principally
relates to the acquisitions of Neopets, Inc., and IFILM
Corp.
(b)
Primarily includes
reclassifications to other intangible assets and foreign currency
translation.
At
December 31, 2005
Gross
Accumulated
AmortizationNet
Subscriber
agreements
$
406.5
$
(288.6
$
117.9
Other
intangible assets
161.8
(24.4
137.4
Total
$
568.3
$
(313.0
$
255.3
At
December 31, 2004
Gross
Accumulated
AmortizationNet
Subscriber agreements
$
406.5
$(235.7)
$
170.8
Other
intangible assets
55.2
(9.3)
45.9
Total
$
461.7
$(245.0)
$
216.7
2006
2007
2008
2009
2010
Amortization
expense
$
70.7
$
56.7
$
17.9
$
16.7
$
15.3
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Balance
At December 31, 2002
$18.3
2003
Charges
18.0
2003 Severance Payments
(9.2)
2003 Lease
Payments
(4.0)
Balance At
December 31, 2003
23.1
2004
Severance Payments
(3.9)
2004 Lease
Payments
(3.7)
Revision to
initial estimate
(8.1)
Balance At
December 31, 2004
7.4
2005
Charges
70.5
2005 Severance Payments
(2.7)
2005 Lease
Payments
(.3)
Balance At
December 31, 2005
$74.9
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
At
December 31,
2005
2004
Theatrical:
Released
(including acquired film libraries)
$
699.3
$
682.8
Completed, not
released
46.2
66.0
In
process and other
483.2
361.1
Program rights
2,098.3
1,915.4
Merchandise
inventory
109.3
65.9
Other
43.5
45.8
Total
Inventory
3,479.8
3,137.0
Less current
portion
506.6
396.6
Total
Non-Current Inventory
$
2,973.2
$
2,740.4
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
At
December 31,
2005
2004
Notes
payable to banks
$
5,405.0
$
—
Obligations
under capital leases
352.9
345.1
Total
debt
5,757.9
345.1
Less
current portion
55.8
53.4
Total
long-term debt from continuing operations, net of current portion
$
5,702.1
$
291.7
2006
2007
2008
2009
2010
2011
and
thereafter
Long-term debt
$
—
$
5,405.0
$
—
$
—
$
—
$
—
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
2005
2004
2003
Expected
dividend
yield(a)
.76
.62
—
Expected
stock price volatility
24.01
38.85
39.57
Risk-free
interest rate
3.80
4.17
3.58
Expected
life of options (years)
5.2
7.4
6.8
(a)
Former
Viacom did not declare any cash dividends on its common stock prior to
the third quarter of 2003. 2003 options were granted to employees of
the Company prior to the third quarter.
Options
Outstanding
Weighted-Average
Exercise
Price
Balance at December 31, 2002
47,098,497
$
38.63
Granted
7,748,118
$
39.88
Exercised
(3,957,900
$
24.20
Canceled
(885,859
$
45.63
Balance
at December 31, 2003
50,002,856
$
39.84
Granted
10,254,850
$
39.05
Exercised
(2,021,704
$
18.19
Canceled
(1,974,312
$
42.89
Balance
at December 31, 2004
56,261,690
$
40.37
Granted
5,772,217
$
37.30
Exercised
(3,452,888
$
15.98
Canceled
(2,610,823
$
41.93
Balance
at December 31, 2005 Pre-Conversion
55,970,196
$
41.53
Conversion
(14,547,110
Balance
at December 31, 2005 Post Conversion
41,423,086
$
51.22
Outstanding
Exercisable
Range
of
Exercise PriceNumber
of
OptionsRemaining
Contractual
Life
(Years)Weighted-
Average
Exercise PriceNumber
of
OptionsWeighted-Average
Exercise
Price
$10.00 to
19.99
2,316,218
1.83
$
19.22
2,316,218
$
19.22
20.00
to 29.99
752,550
.81
$
22.02
752,550
$
22.02
30.00
to 30.99
4,049,575
2.65
$
38.61
4,049,575
$
38.61
40.00
to 49.99
14,019,851
11.82
$
47.70
8,396,812
$
48.75
50.00
to 59.99
10,027,595
5.96
$
52.02
10,017,836
$
52.02
60.00
to 69.99
4,314,645
5.63
$
65.89
4,314,645
$
65.89
70.00
to 79.99
5,399,976
1.62
$
70.84
5,399,976
$
70.84
80.00
to 89.99
542,676
4.53
$
86.33
542,676
$
86.33
41,423,086
35,790,288
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
December 31,
2003 (Pre-conversion)
30,882,155
December 31, 2004
(Pre-conversion)
37,880,817
December 31, 2005
(Post-conversion)
35,790,288
Year
Ended December 31,
2005
2004
2003
United
States
$
2,022.2
$
2,072.8
$
1,863.2
Foreign
296.1
171.4
93.0
Total
$
2,318.3
$
2,244.2
$
1,956.2
Year
Ended December 31,
2005
2004
2003
Current:
Federal
$
751.4
$
590.7
$
575.7
State
and local
180.2
171.7
135.5
Foreign
68.3
35.0
33.9
999.9
797.4
745.1
Deferred
20.1
10.8
42.5
Provision
for income taxes
$
1,020.0
$
808.2
$
787.6
Year
Ended December 31,
2005
2004
2003
Taxes
on income at U.S. federal statutory rate
35.0
35.0
35.0
State
and local taxes, net of federal tax benefit
4.6
4.8
4.2
Effect of
foreign operations
(.4
(2.7
(1.3
Audit
settlements
—
(3.4
—
Other,
net
4.8
2.3
2.4
Total
Income taxes
44.0
36.0
40.3
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Year
Ended December 31,
2005
2004
Deferred
tax assets:
Provision for
expense and losses
$
71.9
$
538.6
Postretirement
and other employee benefits
159.7
80.8
Tax credit and
loss carryforwards
7.3
30.2
Other
28.6
3.5
Total
deferred tax assets
267.5
653.1
Valuation
allowance
(2.1
(9.6
Net
deferred tax assets
$
265.4
$
643.5
Deferred
tax liabilities:
Property,
equipment and intangible assets
$
(174.6
$
—
Other
—
(194.9
Total
deferred tax liabilities
$
(174.6
$
(194.9
Deferred
tax assets, net
$
90.8
$
448.6
Year
Ended December 31,
2005
2004
Current
deferred tax assets, net
$
132.0
$
13.5
Non-current
deferred tax assets, net
—
435.1
Non-current
deferred tax liabilities, net
(41.2
—
Deferred
tax assets, net
$
90.8
$
448.6
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Pension
BenefitsPostretirement
Benefits
At
December 31,
2005
2004
2005
2004
Change
in benefit obligation:
Benefit
obligation, beginning of year
$
412.1
$
340.8
$
7.6
$
6.1
Impact
of 2005 separation
27.2
—
1.9
—
Service
cost
28.9
24.2
.7
.5
Interest
cost
24.7
20.3
.5
.4
Actuarial
loss
6.5
33.1
.5
.8
Benefits
paid
(6.5
(8.7
(.4
(.2
Participants'
contributions
—
—
.1
—
Cumulative
translation adjustments
(.5
2.4
—
—
Benefit
obligation, end of year
$
492.4
$
412.1
$
10.9
$
7.6
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Pension
BenefitsPostretirement
Benefits
At
December 31,
2005
2004
2005
2004
Change
in plan assets:
Fair value
of plan assets, beginning of year
$
178.2
$
142.9
$
.1
$
.1
Impact
of 2005 separation
33.9
—
(.1
—
Actual
return on plan assets
13.1
13.6
—
—
Employer
contributions
2.5
28.6
.3
.2
Benefits
paid
(6.5
(8.7
(.4
(.2
Participants'
contributions
—
—
.1
—
Cumulative
translation adjustments
(.3
1.8
—
—
Fair
value of plan assets, end of year
$
220.9
$
178.2
$
—
$
.1
Pension
BenefitsPostretirement
Benefits
At
December 31,
2005
2004
2005
2004
Funded
status
$
(271.5
$
(233.9
$
(10.9
$
(7.5
Unrecognized
transition obligation
.4
.4
—
—
Unrecognized
prior service cost (benefit)
1.7
2.0
(.3
(.4
Unrecognized
actuarial loss
110.5
96.1
2.0
1.1
Accrued
pension liability
$
(158.9
$
(135.4
$
(9.2
$
(6.8
Amounts
recognized in the Consolidated Balance Sheets:
Accrued
liability
$
(207.5
$
(165.9
$
(9.2
$
(6.8
Prepaid
benefits cost
4.5
3.5
—
—
Intangible
assets
3.8
4.0
—
—
Accumulated
other comprehensive pre-tax
loss(1)
40.3
23.0
—
—
Net
liability recognized
$
(158.9
$
(135.4
$
(9.2
$
(6.8
(1)
Reflects
a minimum liability decrease of $17.3 million in 2005 and a
minimum liability increase of $18.1 million in
2004.
At
December 31,
2005
2004
Projected
benefit obligation
$
492.4
$
383.6
Accumulated benefit
obligation
$
424.0
$
320.8
Fair value
of plan assets
$
220.9
$
154.9
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Pension
BenefitsPostretirement
Benefits
At
December 31,
2005
2004
2003
2005
2004
2003
Components
of net periodic cost:
Service
cost
$
28.9
$
24.2
$
21.8
$
.7
$
.5
$
.5
Interest
cost
24.7
20.3
18.9
.5
.4
.5
Expected
return on Plan Assets
(17.5
(12.1
(9.7
—
—
—
Amortization
of transition obligation
.1
.1
(.8
—
—
—
Amortization
of prior service cost
.3
.4
.3
(.3
(.2
(.2
Recognized
actuarial loss
5.8
3.1
3.8
—
—
—
Net
periodic cost
$
42.3
$
36.0
$
34.3
$
.9
$
.7
$
.8
Pension
BenefitsPostretirement
Benefits
2005
2004
2005
2004
Weighted-average
assumptions used to determine benefit obligations at December
31:
Discount
rate
5.8
5.8
5.8
5.8
Rate
of compensation increase
4.0
3.5
N/A
N/A
Weighted-average
assumptions used to determine net periodic cost for years ended
December 31:
Discount
rate
5.8
6.0
5.8
6.0
Expected
long-term return on plan assets
8.5
8.2
2.0
2.0
Rate
of compensation increase
3.5
3.5
N/A
N/A
N/A
— not applicable
2005
2004
Projected
health care cost trend rate for participants of age 65 and below
9.0
9.0
Projected
health care cost trend rate for participants above age 65
10.0
10.0
Ultimate
trend rate
5.0
5.0
Year
ultimate trend rate is achieved for participants of age 65 and below
2014
2013
Year ultimate trend rate
is achieved for participants above age 65
2016
2015
One
Percentage
Point IncreaseOne Percentage
Point
Decrease
Effect on total of service and interest
cost components
$
—
$
—
Effect
on the accumulated postretirement benefit obligation
$
.6
$
(.5
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Plan
Assets at December 31,
2005
2004
Equity
securities
60.2
55.6
Debt
securities
35.2
36.0
Cash and other
4.6
8.4
Total
100.0
100.0
2006
2007
2008
2009
2010
2011-2015
Pension
$
7.8
$
9.1
$
10.9
$
11.8
$
13.9
$
98.2
Postretirement
$
.5
$
.6
$
.7
$
.8
$
.9
$
5.7
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Leases
Capital
Operating
2006
$
76.8
$
137.7
2007
75.2
127.9
2008
68.2
114.7
2009
64.7
105.4
2010
47.1
73.5
2011
and thereafter
112.9
300.5
Total
minimum payments
$
444.9
$
859.7
Less
amounts representing interest
92.0
Present value of net minimum
payments
$
352.9
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Year
Ended December 31,
2005
2004
2003
Revenues:
Cable
Networks
$
6,757.8
$
5,745.5
$
4,775.3
Entertainment
2,995.3
2,513.7
2,655.8
Eliminations
(143.5
(127.0
(126.7
Total
Revenues
$
9,609.6
$
8,132.2
$
7,304.4
Operating
Income:
Cable
Networks
$
2,610.1
$
2,265.0
1,928.9
Entertainment
70.1
154.2
189.7
Segment
Total
2,680.2
2,419.2
2,118.6
Corporate
expenses
(308.5
(128.1
(103.8
Eliminations
(5.3
(8.3
(13.0
Total
Operating Income
2,366.4
2,282.8
2,001.8
Interest
expense
(23.0
(24.2
(23.2
Interest
income
3.9
3.3
2.2
Other
items, net
(29.0
(17.7
(24.6
Earnings
from continuing operations before income taxes, equity in loss of
affiliated companies and minority interest
2,318.3
2,244.2
1,956.2
Provision
for income taxes
(1,020.0
(808.2
(787.6
Equity
in income (loss) of affiliated companies, net of tax
9.4
(40.0
(18.2
Minority
interest, net of tax
(3.8
(3.1
(3.0
Net
earnings from continuing operations
1,303.9
1,392.9
1,147.4
Net
loss from discontinued operations
(47.0
(1,099.2
(802.8
Net
earnings before cumulative effect of change in accounting principle
1,256.9
293.7
344.6
Cumulative
effect of accounting change, net of tax
—
—
(6.1
Net
Earnings
$
1,256.9
$
293.7
338.5
Year
Ended December 31,
2005
2004
2003
Depreciation
and Amortization:
Cable
Networks
$
230.8
$
223.2
$
171.4
Entertainment
23.0
$
19.0
16.8
Corporate
5.2
9.4
9.7
Total
Depreciation and Amortization
$
259.0
$
251.6
$
197.9
At
December 31,
2005
2004
Total
Assets:
Cable Networks
$
13,835.0
$
13,487.4
Entertainment
4,791.6
4,100.5
Discontinued
Operations
—
340.3
Corporate
489.0
512.6
Total
Assets
$
19,115.6
$
18,440.8
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Year
Ended December 31,
2005
2004
2003
Capital
Expenditures:
Cable
Networks
$
142.4
$
86.9
$
81.7
Entertainment
46.7
29.2
27.6
Corporate
3.9
24.4
5.0
Total
Capital Expenditures
$
193.0
$
140.5
$
114.3
Revenues
by
Type
Year
Ended December 31,
2005
2004
2003
Advertising
sales
$
3,963.4
$
3,349.6
$
2,769.0
Affiliate
fees
1,824.8
1,640.3
1,448.4
Feature
film
2,873.4
2,394.5
2,561.7
Ancillary(a)
948.0
747.8
525.3
Total
$
9,609.6
$
8,132.2
$
7,304.4
(a)
Ancillary
primarily includes revenues from the syndication of cable programming
and music publishing.
Year
Ended December 31,
2005
2004
2003
Revenues(a):
United States
$
7,466.7
$
6,418.0
$
5,790.9
International
2,142.9
1,714.2
1,513.5
Total
Revenues
$
9,609.6
$
8,132.2
$
7,304.4
At
December 31,
2005
2004
Long-lived
Assets(b):
United States
$
14,632.2
$
14,157.5
International
821.4
1,110.1
Total
Long-lived Assets
$
15,453.6
$
15,267.6
(a)
Revenue
classifications are based on customers'
locations.
(b)
Reflects total assets less
current assets, non-current deferred tax assets and investments in
affiliated companies.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
(Tabular dollars in millions, except per
share amounts)
Year
Ended or At December 31,
2005
2004
2003
Cash
paid for interest, net of amounts
capitalized(a)
$
19.8
$
32.6
$
51.4
Cash
paid for income
taxes(a)
$
962.6
$
768.4
$
605.6
Non-cash
investing and financing activities:
Equipment acquired
under capitalized leases
$
93.6
$
91.9
$
58.1
Acquisitions:
Fair value of
assets acquired
$
359.8
$
493.3
$
1,311.0
Fair
value of liabilities assumed
(3.7
(129.3
(100.4
Minority
interest
(0.0
(0.3
73.4
Cash
paid, net of cash acquired
(356.1
(363.7
(1,284.0
Impact
on stockholders' equity
$
—
$
—
$
—
(a) Amounts
also include cash payments for discontinued
operations.
2005
First
QuarterSecond
QuarterThird
QuarterFourth
QuarterTotal
Year
Revenues
$
2,106.9
$
2,301.5
$
2,477.5
$
2,723.7
$
9,609.6
Operating
income
$
621.4
$
589.0
$
743.4
$
412.6
$
2,366.4
Net
earnings from continuing operations
$
362.3
$
362.2
$
449.9
$
129.5
$
1,303.9
Net
earnings
$
350.3
$
353.9
$
423.2
$
129.5
$
1,256.9
2004
First
QuarterSecond
QuarterThird
QuarterFourth
QuarterTotal
Year
Revenues
$
1,791.6
$
1,867.2
$
1,969.6
$
2,503.8
$
8,132.2
Operating
income
$
518.6
$
541.1
$
597.6
$
625.5
$
2,282.8
Net
earnings from continuing operations
$
358.2
$
307.2
$
322.0
$
405.5
$
1,392.9
Net
earnings (loss)
$
444.0
$
343.8
$
(887.3
$
393.2
$
293.7
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In
millions, except earnings per share
amounts)
Six
Months Ended
June
30,
2006
2005
Revenues
$
5,214.2
$
4,408.4
Expenses:
Operating
2,745.2
2,167.0
Selling,
general and
administrative
1,018.0
908.9
Depreciation
and
amortization
164.3
122.1
Total
expenses
3,927.5
3,198.0
Operating
income
1,286.7
1,210.4
Interest
expense,
net
(199.4
(9.5
Other
items,
net
2.2
(8.6
Earnings
from continuing operations before income
taxes, equity in
earnings of affiliated companies
and minority
interest1,089.5
1,192.3
Provision
for income
taxes
(359.9
(470.3
Equity in
earnings of affiliated companies, net of
tax
5.8
4.8
Minority interest, net
of
tax
(2.2
(2.2
Net
earnings from continuing
operations
733.2
724.6
Discontinued
operations, net of
tax
21.3
(20.4
Net
earnings
$
754.5
$
704.2
Basic
earnings per common share
amounts:
Earnings
per share, continuing
operations
$
1.00
$
0.96
Earnings
(loss) per share, discontinued
operations
$
0.03
$
(0.02
Net
earnings per
share
$
1.03
$
0.94
Diluted
earnings per common share
amounts:
Earnings
per share, continuing
operations
$
1.00
$
0.96
Earnings
(loss) per share, discontinued
operations
$
0.03
$
(0.02
Net
earnings per
share
$
1.03
$
0.94
Weighted
average number of common shares
outstanding:
Basic
common
shares
729.1
751.6
Diluted
common shares
731.1
751.6
CONSOLIDATED
BALANCE SHEETS
(In millions, except par
value)
June
30,
2006December 31,
2005
(unaudited)
ASSETS
Current
assets:
Cash and cash
equivalents
$
312.1
$
361.1
Receivables,
less allowances of $136.2 and
$138.6
1,896.1
1,981.7
Inventory
574.6
506.6
Prepaid
expenses
187.3
150.3
Deferred
tax assets,
net
123.6
132.0
Other current
assets
375.7
381.1
Total
current
assets
3,469.4
3,512.8
Property and
equipment,
net
1,149.6
1,179.9
Non-current
inventory, including film
inventory
3,434.8
2,973.2
Goodwill
10,663.9
10,361.4
Intangible
assets
733.5
370.8
Other
assets
596.9
717.5
Total
assets
$
20,048.1
$
19,115.6
LIABILITIES
AND STOCKHOLDERS’
EQUITY
Current
liabilities:
Accounts
payable
$
288.5
$
394.0
Accrued
expenses
1,146.7
1,201.6
Participants’
share, residuals and royalties
payable
737.8
673.0
Program
rights
321.6
321.2
Deferred
income
390.3
284.5
Financing
obligations –
current
59.4
55.8
Other
current
liabilities
415.1
338.5
Total
current
liabilities
3,359.4
3,268.6
Financing
obligations –
non-current
7,601.6
5,702.1
Deferred
tax liabilities,
net
—
41.2
Participants’
share, residuals and royalties
payable
502.6
471.7
Program
rights
419.6
459.8
Other
liabilities
1,271.0
1,384.3
Commitments
and contingencies (Note
13)
Stockholders’
equity:
Class A
Common Stock, par value $0.001, 375.0
authorized
61.6 and 65.7
outstanding,
respectively
0.1
0.1
Class
B Common Stock, par value $0.001, 5,000.0
authorized
690.6 and 685.9
outstanding,
respectively
0.7
0.7
Additional
paid-in
capital
7,693.0
7,837.3
Treasury
stock
(1,602.3
—
Retained
earnings
754.5
—
Accumulated
other comprehensive
income
47.9
(50.2
Total
stockholders’
equity
6,893.9
7,787.9
Total
liabilities and stockholders’
equity
$
20,048.1
$
19,115.6
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In
millions)
Six
Months
Ended
2006
2005
Operating
Activities
Net
earnings
$
754.5
$
704.2
Net
earnings from discontinued
operations
(21.3
20.4
Net
earnings from continuing
operations
733.2
724.6
Reconciliation
of non-cash
adjustments:
Depreciation
and
amortization
164.3
122.1
Feature
film and program
amortization
1,070.8
793.2
Stock
based
compensation
21.4
6.5
Equity
in affiliated
companies
(5.8
(4.8
Minority
interest
2.2
2.2
Reconciliation
of operating assets and liabilities, net of
acquisitions:
Decrease in
receivables
738.5
204.3
Increase
in inventory and program
rights
(1,344.2
(981.4
Decrease
in accounts payable and accrued
expenses
(876.7
(232.5
Increase/(decrease)
in deferred
income
(43.3
10.5
Increase
in tax related
accounts
84.1
32.5
Discontinued
operations,
net
—
23.6
Other,
net
30.2
(17.2
Net
cash provided by operating
activities
574.7
683.6
Investing
Activities
Business
combinations, net of cash
acquired
(914.3
(171.0
Businesses
dispositions
675.3
0.2
Capital
expenditures
(68.7
(68.4
Investments
in and advances to affiliated
companies
(2.2
10.2
Discontinued
operations, net
—
(5.7
Other,
net
(4.9
(4.7
Net
cash used for investing
activities
(314.8
(239.4
Financing
Activities
Borrowings from
banks, net of deferred financing
costs
965.0
—
Repayments to
banks
(5,840.0
—
Senior notes
and debentures, net of
discount
5,466.9
—
Commercial
paper
1,295.9
—
Repayment of
acquired notes payable and preferred
interest
(657.4
—
Proceeds
from cash flow
hedge
88.0
—
Due to Former
Viacom
(60.2
(438.5
Payment of
capital lease
obligations
(27.0
(29.4
Purchase
of treasury
stock
(1,549.1
—
Discontinued
operations, net
—
(0.2
Other,
net
2.2
(4.4
Net
cash used for financing
activities
(315.7
(472.5
Effect
of exchange rate changes on cash and cash
equivalents
6.8
(5.1
Net decrease
in cash and cash
equivalents
(49.0
(33.4
Cash and
cash equivalents as of beginning of
period
361.1
150.0
Cash
and cash equivalents at end of
period
$
312.1
$
116.6
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
(in
millions, except per share amounts)
Six
Months Ended
June 30,
2005
Net
earnings
$
704.2
Stock option expense, net of
tax
$
132.1
Pro
forma net
earnings
$
572.1
Basic
and diluted earnings per common
share:
Net
earnings
$
0.94
Pro forma net
earnings
$
0.76
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
(in
millions)
Amount
Average
Life
Film inventories, including live-action
library
$
1,098.4
10
years
Distribution and fulfillment
services
280.0
8
years
Trademarks
12.8
6
years
Output agreements
7.5
7
years
Working capital deficit,
net
(49.3
Goodwill
179.9
Total
purchase price, net of cash
acquired
$
1,529.3
Six
Months Ended
June 30,
(in
millions)
2006
2005
Revenues
$
5,406.6
$
5,531.7
Net
earnings from continuing
operations
721.9
695.9
Net
earnings
743.2
680.7
Earnings
per common
share
Basic
$
1.02
$
0.91
Diluted
$
1.02
$
0.91
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
(in
millions)
June 30,
2006December 31,
2005
Theatrical:
Released
(including acquired
libraries)
$
755.6
$
699.3
Completed,
not released
0.2
46.2
In
process and
other
774.7
483.2
Television
9.4
—
Program
rights
2,287.2
2,098.3
Merchandise
inventory
156.2
109.3
Other
26.1
43.5
Total
inventory
4,009.4
3,479.8
Less
current
portion
574.6
506.6
Total
non-current
inventory
$
3,434.8
$
2,973.2
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
(in
millions)
June 30,
2006December 31,
2005
Credit
facilities:
Term
facility
$
560.0
$
5,405.0
$3.25
billion revolving
facility
—
—
Senior
notes and
debentures:
Senior notes
due 2009, LIBOR +
0.35%
750.0
—
Senior
notes due 2011,
5.75%
1,491.3
—
Senior
notes due 2016,
6.25%
1,493.6
—
Senior
debentures due 2036,
6.875%
1,732.7
—
Commercial
paper
1,295.9
—
Obligations
under capital
leases
337.5
352.9
Total
financing
obligations
7,661.0
5,757.9
Less
current
portion
59.4
55.8
Total
non-current financing
obligations
$
7,601.6
$
5,702.1
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
Six
Months Ended
June 30,
(in
millions)
2006
2005
Net
earnings
$
754.5
$
704.2
Other
comprehensive income:
Cash
flow hedges, net of
tax
52.9
(2.5
Foreign
currency
47.1
2.4
Other
(1.9
10.8
Comprehensive
income
$
852.6
$
714.9
Six
Months Ended
June 30,
(in millions,
except earnings per
share)
2006
2005
Net
earnings from continuing
operations
$
733.2
$
724.6
Average
common shares outstanding,
basic
729.1
751.6
Dilutive
effect of employee stock
options
1.9
—
Dilutive
effect of restricted share
units
0.1
—
Average
common shares outstanding,
dilutive
731.1
751.6
Earnings
per share, continuing
operations:
Basic
$
1.00
$
0.96
Diluted
$
1.00
$
0.96
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
(in
millions)
June 30,
2006December 31,
2005
Amounts due
from CBS
Corporation
$
102.1
$
142.3
Amounts
due to CBS
Corporation
Accounts
payable
$
15.1
$
12.4
Participants’
share, residuals and royalties
payable
24.4
40.6
Program
rights,
current
150.1
182.8
Deferred
income,
current
15.4
13.0
Other
liabilities
137.2
238.2
Total
due to CBS
Corporation
$
342.2
$
487.0
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
Six
Months Ended
June 30,
(in
millions)
2006
2005
Recognized
in earnings:
Employee stock
options
$
13.6
$
—
Restricted
share
units
7.8
6.5
Total
compensation cost in
earnings
$
21.4
$
6.5
Tax
benefit
recognized
$
8.1
$
2.6
Six
Months Ended
June 30,
(in
millions)
2006
2005
Weighted
average fair value of
grants
$
10.80
$
12.64
Weighted
average
assumptions:
Expected stock
price
volatility
24.4
24.0
Expected
term of options (in
years)
4.5
5.2
Risk-free
interest
rate
4.9
3.8
Expected
dividend
yield
—
0.75
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
Number
of
SharesExercise
PriceContractual
Life
Aggregate
Intrinsic
Value
(thousands)
(in
years)
(millions)
Outstanding
at January 1,
2006
41,423.1
$
51.22
Granted
7,836.9
37.89
Exercised
(263.3
19.97
Forfeited
or
expired
(260.4
45.71
Outstanding
at June 30,
2006
48,736.3
$
49.27
5.2
$
44.6
Exercisable
at June 30,
2006
37,021.1
$
52.06
4.5
$
44.6
Six
Months Ended
June 30,
(in
millions)
2006
2005
Proceeds
from stock option
exercises
$
5.3
$
7.1
Intrinsic
value
5.1
14.3
Tax
benefit
$
2.0
$
5.7
Number
of
SharesGrant Date
Fair ValueContractual
LifeAggregate
Intrinsic
Value
(thousands)
(in
years)
(millions)
Outstanding
at January 1,
2006
1,050.6
$
46.24
Granted
1,383.5
36.01
Vested
(312.4
46.38
Forfeited
(45.2
47.15
Outstanding
at June 30,
2006
2,076.5
$
39.38
2.9
74.4
Unvested
at June 30,
2006
60.3
$
46.95
5.1
2.2
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
Six
Months Ended
June 30,
(in
millions)
2006
2005
Service
cost
$
15.8
$
14.3
Interest
cost
14.0
11.4
Expected return on
plan assets
(8.7
(7.1
Amounts
amortized
4.3
2.9
Net
periodic benefit
costs
$
25.4
$
21.5
Contributions
$
0.8
$
1.2
(in
millions)
Six Months Ended
June 30,
2006
Amounts recorded as of December
31, 2005
$
74.9
Accrued for
period ended June 30,
2006
0.8
Reversal of prior period
charges
(1.5
Payments
(35.7
Amounts
recorded as of June 30, 2006
$
38.5
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
Revenues
(in
millions)Six Months Ended
June
30,
2006
2005
Cable
Networks
$
3,322.8
$
3,093.6
Entertainment
1,948.2
1,363.1
Eliminations
Cable
Networks
(28.0
(28.4
Entertainment
(28.8
(19.9
Total
revenues
$
5,214.2
$
4,408.4
Operating Income
(in
millions)Six Months
Ended
June
30,
2006
2005
Cable
Networks
$
1,331.4
$
1,214.3
Entertainment
57.5
54.2
Total
segment operating
income
1,388.9
1,268.5
Corporate
expenses
(102.2
(65.8
Eliminations
—
7.7
Total
operating
income
$
1,286.7
$
1,210.4
Total
Assets
(in millions)June 30,
2006December 31,
2005
Cable
Networks
$
14,136.4
$
13,835.0
Entertainment
5,642.0
4,791.6
Corporate
269.7
489.0
Total
assets
$
20,048.1
$
19,115.6
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(continued)
Six
Months Ended
June 30,
(in
millions)
2006
2005
Cash
paid for interest
$
164.8
$
13.8
Cash
paid for
taxes
289.0
437.9
Six
Months Ended
June 30,
(in
millions)
2006
2005
Interest
expense
$
223.8
$
12.3
Interest
income
(24.4
(2.8
Interest
expense,
net
$
199.4
$
9.5
Six
Months Ended
June 30,
(in
millions)
2006
2005
Loss
on securitization
programs
$
(12.2
$
(11.0
Foreign
exchange gain
14.5
2.4
Other
items
(0.1
—
Other
items,
net
$
2.2
$
(8.6
($750,000,000 aggregate principal amount
issued June 16, 2006)
for
Floating Rate Senior Notes due
2009
that have been registered under the Securities Act of
1933
($1,500,000,000 aggregate principal amount issued
April 12, 2006)
for
5.75% Senior Notes due
2011
that have been registered under the Securities Act of
1933
($1,500,000,000 aggregate principal amount issued
April 12, 2006)
for
6.25% Senior Notes due
2016
that have been registered under the Securities Act of
1933
($1,750,000,000 aggregate principal amount
issued April 12, 2006)
for
6.875% Senior
Debentures due 2036
that have been registered under the Securities
Act of
1933
(a)
Exhibits
(b)
Financial Statement
Schedule
on
Financial Statement Schedule
March 16, 2006
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(Dollars in
millions)
Col.
