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VIACOM INTERN. INC. v. ICAHN

September 14, 1990

VIACOM INTERNATIONAL INC., PLAINTIFF,
v.
CARL C. ICAHN, ICAHN HOLDING CORPORATION, ICAHN CAPITAL CORPORATION, HERON INVESTORS PLAN INC., ACF INDUSTRIES, INCORPORATED, UNICORN ASSOCIATES CORPORATION, GNU CORP., EXCALIBUR PARTNERS, HEALTH INVESTORS LIMITED PARTNERSHIP, LONGVIEW INVESTORS LIMITED PARTNERSHIP, HARMONIOUS ASSOCIATES LIMITED PARTNERSHIP AND STORK ASSOCIATES LIMITED PARTNERSHIP, DEFENDANTS AND THIRD-PARTY PLAINTIFFS, V. RALPH M. BARUCH, TERRENCE A. ELKES, KENNETH F. GORMAN, JOHN W. GODDARD, LEO CHERNE, JOSEPH F. CONDON, THEORDORE C. JACKSON, ALLAN R. JOHNSON, PAUL A. NORTON, HARRY M. PLOTKIN, NANCY C. REYNOLDS AND JOHN F. WHITE, THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.

  OPINION AND ORDER

This is a motion by defendants for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) or for summary judgment pursuant to Federal Rule of Civil Procedure 56.

Background

On May 15, 1986 the defendants filed a Schedule 13D with the Securities and Exchange Commission stating that by the close of business on May 9, 1986, defendant Carl C. Icahn ("Icahn), along with defendant corporations and partnerships which Icahn controlled, had acquired "approximately 16.95 percent" of the common stock shares of plaintiff Viacom International, Inc. ("Viacom"). In the first four months of 1986, defendants had purchased 998,200 shares of Viacom common stock (4.8 percent of shares outstanding) and within ten days of May 9, 1986, defendants purchased another 2.5 million shares of Viacom common stock, bringing Icahn's aggregate control to 3,498,200 shares of common stock. A share of Viacom common stock had a market value of $65 at the close of business on May 5, 1986 and a market value of $72 at the close of business on May 9, 1986.

Item 4 of May 15, 1986 Schedule 13D set forth the "purpose" of defendants' "obtain[ing] an equity position in the Issuer [Viacom]." Defendants stated that they had interests in using that "equity position" to pursue a variety of options: to "acquire[ ] for cash" "all of the outstanding Common Stock of the issuer" — in which context defendants "would be prepared to pay $75 per share (pre-split) for all of the Issuer's common stock"; to "enter[ ] into a standstill agreement with respect to their [defendants'] shares of Common Stock coupled with an exchange of the shares of Common Stock of the Issuer owned by the Reporting Persons [defendants] for a combination of securities of the Issuer and/or cash and a joint venture between the Issuer and an entity controlled by the Reporting Persons for the purpose of making acquisitions of companies involved in the entertainment industry"; to "continue to explore the feasibility of, and strategies for seeking control of the Issuer"; to "acquire additional shares of the Common Stock (subject to availability of shares at prices deemed favorable) from time to time in the open market, in privately negotiated transactions, by tender offer or otherwise"; or "to dispose of shares of Common Stock in the open market, in privately negotiated transactions with third parties or to the Issuer for cash or otherwise."

On May 21, 1986, Icahn, on behalf of all defendants, signed three agreements with Viacom. The first agreement, entitled "Exchange Agreement," referred to Viacom as "Company," to the 3,498,200 shares controlled by defendants as "Company Shares," and to defendants as "Seller Group" and "Warrant Group."*fn1 The Exchange Agreement stated:

    The Seller Group beneficially owns 3,498,200
  (pre-Stock Split as defined herein) shares (the
  "Company Shares") of Common Shares, $1.00 par
  value, of the Company (the "Common Stock") and
  has agreed with the Company to sell the Company
  Shares to the Company. This Agreement sets forth
  the terms and conditions upon which the entities
  listed on Annex B (the "Warrant Group") (such
  entities being the direct beneficial owners of
  the Company shares) are selling, transferring and
  assigning to the Company the Company Shares in
  exchange for $216,888,400 in cash (or $62 per
  share pre-Stock Split) and warrants (the
  "Warrants") to purchase 2,500,000 shares of
  Common Stock (pre-Stock Split), issued pursuant
  to a Warrant Agreement dated as of May 21, 1986
  between the Company and the Warrant Group (the
  "Warrant Agreement"), substantially in the form
  of Annex C attached hereto.

Def. 3(g), Ex. A.*fn2 The Exchange Agreement also contained a covenant which bars defendants from purchasing Viacom stock or otherwise seeking to control Viacom for a period of eleven years. Id.

Pursuant to the terms of the paragraph quoted above, a second agreement, entitled "Warrant Agreement," was annexed to the Exchange Agreement and set forth the terms of the issuance of warrants to defendants.

On May 21, 1986, there was also a third written agreement reached between defendants and plaintiff. The third written agreement provides for Viacom to give defendants access to commercial air time on the radio and television stations owned by plaintiff. The third agreement is referred to in a passage at the end of the Exchange Agreement: "This [Exchange] Agreement, the Warrant Agreement and an agreement with respect to advertising entered into on the date hereof, contain the entire understanding of the parties with respect to their subject matter." The third agreement (the "Advertising Agreement") is in the form of a letter agreement written to defendants from plaintiff. The Advertising Agreement states:

    Reference is made to the Exchange Agreement
  (the "Exchange Agreement") of even date herewith
  wherein it was agreed that Viacom International
  Inc. (the "Company") would acquire from the
  Seller Group (as defined in the Exchange
  Agreement) all of the common stock now owned by
  you [defendants] in the Company (including common
  stock which you have a right to receive pursuant
  to a two-for-one stock split declared by the
  Company on May 1, 1986) in exchange for cash and
  certain warrants. In consideration of the
  covenants contained in the Exchange Agreement,
  the Company hereby agrees to provide the
  consideration described in this Agreement to you
  or your designated affiliates and assignees as
  part of the consideration for the shares of
  common stock of the Company being acquired by the
  Company pursuant to the Exchange Agreement.
    The Company agrees to provide to you air time
  at no cost, with a Value (as defined below) of
  $10,000,000, on the Company's present and future
  communication facilities (the "Facilities"). . . .

Defendants "accept for purposes of this motion — that [the three agreements resulted in] plaintiff pa[ying] defendants consideration equal to approximately $79.50 per share." Def. 3(g) at 2, ¶ 2. The $79.50 per share figure consists of the cash payments, the value of the warrants and the value to plaintiff of the advertising time. The actual market value of a share of Viacom ...


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