A
Col. B
Col. C
Col. D
Col.
E
Description
Balance
at
Beginning
of PeriodBalance
Acquired
through
AcquisitionsCharged to
Costs and
ExpensesCharged
to
Other
AccountsDeductions
Balance
at
End
of
Period
Allowance
for doubtful
accounts:
Year
ended December 31,
2005
$
124.1
$
—
$
28.5
$
1.1
$
15.1
$
138.6
Year
ended December 31,
2004
$
136.9
$
1.4
$
30.1
$
7.9
$
52.2
$
124.1
Year
ended December 31,
2003
$
126.1
$
6.9
$
32.1
$
.4
$
28.6
$
136.9
Reserves
for inventory
obsolescence:
Year
ended December 31,
2005
$
61.9
$
—
$
33.9
$
(3.6
$
10.3
$
81.9
Year
ended December 31,
2004
$
54.5
$
—
$
7.3
$
.1
$
—
$
61.9
Year
ended December 31,
2003
$
44.3
$
—
$
10.2
$
—
$
—
$
54.5
VIACOM INC.
(Registrant)
By:
/S/ THOMAS E.
FRESTON
Thomas
E. Freston
President and Chief Executive
Officer
Signature
Title
Date
/s/
THOMAS E. FRESTON
President and Chief Executive Officer and
Director
(Principal Executive Officer)
August 18,
2006
Thomas E.
Freston
/s/ MICHAEL J.
DOLAN
Executive
Vice President and Chief Financial Officer
(Principal Financial
Officer)
August 18, 2006
Michael J. Dolan
/s/
JACQUES TORTOROLI
Senior Vice President, Controller and Chief
Accounting Officer
(Principal Accounting Officer)
August 18, 2006
Jacques
Tortoroli
Sumner
Redstone*
Executive Chairman and Founder
August 18, 2006
Shari
Redstone*
Vice Chair
August 18,
2006
George S.
Abrams*
Director
August 18,
2006
Philippe P.
Dauman*
Director
August 18,
2006
Thomas E.
Dooley*
Director
August 18,
2006
Ellen V.
Futter*
Director
August 18,
2006
Alan C.
Greenberg*
Director
August 18,
2006
Robert K.
Kraft*
Director
August 18,
2006
Charles E. Phillips,
Jr.*
Director
August 18,
2006
Frederic V.
Salerno*
Director
August 18,
2006
William
Schwartz*
Director
August 18,
2006
*By:
/s/
MICHAEL D. FRICKLAS
Michael D.
Fricklas
Attorney-in-Fact
for the
DirectorsAugust 18,
2006
Exhibit
No.
Description of
Exhibit
3
.1
Amended
and Restated Certificate of Incorporation of Viacom Inc. effective
December 31, 2005 (incorporated by reference to Exhibit
3.1 to our Annual Report on Form 10-K filed on March 16,
2006) (File No.
001-32686).
3
.2
Amended
and Restated Bylaws of Viacom Inc. effective December 31,
2005 (incorporated by reference to Exhibit 3.2 to our Annual Report on
Form 10-K filed on March 16, 2006) (File No.
001-32686).
4
.1
Indenture,
dated as of April 12, 2006, between Viacom Inc. and The
Bank of New York (incorporated by reference to Exhibit 4.1 to our
Current Report on Form 8-K filed on April 17, 2006) (File
No.
001-32686).
4
.2
First
Supplemental Indenture, dated as of April 12, 2006,
between Viacom Inc. and The Bank of New York, including Form of
5.75% Senior Note due 2011, Form of 6.25% Senior Note due
2016 and Form of 6.875% Senior Debenture due 2036 (incorporated
by reference to Exhibit 4.2 to our Current Report on Form 8-K filed on
April 17, 2006) (File No.
001-32686).
4
.3
Registration
Rights Agreement, dated as of April 12, 2006, among
Viacom Inc., Banc of America Securities LLC, Citigroup Global Capital
Markets Inc. and J.P. Morgan Securities Inc. (incorporated by reference
to Exhibit 4.3 to our Current Report on Form 8-K filed on April
17, 2006) (File No.
001-32686).
4
.4*
Second
Supplemental Indenture, dated as of June 16, 2006,
between Viacom Inc. and The Bank of New York, including Form of
Floating Rate Senior Note due
2009.
4
.5*
Registration Rights
Agreement, dated as of June 16, 2006, between Viacom Inc.
and Deutsche Bank Securities
Inc.
5
.1*
Opinion of Shearman
& Sterling LLP as to the validity of the securities being
offered.
10
.1
Agreement and
Plan of Merger, dated as of November 21, 2005, among
Former Viacom, New Viacom Corp. and Viacom Merger Sub Inc.
(incorporated by reference to Annex A to the Prospectus-Information
Statement that is a part of Amendment No. 1 to the Registration
Statement on Form S-4 of New Viacom Corp. filed on November
23, 2005) (File No.
333-128821).
10
.2
Separation
Agreement dated as of December 19, 2005, by and between
Former Viacom and New Viacom Corp. (incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K of New Viacom Corp.
filed on December 21, 2005) (File No.
001-32686).
10
.3
Tax Matters
Agreement dated as of December 30, 2005, by and between
Former Viacom and New Viacom Corp. (incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K of Viacom Inc. filed on
January 5, 2006) (File No.
001-32686).
Exhibit
No.
Description of
Exhibit
10.4
$6.0
Billion Term Loan Credit Agreement, dated as of December
8, 2005, among New Viacom Corp. the Lenders named therein,
Citibank, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A., as
Syndication Agent, and Bank of America, N.A., Deutsche Bank Securities
Inc., and The Bank of Tokyo-Mitsubishi, Ltd., New York Branch, as
Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to
the Current Report on Form 8-K of New Viacom Corp. filed on
December 14, 2005) (File No.
001-32686).
10.5
$3.25 Billion
Five-Year Credit Agreement, dated as of December 8, 2005,
among New Viacom Corp., the Lenders named therein, JPMorgan Chase Bank,
N.A., as Administrative Agent, Citibank, N.A., as Syndication Agent,
and Bank of America, N.A., Deutsche Bank Securities Inc. and The Bank
of Tokyo-Mitsubishi, Ltd., New York Branch, as Co-Documentation Agents
(incorporated by reference to Exhibit 10.2 to the Current Report on
Form 8-K of New Viacom Corp. filed on December 14, 2005)
(File No. 001-32686).
10.6
Agreement
dated as of December 21, 2005, between New Viacom Corp.,
National Amusements, Inc. and NAIRI, Inc. (incorporated by reference to
Exhibit 10.1 to Current Report on Form 8-K of New Viacom Corp. filed on
December 23, 2005) (File No.
001-32686).
10.7
Summary of Viacom
Inc. Compensation for Outside Directors (incorporated by reference to
Exhibit 10.7 to our Annual Report on Form 10-K filed on March
16, 2006) (File No.
001-32686).
10.8
Viacom Inc. 2006
Stock Option Plan for Outside Directors (incorporated by reference to
Exhibit 10.8 to our Annual Report on Form 10-K filed on March
16, 2006) (File No.
001-32686).
10.9
Viacom Inc. 2006 RSU
Plan for Outside Directors (incorporated by reference to Exhibit 10.9
to our Annual Report on Form 10-K filed on March 16,
2006) (File No.
001-32686).
10.10
Viacom Inc. Senior
Executive Short-Term Incentive Plan (incorporated by reference to
Exhibit 10.10 to our Annual Report on Form 10-K filed on March
16, 2006) (File No.
001-32686).
10.11
Viacom Inc.
Deferred Compensation Plan for Outside Directors (incorporated by
reference to Exhibit 10.11 to our Annual Report on Form 10-K filed on
March 16, 2006) (File No.
001-32686).
10.12
Viacom Inc. 2006
Long-Term Management Incentive Plan (incorporated by reference to
Exhibit 10.12 to our Annual Report on Form 10-K filed on March
16, 2006) (File No.
001-32686).
10.12.1
Form of Viacom
Inc. 2006 Long-Term Management Incentive Plan Award Confirmation Sheet
and Terms and Conditions (incorporated by reference to Exhibit 10.1 to
our Quarterly Report on Form 10-Q filed on August 9, 2006) (File No.
001-32686).
10.12.2
Form of Viacom
Inc. 2006 Long-Term Management Incentive Plan Award with Performance
Conditions Confirmation Sheet and Terms and Conditions (incorporated by
reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on
August 9, 2006) (File No. 001-32686).
Exhibit
No.
Description of
Exhibit
10.12.3
Form of
Viacom Inc. 2006 Long-Term Management Incentive Plan Award for Section
16 Officers Confirmation Sheet and Terms and Conditions (incorporated
by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filed
on August 9, 2006) (File No. 001-32686).
10.12.4
Form of Viacom Inc. 2006 Long-Term
Management Incentive Plan Share the Vision Award Confirmation Sheet and
Terms and Conditions (incorporated by reference to Exhibit 10.4 to our
Quarterly Report on Form 10-Q filed on August 9, 2006) (File No.
001-32686).
10.13
Viacom
Excess Pension Plan (incorporated by reference to Exhibit 10.13 to our
Annual Report on Form 10-K filed on March 16, 2006) (File
No. 001-32686).
10.14
Viacom
Excess 401(k) Plan for Designated Senior Executives (incorporated by
reference to Exhibit 10.14 to our Annual Report on Form 10-K filed on
March 16, 2006) (File No.
001-32686).
10.15
Viacom
Bonus Deferral Plan for Designated Senior Executives (incorporated by
reference to Exhibit 10.15 to our Annual Report on Form 10-K filed on
March 16, 2006) (File No.
001-32686).
10.16
Employment
Agreement with Sumner M. Redstone dated as of December
29, 2005 (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K of New Viacom Corp. filed on December
30, 2005) (File No.
001-32686).
10.17
Employment
Agreement, dated July 1, 2004, between Former Viacom and
Thomas E. Freston (incorporated by reference to Exhibit 10.2 to the
Current Report on Form 8-K of Former Viacom filed July
22, 2004) (File No. 001-09553), as amended by a Letter Agreement
dated June 14, 2005 (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K of Former Viacom filed on
June 17, 2005 and each assigned to Viacom Inc.) (File No.
001-09553).
10.18
Employment
Agreement, dated August 1, 2004, between Former Viacom
and Robert M. Bakish (incorporated by reference to Exhibit 10.31
to Amendment No. 1 to the Registration Statement on Form S-4 of New
Viacom Corp. filed on November 23, 2005 and assigned to
Viacom Inc.) (File No.
333-128821).
10.19
Employment
Agreement, dated May 2, 2005, between Former Viacom and
Michael J. Dolan (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K of Former Viacom filed on May
3, 2005 and assigned to Viacom Inc.) (File
No. 001-09553).
10.20
Employment
Agreement, dated as of May 1, 2000, between Former Viacom
and Michael D. Fricklas (incorporated by reference to Exhibit 10.3 to
the Quarterly Report on Form 10-Q of Former Viacom filed on November
11, 2000) (File No. 001-09553), as amended by Amendment, dated
April 1, 2003 (incorporated by reference to Exhibit 10(a)
to the Quarterly Report on Form 10-Q of Former Viacom filed on May 15,
2003) (File No. 001-09553) and by Letter Agreement, dated
April 12, 2005 (incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K of Former
Viacom filed April 15, 2005 and each assigned to Viacom Inc.)
(File
No. 001-09553).
12.1*
Statement
regarding computation of
ratios.
21.1*
Subsidiaries of
Viacom Inc.
Exhibit
No.
Description of
Exhibit
23
.1*
Consent
of PricewaterhouseCoopers LLP, independent registered public accounting
firm for Viacom Inc.
23
.2*
Consent of
Shearman & Sterling LLP (included in Exhibit
5.1).
24
.1*
Powers of
Attorney.
25
.1*
Statement of
eligibility of trustee on Form T-1 of The Bank of New York, as trustee
of the floating rate notes due
2009.
25
.2*
Statement of eligibility
of trustee on Form T-1 of The Bank of New York, as trustee of the
5.75% senior notes due
2011.
25
.3*
Statement of eligibility
of trustee on Form T-1 of The Bank of New York, as trustee of the
6.25% senior notes due
2016.
25
.4*
Statement of eligibility
of trustee on Form T-1 of The Bank of New York, as trustee of the
6.875% senior debentures due
2036.
99
.1*
Form of Letter of
Transmittal.
99
.2*
Form
of Notice of Guaranteed
Delivery.
99
.3*
Form
of Letter to
Clients.
99
.4*
Form
of Letter to Registered
Holders.
99
.5*
Form of Letter from Beneficial
Owner.
*
Filed
herewith.
between
VIACOM INC.
and
THE BANK OF NEW YORK,
Trustee
and
VIACOM
INC.
By:
/s/ George S.
Nelson
Name: George S. Nelson
Title:
Senior Vice President and Treasurer
THE BANK OF NEW
YORK
By:
/s/ Julie
Salovitch-Miller
Name: Julie Salovitch-Miller
Title: Vice
President
No.
$
CUSIP:
CINS:
ISIN:
(i)
With respect to
any Interest Determination Date, LIBOR shall be therate for deposits in
United States dollars having a maturity of three months commencing on
the first day of the applicable Interest Period that appears on
Telerate Page 3750 as of 11:00 A.M., London time, on such Interest
Determination Date. If no such rate appears, LIBOR in respect to such
Interest Determination Date shall be determined in accordance with the
provisions described in (ii) below.
(ii)
With
respect to an Interest Determination Date on which no rate appears on
Telerate Page 3750, as specified in (i) above, the Calculation Agent
shall request the principal London offices of each of four major
reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in United States dollars for the period of three
months, commencing on the first day of the applicable Interest Period,
to prime banks in the London interbank market at approximately 11:00
A.M., London time, on such Interest Determination Date and in a
principal amount that is representative for a single transaction in
United States dollars in such market at such time. If at least two such
quotations are so provided, then LIBOR on such Interest Determination
Date shall be the arithmetic mean of such quotations. If fewer than two
such quotations are so provided, then LIBOR on such Interest
Determination Date shall be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., in The City of New York, on such Interest
Determination Date by three major banks in The City of New York
selected by the Calculation Agent for loans in United States dollars to
leading European banks, having a three month maturity and in a
principal amount that is representative for a single transaction in
United States dollars in such market at such time; provided, however,
that if the banks so selected by the Calculation Agent are not quoting
as mentioned in this sentence, LIBOR determined as of such Interest
Determination Date shall be LIBOR in effect on such Interest
Determination Date.
Dated:
June 16, 2006
VIACOM INC.
as
Issuer
By:
Name:
Title:
THE
BANK OF NEW YORK, as Trustee
By:
Authorized Signatory
To:
Viacom Inc.
1515 Broadway
New
York, NY 10036
[ ]
our beneficial
interest in the Offshore Global Securities to a purchaser wanting to
receive a beneficial interest in the U.S. Global
Securities.
[ ]
our
beneficial interest in the Offshore Global Securities to a purchaser
wanting to receive a definitive restricted
Security.
[ ]
our
beneficial interest in the Offshore Global Securities to a purchaser
wanting to receive a definitive Senior
Note.
[ ]
our
unrestricted definitive Senior Note to a purchaser wanting to receive a
beneficial interest in the U.S. Global
Securities.
[ ]
our
unrestricted definitive Senior Note to a purchaser wanting to receive a
restricted definitive Senior
Note.
[ ]
our
unrestricted definitive Senior Note to a purchaser wanting to receive a
beneficial interest in the Offshore Global
Securities.
[ ]
our
unrestricted definitive Senior Note to a purchaser wanting to receive
an unrestricted definitive Senior
Note.
[ ]
our
restricted definitive Senior Note to a purchaser wanting to receive a
beneficial interest in the Offshore Global
Securities.
[ ]
our
restricted definitive Senior Note to a purchaser wanting to receive a
beneficial interest in the U.S. Global
Securities.
[ ]
our
restricted definitive Senior Note to a purchaser wanting to receive an
unrestricted definitive Senior
Note.
[ ]
our
restricted definitive Senior Note to a purchaser wanting to receive a
restricted definitive Senior
Note.
[ ]
our
beneficial interest in the U.S. Global Securities to a purchaser
wanting to receive a beneficial interest in the Offshore Global
Securities.
[ ]
our
beneficial interest in the Offshore Global Securities to a purchaser
wanting to receive a restricted definitive Senior
Note.
[ ]
our
beneficial interest in the U.S. Global Securities to a purchaser
wanting to receive an unrestricted definitive Senior Note.
[ ]
to a
person who the Seller reasonably believes is purchasing for its own
account or accounts as to which it exercises sole investment
discretion; such person and each such account is a
‘‘qualified institutional buyer’’ (as defined
in Rule 144A of the United States Securities Act of 1933, as amended
(the ‘‘Securities Act’’)); the
purchaser is aware that the sale to it is being made in reliance upon
Rule 144A; and such transaction meets the requirements of Rule 144A and
is in accordance with any applicable securities laws of any state of
the United States or any other jurisdiction, or
[ ]
in accordance with
Regulation S under the Securities Act, and accordingly the Seller does
hereby certify that:
(i)
the offer of the Securities
was not made to a person in the United
States;
[(ii)
at the
time the buy order was originated, the Buyer was outside of the United
States or the Seller or any person acting on its behalf reasonably
believed that the Buyer was outside the United
States;](1)
[(ii)
the
transaction was executed in, or on or through the facilities of a
designated offshore securities market and neither the Seller nor any
person acting on its behalf knows that the transaction was prearranged
with a Buyer in the United States;](1)
(iii)
no directed selling
efforts have been made in contravention of the requirements of Rule
903(a) or 904(a) of Regulation S, as
applicable;
(iv)
the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act; and
(v)
with regard to transfers
occurring within the 40-Day Restricted Period, any beneficial interest
in Offshore Global Securities shall be held through either Euroclear or
Clearstream, Luxembourg.
[ ]
other than in
accordance with the above, and documents are being furnished to the
Company and the Registrar which comply with the conditions of transfer
set forth in the Senior Note and the relevant agreements.
(1)
Include only one of
alternative paragraphs (ii) as
appropriate.
Name of Seller
Dated
Certifying
Signature
Signed
Note:
(i) The signature on this transfer form must correspond to the name as it appears on the face of this Security.
(ii) A representative of the holder of this Security should state the capacity in which he or she signs (e.g., executor).
(iii) The signature of the person effecting the transfer shall conform to any list of duly authorized specimen signatures supplied by the registered holder or shall be certified by a recognized bank, notary public or in such other manner as the paying agent, acting in its capacity as transfer agent or the Trustee, acting in its capacity as registrar, may require.
5
Exhibit 4.5
REGISTRATION RIGHTS AGREEMENT
Dated as of June 16, 2006
among
VIACOM INC.
and
DEUTSCHE BANK SECURITIES INC.
as the Initial Purchaser
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the ‘‘Agreement’’) is made and entered into as of June 16, 2006, by and among VIACOM INC., a Delaware corporation (the ‘‘Company’’) and DEUTSCHE BANK SECURITIES INC., in its capacity as initial purchaser and as representative of each of the other initial purchasers named in Schedule A hereto (collectively, the ‘‘Initial Purchasers’’).
This Agreement is made pursuant to the Purchase Agreement dated June 13, 2006, by and among the Company and the Initial Purchasers (the ‘‘Purchase Agreement’’), which provides for the sale by the Company to the Initial Purchasers of $750,000,000 aggregate principal amount of the Company's floating rate senior notes due 2009 (the ‘‘Senior Securities’’). In order to induce the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the Initial Purchasers' obligations thereunder, the Company has agreed to provide to the Initial Purchasers and their respective direct and indirect transferees and assigns the registration rights set forth in this Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings:
‘‘1933 Act’’ shall mean the Securities Act of 1933, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder.
‘‘1934 Act’’ shall mean the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder.
‘‘Closing Time’’ shall mean the Closing Time as defined in the Purchase Agreement.
‘‘Company’’ shall have the meaning set forth in the preamble and also includes the Company's successors.
‘‘Depositary’’ shall mean The Depository Trust Company, or any other depositary appointed by the Company, including any agent thereof; provided, however, that any such depositary must at all times have an address in the Borough of Manhattan, in The City of New York.
‘‘Exchange Offer’’ shall mean the exchange offer by the Company of Exchange Senior Securities for Registrable Senior Securities pursuant to Section 2(a) hereof.
‘‘Exchange Offer Registration’’ shall mean a registration under the 1933 Act effected pursuant to Section 2(a) hereof.
‘‘Exchange Offer Registration Statement’’ shall mean an exchange offer registration statement on Form S-4 covering the Registrable Senior Securities (or, if applicable, on another appropriate form), and all amendments and supplements to such
1
registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.
‘‘Exchange Senior Securities’’ shall mean the securities issued by the Company under the Indenture containing terms identical to the Senior Securities (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Senior Securities or, if no such interest has been paid, from the Closing Time, (ii) the transfer restrictions thereon shall be eliminated and (iii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated) to be offered to Holders of Registrable Senior Securities in exchange for Registrable Senior Securities pursuant to the Exchange Offer. The Exchange Senior Securities will be issuable in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.
‘‘Holders’’ shall mean the Initial Purchasers, for so long as they own any Registrable Senior Securities, and each of their respective successors, assigns and direct and indirect transferees who become registered owners of Registrable Senior Securities under the Indenture.
‘‘Indenture’’ shall mean the Indenture dated as of April 12, 2006, as supplemented by the First Supplemental Indenture, dated as of April 12, 2006, and as further supplemented by the Second Supplemental Indenture, dated as of June 16, 2006, between the Company and The Bank of New York, as trustee (the ‘‘Trustee’’) and as the same may be amended and supplemented from time to time in accordance with the terms thereof.
‘‘Initial Purchasers’’ shall have the meaning set forth in the preamble of this Agreement.
‘‘Majority Holders’’ shall mean the Holders of a majority of the aggregate principal amount of Registrable Senior Securities outstanding; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Senior Securities is required hereunder, Registrable Senior Securities held by the Company or any of its affiliates (as such term is defined in Rule 405 under the 1933 Act) (other than the Initial Purchasers or subsequent holders of Registrable Senior Securities, if such subsequent holders are deemed to be such affiliates solely by reason of their holding of such Registrable Senior Securities) shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage or amount.
‘‘NASD’’ shall mean the National Association of Securities Dealers, Inc.
‘‘Participating Broker-Dealer’’ shall have the meaning set forth in Section 3(f).
‘‘Person’’ shall mean an individual, partnership, joint venture, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof.
‘‘Prospectus’’ shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with
2
respect to the terms of the offering of any portion of the Registrable Senior Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein.
‘‘Purchase Agreement’’ shall have the meaning set forth in the preamble of this Agreement.
‘‘Registrable Senior Securities’’ shall mean the Senior Securities; provided, however, that the Senior Securities shall cease to be Registrable Senior Securities when (i) a Registration Statement with respect to such Senior Securities shall have been declared effective under the 1933 Act and such Senior Securities shall have been disposed of pursuant to such Registration Statement, (ii) such Senior Securities shall have been sold to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the 1933 Act, (iii) such Senior Securities shall have ceased to be outstanding or (iv) such Senior Securities have been exchanged for Exchange Senior Securities upon consummation of the Exchange Offer.
‘‘Registration Expenses’’ shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including without limitation: (i) all SEC, stock exchange or NASD registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state or other securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with state or other securities or blue sky qualification of any of the Exchange Senior Securities or Registrable Senior Securities), (iii) all expenses of any Persons in preparing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements, certificates representing the Exchange Senior Securities and other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and expenses incurred in connection with the listing, if any, of any of the Exchange Senior Securities or such Registrable Senior Securities, covered by a Shelf Registration Statement, as applicable, on any securities exchange or exchanges, (vi) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vii) the fees and disbursements of counsel for the Company and the fees and expenses of the independent public accountants of the Company, including the expenses of any special audits or ‘‘cold comfort’’ letters required by or incident to such performance and compliance, (viii) the fees and expenses of a ‘‘qualified independent underwriter’’ as defined by Conduct Rule 2720 of the NASD (if required by the NASD rules) in connection with the offering of the Registrable Senior Securities and the reasonable fees and expenses of its counsel, (ix) the reasonable fees and expenses of the Trustee, any registrar, any depositary and paying agent, including their respective counsel, and any escrow agent or custodian, (x) the reasonable fees and expenses of the Initial Purchasers in connection with the Exchange Offer, including the reasonable fees and expenses of counsel to the Initial Purchasers which shall be Hughes Hubbard & Reed LLP, (xi) the reasonable fees and expenses of one counsel to the Holders which shall be Hughes Hubbard & Reed LLP in connection with the Shelf Registration Statement, and (xii) in
3
the case of an underwritten offering, any reasonable fees and disbursements of the underwriters customarily required to be paid by issuers or sellers of such securities, including the reasonable fees and expenses of counsel to the underwriters, and the fees and expenses of any special experts retained by the Company in connection with any Registration Statement but excluding (except as otherwise provided herein) fees of counsel to the underwriters or the Holders and underwriting discounts and commissions and any transfer taxes, if any, relating to the sale or disposition of Registrable Senior Securities by a Holder.
‘‘Registration Statement’’ shall mean any registration statement of the Company relating to any offering of the Exchange Senior Securities or Registrable Senior Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.
‘‘SEC’’ shall mean the Securities and Exchange Commission.
‘‘Shelf Registration’’ shall mean a registration effected pursuant to Section 2(b) hereof.
‘‘Shelf Registration Statement’’ shall mean a ‘‘shelf’’ registration statement of the Company pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Senior Securities on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.
‘‘Trustee’’ shall mean the trustee under the Indenture.
2. Registration Under the 1933 Act
(a) Exchange Offer Registration. To the extent not prohibited by any applicable law or applicable interpretation of the staff of the SEC, the Company shall use its reasonable best efforts to consummate the Exchange Offer within 300 calendar days after the Closing Time. The Exchange Senior Securities will be issued under the Indenture, it being the objective of the Exchange Offer to enable each Holder (other than Participating Broker-Dealers (as defined in Section 3(f))) eligible and electing to exchange Registrable Senior Securities for Exchange Senior Securities (assuming that such Holder is not an affiliate of the Company within the meaning of Rule 405 under the 1933 Act, acquires the Exchange Senior Securities in the ordinary course of such Holder's business and has no arrangements or understandings with any person to participate in the Exchange Offer for the purpose of distributing the Exchange Senior Securities) to trade such Exchange Senior Securities from and after their receipt without any limitations or restrictions under the 1933 Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States.
In connection with the Exchange Offer, the Company shall:
4
(i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 20 business days (or longer if required by applicable federal and state securities laws) after the date notice thereof is mailed to the Holders;
(iii) use the services of the Depositary for the Exchange Offer with respect to Senior Securities evidenced by global certificates;
(iv) permit Holders to withdraw tendered Registrable Senior Securities at any time prior to the close of business, New York City time, on the last business day on which the Exchange Offer shall remain open, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Senior Securities delivered for exchange, and a statement that such Holder is withdrawing its election to have such Senior Securities exchanged; and
(v) otherwise comply in all material respects with all applicable federal and state securities laws relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the Company shall:
(i) accept for exchange Registrable Senior Securities duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and the letter of transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Senior Securities so accepted for exchange by the Company; and
(iii) cause the Trustee promptly to authenticate and deliver Exchange Senior Securities to each Holder of Registrable Senior Securities equal in principal amount to the principal amount of the Registrable Senior Securities of such Holder so accepted for exchange.
Interest on each Exchange Senior Security will accrue from the last date on which interest was paid on the Registrable Senior Securities surrendered in exchange therefor or, if no interest has been paid on the Registrable Senior Securities, from the Closing Time. The Exchange Offer shall not be subject to any conditions, other than (i) that the Exchange Offer, or the making of any exchange by a Holder, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) that no action or proceeding shall have been instituted or threatened in any court or before any governmental agency with respect to the Exchange Offer which, in the Company's judgment, would impair the ability of the Company to proceed with the Exchange Offer, (iii) that no law, rule or regulation or applicable interpretations of the staff of the SEC has been issued or promulgated which, in the good faith determination of the Company,
5
does not permit the Company to effect the Exchange Offer and (iv) that the Holders tender the Registrable Senior Securities to the Company in accordance with the Exchange Offer.
Each Holder of Registrable Senior Securities (other than Participating Broker-Dealers) who wishes to exchange such Registrable Senior Securities for Exchange Senior Securities in the Exchange Offer shall have represented that (i) it is not an affiliate (as defined in Rule 405 under the 1933 Act) of the Company or, if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the 1933 Act, to the extent applicable, (ii) any Exchange Senior Securities to be received by it will be acquired in the ordinary course of business, (iii) at the time of the commencement of the Exchange Offer, it has no arrangement with any Person to participate in the distribution (within the meaning of the 1933 Act) of the Senior Securities or the Exchange Senior Securities, (iv) it is not acting on behalf of any person who could not truthfully make the foregoing representations and (v) it shall have made such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to render the use of Form S-4 or another appropriate form under the 1933 Act available or for the Exchange Offer Registration Statement to be declared effective. To the extent permitted by law, the Company shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Senior Securities in the Exchange Offer.
(b) Shelf Registration
(i) If, because of any change in law or applicable interpretations thereof by the Staff of the SEC, the Company is not permitted to effect the Exchange Offer as contemplated by Section 2(a) hereof, (ii) if for any other reason the Exchange Offer is not consummated within 300 days after the Closing Time (provided that if the Exchange Offer shall be consummated after the date that is 300 days after the Closing Time, then the Company's obligations under this clause (ii) arising from the failure of the Exchange Offer to be consummated by the date that is 300 days after the Closing Time shall terminate), (iii) if any Holder (other than an Initial Purchaser) is not eligible to participate in the Exchange Offer or elects to participate in the Exchange Offer but does not receive fully tradeable Exchange Senior Securities pursuant to the Exchange Offer or (iv) upon the written request of any of the Initial Purchasers within 90 days following the consummation of the Exchange Offer; provided that such Initial Purchaser shall hold Registrable Senior Securities that it acquired directly from the Company and if such Initial Purchaser is not permitted, in the reasonable opinion of counsel to such Initial Purchaser, pursuant to applicable law or applicable interpretation of the staff of the SEC, to participate in the Exchange Offer, the Company shall, at its cost:
(A) file with the SEC a Shelf Registration Statement relating to the offer and sale of the Registrable Senior Securities by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders of such Registrable Senior Securities and set forth in such Shelf Registration Statement;
(B) use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the SEC as promptly as practicable, but in no event later than the 360th day after the Closing Time (or within 60 days of a request of any Initial
6
Purchaser pursuant to Section 2(b)(iv) above, if later (the ‘‘Request Extension Period’’)); provided that, with respect to Exchange Senior Securities received by a broker-dealer in exchange for any securities that were acquired by such broker-dealer as a result of market-making or other trading activities, the Company may, if permitted by current interpretations by the staff of the SEC, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Regulation S-K Items 507 and/or 508, as applicable, in satisfaction of its obligations under paragraph (A) solely with respect to broker-dealers who acquired their Securities as a result of market-making or other trading activities, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. In the event that the Company is required to file a Shelf Registration Statement upon the request of any Holder (other than an Initial Purchaser) not eligible to participate in the Exchange Offer pursuant to clause (iii) above or upon the request of any Initial Purchaser pursuant to clause (iv) above, the Company shall file and use its reasonable best efforts to have declared effective by the SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Senior Securities and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Senior Securities held by such Holder or such Initial Purchaser, as applicable, after completion of the Exchange Offer;
(C) use its reasonable best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required, in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years, plus any extensions as provided in Section 2(d)(iii) below, after its effective date or such shorter period which will terminate when all of the Registrable Senior Securities covered by the Shelf Registration Statement (i) have been sold pursuant to the Shelf Registration Statement, (ii) cease to be outstanding or (iii) become eligible for resale pursuant to Rule 144 under the 1934 Act without volume restrictions; and
(D) notwithstanding any other provisions hereof, ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming a part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading; provided, however, clauses (ii) and (iii) shall not apply to any information relating to any Initial Purchaser or any Holder furnished to the Company in writing by such Initial Purchaser or Holder expressly for use in the Shelf Registration Statement.
The Company shall only permit Registrable Senior Securities to be included in the Shelf Registration Statement.
7
The Company further agrees, if necessary, to supplement or amend the Shelf Registration Statement if reasonably requested by the Majority Holders with respect to information relating to the Holders and otherwise as required by Section 3(b) below, to use its reasonable best efforts to cause any such amendment to become effective and such Shelf Registration Statement to become usable as soon as practicable thereafter and to furnish to the Holders of Registrable Senior Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC.
(c) Expenses. The Company shall pay all Registration Expenses in connection with the registration pursuant to Sections 2(a) and 2(b). Each Holder shall pay all expenses of its counsel other than as set forth in the preceding sentence, underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Senior Securities pursuant to a Shelf Registration Statement.
(d) Effective Registration Statement
(i) The Company shall be deemed not to have used its reasonable best efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite periods set forth herein if the Company voluntarily takes any action that could reasonably be expected to result in any such Registration Statement not being declared effective or remaining effective or in the Holders of Registrable Senior Securities covered thereby not being able to exchange or offer and sell such Registrable Senior Securities during that period unless (A) such action is required by applicable law or (B) such action is taken by the Company in good faith and for valid business reasons (but not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets or a material corporate transaction or event so long as the Company promptly complies with the requirements of Section 3(k) hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof shall not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Senior Securities pursuant to a Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement shall be deemed not to have been effective during the period of such interference, until the offering of Registrable Senior Securities pursuant to such Registration Statement may legally resume.
(iii) During any 365-day period, the Company may suspend the availability of a Shelf Registration Statement and the use of the related Prospectus, as provided in Section 3(e)(vi) and the last paragraph of Section 3 hereof, for up to four periods of up to 45 consecutive days (except for the consecutive 45-day period immediately prior to maturity of the Senior Securities), but no more than an aggregate 90 days during any 365-day period, if any event shall occur (A) as set forth in Section 2(d)(i) or (B) as a result of which it shall be necessary, in the good faith determination of the board of directors of the Company, to amend the Shelf Registration Statement or amend or supplement any prospectus or prospectus supplement thereunder in order that each such document not include any untrue statement of fact or omit to
8
state a material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made (a ‘‘Material Event Election’’), provided that any period during which the Company requires Holders to refrain from disposing of their Registrable Senior Securities due to a Material Event Election (an ‘‘Election Period’’) shall be deemed to trigger the obligation of the Company to pay Additional Interest in accordance with Section 2(e) to the extent that such Election Period, together with all other days that the Shelf Registration Statement has become unusable in any consecutive twelve-month period, exceeds 90 days in the aggregate. The Two-Year Period provided for in Section 2(b)(B) above shall be extended by an amount of time equal to all such Election Periods.
(e) Increase in Interest Rate. In the event that (i) the Exchange Offer is not consummated on or prior to the 300th calendar day following the Closing Time, or (ii) if required, a Shelf Registration Statement with respect to the Registrable Senior Securities is not declared effective on or prior to the 360th calendar day after the Closing Time (or on or before the end of the Request Extension Period, if longer), or (iii) the Election Periods exceed, in the aggregate, 90 days during any 365-day period the per annum interest rate borne by the Registrable Senior Securities shall be increased by one-quarter of one percent (0.25%) per annum following such 300-day period in the case of clause (i) above, following such 360-day period (or Request Extension Period, if longer) in the case of clause (ii) above, or following such 90-day period in the case of clause (iii) above, which rate will be increased by an additional quarter of one percent (0.25%) per annum for each 90-day period during which noncompliance continues; provided that the aggregate increase in such annual interest rate may in no event exceed one-half of one percent (0.50%) per annum. Upon (y) the consummation of the Exchange Offer after the 300-day period described in clause (i) above, or (z) the effectiveness of a Shelf Registration Statement, after the 360-day period (or Request Extension Period, if longer) described in clause (ii) above, the interest rate borne by the Senior Securities from the date of such effectiveness or consummation, as the case may be, shall be reduced to the original interest rate if the zCompany is otherwise in compliance with this paragraph; provided, however, that, if after any such reduction in interest rate, a different event specified in clause (i), (ii) or (iii) above occurs, the interest rate shall again be increased pursuant to the foregoing provisions. No increase in the rate under clause (i) above shall be payable for any period during which a Shelf Registration is effective.
(f) Specific Enforcement. Without limiting the remedies available to the Initial Purchasers and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Sections 2(a) and 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Sections 2(a) and 2(b).
3. Registration Procedures. In connection with the obligations of the Company with respect to the Registration Statements pursuant to Sections 2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement, within the time periods specified in Section 2, on the appropriate form under the 1933 Act, which form
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(i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration Statement, be available for the sale of the Registrable Senior Securities by the selling Holders thereof and (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the SEC to be filed therewith, and use its reasonable best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary under applicable law to keep such Registration Statement effective for the applicable period; cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the 1933 Act; and comply with the provisions of the 1933 Act with respect to the disposition of all Senior Securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each Holder of Registrable Senior Securities, at least 15 days prior to filing, that a Shelf Registration Statement with respect to the Registrable Senior Securities is being filed and advising such Holders that the distribution of Registrable Senior Securities will be made in accordance with the method elected by the Majority Holders; (ii) furnish to each Holder of Registrable Senior Securities, to counsel for the Initial Purchasers, to counsel for the Holders and to each underwriter of an underwritten offering of Registrable Senior Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter, or their counsel, may reasonably request, including financial statements and schedules and, if the Holder so reasonably requests, all exhibits (including those incorporated by reference) in order to facilitate the public sale or other disposition of the Registrable Senior Securities; and (iii) subject to the last paragraph of this Section 3, hereby consent to the use of the Prospectus, including each preliminary Prospectus, or any amendment or supplement thereto by each of the selling Holders of Registrable Senior Securities in connection with the offering and sale of the Registrable Senior Securities covered by the Prospectus or any amendment or supplement thereto;
(d) use its reasonable best efforts to register or qualify the Registrable Senior Securities under all applicable state securities or ‘‘blue sky’’ laws of such jurisdictions as any Holder of Registrable Senior Securities covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Senior Securities shall reasonably request by the time the applicable Registration Statement is declared effective by the SEC, to cooperate with the Holders in connection with any filings required to be made with the NASD, keep each such registration or qualification effective during the period such Registration Statement is required to be effective and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Senior Securities owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any
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jurisdiction where it would not otherwise be required to qualify but for this Section 3(d) or (ii) take any action which would subject it to general service of process or taxation in any such jurisdiction;
(e) in the case of a Shelf Registration, notify each Holder of Registrable Senior Securities and counsel for such Holders promptly and, if requested by such Holder or counsel, confirm such advice in writing promptly (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Senior Securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to such offering cease to be true and correct in all material respects, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Senior Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (vi) of the happening of any event or the discovery of any facts during the period a Shelf Registration Statement is effective (including as contemplated in Section 2(d)(iii) hereof) which (A) is contemplated in Section 2(d)(i) or (B) makes any statement made in such Shelf Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Shelf Registration Statement or Prospectus in order to make the statements therein not misleading and (vii) of any determination by the Company that a post-effective amendment to a Registration Statement would be appropriate;
(f) (A) in the case of an Exchange Offer, (i) include in the Exchange Offer Registration Statement a ‘‘Plan of Distribution’’ section covering the use of the Prospectus included in the Exchange Offer Registration Statement by broker-dealers who have exchanged their Registrable Senior Securities for Exchange Senior Securities for the resale of such Exchange Senior Securities, (ii) furnish to each broker-dealer who desires to participate in the Exchange Offer, without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such broker-dealer may reasonably request, (iii) include in the Exchange Offer Registration Statement a statement that any broker-dealer who holds Registrable Senior Securities acquired for its own account as a result of market-making activities or other trading activities (a ‘‘Participating Broker-Dealer’’), and who receives Exchange Senior Securities for Registrable Senior Securities pursuant to the Exchange Offer, may be a statutory underwriter and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Senior Securities, (iv) subject to the last paragraph of this Section 3, hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any broker-dealer in connection with the sale or transfer of the Exchange Senior Securities covered by the
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Prospectus or any amendment or supplement thereto, and (v) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer the following provision:
‘‘If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Senior Securities. If the undersigned is a broker-dealer that will receive Exchange Senior Securities for its own account in exchange for Registrable Senior Securities, it represents that the Registrable Senior Securities to be exchanged for Exchange Senior Securities were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Senior Securities pursuant to the Exchange Offer; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an ‘‘underwriter’’ within the meaning of the 1933 Act;’’
(B) to the extent any Participating Broker-Dealer participates in the Exchange Offer, the Company shall use its reasonable best efforts to cause to be delivered at the request of an entity representing the Participating Broker-Dealers (which entity shall be Deutsche Bank Securities Inc., unless it elects not to act as such representative) any ‘‘cold comfort’’ letters with respect to the Prospectus in the form existing on the last date for which exchanges are accepted pursuant to the Exchange Offer and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (C) below;
(C) to the extent any Participating Broker-Dealer participates in the Exchange Offer, the Company shall use its reasonable best efforts to maintain the effectiveness of the Exchange Offer Registration Statement for a period of 180 days following the closing of the Exchange Offer or such shorter period which will terminate when the Participating Broker-Dealers have completed all resales subject to applicable prospectus delivery requirements; and
(D) the Company shall not be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement as would otherwise be contemplated by Section 3(b) hereof, or take any other action as a result of this Section 3(f), for a period exceeding 180 days after the last date for which exchanges are accepted pursuant to the Exchange Offer (as such period may be extended by the Company) and Participating Broker-Dealers shall not be authorized by the Company to, and shall not, deliver such Prospectus after such period in connection with resales contemplated by this Section 3;
(g) (i) in the case of an Exchange Offer, furnish counsel for the Initial Purchasers and (ii) in the case of a Shelf Registration, furnish counsel for the Holders of Registrable Senior Securities copies of any request by the SEC or any state securities
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authority for amendments or supplements to a Registration Statement and Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement as soon as practicable and provide immediate notice to each Holder of the withdrawal of any such order;
(i) in the case of a Shelf Registration, furnish to each Holder of Registrable Senior Securities, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Senior Securities to facilitate the timely preparation and delivery of certificates representing Registrable Senior Securities to be sold and not bearing any restrictive legends; and cause such Registrable Senior Securities to be in such denominations (consistent with the provisions of the Indenture) in a form eligible for deposit with the Depositary and registered in such names as the selling Holders or the underwriters, if any, may reasonably request in writing at least one business day prior to the closing of any sale of Registrable Senior Securities;
(k) in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Section 3(e)(vi) hereof, use its reasonable best efforts to prepare a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Senior Securities, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company agrees to notify each Holder to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and each Holder hereby agrees to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission. At such time as such public disclosure is otherwise made or the Company determines that such disclosure is not necessary, in each case to correct any misstatement of a material fact or to include any omitted material fact, the Company agrees promptly to notify each Holder of such determination and to furnish each Holder such numbers of copies of the Prospectus, as amended or supplemented, as such Holder may reasonably request;
(l) obtain CUSIP numbers, ISINs and common codes for all Exchange Senior Securities or Registrable Senior Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Senior Securities or Registrable Senior Securities, as the case may be, in a form eligible for deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the ‘‘TIA’’), in connection with the registration of the Exchange Senior
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Securities, or Registrable Senior Securities, as the case may be, (ii) cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and (iii) execute, and use its reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions (including those reasonably requested by the Majority Holders of the Registrable Senior Securities being sold) in order to expedite or facilitate the disposition of such Registrable Senior Securities and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, in a manner that is reasonable and customary:
(i) make such representations and warranties to the Holders of such Registrable Senior Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by such Holders and underwriters;
(ii) obtain an opinion of counsel to the Company and updates thereof (which counsel and opinion (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the Holders of a majority in principal amount of the Registrable Senior Securities being sold) addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters;
(iii) obtain ‘‘cold comfort’’ letters and updates thereof from the Company's independent certified public accountants addressed to the underwriters, if any, and will use reasonable best efforts to have such letters addressed to the selling Holders of Registrable Senior Securities, such letters to be in customary form and covering matters of the type customarily covered in ‘‘cold comfort’’ letters to underwriters in connection with similar underwritten offerings;
(iv) enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Registrable Senior Securities, which agreement shall be in form, substance and scope customary for similar offerings;
(v) if an underwriting agreement is entered into in the case of an underwritten offering, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 5 hereof with respect to the underwriters and all other parties to be indemnified pursuant to Section 5 hereof; and
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(vi) deliver such documents and certificates as may be reasonably requested by the underwriters or the Holders and as are customarily delivered in similar offerings.
The above shall be done at (i) the effectiveness of such Registration Statement (and, if appropriate, each post-effective amendment thereto) and (ii) each closing under any underwriting or similar agreement as and to the extent required thereunder. In the case of any underwritten offering, the Company shall provide written notice to the Holders of all Registrable Senior Securities of such underwritten offering at least 30 days prior to the filing of a prospectus supplement for such underwritten offering. Such notice shall (x) offer each such Holder the right to participate in such underwritten offering, (y) specify a date, which shall be no earlier than 10 business days following the date of such notice, by which such Holder must inform the Company of its intent to participate in such underwritten offering and (z) include the instructions such Holder must follow in order to participate in such underwritten offering;
(o) in the case of a Shelf Registration, make available for inspection by representatives of the Holders of the Registrable Senior Securities and any underwriters participating in any disposition pursuant to a Shelf Registration Statement and any U.S. counsel or accountant retained by such Holders or underwriters, all financial and other records, pertinent corporate documents and properties of the Company reasonably requested by any such Persons, and cause the respective officers, directors, employees, and any other agents of the Company to supply all information reasonably requested by any such representative, underwriter, special counsel or accountant in connection with a Registration Statement; provided that any such records, documents, properties and such information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such records, documents, properties or information shall be kept confidential by any such representative, underwriter, counsel or accountant and shall be used only in connection with such Shelf Registration Statement, unless such information has become available (not in violation of this Agreement) to the public generally or through a third party without an accompanying obligation of confidentiality, and except that such representative, underwriter, counsel or accountant shall have no liability, and shall not be in breach of this provision, if disclosure of such confidential information is made in connection with a court proceeding or required by law, and the Company shall be entitled to request that such representative, underwriter, counsel or accountant sign a confidentiality agreement to the foregoing effect. Each such person will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such is made generally available to the public through no fault or action of such person. Each selling Holder of such Registrable Senior Securities will be required to further agree that it will, upon learning that disclosure of confidential information is necessary, give notice to the Company to allow the Company at its expense to undertake appropriate action to prevent disclosure of the confidential information;
(p) (i) in the case of an Exchange Offer, within a reasonable time prior to the filing of any Exchange Offer Registration Statement, any Prospectus forming a part
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thereof, any amendment to an Exchange Offer Registration Statement or amendment or supplement to a Prospectus, provide copies of such document to the Initial Purchasers, and make such changes in any such document prior to the filing thereof as the Initial Purchasers or their counsel may reasonably request; (ii) in the case of a Shelf Registration, within a reasonable time prior to filing any Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Shelf Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Holders of Registrable Senior Securities, to the Initial Purchasers, to counsel on behalf of the Holders and to the underwriter or underwriters of an underwritten offering of Registrable Senior Securities, if any, and make such changes in any such document prior to the filing thereof as counsel to the Initial Purchasers, the Holders or any underwriter may reasonably request; and (iii) cause the representatives of the Company to be available for discussion of such document as shall be reasonably requested by the Holders of Registrable Senior Securities, the Initial Purchasers on behalf of such Holders or any underwriter, and shall not at any time make any filing of any such document of which such Holders, the Initial Purchasers on behalf of such Holders, their counsel or any underwriter shall not have previously been advised and furnished a copy or to which such Holders, the Initial Purchasers on behalf of such Holders, their counsel or any underwriter shall reasonably object within a reasonable time period;
(q) in the case of a Shelf Registration, use its reasonable best efforts to cause the Registrable Senior Securities to be rated with the appropriate rating agencies, if so requested by the Majority Holders or by the underwriter or underwriters of an underwritten offering, unless the Registrable Senior Securities are already so rated;
(r) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least twelve months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder; and
(s) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter and its counsel.
In the case of a Shelf Registration Statement, the Company may (as a condition to such Holder's participation in the Shelf Registration) require each Holder of Registrable Senior Securities to furnish to the Company or its counsel such information regarding such Holder and the proposed distribution by such Holder of such Registrable Senior Securities, as the Company may from time to time reasonably request, and agree in writing to be bound by the Agreement, including the indemnification provisions.
In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event or the discovery of any facts, each of the kind described in Sections 2(d)(i) and 3(e)(ii)-(vii) hereof, such Holder will forthwith discontinue disposition of Registrable Senior Securities pursuant to a Registration Statement until such Holder's receipt of (i) the copies of the supplemented or amended Prospectus contemplated by Section 3(k) hereof or (ii) written notice from the Company that the Shelf Registration Statement is once again effective and that no supplement or amendment is
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required. If so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Senior Securities current at the time of receipt of such notice.
If the Company shall give any such notice to suspend the disposition of Registrable Senior Securities pursuant to a Shelf Registration Statement as a result of the happening of any event or the discovery of any facts, each of the kind described in Sections 2(d)(i) and 3(e)(vi) hereof, the Company shall be deemed to have used its reasonable best efforts to keep the Shelf Registration Statement effective during such period of suspension; provided that (i) such period of suspension shall not exceed the time periods provided in Section 2(d)(iii) hereof and (ii) the Company shall, if necessary, use its reasonable best efforts to file and have declared effective (if an amendment) as soon as practicable an amendment or supplement to the Shelf Registration Statement and shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions.
4. Underwritten Offerings. If any of the Registrable Senior Securities covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Majority Holders of such Registrable Senior Securities included in such offering and shall be reasonably acceptable to the Company.
No Holder of Registrable Senior Securities may participate in any underwritten offering hereunder unless such Holder (a) agrees to sell such Holder's Registrable Senior Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.
5. Indemnification and Contribution
(a) The Company agrees to indemnify and hold harmless each Initial Purchaser, each Holder, including Participating Broker-Dealers, each underwriter who participates in an offering of Registrable Senior Securities, their respective affiliates, and their respective directors, officers, employees, agents, and each Person, if any, who controls any Initial Purchaser or any Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by the Initial Purchaser, any Holder or any such controlling or affiliated Person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any amendment thereof, pursuant to which Exchange Senior Securities or Registrable Senior Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or
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necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Initial Purchaser or any Holder furnished to the Company in writing by such Initial Purchaser or by or relating to any Holder or underwriter who participates in an offering of Registrable Senior Securities, in each case expressly for use therein.
(b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, each Initial Purchaser, each underwriter who participates in an offering of Registrable Senior Securities, and the other selling Holders, and each of their respective directors and officers (including each director and officer of the Company who signed the Registration Statement) and each Person, if any, who controls the Company, any Initial Purchaser, any underwriter or any other selling Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses described in the indemnity contained in Section 5(a), as incurred), but only with reference to information relating to such Holder furnished to the Company in writing by such Holder expressly for use in any Registration Statement or any amendment thereof or any Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above, such Person (the ‘‘indemnified party’’) shall promptly notify the person against whom such indemnity may be sought (the ‘‘indemnifying party’’) in writing (but the failure to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party except to the extent it is materially prejudiced or harmed) and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (a) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Initial Purchasers and all Persons, if any, who control any Initial Purchaser within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and all Persons, if any, who control the Company within the meaning of either such Section and (c) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Holders and all Persons, if any,
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who control any Holders within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Initial Purchasers and such control Persons of the Initial Purchasers, such firm shall be designated in writing by Deutsche Bank Securities Inc. In the case of any such separate firm for the Holders and such Persons who control Holders, such firm shall be designated in writing by the Majority Holders. In all other cases, such firm shall be designated in writing by the Company. The indemnifying party shall not be liable for any settlement of any proceeding affected without its written consent, but if settled with such consent or if there is a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement (i) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and (ii) does not include a statement as to an admission of fault, culpability or failure to act by or on behalf of any indemnified party.
(d) If the indemnification provided for in paragraph (a) or paragraph (b) of this Section 5 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of such indemnifying party or parties on the one hand and the indemnified party or parties on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or parties or such indemnified party or parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The respective obligations of the Company, the Initial Purchasers, and the Holders of Registrable Senior Securities to contribute pursuant to this Section 5 are several in proportion to the respective principal amounts of Senior Securities they have purchased hereunder, and not joint.
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(e) The Company, the Initial Purchasers, and each Holder of Registrable Senior Securities agree that it would not be just or equitable if contribution pursuant to this Section 5 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5, no Holder shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which Registrable Senior Securities were sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 5, each Person, if any, who controls an Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Initial Purchaser or Holder, and each director of the Company, each officer of the Company who signed the Registration Statement, and each Person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Initial Purchaser or any Holder, or any Person controlling any Initial Purchaser or any Holder, or by or on behalf of the Company, its officers or directors or any Person controlling the Company, (iii) acceptance of any of the Exchange Senior Securities and (iv) any sale of Registrable Senior Securities pursuant to a Shelf Registration Statement.
6. Miscellaneous.
(a) Rule 144 and Rule 144A. For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the 1934 Act, the Company covenants that it will file the reports required to be filed by it under Section 13(a) or 15(d) of the 1934 Act and the rules and regulations adopted by the SEC thereunder, that if it ceases to be so required to file such reports, it will upon the request of any Holder of Registrable Senior Securities (i) make publicly available or cause to be made publicly available such information as is necessary to permit sales pursuant to Rule 144 under the 1933 Act, (ii) deliver or cause to be delivered such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933 Act, and (iii) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Senior Securities without registration under the 1933 Act within the limitation of the exemptions provided by (x) Rule 144 under the 1933 Act, as such Rule may be amended from time to time, (y) Rule 144A under the 1933 Act, as such Rule may be amended from time to time, or (z) any
20
similar rules or regulations hereafter adopted by the SEC. Upon the written request of any Holder of Registrable Senior Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.
(b) No Inconsistent Agreements. The Company has not entered into nor will the Company on or after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Registrable Senior Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's other issued and outstanding securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the material provisions hereof may not be given unless the Company has obtained the written consent of the Majority Holders of the outstanding Registrable Senior Securities affected by such amendment, modification, supplement, waiver or departure.
(d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder (other than an Initial Purchaser), at the most current address set forth on the records of the Registrar under the Indenture, (ii) if to an Initial Purchaser, at the most current address given by such Initial Purchaser to the Company by means of a notice given in accordance with the provisions of this Section 6(d), which address initially is the address set forth in the Purchase Agreement and (iii) if to the Company, initially at the address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(d).
All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Senior Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Senior Securities, in any manner, whether by operation of law or otherwise, such Registrable Senior Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Senior Securities, such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale
21
set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof.
(f) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
(j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.
22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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VIACOM INC. | ![]() |
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By: | ![]() |
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/s/ George S. Nelson | ![]() |
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Name: | ![]() |
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George S. Nelson | ![]() |
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Title: | ![]() |
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Senior Vice President and Treasurer | ![]() |
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Confirmed and
Accepted,
as of the date first above written:
DEUTSCHE BANK SECURITIES INC.
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By: | ![]() |
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/s/ Ritu Ketkar | ![]() |
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Name: | ![]() |
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Ritu Ketkar | ![]() |
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Title: | ![]() |
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Director | ![]() |
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By: | ![]() |
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/s/ Charles W. Chigas | ![]() |
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Name: | ![]() |
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Charles W. Chigas | ![]() |
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Title: | ![]() |
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Managing Director/Co-Head of Debt Origination | ||||
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For itself and the other
Initial Purchasers
named in Schedule A to this
Agreement.
23
SCHEDULE A
INITIAL PURCHASERS
Deutsche Bank Securities Inc.
A-1
Exhibit 5.1
[Letterhead of Shearman & Sterling LLP]
August 18, 2006
The
Board of Directors
Viacom Inc.
1515 Broadway
New York,
New York 10036
Ladies and Gentlemen :
We have acted as counsel to Viacom Inc., a Delaware corporation (the ‘‘Company’’), in connection with the preparation and filing by the Company of a registration statement on Form S-4 (the ‘‘Registration Statement’’) with the Securities and Exchange Commission relating to the issuance of up to $750,000,000 aggregate principal amount of the Company's Floating Rate Senior Notes due 2009 (the ‘‘Exchange 2009 Senior Notes’’), up to $1,500,000,000 aggregate principal amount of the Company's 5.75% Senior Notes due 2011 (the ‘‘Exchange 2011 Senior Notes’’), up to $1,500,000,000 aggregate principal amount of the Company's 6.25% Senior Notes due 2016 (the ‘‘Exchange 2016 Senior Notes’’) and up to $1,750,000,000 aggregate principal amount of the Company's 6.875% Senior Debentures due 2036 (the ‘‘Exchange 2036 Senior Debentures’’ and, together with the Exchange 2009 Senior Notes, the Exchange 2011 Senior Notes and the Exchange 2016 Senior Notes, the ‘‘Exchange Senior Notes and Debentures’’). Pursuant to the Registration Statement, the Company is offering to exchange (the ‘‘Exchange Offer’’) all of the Exchange 2009 Senior Notes for a like amount of its outstanding unregistered Floating Rate Senior Notes due 2009 (the ‘‘Unregistered 2009 Senior Notes’’), all of the Exchange 2011 Senior Notes for a like amount of its outstanding unregistered 5.75% Senior Notes due 2011 (the ‘‘Unregistered 2011 Senior Notes’’), all of the Exchange 2016 Senior Notes for a like amount of its outstanding unregistered 6.25% Senior Notes due 2016 (the ‘‘Unregistered 2016 Senior Notes’’) and all of the Exchange 2036 Senior Debentures for a like amount of its outstanding unregistered 6.875% Senior Debentures due 2036 (the ‘‘Unregistered 2036 Senior Debentures’’ and, together with the Unregistered 2009 Senior Notes, the Unregistered 2011 Senior Notes and the Unregistered 2016 Senior Notes, the ‘‘Unregistered Senior Notes and Debentures’’).
The Exchange Senior Notes and Debentures will be registered under the Securities Act as set forth in the prospectus forming a part of the Registration Statement (the ‘‘Prospectus’’) and will be issued upon consummation of the Exchange Offer. The Unregistered Senior Notes and Debentures were, and the Exchange Senior Notes and Debentures will be, issued pursuant to an indenture, dated as of April 12, 2006 among the Company and The Bank of New York, as trustee (the ‘‘Trustee’’), as supplemented by the first supplemental indenture, dated as of April 12, 2006, and by the second supplemental indenture, dated as of June 16, 2006 (as so supplemented, the ‘‘Indenture’’).
In that connection, we have reviewed originals or copies of the following documents:
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(a) | The Indenture. |
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(b) | Forms of each of the Exchange Senior Notes and Debentures. |
The documents described in the foregoing clauses (a) and (b) of this paragraph are collectively referred to herein as the ‘‘Opinion Documents’’.
We have also reviewed the following:
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(a) | The Registration Statement. |
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(b) | The Prospectus. |
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(c) | The Registration Rights Agreement dated as of April 12, 2006 among the Company, Banc of America Securities LLC, Citigroup Global Capital Markets Inc. and J.P. Morgan Securities Inc. and the Registration Rights Agreement dated as of June 16, 2006 among the Company and Deutsche Bank Securities Inc. (together, the ‘‘Registration Rights Agreements’’). |
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(d) | originals or copies of such other corporate records of the Company, certificates of public officials and of officers of the Company and agreements and other documents as we have deemed necessary as a basis for the opinions expressed below. |
In our review of the Opinion Documents and other documents, we have assumed:
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(a) | The genuineness of all signatures. |
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(b) | The authenticity of the originals of the documents submitted to us. |
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(c) | The conformity to authentic originals of any documents submitted to us as copies. |
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(d) | As to matters of fact, the truthfulness of the representations made in the Opinion Documents and in certificates of public officials and officers of the Company. |
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(e) | That each of the Opinion Documents is the legal, valid and binding obligation of each party thereto, other than the Company, enforceable against each such party in accordance with its terms. |
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(f) | That: |
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(i) | The execution, delivery and performance by the Company of the Opinion Documents to which it is a party do not: |
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(A) | except with respect to Generally Applicable Law, violate any law, rule or regulation applicable to it; or |
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(B) | result in any conflict with or breach of any agreement or document binding on it of which any addressee hereof has knowledge, has received notice or has reason to know. |
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(ii) | Except with respect to Generally Applicable Law, no authorization, approval, consent or other action by, and no notice to or filing with, any governmental authority or regulatory body or (to the extent the same is required under any agreement or document binding on it of which an addressee has knowledge, has received notice or has reason to know) any other third party is required for the due execution, delivery or performance by the Company of any Opinion Document to which it is a party or, if any such authorization, approval, consent, action, notice or filing is required, it has been duly obtained, taken, given or made and is in full force and effect. |
We have not independently established the validity of the foregoing assumptions.
‘‘Generally Applicable Law’’ means the federal law of the United States of America, and the law of the State of New York (including the rules and regulations promulgated thereunder or pursuant thereto), that the New York lawyer exercising customary professional diligence would reasonably be expected to recognize as being applicable to the Company, the Opinion Documents or the transactions governed by the Opinion Documents, and the General Corporation Law of the State of Delaware. Without limiting the generality of the foregoing definition of Generally Applicable Law, the term ‘‘Generally Applicable Law’’ does not include any law, rule or regulation that is applicable to the Company, the Opinion Documents or such transactions solely because such law, rule or regulation is part of a regulatory regime applicable to any party to any of the Opinion Documents or any of its affiliates due to the specific assets or business of such party or such affiliate.
Based upon the foregoing and upon such other investigation as we have deemed necessary and subject to the assumptions and qualifications set forth herein, we are of the opinion that, if and when duly authorized and executed by the Company and authenticated by the Trustee in accordance with the terms of the Indenture and delivered to holders tendering in the Exchange Offer in accordance with the terms of the Exchange Offer as set forth in the Registration Statement, the Exchange Senior Notes and Debentures will be legally issued and will constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture.
Our opinions above are subject to the following qualifications:
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(a) | Our opinions above are subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally (including without limitation all laws relating to fraudulent transfers). |
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(b) | Our opinions above are also subject to the effect of general principles of equity, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). |
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(c) | Our opinions are limited to Generally Applicable Law and we do not express any opinion herein concerning any other law. |
This opinion letter is rendered to you in connection with the transactions contemplated by the Opinion Documents. This opinion letter may not be relied upon by you for any other purpose without our prior written consent.
This opinion letter speaks only as of the date hereof. We expressly disclaim any responsibility to advise you of any development or circumstance of any kind, including any change of law or fact, that may occur after the date of this opinion letter that might affect the opinions expressed therein.
We hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement and to the use of our name under the heading ‘‘Legal Matters’’ in the Prospectus.
Very truly yours,
/s/ Shearman & Sterling LLP
STG/TA/CU/GL/SM
BC
Exhibit 12.1
VIACOM INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(Tabular in
millions except
ratios)
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Six
Months Ended June 30, 2006 |
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Twelve Months
Ended December 31, |
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2005 | ![]() |
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2004 | ![]() |
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2003 | ![]() |
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2002 | ![]() |
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2001 | ||||||||||||||||||||||
Earnings before income taxes | ![]() |
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$ | 1,089.5 |
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$ | 2,318.3 |
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$ | 2,244.2 |
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$ | 1,956.2 |
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$ | 1,671.7 |
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$ | 1,056.8 |
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Add: | ![]() |
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Distributions from affiliated companies | ![]() |
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5.9 |
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44.5 |
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16.3 |
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36.0 |
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35.6 |
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54.3 |
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Interest expense, and amortization of debt discount on indebtness | ![]() |
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223.8 |
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23.0 |
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24.2 |
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23.2 |
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40.9 |
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39.2 |
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Capitalized interest amortized | ![]() |
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— |
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— |
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— |
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— |
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— |
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— |
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1/3 of rental expense | ![]() |
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32.0 |
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46.9 |
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32.7 |
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29.6 |
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28.5 |
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23.3 |
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Total Earnings | ![]() |
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$ | 1,351.2 |
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$ | 2,432.7 |
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$ | 2,317.4 |
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$ | 2,045.0 |
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$ | 1,776.7 |
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$ | 1,173.6 |
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Fixed charges: | ![]() |
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Interest expense, and amortization of debt discount on indebtness | ![]() |
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$ | 223.8 |
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$ | 23.0 |
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$ | 24.2 |
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$ | 23.2 |
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$ | 40.9 |
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$ | 39.2 |
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1/3 of rental expense | ![]() |
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32.0 |
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46.9 |
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32.7 |
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29.6 |
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28.5 |
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23.3 |
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Total fixed charges | ![]() |
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$ | 255.8 |
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$ | 69.9 |
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$ | 56.9 |
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$ | 52.8 |
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$ | 69.4 |
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$ | 62.5 |
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Preferred Stock dividend requirements | ![]() |
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— |
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— |
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— |
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— |
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— |
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— |
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Total fixed charges and Preferred Stock dividend requirements | ![]() |
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$ | 255.8 |
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$ | 69.9 |
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$ | 56.9 |
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$ | 52.8 |
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$ | 69.4 |
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$ | 62.5 |
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Ratio of earnings to fixed charges | ![]() |
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5.3x | ![]() |
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34.8x | ![]() |
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40.7x | ![]() |
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38.7x | ![]() |
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25.6x | ![]() |
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18.8x | ||||||||||||||||||
Ratio of earnings to combined fixed charges and Preferred Stock dividend requirements | ![]() |
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5.3x | ![]() |
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34.8x | ![]() |
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40.7x | ![]() |
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38.7x | ![]() |
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25.6x | ![]() |
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18.8x | ||||||||||||||||||
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Exhibit 21.1
Subsidiaries of Viacom Inc.
DOMESTIC
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Subsidiary Name | ![]() |
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Place of Incorporation or Organization |
$600/Hour Productions LLC | ![]() |
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Delaware |
365 Gay LLC | ![]() |
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Delaware |
37th Floor Productions Inc. | ![]() |
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Delaware |
38th Floor Productions Inc. | ![]() |
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Delaware |
5555 Communications Inc. | ![]() |
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Delaware |
Aardvark Productions, Inc. | ![]() |
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Delaware |
Acoustic Music, Inc. | ![]() |
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Delaware |
Adoy LLC | ![]() |
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Delaware |
After School Productions Inc. | ![]() |
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Delaware |
AfterL.com LLC | ![]() |
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Delaware |
All About Productions LLC | ![]() |
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Delaware |
Animated Productions Inc. | ![]() |
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Delaware |
Antics G.P. Inc. | ![]() |
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Delaware |
Artcraft Productions Inc. | ![]() |
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Delaware |
Bardwire Inc. | ![]() |
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Delaware |
Benjamin Button Productions LLC | ![]() |
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Louisiana |
BET Acquisition Corp. | ![]() |
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Delaware |
BET Animations, LLC | ![]() |
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Delaware |
BET Arabesque, LLC | ![]() |
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Delaware |
BET Comic View II, LLC | ![]() |
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Delaware |
BET Creations, Inc. | ![]() |
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Delaware |
BET Development Company | ![]() |
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Delaware |
BET Documentaries, LLC | ![]() |
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Delaware |
BET Event Productions LLC | ![]() |
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Delaware |
BET Grilled, LLC | ![]() |
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Delaware |
BET Holdings LLC | ![]() |
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Delaware |
BET Innovations Publishing, Inc. | ![]() |
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Delaware |
BET International, Inc. | ![]() |
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Delaware |
BET Live From LA, LLC | ![]() |
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Delaware |
BET Live Production, LLC | ![]() |
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Delaware |
BET Music Soundz, Inc. | ![]() |
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Delaware |
BET Oh Drama!, LLC | ![]() |
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Delaware |
BET Pictures II Development & Production, Inc. | ![]() |
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Delaware |
BET Pictures II Distribution, Inc. | ![]() |
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Delaware |
BET Pictures II, LLC | ![]() |
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Delaware |
BET Prime and Mike, LLC | ![]() |
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Delaware |
BET Productions II, Inc. | ![]() |
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Delaware |
BET Productions III, LLC | ![]() |
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Delaware |
BET Productions IV, LLC | ![]() |
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Delaware |
BET Publications, LLC | ![]() |
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Delaware |
BET Radio LLC | ![]() |
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Delaware |
BET Satellite Services, Inc. | ![]() |
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Delaware |
BET Services, Inc. | ![]() |
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Delaware |
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1
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Subsidiary Name | ![]() |
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Place of Incorporation or Organization |
BET Sheryl & Friends LLC | ![]() |
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Delaware |
BET.com Merger Sub LLC | ![]() |
![]() |
Delaware |
BET Television Productions, LLC | ![]() |
![]() |
Delaware |
BET The Way We Do It, LLC | ![]() |
![]() |
Delaware |
Beta Theatres Inc. | ![]() |
![]() |
Delaware |
Big Shows Inc. | ![]() |
![]() |
Delaware |
Black Entertainment Television LLC | ![]() |
![]() |
District of Columbia |
Blackout Productions Inc. | ![]() |
![]() |
Delaware |
Bling Productions Inc. | ![]() |
![]() |
Delaware |
Blue Sea Productions, Inc. | ![]() |
![]() |
Delaware |
Blue/White Productions, Inc. | ![]() |
![]() |
Delaware |
BN Productions Inc. | ![]() |
![]() |
Delaware |
Box Italy, LLC, The | ![]() |
![]() |
Delaware |
Box Worldwide LLC, The | ![]() |
![]() |
Delaware |
Caballero Acquisition Inc. | ![]() |
![]() |
Delaware |
CBS Cable Networks, Inc. | ![]() |
![]() |
Delaware |
Central Productions, LLC | ![]() |
![]() |
Delaware |
Cloverleaf Productions Inc. | ![]() |
![]() |
Delaware |
CMT Productions Inc. | ![]() |
![]() |
Delaware |
Cocktails @ 4 Productions LLC | ![]() |
![]() |
Delaware |
College Publishing Inc. | ![]() |
![]() |
Delaware |
Columbus Circle Films LLC | ![]() |
![]() |
Delaware |
Comedy Partners | ![]() |
![]() |
New York |
Country Entertainment, Inc. | ![]() |
![]() |
Delaware |
Country Music Television, Inc. | ![]() |
![]() |
Tennessee |
Country Network Enterprises, Inc. | ![]() |
![]() |
Delaware |
Country Services Inc. | ![]() |
![]() |
Delaware |
country.com, Inc. | ![]() |
![]() |
Delaware |
Cradle of Life Productions LLC | ![]() |
![]() |
Delaware |
Creative Mix Inc. | ![]() |
![]() |
Delaware |
Danielle Productions LLC | ![]() |
![]() |
Delaware |
Delaware Blue Steel Inc. | ![]() |
![]() |
Delaware |
Desilu Music Corp. | ![]() |
![]() |
New York |
DIGICO Inc. | ![]() |
![]() |
Delaware |
Direct Court Productions, Inc. | ![]() |
![]() |
Delaware |
DreamWorks L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks Distribution L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks Dramatic Television L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks Films L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks Finance L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks International Distribution L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks International Productions L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks Productions L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks Project Development L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks Television Animation L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks Television L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks SKG TV L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks Music Publishing L.L.C. | ![]() |
![]() |
Delaware |
![]() |
2
![]() |
![]() |
![]() |
![]() |
Subsidiary Name | ![]() |
![]() |
Place of Incorporation or Organization |
DreamWorks Music Publishing Nashville L.L.C. | ![]() |
![]() |
Delaware |
DreamWorks Internet L.L.C. | ![]() |
![]() |
Delaware |
DTE Films LLC | ![]() |
![]() |
Delaware |
DW Holdco LLC | ![]() |
![]() |
Delaware |
DW One Corp. | ![]() |
![]() |
Delaware |
DW TV Finance I L.L.C. | ![]() |
![]() |
Delaware |
DW Two Corp. | ![]() |
![]() |
Delaware |
Eighth Century Corporation | ![]() |
![]() |
Delaware |
Emily Productions LLC | ![]() |
![]() |
Delaware |
Ensign Music LLC | ![]() |
![]() |
Delaware |
Extreme Group Holdings Inc. | ![]() |
![]() |
Delaware |
Failure to Launch Productions LLC | ![]() |
![]() |
Louisiana |
Famous Music LLC | ![]() |
![]() |
Delaware |
Famous Orange Productions Inc. | ![]() |
![]() |
Delaware |
Festival Inc. | ![]() |
![]() |
Delaware |
Filmcraft Productions Inc. | ![]() |
![]() |
Delaware |
Future General Corporation | ![]() |
![]() |
Delaware |
Games Animation Inc. | ![]() |
![]() |
Delaware |
Games Productions Inc. | ![]() |
![]() |
Delaware |
GameTrailers Corp. | ![]() |
![]() |
Delaware |
GC Productions Inc. | ![]() |
![]() |
Delaware |
Gladiator Productions L.L.C. | ![]() |
![]() |
Delaware |
Grace Productions LLC | ![]() |
![]() |
Delaware |
Gramps Company Inc., The | ![]() |
![]() |
Delaware |
Hard Caliche LLC | ![]() |
![]() |
New Mexico |
Hey Yeah Productions Inc. | ![]() |
![]() |
Delaware |
House of Yes Productions Inc. | ![]() |
![]() |
Delaware |
IFILM Corp. | ![]() |
![]() |
Delaware |
Imagine Radio, Inc. | ![]() |
![]() |
California |
International Overseas Film Services, Inc. | ![]() |
![]() |
Delaware |
International Overseas Productions, Inc. | ![]() |
![]() |
California |
Joseph Productions Inc. | ![]() |
![]() |
Delaware |
Ladies Man Productions USA Inc. | ![]() |
![]() |
Delaware |
Last Holiday Productions LLC | ![]() |
![]() |
Louisiana |
Little Boston Company Inc. | ![]() |
![]() |
Delaware |
Long Road Productions | ![]() |
![]() |
Illinois |
MAD Production Trucking Company | ![]() |
![]() |
Delaware |
Magical Motion Pictures Inc. | ![]() |
![]() |
Delaware |
Magicam, Inc. | ![]() |
![]() |
Delaware |
Marathon Holdings Inc. | ![]() |
![]() |
Delaware |
Melange Pictures LLC | ![]() |
![]() |
Delaware |
Melee Entertainment L.L.C. | ![]() |
![]() |
Delaware |
Michaela Productions Inc. | ![]() |
![]() |
Delaware |
Mischief New Media Inc. | ![]() |
![]() |
New York |
MoonMan Productions Inc. | ![]() |
![]() |
Delaware |
MTV Animation Inc. | ![]() |
![]() |
Delaware |
MTV Asia Development Company Inc. | ![]() |
![]() |
Delaware |
MTV Australia Inc. | ![]() |
![]() |
Delaware |
![]() |
3
![]() |
![]() |
![]() |
![]() |
Subsidiary Name | ![]() |
![]() |
Place of Incorporation or Organization |
MTV DMS Inc. | ![]() |
![]() |
Delaware |
MTV India Development Company Inc. | ![]() |
![]() |
Delaware |
MTV Networks Argentina LLC | ![]() |
![]() |
Delaware |
MTV Networks Company | ![]() |
![]() |
Delaware |
MTV Networks Enterprises Inc. | ![]() |
![]() |
Delaware |
MTV Networks Europe Inc. | ![]() |
![]() |
Delaware |
MTV Networks Global Services Inc. | ![]() |
![]() |
Delaware |
MTV Networks Latin America Inc. | ![]() |
![]() |
Delaware |
MTV Networks On Campus Inc. | ![]() |
![]() |
Delaware |
MTV Networks Shopping Inc. | ![]() |
![]() |
Delaware |
MTV Networks South Africa Inc. | ![]() |
![]() |
Delaware |
MTV Russia Holdings Inc. | ![]() |
![]() |
Delaware |
MTV Songs Inc. | ![]() |
![]() |
Delaware |
MTVBVI Inc. | ![]() |
![]() |
Delaware |
MTVi Group, Inc., The | ![]() |
![]() |
Delaware |
MTVi Group, L.P., The | ![]() |
![]() |
Delaware |
MTVN Direct Inc. | ![]() |
![]() |
Delaware |
MTVN Online Inc. | ![]() |
![]() |
Delaware |
MTVN Online Partner I Inc. | ![]() |
![]() |
Delaware |
MTVN Online Partner I LLC | ![]() |
![]() |
Delaware |
MTVN Shopping Inc. | ![]() |
![]() |
Delaware |
MTVN Video Hits Inc. | ![]() |
![]() |
Delaware |
Music by Nickelodeon Inc. | ![]() |
![]() |
Delaware |
Music By Video Inc. | ![]() |
![]() |
Delaware |
NeoPets Foundation | ![]() |
![]() |
California |
NeoPets, Inc. | ![]() |
![]() |
Delaware |
Netherlands Overseas Inc. | ![]() |
![]() |
Delaware |
Network Enterprises, Inc. | ![]() |
![]() |
Delaware |
Neutronium Inc. | ![]() |
![]() |
Delaware |
Newdon Productions | ![]() |
![]() |
Delaware |
Nick at Nite's TV Land Retromercials Inc. | ![]() |
![]() |
Delaware |
Nickelodeon Animation Studios Inc. | ![]() |
![]() |
Delaware |
Nickelodeon Australia Inc. | ![]() |
![]() |
Delaware |
Nickelodeon Brasil Inc. | ![]() |
![]() |
Delaware |
Nickelodeon Direct Inc. | ![]() |
![]() |
Delaware |
Nickelodeon Global Network Ventures Inc. | ![]() |
![]() |
Delaware |
Nickelodeon Magazines Inc. | ![]() |
![]() |
Delaware |
Nickelodeon Movies Inc. | ![]() |
![]() |
Delaware |
Nickelodeon Notes Inc. | ![]() |
![]() |
Delaware |
Nickelodeon Online Inc. | ![]() |
![]() |
Delaware |
Nickelodeon UK Holdings LLC | ![]() |
![]() |
Delaware |
Night Falls Productions Inc. | ![]() |
![]() |
Delaware |
Noggin LLC | ![]() |
![]() |
Delaware |
Not Before 10AM Productions Inc. | ![]() |
![]() |
Delaware |
NM Classics Inc. | ![]() |
![]() |
Delaware |
NP Domains, Inc. | ![]() |
![]() |
Delaware |
NV International, Inc. | ![]() |
![]() |
Georgia |
O&W Corporation | ![]() |
![]() |
Tennessee |
![]() |
4
![]() |
![]() |
![]() |
![]() |
Subsidiary Name | ![]() |
![]() |
Place of Incorporation or Organization |
One and Only Joint Venture, The | ![]() |
![]() |
New York |
On-Site Productions Inc. | ![]() |
![]() |
Delaware |
Open Door Productions Inc. | ![]() |
![]() |
Delaware |
Outdoor Entertainment, Inc. | ![]() |
![]() |
Tennessee |
Pacific Productions L.L.C. | ![]() |
![]() |
Delaware |
Paramount Canadian Productions, Inc. | ![]() |
![]() |
Delaware |
Paramount Digital Entertainment Inc. | ![]() |
![]() |
Delaware |
Paramount Films of Australia Inc. | ![]() |
![]() |
Delaware |
Paramount Films of China, Inc. | ![]() |
![]() |
Delaware |
Paramount Films of Egypt, Inc. | ![]() |
![]() |
Delaware |
Paramount Films of India, Ltd. | ![]() |
![]() |
Delaware |
Paramount Films of Italy, Inc. | ![]() |
![]() |
Delaware |
Paramount Films of Lebanon, Inc. | ![]() |
![]() |
Delaware |
Paramount Films of Pakistan, Ltd. | ![]() |
![]() |
Delaware |
Paramount Films of Southeast Asia Inc. | ![]() |
![]() |
Delaware |
Paramount Home Entertainment Inc. | ![]() |
![]() |
Delaware |
Paramount Images Inc. | ![]() |
![]() |
Delaware |
Paramount LAPTV Inc. | ![]() |
![]() |
Delaware |
Paramount Music Corporation | ![]() |
![]() |
Delaware |
Paramount Overseas Productions, Inc. | ![]() |
![]() |
Delaware |
Paramount Pictures Corporation | ![]() |
![]() |
Delaware |
Paramount Pictures Louisiana Production Investment III LLC | ![]() |
![]() |
Louisiana |
Paramount Pictures Louisiana Production Investments II LLC | ![]() |
![]() |
Louisiana |
Paramount Pictures Louisiana Production Investments LLC | ![]() |
![]() |
Louisiana |
Paramount Production Support Inc. | ![]() |
![]() |
Delaware |
Paramount Productions Service Corporation | ![]() |
![]() |
Delaware |
Paramount Worldwide Productions Inc. | ![]() |
![]() |
Delaware |
Para-Sac Music LLC | ![]() |
![]() |
Delaware |
Park Court Productions, Inc. | ![]() |
![]() |
Delaware |
Peanut Worm Productions Inc. | ![]() |
![]() |
Delaware |
Peppercorn Productions, Inc. | ![]() |
![]() |
Tennessee |
Pet II Productions Inc. | ![]() |
![]() |
Delaware |
Pop Channel Productions Inc. | ![]() |
![]() |
Delaware |
Pop Culture Productions Inc. | ![]() |
![]() |
Delaware |
Pop Toons Inc. | ![]() |
![]() |
Delaware |
Premiere House, Inc. | ![]() |
![]() |
Delaware |
Prime Directive Productions Inc. | ![]() |
![]() |
Delaware |
PT Productions Inc. | ![]() |
![]() |
Delaware |
Remote Productions Inc. | ![]() |
![]() |
Delaware |
Rooftop Publishing Inc. | ![]() |
![]() |
California |
Sammarnick Insurance Corporation | ![]() |
![]() |
New York |
Scarab Publishing Corporation | ![]() |
![]() |
Delaware |
SFI Song Company | ![]() |
![]() |
Florida |
SKG Louisiana L.L.C. | ![]() |
![]() |
Louisiana |
SKG Productions L.L.C. | ![]() |
![]() |
Louisiana |
SKG Music Nashville Inc. | ![]() |
![]() |
Delaware |
SKG Music Publishing L.L.C. | ![]() |
![]() |
Delaware |
SKG Music L.L.C. | ![]() |
![]() |
Delaware |
![]() |
5
![]() |
![]() |
![]() |
![]() |
Subsidiary Name | ![]() |
![]() |
Place of Incorporation or Organization |
SonicNet LLC | ![]() |
![]() |
Delaware |
Spelling Films Inc. | ![]() |
![]() |
Delaware |
Spelling Films Music Inc. | ![]() |
![]() |
Delaware |
Spelling Pictures Inc. | ![]() |
![]() |
Delaware |
State of Mind Inc. | ![]() |
![]() |
Delaware |
Staying Alive Foundation Inc., The | ![]() |
![]() |
New York |
Stepdude Productions LLC | ![]() |
![]() |
Louisiana |
Superstar Productions USA Inc. | ![]() |
![]() |
Delaware |
Surprise Merger Sub Inc. | ![]() |
![]() |
Delaware |
Talent Court Productions, Inc. | ![]() |
![]() |
Delaware |
TC Productions Inc. | ![]() |
![]() |
Delaware |
Thinner Productions, Inc. | ![]() |
![]() |
Delaware |
TNN Classic Sessions, Inc. | ![]() |
![]() |
Delaware |
TNN Productions, Inc. | ![]() |
![]() |
Delaware |
Tunes By Nickelodeon Inc. | ![]() |
![]() |
Delaware |
TV Land Canada Holding Inc. | ![]() |
![]() |
Delaware |
UGJ Productions Inc. | ![]() |
![]() |
Delaware |
Untitled Productions II LLC | ![]() |
![]() |
Delaware |
Uptown Productions Inc. | ![]() |
![]() |
Delaware |
VH-1 Save the Music Foundation | ![]() |
![]() |
New York |
Viacom Animation of Korea Inc. | ![]() |
![]() |
Delaware |
Viacom Asia Inc. | ![]() |
![]() |
Delaware |
Viacom Camden Lock Inc. | ![]() |
![]() |
Delaware |
Viacom Consumer Products Inc. | ![]() |
![]() |
Delaware |
Viacom Global Services Inc. | ![]() |
![]() |
Delaware |
Viacom Hearty Ha!Ha! LLC | ![]() |
![]() |
Delaware |
Viacom Holdings Germany LLC | ![]() |
![]() |
Delaware |
Viacom International Inc. | ![]() |
![]() |
Delaware |
Viacom International Inc. Political Action Committee Corporation | ![]() |
![]() |
New York |
Viacom International Services Inc. | ![]() |
![]() |
Delaware |
Viacom Netherlands Management LLC | ![]() |
![]() |
Delaware |
Viacom Networks Europe Inc. | ![]() |
![]() |
Delaware |
Viacom Notes Inc. | ![]() |
![]() |
Delaware |
Viacom Realty Corporation | ![]() |
![]() |
Delaware |
Viacom Receivables Funding I Corporation | ![]() |
![]() |
Delaware |
Viacom Songs Inc. | ![]() |
![]() |
Delaware |
Viacom Subsidiary Management Corp. | ![]() |
![]() |
Delaware |
Viacom Telecommunications (D.C.) Inc. | ![]() |
![]() |
Delaware |
Viacom Tunes Inc. | ![]() |
![]() |
Delaware |
Wilshire Court Productions LLC | ![]() |
![]() |
Delaware |
World Skating League, LLC | ![]() |
![]() |
Tennessee |
World Sports Enterprises | ![]() |
![]() |
Tennessee |
Worldwide Productions, Inc. | ![]() |
![]() |
Delaware |
Wuthering Heights, CA Productions Inc. | ![]() |
![]() |
Delaware |
Xfire, Inc. | ![]() |
![]() |
Delaware |
Zoo Films LLC | ![]() |
![]() |
Delaware |
![]() |
6
FOREIGN
![]() |
![]() |
![]() |
![]() |
Subsidiary Name | ![]() |
![]() |
Place of Incorporation or Organization |
1677873 Ontario Inc. | ![]() |
![]() |
Canada (Ontario) |
1677875 Ontario Inc. | ![]() |
![]() |
Canada (Ontario) |
24th Floor Inc. | ![]() |
![]() |
Canada (Ontario) |
2gether Productions Inc. | ![]() |
![]() |
Canada (B.C.) |
3085284 Nova Scotia Limited | ![]() |
![]() |
Canada (Nova Scotia) |
ATR Films Inc. | ![]() |
![]() |
Canada (Ontario) |
Bad Boys Production Music BV | ![]() |
![]() |
Netherlands |
Belhaven Limited | ![]() |
![]() |
Bahamas |
Biscondi Sdn Bld | ![]() |
![]() |
Malaysia |
Blind Eye Productions Inc | ![]() |
![]() |
Canada (B.C.) |
Brainpool TV GmbH | ![]() |
![]() |
Germany |
Bronson Gate Film Management GmbH | ![]() |
![]() |
Germany |
Cape Cross Studio/Filmlicht GmbH | ![]() |
![]() |
Germany |
Capital Equipment Leasing Limited | ![]() |
![]() |
UK |
Cent Productions Inc. | ![]() |
![]() |
Canada (Ontario) |
CIC Home Video GmbH | ![]() |
![]() |
Switzerland |
CIC Video (Pty) Ltd | ![]() |
![]() |
South Africa |
Cinematic Arts BV | ![]() |
![]() |
Netherlands |
CVV (Japan) BV | ![]() |
![]() |
Netherlands |
Director's Cuts Production Music Limited | ![]() |
![]() |
UK |
DreamWorks Distribution Canada Company | ![]() |
![]() |
Canada (Nova Scotia) |
DTV Productions Inc. | ![]() |
![]() |
Canada (Ontario) |
DW Productions UK Limited | ![]() |
![]() |
UK |
DW (Netherlands) B.V. | ![]() |
![]() |
Netherlands |
Elton TV Produktion GmbH | ![]() |
![]() |
Germany |
e-tv Produktions-und Vermarktungs GmbH | ![]() |
![]() |
Germany |
Extreme Australia Pty Limited | ![]() |
![]() |
Australia |
Extreme Music Limited | ![]() |
![]() |
UK |
Extreme Music RMF Limited | ![]() |
![]() |
UK |
Extreme Musik GmbH | ![]() |
![]() |
Germany |
Famous Music Publishing France SARL | ![]() |
![]() |
France |
Famous Music Publishing Germany GmbH & Co KG | ![]() |
![]() |
Germany |
Famous Music Publishing Limited | ![]() |
![]() |
UK |
Famous Players International BV | ![]() |
![]() |
Netherlands |
Films Paramount S.A. | ![]() |
![]() |
France |
Four Brothers Films Inc. | ![]() |
![]() |
Canada (Ontario) |
Futa BV | ![]() |
![]() |
Netherlands |
Game One SAS | ![]() |
![]() |
France |
Global Film Distributors BV | ![]() |
![]() |
Netherlands |
Greenland Place Music Limited | ![]() |
![]() |
UK |
Haverstraw Insurance Corporation | ![]() |
![]() |
Bermuda |
High Command Productions Limited | ![]() |
![]() |
UK |
HTL Productions Inc. | ![]() |
![]() |
Canada (Ontario) |
Invision Holdings BV | ![]() |
![]() |
Netherlands |
Kindernet CV | ![]() |
![]() |
Netherlands |
Koln Comedy Festival GmbH | ![]() |
![]() |
Germany |
![]() |
7
![]() |
![]() |
![]() |
![]() |
Subsidiary Name | ![]() |
![]() |
Place of Incorporation or Organization |
Lisarb Holding BV | ![]() |
![]() |
Netherlands |
Maximum Attitude Musique S.A.R.L. | ![]() |
![]() |
France |
Mea Culpa Mediaverwertungs GmbH | ![]() |
![]() |
Germany |
Mea Culpa TV Produktions GmbH | ![]() |
![]() |
Germany |
Mile 108 Gripstore GmbH | ![]() |
![]() |
Germany |
MG Films Inc. | ![]() |
![]() |
Canada (Ontario) |
MTV Asia LDC | ![]() |
![]() |
Cayman Islands |
MTV Asia Ownership One LDC | ![]() |
![]() |
Cayman Islands |
MTV Asia Ownership Two LDC | ![]() |
![]() |
Cayman Islands |
MTV Asia Ventures (India) Pte. Limited | ![]() |
![]() |
Mauritius |
MTV Asia Ventures Co. | ![]() |
![]() |
Cayman Islands |
MTV Channel Espana SL | ![]() |
![]() |
Spain |
MTV Extra SAS | ![]() |
![]() |
France |
MTV Hong Kong Limited | ![]() |
![]() |
Hong Kong |
MTV IMP Japan Inc. | ![]() |
![]() |
Japan |
MTV India LDC | ![]() |
![]() |
Cayman Islands |
MTV Networks AB | ![]() |
![]() |
Sweden |
MTV Networks Africa (Proprietary) Limited | ![]() |
![]() |
South Africa |
MTV Networks Argentina Srl | ![]() |
![]() |
Argentina |
MTV Networks Australia Pty Ltd | ![]() |
![]() |
Australia |
MTV Networks Belgium BVBA | ![]() |
![]() |
Belgium |
MTV Networks BV | ![]() |
![]() |
Netherlands |
MTV Networks de Mexico S. de R.L. de C.V. | ![]() |
![]() |
Mexico |
MTV Networks GmbH & Co OHG | ![]() |
![]() |
Germany |
MTV Networks India Private Limited | ![]() |
![]() |
India |
MTV Networks Japan BV | ![]() |
![]() |
Netherlands |
MTV Networks Ltda (Portugal) | ![]() |
![]() |
Portugal |
MTV Networks Productions BV | ![]() |
![]() |
Netherlands |
MTV Networks SARL | ![]() |
![]() |
France |
MTV Networks Verwaltung GmbH | ![]() |
![]() |
Germany |
MTV Radio Productions Limited | ![]() |
![]() |
UK |
MTV SA LDC | ![]() |
![]() |
Cayman Islands |
MTV Taiwan LDC | ![]() |
![]() |
Cayman Islands |
Music Television Networks Co. Ltd. | ![]() |
![]() |
Thailand |
NeoPets Asia Pte. Ltd. | ![]() |
![]() |
Singapore |
Nickelodeon (Deutschland) GmbH & Co KG | ![]() |
![]() |
Germany |
Nickelodeon (Deutschland) Verwaltung GmbH | ![]() |
![]() |
Germany |
Nickelodeon Asia Holdings Pte Ltd | ![]() |
![]() |
Singapore |
Nickelodeon France SAS | ![]() |
![]() |
France |
Nickelodeon Huggings U.K. Limited | ![]() |
![]() |
UK |
Nickelodeon India Pvt Ltd | ![]() |
![]() |
India |
Nickelodeon International Limited. | ![]() |
![]() |
UK |
Nickelodeon Management Pte Ltd | ![]() |
![]() |
Singapore |
Nickelodeon Mauritius Ltd | ![]() |
![]() |
Mauritius |
NV Broadcasting (Canada) Inc. | ![]() |
![]() |
Canada (Federal) |
On Music Network Co Ltd | ![]() |
![]() |
Korea |
Paramount British Pictures Limited | ![]() |
![]() |
UK |
Paramount Films B.V. | ![]() |
![]() |
Netherlands |
![]() |
8
![]() |
![]() |
![]() |
![]() |
Subsidiary Name | ![]() |
![]() |
Place of Incorporation or Organization |
Paramount Comedy Channel Espana SL | ![]() |
![]() |
Spain |
Paramount Home Entertainment (Australasia) Pty. Ltd. | ![]() |
![]() |
Australia |
Paramount Home Entertainment (Brazil) Limitada | ![]() |
![]() |
Brazil |
Paramount Home Entertainment (Denmark) I/S | ![]() |
![]() |
Denmark |
Paramount Home Entertainment (Finland) Oy | ![]() |
![]() |
Finland |
Paramount Home Entertainment (France) S.A.S. | ![]() |
![]() |
France |
Paramount Home Entertainment (Germany) GmbH | ![]() |
![]() |
Germany |
Paramount Home Entertainment (Italy) SRL | ![]() |
![]() |
Italy |
Paramount Home Entertainment (Japan) Ltd | ![]() |
![]() |
Japan |
Paramount Home Entertainment (Korea) Ltd | ![]() |
![]() |
Korea |
Paramount Home Entertainment (Mexico) S de RL de CV | ![]() |
![]() |
Mexico |
Paramount Home Entertainment (Mexico) Services S de RL de CV | ![]() |
![]() |
Mexico |
Paramount Home Entertainment (New Zealand) Ltd. | ![]() |
![]() |
New Zealand |
Paramount Home Entertainment (Norway) ANS | ![]() |
![]() |
Norway |
Paramount Home Entertainment (Spain) S.L. | ![]() |
![]() |
Spain |
Paramount Home Entertainment (Sweden) AB | ![]() |
![]() |
Sweden |
Paramount Home Entertainment (UK) | ![]() |
![]() |
UK |
Paramount Home Entertainment BV | ![]() |
![]() |
Netherlands |
Paramount Home Entertainment International BV | ![]() |
![]() |
Netherlands |
Paramount Home Entertainment International (Holdings) BV | ![]() |
![]() |
Netherlands |
Paramount Home Entertainment International Limited | ![]() |
![]() |
UK |
Paramount Pictures International Limited | ![]() |
![]() |
UK |
Paramount International (Netherlands) BV | ![]() |
![]() |
Netherlands |
Paramount Pay TV Limited | ![]() |
![]() |
UK |
Paramount Pictures Corporation (Canada) Inc. | ![]() |
![]() |
Canada (Ontario) |
Paramount Pictures Entertainment Canada Inc. | ![]() |
![]() |
Canada (Ontario) |
Paramount Pictures International Limited | ![]() |
![]() |
UK |
Paramount Pictures Productions Australia Pty Limited | ![]() |
![]() |
Australia |
Paramount UK Partnership (Paramount Comedy Channel UK) | ![]() |
![]() |
UK |
Perfect Score Films Inc. | ![]() |
![]() |
Canada (B.C.) |
PF Films Inc. | ![]() |
![]() |
Canada (Ontario) |
PPC Film Management GmbH | ![]() |
![]() |
Germany |
Preview Investments BV | ![]() |
![]() |
Netherlands |
Regional Asia Investments Ventures Pte Ltd | ![]() |
![]() |
Mauritius |
RR Films Inc. | ![]() |
![]() |
Canada (Alberta) |
S Media Vision AG | ![]() |
![]() |
Switzerland |
Servicios Para Empresas de Entretenimiento S de RL de CV | ![]() |
![]() |
Mexico |
Smoker Films Inc | ![]() |
![]() |
Canada (Ontario) |
SKG Studios Canada Inc. | ![]() |
![]() |
Canada (Nova Scotia) |
Space TV GmbH | ![]() |
![]() |
Germany |
The Box BV | ![]() |
![]() |
Netherlands |
The Extreme Music Library (Ireland) Limited | ![]() |
![]() |
Ireland |
The Extreme Music Library Limited | ![]() |
![]() |
UK |
The Music Source Inc. | ![]() |
![]() |
Philippines |
Timeline Films Inc. | ![]() |
![]() |
Canada (Ontario) |
TV on tour Veranstaltungs GmbH | ![]() |
![]() |
Germany |
VH-1 Television GmbH & Co. OHG | ![]() |
![]() |
|
Viacom (Deutschland) Beteiligungen GmbH | ![]() |
![]() |
Germany |
![]() |
9
![]() |
![]() |
![]() |
![]() |
Subsidiary Name | ![]() |
![]() |
Place of Incorporation or Organization |
Viacom Brand Solutions Limited | ![]() |
![]() |
UK |
Viacom Global (Netherlands) BV | ![]() |
![]() |
Netherlands |
Viacom Global Limited | ![]() |
![]() |
UK |
Viacom Holdings Brasil Ltda | ![]() |
![]() |
Brazil |
Viacom International Japan KK | ![]() |
![]() |
Japan |
Viacom Limited | ![]() |
![]() |
New Zealand |
Viacom Networks Brasil Ltda | ![]() |
![]() |
Brazil |
Viacom Networks Italia Limited | ![]() |
![]() |
UK |
Viacom Overseas Holdings CV | ![]() |
![]() |
Netherlands Antilles |
Viacom VHENO GmbH | ![]() |
![]() |
Germany |
Visionair Television BV | ![]() |
![]() |
Netherlands |
VIVA Connect GmbH | ![]() |
![]() |
Germany |
VIVA Fernsehen GmbH | ![]() |
![]() |
Germany |
VIVA Media Enterprises GmbH | ![]() |
![]() |
Germany |
VIVA Media GmbH | ![]() |
![]() |
Germany |
VIVA Production SRL | ![]() |
![]() |
Italy |
VIVA Radio Beteiligungs GmbH | ![]() |
![]() |
Germany |
VIVA TV Productions Sp.o.o. | ![]() |
![]() |
Poland |
Wayfarer Media Ltd (MTV Russia) | ![]() |
![]() |
Cyprus |
Westka Interactive GmbH i.L | ![]() |
![]() |
Germany |
Widows Broom Films Inc. | ![]() |
![]() |
Canada (Ontario) |
Worldwide MSP Limited | ![]() |
![]() |
UK |
Z+ Broadcasting Company Ltd | ![]() |
![]() |
Hungary |
Zarina 99 Vermogensverwaltungesellschaft GmbH | ![]() |
![]() |
Germany |
![]() |
10
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form S-4 of our reports dated March 16, 2006 relating to the financial statements and financial statement schedule of Viacom Inc., which appear in such Registration Statement. We also consent to the reference to us under the heading ‘‘Experts’’ in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
New York, New York
August 18,
2006
Exhibit 24.1
VIACOM INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM INC., a Delaware corporation, hereby constitutes and appoints each of Michael D. Fricklas and Mark C. Morril, severally and not jointly, to be his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-4 of Viacom Inc. (and any amendments thereto); granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 18th day of August 2006.
![]() |
/s/ George S.
Abrams
George S. Abrams |
VIACOM INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM INC., a Delaware corporation, hereby constitutes and appoints each of Michael D. Fricklas and Mark C. Morril, severally and not jointly, to be his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-4 of Viacom Inc. (and any amendments thereto); granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 18th day of August 2006.
![]() |
/s/ Philippe P.
Dauman
Philippe P. Dauman |
VIACOM INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM INC., a Delaware corporation, hereby constitutes and appoints each of Michael D. Fricklas and Mark C. Morril, severally and not jointly, to be his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-4 of Viacom Inc. (and any amendments thereto); granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 18th day of August 2006.
![]() |
/s/ Thomas E.
Dooley
Thomas E. Dooley |
VIACOM INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM INC., a Delaware corporation, hereby constitutes and appoints each of Michael D. Fricklas and Mark C. Morril, severally and not jointly, to be her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for her and in her name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-4 of Viacom Inc. (and any amendments thereto); granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or her substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 18th day of August 2006.
![]() |
/s/ Ellen V.
Futter
Ellen V. Futter |
VIACOM INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM INC., a Delaware corporation, hereby constitutes and appoints each of Michael D. Fricklas and Mark C. Morril, severally and not jointly, to be his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-4 of Viacom Inc. (and any amendments thereto); granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 18th day of August 2006.
![]() |
/s/ Alan C.
Greenberg
Alan C. Greenberg |
VIACOM INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM INC., a Delaware corporation, hereby constitutes and appoints each of Michael D. Fricklas and Mark C. Morril, severally and not jointly, to be his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-4 of Viacom Inc. (and any amendments thereto); granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 18th day of August 2006.
![]() |
/s/ Robert K.
Kraft
Robert K. Kraft |
VIACOM INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM INC., a Delaware corporation, hereby constitutes and appoints each of Michael D. Fricklas and Mark C. Morril, severally and not jointly, to be his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-4 of Viacom Inc. (and any amendments thereto); granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 18th day of August 2006.
![]() |
/s/ Charles E. Phillips,
Jr.
Charles E. Phillips, Jr. |
VIACOM INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM INC., a Delaware corporation, hereby constitutes and appoints each of Michael D. Fricklas and Mark C. Morril, severally and not jointly, to be her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for her and in her name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-4 of Viacom Inc. (and any amendments thereto); granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or her substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 18th day of August 2006.
![]() |
/s/ Shari
Redstone
Shari Redstone |
VIACOM INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM INC., a Delaware corporation, hereby constitutes and appoints each of Michael D. Fricklas and Mark C. Morril, severally and not jointly, to be his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-4 of Viacom Inc. (and any amendments thereto); granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 18th day of August 2006.
![]() |
/s/ Sumner M.
Redstone
Sumner M. Redstone |
VIACOM INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM INC., a Delaware corporation, hereby constitutes and appoints each of Michael D. Fricklas and Mark C. Morril, severally and not jointly, to be his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-4 of Viacom Inc. (and any amendments thereto); granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 18th day of August 2006.
![]() |
/s/ Frederic V.
Salerno
Frederic V. Salerno |
VIACOM INC.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of VIACOM INC., a Delaware corporation, hereby constitutes and appoints each of Michael D. Fricklas and Mark C. Morril, severally and not jointly, to be his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-4 of Viacom Inc. (and any amendments thereto); granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto signed my name this 18th day of August 2006.
![]() |
/s/ William
Schwartz
William Schwartz |
Exhibit 25.1
![]() |
![]() |
![]() |
![]() |
![]() |
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE
ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE
PURSUANT TO
SECTION 305(b)(2)
![]() |
|||
![]() |
![]() ![]() |
![]() |
![]() |
![]() |
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
![]() |
|||
![]() |
![]() ![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
New York | ![]() |
![]() |
13-5160382 |
(State of incorporation if not a U.S. national bank) |
![]() |
![]() |
(I.R.S. employer identification no.) |
One Wall Street, New York, N.Y. | ![]() |
![]() |
10286 |
(Address of principal executive offices) | ![]() |
![]() |
(Zip code) |
![]() |
![]() |
|||
![]() |
![]() ![]() |
![]() |
![]() |
![]() |
VIACOM INC.
(Exact name of obligor as specified in its charter)
![]() |
![]() |
![]() |
![]() |
Delaware | ![]() |
![]() |
20-3515052 |
(State or other jurisdiction
of incorporation or organization) |
![]() |
![]() |
(I.R.S.
employer identification no.) |
1515
Broadway New York, NY |
![]() |
![]() |
10036 |
(Address of principal executive offices) | ![]() |
![]() |
(Zip code) |
![]() |
![]() |
|||
![]() |
![]() ![]() |
![]() |
![]() |
![]() |
Floating rate senior notes due 2009
(Title of the indenture securities)
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
1. | General information. Furnish the following information as to the Trustee: |
![]() |
![]() |
![]() |
(a) | Name and address of each examining or supervising authority to which it is subject. |
![]() |
|||
![]() |
![]() |
![]() |
![]() |
Name | ![]() |
![]() |
Address |
Superintendent of Banks of the State of New York | ![]() |
![]() |
One State Street, New York,
N.Y. 10004-1417, and Albany, N.Y. 12223 |
Federal Reserve Bank of New York | ![]() |
![]() |
33 Liberty Street,
New York, N.Y. 10045 |
Federal Deposit Insurance Corporation | ![]() |
![]() |
Washington, D.C. 20429 |
New York Clearing House Association | ![]() |
![]() |
New York, New York 10005 |
![]() |
![]() |
![]() |
![]() |
(b) | Whether it is authorized to exercise corporate trust powers. |
Yes.
![]() |
![]() |
2. | Affiliations with Obligor. |
If the obligor is an affiliate of the trustee, describe each such affiliation.
None.
![]() |
![]() |
16. | List of Exhibits. |
Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the ‘‘Act’’) and 17 C.F.R. 229.10(d).
![]() |
![]() |
![]() |
1. | A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672, Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637 and Exhibit 1 to Form T-1 filed with Registration Statement No. 333-121195.) |
![]() |
![]() |
![]() |
4. | A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 333-121195.) |
2
![]() |
![]() |
![]() |
6. | The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 333-106702.) |
![]() |
![]() |
![]() |
7. | A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. |
3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 24th day of July, 2006.
![]() |
![]() |
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![]() |
THE BANK OF NEW YORK | |||||||
![]() |
![]() |
By: | ![]() |
![]() |
/s/ Van K. Brown | ||||
![]() |
![]() |
![]() |
![]() |
Name: | ![]() |
![]() |
Van K. Brown | ||
![]() |
![]() |
![]() |
![]() |
Title: | ![]() |
![]() |
Vice President | ||
![]() |
4
EXHIBIT 7
Consolidated Report of Condition of
THE BANK
OF NEW YORK
of One Wall Street, New York, N.Y.
10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 2006, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
Dollar Amounts In Thousands |
||||
ASSETS | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Cash and balances due from depository institutions: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Noninterest-bearing balances and currency and coin | ![]() |
![]() |
![]() |
$ | 3,230,000 |
![]() |
Interest-bearing balances | ![]() |
![]() |
![]() |
![]() |
6,440,000 |
![]() |
Securities: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Held-to-maturity securities | ![]() |
![]() |
![]() |
![]() |
2,165,000 |
![]() |
Available-for-sale securities | ![]() |
![]() |
![]() |
![]() |
22,631,000 |
![]() |
Federal funds sold
and securities purchased under agreements to resell Federal funds sold in domestic offices |
![]() |
![]() |
![]() |
![]() |
2,955,000 |
![]() |
Securities purchased under agreements to resell | ![]() |
![]() |
![]() |
![]() |
315,000 |
![]() |
Loans and lease financing receivables: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Loans and leases held for sale | ![]() |
![]() |
![]() |
![]() |
0 |
![]() |
Loans and leases, net of unearned income | ![]() |
![]() |
![]() |
![]() |
32,983,000 |
![]() |
LESS: Allowance for loan and lease losses | ![]() |
![]() |
![]() |
![]() |
415,000 |
![]() |
Loans and leases, net of unearned income and allowance | ![]() |
![]() |
![]() |
![]() |
32,568,000 |
![]() |
Trading assets | ![]() |
![]() |
![]() |
![]() |
6,861,000 |
![]() |
Premises and fixed assets (including capitalized leases) | ![]() |
![]() |
![]() |
![]() |
828,000 |
![]() |
Other real estate owned | ![]() |
![]() |
![]() |
![]() |
0 |
![]() |
Investments in unconsolidated subsidiaries and associated companies | ![]() |
![]() |
![]() |
![]() |
298,000 |
![]() |
Not applicable | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Intangible assets: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Goodwill | ![]() |
![]() |
![]() |
![]() |
2,148,000 |
![]() |
Other intangible assets | ![]() |
![]() |
![]() |
![]() |
760,000 |
![]() |
Other assets | ![]() |
![]() |
![]() |
![]() |
6,551,000 |
![]() |
Total assets | ![]() |
![]() |
![]() |
$ | 87,750,000 |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
Dollar Amounts In Thousands |
||||
LIABILITIES | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Deposits: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
In domestic offices | ![]() |
![]() |
![]() |
$ | 35,956,000 |
![]() |
Noninterest-bearing | ![]() |
![]() |
![]() |
![]() |
16,637,000 |
![]() |
Interest-bearing | ![]() |
![]() |
![]() |
![]() |
19,319,000 |
![]() |
In foreign offices, Edge and Agreement subsidiaries, and IBFs | ![]() |
![]() |
![]() |
![]() |
30,215,000 |
![]() |
Noninterest-bearing | ![]() |
![]() |
![]() |
![]() |
578,000 |
![]() |
Interest-bearing | ![]() |
![]() |
![]() |
![]() |
29,637,000 |
![]() |
Federal funds purchased and securities sold
under agreements to repurchase Federal funds purchased in domestic offices |
![]() |
![]() |
![]() |
![]() |
825,000 |
![]() |
Securities sold under agreements to repurchase | ![]() |
![]() |
![]() |
![]() |
123,000 |
![]() |
Trading liabilities | ![]() |
![]() |
![]() |
![]() |
2,509,000 |
![]() |
Other borrowed money: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
(includes mortgage indebtedness and obligations under capitalized leases) | ![]() |
![]() |
![]() |
![]() |
1,890,000 |
![]() |
Not applicable | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Not applicable | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Subordinated notes and debentures | ![]() |
![]() |
![]() |
![]() |
1,955,000 |
![]() |
Other liabilities | ![]() |
![]() |
![]() |
![]() |
5,573,000 |
![]() |
Total liabilities | ![]() |
![]() |
![]() |
$ | 79,046,000 |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
||
Minority interest in consolidated subsidiaries | ![]() |
![]() |
![]() |
![]() |
151,000 |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
||
EQUITY CAPITAL | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Perpetual preferred stock and related surplus | ![]() |
![]() |
![]() |
![]() |
0 |
![]() |
Common stock | ![]() |
![]() |
![]() |
![]() |
1,135,000 |
![]() |
Surplus (exclude all surplus related to preferred stock) | ![]() |
![]() |
![]() |
![]() |
2,107,000 |
![]() |
Retained earnings | ![]() |
![]() |
![]() |
![]() |
5,487,000 |
![]() |
Accumulated other comprehensive income | ![]() |
![]() |
![]() |
![]() |
–176,000 |
![]() |
Other equity capital components | ![]() |
![]() |
![]() |
![]() |
0 |
![]() |
Total equity capital | ![]() |
![]() |
![]() |
![]() |
8,553,000 |
![]() |
Total liabilities, minority interest, and equity capital | ![]() |
![]() |
![]() |
$ | 87,750,000 |
![]() |
![]() |
I, Thomas J. Mastro, Executive Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.
![]() |
Thomas J.
Mastro, Executive Vice President and Comptroller |
We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct.
![]() |
Thomas A. Renyi Gerald L. Hassell Directors |
Exhibit 25.2
![]() |
![]() |
![]() |
![]() |
![]() |
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE
ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE
PURSUANT TO
SECTION 305(b)(2)
![]() |
|||
![]() |
![]() ![]() |
![]() |
![]() |
![]() |
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
![]() |
|||
![]() |
![]() ![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
New
York
(State of incorporation if not a U.S. national bank) |
![]() |
![]() |
13-5160382
(I.R.S. employer identification no.) |
One
Wall Street, New York, N.Y.
(Address of principal executive offices) |
![]() |
![]() |
10286
(Zip code) |
![]() |
![]() |
|||
![]() |
![]() ![]() |
![]() |
![]() |
![]() |
VIACOM INC.
(Exact name of obligor as specified in its charter)
![]() |
![]() |
![]() |
![]() |
Delaware
(State or other jurisdiction of incorporation or organization) |
![]() |
![]() |
20-3515052
(I.R.S. employer identification no.) |
1515
Broadway New York, NY (Address of principal executive offices) |
![]() |
![]() |
10036
(Zip code) |
![]() |
![]() |
|||
![]() |
![]() ![]() |
![]() |
![]() |
![]() |
5.75%
senior notes due 2011
(Title of the indenture
securities)
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
1. | General information. Furnish the following information as to the Trustee: |
![]() |
![]() |
![]() |
(a) | Name and address of each examining or supervising authority to which it is subject. |
![]() |
|||
![]() |
![]() |
![]() |
![]() |
Name | ![]() |
![]() |
Address |
Superintendent
of Banks of the State of New York |
![]() |
![]() |
One State Street, New
York, N.Y. 10004-1417, and Albany, N.Y. 12223 |
Federal Reserve Bank of New York | ![]() |
![]() |
33 Liberty Street,
New York, N.Y. 10045 |
Federal Deposit Insurance Corporation | ![]() |
![]() |
Washington, D.C. 20429 |
New York Clearing House Association | ![]() |
![]() |
New York, New York 10005 |
![]() |
![]() |
![]() |
![]() |
(b) | Whether it is authorized to exercise corporate trust powers. |
Yes.
![]() |
![]() |
2. | Affiliations with Obligor. |
If the obligor is an affiliate of the trustee, describe each such affiliation.
None.
![]() |
![]() |
16. | List of Exhibits. |
Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the ‘‘Act’’) and 17 C.F.R. 229.10(d).
![]() |
![]() |
![]() |
1. | A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672, Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637 and Exhibit 1 to Form T-1 filed with Registration Statement No. 333-121195.) |
![]() |
![]() |
![]() |
4. | A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 333-121195.) |
![]() |
![]() |
![]() |
6. | The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 333-106702.) |
![]() |
![]() |
![]() |
7. | A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. |
2
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 24th day of July, 2006.
![]() |
![]() |
![]() |
![]() |
THE BANK OF NEW YORK | |||
By: | ![]() |
![]() |
/s/ Van K. Brown |
![]() |
![]() |
Name: Van K. Brown Title: Vice President |
|
![]() |
3
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign
and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 2006, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
Dollar Amounts In Thousands |
||||
ASSETS | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Cash and balances due from depository institutions: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Noninterest-bearing balances and currency and coin | ![]() |
![]() |
![]() |
$ | 3,230,000 |
![]() |
Interest-bearing balances | ![]() |
![]() |
![]() |
![]() |
6,440,000 |
![]() |
Securities: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Held-to-maturity securities | ![]() |
![]() |
![]() |
![]() |
2,165,000 |
![]() |
Available-for-sale securities | ![]() |
![]() |
![]() |
![]() |
22,631,000 |
![]() |
Federal funds sold and securities purchased under agreements to resell | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Federal funds sold in domestic offices | ![]() |
![]() |
![]() |
![]() |
2,955,000 |
![]() |
Securities purchased under agreements to resell | ![]() |
![]() |
![]() |
![]() |
315,000 |
![]() |
Loans and lease financing receivables: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Loans and leases held for sale | ![]() |
![]() |
![]() |
![]() |
0 |
![]() |
Loans and leases, net of unearned income | ![]() |
![]() |
![]() |
![]() |
32,983,000 |
![]() |
LESS: Allowance for loan and lease losses | ![]() |
![]() |
![]() |
![]() |
415,000 |
![]() |
Loans and leases, net of unearned income and allowance | ![]() |
![]() |
![]() |
![]() |
32,568,000 |
![]() |
Trading assets | ![]() |
![]() |
![]() |
![]() |
6,861,000 |
![]() |
Premises and fixed assets (including capitalized leases) | ![]() |
![]() |
![]() |
![]() |
828,000 |
![]() |
Other real estate owned | ![]() |
![]() |
![]() |
![]() |
0 |
![]() |
Investments in unconsolidated subsidiaries and associated companies | ![]() |
![]() |
![]() |
![]() |
298,000 |
![]() |
Not applicable | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Intangible assets: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Goodwill | ![]() |
![]() |
![]() |
![]() |
2,148,000 |
![]() |
Other intangible assets | ![]() |
![]() |
![]() |
![]() |
760,000 |
![]() |
Other assets | ![]() |
![]() |
![]() |
![]() |
6,551,000 |
![]() |
Total assets | ![]() |
![]() |
![]() |
$ | 87,750,000 |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
Dollar Amounts In Thousands |
||||
LIABILITIES | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Deposits: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
In domestic offices | ![]() |
![]() |
![]() |
$ | 35,956,000 |
![]() |
Noninterest-bearing | ![]() |
![]() |
![]() |
![]() |
16,637,000 |
![]() |
Interest-bearing | ![]() |
![]() |
![]() |
![]() |
19,319,000 |
![]() |
In foreign offices, Edge and Agreement subsidiaries, and IBFs | ![]() |
![]() |
![]() |
![]() |
30,215,000 |
![]() |
Noninterest-bearing | ![]() |
![]() |
![]() |
![]() |
578,000 |
![]() |
Interest-bearing | ![]() |
![]() |
![]() |
![]() |
29,637,000 |
![]() |
Federal funds purchased and securities sold under agreements to repurchase | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Federal funds purchased in domestic offices | ![]() |
![]() |
![]() |
![]() |
825,000 |
![]() |
Securities sold under agreements to repurchase | ![]() |
![]() |
![]() |
![]() |
123,000 |
![]() |
Trading liabilities | ![]() |
![]() |
![]() |
![]() |
2,509,000 |
![]() |
Other borrowed money: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
(includes mortgage indebtedness and obligations under capitalized leases) | ![]() |
![]() |
![]() |
![]() |
1,890,000 |
![]() |
Not applicable | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Not applicable | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Subordinated notes and debentures | ![]() |
![]() |
![]() |
![]() |
1,955,000 |
![]() |
Other liabilities | ![]() |
![]() |
![]() |
![]() |
5,573,000 |
![]() |
Total liabilities | ![]() |
![]() |
![]() |
$ | 79,046,000 |
![]() |
Minority interest in consolidated subsidiaries | ![]() |
![]() |
![]() |
![]() |
151,000 |
![]() |
EQUITY CAPITAL | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Perpetual preferred stock and related surplus | ![]() |
![]() |
![]() |
![]() |
0 |
![]() |
Common stock | ![]() |
![]() |
![]() |
![]() |
1,135,000 |
![]() |
Surplus (exclude all surplus related to preferred stock) | ![]() |
![]() |
![]() |
![]() |
2,107,000 |
![]() |
Retained earnings | ![]() |
![]() |
![]() |
![]() |
5,487,000 |
![]() |
Accumulated other comprehensive income | ![]() |
![]() |
![]() |
![]() |
−176,000 |
![]() |
Other equity capital components | ![]() |
![]() |
![]() |
![]() |
0 |
![]() |
Total equity capital | ![]() |
![]() |
![]() |
![]() |
8,553,000 |
![]() |
Total liabilities, minority interest, and equity capital | ![]() |
![]() |
![]() |
$ | 87,750,000 |
![]() |
![]() |
I, Thomas J. Mastro, Executive Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.
![]() |
Thomas J. Mastro, |
![]() |
Executive Vice President and Comptroller |
We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct.
![]() |
Thomas A. Renyi Gerald L. Hassell Directors |
Exhibit 25.3
![]() |
![]() |
![]() |
![]() |
![]() |
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT
OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN
APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT
TO
SECTION 305(b)(2)
![]() |
|||
![]() |
![]() ![]() |
![]() |
![]() |
![]() |
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
![]() |
|||
![]() |
![]() ![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
New York | ![]() |
![]() |
13-5160382 |
(State
of incorporation if not a U.S. national bank) |
![]() |
![]() |
(I.R.S.
employer identification no.) |
One Wall Street, New York, N.Y. | ![]() |
![]() |
10286 |
(Address of principal executive offices) | ![]() |
![]() |
(Zip code) |
![]() |
![]() |
|||
![]() |
![]() ![]() |
![]() |
![]() |
![]() |
VIACOM INC.
(Exact name of obligor as specified in its charter)
![]() |
![]() |
![]() |
![]() |
Delaware | ![]() |
![]() |
20-3515052 |
(State
or other jurisdiction of incorporation or organization) |
![]() |
![]() |
(I.R.S. employer identification no.) |
1515
Broadway New York, NY |
![]() |
![]() |
10036 |
(Address of principal executive offices) | ![]() |
![]() |
(Zip code) |
![]() |
![]() |
|||
![]() |
![]() ![]() |
![]() |
![]() |
![]() |
6.25% senior notes due 2016
(Title of the indenture securities)
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
1. | General information. Furnish the following information as to the Trustee: |
![]() |
![]() |
![]() |
(a) | Name and address of each examining or supervising authority to which it is subject. |
![]() |
||||||
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
Name | ![]() |
![]() |
![]() |
![]() |
Address |
![]() |
Superintendent
of Banks of the State of New York |
![]() |
![]() |
One State
Street, New York, N.Y. 10004-1417, and Albany, N.Y. 12223 |
|||
Federal Reserve Bank of New York | ![]() |
![]() |
33 Liberty Street, New York, N.Y. 10045 |
|||
Federal Deposit Insurance Corporation | ![]() |
![]() |
Washington, D.C. 20429 | |||
New York Clearing House Association | ![]() |
![]() |
New York, New
York 10005 |
|||
![]() |
![]() |
![]() |
![]() |
(b) | Whether it is authorized to exercise corporate trust powers. |
Yes.
![]() |
![]() |
2. | Affiliations with Obligor. |
If the obligor is an affiliate of the trustee, describe each such affiliation.
None.
![]() |
![]() |
16. | List of Exhibits. |
Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the ‘‘ACT’’) and 17 C.F.R. 229.10(d).
![]() |
![]() |
![]() |
1. | A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672, Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637 and Exhibit 1 to Form T-1 filed with Registration Statement No. 333-121195.) |
![]() |
![]() |
![]() |
4. | A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 333-121195.) |
![]() |
![]() |
![]() |
6. | The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 333-106702.) |
![]() |
![]() |
![]() |
7. | A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. |
2
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 24th day of July, 2006.
![]() |
![]() |
![]() |
![]() |
THE BANK OF NEW YORK | |||
By: | ![]() |
![]() |
/s/ Van K. Brown |
![]() |
![]() |
Name: Van K. Brown Title: Vice President |
|
![]() |
3
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign
and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 2006, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
Dollar Amounts In Thousands |
||||
ASSETS | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Cash and balances due from depository institutions: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Noninterest-bearing balances and currency and coin | ![]() |
![]() |
![]() |
$ | 3,230,000 |
![]() |
Interest-bearing balances | ![]() |
![]() |
![]() |
![]() |
6,440,000 |
![]() |
Securities: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Held-to-maturity securities | ![]() |
![]() |
![]() |
![]() |
2,165,000 |
![]() |
Available-for-sale securities | ![]() |
![]() |
![]() |
![]() |
22,631,000 |
![]() |
Federal funds sold and securities purchased under agreements to resell | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Federal funds sold in domestic offices | ![]() |
![]() |
![]() |
![]() |
2,955,000 |
![]() |
Securities purchased under agreements to resell | ![]() |
![]() |
![]() |
![]() |
315,000 |
![]() |
Loans and lease financing receivables: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Loans and leases held for sale | ![]() |
![]() |
![]() |
![]() |
0 |
![]() |
Loans and leases, net of unearned income | ![]() |
![]() |
![]() |
![]() |
32,983,000 |
![]() |
LESS: Allowance for loan and lease losses | ![]() |
![]() |
![]() |
![]() |
415,000 |
![]() |
Loans and leases, net of unearned income and allowance | ![]() |
![]() |
![]() |
![]() |
32,568,000 |
![]() |
Trading assets | ![]() |
![]() |
![]() |
![]() |
6,861,000 |
![]() |
Premises and fixed assets (including capitalized leases) | ![]() |
![]() |
![]() |
![]() |
828,000 |
![]() |
Other real estate owned | ![]() |
![]() |
![]() |
![]() |
0 |
![]() |
Investments in unconsolidated subsidiaries and associated companies | ![]() |
![]() |
![]() |
![]() |
298,000 |
![]() |
Not applicable | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Intangible assets: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Goodwill | ![]() |
![]() |
![]() |
![]() |
2,148,000 |
![]() |
Other intangible assets | ![]() |
![]() |
![]() |
![]() |
760,000 |
![]() |
Other assets | ![]() |
![]() |
![]() |
![]() |
6,551,000 |
![]() |
Total assets | ![]() |
![]() |
![]() |
$ | 87,750,000 |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
Dollar Amounts In Thousands |
||||
LIABILITIES | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Deposits: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
In domestic offices | ![]() |
![]() |
![]() |
$ | 35,956,000 |
![]() |
Noninterest-bearing | ![]() |
![]() |
![]() |
![]() |
16,637,000 |
![]() |
Interest-bearing | ![]() |
![]() |
![]() |
![]() |
19,319,000 |
![]() |
In foreign offices, Edge and Agreement subsidiaries, and IBFs | ![]() |
![]() |
![]() |
![]() |
30,215,000 |
![]() |
Noninterest-bearing | ![]() |
![]() |
![]() |
![]() |
578,000 |
![]() |
Interest-bearing | ![]() |
![]() |
![]() |
![]() |
29,637,000 |
![]() |
Federal funds purchased and securities sold under agreements to repurchase | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Federal funds purchased in domestic offices | ![]() |
![]() |
![]() |
![]() |
825,000 |
![]() |
Securities sold under agreements to repurchase | ![]() |
![]() |
![]() |
![]() |
123,000 |
![]() |
Trading liabilities | ![]() |
![]() |
![]() |
![]() |
2,509,000 |
![]() |
Other borrowed money: | ![]() |
![]() |
![]() |
![]() |
![]() |
|
(includes mortgage indebtedness and obligations under capitalized leases) | ![]() |
![]() |
![]() |
![]() |
1,890,000 |
![]() |
Not applicable | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Not applicable | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Subordinated notes and debentures | ![]() |
![]() |
![]() |
![]() |
1,955,000 |
![]() |
Other liabilities | ![]() |
![]() |
![]() |
![]() |
5,573,000 |
![]() |
Total liabilities | ![]() |
![]() |
![]() |
$ | 79,046,000 |
![]() |
Minority interest in consolidated subsidiaries | ![]() |
![]() |
![]() |
![]() |
151,000 |
![]() |
EQUITY CAPITAL | ![]() |
![]() |
![]() |
![]() |
![]() |
|
Perpetual preferred stock and related surplus | ![]() |
![]() |
![]() |
![]() |
0 |
![]() |
Common stock | ![]() |
![]() |
![]() |
![]() |
1,135,000 |
![]() |
Surplus (exclude all surplus related to preferred stock) | ![]() |
![]() |
![]() |
![]() |
2,107,000 |
![]() |
Retained earnings | ![]() |
![]() |
![]() |
![]() |
5,487,000 |
![]() |
Accumulated other comprehensive income | ![]() |
![]() |
![]() |
![]() |
−176,000 |
![]() |
Other equity capital components | ![]() |
![]() |
![]() |
![]() |
0 |
![]() |
Total equity capital | ![]() |
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8,553,000 |
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Total liabilities, minority interest, and equity capital | ![]() |
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$ | 87,750,000 |
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I, Thomas J. Mastro, Executive Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.
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Thomas J. Mastro, Executive Vice President and Comptroller |
We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct.
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Thomas A.
Renyi Gerald L. Hassell Directors |
Exhibit 25.4
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FORM T-1
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT
OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A
TRUSTEE PURSUANT TO
SECTION 305(b)(2)
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THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
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New York | ![]() |
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13-5160382 |
(State
of incorporation if not a U.S. national bank) |
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(I.R.S.
employer identification no.) |
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||
One Wall Street, New York, N.Y. | ![]() |
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10286 |
(Address of principal executive offices) | ![]() |
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(Zip code) |
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VIACOM INC.
(Exact name of obligor as specified in its charter)
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Delaware | ![]() |
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20-3515052 |
(State
or other jurisdiction of incorporation or organization) |
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(I.R.S. employer identification no.) |
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||
1515
Broadway New York, NY |
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10036 |
(Address of principal executive offices) | ![]() |
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(Zip code) |
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6.875% senior debentures due 2036
(Title of the indenture securities)
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1. | General Information. Furnish the following information as to the Trustee: |
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(a) | Name and address of each examining or supervising authority to which it is subject. |
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Name | ![]() |
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Address |
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Superintendent
of Banks of the State of New York |
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One State
Street, New York, N.Y. 10004-1417, and Albany, N.Y. 12223 |
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Federal Reserve Bank of New York | ![]() |
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33
Liberty Street, New York, N.Y. 10045 |
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Federal Deposit Insurance Corporation | ![]() |
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Washington, D.C. 20429 | |||
New York Clearing House Association | ![]() |
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New York, New York 10005 | |||
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(b) | Whether it is authorized to exercise corporate trust powers. |
Yes.
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2. | Affiliations with Obligor. |
If the obligor is an affiliate of the trustee, describe each such affiliation.
None.
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16. | List Of Exhibits. |
Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the ‘‘Act’’) and 17 C.F.R. 229.10(d).
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1. | A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672, Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637 and Exhibit 1 to Form T-1 filed with Registration Statement No. 333-121195.) |
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4. | A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 333-121195.) |
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6. | The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 333-106702.) |
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7. | A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. |
2
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 24th day of July, 2006.
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THE BANK OF NEW YORK | |||||||
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By: | ![]() |
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/s/ Van K. Brown | ||||
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Name: | ![]() |
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Van K. Brown | ||
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Title: | ![]() |
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Vice President | ||
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3
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign
and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 2006, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
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Dollar Amounts In Thousands |
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ASSETS | ![]() |
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|
Cash and balances due from depository institutions: | ![]() |
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|
Noninterest-bearing balances and currency and coin | ![]() |
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$ | 3,230,000 |
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Interest-bearing balances | ![]() |
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6,440,000 |
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Securities: | ![]() |
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|
Held-to-maturity securities | ![]() |
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2,165,000 |
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Available-for-sale securities | ![]() |
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22,631,000 |
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Federal funds sold
and securities purchased under agreements to resell Federal funds sold in domestic offices |
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2,955,000 |
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Securities purchased under agreements to resell | ![]() |
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315,000 |
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Loans and lease financing receivables: | ![]() |
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|
Loans and leases held for sale | ![]() |
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0 |
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Loans and leases, net of unearned income | ![]() |
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32,983,000 |
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LESS: Allowance for loan and lease losses | ![]() |
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415,000 |
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Loans and leases, net of unearned income and allowance | ![]() |
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32,568,000 |
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Trading assets | ![]() |
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6,861,000 |
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Premises and fixed assets (including capitalized leases) | ![]() |
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828,000 |
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Other real estate owned | ![]() |
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0 |
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Investments in unconsolidated subsidiaries and associated companies | ![]() |
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298,000 |
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Not applicable | ![]() |
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|
Intangible assets: | ![]() |
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|
Goodwill | ![]() |
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2,148,000 |
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Other intangible assets | ![]() |
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760,000 |
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Other assets | ![]() |
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6,551,000 |
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Total assets | ![]() |
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$ | 87,750,000 |
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Dollar Amounts In Thousands |
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LIABILITIES | ![]() |
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|
Deposits: | ![]() |
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|
In domestic offices | ![]() |
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$ | 35,956,000 |
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Noninterest-bearing | ![]() |
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16,637,000 |
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Interest-bearing | ![]() |
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19,319,000 |
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In foreign offices, Edge and Agreement subsidiaries, and IBFs | ![]() |
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30,215,000 |
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Noninterest-bearing | ![]() |
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578,000 |
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Interest-bearing | ![]() |
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29,637,000 |
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Federal funds purchased and securities sold under agreements to repurchase | ![]() |
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|
Federal funds purchased in domestic offices | ![]() |
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825,000 |
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Securities sold under agreements to repurchase | ![]() |
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123,000 |
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Trading liabilities | ![]() |
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2,509,000 |
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Other borrowed money: | ![]() |
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|
(includes mortgage indebtedness and obligations under capitalized leases) | ![]() |
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1,890,000 |
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Not applicable | ![]() |
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|
Not applicable | ![]() |
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|
Subordinated notes and debentures | ![]() |
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1,955,000 |
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Other liabilities | ![]() |
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5,573,000 |
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Total liabilities | ![]() |
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$ | 79,046,000 |
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||
Minority interest in consolidated subsidiaries | ![]() |
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151,000 |
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||
EQUITY CAPITAL | ![]() |
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|
Perpetual preferred stock and related surplus | ![]() |
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0 |
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Common stock | ![]() |
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1,135,000 |
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Surplus (exclude all surplus related to preferred stock) | ![]() |
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2,107,000 |
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Retained earnings | ![]() |
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5,487,000 |
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Accumulated other comprehensive income | ![]() |
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–176,000 |
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Other equity capital components | ![]() |
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0 |
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Total equity capital | ![]() |
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8,553,000 |
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Total liabilities, minority interest, and equity capital | ![]() |
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$ | 87,750,000 |
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I, Thomas J. Mastro, Executive Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.
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Thomas J. Mastro, Executive Vice President and Comptroller |
We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct.
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Thomas A.
Renyi Gerald L. Hassell Directors |
Exhibit 99.1
VIACOM INC.
FORM OF
LETTER OF TRANSMITTAL FOR THE
OFFER TO
EXCHANGE
Unregistered Floating Rate Senior Notes due
2009
($750,000,000 aggregate principal amount issued June
16, 2006)
for
Floating Rate Senior Notes due 2009
that have
been registered under the Securities Act of
1933
and
Unregistered
5.75% Senior Notes due 2011
($1,500,000,000 aggregate
principal amount issued April 12, 2006)
for
5.75%
Senior Notes due 2011
that have been registered under the
Securities Act of
1933
and
Unregistered
6.25% Senior Notes due 2016
($1,500,000,000 aggregate
principal amount issued April 12, 2006)
for
6.25%
Senior Notes due 2016
that have been registered under the
Securities Act of
1933
and
Unregistered
6.875% Senior Debentures due 2036
($1,750,000,000 aggregate
principal amount issued April 12,
2006)
for
6.875% Senior Debentures due 2036
that
have been registered under the Securities Act of
1933
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THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2006 (THE ‘‘EXPIRATION DATE’’) UNLESS THE EXCHANGE OFFER IS EXTENDED BY VIACOM IN ITS SOLE DISCRETION.
TENDERS OF UNREGISTERED SENIOR NOTES AND DEBENTURES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Deliver To:
Exchange Agent:
The Bank
of New York
Corporate Trust Operations – Reorganization
Unit
101 Barclay Street, 7 East
New York, New York
10286
Attn: Mr. David
Mauer
Telephone number: (212) 815-3687
Facsimile number: (212) 298-1915
Delivery of this letter of transmittal to an address, or transmission via telegram, telex or facsimile, other than to the exchange agent as set forth above (the ‘‘Exchange Agent’’), will not constitute a valid delivery. The method of delivery of all documents, including certificates, is at the risk of the holder. If delivery is by mail, we recommend the use of registered mail with return receipt requested, properly insured. You should read the instructions accompanying this letter of transmittal carefully before you complete this letter of transmittal.
1
The undersigned acknowledges that he or she has received the Prospectus dated , 2006 (the ‘‘Prospectus’’), of Viacom Inc. (‘‘Viacom’’) and this letter of transmittal and the instructions hereto (the ‘‘Letter of Transmittal’’), which together constitute Viacom's offer (the ‘‘Exchange Offer’’) to exchange up to $750,000,000 aggregate principal amount of floating rate senior notes due 2009, which are registered under the Securities Act of 1933, for any and all outstanding unregistered floating rate senior notes due 2009 issued on June 16, 2006, $1,500,000,000 aggregate principal amount of 5.75% senior notes due 2011, which are registered under the Securities Act of 1933, for any and all outstanding unregistered 5.75% senior notes due 2011 issued on April 12, 2006, $1,500,000,000 aggregate principal amount of 6.25% senior notes due 2016, which are registered under the Securities Act of 1933, for any and all outstanding unregistered 6.25% senior notes due 2016 issued on April 12, 2006, and $1,750,000,000 aggregate principal amount of 6.875% senior debentures due 2036, which are registered under the Securities Act of 1933, for any and all outstanding unregistered 6.875% senior debentures due 2036 issued on April 12, 2006, pursuant to a Registration Statement of which the Prospectus is a part.
The outstanding unregistered floating rate senior notes due 2009 have CUSIP numbers 925524BE9 or U9222XAK3. The outstanding unregistered 5.75% senior notes due 2011 have CUSIP numbers 925524AY6 or U9222XAG2. The outstanding unregistered 6.25% senior notes due 2016 have CUSIP numbers 925524BA7 or U9222XAH0. The outstanding unregistered 6.875% senior debentures due 2036 have CUSIP numbers 925524AW0 or U9222XAF4.
The term ‘‘Expiration Date’’ shall mean 5:00 p.m., New York City time, on , 2006, unless Viacom, in its sole discretion, extends the Exchange Offer, in which case the term shall mean the latest date and time to which the Exchange Offer is extended. Whenever we refer to the unregistered floating rate senior notes due 2009, the unregistered 5.75% senior notes due 2011, the unregistered 6.25% senior notes due 2016 or the unregistered 6.875% senior debentures due 2036, we will refer to them collectively as the ‘‘unregistered senior notes and debentures.’’ Whenever we refer to the exchange floating rate senior notes due 2009, the exchange 5.75% senior notes due 2011, the exchange 6.25% senior notes due 2016 or the exchange 6.875% senior debentures due 2036, we will refer to them collectively as the ‘‘exchange senior notes and debentures.’’ All other terms used but not defined herein have the meaning given to them in the Prospectus.
This Letter of Transmittal is to be used if (1) certificates representing unregistered senior notes and debentures are to be physically delivered to the Exchange Agent by Holders (as defined below), (2) the unregistered senior notes and debentures are to be tendered by book-entry transfer pursuant to the procedures set forth in the Prospectus under ‘‘The Exchange Offer—Book-Entry Transfer’’ or (3) tender of the unregistered senior notes and debentures is to be made by Holders according to the guaranteed delivery procedures set forth in the Prospectus under ‘‘The Exchange Offer—Guaranteed Delivery Procedures.’’ Delivery of this Letter of Transmittal and any other required documents must be made to the Exchange Agent.
DELIVERY OF DOCUMENTS TO THE DEPOSITORY TRUST COMPANY (‘‘DTC’’), EUROCLEAR OR CLEARSTREAM LUXEMBOURG DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term ‘‘Holder’’ as used herein means any person in whose name unregistered senior notes and debentures are registered on the books of Viacom or any other person who has obtained a properly completed bond power from the registered holder.
Any Holder of unregistered senior notes and debentures who wishes to tender his, her or its unregistered senior notes and debentures must, prior to the Expiration Date, either: (a) complete, sign and deliver this Letter of Transmittal, or a facsimile thereof, to the Exchange Agent, in person or to the address or facsimile number set forth above and tender (and not withdraw) his, her or its unregistered senior notes and debentures, or (b) if a tender of unregistered senior notes and debentures is to be made by book-entry transfer to the account maintained by the Exchange Agent at DTC, Euroclear or Clearstream Luxembourg, confirm such book-entry transfer, including the delivery of an Agent's Message (a ‘‘Book-Entry Confirmation’’), in each case in accordance with the procedures for tendering described in the Instructions to this Letter of Transmittal.
2
Holders of unregistered senior notes and debentures whose certificates are not immediately available or who are unable to deliver their certificates or Book-Entry Confirmation and all other documents required by this Letter of Transmittal to be delivered to the Exchange Agent on or prior to the Expiration Date must tender their unregistered senior notes and debentures according to the guaranteed delivery procedures set forth under the caption ‘‘The Exchange Offer—Guaranteed Delivery Procedures’’ in the Prospectus. (See Instruction 2.)
Upon the terms and subject to the conditions of the Exchange Offer, the acceptance for exchange of the unregistered senior notes and debentures validly tendered and not withdrawn and the issuance of the exchange senior notes and debentures will be made promptly following the Expiration Date. For the purposes of the Exchange Offer, Viacom shall be deemed to have accepted for exchange validly tendered unregistered senior notes and debentures when, as and if Viacom has given written notice thereof to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. THE INSTRUCTIONS INCLUDED IN THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS, THIS LETTER OF TRANSMITTAL AND THE NOTICE OF GUARANTEED DELIVERY MAY BE DIRECTED TO THE EXCHANGE AGENT. SEE INSTRUCTION 11.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR UNREGISTERED SENIOR NOTES AND DEBENTURES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY AND COMPLY WITH ALL OF ITS TERMS.
3
Please list below the unregistered senior notes and debentures to which this Letter of Transmittal relates. If the space provided below is inadequate, the Certificate Numbers and Principal Amounts should be listed on a separate signed schedule, attached hereto. The minimum permitted tender is $2,000 in principal amount. All other tenders must be in integral multiples of $1,000 in excess thereof.
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DESCRIPTION OF UNREGISTERED SENIOR NOTES AND DEBENTURES | |||||||||
Name(s)
and Address(es) of Holder(s) (please fill in, if blank) |
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Type
of Security Tendered |
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Certificate
Number(s) (attach signed list, if necessary) |
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Aggregate
Principal Amount Tendered |
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TOTAL PRINCIPAL AMOUNT OF
UNREGISTERED SENIOR NOTES AND DEBENTURES TENDERED: |
|||||||||
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CHECK HERE IF TENDERED UNREGISTERED SENIOR NOTES AND DEBENTURES ARE BEING DELIVERED BY DTC, EUROCLEAR OR CLEARSTREAM LUXEMBOURG TO THE EXCHANGE AGENT'S ACCOUNT AT DTC, EUROCLEAR OR CLEARSTREAM LUXEMBOURG AND COMPLETE THE FOLLOWING: |
Name of Tendering Institution:__________________________________________________
DTC, Euroclear or Clearstream Luxembourg Book-Entry Account:______________________
Transaction Code No.:________________________________________________________
Holders who wish to tender their unregistered senior notes and debentures and (i) whose unregistered senior notes and debentures are not immediately available, or (ii) who cannot deliver their unregistered senior notes and debentures, the Letter of Transmittal or any other required documents to the Exchange Agent prior to the Expiration Date, or cannot complete the procedure for book-entry transfer on a timely basis, may effect a tender according to the guaranteed delivery procedures set forth in the Prospectus under the caption ‘‘The Exchange Offer—Guaranteed Delivery Procedures.’’
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CHECK HERE IF TENDERED UNREGISTERED SENIOR NOTES AND DEBENTURES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: |
Name(s) of Holder(s) of unregistered senior notes and debentures:______________________
Window Ticket No. (if any):__________________________________________________
Date of Execution of Notice of Guaranteed Delivery:________________________________
DTC, Euroclear or Clearstream Luxembourg Book-Entry Account:______________________
If Delivered by Book-Entry Transfer:____________________________________________
Name of Tendering Institution:______________________________________________
Transaction Code No.:____________________________________________________
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CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. |
Name:________________________________________________________________
Address:______________________________________________________________
4
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned hereby tenders to Viacom the principal amount of unregistered senior notes and debentures indicated above. Subject to and effective upon the acceptance for exchange of the principal amount of unregistered senior notes and debentures tendered hereby in accordance with this Letter of Transmittal and the accompanying instructions, the undersigned sells, assigns and transfers to, or upon the order of, Viacom all right, title and interest in and to the unregistered senior notes and debentures tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as agent of Viacom and as Trustee under the Indenture for the unregistered senior notes and debentures and the exchange senior notes and debentures) with respect to the tendered unregistered senior notes and debentures with full power of substitution to (i) deliver certificates for such unregistered senior notes and debentures to Viacom, or transfer ownership of such unregistered senior notes and debentures on the account books maintained by DTC, Euroclear or Clearstream Luxembourg, as the case may be, together, in any such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, Viacom and (ii) present such unregistered senior notes and debentures for transfer on the books of Viacom and receive all benefits and otherwise exercise all rights of beneficial ownership of such unregistered senior notes and debentures, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power and authority to tender, exchange, sell, assign and transfer the unregistered senior notes and debentures tendered hereby and to acquire the exchange senior notes and debentures issuable upon the exchange of the unregistered senior notes and debentures, and that Viacom will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim, when the same are acquired by Viacom. The undersigned also acknowledges that this Exchange Offer is being made in reliance upon an interpretation by the staff of the Securities and Exchange Commission that the exchange senior notes and debentures issued in exchange for the unregistered senior notes and debentures pursuant to the Exchange Offer may be offered for sale, resold and otherwise transferred by holders thereof (other than a broker-dealer who purchased such unregistered senior notes and debentures directly from Viacom for resale pursuant to Rule 144A, Regulation S or any other available exemption under the Securities Act or a holder that is an ‘‘affiliate’’ of Viacom within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such exchange senior notes and debentures are acquired by a non-affiliate in the ordinary course of such holder's business and such holders have no arrangement or understanding with any person to participate in the distribution of such exchange senior notes and debentures.
The undersigned Holder represents and warrants that
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(a) | the exchange senior notes and debentures acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving the exchange senior notes and debentures, whether or not the person is the Holder, |
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(b) | neither the undersigned Holder nor any other recipient of the exchange senior notes and debentures (if different than the Holder) is engaged in, intends to engage in, or has any arrangement or understanding with any person to participate in, the distribution of the unregistered senior notes and debentures or exchange senior notes and debentures, |
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(c) | neither the undersigned Holder nor any other recipient is an ‘‘affiliate’’ of Viacom within the meaning of Rule 405 promulgated under the Securities Act or, if the Holder or such recipient is an affiliate, that the Holder or such recipient will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, |
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(d) | if the undersigned is a broker-dealer, it has not entered into any arrangement or understanding with Viacom or any ‘‘affiliate’’ of Viacom within the meaning of Rule 405 promulgated under the Securities Act to distribute the exchange senior notes and debentures, |
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(e) | if the undersigned is a broker-dealer, the undersigned further represents and warrants that, if it will receive exchange senior notes and debentures for its own account in exchange for unregistered senior notes and debentures that were acquired as a result of market-making activities or other trading activities, the undersigned will deliver a prospectus meeting the requirements of the Securities Act (for which purposes, the delivery of the Prospectus, as the same may be hereafter supplemented or amended, shall be sufficient) in connection with any resale of exchange senior notes and debentures received in the Exchange Offer, and |
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(f) | the undersigned Holder is not acting on behalf of any person or entity that could not truthfully make these representations. |
By acknowledging that you, as such a broker-dealer, will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of exchange senior notes and debentures, you will not be deemed to admit that you are an ‘‘underwriter’’ within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or Viacom to be necessary or desirable to complete the exchange, assignment and transfer of the unregistered senior notes and debentures tendered hereby or transfer of ownership of such unregistered senior notes and debentures on the account books maintained by a book-entry transfer facility.
The undersigned understands and agrees that Viacom reserves the right not to accept validly tendered unregistered senior notes and debentures from any tendering Holder if Viacom determines, in its sole and absolute discretion, that its ability to proceed with the Exchange Offer would be impaired by a pending or threatened action or proceeding with respect to the Exchange Offer or that such acceptance could result in a violation of applicable securities laws.
For purposes of the Exchange Offer, Viacom shall be deemed to have accepted validly tendered unregistered senior notes and debentures when, as and if Viacom has given oral or written notice thereof to the Exchange Agent. If any tendered unregistered senior notes and debentures are not accepted for exchange pursuant to the Exchange Offer for any reason, such unaccepted or non-exchanged unregistered senior notes and debentures will be returned to the address shown below or to a different address as may be indicated herein under ‘‘Special Delivery Instructions,’’ without expense to the tendering Holder thereof, (or, in the case of tender by book-entry transfer into the Exchange Agent's account at the book-entry transfer facility pursuant to the book-entry transfer procedures described in the Prospectus under the ‘‘The Exchange Offer—Book-Entry Transfer,’’ such non-exchanged senior notes and debentures will be credited to an account maintained with such book-entry transfer facility) as promptly as practicable after the expiration or termination of the Exchange Offer.
The undersigned understands and acknowledges that Viacom reserves the right in its sole discretion to purchase or make offers for any unregistered senior notes and debentures that remain outstanding subsequent to the Expiration Date or, as set forth in the Prospectus under the caption ‘‘The Exchange Offer—Expiration Date; Extensions; Amendment; Termination,’’ to terminate the Exchange Offer and, to the extent permitted by applicable law, purchase unregistered senior notes and debentures in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer.
The undersigned understands that tenders of unregistered senior notes and debentures pursuant to the procedures described under the caption ‘‘The Exchange Offer—Procedures for Tendering’’ in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and Viacom upon the terms and subject to the conditions of the Exchange Offer. The undersigned also agrees that acceptance of any tendered unregistered senior notes and debentures by Viacom and the issuance of exchange senior notes and debentures in exchange therefor shall constitute performance in full by Viacom of its obligations under the Exchange Offer and Registration Rights Agreement and that, upon the issuance of the exchange senior notes and debentures, Viacom will have no further obligations or liabilities thereunder (except in certain limited circumstances).
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All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death, incapacity or dissolution of the undersigned and every obligation under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. This tender may be withdrawn only in accordance with the procedures set forth in the Prospectus and in this Letter of Transmittal.
By acceptance of the Exchange Offer, each broker-dealer that receives exchange senior notes and debentures pursuant to the Exchange Offer hereby acknowledges and agrees that, upon the receipt of notice by Viacom of the happening of any event that makes any statement in the Prospectus untrue in any material respect or that requires the making of any changes in the Prospectus in order to make the statements therein not misleading (which notice Viacom agrees to deliver promptly to such broker-dealer), such broker-dealer will suspend use of the Prospectus until Viacom has amended or supplemented the Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented prospectus to such broker-dealer.
Unless otherwise indicated under ‘‘Special Registration Instructions,’’ please issue the certificates representing the exchange senior notes and debentures issued in exchange for the unregistered senior notes and debentures accepted for exchange and return any unregistered senior notes and debentures not tendered or not exchanged, in the name(s) of the undersigned (or, in either event, in the case of unregistered senior notes and debentures tendered by DTC, Euroclear or Clearstream Luxembourg, by credit to the respective account at DTC, Euroclear or Clearstream Luxembourg). Similarly, unless otherwise indicated under ‘‘Special Delivery Instructions,’’ please send the certificates representing the exchange senior notes and debentures issued in exchange for the unregistered senior notes and debentures accepted for exchange and return any unregistered senior notes and debentures not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signatures, unless, in either event, tender is being made through DTC, Euroclear or Clearstream Luxembourg. In the event that both ‘‘Special Registration Instructions’’ and ‘‘Special Delivery Instructions’’ are completed, please issue the certificates representing the exchange senior notes and debentures issued in exchange for the unregistered senior notes and debentures accepted for exchange and return any unregistered senior notes and debentures not tendered or not exchanged in the name(s) of, and send said certificates to, the person(s) so indicated. The undersigned recognizes that Viacom has no obligations pursuant to the ‘‘Special Registration Instructions’’ and ‘‘Special Delivery Instructions’’ to transfer any unregistered senior notes and debentures from the name of the registered holder(s) thereof if Viacom does not accept for exchange such unregistered senior notes and debentures so tendered.
Holders who wish to tender the unregistered senior notes and debentures and (1) whose unregistered senior notes and debentures are not immediately available or (2) who cannot deliver their unregistered senior notes and debentures, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date may tender their unregistered senior notes and debentures according to the guaranteed delivery procedures set forth in the Prospectus under the caption ‘‘The Exchange Offer—Guaranteed Delivery Procedures.’’ (See Instruction 2.)
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PLEASE SIGN HERE WHETHER OR NOT TENDER IS TO BE MADE PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES.
(To Be Completed by All Tendering
Holders of Unregistered Senior Notes
and Debentures Regardless of
Whether Unregistered Senior Notes and Debentures Are
Being
Physically Delivered Herewith)
This Letter of Transmittal must be signed by the registered Holder(s) of unregistered senior notes and debentures exactly as its (their) name(s) appear(s) on certificate(s) of unregistered senior notes and debentures or, if tendered by a participant in DTC, Euroclear or Clearstream Luxembourg, exactly as such participant's name appears on its security position listing it as the owner of unregistered senior notes and debentures, or by person(s) authorized to become registered Holder(s) by endorsements and documents transmitted with this Letter of Transmittal. If the unregistered senior notes and debentures to which this Letter of Transmittal relates are held of record by two or more joint Holders, then all such Holders must sign this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, then such person must set forth his or her full title below under ‘‘Capacity’’ and submit evidence satisfactory to Viacom of such person's authority to so act. (See Instruction 6.) If the signature appearing below is not that of the registered Holder(s) of the unregistered senior notes and debentures, then the registered Holder(s) must sign a valid proxy.
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Date: | |
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Date: | |
Signature(s) of Holder(s)
or
Authorized Signatory |
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Name(s): | ![]() |
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Address: |
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(Including Zip Code) | |
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(Please Print) | ![]() |
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Capacity(ies): | ![]() |
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Area Code and Telephone No.: |
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Tax Identification or Social Security Number(s): ______________________________________
[Complete Substitute Form W-9 below.]
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SIGNATURE
GUARANTEE
(See Instruction 1 herein)
Certain Signatures
Must Be Guaranteed by an Eligible
Institution
______________________________________________________________________________
(Name of Eligible
Institution Guaranteeing
Signatures)
______________________________________________________________________________
(Address (including
zip code) and Telephone Number (including area code) of
Firm)
______________________________________________________________________________
(Authorized
Signatures)
______________________________________________________________________________
(Printed
Name)
______________________________________________________________________________
(Title)
Date:
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SPECIAL
REGISTRATION INSTRUCTIONS
(See Instruction 7
herein)
To be completed ONLY if certificates for unregistered senior notes and debentures in a principal amount not tendered or not accepted for exchange are to be issued in the name of, or the exchange senior notes and debentures issued pursuant to the Exchange Offer are to be issued to the order of, someone other than the person or persons whose signature(s) appear(s) within this Letter of Transmittal or issued to an address different from that shown in the box entitled ‘‘Description of Unregistered Senior Notes and Debentures’’ within this Letter of Transmittal, or if exchange senior notes and debentures tendered by book-entry transfer that are not accepted for purchase are to be credited to an account maintained at DTC, Euroclear or Clearstream Luxembourg other than the account indicated above.
Name:______________________________
(Please Print)
Address:______________________________
(Please Print)
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(Zip Code)
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Tax
Identification or Social Security Number
(See Substitute Form W-9
herein)
SPECIAL
DELIVERY INSTRUCTIONS
(See Instruction 7
herein)
To be completed ONLY if certificates for unregistered senior notes and debentures in a principal amount not tendered or not accepted for exchange are to be sent to, or the exchange senior notes and debentures issued pursuant to the Exchange Offer are to be sent to someone other than the person or persons whose signature(s) appear(s) within this Letter of Transmittal, or to an address different from that shown in the box entitled ‘‘Description of Unregistered Senior Notes and Debentures’’ within this Letter of Transmittal, or to be credited to an account maintained at DTC, Euroclear or Clearstream Luxembourg other than the account indicated above.
Name:______________________________
(Please Print)
Address:______________________________
(Please Print)
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||
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(Zip Code)
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||
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Tax
Identification or Social Security Number
(See Substitute Form W-9
herein)
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INSTRUCTIONS
Forming
Part of the Terms and Conditions
of the Exchange Offer and the
Solicitation
1. Guarantee of Signatures. Signatures on this Letter of Transmittal (or copy hereof) or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an ‘‘eligible guarantor institution’’ within the meaning of Rule 17Ad-15 under the Exchange Act (an ‘‘Eligible Institution’’) unless the unregistered senior notes and debentures tendered pursuant hereto are tendered (i) by a registered Holder (including any participant in DTC, Euroclear or Clearstream Luxembourg whose name appears on a security position listing as the owner of unregistered senior notes and debentures) who has not completed the box set forth herein entitled ‘‘Special Registration Instructions’’ or ‘‘Special Delivery Instructions’’ or (ii) for the account of an Eligible Institution.
2. Delivery of this Letter of Transmittal and Unregistered Senior Notes and Debentures. Certificates for the physically tendered unregistered senior notes and debentures (or a confirmation of a book-entry transfer to the Exchange Agent at DTC, Euroclear or Clearstream Luxembourg of all unregistered senior notes and debentures tendered electronically), as well as, in the case of physical delivery of unregistered senior notes and debentures, a properly completed and duly executed copy of this Letter of Transmittal or facsimile hereof and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. The method of delivery of the tendered unregistered senior notes and debentures, this Letter of Transmittal and all other required documents, or book-entry transfer and transmission of an Agent's Message (as defined below) by a DTC, Euroclear or Clearstream Luxembourg participant, to the Exchange Agent are at the election and risk of the Holder and, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that the Holder use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No Letter of Transmittal or unregistered senior notes and debentures should be sent to Viacom, DTC, Euroclear or Clearstream Luxembourg but must instead be delivered to the Exchange Agent.
The Exchange Agent will make a request to establish an account with respect to the unregistered senior notes and debentures at DTC, Euroclear or Clearstream Luxembourg for purposes of the Exchange Offer promptly after receipt of the Prospectus, and any financial institution that is a participant in DTC, Euroclear or Clearstream Luxembourg may make book-entry delivery of unregistered senior notes and debentures by causing DTC, Euroclear or Clearstream Luxembourg, as the case may be, to transfer such unregistered senior notes and debentures into the Exchange Agent's account at DTC, Euroclear or Clearstream Luxembourg, as the case may be, in accordance with the relevant entity's procedures for transfer. However, although delivery of unregistered senior notes and debentures may be effected through book-entry transfer at DTC, Euroclear or Clearstream Luxembourg, the Exchange Agent must receive timely confirmation of a book-entry transfer of the unregistered senior notes and debentures into the Exchange Agent’s account and must receive an Agent's Message (as defined in the next paragraph) in connection with a book-entry transfer and any other required documents at the address specified on the cover page of the Letter of Transmittal on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with.
A Holder may tender unregistered senior notes and debentures that are held through DTC by transmitting its acceptance through DTC's Automatic Tender Offer Program, for which the transaction will be eligible, and DTC will then edit and verify the acceptance and send an Agent's Message to the Exchange Agent for its acceptance. The term ‘‘Agent's Message’’ means a message transmitted by DTC to, and received by, the Exchange Agent and forming part of the Book-Entry Confirmation, which states that DTC has received an express acknowledgment from a participant tendering unregistered senior notes and debentures and that such participant has received the Letter of
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Transmittal and agrees to be bound by the terms of the Letter of Transmittal and we may enforce such agreement against such participant. Delivery of an Agent's Message will also constitute an acknowledgment from the tendering DTC participant that the representations and warranties set forth on pages 7 and 8 of this Letter of Transmittal are true and correct.
Holders of unregistered senior notes and debentures held through Euroclear or Clearstream Luxembourg are required to use book-entry transfer pursuant to the standard operating procedures of Euroclear or Clearstream Luxembourg, as the case may be, to accept the Exchange Offer and to tender their unregistered senior notes and debentures. A computer-generated message must be transmitted to Euroclear or Clearstream Luxembourg, as the case may be, in lieu of a Letter of Transmittal, in order to tender the unregistered senior notes and debentures in the Exchange Offer.
Holders who wish to tender their unregistered senior notes and debentures and (i) whose unregistered senior notes and debentures are not immediately available or (ii) who cannot deliver their unregistered senior notes and debentures, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis must follow the guaranteed delivery procedures set forth in the Prospectus to tender their unregistered senior notes and debentures. Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution (as defined above); (ii) prior to the Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the Holder of the unregistered senior notes and debentures, the certificate number or numbers of such unregistered senior notes and debentures and the principal amount of unregistered senior notes and debentures tendered, stating that the tender is being made by guaranteed delivery and guaranteeing that within three (3) Business Days after the Expiration Date, this Letter of Transmittal (or copy thereof) together with the certificate(s) representing the unregistered senior notes and debentures (or a confirmation of book-entry delivery into the Exchange Agent's account at DTC, Euroclear or Clearstream Luxembourg) and any other required documents will be deposited by the Eligible Institution with the Exchange Agent and (iii) such properly completed and executed Letter of Transmittal (or copy thereof), as well as all other documents required by this Letter of Transmittal and the certificate(s) representing all tendered unregistered senior notes and debentures in proper form for transfer or a confirmation of book-entry delivery into the Exchange Agent's account at DTC, Euroclear or Clearstream Luxembourg, must be received by the Exchange Agent within three (3) Business Days after the Expiration Date, all as provided in the Prospectus under the caption ‘‘The Exchange Offer —Guaranteed Delivery Procedures.’’ Any Holder of unregistered senior notes and debentures who wishes to tender his unregistered senior notes and debentures pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who wish to tender their unregistered senior notes and debentures according to the guaranteed delivery procedures set forth above.
All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered unregistered senior notes and debentures or this Letter of Transmittal will be determined by Viacom in its sole discretion, which determination will be final and binding. All tendering Holders, by execution of this Letter of Transmittal (or copy hereof), shall waive any right to receive notice of the acceptance of the unregistered senior notes and debentures for exchange. Viacom reserves the absolute right to reject any and all unregistered senior notes and debentures or Letter of Transmittal not properly tendered or any tenders Viacom's acceptance of which would, in the opinion of counsel for Viacom, be unlawful. Viacom also reserves the absolute right to waive any defects, irregularities or conditions of tender as to particular unregistered senior notes and debentures. Viacom's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of unregistered senior notes and debentures must be cured within such time as Viacom shall determine. Although Viacom intends to notify Holders of defects or
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irregularities with respect to tenders of unregistered senior notes and debentures, none of Viacom, the Exchange Agent or any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of unregistered senior notes and debentures, nor shall any of them incur any liability for failure to give such notification. Tenders of unregistered senior notes and debentures will not be deemed to have been made until such defects or irregularities have been cured or waived. Any unregistered senior notes and debentures received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost by the Exchange Agent to the tendering Holders of unregistered senior notes and debentures, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date.
3. Inadequate Space. If the space provided is inadequate, the certificate numbers and/or the number of the unregistered senior notes and debentures should be listed on a separate signed schedule attached hereto.
4. Tender by Holder. Except in limited circumstances, only a registered Holder of unregistered senior notes and debentures or a Euroclear, Clearstream Luxembourg or DTC participant listed on a securities position listing furnished by Euroclear, Clearstream Luxembourg or DTC with respect to the unregistered senior notes and debentures may tender its unregistered senior notes and debentures in the Exchange Offer. Any beneficial owner of unregistered senior notes and debentures who is not the registered Holder and is not a Euroclear, Clearstream Luxembourg or DTC participant and who wishes to tender should arrange with such registered holder to execute and deliver this Letter of Transmittal on such beneficial owner's behalf or must, prior to completing and executing this Letter of Transmittal and delivering his, her or its unregistered senior notes and debentures, either make appropriate arrangements to register ownership of the unregistered senior notes and debentures in such beneficial owner's name or obtain a properly completed bond power from the registered holder or properly endorsed certificates representing such unregistered senior notes and debentures.
5. Partial Tenders; Withdrawals. Tenders of unregistered senior notes and debentures will be accepted only in minimum denominations of $2,000 or in integral multiples of $1,000 in excess thereof. If less than the entire principal amount of any unregistered senior notes and debentures is tendered, the tendering Holder should fill in the aggregate principal amount tendered in the fourth column of the chart entitled ‘‘Description of Unregistered Senior Notes and Debentures.’’ The entire principal amount of unregistered senior notes and debentures delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all unregistered senior notes and debentures is not tendered, unregistered senior notes and debentures for the principal amount of unregistered senior notes and debentures not tendered and a certificate or certificates representing exchange senior notes and debentures issued in exchange of any unregistered senior notes and debentures accepted will be sent to the Holder at his, her or its registered address, unless a different address is provided in the appropriate box on this Letter of Transmittal or unless tender is made through DTC, Euroclear or Clearstream Luxembourg promptly after the unregistered senior notes and debentures are accepted for exchange.
Except as otherwise provided herein, tenders of unregistered senior notes and debentures may be withdrawn at any time prior to the Expiration Date. To withdraw a tender of unregistered senior notes and debentures in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. For DTC, Euroclear or Clearstream Luxembourg participants, Holders must comply with their respective standard operating procedures for electronic tenders and the Exchange Agent must receive an electronic notice of withdrawal from DTC, Euroclear or Clearstream Luxembourg. Any such notice of withdrawal must (1) specify the name of the person having deposited the unregistered senior notes and debentures to be withdrawn (the ‘‘Depositor’’), (2) identify the unregistered senior notes and debentures to be withdrawn (including the certificate number or numbers and principal amount of such unregistered senior notes and debentures, or, in the case of unregistered senior notes and debentures transferred by book-entry transfer, the name and number of the account at Euroclear, Clearstream Luxembourg, or DTC to be credited), (3) be signed by the Depositor in the same manner as the original signature on the Letter of Transmittal by which such unregistered senior notes and
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debentures were tendered (including any required signature guarantees) and (4) specify the name in which any such unregistered senior notes and debentures are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by Viacom, whose determination shall be final and binding on all parties. Any unregistered senior notes and debentures so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no exchange senior notes and debentures will be issued with respect thereto unless the unregistered senior notes and debentures so withdrawn are validly re-tendered. Any unregistered senior notes and debentures which have been tendered but which are not accepted for exchange by Viacom will be returned to the Holder thereof without cost as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn unregistered senior notes and debentures may be re-tendered by following one of the procedures described in the Prospectus under ‘‘The Exchange Offer—Procedures for Tendering’’ at any time prior to the Expiration Date.
6. Signatures on the Letter of Transmittal; Bond Powers and Endorsements. If this Letter of Transmittal (or copy hereof) is signed by the registered Holder(s) of the unregistered senior notes and debentures tendered hereby, the signature must correspond with the name(s) as written on the face of the unregistered senior notes and debentures without alteration, enlargement or any change whatsoever.
If any of the unregistered senior notes and debentures tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of unregistered senior notes and debentures registered in different names are tendered, it will be necessary to complete, sign and submit as many copies of this Letter of Transmittal as there are different registrations of unregistered senior notes and debentures.
If this Letter of Transmittal (or copy hereof) is signed by the registered Holder(s) (which term, for the purposes described herein, shall include a book-entry transfer facility whose name appears on the security listing as the owner of the unregistered senior notes and debentures) of unregistered senior notes and debentures tendered and the certificate(s) for exchange senior notes and debentures issued in exchange therefor is (are) to be issued (or any untendered principal amount of unregistered senior notes and debentures is to be reissued) to the registered Holder(s), such Holder(s) need not and should not endorse any tendered unregistered senior notes or debentures, nor provide a separate bond power. In any other case, such Holder(s) must either properly endorse the unregistered senior notes and debentures tendered or transmit a properly completed separate bond power with this Letter of Transmittal, with the signatures on the endorsement or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or copy hereof) is signed by a person other than the registered Holder(s) of unregistered senior notes and debentures listed therein, such unregistered senior notes and debentures must be endorsed or accompanied by properly completed bond powers which authorize such person to tender the unregistered senior notes and debentures on behalf of the registered Holder(s), in either case signed as the name(s) of the registered Holder(s) appear(s) on the unregistered senior notes and debentures.
If this Letter of Transmittal (or copy hereof) or any unregistered senior notes and debentures or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, or officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by Viacom, evidence satisfactory to Viacom of their authority to so act must be submitted with this Letter of Transmittal.
Endorsements on unregistered senior notes and debentures or signatures on bond powers required by this Instruction 6 must be guaranteed by an Eligible Institution.
7. Special Registration and Delivery Instructions. Tendering Holders should indicate, in the applicable spaces, the name and address to which exchange senior notes and debentures or substitute unregistered senior notes and debentures for principal amounts not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this
14
Letter of Transmittal (or in the case of tender of the unregistered senior notes and debentures through DTC, Euroclear or Clearstream Luxembourg, if different from the account maintained at DTC, Euroclear or Clearstream Luxembourg indicated above). In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated.
8. Transfer Taxes. Viacom will pay all transfer taxes, if any, applicable to the exchange of unregistered senior notes and debentures pursuant to the Exchange Offer. If, however, certificates representing exchange senior notes and debentures or unregistered senior notes and debentures for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered Holder of the unregistered senior notes and debentures tendered hereby, or if tendered unregistered senior notes and debentures are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reasons other than the exchange of unregistered senior notes and debentures pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other person) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 8, it will not be necessary for transfer tax stamps to be affixed to the unregistered senior notes and debentures listed in this Letter of Transmittal.
9. Waiver of Conditions. Viacom reserves the right, in its sole discretion, to amend, waive or modify specified conditions in the Exchange Offer in the case of any unregistered senior notes and debentures tendered.
10. Mutilated, Lost, Stolen or Destroyed Unregistered Senior Notes and Debentures. Any tendering Holder whose unregistered senior notes or debentures have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated herein for further instruction.
11. Requests for Assistance or Additional Copies. Questions and requests for assistance and requests for additional copies of the Prospectus or this Letter of Transmittal may be directed to the Exchange Agent at the address specified in the Prospectus. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer.
15
IMPORTANT TAX INFORMATION
The Holder is required to give the Exchange Agent the social security number or employer identification number of the Holder of the unregistered senior notes and debentures. If the unregistered senior notes and debentures are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report.
TO BE COMPLETED BY ALL TENDERING HOLDERS
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PAYER'S NAME: VIACOM INC. | ![]() |
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|
Substitute Form W-9 |
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Part 1 – PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. | ![]() |
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______________________ Social Security Number(s) or ______________________ Employer Identification Number(s) (If awaiting TIN, write ‘‘Applied For’’) |
Department of the Treasury Internal Revenue Service Payer's Request for Taxpayer Identification Number (‘‘TIN’’) |
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Part 2 –
Certification
– Under Penalties of Perjury, I certify that: (1)The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and |
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|
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(2)I
am NOT subject to back-up withholding because: (a) I am exempt from backup
withholding, (b) I have not been notified by the Internal Revenue Service
(‘‘IRS’’) that I am subject to back-up
withholding as a result of failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to
back-up withholding. |
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Sign Here → | ![]() |
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Certification
Instructions – You must cross out item (2) above if you
have been notified by the IRS that you are currently subject to back-up
withholding because of underreporting interest or dividends on your tax
return. SIGNATURE: __________________________________ DATE: ________________ |
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NOTE: | FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31 PERCENT OF ANY PAYMENTS MADE TO YOU UNDER THE EXCHANGE SENIOR NOTES AND DEBENTURES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. |
16
GUIDELINES
FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE
FORM W-9
Obtain a Number:
If you don’t have a taxpayer identification number or you don’t know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number.
Payees Exempt from Backup Withholding:
Payees specifically exempted from backup withholding on ALL payments include the following:
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• | A corporation. |
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• | A financial institution. |
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• | An organization exempt from tax under section 501(a) or an individual retirement plan. |
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• | The United States or any agency or instrumentality thereof. |
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• | A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. |
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• | A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. |
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• | An international organization or any agency of or instrumentality thereof. |
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• | A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. |
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• | A real estate investment trust. |
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• | A common trust fund operated by a bank under section 584(a). |
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• | An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). |
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• | An entity registered at all times under the Investment Company Act of 1940. |
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• | A foreign central bank of issue. |
Payments of dividends and patronage dividends not generally subject to backup withholding include the following:
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• | Payments to nonresident aliens subject to withholding under section 1441. |
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• | Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. |
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• | Payments of patronage dividends where the amount renewed is not paid in money. |
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• | Payments made by certain foreign nations. |
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• | Payments made to a nominee. |
Payments of interest not generally subject to backup withholding include the following:
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• | Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer’s trade or business and you have not provided your correct taxpayer identification number to the payee. |
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• | Payments of tax-exempt interest (including exempt-interest dividends in section 852). |
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• | Payments described in section 6049(b)(5) to non-resident alien. |
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• | Payments on tax-free covenant bonds under section 1451. |
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• | Payments made by certain foreign organizations. |
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• | Payments made to a nominee. |
Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding.
FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE ‘‘EXEMPT’’ ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045 and 6050A.
Privacy Act Notice. Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payee. Certain penalties may also apply.
Penalties:
(1) Penalty for Failure to Furnish Taxpayer Identification Number. If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.
(2) Civil Penalty for False Information with Respect to Withholding. If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information. Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE.
17
GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON
SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer. Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer.
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For this type of account: | ![]() |
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Give the SOCIAL
SECURITY number of — |
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For this type of account: | ![]() |
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Give the SOCIAL
SECURITY number of — |
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1. | ![]() |
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An individual's account | ![]() |
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The individual | ![]() |
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8. | ![]() |
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Sole proprietorship account | ![]() |
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The owner4 |
2. | ![]() |
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Two
or more individuals (joint account) |
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The actual owner of the account or, if combined funds, any one of the individuals1 | ![]() |
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9. | ![]() |
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A valid trust, estate, or pension trust | ![]() |
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The legal entity (Do not furnish the identifying number of the personal representatives or trustee unless the legal entity itself is not designated in the account title.)5 |
3. | ![]() |
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Husband and wife (joint account) | ![]() |
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The actual owner of the account or, if joint funds, either person1 | ![]() |
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10. | ![]() |
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Corporate account | ![]() |
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The corporation |
4. | ![]() |
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Custodian account of a minor (Uniform Gift to Minors Act) | ![]() |
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The minor2 | ![]() |
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11. | ![]() |
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Religious, charitable, or educational organization account | ![]() |
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The organization |
5. | ![]() |
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Adult
and minor (joint account) |
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The adult or, if the minor is the only contributor, the minor1 | ![]() |
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12. | ![]() |
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Partnership account held in the name of the business | ![]() |
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The partnership |
6. | ![]() |
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Account in the name of guardian or committee for a designated ward, minor, or incompetent person | ![]() |
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The ward, minor or incompetent person3 | ![]() |
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13. | ![]() |
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Association, club or other tax-exempt organization | ![]() |
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The organization |
7. | ![]() |
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a. The usual revocable savings trust account (grantor is also trustee) | ![]() |
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The grantor-trustee1 | ![]() |
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14. | ![]() |
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A broker or registered nominee | ![]() |
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The broker or nominee |
7. | ![]() |
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b. So-called trust account that is not a legal or valid trust under State law | ![]() |
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The actual owner1 | ![]() |
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15. | ![]() |
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Account with the Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments. | ![]() |
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The public entity |
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1 | List first and circle the name of the person whose number you furnish. |
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2 | Circle the minor's name and furnish the minor's Social Security number. |
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3 | Circle the ward's, minor's or incompetent person's name and furnish such person's Social Security number. |
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4 | Show the name of the Owner. |
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5 | List first and circle the name of the legal trust, estate or pension trust. |
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NOTE: | If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. |
18
(DO NOT WRITE IN SPACE BELOW)
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Certificate Surrendered | ![]() |
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Unregistered Senior Notes and Debentures Tendered | ![]() |
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Unregistered
Senior Notes and Debentures Accepted |
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Delivery Prepared by | ![]() |
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Checked by | ![]() |
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Date |
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19
The Exchange Agent for the Exchange Offer is:
The Bank of New
York
Corporate Trust Operations – Reorganization Unit
101
Barclay Street, 7 East
New York, New York 10286
Attn:
Mr. David Mauer
Telephone number: (212)
815-3687
Facsimile number: (212) 298-1915
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT (212) 815-3687 OR BY FACSIMILE AT (212) 298-1915.
ALL UNREGISTERED SENIOR NOTES AND DEBENTURES MUST BE (1) PHYSICALLY TENDERED IN ACCORDANCE WITH THE TERMS OF THIS EXCHANGE OFFER WITH A PROPERLY COMPLETED AND DULY EXECUTED COPY OF THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF AND ANY OTHER DOCUMENTS REQUIRED BY THIS LETTER OF TRANSMITTAL OR (2) TENDERED BY BOOK-ENTRY TRANSFER IN ACCORDANCE WITH THE STANDARD OPERATING PROCEDURES OF DTC, EUROCLEAR OR CLEARSTREAM LUXEMBOURG. HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE SENIOR NOTES AND DEBENTURES FOR THEIR UNREGISTERED SENIOR NOTES AND DEBENTURES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR UNREGISTERED SENIOR NOTES AND DEBENTURES TO THE EXCHANGE AGENT, DTC, EUROCLEAR OR CLEARSTREAM LUXEMBOURG, AS THE CASE MAY BE, PRIOR TO THE EXPIRATION DATE OR PROVIDE NOTICE OF GUARANTEED DELIVERY TO THE EXCHANGE AGENT AS DESCRIBED HEREIN.
20
Exhibit 99.2
VIACOM INC.
FORM OF NOTICE OF GUARANTEED DELIVERY
Unregistered Floating Rate Senior Notes due
2009
($750,000,000 aggregate principal amount issued June
16, 2006)
Unregistered 5.75% Senior Notes due
2011
($1,500,000,000 aggregate principal amount issued April
12, 2006)
Unregistered 6.25% Senior Notes due
2016
($1,500,000,000 aggregate principal amount issued April
12, 2006)
Unregistered 6.875% Senior Debentures
due 2036
($1,750,000,000 aggregate principal amount issued
April 12, 2006)
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As set forth in the Prospectus dated , 2006 (the ‘‘Prospectus’’) of Viacom Inc. (‘‘Viacom’’) and in the accompanying Letter of Transmittal and instructions thereto (the ‘‘Letter of Transmittal’’), this form or one substantially equivalent hereto must be used to accept Viacom’s offer to exchange up to $750,000,000 aggregate principal amount of floating rate senior notes due 2009, $1,500,000,000 aggregate principal amount of 5.75% senior notes due 2011, $1,500,000,000 aggregate principal amount of 6.25% senior notes due 2016 and $1,750,000,000 aggregate principal amount of 6.875% senior debentures due 2036, which have been registered under the Securities Act of 1933, as amended (the ‘‘Securities Act’’) (collectively, the ‘‘exchange senior notes and debentures’’), for the outstanding unregistered $750,000,000 aggregate principal amount of floating rate senior notes due 2009, $1,500,000,000 aggregate principal amount of 5.75% senior notes due 2011, $1,500,000,000 aggregate principal amount of 6.25% senior notes due 2016 and $1,750,000,000 aggregate principal amount of 6.875% senior debentures due 2036 (collectively, the ‘‘unregistered senior notes and debentures’’), respectively, if (i) certificates representing the unregistered senior notes and debentures to be tendered for exchange are not lost but are not immediately available, (ii) time will not permit the Letter of Transmittal, certificates representing such unregistered senior notes and debentures or other required documents to reach the Exchange Agent prior to the Expiration Date (as defined herein) or (iii) the procedures for book-entry transfer cannot be completed prior to the Expiration Date. This form may be delivered prior to 5:00 p.m., New York City time, on the Expiration Date (as defined below) by an Eligible Institution (as defined in the Letter of Transmittal) by mail or hand delivery or transmitted, via telegram, telex or facsimile, to the Exchange Agent as set forth below. All capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2006 (THE ‘‘EXPIRATION DATE’’) UNLESS THE OFFER IS EXTENDED BY VIACOM. TENDERS OF UNREGISTERED SENIOR NOTES AND DEBENTURES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
To: The Bank of New York, Exchange Agent
By Hand or Overnight Courier:
The Bank of
New York
Corporate Trust Operations – Reorganization
Unit
101 Barclay Street, 7 East
New York, New
York 10286
Attn: Mr. David
Mauer
By Facsimile Transmission:
(212)
298-1915
Confirm by Telephone:
(212)
815-3687
Delivery of this instrument to an address, or transmission via facsimile with confirmation, other than to the Exchange Agent as set forth above will not constitute a valid delivery. The method of delivery of all documents, including certificates, is at the risk of the holder. If delivery is by mail, we recommend registered mail with return receipt requested, properly insured. You should read the instructions accompanying the Letter of Transmittal carefully before you complete this Notice of Guaranteed Delivery.
This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal.
2
Ladies and Gentlemen:
The undersigned hereby tender(s) to Viacom, upon the terms and subject to the conditions of the exchange offer as set forth in the Prospectus and the Letter of Transmittal, receipt of which is hereby acknowledged, the aggregate principal amounts of unregistered senior notes and debentures set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus.
The undersigned understands that tenders of unregistered senior notes and debentures will be accepted only in authorized denominations. The undersigned understands that tenders of unregistered senior notes and debentures pursuant to the exchange offer may not be withdrawn after 5:00 p.m., New York City time, on the Expiration Date. Tenders of unregistered senior notes and debentures may be withdrawn if the exchange offer is terminated or as otherwise provided in the Prospectus.
The undersigned understands that the exchange of unregistered senior notes and debentures for exchange senior notes and debentures will only be made after (a) receipt by the Exchange Agent prior to 5:00 p.m. on the Expiration Date of a properly completed and duly executed copy of this Notice of Guaranteed Delivery together with any other required documents (by facsimile transmission, mail or hand delivery) and (b) receipt by the Exchange Agent within THREE (3) business days after the Expiration Date of:
(i) a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) with any required signature guarantees; and
(ii) certificates representing the unregistered senior notes and debentures covered hereby in proper form for transfer (or confirmation of the book-entry transfer of such unregistered senior notes and debentures into the Exchange Agent’s account at The Depository Trust Company, Euroclear or Clearstream Luxembourg, pursuant to the procedure for book-entry transfer set forth in the Prospectus).
All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned.
3
PLEASE SIGN AND COMPLETE
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Principal Amount of Unregistered Floating Rate | ![]() |
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Date:__________________________________ |
Senior Notes due 2009 Tendered:* ______________ | ![]() |
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Principal Amount of Unregistered 5.75% Senior | ![]() |
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Notes due 2011 Tendered:* __________________ | ![]() |
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Principal Amount of Unregistered 6.25% Senior | ![]() |
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Notes due 2016 Tendered:* __________________ | ![]() |
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Principal Amount of Unregistered 6.875% Senior | ![]() |
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Debentures due 2036 Tendered:* ______________ | ![]() |
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Certificate No(s). of unregistered senior notes | ![]() |
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Name(s) of Registered Holder(s):______________ |
and debentures (if available): ________________ | ![]() |
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Address: ________________________________ | |
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Area Code and Telephone No.: ________________ | |
If unregistered senior notes and debentures will | ![]() |
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Signature(s) of Registered Owner(s) or |
be delivered by book-entry transfer at The | ![]() |
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Authorized Signatory: |
Depository Trust Company, Euroclear or | ![]() |
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Clearstream Luxembourg, insert Account No.: | ![]() |
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* | Must be in denominations of principal amount of $2,000 and any integral multiple of $1,000 in excess thereof. |
This Notice of Guaranteed Delivery must be signed by the registered Holder(s) of unregistered senior notes and debentures exactly as its (their) name(s) appear on certificates for unregistered senior notes and debentures or on a security position listing as the owner of unregistered senior notes and debentures, or by person(s) authorized to become registered Holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information.
Please print name(s) and address(es)
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Name: | ____________________________________________________________________ ____________________________________________________________________ |
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Capacity: | ____________________________________________________________________ |
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Address(es): | ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ |
Do not send unregistered senior notes and debentures with this form. Unregistered senior notes and debentures should be sent to the Exchange Agent, together with a properly completed and duly executed Letter of Transmittal.
4
GUARANTEE
(Not to be used for
signature guarantee)
The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or a correspondent in the United States or an ‘‘eligible guarantor institution’’ as defined by Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), hereby (a) represents that each Holder of unregistered senior notes and debentures on whose behalf this tender is being made ‘‘own(s)’’ the unregistered senior notes and debentures covered hereby within the meaning of Rule 13d-3 under the Exchange Act, (b) represents that such tender of unregistered senior notes and debentures complies with such Rule 14e-4, and (c) guarantees that, within THREE (3) business days after the Expiration Date, a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), together with certificates representing the unregistered senior notes and debentures covered hereby in proper form for transfer (or confirmation of the book-entry transfer of such unregistered senior notes and debentures into the Exchange Agent’s account at The Depository Trust Company, Euroclear or Clearstream Luxembourg, pursuant to the procedure for book-entry transfer set forth in the Prospectus) and required documents will be deposited by the undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of Transmittal and unregistered senior notes and debentures tendered hereby to the Exchange Agent within the time period set forth and that failure to do so could result in financial loss to the undersigned.
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Name of Firm: __________________________ | ![]() |
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Authorized Signature: ______________________ |
Address: ________________________________ | ![]() |
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Name: __________________________________ |
______________________________________ | ![]() |
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Title: __________________________________ |
Area Code and Telephone No.: ______________ | ![]() |
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5
Exhibit 99.3
VIACOM INC.
PURSUANT TO THE EXCHANGE OFFER IN RESPECT OF
Unregistered Floating Rate Senior Notes due
2009
($750,000,000 aggregate principal amount issued June
16, 2006)
Unregistered 5.75% Senior Notes due
2011
($1,500,000,000 aggregate principal amount issued April
12, 2006)
Unregistered 6.25% Senior Notes due
2016
($1,500,000,000 aggregate principal amount issued April
12, 2006)
Unregistered 6.875% Senior Debentures
due 2036
($1,750,000,000 aggregate principal amount issued
April 12,
2006)
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To Our Clients:
We are enclosing herewith a Prospectus dated , 2006 (the ‘‘Prospectus’’) of Viacom Inc. and the related Letter of Transmittal (which together constitute the ‘‘Exchange Offer’’) relating to the offer by Viacom to exchange up to $750,000,000 aggregate principal amount of floating rate senior notes due 2009, $1,500,000,000 aggregate principal amount of 5.75% senior notes due 2011, $1,500,000,000 aggregate principal amount of 6.25% senior notes due 2016 and $1,750,000,000 aggregate principal amount of 6.875% senior debentures due 2036, which have been registered under the Securities Act of 1933, as amended (the ‘‘Securities Act’’) (collectively, the ‘‘exchange senior notes and debentures’’), for the outstanding unregistered $750,000,000 aggregate principal amount of floating rate senior notes due 2009, $1,500,000,000 aggregate principal amount of 5.75% senior notes due 2011, $1,500,000,000 aggregate principal amount of 6.25% senior notes due 2016 and $1,750,000,000 aggregate principal amount of 6.875% senior debentures due 2036 (collectively, the ‘‘unregistered senior notes and debentures’’), respectively, upon the terms and subject to the conditions set forth in the Exchange Offer.
Please note that the Exchange Offer will expire at 5:00 p.m., New York City time, on , 2006 unless extended by Viacom in its sole discretion.
The Exchange Offer is not conditioned upon any minimum number of unregistered senior notes and debentures being tendered.
We are the holder of record of unregistered senior notes and debentures held by us for your account. A tender of such unregistered senior notes and debentures can be made only by us as the record holder and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender unregistered senior notes and debentures held by us for your account.
We request instructions as to whether you wish to tender any or all of the unregistered senior notes and debentures held by us for your account pursuant to the terms and conditions of the Exchange Offer. We also request that you confirm that we may make the representations contained in the Letter of Transmittal on your behalf.
Pursuant to the Letter of Transmittal, each holder of unregistered senior notes and debentures (a ‘‘Holder’’) will represent to Viacom that:
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• | the exchange senior notes and debentures acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving the exchange senior notes and debentures, whether or not the person is the Holder; |
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• | neither the Holder nor any other recipient of the exchange senior notes and debentures (if different than the Holder) is engaged in, intends to engage in, or has any arrangement or understanding with any person to participate in, the distribution of the unregistered senior notes and debentures or exchange senior notes and debentures; |
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• | neither the Holder nor any other recipient is an ‘‘affiliate’’ of Viacom within the meaning of Rule 405 promulgated under the Securities Act or, if the Holder or such recipient is an affiliate, that the Holder or such recipient will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable; |
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• | if the signatory is a broker-dealer, it has not entered into any arrangement or understanding with Viacom or any ‘‘affiliate’’ of Viacom within the meaning of Rule 405 promulgated under the Securities Act to distribute the exchange senior notes and debentures; |
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• | if the signatory is a broker-dealer, the signatory further represents and warrants that if it will receive exchange senior notes and debentures for its own account in exchange for unregistered senior notes and debentures that were acquired as a result of market-making activities or other trading activities, the signatory will deliver a prospectus meeting the requirements of the Securities Act (for which purposes, the delivery of the Prospectus, as the same may be hereafter supplemented or amended, shall be sufficient) in connection with any resale of exchange senior notes and debentures received in the Exchange Offer; and |
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• | the Holder is not acting on behalf of any person or entity that could not truthfully make these representations. |
By acknowledging that you will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such exchange senior notes and debentures, you will not be deemed to admit that you are an ‘‘underwriter’’ within the meaning of the Securities Act.
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Very truly yours, |
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Exhibit 99.4
VIACOM INC.
EXCHANGE OFFER IN RESPECT OF
Unregistered Floating Rate Senior Notes due
2009
($750,000,000 aggregate principal amount issued June
16, 2006)
Unregistered 5.75% Senior Notes due
2011
($1,500,000,000 aggregate principal amount issued April
12, 2006)
Unregistered 6.25% Senior Notes due
2016
($1,500,000,000 aggregate principal amount issued April
12, 2006)
Unregistered 6.875% Senior Debentures
due 2036
($1,750,000,000 aggregate principal amount issued
April 12,
2006)
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To Registered Holders:
We are enclosing herewith the material listed below relating to the offer (the ‘‘Exchange Offer’’) by Viacom Inc. to exchange up to $750,000,000 aggregate principal amount of floating rate senior notes due 2009, $1,500,000,000 aggregate principal amount of 5.75% senior notes due 2011, $1,500,000,000 aggregate principal amount of 6.25% senior notes due 2016 and $1,750,000,000 aggregate principal amount of 6.875% senior debentures due 2036, which have been registered under the Securities Act of 1933, as amended (the ‘‘Securities Act’’) (collectively, the ‘‘exchange senior notes and debentures’’), for the outstanding unregistered $750,000,000 aggregate principal amount of floating rate senior notes due 2009, $1,500,000,000 aggregate principal amount of 5.75% senior notes due 2011, $1,500,000,000 aggregate principal amount of 6.25% senior notes due 2016 and $1,750,000,000 aggregate principal amount of 6.875% senior debentures due 2036 (collectively, the ‘‘unregistered senior notes and debentures’’), respectively, upon the terms and subject to the conditions set forth in the Prospectus dated , 2006 (the ‘‘Prospectus’’) and the related Letter of Transmittal.
Enclosed herewith are copies of the following documents:
1. Prospectus dated , 2006;
2. Letter of Transmittal, including Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9;
3. Instruction to Registered Holder from Beneficial Owner; and
4. Letter to Clients which may be sent to your clients for whose account you hold unregistered senior notes and debentures in your name or in the name of your nominee, which shall accompany the Instruction to Registered Holder from Beneficial Owner for obtaining such client's instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the Exchange Offer will expire at 5:00 p.m., New York City time, on , 2006 unless extended by Viacom in its sole discretion.
The Exchange Offer is not conditioned upon any minimum number of unregistered senior notes and debentures being tendered.
Pursuant to the Letter of Transmittal, each holder of unregistered senior notes and debentures (a ‘‘Holder’’) will represent to Viacom that:
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• | the exchange senior notes and debentures acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving the exchange senior notes and debentures, whether or not the person is the Holder; |
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• | neither the Holder nor any other recipient of the exchange senior notes and debentures (if different than the Holder) is engaged in, intends to engage in, or has any arrangement or understanding with any person to participate in, the distribution of the unregistered senior notes and debentures or exchange senior notes and debentures; |
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• | neither the Holder nor any other recipient is an ‘‘affiliate’’ of Viacom within the meaning of Rule 405 promulgated under the Securities Act or, if the Holder or such recipient is an affiliate, that the Holder or such recipient will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable; |
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• | if the signatory is a broker-dealer, it has not entered into any arrangement or understanding with Viacom or any ‘‘affiliate’’ of Viacom within the meaning of Rule 405 promulgated under the Securities Act to distribute the exchange senior notes and debentures; |
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• | if the signatory is a broker-dealer, the signatory further represents and warrants that if it will receive exchange senior notes and debentures for its own account in exchange for unregistered senior notes and debentures that were acquired as a result of market-making activities or other trading activities, the signatory will deliver a prospectus meeting the requirements of the Securities Act (for which purposes, the delivery of the Prospectus, as the same may be hereafter supplemented or amended, shall be sufficient) in connection with any resale of exchange senior notes and debentures received in the Exchange Offer; and |
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• | the Holder is not acting on behalf of any person or entity that could not truthfully make these representations. |
By acknowledging that you will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such exchange senior notes and debentures, you will not be deemed to admit that you are an ‘‘underwriter’’ within the meaning of the Securities Act.
The enclosed Instruction to Registered Holders from Beneficial Owners contains an authorization by the beneficial owners of the unregistered senior notes and debentures for you to make the foregoing representations.
Viacom will not pay any fee or commission to any broker or dealer or to any other person other than the exchange agent for the Exchange Offer. Viacom will pay all transfer taxes, if any, applicable to the exchange of unregistered senior notes and debentures pursuant to the Exchange Offer, except as otherwise provided in the Prospectus under the caption ‘‘The Exchange Offer—Fees and Expenses.’’
Any inquiries you may have with respect to the Exchange Offer may be addressed to, and additional copies of the enclosed materials may be obtained from, the Exchange Agent, The Bank of New York, in the manner set forth below.
Exchange Agent:
The Bank of New York
Corporate Trust
Operations – Reorganization Unit
101 Barclay Street, 7
East
New York, New York 10286
Attn: Mr. David
Mauer
Telephone number: (212) 815-3687
Facsimile number: (212)
298-1915
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Very truly yours, |
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VIACOM INC. |
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NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF VIACOM OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF VIACOM OR THE EXCHANGE AGENT IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED HEREIN.
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Exhibit 99.5
VIACOM INC.
INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER OF
Unregistered Floating Rate Senior Notes due
2009
($750,000,000 aggregate principal amount issued June
16, 2006)
Unregistered 5.75%
Senior Notes due 2011
($1,500,000,000 aggregate principal amount
issued April 12,
2006)
Unregistered 6.25% Senior Notes
due 2016
($1,500,000,000 aggregate principal amount issued
April 12, 2006)
Unregistered
6.875% Senior Debentures due 2036
($1,750,000,000 aggregate
principal amount issued April 12,
2006)
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To Registered Holder:
The undersigned hereby acknowledges receipt of the Prospectus dated , 2006 (the ‘‘Prospectus’’) of Viacom Inc. and the related Letter of Transmittal, that together constitute the offer of Viacom (the ‘‘Exchange Offer’’) to exchange up to $750,000,000 aggregate principal amount of floating rate senior notes due 2009, $1,500,000,000 aggregate principal amount of 5.75% senior notes due 2011, $1,500,000,000 aggregate principal amount of 6.25% senior notes due 2016 and $1,750,000,000 aggregate principal amount of 6.875% senior debentures due 2036, which have been registered under the Securities Act of 1933, as amended (the ‘‘Securities Act’’) (collectively, the ‘‘exchange senior notes and debentures’’), for the outstanding unregistered $750,000,000 aggregate principal amount of floating rate senior notes due 2009, $1,500,000,000 aggregate principal amount of 5.75% senior notes due 2011, $1,500,000,000 aggregate principal amount of 6.25% senior notes due 2016 and $1,750,000,000 aggregate principal amount of 6.875% senior debentures due 2036 (collectively, the ‘‘unregistered senior notes and debentures’’), respectively. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken by you relating to the Exchange Offer with respect to the unregistered senior notes and debentures held by you for the account of the undersigned.
The aggregate face amount of the unregistered senior notes and debentures held by you for the account of the undersigned is (fill in amount):
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$ of Floating Rate Senior Notes due 2009. |
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$ of 5.75% Senior Notes due 2011. |
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$ of 6.25% Senior Notes due 2016. |
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$ of 6.875% Senior Debentures due 2036. |
With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box):
To TENDER the following unregistered senior
notes and debentures held by you for the account of the undersigned
(insert principal amount of unregistered senior notes and debentures to
be tendered (if
any)):
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$ of Floating Rate Senior Notes due 2009. |
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$ of 5.75% Senior Notes due 2011. |
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$ of 6.25% Senior Notes due 2016. |
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$ of 6.875% Senior Debentures due 2036. |
NOT
to TENDER any unregistered senior notes and debentures held by you for
the account of the undersigned.
If the undersigned instructs you to tender unregistered senior notes and debentures held by you for the account of the undersigned, it is understood that you are authorized to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations, that:
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• | the exchange senior notes and debentures acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving the exchange senior notes and debentures, whether or not the person is the undersigned; |
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• | neither the undersigned nor any other recipient of the exchange senior notes and debentures (if different than the undersigned) is engaged in, intends to engage in, or has any arrangement or understanding with any person to participate in, the distribution of the unregistered senior notes and debentures or exchange senior notes and debentures; |
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• | neither the undersigned nor any other recipient is an ‘‘affiliate’’ of Viacom within the meaning of Rule 405 promulgated under the Securities Act or, if the undersigned or such recipient is an affiliate, that the undersigned or such recipient will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable; |
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• | if the undersigned is a broker-dealer, it has not entered into any arrangement or understanding with Viacom or any ‘‘affiliate’’ of Viacom within the meaning of Rule 405 promulgated under the Securities Act to distribute the exchange senior notes and debentures; |
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• | if the undersigned is a broker-dealer, the undersigned further represents and warrants that if the undersigned broker-dealer will receive exchange senior notes and debentures for its own account in exchange for unregistered senior notes and debentures that were acquired as a result of market-making activities or other trading activities, the undersigned will deliver a prospectus meeting the requirements of the Securities Act (for which purposes, the delivery of the Prospectus, as the same may be hereafter supplemented or amended, shall be sufficient) in connection with any resale of exchange senior notes and debentures received in the Exchange Offer; and |
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• | the undersigned is not acting on behalf of any person or entity that could not truthfully make these representations. |
By acknowledging that you will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such exchange senior notes and debentures, you will not be deemed to admit that you are an ‘‘underwriter’’ within the meaning of the Securities Act.
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SIGN HERE
Name of beneficial owner(s) (please print): ______________________________________
Signature(s): ______________________________________________________________
Address: ________________________________________________________________
Telephone Number: ________________________________________________________
Taxpayer Identification or Social Security Number: ______________________________
Date: ____________________________________________________________________
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